INDIA Trends and Developments Contributed by: Essenese Obhan and Neel Mason, Obhan Mason
remit royalties to artists on onward sales; at the same time, artists also do not always demand them. Very few, if any, artists have been able to successfully invoke the statutory resale right. Why are resale rights not common in India? This is likely due to a combination of a lack of awareness among artists and the gaping information asymmetry in the art market itself, which means that artists may not even be aware of when and at what valuation their works are resold. Resale clauses In this scenario – ie, where statutory resale rights are not systematically enforced in India – the most immediate and practicable solution is contractual. At the first instance of sale of an artwork, artists should demand the inclusion of bespoke resale royalty claus - es in sales agreements. Galleries and auction houses should also adopt policies to ensure that resale royal - ties reach the artist. Although such contractual arrangements cannot bind a third-party buyer who was not a party to the con - tract, the fact that the legislation grants rights to the artist and their legal heirs for the term of copyright means that a non-party to the agreement would still be bound by the legislation should an artist choose to enforce a subsequent sale. Resale clause templates must ideally include certain basic elements for clarity and enforceability. These include the following: • definitions of “resale” and “covered transactions” – mentioning whether this covers private sales, auctions, dealer sales, consignments, or transfers via inheritance; • royalty rate and thresholds – specifying the per - centage payable (eg, 3%–5% is common interna - tionally); • payer – identifying who is obligated to pay the roy - alty (eg, the seller/owner upon resale, the auction house, or the intermediary facilitating the sale); • payment mechanics – timelines (eg, payable within 30 days of resale), currency, taxes and method (bank transfer/escrow);
• notification and accounting – obligation to notify the artist or their representative within a specified number of days of resale, and to provide proof of sale price and purchaser information; • audit rights – allowing artists or their representa - tives to audit resale records; • assignment and transfer – specifying whether the right can be assigned to heirs or a collecting society; • remedies and interest for late payment; • dispute resolution – via arbitration or Indian courts; • publicity and confidentiality – allowing for disclo - sure of resale to the artist; and • applicability to cross-border sales – address - ing sales outside India and how payments will be enforced or co-ordinated. Implementation mechanisms There are multiple mechanisms by which resale claus - es can be implemented, either directly or indirectly. In a direct contractual royalty arrangement, the seller and buyer may sign an agreement which includes a resale clause that binds the buyer on future resales. This works best in the primary market, where resale obligations are embedded in the initial sale contract and registered in any provenance record. To ensure that secondary market sales are protected, auction houses may undertake (by way of a policy) to collect and remit resale royalties. Where available, col - lecting societies for artists could administer (through collection and distribution) resale royalties as well. This would work best in markets that have robust statutory resale rights already in place, but can also be created contractually by groups of artists and galleries. Yet another mechanism is the escrow or retention model, where a portion of sale proceeds could be retained in escrow for a period of time. This would cover potential resale royalty obligations when works are resold through certain channels. Limitations and challenges The absence of a Commercial Court decision setting out the contours of royalty is one of the biggest chal - lenges in India today. It is debatable whether the rate set by a Commercial Court can vary a contractual
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