We see this scheme as being an important step towards recognising creators of artworks. It will also align New Zealand with equivalent schemes of key international trading partners.

Background

The New Zealand Government has announced that it intends to establish a resale royalty scheme for artists. This follows New Zealand’s commitment to introduce such a scheme under the Free Trade Agreement with the United Kingdom. The aim of the scheme is to recognise and reward creators when their artworks are resold in the secondary market, particularly when their works increase in value over time. The “secondary market” generally refers to resales of artworks following the first sale of the artwork by the artist.

In summary, the scheme is intended to provide the following:

• The scheme will guarantee artists a five per cent royalty fee when their artworks are sold in the secondary market. Administration fees for the scheme will be deducted from the royalties.

• The right would apply to resales of artworks in the secondary market that involve a party “acting in the course of business of dealing in works of art”, such as art galleries and dealers.

• The scheme will apply to citizens or residents of New Zealand, and residents of jurisdictions with reciprocal schemes, including the United Kingdom and European Union.

• The duration of the royalty right will be linked to the duration of copyright in the artwork, which will be extended under the Free Trade Agreement to the life of the artist plus 70 years from their death, instead of the current term of life of the author plus 50 years.

• The right to royalties will be inalienable, and cannot be waived.

Our comments

The Government’s announcement comes as no surprise. The possibility of introducing such a scheme has been contemplated by the industry for a number of years, and was also proposed in 2008 under the Copyright (Artists’ Resale Right) Amendment Bill, which did not progress. The introduction of a scheme became inevitable following the signing of the New Zealand - United Kingdom Free Trade Agreement.

However, there are a number of issues that are yet to be clarified and addressed for the new scheme. For example:

• Is there a minimum price for an artwork that must be met before the scheme will apply?

• Will certain artworks be excluded, such as mass-produced artworks using a mechanical process?

• How will a party “acting in the course of business of dealing in works of art” be defined in the legislation?

• Do artists have to register with the collection agency in order to receive their royalties?

• What happens if an artist does not register with the collection agency - will they still receive their royalty or will the collection agency collect it and keep it?

• How will liability of sellers, buyers, and intermediaries work at a practical level?

• What will the tax implications be for artists?

• How will this impact artists who have established companies or other legal entities to own their copyright or manage the production and sale of their works?

• How will this impact artists who have a team of people working for them to create the artworks?

• How will authenticity of works and authorship be verified?

• Which organisation will be appointed to administer the scheme, and what will be done to ensure it is administered effectively?

We would not be surprised if the Government looks at corresponding schemes in other territories such as in Australia and the United Kingdom to consider how these issues might be addressed in legislation. In both these jurisdictions comprehensive provisions have been included in their legislation that deal with a number of these issues.

Next steps

The New Zealand-United Kingdom Free Trade Agreement requires that New Zealand implements the scheme by 2024.

We look forward to seeing the Bill for this scheme, and how (or whether) it addresses issues such as those discussed above.

Get in touch

If you would like to discuss any of the above, and how it may affect you, please get in touch with one of the experts listed.

Special thanks to Brooke Crenfeldt-Smith for her assistance in writing this article.