ARTinvestor Magazine Fall 2005

In 1973 Ethel and Robert Skull, as the result of a divorce settlement, staged a significant auction of contemporary art in New York; significant in as much as it was the first time a major evening auction transpired featuring solely contemporary art. Immediately after the sale, which was a monumental, historic success, Robert Rauschenberg punched Robert Skull in the stomach due to the fact two Rauchenberg paintings purchased from the studio for under $3,500 realized a quantum leap from his then primary market to $175,000. What pissed-off the artist so much to the point of fisticuffs was the fact that not only did Rauchenberg himself fail to participate in the upside of this market surge to the extent the Skull’s did, but moreover, the notion that he didn’t stand to make a cent off of the tremendous windfall the works achieved at the sale. Rauchenberg declared he wound henceforth receive a royalty in the resale of his art. He didn’t, but this now quaint anecdote presaged the issue of the Droit de Suite (resale profit-sharing rights) that to this day is widely debated and is sure to be even more hotly contested January 1, 2006 when it takes effect in the UK.

In a nutshell, Droit de Suite affects the public resale of an original work of art (including prints!) by a living artist or the works of dead artists up to 70 years after death. A levy of .25% to 5% (depending on sales proceeds) will benefit the artist or artists’ estate calculated on the sales price, not profit. Generally, no Droit de Suite is payable on sales less than €3000, but for all other transactions the rates are around 4-5% of the sale price up to €50,000, then declining to the lowest rate as the prices climb up to €2,000,000. The total amount of the Droit de Suite is not to exceed €12,500. The origin of the tax in the 1920’s was to assist French widows of artists that perished in WWI. The Droit de Suite provisions were later incorporated into copyright legislation of most nations in what is now the European Union and reflected in the Berne Convention. The Droit is not adapted in the US (except for California), Canada, New Zealand or Asia. Figures it was the French who started it, but can someone explain California?

The points of view (or rather, polemical positions) about the Droit de Suite are fairly straightforward, but nevertheless present an ongoing quagmire in the making. On one side are artists who (if they are lucky) see their works resold at auction but see no profits from subsequent transactions and still can manage to go hungry during such ongoing economic activity. On the other hand are the dealers and auction houses in the countries that adapt the law who stand to lose business, not to mention the poor collectors put out by having to search for tax friendly venues to shift works. The dealer and auction houses also argue artists’ prices will suffer because of the restrictions on trade.

To this writer, not lest of all as I ply my trade buying and selling “original” works of art and frequently arbitrage sales according to local tastes and tax consequences, this measure is clearly anti laissez-faire and bad for business. Though the tax is admittedly small and not too onerous, why not sell in New York (or Switzerland, see below) and not bother about the consequences. Also enforcement must be an expensive Herculean undertaking, to say the least, waiting for an over-zealous prosecutor with political aspirations. In addition, a “starving artist” is by most definitions not one being feted at night sales by Sotheby’s and Christies. When an artwork reaches new heights at auction and on the resale market there is clearly a spillover effect that benefits the artist directly by an increase in their primary market and an increase in the stock of paintings, etc. held by the artist. By the same token, should an artwork turn out to have lost value, (hypothetically speaking of course, as its never happened to me) should the artist chip in to restore the collector to parity? In the end, the consequences might be said to have materialized already in the way of recent gallery migrations from both the UK and Germany to Switzerland: London’s Haunch of Venison Gallery and Berlin’s Arndt and Partners will be launching form Zurich this season.

Kenny Schachter