As reported in a prior blog, the EU is looking to tackle the trade in illicit cultural goods by introducing import controls at EU borders. On 7 June 2019, the European Parliament and Council Regulation No 880/2019 of 17 April 2019 on the introduction and the import of cultural goods was published in the Official Journal of the European Union (L No 151, pg. 1). The Regulation will enter into force 20 days after publication.
The Regulation seeks to introduce common import rules across Member States, so as to ‘ensure the effective protection against illicit trade in cultural goods and against their loss or destruction, the preservation of humanity’s cultural heritage and the prevention of terrorist financing and money laundering through the sale of pillaged cultural goods to buyers in the Union’. Few can argue with the objective of the Regulation, but does the Regulation achieve its objective? In this blog, we set out how the Regulation will work in practice and what art collectors and the trade should consider doing to prepare.
In our earlier blog, we highlighted the numerous amendments to the original draft of the Regulation, such as creating exemptions for temporary import for exhibition, study, conservation and art fairs. The final version of the Regulation is much the same as the version we commented upon in our blog, save that following concerns raised by the antiquarian book trade, restrictions for ancient manuscripts have been diluted. Ancient manuscripts have been removed from the category of cultural goods which are particularly vulnerable to pillage and destruction, moving manuscripts from a high risk object to a lower risk object. Moreover, the financial threshold above which lower risk objects are subject to EU import controls has been increased from EUR 10,000 to EUR 18,000.
Despite the numerous amendments during the legislative process, the Regulation remains controversial. Unsurprisingly, art collectors and the art trade are concerned about this additional compliance burden, however it is not just the art market that feels uneasy about the Regulation. UK MEPs voiced their discontent in October 2018 during a Parliamentary vote and hoped that the Regulation might not be adopted until after Brexit, meaning that it would not apply in the UK. Some archaeologists and academics have also raised concerns that the Regulation will not, in fact, tackle looting. For example, coins require a financial threshold of EUR 18,000 per item to be caught by the Regulation, which is too high for such objects.
However, perhaps the most concerning consequence is that because of the vast gap in the requirements for provenance in circumstances when the origin of an object is known, and when it cannot reliably be determined (explained below), we may lose valuable information about the origin, history and authenticity of an object, as such information may prove a barrier to importing the object into the EU. This would be a devastating loss of knowledge and history.
How will it work?
The Regulation does not apply to cultural property made in the EU. Accordingly, cultural property most likely to be affected by the Regulation includes property from civilisations in the Near East, Far East, the Americas, Africa and Australasia. Objects such as Russian icons, Eskimo art, rugs from Iran, Turkey and other Asian countries, and art from the South Pacific, will also be affected.
The Regulation establishes a system
of high-risk objects and lower-risk objects:
High Risk Objects: Category B
The high-risk objects encompass, under Part B (attached below) ‘products of archaeological excavations or of discoveries on land or underwater’ or ‘elements of artistic or historical monuments or archaeological sites which have been dismembered’. These objects, which do not have a minimum financial threshold, but must exceed 250 years in age, require an import licence before they can permanently enter the EU.
In order to import these high-risk objects, the importer must apply for an import licence to the competent authority in the EU Member State of importation. This application will be made through an electronic system (not yet operational) and the importer will be required to provide documentation to demonstrate, either:
- that the object was exported from the country ‘where they were created or discovered’ in accordance with the laws of that country at the time of export, i.e. export licences or certificates; or
- if no such laws existed at the time of export, evidence of the absence of such laws.
As discussed in our previous blog, these conditions are a significant concern to many dealers and collectors as export documentation is generally unavailable.
First, you often do not know when an object was exported from the country of creation or discovery. You may be able to infer that the object was exported before a certain date, because you know from the provenance that by then, the object was in a different country. That, however, will not tell you when the object was exported from its country of origin.
Assuming that you do know when it was exported from its country of origin, how do you establish what export control laws were in force at the time of export? That can be a challenge, even with the benefit of legal advice. Specialist lawyers will be familiar with current export control laws, but if the object was exported from the country of creation or discovery, say, 35 years ago, what then?
Assuming that you know when the object was exported and what national export control laws applied at the time of export, how do you establish that your object was exported in accordance with the laws of the country of export? More often than not, the exporter is unknown to the current possessor and to the seller to the current possessor, and no documentation is available. It is highly unlikely that the country of export will help in establishing whether or not the object was lawfully exported. How are you expected to comply with condition (i) above?
The other question is, how do you provide evidence that no export control laws existed in the country of creation or discovery at the time of export (condition (ii) above)? This entails, first, knowing when the object was exported, and second, obtaining legal advice in the country of export (in a language understood by the officials of the EU country of import) that at the date of export, no export control laws applied to the object in question. The Regulation is silent on the type of evidence acceptable to national EU authorities.
The absence of export documentation does not automatically mean that the object was unlawfully exported or looted and further, absence of export documentation does not prevent the possessor of the object from having ownership of that object. Accordingly, once the Regulation applies, the possessor of a high-risk object may be its legal owner, but he/she may be unable to import it into the EU.
Lower Risk Objects: Category C:
A lower risk object is one that falls under a category listed in Part C (attached below), is more than 200 years in age and has a minimum value of EUR 18,000.
To import these objects, the importer must submit an importer statement via the electronic system (not yet operational), comprising a signed declaration stating the object was lawfully exported from the country of origin and a standardised document describing the cultural object (in sufficient detail to allow the relevant authorities to identify it). It is expected that the criteria for this standardised document will be set by the EU in the next two years.
Member States are to introduce criminal penalties in the event that the importer makes a false statement or submits false information. The importer will often rely on information provided by his or her client, such as an auction house, dealer or collector, and cannot know whether or not such information is accurate. The ‘mens rea’ of the proposed criminal offence is yet unknown and may vary from Member State to Member State.
Two derogations apply to both high-risk and low-risk objects. If (a) the country where the object was ‘created or discovered’, cannot be reliably established, or (b) the export from that country occurred prior to 24 April 1972 (the date when the UNESCO Convention of 1970 came into force), then the application for an EU import licence may instead be accompanied by documents which prove that the object was exported in accordance with the laws and regulations of the last country in which it has been for more than five years.
Whilst helpful to mitigate the unrealistic conditions attached to the importation of high-risk objects, the derogations also provide a window of opportunity for traffickers and the less conscientious importer. If the holder of the cultural object does not have evidence of legal export, but does have evidence of legal export from the country where the object has been for five years, then what is to stop the possessor of looted cultural property from claiming that they cannot reliably determine the country of origin (which is very often the case) or that export was “prior to 1972”, park the looted property in another country for 5 years, then export it legitimately from the ‘parking’ country and import it into the EU by relying on the derogation? There may well be a return of “Private Collection 1970” that many have worked so hard to reject, (save that it will now be “Exported prior to 1972”). Or we may now only see the ancient civilisation listed for the object, and gradually lose access to expert opinions or scholarly reports indicating the physical origin of the object.
To conclude, whilst the objective of restricting the EU trade in looted cultural property is worth pursuing, the Regulation is unlikely to achieve its objective because it leaves open doors to looters and smugglers. At the same time, it targets categories of cultural property that are highly unlikely to ever be looted, thereby imposing disproportionate compliance obligations on art collectors and the art trade. The Regulation risks making our understanding of foreign civilisations poorer. It will also, inevitably, boost the trade of non-EU cultural objects in non-EU art trading centres, to the detriment of the EU.
What should the art market do to prepare?
The Regulation will not apply immediately. Before any import licence is required, the EU has two years to establish the rules and processes for the electronic system, and then the electronic system must be built and fully operational. We understand that in reality, the EU does not expect for the database to be in place for another 5 years, so the art market has considerable time to prepare.
Ultimately, collectors and dealers must audit their collections to determine whether cultural property subject to the Regulation is accompanied by the documentation required in order to be allowed into the EU. This audit is particularly desirable for collectors and dealers storing cultural property in freeports outside the EU that they may wish to import into the EU at a later date.
Specialist shipping companies will often retain export documentation for a period of time. To collectors and dealers who use the same shipping company on a regular basis, we recommend that they contact them in order to ascertain what documentation they might have in their possession related to the collector or the dealer’s property. Collectors and dealers should assemble as much export documentation as possible and retain it (if possible, the original).
Collectors and dealers must also prepare to adjust their document retention process, and they should ask for export documentation when acquiring cultural property within the scope of the Regulation. This applies to property acquired at auction outside the EU that the buyer intends to import into the EU.
Preparations also include:
Delays: Under the Regulation, if the importer fails to provide the necessary documentation, the authorities have three weeks to request missing information. Once the authorities receive a complete application, they have a further 90 days to decide whether to issue an import licence. This is much longer than the art market is used to and dealers and collectors need to be prepared for this. One way to minimise the impact is to collate the documentation they will require to import objects into the EU under the Regulation now, and to get into the habit of obtaining and retaining these documents. Importers should keep an eye out for future implementing legislation, which will detail the necessary templates, formats, supporting documents and procedural rules to follow.
Cataloguing: The EU will release information that will be required in the “Standardised Document”, which we anticipate will require the description, origin, dimensions and images of an object to be set out in a particular format. Dealers and collectors may wish to begin collating this information in a standardised format, which can easily be adapted once the EU release the criteria. It may be helpful to consult the Object ID standard, which is increasingly being used by institutions to identify cultural objects.
Research: Assuming an object does not have an export licence, it is important to obtain provenance dating back to the date at which the country of origin restricted export of such objects. This may involve going back to previous owners, consulting archives, experts or auction catalogues, a time-consuming task. It would also be prudent to resolve any inconsistencies as to origin, which will become a very important factor.
Legal Advice: The requirements for provenance assume a detailed knowledge of the national laws of various countries. Whilst there are free databases such as the UNESCO Database of National Cultural Heritage Laws, which contain lists of national cultural property laws, these are not always translated into English and the onus is on the reader to interpret such laws to determine which law is the definitive law. One only needs to look at some of the disputes over antiquities in the press at present to see that it is often very unclear which law applies. Dealers and collectors should determine which countries they need to consider and take legal advice.
Purchases/ Due Diligence: Whilst all dealers and collectors ought to be well accustomed to carrying out due diligence when acquiring cultural property, requesting import/export documents is less common. However, in preparation for the Regulation, dealers and collectors should consider whether they want to acquire an object that does not have sufficient evidence to satisfy the new Regulation.
Movement: If the origin of an object cannot be reliably determined, an importer will need to demonstrate legal export from a country where the object has been for five years. Dealers and collectors who regularly move their objects between countries should seriously consider keeping objects in one country to ensure that, in future, they can satisfy the five-year requirement.
Given that EU regulations are directly and automatically applicable in all Member States, and that the Regulation will come into force at a date when the UK is still an EU Member State, the Regulation will automatically form part of the UK legal system, regardless of Brexit.
Pierre Valentin and Fionnuala Rogers