Bad Arguments Against "Droit de Suite"

When I teach critical thinking and argumentation, I often tell students that nothing bothers philosophers more than bad arguments in support of positions they agree with. Well, bad arguments against positions one cautiously supports can also be pretty annoying. A couple of weeks ago I discussed droit de suite – a royalty that visual artists or their heirs receive when their work is resold at auction. Since then I’ve tried to learn more about droit de suite and I’ve come across a few persistent bad arguments against it.

1. Droit de suite benefits established, older artists, not the young and struggling artists who really need financial support.

Any policy will benefit some people more than others. That, in itself, is not a reason to be against a particular policy. This objection would only have force if we were choosing between droit de suite and some other policy that would in fact benefit younger artists. But so far I’ve heard nothing about a possible alternative.

2. Droit de suite is not a substitute for a proper retirement plan.

The folks at Fidelis Art Prints in Vancouver make this objection in an article on their website. They make some excellent points about the importance of pricing one’s art properly and about financial management for artists. And they’re right - droit de suite is definitely not a substitute for a proper retirement plan. Neither is winning the lottery. But it simply doesn’t follow that the Canadian government should resist efforts to institute droit de suite here.

3. Art collectors have a right to make a profit from their investments.

Art collectors are an important part of the art world. When collectors purchase works, they help support artists and galleries. Some collectors generously lend or donate their collections to museums where they can be viewed and enjoyed by everyone. Collectors most definitely should have the chance to reap a financial gain if they choose to sell. In countries were droit de suite is the law, the amount of money that goes to an artist when a work is resold is quite small – usually four to five percent of the resale price up to a certain maximum. No one is asking collectors to stop making a profit, only to make a somewhat smaller profit.

4. Why should droit de suite apply to artworks, but not to works of fine design?

Perhaps works of fine design should also be included in resale royalty schemes. I tend to think that there are important differences between artworks and design objects that would make droit de suite inappropriate for design objects. Yet whether I’m correct about this or not has little bearing on the main question: Would droit de suite be a good thing for Canadian artists and the Canadian art market, or not?

5. Droit de suite is difficult to administer and enforce.

Again, this is probably true. Yet many other jurisdictions have found a way to administer droit de suite. Canada might learn from their experiences. Also, the fact that a policy is difficult to enforce is not necessarily a reason to reject it. The administration and enforcement of child support payments by non-custodial parents can be extremely difficult; yet this is not given as a reason to change existing family law.

These five arguments against droit de suite are low-hanging fruit, so to speak. Most of them are “fallacies of relevance.” Even if the point they make is true, it is of little or no consequence for the issue at hand. I don’t mean to suggest that all arguments against the policy are bad. In fact, some of the arguments against it, such as those raised in an article by Jonathan Tepper, are very subtle and complex, and would require a lot more attention that I can give them here.

One final thought: Some of the more legally sophisticated arguments against droit de suite turn on the objection that it would be a mistake to treat artworks differently from other types of property. But it is worth noting that we do, in fact, already treat artworks differently, both as a matter of practice and in the law. For example, many countries have laws and regulations against exporting certain kinds of artworks, laws and regulations that do not apply to other kinds of property.

Mediation as a Substitute for Justice?

“Mediation is a complement to justice. It cannot ever be a substitute for justice.”

These are the final words of the Gordon Slynn Memorial Lecture 2010, given by Lord Neuberger of Abbotsbury, the Master of the Rolls. (The “Master of the Rolls” is the Monty-Pythonesque title given to the second most senior judge in England and Wales. He is the presiding officer of the Court of Appeal, Civil Division.)

Lord Neuberger assures his audience that he is a “keen supporter” of ADR; his worry is that the tendency to treat mediation as good and litigation as bad may be inconsistent with a commitment to equal access to justice. His argument goes like this: Equal access to the law is a fundamental component of democracy. The civil justice system is not merely a service offered in the marketplace; to regard it as such is to misinterpret its constitutional function. Mediation and ADR, in contrast, are not part of the state; they are services offered to those in dispute. To insist that disputants try mediation before litigation places an additional financial barrier to the justice system, thus compromising the principle of equal access to the courts. Disputants may accept a mediated solution that does not reflect their legal rights because they cannot afford both to mediate and to litigate.

Lord Neuberger gave this lecture on November 10, just days before the British government announced cuts to legal aid for civil cases and increased support for mediation and ADR. His remarks have to be interpreted in light of the current political situation in the U.K.

What does Lord Neuberger mean when he claims that mediation is not a “substitute” for justice? It sounds like he means that mediation is something different from and inferior to justice, the way a baker might caution one that nutrasweet or sucralose would not be adequate substitutes for sugar in the chocolate chip cookie recipe. And I fear that this is the meaning that will be assumed by those who hear this remark out of context and fail to read his entire lecture. I think it is fair to say that Lord Neuberger means that ADR is not a substitute for the justice system. He is using the word “justice” to mean something like “those decisions that are handed down formally through the legal system.” Now, while it is legitimate to use the word “justice” in such a way, this is probably not the meaning that most people have in mind when they use the word. We allow for the possibility that certain laws may be unjust and that the administration of the law itself may be unjust. Of course, Lord Neuberger recognizes this too. He even quotes Sir James Mathew’s ironic remark that, “In England, justice is open to all – like the Ritz Hotel.” Yet while Lord Neuberger acknowledges that equal access to the law is far from being a reality, I don’t think he makes enough of existing barriers – ones that have nothing to do with the proposed expansion of ADR.

No one would disagree that mediation is not a substitute for the civil justice system. Even the most enthusiastic ADR supporters recognize that some disputes are inappropriate for mediation. There are other reasons why “mediation” and “justice” should not be opposed to one another. Justice can be a quality of processes or of outcomes. Mediation and litigation are both processes of dispute resolution. As such, each can be conducted fairly (justly) or not. Litigation and the formal legal system do not have a monopoly on fairness. Similarly, the outcomes of either of these processes might be fair or not. The fact that a settlement has been voluntarily assumed or forced upon disputants does not tell us whether or not it is fair. Finally, mediation and the legal system need not be seen as in competition with one another. A mediated settlement may be formalized as a contract, a document with the power of the courts behind it.

Ethics and Insider Trading

This morning’s Globe and Mail brought the news that Mitchell Finkelstein, a partner in a prominent Toronto commercial law firm has been accused of “tipping” – passing along sensitive confidential information to an old friend from university, who in turn profited from the information. The friend, Paul Azeff, works for the Canadian Imperial Bank of Commerce in their “World Markets” division. He, along with Korin Bobrow (a high school friend and colleague) have been accused by the Ontario Securities Commission of insider trading and suspended by their employer. Two employees of TD Waterhouse were also charged by the OSC in connection with the investigation and have been suspended by the bank.

It is important to note that none of these allegations has been proven.

Insider tipping and trading are both immoral and illegal and certainly no laughing matter. Still, I couldn’t help smiling as I read the Globe’s earnest claim that:

“Nothing in Mr. Finkelstein’s background would have suggested this turn of events.”

Now, insider tipping and trading are, by definition, crimes committed by insiders. That is, by people with access to information that is not yet public knowledge. People without access to privileged information – outsiders – are unlikely to run afoul of the law here. So the very “background” that made Mr. Finkelstein an insider – his private school education, his membership in the same fraternity as Mr. Azeff, and his position of trust in a prominent law firm – are the same things that made possible the accusations against him.

The Globe’s claim is also naïve in its implication that we should be able to find something in Mr. Finkelstein’s background that would allow us to make sense of the allegations. Surely, the reasoning goes, there must be some character flaw or formative experience that separates the vast majority of honest and rule-abiding lawyers and brokers from those who seek to profit from insider information. This idea is comforting, because once we have figured out what that difference is, we should be able to protect ourselves from the cheaters and fraudsters of the world. It hardly needs to be said that the idea is dangerous as well. Men like Bernie Madoff and Earl Jones were able to dupe as many as they did just because there was nothing in their backgrounds to indicate that they would engage in criminal acts.

If an employer can’t tell from a person’s background whether he or she is likely to commit an immoral act or a crime, what is to be done? One answer is to reduce the opportunity that any employee has to get their hands on information that might be profitable if passed along. This passage in another article about Finkelstein jumped out at me:

“In the report the OSC alleges that between November 2004 to May 2007 Finkelstein “actively sought out and acquired” non-public information either through his role as counsel with Davies or by conducting searches on company system.

If the allegations are true, then Finkelstein was able to gain access to sensitive information that he strictly had no right to have. Reduce the number of people who have access to such information, and the potential for insider tipping and trading will also be reduced. Furthermore, taking a leaf out of the Security Services book, every deal file that is of potential value should be marked as such and then meticulous track kept of every person who reads it.

"Droit de suite" and the Canadian Art Market

A composer receives a royalty when her work is played over the radio. A writer whose articles are reprinted is paid a fee. A painter whose work is re-sold at a profit receives….. nothing.

This is the current situation for visual artists in Canada, most of the U.S., Asia, and New Zealand. However things are different in the countries of the European Union, Australia, and California. There artists receive a percentage of the re-sale value when their work is sold at auction. If the artist is deceased, his or her heirs are paid until copyright is expired, usually in seventy years. This fee, called “droit de suite,” is a way for artists and their families to benefit from the increase in value of their work over time. It is different from copyright, which visual artists usually retain over their work. Droit de suite originated in France in the years after WWI as a way to help the widows of artists killed in the war. The amount received by an artist depends on the price of the work at sale, but usually amounts to about four percent. The maximum royalty payment an artist can receive for each re-sold work is 12 500 euros, or about $17 500 Cdn.

The EU agreed on the adoption of droit de suite in 2001, although it was only put into effect in the U.K. in 2006. Australia adopted the Resale Royalty Right for Visual Artists Act in 2010, with the exploitation of aboriginal artists particularly in mind. Here, the Canadian Arts Representation (CARFAC) has been lobbying politicians to add a resale right to Canada’s copyright legislation. As European countries pay resale fees to artists of all nationalities, they would like to see Canadian auction houses respond in kind. The Globe and Mail recently discussed the issue of droit de suite with an article featuring the painter Mary Pratt. A painting she sold for $50 in 1966 is expected to bring between $10 000 and $15 000 at Sotheby’s auction of Canadian art later this fall. Pratt is now 75 and suffers from health problems; I imagine she might appreciate a financial windfall.

There was a lot of controversy in the UK when a harmonization of droit de suite across Europe was first suggested. Because few wanted to be seen as arguing against a measure that would benefit artists, most of the arguments put forth against resale royalty rights tended to be practical or pragmatic, rather than strictly moral. For example, it was said that the fees would be difficult to administer, and that the payments would tend to benefit the heirs of established dead artists, rather than impoverished living artists. It was also suggested that artists already benefit from higher re-sale prices for their work, as they tend to push up the prices for new work as well.

The strongest argument offered in the UK against the adoption of droit de suite came from the auction houses, who argued in effect that it would create an un-level playing field for them in comparison with auction houses in the U.S., Switzerland, and Asia. If the transaction costs for selling a work are higher in the UK than in these other markets, then collectors would be likely to move to these other markets. Imagine a Japanese collector with a Picasso to sell. If it would cost him an extra $17 500 to sell the work in Paris or London as opposed to New York, it is not difficult to imagine that he would opt to sell the work in New York.

It is too early to tell in what ways the adoption of droit de suite in the U.K. has affected the art market there. What would be the effect if Canadian politicians voted to adopt some form of droit de suite? It would be very interesting to see some industry projections. How much would living artists benefit? What percentage of the art market in Canada is made up of Canadian works, and how much is international? If the auction houses do most of their business with Canadian works, then droit de suite might have only a minimal effect on their bottom line.

Read This….. or Else

Ontario Superior Court Justice David Price has ordered an estranged couple to read three books on communication and parenting and to report back to him on what they have learned at their next court appearance. The books are: Difficult Conversations by Douglas Stone, Bruce Patton and Sheila Heen; Parenting After Divorce, by Philip M. Stahl; and Parenting from the Inside Out, by Daniel J. Siegel and Mary Hartzell.

As an educator, I’m a little uncomfortable with anything that might smack of reading as punishment. Family lawyers contacted by The Toronto Star and The National Post noted that the ruling was unusual and disagreed as to whether the “homework” assignment would have its desired outcome.

It is not difficult to understand why Justice Price might be frustrated with the couple. Their disagreements – over money and access to their twin sons – seem both intractable and unremarkable. I imagine that similar disputes play out in family courts on a daily basis. The mother is asking for her former husband’s share of the proceeds from their matrimonial home, and to deny him the right to see their children. The father is asking his estranged wife for $12 000 and accuses her of already denying him access to the children. She in turn says that the children are reluctant to see their father; while he seeks to end her sole custody of the boys, and prevent her from taking them for counseling to an abused-children’s group. Along with the reading assignment, the judge ordered the mother to provide make-up days for the denied access, the father to undergo an assessment for alcohol and drug dependency, and for both of them to seek counseling on communicating with one another.

The estranged couple in this case have at least one thing in common: neither was represented by a lawyer. So neither has the financial incentive to settle a case that is provided by the specter of imminent and increasing legal bills.

There are many different ways to solve disputes. When you elect to solve a dispute through litigation, as this couple has, one advantage is that there will be an eventual clear resolution. But going to court means giving up control over the outcome of your dispute, and the resolution imposed by the courts might not be to your liking. Perhaps people lose sight of this possibility, or are simply unable to imagine a court not seeing the situation exactly as they do. So they may refuse to comply with court orders they dislike, only to find themselves back in court. And on it goes. The law is a blunt instrument, as it is often said, and it is interesting to see Justice Price try something new, whether or not his measures have their desired effect. Just as a good mediator might, the judge is appealing to the couple’s better instincts, and trying to get them to see that they have a shared interest in the well-being of their children, and that they may even continue to share some important values related to their children’s upbringing.

There is also the slightest hint of public shaming in the judge’s order. In demanding that the couple read up on parenting, the judge makes a clear statement as to what he thinks of their behaviour and their parenting skills up to now. It can be uncomfortable to realize how others see us, but it might be the beginning of some positive change.