The long and winding road to royalties

For many New Zealand artists, the visual art market is an unforgiving place. However, perhaps unexpectedly, things are looking up following the introduction of the New Zealand and United Kingdom Fair Trade Agreement. In good news for artists, this agreement was the impetus to finally implement an artist resale royalty scheme (ARR).

The ARR aims to ensure visual artists are recognised and rewarded when their works are resold on the secondary art market.

The Resale Right for Visual Artists Bill (Bill), which will introduce the ARR, has now unanimously passed its third reading and only needs the Royal assent to become law.

So, what does the Bill do and what does the ARR mean for intellectual property rights?

What is the ARR?

Broadly, the ARR provides a framework for visual artists to continue to receive royalties when their work is sold in the secondary market (that is, in a resale after the initial sale by the artist). This is a similar concept to musical artists receiving royalties when their songs are replayed. The aim is to better compensate artists for their work, particularly where it increases in value over time, and to create more opportunity for artists to follow their passion as a career.

New Zealand has lagged behind in this space, but the ARR will bring New Zealand in line with around 80 other countries with similar resale frameworks. An additional benefit is that where those other countries have reciprocal schemes, eligible sales of New Zealand art in those countries will see Kiwi artists benefit, even when their art is sold offshore.

What do we know about the ARR?

• Any ‘eligible artist’ (or their estate) will receive a royalty payment when their art is resold on the secondary art market. This right can’t be waived or transferred.  

• There will be a flat rate royalty of five percent of the resale value (before any additions, deductions or charges).

• The ARR will be managed through an independent, not-for-profit collecting agency. The agency will deduct a twenty percent fee from the five percent royalty to cover administration costs of collecting and redistributing royalties.

• The royalty will usually be paid by the seller and their agent, but buyers and buyers’ agents could also be liable to pay the royalty.

• The resale right automatically applies to all ‘professional resales’ i.e., sales involving art market professionals (e.g., art galleries, dealers, consultants and auctioneers), or sales by publicly funded museums, galleries, libraries and archives.

• Parties to private resales can opt in as ‘voluntary qualifying resales’. The aim is to help Māori, Pacific and female artists, whose work is more frequently resold privately.

• The collecting agency or the artist can bring proceedings to collect unpaid royalties.

• The resale right has the same lifespan as copyright. However, unlike copyright, the resale right is inalienable, meaning it cannot be transferred or waived.

• The resale right will be provided on a reciprocal basis with corresponding regimes overseas.

Who and what qualifies for the ARR?

There are four conditions to be met to qualify for the ARR.

1. The work needs to be an original visual artwork. This includes where an artist has made a limited number of copies, and art created using computers or electronic devices, but does not include buildings, dramatic works, musical works, or literary works (as defined in the Copyright Act 1994).

2. It must be a 'Qualifying Resale’, so a New Zealand-based Art Market Professional must be involved and the resale value must meet the minimum threshold price of NZ$1,000).

3. It needs to be a current right. The right generally aligns with the term of copyright, 50 years past the death of the artist (so that successors may benefit too). Works created before the ARR is implemented are eligible but the scheme is not retrospective, so sales occurring before the ARR comes into force will not qualify.

4. The artist must be an ‘Eligible Artist’ i.e., a citizen or resident of New Zealand or a country providing reciprocal rights. The same eligibility requirements are applied to the artist's successor.

What does this mean for copyright owners - will artists still receive a resale royalty?

Yes. The ‘resale right’ is a related but separate right to copyright, a little like ‘moral rights’.

The owner of copyright in an artwork can sell or licence the copyright, usually for a fee. The artist will be the ‘first’ owner of copyright for their own work, and so unless they agree that the copyright will be owned by someone else, or the artwork has been ‘commissioned’, the artist will be the copyright owner. The copyright owner can decide the terms of any licence for the artwork, which can include restrictions on its use.  

The ARR will operate independently of copyright and licensing. This means that artists will be entitled to royalties under the ARR regardless of whether they own or have licensed copyright in the work. So, provided an artist doesn’t transfer copyright, they could sell their work to one party, while continuing to license it to others, and then profit again when the work is resold (and resold, and resold…).

What’s the big deal?

The ARR aims to support Aotearoa artists missing out on some of the benefit of the potentially large sums in the secondary market. For example, Bill Hammond’s estate would have been entitled to around $25,000 from the sale of “Hokey Pokey 3” on 15 August, had the ARR been in force.

The ARR will be operational by the end of 2024, bringing New Zealand visual artists to the end of a long and winding road to receiving royalties in the secondary market. This appears to be a very positive step.

If you have questions about how this could impact you or your business, we’re happy to discuss how the ARR could matter to you.