The British Art Market Federation's Chairman on the "Corrosive Effect" of Droit de Suite

The British Art Market Federation's Chairman on the "Corrosive Effect" of Droit de Suite
Pablo Picasso's "Portrait d'Angel Fernández de Soto" (1903), which sold for $54 million in June 2010, would have earned Picasso's heirs €12,500.
(Courtesy Getty Images)

The hammer has finally fallen. Since January 1, the European Resale Rights directive has been fully applicable in the United Kingdom. Each time an artwork goes up for resale, a portion of the proceeds must go to the artist or their descendents. The resale rights, or "droit de suite," has been in place in several European Union countries since 2006, but the U.K., together with Ireland, Austria, and a few others, had a derogation, which meant that for the last five years the law in these countries only applied to the work of living artists. This derogation has come to an end, and the resale rights now also apply across the E.U. to the work of artists who died in the last 70 years.

The impact on the U.K., which accounts from more than 50 percent of the European art market, might be significant. Representing the likes of Christies, Sotheby's, Bonhams, the Society of London Art Dealers, and LAPADABritish Art Market Federation chairman Antony Browne spoke to ARTINFO UK about global distortion, the decline of the U.K.'s market share, and the potential threat the end of this derogation poses to British jobs.

What does the change in the resale rights directive mean?

One of the original concepts of having the derogation was that the European Commission wanted to have more time to negotiate an amendment to the international Berne Convention on copyright, which enshrines the resale rights, but makes it a voluntary provision. The argument that the European Commission put forward in its justification of the directive was an attempt to get an international agreement in order to avoid displacement of sales from Europe to elsewhere, following a unilateral imposition of this levy in Europe. They had ten years to try to negotiate this, but there's been no progress at all. We argued that it would be more sensible to continue this derogation until an international agreement had been arrived at. Unfortunately, the process in Brussels is such that it's very hard to reverse directives. When you put a time limit on something like that, it tends to stick, unless there is really serious political pressure to try and change it.

So where we are now is that there has been no progress on an international agreement and, not withstanding that, the resale rights expands in the U.K. The significance of the extension is that whereas, with living artists, it affects approximately 14 percent of the fine art market by value, when you extend it to the work of artists within copyright, whose death occurred in the last 70 years, that expands to about 62 percent — and actually if you look at the global market, it's about 64 percent of the value of the fine art market. So clearly, the potential distorting effect of this on the U.K. is going to be substantially greater.

How do you think this might affect the art market in Britain?

I simply don't know the answer to that question. The logic of the directive was to have a harmonized system. In other words, somebody in Germany was selling a piece of modern art in London in order to avoid paying the resale rights in Germany. What the European Union has effectively done is replace this internal European distortion with a global distortion. Now, the extent to which, or when, and how this will affect the London market is at the moment a matter of speculation.

What we have established by doing the research that we produced for the European Commission is that both Europe's in general and the U.K'.s in particular share of the global market has been in steady decline for the last five years. What we can't prove without doubt is that, in the five years the resale rights has been introduced for living artists, it has been the reason why our market share has been in decline. The general view among people I represent is that resale rights contribute to the perception that doing business in Europe is more complicated and expensive than elsewhere — but the extent to which this [perception] is based solely on the resale rights, at this stage, can't be proved one way or the other.

One of the things that the European Commission has done, in its recent report on the consultation it had on the directive, was to say: "We need to look at this again quite soon." They are revisiting it during the course of 2014. They'll have two years of data to analyze to see whether this has caused a further decline and the extent to which there is firm evidence: for example that certain objects were sold in New York or Hong Kong simply because people didn’t want to have to pay additional charges, and so on.

The point I've made to the European Commission on many occasions is that the danger here is that if you lose a market, it's very, very hard to get it back. Obviously the ending of the derogation hugely increases the risk that this will cause damage. Why I'm pleased that we are keeping it under review — and the commission is doing that — is that at least one hopes that if signs are found that this really is accelerating the decline of our position, then something can be done about it, but that will depend on the political will to do it and the evidence there is. I can't believe that having a charge on a market in one place and not on the other doesn't have an effect — if it didn't affect that the European Commission wouldn't have introduced it in the first place.

If I'm speculating, I've always said that the effect of this, and of other measures that are imposed on the market in Europe and in the U.K., is going to be a corrosive effect rather than a sudden, dramatic closing down of this and that. It's not like a steel works shutting down and putting 5,000 people out of work. [But] if the attraction of London as a market hub has gone into decline then quite clearly the opportunity for jobs here becomes less and the opportunity for jobs somewhere else, where a market hub is stronger, increases. And it has a trickle-down effect, of course. The art market in the U.K. supports directly 60,000 jobs, and is actually indirectly supporting about another 60,000 or 70,000 jobs, so anything that damages the market, particularly at the top end, or the international end, is bound to have a knock-on effect on jobs. That's what we are trying to defend here: the benefits the market brings to London. There will always be a market of sorts, most European countries have an art market of sorts, but what distinguishes London is the fact that over £2 billion worth of works of art are imported every year for sales here, and that's what makes it an international entrepreneur market. But those things don't have to come here. In other words, you put a Picasso on an aeroplane, it doesn’t necessarily have to come to London. It could just as easily go to Hong Kong.

Some say that the general tendency is for the market to be increasingly regulated and that the application of the resale rights happening here now could happen in New York or Hong Kong in the foreseeable future.

That's possible but the resale rights has been in existence since the 1920s. It has been enshrined in the Berne Convention for decades, and the European directive has been in existence since 2001. It's not as if people are unfamiliar with it. All the indication that I've been given, and even the European Commission frankly admits that they made absolutely no progress in persuading the international intellectual property organizations to amend the Berne Convention to make the article on resale rights compulsory. So the evidence is that this has been around for nearly 100 years and it hasn't spread beyond Europe much. And don't forget that it only came to the United Kingdom, because the U.K. was outvoted on the European directive. People have strong views on both sides of the stick of the argument but I'm more agnostic: I feel that you either got to have it everywhere, or not at all, because we are risking jobs otherwise.

One of the main concerns we have about this, is not only the international distortion one — which is obviously the key one for London — but also the administrative impact and costs for small businesses. Most art businesses I represent are SMEs [small and medium enterprises], and for them, anything which is actually going to increase paperwork, and uncertainty and difficulties, is obviously a cost that they could do without.

The media have largely picked up on the story of Jean-François Millet, whose painting "Angélus" sold for a large profit after World War One while his descendents lived in poverty. Don't you think there is something worthwhile in this directive from a moral, or ethical point of view, or is it just useless paperwork?

I don't think it's as black or white as that. The moral case is a strange one for the resale rights. You cite Millet as an example, and you are absolutely right, this whole idea was born in completely different socio-economic environment. It came into being in France when they didn't have social security, and support for poorer people. And there were no international, sophisticated, global, internet-based art market. We inhabit a completely different world.

When you start debating morality, it always become rather difficult — but to be frank with you, there are some aspects of the resale rights, make even its supporters uneasy. For example, why does it apply irrespective of things being sold at a profit or a loss? That has always seemed to be the fundamental flaw in the system. If you are looking at it from a morality point of view, I would question if it's equitable or moral, that people should automatically share irrespective of whether the thing is being sold for more or less than the purchaser paid for it.