Copyright (Artists’ Resale Right) Amendment Bill

Hon JUDITH TIZARD (Associate Minister for Arts, Culture and Heritage) Link to this

I move, That the Copyright (Artists' Resale Right) Amendment Bill be now read a first time. This bill amends the Copyright Act 1994, to insert a new stand-alone part establishing a resale right for visual artists. At the appropriate time I intend to move that the bill be referred to the Government Administration Committee for consideration. It is my enormous pleasure as Associate Minister for Arts, Culture and Heritage and as Associate Minister of Commerce to introduce this bill. It constitutes a separate part of the Copyright Act, with its own interpretation clauses. The Copyright Act covers a wide range of creative work, including dramatic, literary, and musical works, and film and sound recordings. This bill includes visual artists and widens their right to benefit from increases in the value of their works over time. This provision gives New Zealand artists the same rights that artists in many overseas countries have had for many years.

A resale right is a variation of the rights that exist under the Act, and it recognises the unique nature of visual art. As much as possible, the new resale right aligns with the provisions of the Act. The bill entitles visual artists to receive a royalty payment each time their original artistic work is resold on the secondary art market through any auction house, gallery, dealer, or any other business that deals with artistic works. The resale right will not apply to the first sale or transfer of an artistic work, and will not apply to sales between private individuals. A resale right is a moral right that recognises the continuing relationship between visual artists and their artistic works. It also recognises that visual artists, unlike creators of some other types of work, have limited opportunities in most cases to benefit from copyright, which deals mainly with reproductions or repeated uses of works.

Visual artists may be able to get some royalties from the reproduction of artworks in a variety of publications, but most of the real value for artists is in their original one-off work or in limited editions of prints, and it is currently rare for visual artists to benefit, once their artistic work has been sold, unless they have made special provision in the contract of sale. This amendment bill was signalled by the Labour Party manifesto in 2005 and it follows a discussion paper released in April 2007. The paper was very widely distributed to artists, art collectors, art dealers, galleries, auctioneers, iwi, second-hand dealers, museums, art institutions, and lots of members of the public with an interest in visual artworks. Over 200 submissions were received on the discussion paper, with most supporting a resale right. Artists made up about half of the submitters, with art collectors the second-largest group of respondents.

Generally, artists and arts groups supported the resale right, and auction houses and dealers did not. It is noted, however, that a few artists have spoken out against the resale right—something that also occurred when provisions of this sort were introduced overseas. It is also noted that a number of art dealers, curators, and collectors supported the resale right, and some already voluntarily pass on a percentage of resale proceeds to artists.

One argument against the resale right was the concern of increased compliance costs for businesses such as dealer galleries and auction houses. The Government has considered this and taken it on board. We are introducing a flat 5 percent royalty rate rather than the variety of royalty rates that applies in some other countries, such as the UK. Monitoring and enforcement will be undertaken by one appointed collecting agency, which will be selected through a tender process and will assist businesses in calculating royalties due and determining the eligibility of artists. Auction houses already publicly report sales of artistic works, and all businesses have to complete sales and financial returns, so any additional work to determine a resale right should not prove onerous. It is also argued that a resale right would depress the art market, but there is no evidence to establish that that will occur—it certainly did not in the United Kingdom.

There is already a range of costs inherent in the art market, such as a buyer’s premium, and an additional 12 to 15 percent charge by the business on top of each sale of an artwork. Dealers and agents can also charge similar amounts, or more, as commission on each sale. There is no evidence to show that any of these factors impact negatively on the price people are prepared to pay for an artwork, nor that they reduce demand for art generally. I do not believe, therefore, that paying 5 percent to the creators of artworks will depress the art market. In the UK, surveys show that the art market has strengthened considerably since the introduction of a resale right in February 2006. Visual artists in the UK have benefited from this demand, with the main collecting agency reporting resale royalty returns of more than £4.6 million going to artists.

In tackling this complex issue, the Labour-led Government is honouring an election promise to examine international developments relating to resale royalties and their possible application to New Zealand. I also note that the Australian Government has indicated that it will undertake a similar investigation. The Government is also honouring an optional international commitment under the Berne Convention for the Protection of Literary and Artistic Works, and engaging with like-minded countries that enable their visual artists to have an ongoing economic benefit from their work. Many countries already have a resale right for their visual artists, including France, which in 1920 was the first country to introduce this right. New Zealand will pursue reciprocal understandings with those countries, particularly in the European Union, that will enable New Zealand artists whose work is sold in other countries to also benefit from a resale right.

The resale right will apply to artwork sold in New Zealand by artists who are residents or citizens of New Zealand, and to artists who are nationals of reciprocating countries that offer a similar right on artwork sold in their countries by nationals of New Zealand. A resale right will apply to any visual artwork on which copyright exists. In line with the Act, this includes original work such as paintings, drawings, photographs, sculptures, glassworks, and ceramics. It includes limited editions made by the artist or made under the artist’s authority, and it also includes unique pieces of jewellery or furniture made by an identifiable artist.

In line with international practice, a resale right will not apply to works of architecture, such as a building or a model of a building. Although architecture is deemed as an artistic work under the Copyright Act, overseas practice is to exclude architecture from resale right schemes, and that is what has been done with a separate part of the Act in New Zealand. A drawing or a plan of a building, however, would be included in the resale right scheme and could attract a resale royalty if it were sold on the secondary art market.

The bill deems an artist who creates an original artwork to be the holder of a resale right. That right will be inalienable and it protects an artist from being pressured to contract out of the right. It also protects artists from being pressured to share the rights with someone else. However, the right can be left to others in an artist’s will.

Resale royalties will be collected on artworks sold during the artist’s lifetime and on works sold for 50 years after the artist’s death. This is the same duration as for copyright under the Copyright Act. All commercial dealers will be liable for payment of the resale royalty, and royalties will be collected by one appointed agency that will have been appointed under regulations made under the proposal in new section 204R. Only that agency will be able to request information from those selling artworks, and it may use this information only for the purposes of the provision. Non-payment of resale royalties or the failure to provide information will be subject to civil proceedings, and only the collection agency can take court action on behalf of resale right holders.

In return for managing the resale right on behalf of artists, the collecting agency will charge a fixed fee or percentage of the royalty. This is also consistent with international practice and with other agencies in New Zealand and overseas that collect copyright royalties. This fee will cover the collecting agency’s administration costs. Therefore, the scheme will be self-sustaining and of no ongoing cost to the Government, and it will operate the same way as the Australasian Performing Right Association and the Copyright Licensing Ltd schemes do.

The resale royalty right will be 5 percent of the resale price of the artwork. It is a relatively small amount compared with the combined 30 percent or more that is typically collected by art dealers from buyers and sellers of artworks. A resale right will also apply only to works that sell for $500 or more. That threshold and the flat 5 percent rate make it a simple scheme, and make it easy to understand and enforce. Many overseas schemes are, by contrast, more complex and difficult to administer. The Government is pleased that this stand-alone part of the Copyright Act recognises the contribution made by both established and emerging visual artists and that it offers some of the economic benefit that artists can derive as creators of original works as their works increase in value over time.

Research shows that New Zealanders are more likely than many others across the globe to have original artworks in their homes, be it for pleasure or because art is seen as a good investment, or both. This bill recognises, as most New Zealanders do, the contribution that artists make to our society. The Copyright Act 1994 and amendments recognise a range of interests and rights by a wide range of creative workers and users. By its nature its use covers different rights in different ways. I am happy to see this amendment being proposed. This Government recognises that Parliament must continue to review and update copyrights so that there are clear incentives for creators to create, innovate, and develop across creative and technical sectors.

I thank those parties who have supported this legislation being referred to the select committee. I urge all parties to support the first reading of this bill and its referral to the Government Administration Committee for the calling of submissions and further consideration.

CHRISTOPHER FINLAYSON (National) Link to this

The Copyright (Artists’ Resale Right) Amendment Bill proposes yet another piecemeal amendment to the Copyright Act 1994. As the Minister said, it proposes to establish a scheme that entitles visual artists to receive a royalty payment each time an original artwork is sold commercially through an auction house, gallery, dealer, or other professional involved in the business of dealing in works of art.

Some history is perhaps instructive. The resale royalty right is known in France as the droit de suite and it became law there, as the Minister said, in 1920, for a number of reasons. In the early 1900s, for example, the widow of Impressionist painter Jean-François Millet was found living in poverty just as the resale price of her husband’s work was spiralling to new heights. One of the stated reasons for the law was to ensure that such a situation would never recur. It was also established, apparently, to assist the widows of French artists who were killed in the First World War, at a time when no welfare or social security systems were in place. Over the years since the French introduced this scheme in 1920, more than 50 countries have adopted a type of resale royalty right, and indeed quite recently, in 2001, a European Union directive was passed that mandated that those member countries that did not have a resale royalty right had to introduce one into domestic law by 2006. That is why Britain implemented the Artist’s Resale Right Regulations in February 2006.

National will not support this bill, for a number of reasons. The first reason is that it is yet another example of the episodic reform of copyright law. What is required is comprehensive reform. In my first reading speech on the Copyright (New Technologies and Performers’ Rights) Amendment Bill, I put the case for a complete review of the law of copyright. I expressed concerns about the episodic reform of the law. I said that such reform can undermine the structure of the substantive legislation. I reiterate those concerns here. The time has come for a comprehensive review of the law of copyright, where all competing interests can be examined in the light of technological change since the last major revision in 1994. Parliament can then make decisions about the appropriate structure of copyright legislation for the next few years of the 21st century. Such a task is, admittedly, a major undertaking, but I believe it is one that is needed.

The Government has an important role to play in defining artistic property rights. Indeed, it is far more important than its funding and subsidy decisions. Copyright law that protects the expression of artistic ideas specifies, for example, who has the rights to revenues. In New Zealand, the domestic retail sales of music were worth $173 million in 2005, book publishing generated $204 million in 2002, and the total gross revenue for the New Zealand screen industry for 2007 was $2.45 billion. The creative sector contributes about 3 percent to New Zealand’s GDP, so copyright law in New Zealand is a very important issue. Yet for 8 years this lazy Government has done very little in the area, preferring to tinker, and we all know about the mess it made of the most recent amendment. Then, out of the blue has come this stand-alone proposal. National will not support this amateurish mode of law reform for such an important statute.

The second reason National will not support the bill is that this scheme is contrary to basic property law concepts. The droit de suite was founded on, and is consistent with, civil law notions of property. Such a notion sees the artist joining his or her individual will to the work, and as a result the work comes to embody the owner’s personality. Yet in our property law system, an artist’s work is treated as a commodity, and generally no continuing connection between artists and their work subsists. Accordingly, the purchaser of an artwork who pays the market price, and who assumes the considerable risk that the work may decline in value, should receive unfettered ownership.

The essence of the argument for an artists’ resale royalty is the disparity between the initial sales price of a work in the primary market and the price for which the work is later sold in a secondary market. However, that raises the question of why artists should be treated differently from other producers of negotiable goods. It would be unreasonable, for example, if a person who had invested in shares had to share any profits with the company or its management when he or she sold those shares. There is also a strong argument that because investors carry the financial risks of owning an artwork, it is inappropriate for an artist to benefit from the resale but share none of the risks or costs in between sales.

The third reason we do not support the bill is that this legislation will encourage an exodus of art transactions to jurisdictions where the royalty is not paid. Art resales will become private and underground, in order to avoid the resale imposition. It is worth noting that the UK Government fought the introduction of the droit de suite scheme, arguing that the levy would cost up to 5,000 industry jobs and would divert trade to the United States and Switzerland in order to avoid it. The effect on the French market since the introduction of droit de suite supports that argument. At present, although roughly a third of the fine art sold in the world is French in origin, only 7 percent of all French art sales take place in France. Indeed, I was reading an article just last week that indicated that the French are trying to water down their own system because they have seen the harmful effects of it.

A fourth point is that the measure is economically detrimental to the art market and to artists generally. It is basically a tax on sales, and as such it could have the effect of discouraging investment in, and consequently depressing, the art market. In the secondary market, collectors may hesitate to buy the works of contemporary artists, because as soon as they purchase a work it immediately drops in value, as any subsequent sale will be subjected to a resale levy.

The fifth point is that the measure would only benefit successful artists. The secondary market for contemporary art is very small indeed. Only a handful of contemporary artists will ever see one of their works resold. Resale royalty payments therefore benefit only a small number of already successful artists, as those are the artists whose works attract large prices and typically resell frequently. They are also the people who do not generally need a resale royalty. Less successful artists fail to benefit, as their works are less likely to be resold at a high price. Again I refer to the United Kingdom situation. The scheme has been condemned by the people it is designed to benefit. Seventy percent of the 50 million francs levied under the French scheme in 1996 went to the families of only seven artists, including the heirs of Picasso and Matisse. The same situation has occurred in both Germany and Australia.

The scheme will be very costly to administer, and I note that $500 is a very low threshold price. It is probable that the cost of administering the scheme would outweigh the benefit of the royalty.

The other point that needs to be emphasised is that some schemes have not been particularly successful overseas. The Californian statute has been described as having teeth like those of a gummy bear, and it is rarely enforced. Of the 11 European Union member States that currently have legislation, seven do not enforce it, or, at the very least, do not enforce it on a regular basis.

Finally, the scheme may create privacy concerns. The Minister also failed to address an interesting issue that has arisen recently with members of Parliament. Who is to receive the royalties? In the context of a painting, for example, will it be those who paint the work or those who sign it? That is a very difficult legal issue, which the Minister has dodged.

So this is a very poor bill. It comes after 8½ years of the Government’s doing nothing to address the real concerns of artists. Copyright law is an extremely important subject, but this bill is a poor bill introduced in the dying days of a Labour Government. It deserves to go no further than its first reading, and National will oppose it.

Hon PAUL SWAIN (Labour—Rimutaka) Link to this

That was actually quite a disappointing contribution from the member Chris Finlayson.

NICKY WAGNER (National) Link to this

I rise to speak to the Copyright (Artists’ Resale Right) Amendment Bill. I will consider the operation of such a scheme and explain why under this legislation it just will not work.

At first view, the idea of droit de suite, or an artist’s resale royalty, appeals, as the previous speaker was saying. After all, most New Zealanders who enjoy the visual arts are keen to reward and support artists. It is well known that economic success in the world of visual art is unusual and that the vast majority of New Zealand artists struggle to make ends meet. Instinctively, the idea of a struggling young artist selling his or her work for peanuts and later having to watch the art dealer make a fortune out of the artist’s creation disturbs the Kiwi idea of fair play.

Making a living in the art world is not easy, and payments for ongoing work are irregular and incomes are low. We all know artists, particularly the young, the talented, and the passionate whom we would like to see earn a decent living. I really like the story of artist Michael Smither, one of our most renowned and top-selling artists, who has created his own DIY resale royalty scheme—and it works for him. After finding that some of the paintings he originally sold for about $150 to $400 back in the 1960s and 1970s were being resold for up to $100,000, he created a very simple contract that required buyers of his paintings to return 5 percent of gross resale value of the work to the living artist. The contract is simple and straightforward, and it pertains only to the first sale of the work and only whilst Mr Smither is alive. Mr Smither has had no problems promoting his scheme. He found that 85 percent of potential buyers happily agreed to the contract, and as far as he was concerned the other 15 percent, whom he thought were trading in his art only for profit, were not worth dealing with anyway. His paintings, even with their own resale royalty, have retained their value and have, in fact, been in huge demand.

Over the last 5 years Mr Smither has sold over 100 paintings under his resale contract, and although not a large number have been resold, so far all the vendors have voluntarily repaid the resale royalty. Mr Smither is also confident that he is able to track the resales. His scheme is simple and cheap, and it has proved to be very effective. He would therefore favour a voluntary code of practice that works rather than an unproven legislated royalty scheme.

Recently, I was talking with Don Binney, who has created a similar resale scheme for his work. He found that although the contract at times made the original sale more complex, as buyers grappled with the concept, they were still purchasing. But at the time of our discussion he had not had any resales.

It is great to see these artists creating simple, effective systems that work for them and their buyers. But that does not mean that a Government-legislated scheme will be equally successful. A Government-legislated droit de suite is a totally different animal. Whereas Smither’s and Binney’s DIY systems are simple and effective, the scheme proposed by the Copyright (Artists’ Resale Right) Amendment Bill is complex, expensive, and, most likely, ineffectual. It all boils down to the size of our art market versus the cost of regulating, and the size of the bureaucracy needed to recover and redistribute the royalties.

Art sales data is difficult to quantify, but it seems that the entire New Zealand visual arts sales through dealers or at auction is only about $15 million a year. So even if all art works included a 5 percent royalty, the whole scheme would have a maximum collect of $750,000. But when we exclude artworks that are sold for the first time and all art works under $500, just how much money would there be in the pot? When we deduct the cost of monitoring, collecting, and distribution, how much money would actually get to the artists? That is the key issue. Some estimates are as low as $300,000. That will not go very far. Three hundred thousand dollars to support all New Zealand’s visual artists? It will not do anything. In fact, it is pretty close to the amount that the Ministry for Culture and Heritage pays to one person at the top of its organisation. Who will head the organisation that collects the royalties, and how much would that person be paid? Then there is the problem of who is likely to benefit from the little amount of royalty there is likely to be. Payments from similar schemes overseas tend to favour the already successful and the dead. In France, for example, the vast majority of the droit de suite levy goes to a handful of families of dead artists, including the heirs of Picasso and Matisse. In Germany, the royalties are paid out to about 500 artists out of an artistic population of 12,000.

It should be noted that one of the reasons that the Australian Parliament voted against a resale royalty recently was that 20 percent of the art auction sales in that country that would have attracted a royalty would, again, have gone to prominent and deceased artists such as Arthur Boyd, Sidney Nolan, and Brett Whiteley. It should also be noted that as long as Australia does not have an arts resale scheme it would be very simple for New Zealand art sales to transfer to Australia. There is a risk that the Australian art sales network would be strengthened at the expense of New Zealand’s, and with absolutely no benefit to our artists. I certainly do not fancy supporting the outsourcing of art sales overseas.

Although we are all keen to support the visual arts, and although a method of funding that would support working artists by providing a more reliable income is attractive, this scheme gives me no assurance that it will do anything significant for New Zealand artists at all. In fact, the size of our arts market means that under present legislation this scheme will be a bureaucratic disaster, with costs eating up the majority of the royalty revenue and resulting in tiny payments to a small number of artists. This bill is a Clayton’s bill. Like so much of Labour’s legislation, it promises much but delivers very little more than bureaucracy and red tape. It would be expensive, impractical, and inefficient.

DAIL JONES (NZ First) Link to this

This Copyright (Artists’ Resale Right) Amendment Bill is very interesting legislation. It is a new idea. With the way the bill is drafted, it is almost a work of art in itself, bearing in mind the new concept that exists in it. New Zealand First will be pleased to support this bill’s referral to a select committee.

New Zealand First is a party that believes in actually doing things. We do not believe in opposing things just for the sake of opposing, which is what we have just heard in the speech from the preceding speaker, Nicky Wagner. Sometimes we should try an idea, send it to a select committee, and see what the people of New Zealand have to say about it, rather than listen to a member pontificating in a speech that was probably prepared by someone in a research unit rather than one that gives the member’s own viewpoint. We in New Zealand First would much prefer to hear the views of the people of New Zealand—in this case, particularly, the views of the artists, the auctioneers, and all of those who are interested in the art field.

I have a few paintings myself. I have never thought of selling any of them. Maybe they are not very good, but one never knows. They might be very valuable for all I know. We seem to collect them at various places we go out to in New Zealand. As a member of Parliament in particular, one might go to an A and P show, and there is always an art exhibition there of some kind. I have bought pictures to support the local artists. I have bought pictures at Muriwai Beach, in the Helensville area, and in Nelson. I tend to collect them. Of course, one day I might sell them, or someone might sell them for me when I am no longer around.

We in New Zealand First wish to try anything that can be done to support artists, who are not terribly wealthy people. We want to do things for people to encourage them to produce more art in New Zealand, and if they can get some sort of royalty over the years for the work they have done, then why not? Why should a, perhaps, speculative buyer make all the profit rather than the person who painted the item or did whatever was necessary to bring it within this definition?

Mention has been made of an interesting scheme set up by one artist, and I think it is a very good idea. It is good thinking, but the problem that that artist clearly has with the scheme is that he has set it up to do it only once, because of problems with assignments and suchlike, whereas I would like to see a scheme whereby if something is sold more than once within the time frame set out in the bill, then the artist can profit from it.

Why should artists not make a profit? What is wrong with artists making a profit? I would ask why the National Party is against a profit being made by an artist, because that is what we are looking at—artists profiting and making money. It is called private enterprise. It is called the open market. Why are National members opposed to the open market? Why are they opposed to artists making a profit? Do National members have it in their minds that artists are not allowed to make money?

KATRINA SHANKS (National) Link to this

It is my pleasure to rise to speak to the Copyright (Artists’ Resale Right) Amendment Bill. When I was looking at this bill—and I have been briefed on it a little bit—I asked where the sector actually sits and who is for and who is against it. Not a lot of people are really for this bill. When one goes into the sector and talks to the people in the auction houses and asks them whether they support the bill and whether they think that it is a good idea, I must say they are not very hot on it. I have a couple of friends who are artists and who sell a bit of art. I asked them whether they support this bill and whether they think it is a good idea. They were not very hot on it, either. They said they were happy to sell their art, to get what it is worth on the day, then to let other people enjoy their art and onsell or on-gift it if they wanted to. So I tried to figure out why this bill is here and why it is going to a select committee. Then I worked it out. It is because when Helen Clark leaves Parliament and her art is sold at an auction or through a broker, she will get 5 percent royalty. That is what this bill is about. It is about protecting her revenue source, going forward. It is to protect the Prime Minister’s revenue in the future.

JUDY TURNER (Deputy Leader—United Future) Link to this

I stand to speak to the first reading of the Copyright (Artists’ Resale Right) Amendment Bill, which amends the Copyright Act of 1994 and inserts a new provision to establish a resale right for visual artists in New Zealand.

This resale right entitles visual artists to receive a royalty payment each time an original artistic work is resold on the secondary market. The provision does not apply to the first sale or transfer of an artist’s work, and does not apply to sales between private individuals. The scope of this bill is limited to original works of visual art—paintings, photographs, sculptures, and some jewellery. It expressly excludes works of architecture, original manuscripts of writers and composers, and artefacts like that. The scheme will be extended to all auction houses, galleries, dealers, and any other intermediary or professional who is involved in the business of dealing in works of art. Interestingly enough, auction sites such as TradeMe and eBay are excluded from the provisions of this bill.

United Future is opposing this bill because although similar schemes or variants of it exist in other countries—like France and, as has been mentioned, the UK—the application of those schemes is broader than what is proposed for this New Zealand scheme. Those countries also have long-established art markets and a greater population of art benefactors and investors, whereas the New Zealand market—particularly of works by New Zealand artists—is a comparatively fledgling market. It is only in recent times that emerging notable and collectable New Zealand artworks have attracted premium prices. United Future believes that as this emerging market develops, it could come under threat by this proposed scheme.

The bill has a tendency to be elitist. By restricting the scheme to visual artworks, it also starts to define, in economic terms, what art is.

A key argument for a royalty fee is to help artists, and, in particular, emerging artists, to get early recognition of their creative outputs, and to enable them to support themselves as full-time professionals. The claim is often made that a struggling artist, out of necessity, often sells work at a very low price, and thereafter derives no benefit from capital gain, should the artist’s work subsequently appreciate in value.

United Future asks when it is the State’s role to legislate in order to guarantee in virtual perpetuity an assured share of the potential capital gain of any goods or any service. If the State is concerned about ensuring the financial viability of professional artists, then it would be better to specifically target funding at assisting such groups. United Future looked very closely at what has happened in places like Ireland, where there has been a real flourishing of the arts, due to some really good Government initiatives—but not this kind of control and tracking.

One of the concerns I have had as I have been thinking about the ongoing implications of this bill is around issues of privacy. I can imagine an artist selling his or her piece of art, then having an extremely close interest in where it is, who is looking after it, and how it is being displayed. A lot of people who purchase art for their private collection do so for their own personal enjoyment; it is not necessarily an investment. I am not sure how appreciative they would be if, over the years, they are constantly contacted and asked whether they still own the art, where it is, and whether they are looking after it properly, because the artist has an ongoing sense of investment in the ongoing care and—