UK: The Resale Right – Whose Right is it Anyway?

In April this year, the Court of Justice of the European Union ruled that EU countries with forced heirship rules (which govern the apportionment of a fixed share of the deceased's estate to next of kin) can impose a limitation that only heirs can benefit from the resale right, to the exclusion of those who benefit under the artist's will.

The case before the EU Court concerned the estate of Salvador Dali, who died on 23 January 1989 in Spain leaving five heirs under Spanish forced heirship rules.

By will dated 20 September 1982, Dali appointed the Spanish state as sole legatee of his intellectual property rights. Those rights are administered by the Fundacion Gala-Salvador Dali, a foundation set up by Dali in 1983 in Spain.

In 1997 the Fundacion granted to VEGAP, the Spanish collecting society, an exclusive worldwide mandate to collect copyright in Dali's works.

In turn, VEGAP entered into a contract with its French counterpart ADAGP, which is responsible for the collection of Dali's copyright in France.

Since 1997, ADAGP has accounted to VEGAP for all sums collected in respect of the exploitation of Dali's works, except those relating to the resale right. This is because under French law, the resale right passes to the heirs of the artist to the exclusion of beneficiaries named in the artist's will. Accordingly, ADAGP paid the resale right royalties to Dali's heirs, not VEGAP.

On 28 December 2005, the Fundacion and VEGAP issued an application against ADAGP before the Paris Regional Court for repayment of the resale right royalties. ADAGP requested that Dali's heirs should also be joined to the proceedings so that they were bound by the French Court's judgment.

The French Court adjourned the matter and referred it to the EU Court for a preliminary ruling on whether the EU Directive on the resale right must be interpreted as precluding national law from reserving the resale royalty to the heirs only.

The EU Directive on the resale right entitles the artist to a royalty payment each time his work is sold after its first sale. In principle, the resale right lasts for the artist's lifetime and for 70 years after his death. Only living artists are currently entitled to the resale right in the UK. The right is set to be extended to the artist's estate from the end of 2011.

The EU Court considered the objectives of the EU Directive. The Court noted that there are two objectives in the preamble to the Directive.

The first objective is to ensure that 'authors of graphic and plastic works of art share in the economic success of their original works of art' which may be sold on for significant sums by collectors and dealers.

The second objective is to avoid distortion of competition in the EU art market by preventing the displacement of sales of works of art to those countries which do not apply the resale right.

The Court noted that the first objective sought to secure a certain level of remuneration for artists. It held that the objective was not compromised by the transfer of the resale right to certain categories of person to the exclusion of others after the artist's death.

The Court held that the second objective, namely harmonisation of the resale right, did not have to extend to the issue of who benefits from the resale right following the artist's death. It did not consider it appropriate for the resale right to interfere with national laws of succession.

Accordingly, the Court concluded that the EU Directive did not preclude national law from reserving the benefit of the resale right to heirs only.

Another, separate, issue involving the resale right has been brewing in the last few months, namely whether auction houses are obliged to charge the royalty to the seller, or whether they can charge it to the buyer. The current policy of the main auction houses is to charge the resale royalty to the buyer. That policy is being challenged in France, and may be challenged in other countries.

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