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Monday, 3 April 2017

French court rules that resale right royalty must be only paid by sellers

Latest French ruling causes agitation
in the art world
Among the areas of copyright harmonized at the EU level there is the so called 'droit de suite' (also known as 'resale right' or 'artist's resale royalty'), a creature at first typically belonging to droit d'auteur, rather than common law copyright [the UK, for instance, has only had it since 2001], systems.

The EU resale right

By adopting Directive 2001/84 (Resale Right Directive) EU legislature mandated upon Member States to "provide for the benefit of the author of an original work of art, a resale right, to be defined as an inalienable right, which cannot be waived, even in advance, to receive a royalty based on the sale price obtained for any resale of the work, subsequent to the first transfer of the work by the author." [Article 1(1)].

In a nutshell, the resale right, as explained in the preamble to the directive:
  • is meant to enable authors/artists to receive consideration for successive transfers of their work [Recital 1], so to share in the economic success of their original works of art [Recital 3];
  • concerns the physical work, namely the medium in which the protected work is incorporated [Recital 2];
  • forms an integral part of copyright and is an essential prerogative for authors [Recital 4].
This non-assignable and non-waivable right applies to "all acts of resale involving as sellers, buyers or intermediaries art market professionals, such as salesrooms, art galleries and, in general, any dealers in works of art." [Article 1(2)]

The question that arises - and has actually arisen - is who is responsible for paying such royalty.

The Resal Right Directive - in my view and contrary to the reasons for harmonization within Recital 9 - fails to provide a uniform response, in that Article 1(4) therein does not really mandate a harmonized approach at the level of individual Member States. 

While stating that "the royalty shall be payable by the seller", that provision also allows Member States to envisage that "one of the natural or legal persons referred to in paragraph 2 [ie buyers or intermediaries art market professionals, such as salesrooms, art galleries and, in general, any dealers in works of art] other than the seller shall alone be liable or shall share liability with the seller for payment of the royalty."

Who has to pay
the resale royalty
for this artwork?
The CJEU decision in Christie's France

Readers will remember that the Court of Justice of the European Union (CJEU) has been indeed asked to clarify whether the rule laid down by Article 1(4) of Directive 2001/84, which makes the seller responsible for payment of the royalty, must be interpreted peremptorily, ie without any derogation by agreement being possible, as meaning that the seller is required definitively to bear the cost of the royalty.

The French Supreme Court (Cour de Cassation) made this reference for a preliminary ruling in the context of litigation between the Syndicat National des Antiquaires (SNA) and Christie's France [French subsidiary of the multinational firm Christie’s, ie a company that notoriously arranges voluntary sales by public auction] over the change, by the latter, of its terms and conditions to the effect that the buyer, and not the seller, would be liable to pay the royalty. 

The SNA had sued Christie's France, claiming that this change of contractual conditions and the placing of the burden of paying the royalty on the buyer would amount to unfair competition and be contrary to Article L. 122-8 of the French Intellectual Property Code.

The action was dismissed at first instance, but the Paris Court of Appeal sided with SNA. Eventually, the case made its way to the Supreme Court, that referred the case to the CJEU.

As this blog reported, in 2015 the CJEU appeared to endorse in principle Christie's France's move, and held (C-41/14) that:

"Article 1(4) of Directive 2001/84 must be interpreted as not precluding the person by whom the resale royalty is payable, designated as such by national law, whether that is the seller or an art market professional involved in the transaction, from agreeing with any other person, including the buyer, that that other person will definitively bear, in whole or in part, the cost of the royalty, provided that a contractual arrangement of that kind does not affect the obligations and liability which the person by whom the royalty is payable has towards the author." [para 33]

When the case returned from Luxembourg, the Supreme Court ruled in compliance with the CJEU decision and found that the royalty could be paid by the buyer or the seller, or shared by them, as long as the artists’ rights were duly respected. 

Actual Kat-twist
What has happened in France since Christie's France? The Versailles twist

Further to the CJEU and Supreme Court' judgments, I forgot to check was not able to find any details on how things kept developing.

However, a few days ago a number of specialist art magazines [eg, here and herereported on an interesting decision of the Versailles Court of Appeal [many thanks to Jean Fau (@jeanfau) for kindly providing the text of the judgment] on 24 March last that likely represents a twist in the longstanding saga of responsibility for payment of the resale royalty.

According to The Art Newspaper, in the context of other proceedings against Christie's, the Versailles court stated that the the royalty must be paid by sellers, with NO exception. 

Apparently this is in line with the decision of French legislature when implementing the Resale Right Directive into French law:

"The lawmakers required the seller to pay the royalty" not only as a simple method of payment, but "in order to safeguard healthy competition between the national operators." 

As anticipated by Antiques Trade Gazette, the Versailles ruling opens the possibility that - lacking definitive clarity on the matter of who has to pay the resale royalty - buyers who paid the royalty could now ask to be refunded and vendors charged instead.

In any case, further developments are likely to occur (and Christie's has announced an appeal to the Supreme Court), so stay tuned!

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