Select Committee on European Scrutiny Eighth Report


ARTISTS' RESALE RIGHTS


(22117)
5665/01
COM(01) 47

Commission Opinion on the European Parliament's amendments to the Council's common position on the draft Directive on the resale right for the benefit of the author of an original work of art.


Legal base: Article 95; co-decision; qualified majority voting
Document originated: 24 January 2001
Forwarded to the Council: 24 January 2001
Deposited in Parliament: 13 February 2001
Department: Trade and Industry
Basis of consideration: EM of 1 March 2001
Previous Committee Report: None; but see 20550 — : HC 23-xii (1999-2000), paragraph 3 (15 March 2000)
Discussed in Council: 12 March 2001
Committee's assessment: Politically important
Committee's decision: Cleared

The proposal

  26.1  The proposal would introduce a resale right, often referred to as droit de suite, which would give an artist and, for 70 years after his death, his successors in title, a right to a percentage of the selling price, whenever one of his original works is resold in the Community.

  26.2  Resale rights exist in various forms in most Member States, but not in the United Kingdom, Ireland, the Netherlands and Austria. The right is not enforced in Italy and Luxembourg. By harmonising the right, the proposal aims to:

    —  remedy alleged distortions in the sale of modern and contemporary art in the Internal Market; and

    —  redress an alleged imbalance between the economic situation of authors of graphic and plastic works and that of other creative artists.

Scrutiny

  26.3  We have reported on this proposal on many occasions since it was introduced in 1996 and debated in European Standing Committee B on 29 January 1997.[57] The House of Lords has debated it on two occasions, 11 December 1996[58] and 10 December 1997.[59] We cleared it on 26 May 1999[60] before the June Internal Market Council. We last considered it, on the basis of an update from the Minister, on 15 March 2000.[61] A Common Position was finally adopted on it, unanimously, on the basis of a Presidency compromise text, at the June 2000 Council.

  26.4  In his Explanatory Memorandum of 1 March 2001, the Parliamentary Under-Secretary of State for Consumers and Corporate Affairs (Dr Kim Howells) says that the Commission did not accept the Common Position, taking the view that some of the changes introduced by the Council would unduly delay harmonisation.

The Commission Opinion

  26.5  The proposal we consider here is the Commission's opinion on the amendments adopted by the European Parliament at its Second Reading on 13 December 2000.

  26.6  The Commission accepts nine of the European Parliament's thirteen amendments, rejects three, and is willing to accept one as a recital. Most of the amendments do not affect the substance of the Common Position, but three would change it substantially. These amendments would reduce:

    —  from 5 years to 2 years, the period for implementing the Directive [amendment 15];

    —  from 10 years to 2 years, the transition period during which Member States which do not already apply a resale right would be entitled to apply the right to living artists only [amendment 11]; and

    —  from 4000 euros to 1000 euros, the threshold below which there would be no obligation to charge the levy [amendment 6, first paragraph].

  26.7  The Commission rejects the second paragraph of amendment six. This would remove the flexibility for Member States to set a national threshold lower than the one set by the Community and would have the effect in some Member States of depriving artists of the right on works sold at a price which, at present, entitles them to the right.

  26.8  The only other amendment with a potentially significant impact is amendment 14. This amendment was also accepted by the Commission. It would constrain the Commission to submit proposals to raise or abolish the 12,500 euro cap on the total amount of the royalty payable, but not to lower it.

The Government's view

  26.9  The Minister comments on the latest proposal, and how it differs from the Common Position text, as follows:

    "The common position is the culmination of four years of negotiation and five Councils. It reflects an acceptable balance between the rights of artists, the international competitiveness of Community art markets and the needs of the Internal Market.

    "The hard-fought agreement, reached unanimously in the Council last year, is a significant improvement on the Commission's original proposal, and on its amended proposal following the Parliament's first reading. Those proposals provided: the standard implementation period for Internal Market measures (18 months to 2 years is the norm); a minimum threshold of 1000 euros (cf amendment 6); no transition period; and no royalty cap. The earlier Commission proposals also provided a royalty rate tapering down only to 2% on high-value works, whereas the common position rate tapers to 0.25%. Happily, the Parliament has not changed this; nor the 12,500 euro royalty cap. The common position improvements were introduced largely in response to UK concerns about the potentially adverse effect of the levy on the international competitiveness of Britain's art market.

    "The Parliament's amendments, however, would substantially change some of the key common position improvements and bring the draft Directive back closer to the Commission's original proposal. The Parliament's package of amendments is not acceptable to the Government; and it wholeheartedly supports the Council's intention to reject the Parliament's amended text. Conciliation between the Council and the Parliament, in accordance with the provisions of Article 251 (ex 189b) of the EC Treaty, must necessarily follow Council's rejection of the Parliament's text."

  26.10  Commenting further on the proposal, the Minister says:

    "Threshold

    "The effect of lowering the threshold from 4000 to 1000 euros would be to apply the resale right to a greater number of transactions, and thereby increase the burden on business, particularly small firms handling low-value sales. For them, the cost of compliance would exceed the benefit to artists.

    "Implementation period

    "The reduction in the implementation period from 5 years to 2 would more than halve the time available for firms to plan for, and adjust to, the new right; and for mechanisms to be set up to collect and distribute royalties on a pan-European basis (possibly beyond). This will not be easy, especially for small firms with limited resources.

    "Transition period

    "The reduction in the transition period means there would be only two years (instead of up to ten) in which to phase the new right in, by first applying the right only to living artists, and later to successors in title. The effect of this reduction, combined with the reduction in the implementation period, would be to reduce from a maximum of 15 years to just 4 the time available to the Commission to try to negotiate an agreement extending the right at international level. But this will not be easy; and the Government would have preferred a period of more than 15 years in which to do this.

    "Adjustment of the royalty cap

    "The amendment whereby it would be possible for the Commission to submit proposals to only raise or abolish the 12,500 euro royalty cap would preclude the possibility of lowering the cap should experience of the Directive show that the level set in the common position was failing in its aim of minimising the incentive for owners of works of art to sell their collections on markets where the levy is not charged. Britain is by far the EU's largest and most important market for modern and contemporary art; and any significant increase in, or abolition of, the cap could impair its ability to compete for high-value, international sales against its main competitor, the United States, and other markets which do not charge the levy."

Subsidiarity

  26.11  On this question, the Minister comments:

    "The Commission, in rejecting the second paragraph of Amendment 6, argues that any disparity in the Internal Market resulting from application of the right below 1000 euros in some Member States is unlikely to have a significant effect on intra-Community trade. It therefore concludes, in accordance with the principles of subsidiarity, that Member States should be allowed to establish thresholds lower than the Community one. Likewise, in rejecting amendment 8 (modifying Article 6(1) so as to specify the persons entitled to inherit the resale right), the Commission concludes that inheritance rights are a matter for the individual Member States."

Regulatory Impact Assessment

  26.12  The Minister says that a regulatory impact assessment will be produced as soon as the likely impact of the Directive on United Kingdom business can be ascertained.

  26.13  The Minister recalls, however, that a regulatory impact assessment was made for the original proposal. A sensitivity analysis in it considered three scenarios. The worst case scenario assumed that all UK sales subject to the resale right would be driven offshore to markets where the levy is not charged. The middle case scenario assumed the displacement of sales originating from sources outside the EU, while the best case scenario assumed no displacement at all. He says:

"The results of the analysis were as follows:

£ million
Worst case scenario
Middle scenario
Best scenario

Loss of earnings

Possible job losses

Loss of VAT revenue

Royalties

Cost to artists of collecting royalty

68.1

5000

3.7

0

0

17.5

1293

3.7

6.9

1.38

0

0

0

9.8

2

    "An independent study of the proposal, as it later stood under the German Presidency, was commissioned by the Government in March 1999. At this stage, further improvements to the proposal were under consideration, notably a royalty rate of 0.5% on the highest price tranche and a minimum threshold of 2000 euros.

    "The study concluded that the relevant market in modern and contemporary art (on a worst case scenario) could decline by as much as 78% i.e. from £280 million to £61 million, resulting in a loss of earnings of £57 million per annum. Moreover, total art sales could fall by as much as £750 million or 23%, owing to the shipping of mixed lots for sale outside the EU i.e. batches containing works only some of which would be subject to the resale right. The study estimated this could cost up to 8,000 jobs.

    "The proposal was progressively improved during subsequent Presidencies, in particular to provide a royalty rate of just 0.25% on the highest price tranche and a 12,500 cap on the royalty payable (meaning no more to pay on a work fetching 2 million euros or more). The effect of the common position improvements should be to further reduce the incentive for owners to sell their collections outside the EU. The position would improve still further were the Commission able, within the combined period of the common position's implementation and transition periods, to level the global playing field by negotiating an agreement extending the right at international level."

Timetable

  26.14  The Council's formal rejection of the Parliament's amendments is expected in March, possibly at the 12 March Internal Market Council. The first conciliation committee discussion will take place on 27 March. The committee must prepare a compromise text by 22 May. The Council and the Parliament will then have six weeks (extendable by two) to accept or reject the text.

  26.15  The Minister describes the voting procedure as follows:

    "The Council acts by a qualified majority. This will continue to be the case ... in the conciliation between the Council and Parliament; and in deciding whether to accept or reject a joint text. However, the Parliament's representatives on the conciliation committee act by majority; and the Parliament, in deciding whether to accept or reject the joint text, acts by an absolute majority of the votes cast."

Conclusion

  26.16  It is regrettable that the European Parliament has sought to alter the balance achieved in the Common Position. Concern for the impact of the proposal on jobs in this country remains and we urge the Government to argue for a review, after two years, of progress being made by the Commission in negotiating an agreement extending the right at international level. The Directive should provide for the transition period to be extended if the prospect of success in these negotiations is not good.

  26.17  We now clear this document.


57  Official Report, European Standing Committee B, 29 January 1997. Back

58  Official Report, 11 December 1996, col. 1160ff. Back

59  Official Report, 10 December 1997, col. 196ff. Back

60  (18976) 6992/98; see HC 34-xxi (1998-99), paragraph 10 (26 May 1999). Back

61  (20550) - ; see headnote to this paragraph. Back


 
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