The Fate of the ARR Within the Contemporary Landscape of the Art Market in the U.K. and Australia

December 4, 2023

By Angelica Fromer

The nexus relationship between art and finance has invited an ample influx of capital into the art market, particularly the resale of contemporary art at auction. One could say that the emergence of the artworld as a new financial frontier has revitalized an expanded range of ultra-wealthy buyers competing for high priced works by established artists. As such, lesser known artists seem to be excluded from the art world’s new terrain. Established to uphold the equity of struggling artists, the relevance of the Artist’s Resale Right (ARR) is put on trial in the wake of the financialization of art.

Equity for the Starving Artist

The Artist’s Resale Right (ARR) is the moral right of both an artist and his/her estate to be entitled to receive resale royalties.^[1] The emergence of moral rights can be traced to France in the 1920s, with the term “moral rights” itself a translation of the French phrase “droit moral” referring to the ability of authors to control the eventual fate of their works. The recognition of a creator’s moral claim to receive compensation for the resale of their works, known as Droit de Suite (“right to follow”), arose following the sale of Jean-Francois Millet’s painting, “L’Angélus” (1858).^[2] While the owner of the painting – which ironically depicts two peasants bowed in prayer – reaped ample profits from its sale, Millet’s family toiled away in poverty.^[3] Thus, the idea of Droit de Suite emerged as a regulator of equity within the arts; a mechanism to address the concern of an impecunious artist who initially sold his artworks for a modest amount but may later see his artworks change hands at significant sums.^[4] Almost 170 years after the “L’Angélus” – the ARR endures in many art markets around the world.

Contemporary Art as the New Financial Frontier

Art has historically functioned as a site of patronage, an asset class, and a social signifier; however, the categorical distinction between art and capital is blurrier than ever. Characterized by opportunistic tax laws and crowded freeports functioning to erode the art world to “a glitzy barnacle on the side of global finance”^[5] – the contemporary landscape of the art market has largely obfuscated the once equitable aims of Droit de suite.^[6] In a recent departure from tradition, the major auction houses, Christie’s and Sotheby’s, have deviated from bolstering the Old Masters and Impressionists as the bedrock of their business in exchange for embracing the contemporary market.^[7] And with their arrival to the new world, auction houses have adopted a correspondingly contemporary orientation, resembling the ethos of a luxury lifestyle brand: “hyping a never-ending flow of new inventory, and with it, a jet-set lifestyle of multi-million dollar auctions, exclusive gallery dinners, and VIP art fair vernissages.”^[8]

This rebrand has propelled a stratospheric rise in the market for contemporary art. Theoretically, such an influx of capital and newfound interest would predictably provide some degree of benefit to lesser-known artists by enlarging global consumption of contemporary art. The bleaker actuality, however, is “an expanded range of ultra-wealthy buyers who aggressively compete for works by brand-name artists.”^[9] As the contemporary artworld enlarges with diminishing prosperity for lesser-known names, a modernized rendition of the “L’Angélus” dilemma materializes in which only a concentrated cohort of artists cash in on newfound acclaim.^[10]

The Practical Paradox of the Artist’s Resale Right

Within this convergence of art and the mega-rich, the ARR makes an unexpected, but equally unsatisfying cameo. Expressly that, in the United Kingdom (UK), a work must be resold through an auction or by an art market professional^[11] – namely, galleries, dealers, auction houses and agents – for €1,000 or more to qualify for a resale royalty.^[12] Meanwhile, auction houses have grown increasingly concerned, and aggressively conservative, with their sell-through rate – or the ratio of lots offered to lots sold.^[13] This conservatism has manifested as an especially selective process with auction houses only offering artworks sure to sell.^[14] For example, the ultra-Contemporary genre^[15] – the fastest growing in the auction market by both volume and value – has maintained a sell-through rate of above 70 percent in the years post lockdown while hovering between 60 percent and 65 percent between 2018 and 2020.^[16] And as billionaire buyers crowd auction houses in pursuit of beloved brand name pieces, it is only reasonable for curators to prioritize procurement of the most in-demand pieces; and in turn, unfortunately but inescapably, a consequential decline in the likelihood of lesser-known artworks being offered on the secondary market.^[17]

Within the landscape of the secondary market, the mere implementation of monetary thresholds and formalistic sentinels partition eligibility to only the beau monde of art – those with access to the exclusive echelons of auction houses and galleries. In effect, these requirements seem incompatible with the original purpose of the ARR: “to help struggling artists and their families benefit from the value of their art.”^[18] In fact, data from the UK in 2018 revealed that 54 percent of the total estimated pay out from the ARR went to estates of only 30 deceased artists and 73 percent was paid out to the top 50 artists in the UK.^[19] This disparity amounts to a terminal blow to the original intent of the ARR and what emerges is a paradox in which the ARR succeeds in benefiting the most commercially successful names while providing diminishing returns for lesser-known artists.^[20]

Even amidst a set of exceptional circumstances enabling the work of some struggling artist to puncture the barricades of entry into the resale market, the economic reverberations of the ARR inadvertently detriment independent artists on a larger scale. In effect, when purchasing a work from an artist, a dealer will pay the artist less for the work than if the ARR did not apply, as the dealer will have to share any future gains with the artist.^[21] The contention is that – for most artists whose works will never occupy space within the ornate corridors of Christie’s – a first sale is likely their only realistic source of income.^[22]

Considering the inflammation of popularity surrounding the art resale market, buyers now more than ever actively appraise the expected value of a work on the secondary market to ascertain an artwork’s initial price point. For these buyers, resale royalties reduce the initial value of the work because of the eventual deduction upon resale.^[23] Because the market adjusts to virtually absorb royalty costs at first sale, lesser-known artists – many of whom rarely enter the secondary market – paradoxically emerge as the most wounded soldiers of the ARR. And so, any equity-based evaluation of the ARR continues to be a dubious determination provided it hinders the very group it was intended to privilege.

The Resale Right & Aboriginal Art in Australia

While contemporary complexities have largely rendered the ARR as an antique, many artists maintain a favorable opinion of the resale right.^[24] Their support is far from baseless; in Australia, for example, the resale royalty scheme has seemingly achieved, and even exceeded, the equitable aims of the ARR’s conception.^[25] The scheme, which is set up to pay 5 percent in royalties to artists on all works sold on the secondary market over $1,000, hit its $11 million milestone alongside its eleventh birthday in April 2022.^[26] A notable mark of its success is within the vast cultural reach of the Australian resale royalty scheme:

“Australian artists, from emerging to established, remote to urban, Aboriginal and Torres Strait Islander and non-Indigenous, have embraced the scheme. It is a sign of respect, adds to their economic wellbeing and importantly, protects their ethical rights in the resale of their works.”^[27]

As aboriginal art sales continue to rise, the institution of a resale royalty scheme functions to track the demand and value of the artworks while ensuring the original artists are compensated at each transaction.^[28] More than 65 percent of the artists participating in Australia’s scheme are of Aboriginal and Torres Strait Islander origin, receiving 38 percent of the scheme’s total, which flows back into the underserved communities in remote and regional Australia.^[29] While the Australian royalty scheme has seemingly delivered deserved income and notoriety to aboriginal artists, the royalty scheme remains a point of controversy within Australia for the reasons seemingly endemic to this type of regulation worldwide such as eligibility barriers and absorption of the royalty cost at first sale.^[30]

Conclusion

Conceived with the honorable intention of ensuring equitable outcomes in an artwork’s afterlife, the changing landscape of the art market has outpaced the ARR. The requirements for the ARR under UK law, combined with trends of financialization among auction houses, functionally limit the scope of this moral right to the art world’s most known and celebrated names. While amending these requirements could potentially provide some solvency in allowing lesser known artists to reap the benefits of the royalty such as that exemplified within the Australian scheme, the deflating effect of the ARR on selling points at first sale persist – rendering the ultimate impact of the ARR on lesser known artists to be a net negative given that most artworks of this kind rarely hit the secondary market. Thus, it seems that the abandonment of the ARR would serve to provide more meaningful equity than its continuation.

Suggested Reading

• Rachel Wetzler, How Modern Art Serves the Rich, New Republic (Feb. 26, 2018) https://newrepublic.com/article/147192/modern-art-serves-rich.
• Georgina Adam, Dark Side of the Boom: The Excesses of the Art Market in the 21^st Century (Mar. 15, 2018).
• Laura Chesters, Artist’s Resale Right: The ‘Rights and Wrongs’ of Law on Resale Duties, Antiques Trade Gazette (2019).

About the Author

Angelica Fromer is currently a third-year law student at Notre Dame University with an interest in art and fashion law.

Source:

1. Moral rights protect the personal and reputational, rather than purely monetary, value of a work to its creator. The scope of a creator’s moral rights may include the creator’s right to receive or decline credit for her work, to prevent her work from being altered without her permission, to control who owns the work, to dictate whether and in what way the work is displayed, and/or to receive resale royalties. Under American Law, moral rights are protected through judicial interpretation of several copyright, trademark, privacy, and defamation statues, and through the the Visual Artists Rights Act of 1990. Betsy Rosenblatt, Moral Rights Basics, (Mar. 1998) https://cyber.harvard.edu/property/library/moralprimer.html. ↑
2. Maryam Dilmaghani & Jim Engle-Warnick, The Efficiency of Droit De Suite: An Experimental Assessment, 9 Rev. of Econ. Research on Copyright Issues 95 (2012). ↑
3. Caroline Davies & Esther Addley, Art Dealers Claim Droit de Suite Levy Threatens London’s Art Trade, The Guardian, (Dec. 22, 2011) https://www.theguardian.com/artanddesign/2011/dec/22/art-dealers-droit-de-suite. ↑
4. Martin Wilson, Art Law and The Business of Art 19 (2019). ↑
5. Anna Khachiyan, Art Won’t Save Us, Open Space (Mar. 19, 2018) https://openspace.sfmoma.org/2018/03/art-wont-save-us/. ↑
6. See Christopher Upton-Hansen, The Financialization of Art, The London School of Econ. and Pol. Sci. (Jan. 2018). ↑
7. Rachel Wetzler, How Modern Art Serves the Rich, New Republic (Feb. 26, 2018) https://newrepublic.com/article/147192/modern-art-serves-rich. ↑
8. Id. ↑
9. Id. ↑
10. “Financialization, as a fact of late capitalism, produces severe inequalities by accentuating investment into financial assets rather than productivity and growth, hence simultaneously dedicating more resources to pursuing the returns on capital (in conditions where the rate of return is higher than output growth), and actively depressing output and productivity growth in the long run. This inequality accentuates the influence of the consumer patterns and preference profiles of its beneficiaries, thereby affecting the economic incentives within sectors where they are a key source of demand (for instance fine arts and luxury goods), and thus ultimately effecting structural changes within them.” Christopher Upton-Hansen, The Financialization of Art, The London School of Economics and Political Science (Jan. 2018) at p.111. See also id at 163 “Each of the facets discussed also presented a stark element of inequality: multiplying branded museums, factory-produced art and ‘mega-galleries’ expanding globally, met by museums closing for lack of funding, a vast majority of artists on the flat part of the Lorenz curve, and small and medium sized galleries packing shop.” ↑
11. DACS, Who Pays the Resale Royalty? DACS.Org (2022) (defining art market professional as someone “acting in the course of a business of dealing in works of art.” In practice this includes galleries, dealers, auction houses and agents, but excludes in general museums and private individuals.) ↑
12. Id. ↑
13. Artnet News & Morgan Stanley, State of the Art Market: An Analysis of Global Auction Sales in the First Five Months of 2022, Artnet (June 24, 2022) https://news.artnet.com/market/state-of-the-art-market-an-analysis-of-global-auction-sales-in-the-first-five-months-of-2022-2136208. ↑
14. Id. In 2022, the sell-through rate was 73.4 percent, a higher ratio in any year examined, except 2021. ↑
15. Id. (defining “Ultra-Contemporary” as artworks created by born after 1974). ↑
16. Id. In 2018, 1,520 works by artists born after 1974 were sold at auction during the subject period. In 2022, that figure jumped by 188 percent, to 4,379 works sold. The category has seen an even larger in value. In 2018, the category was responsible for $43.1 million in sales. This year, that figure nearly quintupled, to $246 million. ↑
17. The result is that the prices for contemporary art have risen higher and higher, which in turn attracts new buyers, many of them drawn in by the money alone. Rachel Wetzler, How Modern Art Serves the Rich, New Republic (Feb. 26, 2018) https://newrepublic.com/article/147192/modern-art-serves-rich. ↑
18. Ivan Macquisten, Should Post-Brexit UK get Rid of the Artists’ Resale Right? The Art Newspaper (2021). ↑
19. Id. ↑
20. See See also Laura Chesters, Artist’s Resale Right: The ‘Rights and Wrongs’ of Law on Resale Duties, Antiques Trade Gazette (2019). In the 2014 Art Market report, author Dr McAndrew found “ARR has done nothing of significance to help artists on lower incomes or early in their careers, when they are in most need of financial support, even though they were its intended beneficiaries. It has been the heirs of recently died, highly sought after and well-known artists who have gained the most.” ↑
21. Simon Stokes, Artist’s Resale Right (Droit De Suite): Law and Practice 5 (2006). ↑
22. Stephanie Turner, The Artist’s Resale Royalty Right: Overcoming the Information Problem, 330 UCLA Ent. L. Rev. 2 (2012). ↑
23. Id. ↑
24. Copyright Agency, Resale Royalty Scheme Hits $11 Million Milestone, Copyright.Com.AU (Apr. 5, 2022) https://www.copyright.com.au/2022/04/resale-royalty-scheme-hits-11-million-milestone/. ↑
25. Id. Over the life of the scheme, 2,300 artists and estates have received one or more resale royalties, from more than 25,000 sales. The majority – 80 per cent – of all royalties are between $50 and $500, and more than 46 per cent of royalties have been paid directly to living artists, with the remainder paid to artists’ estates and beneficiaries. ↑
26. Id. ↑
27. Id. (quoting CEO of Copyright Agency Josephine Johnston). ↑
28. Id. ↑
29. Id. ↑
30. Gina Fairley, Resale Royalty Scheme: 10 Years On and We’re Still Confused, Arts Hub (Jul. 5, 2020). ↑