In the aftermath of Brexit, there may well be an opportunity for the UK to repeal the legislation implementing the Artists' Resale Right Directive.

Many felt that when it was implemented into UK law in January 2012, it would herald the demise of London's standing as a leading international art sales centre. We explore the issues here and the potential outcome.

What is droit de suite?

The artists' resale right (ARR), sometimes referred to as droit de suite, provides that a royalty is payable to visual artists or their heirs whenever an original work of art is resold on the secondary market in the European Economic Area in transactions involving art dealers and auctioneers. The rule applies until 75 years after the artist's death. The royalty is calculated as a percentage of the sale price up to 4% (and subject to a cap and applicable exemptions). The primary liability for the payment of the royalty lies with the seller and the art market professional or auction house who was involved in the transaction.

The royalty is thought to have first originated in France in the 1920s following the sale of Millet's 1859 painting, L' Angélus', in 1889. L' Angélus' was sold by Millet for ₣ 1,000 in 1860, but just 14 years after Millet's death in 1889 the sale price reached ₣ 553,000 while the artist's impoverished family gained nothing. Unlike musicians, screenwriters, and authors, artists make money only from the initial sale of their artwork, when their artworks will often increase in value over time on subsequent sales.

The introduction of the ARR

Although a number of European jurisdictions have granted artists a resale right for some time, the right did not exist in the UK until 2006 pursuant to The Artists' Resale Right Regulations 2006 which implemented the Directive. It sought to harmonise the position across Europe and ensure that all qualifying sales within the EU were subject to the resale right. This was to avoid distortions of competition by displacement of sales to countries where the royalty did not have to be paid. However, other countries with substantial art markets including the USA and Switzerland, have no such right.

Up until January 2012, in the UK the resale right applied only to sales of works by living artists. This followed from a hard-fought derogation from the Directive by Tony Blair in 2006 which allowed member states without a domestic resale right on the entry into force of the Directive, to exclude ARR from the heirs or the estates of artists deceased within 70 years of the date of sale up until 1 January 2012.

Is ARR detrimental for the UK Market?

ARR sought to harmonise art markets across Europe - but with London as the main Post War & Contemporary European capital, with 28.6% of the auction market share in 2015¹ (and with Post War & Contemporary art accounting for 45% of the art market globally by value), the UK is at risk of being disproportionately affected by the ARR regime. Post War & Contemporary is defined by artists born after 1910 and includes artists such as Damien Hirst, David Hockney and Francis Bacon.

Since the ARR regime has been introduced, many leading economists felt that the UK art market has suffered, particularly since the end of the derogation in January 2012.

Auction sales in Post War & Contemporary art in the UK dropped 12% by value yearon- year in 2013, in contrast to the 11%² increase by value in the Post War & Contemporary art market globally.

Will we see a change to ARR following Brexit?

In the wake of Brexit, many artists and curators who favoured "Remain" like many others will be dismayed by the potential lack of EU funding for exhibitions and projects. Other commentators are likely to hope to see a repeal of droit de suite and are of the view that the international art market is highly competitive and transactions might be increasingly shifted to countries without an ARR regime in place, such as the US and Hong Kong.

Brexit may present the opportunity for a permanent relaxation of the ARR Directive to transactions within 75 years of the relevant artist's death, or further still a repeal of the legislation in the UK altogether.