Britain’s new resale royalty law, which grants living artists a portion of the proceeds when their artworks are resold by art dealers or auction houses, turns one year old on Feb. 14, 2007. Opponents of the measure, which was prompted by British participation in the European Economic Union, feared that the new tax -- also known by its French name, droit de suite -- would damage the country’s art market and drive business to the U.S. and Switzerland. Has that been the case?

Au contraire. London’s contemporary art business is stronger than ever. "Sales have been as healthy as they were before the law came into effect," said Glenn Scott-Wright, director of London’s Victoria Miro Gallery. "Clients haven’t indicated that they were unwilling to buy because of the royalty. In fact, there hasn’t really been much discussion of the law at all."

British auctioneers have reported similar results. Pilar Ordovas, head of Christie’s contemporary art department in London, stated that 2006 brought "the best sales ever in contemporary art in our history." As far as paying royalties on sales, she said, "Nobody seems to be concerned."

Under the British law, the resale royalty kicks in when an artwork is resold for a price more than €1,000 (£680) and is calculated on a sliding scale. The royalty rate is four percent on the first €50,000 of the price, three percent on the €50,000.01-€200,000 portion of the price, and one percent on €200,000.01-€350,000, one-half of one percent on €350,000-€500,000.01, and one-quarter of one percent for the amount exceeding €500,000. The maximum payment for any one sale is €12,500. The royalty is payable without regard to profits, i.e., even when the resale is at a loss.

For instance, to calculate the resale royalty due on British sculptor Barry Flanagan’s manic bronze Nijinski Hare (1996), which sold for a record-setting £624,000 at Christie’s London on Nov. 17, 2006, first get the hammer price, which was £550,000 (the buyer’s premium amounts to 20 percent of the first £100,000 and 12 percent of the rest, or £74,000). So, Flanagan presumably was due royalty on €803,000, at an exchange rate of £1 = €1.46, or -- stand by, now -- €2,000 + €4,500 + €1,500 + €750 + €758 = €10,266. Converting that sum back into pounds sterling, we’re talking somewhat more than £7,030.

At first the collection of the new royalty was monopolized by the London-based Design and Artists’ Copyright Society (DACS), an organization that was founded in 1984 to collect copyright fees for artists and illustrators. According to a recent DACS report, 412 artists have been paid royalties totalling £709,000 in 2006, with amounts ranging from £13.77 to £27,358 (for multiple sales). Among the more well-known artists who have received royalties are Lucian Freud, Richard Hamilton, Damien Hirst, David Hockney and Bridget Riley. Approximately three-quarters of the resales were at auction houses, while the rest took place at galleries.

Initially DACS charged a fee of 25 percent of the resale royalty for this service, prompting charges that the amount was excessive from some artists, Richard Hamilton among them. More recently, the Bridgeman Art Library, another organization that has historically collected artist’s copyrights and reproduction rights, has launched the Artists’ Collecting Society to collect resale royalties. The competition has pushed the commission down to 15 percent.

One of the most outspoken opponents of the resale royalty scheme is Anthony Browne, chairman of the British Art Market Federation. In fact, Browne issued a statement claiming that the low number of beneficiaries of the new law -- 412 artists, rather than the "thousands" that he said had been predicted -- showed the act was a "failure," with its meager returns more than offset by its costs to the art trade. He vowed to redouble his efforts to block the extension of the act to artist’s estates, now due to take place in 2012.

But Browne also admitted that the resale royalty law had no visible effect on the British art market. "There has been a substantial boom on the contemporary side," he said, "and this law isn’t going to knock that off its perch." He added that the €12,500 cap on royalties -- about £8,500 -- "helped reduce its impact."

Browne noted that the British pound has gained strength in relation to the U.S. dollar -- with the exchange rate increasing from $1.75 to the pound at the beginning of 2006 to almost $2 at the end of the year -- which also strengthens the British art market. "With a less favorable exchange rate, however, people won’t be so sanguine about this law," Browne speculated, noting that "where artists are represented by more than one gallery, sellers may start to look elsewhere."

At present, royalties in England are only paid to living artists, and as Browne indicates, the provision that would extend resale royalties to artist’s estates -- that is, artist’s heirs -- has tended to be the most controversial part of the law. In France, for instance, an estimated 70 percent of resale royalties go to the families of a handful of famous dead artists, notably Georges Braque, Fernand Léger, Henri Matisse and Pablo Picasso. Similarly, in Germany, artists’ heirs collected seven times as much as living artists. Such results tend to undermine the argument that resale royalties are designed to help needy artists.

What’s more, the number of artworks subject to resale royalties is likely to increase significantly if works by deceased artists are included. "Things will change considerably after 2012, and probably not for the better," Pilar Ordovas said. "Collectors may start looking for other places to sell."

A number of British artists have gone on record in opposition to resale royalties, citing the issue of fairness, including sculptor Anthony Caro and painter David Hockney, both of whom have received royalties in the past year under the new law. By email, Caro claimed that the law "will mainly benefit artists who are already successful."

The British government is underwriting its own study of the effects of the new resale royalties law, although findings are not expected to be released for another year.

DANIEL GRANT is a contributing editor of American Artist magazine and the author of The Business of Being an Artist and several other books.