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The settlement includes clauses relating to the resale levy in which both the EU and UK have committed to continuing ARR as part of the level playing field.
Although the text of the agreement may disappoint some Brexiteers in the art market who hoped the UK would be able to pursue a different course after leaving the EU, it does appear to allow for some leeway in terms of changing how ARR operates and even the levels at which the charges apply.
In theory, the UK could change the percentages and thresholds, although the government has not indicated it would consider doing so.
Currently under ARR, royalties are paid on original works of art when they are resold by an art market professional and the sale price exceeds €1000. The amount due is calculated on a sliding scale and is capped at €12,500.
The levy gives creators of original works across their lifetime, and their family for 70 years after their death, the right to receive a payment when their work is resold.
Lawyer Simon Stokes, partner at Blake Morgan LLP and author of Artist’s Resale Right: A Guide to Law and Practice, told ATG: “The inclusion of ARR in the final Brexit deal should not come as a surprise.
“The UK had already stated its intention to retain ARR in UK law in the Political Declaration relating to Brexit made in October 2019 and had already put in place legal provisions for ARR to continue to fully operate in the UK, whether or not there was a deal with the EU.
“However, the Brexit deal does not commit the UK to continue to retain ARR in its current form. This means the UK will have more flexibility than currently in how it applies the right – it can revisit how the right is collected and also the thresholds and royalty amounts.”
Tariffs risk
If a future UK government decided to revoke ARR entirely, as some dealers and auctioneers have called for, the EU could respond by calling for arbitration and, should that fail, the imposition of retaliatory tariffs (although Stokes pointed out that such a scenario appears unlikely).
The Brexit deal contains a string of other changes for the art market.
Most immediately, trade will no longer be frictionless – customs and regulatory checks now apply when moving items between the UK and the EU (see ATG No 2472).
There are also extra considerations for items subject to CITES guides.
VAT variations
Rudy Capildeo, partner at law firm Charles Russell Speechlys, pointed to other key changes including that, while the Temporary Admission scheme remains in place (meaning duties and taxes are not charged when works of art are imported in order to be exhibited or auctioned), EU buyers will now pay import VAT in their respective country when they make purchases in the UK (assuming the goods were also sourced in the UK).
The average import VAT rate applied by the UK’s top six EU trading partners is 9.2%.
When UK purchasers buy in Europe, import VAT of 5% will apply.
The Brexit deal also contains clauses relating to cultural property under the ‘Trade in Goods’ section (Article Goods 20, p26 of the agreement).
While the UK and EU have pledged to work together to return illicitly removed cultural property from the territories of either side, the UK has not signed up to EU regulations relating to cultural goods sourced from elsewhere.
Since January 1 the rules have also changed for EU nationals moving to or opening a business in the UK with the same true vice-versa.
Details of Trade and Cooperation Agreement
Signed at the end of last year, the Brexit deal (or ‘Trade and Cooperation Agreement’ to give it its full title) includes a large series of measures that maintain the level playing field, including a detailed section relating to intellectual property.
Within this section on page 130 of the agreement, Article IP.13 states: ‘Each Party shall provide, for the benefit of the author of an original work of graphic or plastic art, a resale right, to be defined as an inalienable right, which cannot be waived, even in advance, to receive a royalty based on the sale price obtained for any resale of the work, subsequent to the first transfer of the work by the author.’
The language in this clause is similar to the EU directive on ARR that has been applied in EU countries since 2006, although the text in the Brexit agreement is considerably less detailed (four clauses as opposed to over 50 in the EU directive).
Simon Stokes pointed out that overall the wording in the Brexit deal is in fact closer to what the Berne Convention on international copyright says about ARR.
The Brexit deal also states that ‘the procedure for collection… and their amounts shall be determined by the law of each Party’, which appears to allow for some divergence in the charges and how they operate in the future.
One aspect the UK could change quite easily and quickly would be to change the ARR thresholds and bands so they are calculated in pounds rather than euros.
