Law change will hit design and the consumer

A new EU-inspired law is supposed to champion designers, but design itself, along with many others, will pay the price

COMMENT: The final nail has been hammered home in changing a small but important part of the Copyright Designs & Patents Act 1988 that will see a revolution in industrial design rights. Section 52 of the Act is about to be repealed. Sounds dry?

Maybe; however, it’s anything but, because the impact on consumer choice, design innovation, reprinting of books, reissue of films and many other facets of our cultural life will be far-reaching… and bad.

I have spent a fair portion of the last four and a half years trying to put a stop to this semi-suicidal, EU-prompted law change, which, like so many chairothers, achieves the reverse of what it sets out to do, while causing even more disruption to our culture and way of life. The bit I focused on was replica furniture. The rights, balanced with trademark and patent, for original industrial designs – items produced in quantities of more than 50 – expired after 25 years. The idea behind this rule was to give creators sufficient monopoly to benefit financially from their designs before opening up competition in the market to the benefit of the consumer.

That meant that after the 25 years was up, quite a bit of post-war modern and contemporary furniture design could be copied in considerably less expensive replica form in an ‘inspired by’ format. Those wanting licensed design originals such as the Eames lounge chair and ottoman could still pay considerably more for them if they wished. As the Government acknowledged, the price differential was so great between the originals and the replicas that they served two separate and distinct markets.

What the replicas could not do legally was pass themselves off as the originals, as pirated copies do, and doubtless will continue to do; ‘inspired by’ was as close as they could get while staying on the right side of the law.

No longer.

As of the end of January 2017, the replicas will be outlawed too, with a further tranche of designs added to the list as of April 6 next year. If you want anything that looks like an Eames chair and ottoman after that date, you will have to pay around £6,815 at The Conran Shop for a licensed original instead of the Eames-inspired version you can currently get at Wallace Sacks for £599.

I wonder how Charles and Ray Eames themselves would feel about that, having made it clear that they wanted “to make the best (designs) for the most (people) for the least (amount of money)”.

Certainly Design Museum co-founder Stephen Bayley does not approve, telling The Independent that the changes are “at odds with the principles of widely available democratised luxury which make design such an interesting subject”.

Retroactive rights are causing the real problem

Instead of waiting 25 years after the first year of manufacture or marketing for these designs to open up to the wider market, the public will now have to wait until 70 years after the death of the designer. That brings the law in line with copyright for artists, photographers and musicians, but rather upsets the applecart when additional trademark and patent protections are taken into account.

What is causing the real problem is that the law will be retroactive, reviving rights in designs that expired sometimes decades ago, while awarding rights to other designs that never enjoyed them in the first place.

To give you an idea of how massive this is, let’s take an example.

The Bauhaus table lamp was designed by Karl Jucker and Wilhelm Wagenfeld in 1923-24. Had the 25-year rule applied at the time, their right would have expired in 1949. However, Wagenfeld did not die until 1990 and Jucker not till 1997. So under the new rules the right is revived and lasts until 70 years after Jucker’s death: 2067. That’s an additional 118 years after 1949 when the right would have expired originally. And that is not even the most extreme example.

The other change is the one that is likely to hit designers, because the right has also been upgraded from design right to copyright. Why is this important? Because under design right it was permissible for a designer to incorporate an element of the earlier design of a work with artistic merit into a new design as long as the overall appearance and impact of the new design was substantially different. Copyright does not allow for this ‘inspired by’ element, known in the trade as ‘follow-on design’. Breaching this new rule risks committing a criminal offence and incurring a heavy fine and prison sentence.

While the Government has assured many that matters are unlikely ever to reach such a stage, designers in the know are likely to be less sanguine, especially as the rights holders of many of the most popular designs coming back into right are mega-wealthy and powerful international corporations and highly active when it comes to enforcement and civil claims. Notice I say ‘rights holders’. That is because some of the most active of the rights holders are not designers themselves but companies that have licensed the rights from the designers or their heirs.

This is not about protecting design. It is about money.

What will make the everything so uncertain is that for a work to qualify for revived rights under the rule change, it must be deemed to have ‘artistic merit’, but the law does not define what that is. Instead, the Government has said that it will be up to the courts to decide.

Now consider that it can take up to a decade and hundreds of thousands of pounds to develop a new design and test it on the market. Many designs fail to make their mark even after all of this, so it is a costly and high-maintenance process. Imagine, then, having succeeded in all of this and launched a blockbuster new design that the public flock to. Then imagine having it snatched away as the rights holder to an earlier design claims that your new design breaches their rights because of an unintended similarity between a small element of your design and theirs. Are you going to risk a costly court action fighting an international corporation without having any certainty at all about the prospects of the case because of the obfuscation over the definition of ‘artistic merit’ or even if the challenge of copying has any validity at all?

Changes would have a “chilling” effect on innovation in design – The Government

And what incentive will those same corporations, who declare themselves champions of design, have to invest in developing new designs that might suffer the same risks?

No wonder the Government stated repeatedly that the change in the law would have a “chilling effect” on innovation in design.

If you think this is fanciful, let me tell you that it has already happened several times in high-profile cases in the world of music, costing Pharrell Williams and Robin Thicke £5 million over their hit Blurred Lines and Richard Ashcroft all his royalties and even the writing credit for his 1997 composition Bitter Sweet Symphony.

The result of all this is that the wholesale and retail sector in replica design furniture has all but collapsed in the UK. The Government had promised a five-year transitional period to allow businesses to convert to new activity – deeming such a period ‘necessary’ – but pulled the rug out from under them in October last year after the powerful rights holders based in Switzerland, Italy and the US threatened it with a Judicial Review.

Having read the Government’s February 2015 findings after a lengthy consultation process, it was clear that it viewed anything earlier than an April 2020 enforcement as disastrous for business, jobs and taxes. The complete U-turn in October 2015 never even attempted to explain or justify the change in position. I use the word ‘position’ carefully, because my reading is that the Government clearly did not change its opinion at all in the interim, a fact confirmed to me in person when I met the former Business Secretary Sajid Javid when I met him in December 2015.

So where do the museums, books, films, photographic archives and the rest come into all of the this?

Quite simply, along with the introduction of copyright for these 3D designs comes the 2D rights in them. In other words, the designs also acquire their own image rights. So that means where an Eames lounge chair and ottoman appear in a magazine photo for a room set, or in a book on design, in the background of a film, on a tea towel or mug sold through a museum shop, or are represented in any other similar way, the rights holder acquires image rights to that representation. All was not lost until now thanks to an assumption made when copyright in images extended from 50 to 70 years: Regulation 24 stipulated that any works whose copyright was “revived” as a result of this increase in term were to be “treated as licensed by the copyright owner” if the person wishing to use them gave reasonable notice, subject to payment of a reasonable royalty. Now though, that assumption is seen as being at odds with a 2001 EU directive relating to copyright because it denies exclusive rights to the rights holder to control reproduction of their work.

The result? The Government is repealing the regulation. This is potentially disastrous for film and photographic archives, which must now actively check anything they want to republish, seek out rights holders to any potentially infringing images, secure a licence for them and pay the fee.

The British Film Institute has serious concerns for the future

The task is monumental. The British Film Institute, which is the world’s largest film archive, formally objected to the changes, pointing out: “The likelihood of any rights holder whose works appear in a film being aware of these renewed rights is very low,” meaning that they would be unlikely to come forward and register a claim, leaving the BFI with the obligation of seeking them out.

“The administrative cost on the current owner/distributor of the film of meeting this obligation by ensuring clearance for all embedded designs with revived copyright will be high, the level of remuneration available to license such use will inevitably be minimal,” it concluded.

The BFI raised further concerns, which explain why some treasured films may never see the light of day again: “For companies and archives involved in re-releasing films where copyright has been revived they will lead to additional burdens on an already financially challenged sector when it wishes to provide online access to materials in collections or prepare theatrical rereleases of titles. Simply put, the information needed to secure the necessary licences for embedded designs will not be available in most cases where archives hold a copy. This will discourage organisations from making such material available in order to avoid unwitting infringements.”

One museum, thought to be the V&A, estimated that the loss in revenue from its shop, together with new restrictions on its existing collection, resulting from the changes, would cost it £850,000 in the first year alone. And the change in law will affect its collections policy moving forwards, it says. In other words, it may well stop acquiring anything that would come with such rights, which would skew the view of cultural history at one of the nation’s leading repositories for it. Will the Government be forced to replace this loss of revenue? If so, it will give the lie to its own assessment that the new law will have no significant economic impact on the public purse. And that is just one public body affected.

The greatest irony, I suppose, is that all of this is coming into force on the back of an Italian court ruling linked to an EU harmonisation directive in the months after the Brexit vote.

Understandably, one of the biggest concerns of those who voted Remain is the potential threat to the UK economy of leaving the EU. What will such a move cost in terms of jobs and tax revenues? No one can be certain at this stage. However, what they can be certain of is that here we have a highly damaging EU policy that is already costing jobs and millions in tax revenues, while inflicting very significant damage on our creative industries.

Why transparency is the Art Market’s – and lawmakers’ – latest obsession

transparencyAnd what the industry can do about it now…

In recent years, global media coverage of multi-million dollar auction prices, combined with the rise of art as an alternative asset class, has focused more attention on the international art market than ever before.

That increase in awareness has brought the issue of transparency to the fore, but what exactly do we mean by it?

To the public – the market’s client base – transparency largely means more clarity about terms and conditions, pricing, and consumer rights when buying and selling.

However, to politicians, interest groups, the media and the many and varied corners of the market itself, concerns over transparency focus on a far wider range of topics: provenance, finance, crime and market manipulation, to name the most obvious. The general attitude seems to be that improved transparency will boost confidence and reduce the risk of things going wrong.

With the trade in antiquities, concern gravitates towards looting and fakes, with money laundering and theft following close behind. With finance around high-end auctions, critics argue that a lack of transparency allows auction houses, dealers and collectors to skew the market to give themselves an unfair competitive advantage or create bubbles to sustain their holdings in artworks that might otherwise decline in value.

For the trade, though, increased transparency can cause problems. Thanks to the internet, it is far easier for potential buyers to find out what a dealer paid for an item, making it much more difficult for them to cover their costs and sell at a decent profit; most people are not interested in the time, effort, expertise, or the restoration, transport or other costs that the dealer has to account for in acquiring the item, as these are not seen as contributing to its value. How justified are concerns, and what should be done?

Focus on the four key variables in any transaction

Let’s deconstruct all of this a little. Every transaction really only has four key variables: the buyer, the seller, the goods, and the money. Each brings its potential to the deal, and its risks. Due diligence on behalf of both buyer and seller can tackle much of that risk, but not all of it. How can you be absolutely sure where the buyer’s money comes from? How robust is the seller’s paperwork? And who exactly are they? Surely the answer is to regulate the art market directly, like the worlds of finance, insurance and the law, so that officialdom can intervene where necessary and public confidence in honest trading does not have to rest on what some view as little more than a person’s word.

The first thing to understand is that hundreds of laws already regulate the market (you can download the list that applies to the UK art market from the British Art Market Federation website), but experience tells us that direct regulation rarely solves the problem.

The establishment of the Conseil des Ventes in France in 2000 to govern the market once France liberalised its auction laws did nothing to prevent the cols rouges scandal at the Drouot auction house nine years later, where the closed shop of portering services masked a criminal network of theft. Nor did the Wine Association’s establishment of a rigorous code of practice in 2003 prevent people from falling victim to rogue funds in the years that followed. Then we have the age-old issue of what exactly art is: if you can’t define something clearly, then you can’t legislate for it effectively.

But more pressing, perhaps, is where questions of art market transparency overlap with debates about public interest and the right to privacy. If politics is to intervene here, then the lawmakers as a whole need a better understanding of how to balance public interest with the practical needs of business. That means consulting trade professionals to a far greater degree than happens now rather than relying on the opinions of academics and others lobbying against art market interests. We also need more consistency on codes of practice across trade associations as well as with legal definitions for cultural property, what constitutes art and other loose terms.

Baroness Neville-Rolfe, the minister guiding the Cultural Property (Armed Conflicts) Bill through the UK parliament, recently declared that creating such passports would breach Article 8 of the European Convention on Human Rights, which covers the right to privacy.

In 2014, in a case involving the auctioneers William J. Jenack, the New York Court of Appeals overturned a New York Supreme Court ruling that an auction contract was null and void if it did not name the seller. The court clearly recognised the damage this would do to auctions and declared that having the auctioneer’s details on the paperwork as the agent of the seller was good enough.

How to use the art of persuasion when it comes to transparency

I have always believed that the most effective way of getting people to change their behaviour is to show them why it is in their interests to do so – and enlightened trade professionals are already demonstrating how and why this should be done.

Online aggregator Barnebys has just published research showing that transparency online at auction, along with ease of bidding and post-sale fulfilment, is the most important factor in building brand trust and improving sell-through rates. ‘The new generation of buyers and sellers expect all information to be easily at their disposal, without any barriers,’ says Barnebys co-founder Pontus Silverstolpe. ‘Withholding information, such as final prices, foments distrust and alienates users.’ Anna-Karin Laurell, CEO of Scandinavian auction house Bukowskis, echoes this sentiment: ‘Transparency and [improved] function increases credibility. Through our new website we have also reached new target markets we previously believed were very hard to reach – the youngest between 18–25.’

The Hiscox Online Art Trade Report 2014 concurs, while its 2016 report highlights the growth in businesses that are improving access to art market information online, while simplifying fulfilment services.

Enhanced condition reports for online auctions, accompanied by excellent images, certificates of authenticity and a clear summary of all charges are the building blocks to buyer confidence and brand trust for sellers and their agents. So you may not know exactly who you are buying from, but if the auction site handling the transaction effectively underwrites it with all of the above, then it is a form of transparency that addresses many buyers’ concerns. This reflects the appeal court ruling in the Jenack case.

Having assessed auction websites professionally for nearly 20 years, my first and most important test is how easy it is to find the buyer’s premium rates. If there is any difficulty at all with this, I simply will not buy from that auctioneer, nor recommend them. Newly launched Forum Auctions have made a virtue of publishing exactly what their charges are at the top of their advice page on buying, and they also promote a set of core values, including a pledge on dealing with complaints promptly and fairly. It’s a simple, cost-free and uncomplicated piece of marketing that immediately promotes confidence. It is also a wise move because the Advertising Standards Authority has just launched an investigation into charges at auction, including whether buyer’s premium rates, VAT and other charges should be reflected in auction estimates.

The transparency issue is not going to go away. The market needs to regulate itself better if it is to keep the legislators off its back. It also needs to be better organised and more proactive in developing relationships with government. If the UK industry is serious in this, it needs to increase funding to its lobbying arm, the British Art Market Federation, by a factor of ten. The US would do well to follow suit.

This article first appeared in the October 2016 issue of Apollo, the International Art Magazine

The birth of the buyer’s premium may shed light on UK/EU trade deals

How the Milwaukee Journal reported the protest against the introduction of the buyer's premium in 1975.

How the Milwaukee Journal reported the protest against the introduction of the buyer’s premium in 1975.

Self-interest among EU member states will prevail in the end, if history is anything to go by

Whatever your views on the big EU vote on June 23, now is the time to deal with its aftermath. Brexit leaders who left the stage almost the moment the fight was over did not do their supporters or anyone else any favours as they failed to provide the direction they had promised.

David Cameron announced his resignation but said he would steady the ship of state until his successor was in place. Having announced this, however, he left it as rudderless as all the others.

Andrea Leadsom let down her supporters by demonstrating instantaneously just how unfit she was to take on the mantle of PM, which fortunately meant that the anticipated summer limbo of the Conservative Party leadership election came to a swift end with the coronation of Theresa May. Like her or not, her appointment means more immediate stability and direction, providing the country with a leader that other European heads of state feel they can negotiate with.

Beyond the politicians, Bank of England Governor Mark Carney has not exactly covered himself in glory. Instead of being the voice of calm reassurance, he has consistently talked the economy down. He should know better than most that the best way to create a recession is to talk your way into it.

As I write, Angela Merkel has endorsed May’s decision not to invoke Article 50 until 2017, so as to allow for the groundwork to be done on the way forward. Both Australia and, most importantly, the US have started talks on trade deals, with Secretary of State John Kerry expressing enthusiasm for getting on with the job and telling the world that leaving the UK adrift now would be a bad idea for all. The German industry association has already called for existing trade deals with the UK to be ongoing without hindrance or penalty.

The FTSE 100 – ok not as good a bellwether on Brexit as the 250, but still – has just risen above 6700, and the pound has climbed back to $1.31 as the Bank of England has announced that there is “no clear evidence” to show a sharp Brexit slowdown and warns against a kneejerk interest rate cut, especially as consumer spending, in general, has held up.

Market researchers Gfk, who specialise in measuring consumer confidence, reported a sharp fall immediately following the vote – the sharpest since 1994 – but only to levels at or above historical averages.

Looking beyond the cloud of gloom

Let’s be clear on this: it’s way too early to declare the bumpy ride over, and potholes along the road may be deep and rocky. But with growth forecasts for the UK outperforming the EU by some margin for the year ahead on top of all the other good news mentioned above, maybe we should spend at least some time looking for the silver lining rather than insisting at pointing relentlessly at the cloud.

Legally, the UK and others cannot sign off new trade deals independently while we are still members of the EU, but as John Kerry stated, that doesn’t mean we can’t start negotiations now. What’s more, we can take those negotiations a long way down the road.

As for the desire to punish the UK for its decision to leave the EU, just how far will Eurozone countries go? Some facts we do know.

We know, for instance, that the UK has the fifth largest economy in the world. We also know that in 2015 the UK accounted for 17% of the EU GDP, second only to Germany at 20%. And we also know that the trade gap between the UK and EU stands at around £24bn and is growing to the EU’s advantage.

All of these facts tell us that punishing the UK over trade deals would do more harm to the EU than to the UK.

However, some argue that for sound political reasons the EU must hold firm and punish the UK on tariffs: let the UK off lightly and others may well follow the Brexit route.

This thinking fails to take account of two factors, however: the rest of the world and national interest.

Let’s take the rest of the world first. Taking the view that Brexit is at least partially about gaining freer access to a much bigger market, it is not unreasonable to assume that the UK’s ability to negotiate better trade deals independently with the US and burgeoning Far Eastern economies will lead to some redirection of both exports and imports. Less favourable terms from our EU neighbours are likely to encourage us to increase two-way trade with these other partners, for instance by importing more Japanese cars than German ones.

The net result is that the EU will be the loser. Punishment of the type that has been mooted only works if the UK has no alternative, but here it clearly does.

This means that it will not be that long before the balance of power on EU trade deals shifts towards the UK, which can then demand far more favourable terms than before.

National interest and the buyer’s premium

Now let’s look at the national interest. For all the talk of the EU being a convocation of nation states working towards a federal union, the evidence shows that national interest among members is as strong as ever. One only has to look at what is happening in Italy, with Matteo Renzi’s stand-off against Brussels over injecting state money in to the economy, to show what the EU is up against.

Interestingly, the art market and its reaction to the introduction of the buyer’s premium in 1975 provides one of the best examples of what can happen when trade interests come together to make a principled stand.

Dealers protesting against Sotheby’s and Christie’s decision to introduce the buyer’s premium at Sotheby’s organised selective boycotts of sales. At a pre-arranged signal, they stood up in the saleroom and tore up their catalogues before leaving in protest. However, self-interest paved the way for the BP’s establishment and survival because, as legend has it, so many of these same dealers had quietly ensured that they had placed someone in the room to bid for them after they left.

So it is likely to be with the EU. Technocrats in Brussels may make a lot of noise, and national leaders may announce firm stands for the benefit of media outlets and their electorates, but be sure that behind closed doors they will all be scrabbling to win the best deals with what remains – for now, at least – the EU’s second biggest economy.

Those who say that such jockeying for position among member states on trade is impossible under EU rules should remember which two countries first broke EU fiscal rules: Germany and France. And they have both continued to do so, with France again predicted to break Eurozone budget deficit rules by some margin this year.

Is this a cynical view of the world? Maybe, but I would argue it is also a fairly realistic one. For all the grandstanding, talk of treaties and unbreakable rules, a lot of the talk coming out of Brussels is little more than demagoguery.

The UK may have a limited time left in the EU, but it will always be part of Europe and thank God for that. The British may dislike bullying from Brussels, but when it comes to individual nations and their peoples, I find that we are pretty big fans on the whole and long may that last.

If individual nations states within the EU attempt to put themselves at a competitive advantage over trade with the UK in future, then they will simply be trying to do their best by their electorates.

In the end, that’s just human nature and we would do well to remember it.

ARR – The reality about the Artist’s Resale Right

The biggest advantage to those who champion
ARR is that so few people really understand it

One of the first issues to be raised in post-Brexit discussions with the art market was the long-running sore of Artist’s Resale Right.

Introduced in two stages (2006: living artists; 2012: artists’ estates for up to 70 years after their death), the combination of charges and red tape made it all but universally unpopular among auctioneers and, especially, dealers.

ARReaselArtists, the collecting agencies who stood to benefit more than anyone and various others saw it as overdue compensation for those whose work goes on to sell for huge sums without them benefiting further.

The message in brief: Why shouldn’t artists share in the benefits their art brings to others?

Now that the UK is heading for the door, will this law – the result of a European Union harmonisation directive – survive?

Difficult to say, but with everything else on the agenda, scrutiny of it is hardly likely to be a Government priority.

Failing the fairness test

As someone who spent many years campaigning against the introduction and then extension of ARR, I have always believed that it is not only detrimental to the art market, but also to artists. I also think that it fails the fairness test completely in the way it is structured. The problem is that so few people understand its scope and impact that, as with many other measures that should never have made it onto the statute book, they can’t see why art market professionals have any reason to object to it.

Let’s try to clarify that with a few facts:

  • ARR has nothing to do with copyright, which is an entirely different right subsisting with the artist for their lifetime and to their heirs for 70 years afterwards.
  • It is charged every time a qualifying work resells in the commercial marketplace.
  • ARR applies to qualifying works three years after the original sale when the price is the equivalent of €1000 or more and immediately if it is €10,000 or more.
  • ARR is not charged as a percentage of profits on an artwork, but as a percentage of the entire price when the art is sold in the commercial marketplace.
  • As long as the artist qualifies for ARR and the price is above the qualifying threshold (€1000 or equivalent), the charge applies, even when the seller makes a loss.
  • ARR cannot be paid directly to the artist but must pass through one of the two collecting agencies that administer it in the UK, The Design & Artists Collecting Society (DACS) or the Artists Collecting Society (ACS), which each charge 15% of the sum collected in fees, except on overseas sales, for which they make no charge. Originally DACS wanted to charge 25%, but this was reduced in line with the ACS prior to ARR coming into effect in 2006.
  • ARR is an inalienable right, which means a qualifying artist cannot opt to waive it, regardless of whether they think it is unfair or risks damaging the market for their work.
  • Those involved in the transaction are jointly and severally liable for paying ARR, although in practice the auction houses pass on the charge to the buyer, while only some dealers pass it onto those who buy from them. This means dealers suffer from ‘double dip’ payments – one on buying and one on selling. So a levy across the deal can be as much as 8% of the entire price.
  • There is no definitive list of qualifying artists.
  • Failure to meet your obligations under ARR rules risks a criminal charge.
  • The collecting agencies hold no liability for their mistakes, even if you are the loser as a result.
  • If a collecting agency accepts an ARR payment for a transaction that may not qualify, or for which the artist or their heirs cannot be traced, they can keep the money for up to six years before returning it. In doing so, they still charge their 15% fee and keep all the interest accrued.
  • ARR is primarily supposed to help poorer artists as they establish their careers. However, the vast bulk of sums collected go to the most successful and richest artists and their estates.
  • 30% of all monies distributed go to artists’ estates.
  • ARR is capped at €12,500 on any single work of art.
  • ARR rates apply as follows: 4% from €1000-50,000; 3% from there up to €200,000; 1% from there up to €350,000; 0.5% from there up to €500,000; and 0.25% above that to the cap. The scale is cumulative, so on artworks selling for more than €500,000, you pay ARR according to the scale of rates up to that point.
  • ARR applies to the hammer price for auction sales.
  • The UK Government went against its own policy by ‘gold-plating’ the threshold at which ARR should apply. The EU directive stipulated that it did not have to apply under €3000, but the Government went further than that by reducing the threshold to €1000. Originally, the Government had actually campaigned in Europe for the threshold to be raised to €5000.
  • Dealers complain as much about the paperwork involved as the fee.
  • Failure to comply with the directive and pay ARR meant that many dealers could not show its impact when the UK Government carried out its impact study into ARR at the end of 2013.
  • By DACS’ own figures, it has charged over £7m in ARR fees over the past ten years. If its overheads (taking into account other revenues it raises) are lower than this, then it may be not-for-profit, but will certainly be banking a healthy surplus.
  • I have never made a penny out of ARR and have no financial or other material advantage in arguing my case.

All of the above is quite a lot to take in. People will argue the fairness of the concept of ARR till the cows come home and still not agree. However, a number of things concern me.

The first is that ARR in the UK has never met the terms of the directive that imposed it on the market. It is not harmonised with other ARR programmes across the EU in terms of thresholds and application. It is not supposed to continue if global harmonisation fails to take place (it has failed and is unlikely ever to take place, as recent events in the US show), yet there appears to be no political will by those who imposed it on the market to meet these terms.

It is not in the interests of the market, which is put at a competitive disadvantage in relation to the other leading global art markets (US, Hong Kong, Switzerland), which have not adopted it.

It acts against the interest of artists trying to establish themselves in the market because dealers are less likely to take a risk in buying collections of their work for resale, giving them a lump sum in the process. Now, most will only sell on commission, allowing fewer artists to rely on this as a source of income.

Most of all, though, I have found that almost no one I talk to about ARR understands it fully and accurately.

Of these, nearly everyone who is not a dealer or auctioneer thinks it is a levy solely on profit. Not one – artists included – thinks that paying it as a percentage of the entire price is fair. No one at all thinks that it is fair that it should be levied even if the transaction makes a loss – not even DACS could come up with an argument for that one when I first asked them about it shortly after its introduction.

A practicable solution that better meets the fairness test

The only argument for these conditions is that it makes it practicable to collect the levy. If you were to charge 4% above €1000 for an artwork where the profit was, say, €100, then ARR would be just €4. From that the collecting agency fee would be €0.60. In this case it would probably cost more to administer and distribute the levy than the sum raised by it.

However, the driving argument by the collecting agencies and the supporters of ARR has always been one of fairness. If fairness trumps all, then make it truly fair. This can be done by raising the threshold to where it should have been in the first place and charging only on profits. The flat rate percentage charged by the collecting agencies allows them to subsidise loss-making distribution activities at the lower end of the scale with the large surpluses made at the top end of the scale, a fitting arrangement for the self-declared not-for-profit organisations.

To my mind, it would also be fairer to poorer, less established artists who might, once more, find a healthy level of patronage among dealers willing to take a risk on them by purchasing collections up front and giving the artists lump sums to work on their next phase. Don’t forget, those same dealers invest considerably in helping boost the artists’ reputations. Successful artists’ reputations are rarely built in isolation, so why would you want to penalise the very people who can make it happen for them.

Do I think anything will change?

Probably not. All I hope is that those who declare ARR a great idea are fully aware of its parameters and potential consequences. I have been looking at them closely for almost 20 years and still can’t see how fairness or common sense applies.

Art brings hope to South Africa in troubled times

Maggie Laubser’s Birds and Boats is a signed oil on canvas laid down on board measuring 15½ x 19½in (39.5 x 49.5cm), which sold for R1.3m hammer – around £59,000 – against an estimate of R700,000-900,000 at Strauss & Co on March 14.

Maggie Laubser’s Birds and Boats is a signed oil on canvas laid down on board measuring 15½ x 19½in (39.5 x 49.5cm), which sold for R1.3m hammer – around £59,000 – against an estimate of R700,000-900,000 at Strauss & Co on March 14.

The art market is a beacon of hope in these troubled times for South Africa, but those who want to be part of the success story need to prepare now

One moment, it was very much a man’s world, the next it is women coming to the fore in the South African art market.

This is the result of the death on Christmas Day of Stephan Welz, the colossus of the country’s art market for the past 30 years and more, and the passing of the baton to the new joint managing directors at Strauss & Co, the country’s leading auction house, Bina Genovese and Vanessa Phillips. Add to their skills, contacts and experience the talents of fine art specialists Ann Palmer and Emma Bedford, and the future vision rests very much on the shoulders of the women in the firm chaired by Elisabeth Bradley.

But back to Welz the man for a moment.

The dominant force for so many years in a way that no other individual can claim to have been in any other art market across the globe, his name added lustre to the works he offered for sale in a way that no one else has ever been able to imitate. The top consignors to auction looked for his personal touch as the magic ingredient, as so often it proved to be.

Such was his competitive spirit that despite ongoing health issues he never lost his edge, even taking R8.5m (£393,520) for the oil and gesso work The Creation of Adam I (1968) by Alexis Preller, the rising star of South African art, in Johannesburg on November 9.

So it was no surprise that the man Strauss & Co described as their “living archive” had two memorial services – one in Johannesburg, the other in Cape Town – and that just about the whole of the South African art market turned out to pay their respects.

Generational change in South Africa’s art scene

Welz’s passing marks not just the end of an era in the terms of his influence. It comes at a time of huge change in the South African art scene as the leading lights of the older generation give way to the new. With that change comes a whole new approach to art and antiques and the way they are marketed. And it all comes as the rand sinks to a new low against sterling amid political uncertainty and the shadow of recession. Five years ago the exchange rate was around 10 rand to the pound; now its sits at around 23.

The mood on the street is negative, as those I talked to in Cape Town and beyond told me at the beginning of February. But strangely, this is not reflected in the art market, where the trade, represented by the South African Antique, Art & Design Association (SAADA) have boosted membership by bringing in the pick of the Contemporary art dealerships to their Cape Town fair with a view to permanent membership of the association.

Having rebranded the association itself in 2013, they moved the fair, now called the SAADA Expo, to The Lookout in the V&A Waterfront last year and packed it out for 2016’s event from February 11-13, no mean feat bearing in mind that it is a considerably larger space than the old venue in the Botanical Gardens.

This was a shrewd move, because the Expo now finds itself right in the centre of the tourist trail for cash-rich evening visitors, who would only be attracted to the botanical gardens during daylight hours.

In turn, the blending of antiques with Contemporary art, and the new policy of marketing traditional objects as pieces of design and sculpture is helping to attract a new and younger domestic audience.

For the Contemporary art galleries, the endorsement of the SAADA brand sets them apart from the mass of other galleries that wouldn’t get past the vetting committee, while the new players help expand the reach and influence of the traditional SAADA membership.

Cape Town and Johannesburg trade adapting their approach

“I no longer market myself as a silver dealer; I sell sculptural artefacts that just happen to be in the form of silver,” says Jeremy Astfalck, former SAADA chairman and owner of The Old Corkscrew, who is the one South African dealer who regularly stands at British fairs (Olympia, LAPADA and the NEC).

“Alongside the Contemporary art this is definitely attracting a younger crowd.”

Some believe that it may also be showing signs of crossing the colour bar. And this is the holy grail for the art market in South Africa: attracting the interest and engagement of the newly prosperous black middle classes who simply do not relate to the traditional collecting fields in South Africa, much of it based on colonial history.

Astfalck, a huge admirer of how his successor at SAADA, Paul Mkrusic, has moved things on, is adamant that taking a new and dynamic approach does not mean compromising where it matters.

“The quality still has to be there for art and objects, including their history.”

He is also finding that his trips to stand at fairs in the UK pay off back home, where contacts he has made turn up at his Franschhoek gallery to make the most of the fabulous exchange rate.

These ‘swallows’, as they are known, because they fly south for winter, have been a staple of the market for years. The trade members among them, from the US, UK and Europe, come to snap up the best of what remains from old family collections for resale at a decent mark-up back home. Although some market watchers, like retired auctioneer Charles Rudd, believe that most of the European heirlooms have already been flushed out from colonial settler families, they still see treasures emerging that make the trip more than worthwhile.

Having closed his own Cape Town auction house in November, Rudd is still very active as an independent valuer and appraiser. Reflecting on the generational shift in the market, he is wistful about the gradual disappearance of the expertise in traditional collecting fields, but says South Africa still has a lot to offer here and believes that many European dealers and collectors are still missing out.

Weak rand attracting buyers to the Cape

“As far as the antiques side is concerned, there are still strong buyers and sellers in the traditional market and I would encourage the international trade to come down,” he says, noting the high level of fresh-to-market items available.

He acknowledges the gap left by Welz but is one of many who warn against writing off Strauss & Co, who, it must be remembered, remain the strongest domestic force in South African art. Also best remembered is that continuity is a strong feature because those now at the helm are not new at all to the company but worked with Welz for years – collectively 48 years, in fact. And they have a record R200m turnover for 2015 to build on. Add to that the strong brand and solid database of clients and their future certainly looks much more positive.

“Contrary to what happened internationally where major auction houses elected to operate only at the top end of the market and are now having to rethink their strategies, Strauss & Co has continued to operate in both the high end and the middle market (this also includes furniture and decorative arts) reaping substantial benefits both ways,” says Genovese.

“The weak rand, along with exceptionally high buyer’s premiums and VAT rates charged, have become a deterrent for local buyers. Conversely, the weak rand is extremely attractive for international buyers that are noticeably on the rise, in particular for decorative arts.”

Strauss are not without their rivals, foremost among them in South Africa itself being Stephan Welz & Co, the company Welz the man sold in 2006 when ill, only to recover his heath and his ambition, which led to the creation of Strauss & Co.

Ironically, despite carrying his name, the firm is still often referred to as Sotheby’s, a legacy of its former incarnation as the auction giant’s South African outpost.

With a new-look website and beefed up media section, as well as a range of specialisms that now includes vintage fashion, its owner Alan Demby clearly has his eye on an even more competitive future, especially now Welz the man is no longer a player.

These two, with Ashbey’s Galleries upping their game on European art but on a smaller scale, are setting the pace domestically.

One thing is for certain: all eyes will be on the next two or three series of sales to see how the rivals perform. The first test has been the March sales in Cape Town, which are still being assessed.

Bonhams continue to dominate international scene

On the international scene, though, Bonhams continue to dominate. It is ten years since Giles Peppiatt established The South African Sale in London and new records for Irma Stern, Vladimir Tretchikoff and others have held sway, even when lesser artists have failed to make their mark.

Here the weak rand is Bonhams’ greatest gift when it comes to consignments: quite simply, they are able to sell them for much more in London than their rivals can in Cape Town, with the caveat that currency rules mean that sellers from South Africa must re-import a hefty slice of the profits.

As for the art itself, Irma Stern and Jacob Hendrik Pierneef have dominated for a long time, but others have been showing strongly in recent years, among them William Kentridge, Alexis Preller, Gerard Sekoto, Maggie Laubser and Stanley Pinker.

“South African artists that should be followed and will in my opinion continue to appreciate are Stanley Pinker, Robert Hodgins and Lucas Sithole,” says Peppiatt. “The one artist who I think that will eventually eclipse all the South African hands is Gerard Sekoto. I would not be surprised if we sell a work by Sekoto for over a £1m in the next ten years.”

Pan-African art the next big shift

The next big shift, though, is likely to be towards the Contemporary artists from South Africa, Nigeria, Ghana and the Cote D’Ivoire, among other African countries, whose work is already being championed by new galleries in Cape Town and Johannesburg.

Africa’s most successful living artist, the Ghanaian El Anatsui, has already crossed over into Western taste. His Gustav Klimt-like bottle-top installations sell for hundreds of thousands of pounds, have won prizes at the Royal Academy and have been on show at the Met in New York and the Venice Biennale.

Events such as 1:54, the Contemporary African art and photography fair that now runs in New York and London each year, are championing new and established African talent, with the art taking on global as well as continental themes, creating mass appeal in their wake.

Names such as Sokari Douglas Camp, a Nigerian in his late fifties, Mali’s Abdoulaye Konaté, in his sixties, and Adeola Olangunju a 29-year-old Nigerian photographer living and working in Lagos, are indicative of the explosion of talent and creativity to be found. This is an unstoppable force.

Names to watch coming out of South Africa itself now include Athi-Patha Ruga, Zander Blom, Michael Taylor and Georgina Gratrix, says Genovese at Strauss.

When the Zeitz Museum of Contemporary Art Africa opens around the end of this year on Cape Town’s Waterfront as the continent’s largest gallery of its type, it should provide a hitherto absent hub for Contemporary African art that has the potential to catapult South Africa onto the international art market, taking it well beyond the modest $35m auction market value it now enjoys to something on an altogether grander scale in a global market valued at around $55 billion. If that happens, those far-sighted enough to be ready for this will be the market leaders of the future. And it will be them, whether galleries, fairs or auction houses, who will also reap the rewards of the new and younger domestic market.

Players line up for market’s next phase

Bonhams, who already hold Contemporary African art sales in London and whose London specialists across several departments can be found in the Cape on a monthly basis, are clearly getting ready for the next phase.

“The growth of Contemporary African art over the past four years has been extraordinary and nominal values have risen by over 200% in some areas,” says Peppiatt.

“In my opinion the art market in South Africa is on the verge of being the key springboard for the larger African market. There has been such growth in Contemporary African art, both from South Africa and further North, and South Africa deserves to be at the forefront of this market.”

He and his colleague Hannah O’Leary keep a close eye on the political scene in South Africa, how the Government and economy are shaping up in that other great African art centre, Nigeria, and how that all plays into the art scene.

“Those lacking a global view are most at risk of missing the boat when it comes to the changing scene in both South Africa and the continent as a whole,” says Peppiatt.

Phillips are now openly preparing to makes moves on the pan-African market and the organisers of the Cape Town Art Fair have clearly taken this message on board too. They moved the event from the Waterfront to the much bigger Cape Town International Convention Centre for its February 19 to 21 run – a bold statement.

Displaying pan-African Contemporary art, its stated aims include showcasing new trends, exposing collectors to new artists and, perhaps most interesting of all, adapting the best international practices to build and sustain an economic platform for the art market.

The challenge for the traditional auction houses and dealers in the country is to make sure they do not miss the chance to join the party when it starts.

Like London, Cape Town has the advantage of being a nice place to do business, which can only add to the mix.

Mortgage rates may be going up and food prices rising, but the art market offers a beacon of hope in these troubled times for the Rainbow Nation.