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The UK Money Laundering Regulations 2017: key changes and impact for art businesses

04/07/2017

Introduction The UK Money Laundering Regulations 2017 (“Regulations 2017”) which implement the EU’s Fourth Money Laundering Directive (“4MLD”) came into force on 26 June 2017, repealing the Money Laundering Regulations 2007 (“Regulations 2007”). The 4MLD seeks to give effect to the international standards for combating money laundering and terrorist financing developed by the Financial Action Task Force (“FATF”), an inter-governmental body founded on the initiative of G7. Please click here for more information. The UK is traditionally ahead of the EU

The Regulation of the Art Trade for Anti-Money Laundering in the EU

28/06/2017

Certain types of businesses fall within the regulated sector for EU anti-money laundering, such as banks, wider financial institutions, law firms, accountancy businesses and estate agents.  Luckily for the British art market, the British government has not invited auction houses and art/antique dealers to join the club.  Auction houses and art/antique dealers in other EU Member States have not been so lucky. Being in the regulated sector for money laundering carries a compliance burden that should not be under-estimated.  Businesses

An Italian story of bad luck and lack of diligence

06/06/2017

In a recent judgment, a Milan Court rejected a claim for the loss of value of a sculpture loaned by an Italian public entity to a Belgian museum arising from the alleged damage caused by a fall of the sculpture whilst on loan to the Belgian museum.  The judgment is a reminder that in the absence of a detailed condition report, the alleged damage can be difficult to prove.  The judgment also points to the difficulty in assessing the loss

Faithless Servants and the Law: Fine Art Dealers Beware

06/06/2017

On 27 February 2017, a New York State Court[1] held that Lisa Jacobs, a fine art dealer and private curator, breached the fiduciary duties she owed to the seller of an artwork entitled Future Sciences Versus the Man by artist Jean Michael Basquiat (the “Work”).  As a result of her disloyalty, the Court ordered Jacobs to pay to the seller the $1 million in secret profits plus $50,000 compensation she earned for the sale of the Work along with interests,

Appropriation Art Takes Another Hit in European Courts

09/05/2017

On 9 March 2017, a French High Court held that a 1988 sculpture by appropriation artist Jeff Koons, Naked, infringed on the copyright of the late photographer, Jean-Francois Bauret.  The claim was brought by Bauret’s widow, Claude Bauret-Allard, against Koons for copying her husband’s work and against the Centre Pompidou in Paris for using an image of the work in the advertising material for their Koons retrospective in 2014. The court ordered Koons’s company and the Pompidou to each pay

The UK Competition and Markets Authority opens an investigation into auction services

16/12/2016

On 22 November 2016, the UK Competition and Markets Authority (CMA) launched an initial investigation into suspected anti-competitive practices in relation to the supply of auction services in the UK. In its announcement, the CMA stated that the investigation is focusing on suspected exclusionary and restrictive pricing practices, including most favoured nation provisions (MFNs) in respect of online sales. The CMA has also received an application for interim measures in connection with this case. MFNs (also known as “most favoured

Series on Art Restitution – Nazi Looted Art

07/12/2016

Introduction The field of art restitution generally concerns itself with artworks that were confiscated or seized from, forcibly sold by, or otherwise lost by their previous owners. Generally, these owners were subject to persecution.  There has been an array of (sometimes inconsistent) court decisions and differing opinions on how art restitution claims should be treated. This series of brief articles seeks to provide a non-exhaustive overview of categories of claims that have been considered. Nazi-looted art By Nazi-looted art, we

Series on Art Restitution – Bolshevik Looted Art

07/12/2016

Introduction The field of Art Restitution generally concerns itself with artworks that were confiscated or seized from, forcibly sold by, or otherwise lost by the artworks’ previous owners. Generally, these owners had been subject to persecution or considerable duress.  Given the various categories of potential Art Restitution claims, there appears to have been an array of (sometimes inconsistent) court decisions and differing opinions on how claims should be treated. This series of brief articles seeks to provide a non-exhaustive overview

Series on Art Restitution – Stasi Looted Art

07/12/2016

Introduction The field of Art Restitution generally concerns itself with artworks that were confiscated or seized from, forcibly sold by, or otherwise lost by the artworks’ previous owners. Generally, these owners had been subject to persecution or considerable duress.  Given the various categories of potential Art Restitution claims, there appears to have been an array of (sometimes inconsistent) court decisions and differing opinions on how claims should be treated. This series of brief articles seeks to provide a non-exhaustive overview

Is this a rebellion? No Sir, this is a revolution

06/12/2016

It is said that when a messenger brought the news to Louis XVI that the Bastille had been taken, the monarch asked: is this a rebellion? No Sir, replied a minister standing by, this is a revolution.  Could the same be said of the public announcements made last week by the French auctioneers? On 29 November 2016, the National Union of French (Commercial) Auctioneers (Syndicat National des Maisons de Ventes Volontaires, also known as ‘SYMeV’) publicly called for the abolition

The Tale of the Two Cranachs

04/11/2016

On 9 August 2016, a federal judge in the U.S. District Court of California summarily dismissed a lawsuit against the Norton Simon Museum brought by the heirs of a Dutch dealer, Jacques Goudstikker, to recover two sixteenth century oil paintings, entitled “Adam” and “Eve” by Lucas Cranach the Elder.[i]  Granting the Museum’s motion for summary judgment, the court held that the Museum is entitled to keep the Cranachs because the Dutch government “acquired ownership of the Cranachs” and, as a

Update – New German Export Provisions for the “Protection of Cultural Property” now in force

29/09/2016

Earlier this year we reported that Germany’s government was in the process of legislating to protect objects of national heritage and restrict their export from Germany. The new Act for the Protection of Cultural Property automatically (and practically, overnight) adds to the list of items declared as national cultural property, all items: owned by the public and held by a public institution holding cultural property (e.g. a national museum); owned and held by an institution holding cultural objects that is

A new Guarantee Facility for the Culture and Creative Sectors

22/07/2016

On 30 June 2016, the European Commission and the European Investment Fund (EIF) launched a €121 million guarantee initiative, the “Cultural and Creative Sectors Guarantee Facility”, to support small and medium enterprises (SMEs) in the cultural and creative sectors via financial institutions. The new guarantee facility will be offered through “Creative Europe” (see here), a 7-year programme (2014-2020) aimed at supporting the cultural and creative sectors.  The guarantee facility will be managed by the EIF on behalf of the European

Spain: Competition Authority investigates Art Logistics Companies

05/07/2016

The Comisión Nacional de los Mercados y la Competencia (“CNMC”) is the independent authority in charge of both competition and regulatory matters in Spain. Its role is to guarantee and maintain the correct operation and effective competition of all productive sectors and markets in Spain. On 24 June 2016, the CNMC issued a press release (see here) announcing that it is investigating potentially anti-competitive practices carried out by certain companies providing transport, production and assembly services in relation to art

Brexit: the long road ahead

29/06/2016

Less than a week after the British EU Referendum, it is becoming increasingly obvious that the vote to “Leave” has settled nothing. This is because the question on the ballot was fundamentally flawed. The Prime Minister should have delayed the process until the Leave supporters put forward a coherent, persuasive alternative to the status quo and voters should then have been asked to choose between the two alternatives. Instead, the British people have voted against an existing system but not

De Sole v. Knoedler Gallery – A Field of Red Flags

31/03/2016

Last month, collectors Domenico and Eleanore De Sole settled their claims against the now defunct Knoedler Gallery and its former president and director, Ann Freedman. The settlement, though hardly surprising, left many questions unanswered and raised other interesting ones. Unfortunately, we will never know whether, in the eyes of a jury, the De Soles’ reliance on the representations made by Knoedler and Freedman was reasonably justified, and whether Knoedler and Freedman intended to defraud. The Knoedler Gallery, founded in 1846

Protecting national heritage or stifling the German Art Market?

29/03/2016

Since 1955, it has been possible for Germany’s 16 states to register on a list of objects of national cultural importance artworks that are considered of particular cultural significance to the German nation. Once registered, the artwork cannot be permanently exported from Germany. Thus far, some 2,700 artworks have been registered by Germany’s 16 states. Most of these artworks are held in private collections. It has only been possible to register artworks held in public collections since 2007. Naturally, once

Switzerland revisits laws on anti-money laundering and terrorist financing

25/02/2016

Since 1 January 2016, art collectors and art businesses dealing in art, or storing art, in Switzerland must comply with new anti-money laundering and terrorist financing laws. Key legislation in Switzerland Money laundering is regulated in Switzerland by the Swiss Criminal Code (“SCC”) which makes money laundering a criminal offence and the Swiss Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector (“AMLA”) which sets out the due diligence and reporting obligations which must be complied

Reform of Bills of Sale could offer a welcome boost to England’s Art Lending Market

03/02/2016

Lending against art is on the rise. In a survey conducted by Deloitte and ArtTactic for their Art and Finance Report 2014, 48% of collectors said that they would be interested in using their art collection as collateral for a loan, which according to the report, is an increase from 41% in 2012.  Skate’s Global Art-Loans Market Report, whilst wildly optimistically predicting that “the 2015 art loans book [is] scheduled to grow above $10 billion this year, which is at

The New Code of Ethics of the Museums Association

22/01/2016

In November 2015, the (UK) Museums Association approved a new version of the Code of Ethics for Museums. The Code is one of a series of guidelines on museums’ ethics published by the Museums Association which also include ‘Guidance on the ethics and practicalities of acquisition’ and the ‘Disposal Toolkit’. The Museums Association has been at the forefront of museum ethics since it published its first Code of Practice in 1977. Since then, it has been continually developing museum standards. 

When it comes to business, a longstanding friendship will not save the day

25/08/2015

On 4 December 2014, Larry Gagosian won a protracted, hostile, and expensive court battle against his long-time friend and client Ronald Perelman. The dispute arose in connection with a series of transactions between the parties involving works of art by Jeff Koons, Cy Twombly, and Richard Serra. In MAFG Art Fund LLC and MacAndrews & Forbes Group LLC v. Larry Gagosian and Gagosian Gallery, Inc., Index No. 653189/2012, two New York courts dismissed the claims brought against the Gagosian defendants.

A New York State Bill Seeking to Protect Art Authenticators

17/08/2015

On 15 June 2015, the New York State Senate approved a bill, S1229A-2015 (the “Bill”) to amend New York Arts and Cultural Affairs Law (“NYACAL”) in relation to opinions concerning authenticity, attribution and authorship of works of fine art. The Bill, which we hope will one day become law, aims to remedy some deficiencies in NYACAL around the absence of protection for experts rendering independent, good-faith opinions about authenticity, attribution and authorship of works of fine art. Specifically, the approved

The pitfalls of selling art to consumers – Three short stories

14/01/2015

Off-Premises Sales: the Consumer Goes on an Excursion… At the Art Business Conference last September organised in London by Art Market Minds, a delegate asked whether a sale to a consumer concluded by a dealer in his gallery could constitute an ‘off-premises’ sale.  The short answer is that it can. The question is significant because if a dealer sells ‘off-premises’ to a consumer, he is required by law (pursuant to the UK Consumer Contracts (Information, Cancellation and Additional Charges) Regulations

Rothko Revisited

17/12/2014

Earlier this year, we wrote about the claim brought by Dallas art collector, Marguerite Hoffman, against three defendants, L&M Arts, Studio Capital and David Martinez. The subject of the claim was the purported breach of a confidentiality clause in the contract for the sale of Hoffman’s 1961 Mark Rothko oil painting, Untitled. The contract was in the form of a letter agreement, dated April 24, 2007 which provided that it would serve as “an agreement between Greenberg Van Doren Gallery

Changes to Copyright Exceptions

07/11/2014

As of 1 October 2014, three new exceptions to copyright infringement have come into force in the UK. The new exceptions affect the way in which copyrighted works can be used and have come about as a result of increasing pressure on UK legislation to reflect the fast-paced digital age that we live in. These changes are likely to not only impact creators and copyright owners, but also consumers, researchers and those in the education sector. The three new exceptions

Peggy Guggenheim – when the heirs and the foundation disagree

07/11/2014

Foundations are often established to manage large art collections after the death of the art collector.  Unfortunately, the interests of the collector’s heirs do not always align with those of the foundation, and disputes arise. Such disputes raise the question of the extent of the rights of the heirs when the deceased’s art collection is managed by a foundation. The Tribunal de Grande Instance in Paris had to examine this very question in the context of the Peggy Guggenheim collection,

The impact of new consumer protection on dealer and gallery sales

11/06/2014

New regulations aimed at protecting consumers come into force in the UK on 13 June 2014.  The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 apply to sales between traders and consumers.  Sales amongst professionals are not caught by the regulations. The regulations consider different types of trader-to-consumer sales: on-premises sales, distance sales and off-premises sales.  Each category of sale is subject to its own regulations. The main issues for dealers and galleries selling art, antiques and collectibles are

Expert opinion: a U-turn by the French Supreme Court

11/06/2014

French courtrooms are no strangers to disputes over the authenticity of artworks.  Over the past 15 years, the French judiciary has repeatedly been called upon to adjudicate lawsuits brought against authors of catalogue raisonnés, artists’ foundations, and connoisseurs recognised by the art market as the ‘leading experts’ on a given artist.  These lawsuits, usually brought by aggrieved art owners, have one fundamental objective: challenging the experts’ refusal to acknowledge the authenticity of the artwork. In authenticity disputes, French Courts like

The new UK payment surcharges regulations and their effect on art market transactions

11/06/2014

As part of the broader EU reform of consumer protection, the UK has implemented a number of legislative changes substantially strengthening consumer rights. One of those changes is enshrined in the Consumer Rights (Payment Surcharges) Regulations 2012, which came into force on 6 April 2013 and directly impact art market professionals accepting payment by card. The Regulations prohibit traders from charging consumers fees that exceed the cost borne by the trader for the use of a given means of payment.

Considering the murky world of AIFMD and its impact on art fund managers

17/04/2014

In response to the perceived risk to investors and to the stability of the European financial market, the activities of alternative investment fund managers are being more strictly regulated.  The EU Directive on Alternative Investment Fund Managers (“AIFMD”) aims to create a harmonised regulatory framework for managers of alternative investment funds within the European Union.  Impacted investment managers are currently grappling with the implementation of the new regulatory regime, in large part because of the ambiguity of the Directive, the

Changes in the law make auction rings easier to prosecute, but is the regulatory framework still fit for purpose?

26/02/2014

Art dealers regularly bid at auction in partnership with other art dealers.  The law does not object to joint bidding provided that certain conditions are met.  If they are not, the bidding arrangement can turn into an illegal auction ring.  The risk if the bidding arrangement amounts to an auction ring is not simply pecuniary; parties bidding in concert may be prosecuted. The law in England and Wales is changing, potentially making it easier to prosecute illegal bidding practices. Traditionally,

Artist’s Resale Right in France: The Economic Burden Revisited

21/02/2014

Over a period of seven months, the Paris Court of Appeal has reached two different decisions over whether Christie’s France can collect from the buyer at auction an amount equal to the resale royalty, as opposed to charging the royalty to the seller. Now the dispute has been referred to the French Supreme Court, which is calling the Court of Justice of the European Union to the rescue. In March 2013, we reported on a judgment by the Paris Court

The Price of Confidentiality

14/02/2014

When, in 2007, Marguerite Hoffman, a prominent Dallas art collector, decided to sell a major painting by Mark Rothko (Untitled, 1961), she insisted on confidentiality.  Her husband had died the year before.  She did not want to draw attention to her finances. The painting was well known.  So was the fact that the Hoffmans owned it.  At the time of the sale, it was hanging on the walls of the Dallas Museum of Art, as part of an exhibition called

Out of the Shadow of the Third Reich

23/11/2013

The discovery in a Munich flat of a hoard of over 1400 artworks acquired by Hildebrand Gurlitt in dubious circumstances during the Second World War has been making headline news.  The current value of the collection of artworks has been estimated at over €1 billion and contains previously unknown works by Matisse, Chagall, Picasso and Renoir. Gurlitt, an art dealer and collector, allegedly assisted Hitler in pillaging art from Jews in Germany and other countries occupied by the Third Reich. 

Online Trading – Art Dealers Beware

23/11/2013

An increasing number of dealers in art and antiques are making sales online.  Whilst legal principles relevant to the sale of goods in person apply to sales on the Internet, consumers buying online are offered an additional protection.  In particular, they have the unconditional right to cancel online purchases for any reason within a ‘cooling off period’.  The right to cancel is particularly draconian for dealers and is set to get worse. These additional rights are available only to consumers. 

Art Finance – Leaving the art on the borrower’s walls

23/11/2013

In Europe, banks and other specialist providers of loans against art, antiques and collectible items have often no choice but to take possession of the collateral in order to perfect their security interest.  This is the case where the law of the country where the collateral is physically located when the security interest is granted, affords the lender no option to put third parties on notice that the lender has an interest in the collateral, other than by taking possession.

Danger Ahead – Auctions Undermined by New Consumer Protection

23/11/2013

Under EU law, consumers buying goods from a trader at a distance, or from a trader face-to-face but outside the trader’s usual business premises, have the right to cancel the contract of sale within the so-called ‘cooling off period’ without giving any reason.  They simply notify the trader that they no longer want the goods, and return them. In the case of distance purchase, the consumer is not able to see the goods before concluding the contract, accordingly, so the

Borrowing Against Your Art

12/09/2013

Art collectors are often unable to display their entire collection in their homes. They keep part of it in storage, or they lend it to museums. Why not leverage artworks in storage or hanging on museum walls by borrowing against them? Art finance is a growing industry. Citibank pioneered art finance in the 1970’s.  Last year, Michael Plummer of Artvest Partners in New York estimated the art lending market at USD 7 billion. Since then, new lenders have entered the market.

Trading with the Enemy

12/09/2013

International sanctions are actions taken by one country against another, either unilaterally or multilaterally. Their aim is to change the behaviour of the target country’s regime in order to maintain or restore international peace and security, or to improve the situation in that country. International sanctions are generally imposed by the United Nations or the European Union. Trade sanctions typically involve a ban on trade, possibly limited to certain sectors such as armaments, or with certain exceptions (such as food

The Destruction of Fakes

12/09/2013

The destruction of fakes at the behest of artist committees is a long standing practice in France. In two recent decisions both involving artworks signed “Miro”, the Court of Appeal of Paris ordered the destruction of the artworks. In the first case (Lotz -v- A.D.O.M., 12 June 2013), Mr Lotz, an Austrian national, bought a watercolour on paper signed “Miro” from a US dealer through Artprice. Mr Lotz submitted the watercolour to A.D.O.M., the association with moral rights over artworks

The Recovery of Unlawfully Exported Cultural Property with the European Union – The European Commission has a Plan

12/09/2013

The European Commission has unveiled plans to strengthen the Restitution Directive. Council Directive 93/7 EEC on the return of cultural objects unlawfully removed from the territory of a Member State (also known as the Restitution Directive) was adopted in 1993, when the internal frontiers amongst Member States were abolished, in order to protect cultural objects that are classified as national treasures. The purpose of the Directive was to assist Member States in securing the return of cultural objects classed as

Import VAT and the Free Movement of Goods within the European Union

12/09/2013

The importation of goods into the European Union is subject to import VAT. The rate of import VAT varies from EU country to EU country. The rate also varies depending on the type of goods. Unless an exemption applies, the importer of art, antiques and collectibles is liable to pay import VAT. In some EU countries, the standard rate of import VAT applies. The standard rate (depending on the EU country) varies between 15% and 25%. In other EU countries,