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Resale Right Royalty: Who Pays? For the CJEU it does not matter whether it is the seller or the buyer as long as it is paid
Friday, 08 March 2019 14:46

Resale Right Royalty: Who Pays? For the CJEU it does not matter whether it is the seller or the buyer as long as it is paid

Elena Dazio

At the end of November 2018, "Pool with Two Figures" by David Hockney was sold at the international auction house Christie’s for 90.3 million dollars, becoming the most expensive work of art of a living artist sold at auction. Just two weeks prior to this record sale Christie’s had obtained a significant victory which put an end to its years-long legal battle before the French Courts with “Syndicat National des Antiquaires” (SNA). The  question at issue was : “who pays the droit de suite (resale right) royalty – the seller or the buyer?”

The dispute began after insertion of a provision in the “Artist’s Resale Royalty” section of Christie’s standard Terms and Conditions whereby the buyer of an art work must “pay” the so-called resale right royalty following sale of the work and not the seller as provided by the French Intellectual Property Code  (IPC). SNA contested this provision, claiming that it contravened article L 122-8 of the IPC, which was implemented by way of transposing Directive 2001/84/EC on the harmonization of sales and resales of works of art in the Common Market. SNA claimed that this article was dictated by reason of "public order" and that therefore parties could not deregate from it. The Paris Court of Appeal, called upon to decide the matter,  admitted this argument and declared the provision invalid on the grounds that it ran contrary to the IPC and the Directive.

Christie's appealed the decision before the French Supreme Court which referred the question to the CJEU, asking it to examine whether the rule established by art. 1, no. 4, of Directive 2001/84 could be derogated from. The CJEU, in a decision of 26 February 2015, stated that  Directive 2001/84 must be interpreted as not precluding the person by whom the resale royalty is payable, designated as such by national law, provided that a contractual arrangement of this kind does not affect the obligations and liability which the person who is to pay the royalty has towards the author. (C-41/14, paragraph 14). In short, it does not  matter who pays the resale right royalty as long as it is paid.

Following the CJEU decision the French Supreme Court overturned the 2012 decision of the Paris Court of Appeal and referred the parties to the Court of Appeal of Versailles for a final ruling on the dispute.  The latter Court resisted the interpretation proposed by the CJEU. On 9 November 2018, the Plenary Assembly of the Supreme Court intervened to put an end to the dispute on the question, stating that article L 122-8 of the IPC could be derogated from by contract, aligning itself with the interpretation of the CJEU  and overturning the position on the point which had been consolidated in France since 1920.

The interpretation of resale right proffered by the French Supreme Court is confirmed by Italian law (articles 144-155 Copyright Law). Albeit stating in a general fashion that the royalty is to be paid by the seller, it seems to favour the possibility of the contracting parties deciding who is to pay the resale right royalty, provided however that the royaltyis paid by the buyer only when art market professionals, such as auction houses and art galleries, are involved which will undertake to declare the transaction data, to withdraw and withold from the sale price the amount due in their capacity of depositories and to pay the relative amount within 90 days of the sale. 

The Italian Courts are thus aligned with the interpretation of the CJEU: the rationale of the resale right lies in the right of the author to participate in the profits deriving from exploitation of his/her works, no matter who has been chosen to guarantee that right.