Plans for EU ministers to seek a compromise at a special meeting later this week were scrapped. The issue will now be passed over to Portugal, which takes over the EU's rotating presidency next month.
Britain's stalling tactics mirror its blocking last week of an EU-wide savings tax, which the Government believes will harm the City of London's eurobond market. This has been stalled for six months.
Mr Blair upset Finland, current holders of the presidency, and Germany by demanding special measures to protect the pounds 2.2bn London art market, which holds 70 per cent of Europe's sales. He has written to all EU leaders and telephoned several before key meetings about the directive in recent weeks. There were also veiled threats from British ministers to invoke the rarely-used "Luxembourg compromise", a device to block legislation when a member state has a special national interest. Mr Blair's intervention followed a campaign by the London market, which employed the lobbyist company GJW and warned that paying royalties could cost 8,500 jobs in UK auction houses as sales switched to New York and Switzerland.
"It is astonishing that a Labour Prime Minister can spend so much time defending the likes of Sotheby's from a relatively minor burden they could easily afford," said one official from another EU country.
The European Commission, already angry over Britain's actions on the savings tax, were furious at the rearguard action over the art directive.
The Commission said the proposed 4 per cent levy would be small compared with the 25 per cent charge that auction houses can impose on art sales. It said 250,000 artists would benefit from resale rights, arguing that they should not be denied the benefits given to musicians. Britain still faces a battle over the proposal in the new year. Unlike the savings tax, it cannot veto the measure because it does not require the backing of all 15 EU countries and can be passed by qualified majority voting.
Mr Blair has proposed limiting royalty payments to living artists, which would protect Britain's high-margin sales, most of which are made after an artist's death. Under the Commission's plans, their relatives could benefit for up to 70 years after their death.Reuse content