Hon Christopher Finlayson

CHRISTOPHER FINLAYSON (National) : 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.