Resale Right for Visual Artists Regulations – summary of submissions | Manatū Taonga

The Scheme

An artist resale royalty Scheme is being established in New Zealand to ensure that visual artists are recognised and rewarded when their work is resold on the secondary art market. The scheme will be operational in Aotearoa by the end of 2024.

The scheme is being established through two types of legislation; primary legislation (the Resale Right for Visual Artists Bill) and secondary legislation (the Resale Right for Visual Artists Regulations).

The Bill provides the framework for the scheme. It contains many of the key elements of the scheme including what artworks and which artists are eligible, the royalty amount and duration, of the royalty, and who has to pay the royalty.

The regulations provide important supporting details like the threshold sale price above which the royalty right applies, and how the agency collecting royalties on behalf of artists should operate.

Summary of submissions

There were 27 submissions on the Resale Right for Visual Artists proposals for regulations. 22 of these submissions were received through Manatū Taonga’s public consultation process on proposals for the regulations. This process included publishing a discussion document of the proposed regulatory settings, which submitters could answer questions about and respond to when sending in their feedback. The remaining five submissions received were submitted in response to the Resale Right for Visual Artists Bill, and commented on aspects of the proposals for regulations. The consultation process for the Resale Right for Visual Artists Bill followed usual New Zealand Parliament standards, and included consulting via the Bill’s Select Committee process. These submissions were then transferred to Manatū Taonga to be included in the submissions about the proposals for regulations.

Submissions received through public consultation on the regulations

Of the 22 submissions received through the public consultation process, the majority (18) commented on one or more of the proposals for the regulations. A detailed summary of this feedback is provided below, relating to each of the proposals for regulatory settings that were included in the discussion document. Of the remaining four submissions:

two were form submissions offering general support for the scheme because artists deserve to benefit from increased purchase prices for their work
one submission supported the scheme because it was fair and would bring visual artists into line with other creative professionals
one submission opposed the scheme as it does not apply to other things that can make a profit after being sold, such as houses.

Submissions received through the Bill’s select committee process and transferred to Manatū Taonga for analysis

An additional five submissions were received through the Bill’s select committee process that commented on the proposals for regulations. These submissions commented on the importance of accessible information about the scheme, the regulations avoiding creating precedents for the review of the Copyright Act, and that the collection agency should not retain royalty fees indefinitely.

The proposals for regulations discussion document asked questions about each of the proposals for operational settings. Below, the proposals that were outlined in the discussion document are described, and then the feedback from submissions is summarised. Quotes from the submissions are also included.

Royalty Threshold

Proposal

Regulations would set the price threshold above which artworks would be eligible for the scheme at $1,000.

Feedback from submitters

14 submitters commented on this proposal. Of these submitters, nine supported the proposed threshold, four were opposed to the proposed threshold, and one submitter did not express support or opposition.

Comments from those who supported the proposal included that:

a threshold any higher would maintain existing social inequities and may exclude artists benefitting who are from communities which have been historically disadvantaged, including Māori, Pacific and marginalised genders
the proposed threshold would align with other licensing activities
the threshold would maximise the value of the royalty scheme for newer and emerging artists
the threshold is fair and reasonable, but should be reviewed on a regular basis to take into account inflation and changes in market values.

Comments from those who opposed the proposal included that:

imposing resale fees on artworks valued under $5,000 may dissuade collectors from buying them, as low value artworks on the secondary market rarely return a profit for collectors and frequently incur a loss
a threshold lower than $1,000 is needed to ensure the scheme targets the artists most in need of support, rather than just benefitting established and financially-successful artists
the threshold is too low given the broad definition of visual art in the Bill
the proposed threshold penalises artists who try and make their work affordable for New Zealanders
the cost to collect, manage and distribute royalties for works sold for $1,000 would be more than the administration fee collected.

Administrative fee

Proposal

Regulations would allow the collection agency to retain 20% of each royalty collected to fund the administration of the scheme, and the Minister would set the fee in consultation with the collection agency and Manatū Taonga. In setting the fee the Minister would need to consider:

future forecasting on likely administrative fees collected and the future operating expenses of the collection agency
the total administrative fees collected per year over a minimum three-year period and the operating expenses of the collection agency during that time
feedback from right holders.

Feedback from submitters

12 submitters commented on this proposal. Of these submitters, nine supported the proposal, and three were opposed.
Comments from those who supported the proposal included that:

the administrative fee was fair and balanced, especially with what the Minister will have to consider in reviewing the fee
the fee was appropriate, but should not be any higher
the fee was based on existing practice
the Minister’s requirement to consult right holders when making changes to the fee would help ensure right holders remain a central consideration in the scheme’s operation.

Comments from those who opposed the proposal included that:

the fee should be a fixed fee and not a percentage, as it does not cost more to collect and distribute a royalty on higher value works
a 20% administrative fee will have a disproportionate effect on remuneration for lower value resales
other jurisdictions have a ceiling on the fee which ensures that the collection agency does not make excess profits for very large sales and this could be considered in the New Zealand scheme.

Appointment of the collection agency

Proposal

Regulations would require the collection agency to be appointed in the following manner:

the Minister considers advice from Manatū Taonga before making a decision on the appointment of the collection agency
the process for appointment is an open tender process
the successful organisation is appointed for a fixed term of no more than five years.
in cases of non-performance, the collection agency’s appointment can be revoked by the Minister on the advice of Manatū Taonga, and the collection agency can also request to have its appointment revoked
the Minister must consider how organisations applying for the role of the collection agency will involve Māori in governance and decision-making in relation to the collection agency’s functions and duties.

Feedback from submitters

Twelve submitters commented on this proposal. Of these submitters, eight supported the proposal, three submitters offered support with caveats, and one did not express support or opposition.

Comments from those who supported the proposal included that:

having a regulatory requirement to include Māori in governance and decision-making will help give effect to the requirement in the Bill that the collection agency acknowledge and respect the role of Māori as tangata whenua and provide culturally appropriate support
it is vital for the success of this scheme that the appropriate collection agency is appointed from the start
there needs to be a clear way for the industry to advise Manatū Taonga if the appointed agency is not acting in the best interests of artists.

Comments from those who supported the proposal with caveats included that:

the process followed by the Ministry when making a recommendation to the Minister should follow standard government practice
there should not be a special focus on Māori and Pacific artists and that all New Zealanders should get equal support
in other countries with artist resale royalty schemes, the same agency manages both copyright and resale rights. If this was repeated in New Zealand, it could create a conflict of interest.

Process for collection and distribution of the royalty

Proposal

Regulations would require the collection agency to collect, hold, and distribute the resale royalty in the following manner:

information on sales eligible for the royalty must be provided within 60 days of the sale and include detail on the royalty amount, who must pay the royalty and who it must be paid to
when the collection agency receives a royalty, it must use its best endeavours to locate the right holder(s) and distribute the royalty, minus the administrative fee
if a right holder wants to decline a royalty they must provide written notice to the collection agency that they wish to do so, but can change their mind and claim the royalty (including interest earned) as long as it is within three years of providing notice
if a royalty is unclaimed then it will be retained by the collection agency indefinitely to distribute in the future if the right holder is identified
if the collection agency collects a royalty in error, then it must return the royalty to the person that paid it
if a royalty is paid in error, then the recipient must return the payment in 90 days
the collection agency must develop a publicly-available royalty distribution policy.

Feedback from submitters

Fourteen submitters commented on this proposal. Of these submitters, eight supported the proposal, four offered support with caveats and one did not support the proposal.
Comments from those who supported the proposal included that:

the proposed timeframes are practical and manageable
the various proposed scenarios appear to have been thoroughly considered, with reasonable remedies proposed
the requirement to develop a publicly-available royalty distribution policy is an important part of the scheme.

Comments from those who supported the proposal with caveats included that:

it makes sense to allow people time to change their minds on resales they have declined in the past to maintain the connection between the right holder and the resale right
the collection agency holding royalties indefinitely is aligned with a Te Ao Māori perspective, where tangata whenua never cede guardianship over taonga to ensure the preservation and protection of that taonga
it is unlikely that money paid in error would be recouped and this could put undue stress on both the person paid in error and the correct right holder who is awaiting payment
right holders should have an indefinite claim to royalties they think they should have received but have not, rather than restricting this to six years
the benefits of the scheme will be diluted if the collection agency must hold royalty fees in its accounts indefinitely. These funds would more productively benefit visual artists through the cultural fund — particularly Māori, Pacific, emerging and minority group artists
over the long-term, interest accrued on royalty fees cannot be calculated to a level of accuracy likely to give confidence to financial auditors or compliance audits by Manatū Taonga, and the administrative cost of calculating and paying accrued interest to right holders is likely to exceed the benefit to the right holder.

Comments from those who opposed the proposal included that:

claiming a royalty retrospectively up to six years after a sale is unworkable.

Reporting

Proposal

Regulations would require the collection agency to keep financial records of royalty transactions and the financial position of the scheme. The agency would also be required to keep records of how the scheme is impacting artists, including the specific impacts on Māori and Pacific artists, compliance with the scheme and any enforcement action taken by the agency.

Regulations would also require the collection agency’s records to be audited after the end of each financial year, with a copy of its audited financial report provided to the Minister within six months and tabled in Parliament by the Minister within thirty Parliament sitting days of them receiving the report.

Feedback from submitters

Fifteen submitters commented on this proposal. Of these submitters, ten supported the proposal, two offered support for the proposal with caveats and three did not express support or opposition.

Comments from those who supported the proposal included that:

the areas of reporting outlined will be useful for considering changes and improvements to the scheme as it is implemented and evolves over time
the explicit inclusion of Māori and Pacific statistics in the reporting will better quantify the impact of the scheme and, in turn, the secondary art market
monitoring requirements relating to the impact of the scheme on Māori and Pacific artists, and Māori representation in decision-making at governance and management levels of the scheme will help ensure the scheme is fit-for-purpose
select findings should be published ahead of the proposed five-year review so stakeholders can consider and understand how effective the scheme is.

Comments from those who supported the proposal with caveats included that:

it may be difficult to provide accurate data on artists’ ethnicity, as this would rely on artists providing the information and some artists may not be prepared to provide it
there should be a requirement for the collection agency to regularly publish information relating to non-financial records.

Monitoring

Proposal

Regulations would require that monitoring arrangements are set out in the contractual agreement between the collection agency and Manatū Taonga.
Regulations would also require the collection agency to provide relevant information to the monitoring agency, including on:

how the scheme is impacting artists, with a specific focus on Māori and Pacific artists
how Māori are being represented in decision-making at the governance and management levels of the agency in relation to the scheme
records of royalty transactions
information on any royalties paid into the cultural fund and how the cultural fund is being operated to benefit artists
compliance with the scheme, including a record of disputes
the agency’s operating expenses for the scheme
any enforcement action taken by the agency.

Feedback from submitters

Twelve submitters commented on the proposal. Of those who commented, 11 supported the proposal and one submitter did not express support or opposition.
Comments from submitters who supported the proposal included that:

Manatū Taonga has the sector expertise needed to monitor the scheme and the proposed arrangements will ensure the scheme operates as expected
including monitoring of complaints will help identify if the agency is responding to these claims satisfactorily
Manatū Taonga should monitor for works sold that are attributed to an “unknown artist” or misattributed to avoid being subject to the scheme, as art market professionals will try to find loopholes to avoid payment of the royalty
Manatū Taonga should remain objective in its monitoring of the collection agency.

Privacy Act

Proposal

Regulations would require the collection agency to have a privacy policy complying with the Privacy Act 2020, outlining what personal information collected is used for.
The policy would also need to detail the measures that will ensure the security and safety of the personal information the collection agency holds. In line with privacy principles, only information necessary to administer the scheme and meet reporting requirements would be collected from right holders.

Feedback from submitters

Eleven submitters commented on this proposal. Of these submitters, eight supported the proposal, one offered support for the proposal with caveats and two did not express support or opposition.

Comments from those who supported the proposal included that:

the requirements are reasonable and balanced
management of the scheme in line with the Privacy Act 2020 and its principles is expected
right holders will be especially interested in knowing how information that is collected will be used, and the extent to which this might need to be shared with others to administer the scheme, such as reciprocal countries if necessary.

Comments from those who supported the proposal with caveats included that:

having a privacy policy in line with the Privacy Act 2020 will help ensure that information is managed, stored, and accessed legally and appropriately
there is a real opportunity with the establishment of the collection agency to be able to build a mutually beneficial relationship between the GLAM (galleries, libraries, archives and museums) sector and the collection agency through legal sharing of information. The regulations therefore should include legal and controlled access to this information to ensure full benefits for both artists and institutions.

Dispute resolution process

Proposal

The regulations would require the collection agency to have a formal complaints process if it doesn’t already. A complaint against the collection agency by a participant in the scheme would be addressed through the collection agency’s complaints process in the first instance. If the complaint is not resolved satisfactorily through the complaints process, the complaint could proceed to the dispute resolution process. This would include independent mediation, and if mediation is unable to resolve the dispute, arbitration.

Feedback from submitters

Eleven submitters commented on this proposal. Of these submitters, six supported the proposal, two offered support for the proposal with caveats, two were opposed and one did not express support or opposition.

Comments from those who supported the proposal included that:

the proposed process is balanced, ensuring both parties are treated equally
the proposed process is a welcome alternative to legal action
they fully supported the dual avenues provided, where complaints against the collection agency are separate to disputes raised by any other participant in the scheme.

Comments from those who supported the proposal with caveats included that:

the cost of arbitration should not necessarily be split evenly, and that the arbitrator should be able to assign costs based on the merits of the case and conduct of the parties involved
parties shouldn’t always necessarily have to meet their own dispute resolution costs
non-compliance will be considerably reduced if the primary or secondary legislation provides for a scale of financial penalties for obstruction, and prevents use of alternative dispute resolution in favour of referral to courts in cases of repeated patterns of behaviour.

Comments from those who opposed the proposal included that:

mediation presents a significant financial barrier ranging from $1500 to $4000 for a half-day session
disputes relating to the scheme would not necessarily be amenable to mediation
the main issue is likely to be non-compliance, rather than a legitimate disagreement between the collection agency and an art market participant, or between participants, about how the scheme applies.

Cultural Fund

Proposal

The regulations would enable the collection agency to establish and operate a cultural fund, into which 75% of declined or unclaimed royalties and 100% of donated royalties would be transferred.

The regulations would also enable the collection agency to determine, in consultation with right holders, the specifics of what this fund should be used for and review this periodically.

Feedback from submitters

Twela culturalve submitters commented on this proposal. All 12 submitters supported the proposal.

Comments from submitters included that:

a cultural fund recognises and supports the aims of the scheme and could provide valuable support for emerging artists
a cultural fund sounds like a great idea to get more funding injected into the arts and culture in New Zealand
the cultural fund offers an opportunity to prioritise demographics whose work has lower market values. Privileging those artists through the cultural fund could help reduce inequity in the arts sector
a cultural fund could fund exhibitions, artists’ residences, art workshops and other related events/projects
the priority of the fund should be to deliver practical encouragement and opportunities for Māori, Pacific, emerging, and minority group visual artists
the costs of administering a cultural fund are significant and this should be considered when considering the collection agency’s funding.

Out of scope

A number of submitters on the proposals for regulations commented on features of the scheme that were out of scope of the consultation process. This was either because these features are part of the Resale Right for Visual Artists Bill, because they have already been discounted as part of the policy process to develop the Bill, or because they concern issues beyond the scope of this scheme.

The comments from these submitters included that:

having no cap on the total fee payable will result in excessive payments to artists and their estates, which will act as a disincentive for the art market in New Zealand
the collection agency should be a publicly funded organisation and no administration fee should be collected
there should be an opt-out option for right holders to be able to redirect their fees to the cultural fund or other charitable entities
libraries and archives also collect, preserve, describe, and provide access to art in the same way as museums and galleries. Clarification on whether these institutions are included or excluded from this scheme is required
there should not be a cap on larger royalty payments as they can cross-subsidise the smaller payments to newer and emerging artists that could otherwise be inefficient to distribute. Providing for larger royalty payments also acknowledges the limited income that even well-established artists receive for the initial sale of their work
there should be a basis in the primary or secondary legislation for the liable party to be compelled to provide information on all sales, and for the collection agency to request that information be supplied
the definition of art market professional in the primary legislation is open to interpretations that may lead to compliance issues
providing for financial penalties at a level sufficient to deter non-compliance will help with the sufficient establishment and operation of the scheme
another deterrent for individuals that wish to falsify work should be created to protect all artists in New Zealand
it is important to ensure that art market professionals fully respect and comply with the resale right.