The French Supreme Court has put an end to an eight year-long legal battle over the payment of the artist’s resale royalty in France. The issue was whether Christie’s France could, by way of contract, provide that buyers at auction should pay the artist’s resale royalty. The French dealers argued that they were not, and that the royalty must be paid by the seller.
Background
Each of the French national association of antique dealers (Syndicat National des Antiquaires) and the art galleries’ professional committee (Comité professionnel des galeries d’art) brought legal proceedings against Christie’s France in 2011. Two main arguments were put forward. First, the French dealers argued that it was unlawful as a matter of French law to shift the burden of payment of the artist’s resale royalty from seller to buyer. The Directive 2001/84/EC on the artist’s resale right provided that in principle, the “royalty shall be payable by the seller” (Article 1(4)). However, this is only a guiding principle and Member States were given the possibility to make other persons liable, such as the buyer (Article 1(4); Recital (25)). When France implemented the Directive (Law 2006-961 of 1 August 2006), it chose to make the seller liable for the payment of artist’s resale royalty (Law 2006-961 is now codified in Article L. 122-8 of the French Intellectual Property Code). However, the law was silent on whether seller and buyer could agree otherwise. Secondly, the Syndicat and the Comité alleged that the artist’s resale right provisions in Christie’s conditions of sale were anti-competitive. The anti-competitive arguments are described in a previous article of this blog.
The French courts rendered inconsistent decisions. When the battle reached the French Supreme Court, it referred the following question to the Court of Justice of the European Union (“CJEU”): does the reference in Article 1(4) of the Directive 2001/84 to the seller being responsible for the payment of the artist’s resale royalty, prevent parties to a sale of a work of art to agree otherwise?
In 2015, the CJEU addressed the preliminary question. The Court noted that ‘Article 1(4) of Directive 2001/84 makes clear that, if a Member State decides to provide that the royalty is to be payable by a person other than the seller, it must select that person from among the professional persons referred to in Article 1(2) who are involved, as sellers, buyers or intermediaries, in the acts of resale falling within the directive’s scope’. The Court then observed that ‘although some language versions of Article 1(4) of Directive 2001/84, such as the Spanish, French, Italian or Portuguese versions, could be understood as drawing a distinction between, on the one hand, the person who is liable for payment to the author and, on the other, the person who must definitively bear the cost of the royalty, it should be noted that other language versions of the same provisions, such as the Danish, German, English, Romanian and Swedish versions, do not make such a distinction’. The need for a uniform interpretation of a provision of EU law means that, where there is divergence between the various language versions of a provision, it must be interpreted by reference to the context and purpose of the rules of which it forms part. After considering the objectives pursued by the directive, the Court concluded that ‘in a situation where a Member State adopts legislation which provides that the seller or an art market professional involved in the transaction is to be the person by whom the royalty is payable, Directive 2001/84 does not preclude those persons from agreeing, on the occasion of a resale, with any other person, including the buyer, that that other person will definitively bear the cost of the resale royalty due to the author, provided that a contractual arrangement of that kind does not affect the obligations and liability which the person by whom the royalty is payable has towards the author.’ Accordingly, the Court ruled that ‘the answer to the question referred is that Article 1(4) of Directive 2001/84 must be interpreted as not precluding the person by whom the resale royalty is payable, designated as such by national law, whether that is the seller or an art market professional involved in the transaction, from agreeing with any other person, including the buyer, that that other person will definitively bear, in whole or in part, the cost of the royalty, provided that a contractual arrangement of that kind does not affect the obligations and liability which the person by whom the royalty is payable has towards the author.’
This was a victory for Christie’s France.
When proceedings were resumed in France, the French Supreme Court followed the CJEU’s interpretation having quashed the decision of Court of Appeal. The French Supreme Court was presumably hoping that its decision would put an end to the matter. Its hope was short-lived. In 2017, the Court of Appeal of Versailles (to whom the Supreme Court has referred the dispute for a decision on the facts) disregarded the decision of the French Supreme Court and found against Christie’s France. The dispute went back to the Supreme Court, this time sitting in Assemblée Plénière, a special formation of the French Supreme Court, usually called upon to settle conflicts between the French courts.
The decision
On 9 November 2018, the Supreme Court held that the Versailles Court of Appeal had wrongly interpreted Article L. 122-8 of the French Intellectual Property Code. It ruled that it was possible for the seller of a work of art to agree with the buyer that she would be liable for the royalty, provided that the contractual arrangement between the parties does not affect the primary obligation to pay such royalty to the artist.
With a decision which is almost word by word the same as the CJEU’s preliminary ruling, the Supreme Court aligned the interpretation of Article L. 122-8 with the CJEU’s interpretation of Article 1(4) of the Directive, although the language of these two provisions is different. It also held that the payment of the royalty to the artist was a matter of economic public order.
Comment
The decision of the Supreme Court of 9 November 2018 is welcome, for it does not disadvantage sellers who decide to sell their art in France as opposed to countries that do not apply the resale right. When the Resale Right Directive was debated, a primary concern, especially in the UK, was that if sellers were forced to pay the royalty in the EU, sales would be displaced to New York and Switzerland. By shifting the liability to pay from sellers to buyers, Christie’s France addressed that concern. Naturally, for art market professionals operating solely in France or in the EU, the issue of sales displacements was less of a concern, although the interest of the French art market generally was not best served if sellers decided that it was financially more advantageous to sell in New York, for example, than in Paris.
As of January 2019, Sotheby’s started charging buyers for the applicable artist’s resale right.
Emelyne Peticca and Pierre Valentin