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Rewritten Artist Resale Royalty Law to Be Introduced This Fall

10/08/2013 09:46 am ET | Updated Dec 08, 2013

Legislation that would guarantee to fine artists a percentage of the profits whenever their work is sold on the secondary market looks to be heading back for a rewrite, perhaps as soon as this fall.

New York Democratic Representative Jerrold Nadler's "Equity for Visual Artists Act," which he introduced into Congress in late 2011 with now retired Wisconsin Democratic Senator Herbert Kohl, would establish a seven percent "resale royalty" on sales of artwork over $10,000 after the initial sale, with half of that money going to the individual artists or their heirs and the remainder to be used to help nonprofit art museums finance purchases of contemporary art. Because tracking art sales by private dealers and galleries can be quite difficult, the law only would apply to purchases through auction houses with $25 million or more in sales.

A period of written public comment in late 2012 and a round table hearing in Washington, D.C. this past April, convened by the Library of Congress, which had been asked by the Congress to study the bill, produced some fierce resistance on the part of the major auction houses and a major museums association, leading Representative Nadler to acknowledge the need for certain alterations.

"I am continuing to listen to a broad range of feedback on the resale royalty system in the U.S., and will soon consider possible changes to my forthcoming bill on the matter," he said in a statement, adding that he plans to reintroduce the legislation, "once I have gathered that feedback and read the report that will soon be issued by the U.S. Copyright Office."

The artist resale royalties legislation would align United States law more closely with practices in Europe and other areas of the world where what are called artist resale royalties (or "droit de suite") have been adopted years or, in some instances, decades ago. The percentage of these royalties in these countries range from one-quarter of one percent to five percent, with the money held by arts collecting agencies that disperses the royalties to artists, less an administrative fee of between 15 and 25 percent.

Representative Nadler's Equity for Visual Artists Act was drafted by Robert Panzer, executive director of VAGA, and Theodore Feder, president of the Artists Rights Society, both New York City-based organizations that collect licensing fees for works by their member artists. The two organizations would likely move into the realm of collecting resale royalty fees if and when the legislation is enacted. Panzer noted that fees from resale royalty payments would "exceed considerably what we do in licensing."

The written comments have been published on the Web site of the Library of Congress.

Many of those published comments reflected a strong self-interest in the concept of resale royalties. Denise Lassaw Paljor, daughter of deceased American sculptor Ibram Lassaw and who now acts as "curator, archivist, repair person, photographer and historian" of the artworks in the estate, claimed that "it seems morally unfair that strangers reap the benefits for something they paid very little for and had nothing to do with creating." She also noted that she could use some "money so I can maintain the studio and the work."

A number of the resale royalty collecting agencies around the world where the law has been enacted, including Argentina, Australia, Belgium, Finland, Germany, Hungary, Ireland, Portugal and the United Kingdom, offered their support for the proposed bill. Countering expected worries about the legislation, Sabina Riccardelli, director of the Rome-based Italian Society of Authors and Editors, noted that paying royalties to artists has not been found to have produced "any negative consequences on the European art market."

Not everyone who submitted comments had a vested interest in the law. Manhattan clinical psychologist Mark Mellinger, who claimed to be "an amateur painter," expressed enthusiasm for "the prospect of a law that would allow artists to share in the future value of their work," while San Francisco-based artist career consultant Alan Bamberger found the Nadler bill to be unnecessary. "They've already been paid once - and that's enough," he wrote.

Opposition to the Equity for Visual Artists Act also was expressed by lawyers representing Christie's and Sotheby's, as well as by former Christie's general counsel Jo Backer Laird, who claimed that the proposed bill would "interfere with the ownership rights of collectors" and "cede the current advantage enjoyed by the United States in the global art market." The current president of the Association of Art Museum Directors, Kimberly Rorschach, who is also the director of the Seattle Art Museum, claimed that the bill, which targets secondary market sales only at major auction houses, would drive consignors away from auctioneers and "encourage closed-door, private sales at the expense of public auctions, potentially depriving museums of vital information about the availability and pricing of works of art." This would harm museums since these institutions more frequently purchase new works for their collections from auction houses rather than from private dealers for reasons of "transparency."

At the round table discussion, Irish economist Clare McAndrew claimed that Europe has lost market share in the contemporary art field since 2006, the year that artist resale royalties was adopted in the U.K. "I'm not saying that one caused the other, and there's a lot of factors that cause markets to shift, but the resale royalty is likely to be a contributory factor," she said. McAndrew also claimed that, based on U.S. census statistics, only "0.4 percent of artists in the U.S. will benefit" from Representative Nadler's proposal. That number is apt to grow if the minimum $10,000 resale price limit is reduced.

In his statement, Representative Nadler said that he is open to "lowering the threshold at which the new resale rules would take effect, broadening the number of auction houses for which the law would be applicable, and adjusting the percentage of fees that would be directed toward museum funding."