WYWH: Review of “Cultural Property: Current Problems Meet Established Law”

By Jill A. Ellman, Esq.*

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On March 27, 2015, the Lawyers Committee for Cultural Heritage Preservation (LCCHP) and the Penn Cultural Heritage Center hosted the conference entitled Cultural Property: Current Problems Meet Established Law  in Philadelphia. This was the sixth annual conference for LCCHP, a not-for-profit organization dedicated to safeguarding cultural heritage, and the attendees included attorneys, archaeologists and other individuals interested in preserving cultural property. Four panels tackled ongoing issues including the problem of archaeological site looting, museum responses to the legal environment and collecting ethics, due diligence in provenance research, and emergency responses to the current crisis in Syria.

Patty Gerstenblith (Distinguished Research Professor of Law, DePaul University), commenced the conference by presenting on the adequacy of U.S. law, policy and practice in averting the international trade of looted objects. Gerstenblith explained that as looting of cultural property, a worldwide phenomenon, motivates by economic gain from source countries, cutting the demand for such objects in destination markets might be the only way to stem it. She described the vulnerability of archaeological sites, which consist of multiple layers of objects that reconstruct entire time periods and civilizations. Once looters destroy these sites, the context of the objects contained within are misunderstood or lost. See, e.g., Euphronios krater. While scholars are able to piece together the painter, potter, writing and characters represented on the Euphronios krater, information regarding the person buried in the tomb, including the food ritual burial practices as well as the health and age of the person, remain a mystery. Additionally, Ms. Gerstenblith explained that the abrupt stripping of objects from the ground results in the loss of knowledge of authenticity and purpose of those objects, such as the case of looted Cycladic figurines, which appeared on the art market in the 1950s.

Ms. Gerstenblith addressed existing laws aimed to combat illicit trafficking and trade of cultural property, including the UNESCO 1970 Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (implemented by the United States through the enactment of the Cultural Property Implementation Act in 1983). Ms. Gerstenblith emphasized that even if an object is seized at the U.S. border and returned to the source country, it is still a loss for humanity because the context of that object is displaced. The ultimate win would be for the object to stay in the origin country. Efforts to train and provide expertise that would stem the flow of exporting objects in the originating country are therefore more effective for the preservation of cultural remains.

Ms. Gerstenblith also discussed the history of legal cases involving stolen property, identifying a first generation of cases in which a foreign country brings a replevin action in a U.S. court with the assistance of U.S. attorneys. But, she explained that a second generation of cases involving countries requesting actions to be brought by the U.S. government is now more prevalent. With respect to these second generation cases, the burden of proof is in favor of the U.S. government. Ms. Gerstenblith highlighted the problems with the current state of government involvement for this second generation of restitution cases. For instance, the U.S. government is likely to prevail even in circumstances where it is unclear how a foreign state possesses ownership of an object. See, e.g., U.S. v. Khmer Statue (specific factual allegations in the U.S. government’s complaint were lacking as to when the statue was stolen from Cambodia). See also Buying and Selling Antiquities in Today’s Market. In addition, Ms. Gerstenblith emphasized that because of the burdens of proof and costs, most of these cases are not litigated. Instead, courts sign off on complaints brought by the U.S. government, resulting in the creation of bad law.

Finally, Ms. Gerstenblith mentioned that there has not been a successful criminal prosecution since U.S. v. Schultz, in which the U.S. government brought charges against an American dealer for his conspiracy to smuggle Egyptian antiquities. Instead, the importation of stolen antiquities has become more of a game of catch and release: if a person imports stolen antiquities, then he or she may simply give up the object and walk away. She contended that the U.S. government has become lax with prosecuting and governmental agencies do not actively pursue criminal investigations. In addition, she suggested that there is ambiguity within the current legal framework for those who want to comply with the law.

Part I. Destruction of Archaeological Context

Dr. Katharyn Hanson (Postdoctoral Fellow, Penn Cultural Heritage Center, the University of Pennsylvania) opened the first panel concerning The Problem of Archaeological Site Looting and the Legal Context/Legal Response by showing satellite images of devastating looting of Mesopotamian archaeological sites in Iraq and Syria. At the site of Umma in southern Iraq, for example, satellite images detected over 8,000 looters’ pits between 2003 and 2005. The rapid acceleration of damage to Syrian sites is also very alarming. With respect to the ancient site of Apamea in Syria, satellite images taken between July 2011 and April 2012 revealed looting of at least 15,000 more pits than in southern Iraq. Dr. Hanson stated that looting is most effective when stopped on the ground by archaeologists and local police.

Tess Davis (Executive Director, the Antiquities Coalition) presented her research on the criminal trafficking networks in the historical case study of Cambodia’s civil war in the 1960s and 1970s. Her presentation revealed the corrupt nature of criminal looting networks that often involve gangs, foreign military and incumbent governments. Ms. Davis painted a grim picture that once the established criminal networks are in place, especially when armed forces fund the theft, those networks become more difficult to dismantle, and peace may in fact make it easier for them to operate.

Ole Varmer (Attorney, National Oceanic and Atmospheric Administration) and Jim Goold (Counsel, Covington & Burling) delved into the emerging area of law regarding the looting of underwater cultural heritage (UCH). Mr. Varmer explained that there is a gap in protecting UCH. He suggested future protection of UCH may be enforced through the Archaeological Resources Protection Act §6(c), which has been applied to archaeological objects from foreign lands. For further discussion See Underwater Cultural Heritage Law Study. Mr. Goold spoke on his involvement in the “Black Swan” case, concerning the salvage from a Spanish warship off the coast of Portugal by U.S. treasure hunters. In that case, the American company Odyssey Marine Exploration, Inc. brought a lawsuit claiming that its imported treasure from an unknown site (code-named the “Black Swan”) was from beyond the territorial waters of any nation, and therefore international laws did not apply. Mr. Goold’s presentation highlighted the thorny set of issues that may arise in cases where UCH does not fall within specific jurisdictional boundaries.

Keynote speaker Mariano Aznar Gomez (Professor, Universitat Jaume I) addressed the issue of the adequacy of international law, policy and practice in preventing underwater looting. He noted the difficulty of establishing hierarchy of ownership among states or countries of origin. Mr. Gomez concluded that while there are still many perceived threats to the protection of UCH, the 2001 UNESCO Convention on the Protection of the Underwater Cultural Heritage may be a good solution. He emphasized the importance of the cooperation and collaboration of states to protect cultural objects.

Museum Responsibility, Collection Ethics and Due Diligence in Provenance Research

The lunchtime discussion moderated by Thomas Kline (Of Counsel, Andrews Kurth) among Dr. Richard Leventhal (Executive Director, Penn Cultural Heritage Center), Timothy Rub (CEO, Philadelphia Museum of Art), and Victoria Reed (Senior Curator for Provenance, Museum of Fine Arts, Boston (MFA)) focused on Museum Responses to Legal Environment and Collecting Ethics. All panelists emphasized the importance of transparency and continued best-effort practices for museums to disclose objects with incomplete provenance to foreign countries as a means to encourage dialogue. Dr. Leventhal highlighted that he was proud of the University of Pennsylvania’s “Pennsylvania Declaration” that it would not purchase art without verifiable provenance. Nonetheless, he emphasized that museums should engage in more provenance research and provide object registries accessible to the public. He opined that the transition from litigation to cooperation between museums and other countries, especially smaller and poorer countries, is essential in negotiating the placement of an object. Ms. Reed mentioned the MFA’s adherence to the 2008 Association of Art Museum Directors (AAMD) Guidelines and its staffs’ due diligence in conducting research to verify an object’s provenance. She seconded Dr. Leventhal’s sentiment that museums may reach creative solutions with countries, such as receiving exhibition loans in exchange for the museum’s return of certain objects. In addition, she stressed the importance of museums’ ongoing responsibility to consistently review collections and digitize records. Mr. Rub responded that digitizing records for big museums with large collections is a monumental task. He queried whether the more important issue is museums’ ability to check so-called orphaned objects with unverifiable provenance.

Legal Responsibilities, Methods and Due Diligence in Provenance Research, as those responsibilities extend to museum collections, was the topic of the third panel. Dr. Margaret Bruhac (Assistant Professor of Anthropology, the University of Pennsylvania) discussed approaches to provenance research for Native American heritage collections. Dr. Bruhac revealed the immoral museum collection methods of Native American artifacts in the early 19th century, including the purchase of artifacts from elderly or vulnerable tribes. She explained the identity of an object may be lost through the sorting and circulation of museums and collectors; such as the case of wampum belts, which became a hot sales commodity in the 1970s. Dr. Bruhac concluded that Native American property may be identifiable to a particular tribe only if museums and tribal nations share an open dialogue. Ms. Reed defended the ability of museums to acquire antiquities in the case of unverifiable provenance, citing MFA’s policy of assessing the risk of acquisition based on certain criteria. Ms. Reed mentioned that museums and collectors should demand the proper paperwork and ask more questions in order to facilitate transparency of orphaned objects. Dr. Lauren Ristvet (Associate Professor of Anthropology, the University of Pennsylvania) presented on provenance research approaches regarding cuneiform tablet collections. Her presentation highlighted the problematic impact that continual looting in Mesopotamian archaeology has in understanding the past. She differentiated the University of Pennsylvania’s collection, acquired through excavations in the ancient city of Nippur in Iraq versus those purchased for Yale University’s collection. The tablets at Penn, while not as aesthetically pleasing as those in Yale’s collection, are arguably more invaluable because their context is intact, providing insights into Sumerian literature and the Sumerian educational system. The tablets acquired at Yale, in contrast, consist of glued, incongruent fragments, some of which were thrown away, thereby destroying the historical meaning of the tablet.

Current Responses and Solutions

The final panel, Emergency Responses to Heritage Destruction in Times of Conflict, focused on the safeguarding of antiquities under siege and attempts to curtail present-day looting. Cori Wegener (Cultural Heritage Preservation Officer, Smithsonian Institution) disclosed international responses to site looting and heritage destruction in Syria. In particular, she stressed the importance of partnerships between non-governmental organizations and museums in order to raise awareness of the looting and help those on the ground who have been cut off from resources. She discussed the current collaboration of the Smithsonian with Safeguarding the Heritage of Syria Initiative (SHOSHI), spearheaded by Salam Al-Kuntar (Consulting Scholar, the University of Pennsylvania Museum). In June 2014, SHOSHI along with the Smithsonian led a conference in Southern Turkey to address emergency packing and planning for Syrian museum collections and the protection of archaeological sites. Led by Syrian technical experts, SHOHSI provided training workshops and supplies to volunteers looking to respond to the disaster. Apart from the conference, SHOSHI engaged in other projects, including training officials from the Ma’arra Museum to cover 90% of the museum’s mosaics with sandbags. Dr. Al-Kuntar seemed hopeful that these emergency efforts will preserve existing artifacts amidst the continual looting.

Susan Wolfinbarger (Project Director, the Geospatial Technologies and Human Rights Project, American Association for the Advancement of Science (AAAS)) concluded with the potential use of satellite imagery for cultural property war crimes prosecutions in Syria. She mentioned efforts by AAAS to train international human rights courts and commissions regarding the use of remote sensing in research documentation. Inaccurate evidence is common in these cases as prosecutions are based off of eyewitness testimony and lack of access to sites. Ms. Wolfinbarger expressed that the technology would be a useful tool in presenting objective evidence of human rights abuses and destruction to cultural property.

Conclusion

The destruction and plunder of cultural heritage, especially in areas of conflict, continues to be a devastating, universal problem. This year’s LCCHP conference highlighted the loss of the cultural meaning of objects and our understanding of memory and past cultures if artifacts are disturbed from their original context. A current illustration of this is ISIS’s attempts to eradicate past history and cultures.

While cooperation, as in the case between foreign governments and museums, is a useful tactic for the restitution of looted objects, there is room for improvement to block looted objects before they reach destination countries. Technology may facilitate the tracking of lost antiquities, but the most effective way to prevent looting is on the ground. Unfortunately, countries of conflict do not possess the resources or ability to police such pillaging. However, educational efforts led by non-governmental organizations and/or resource-rich populations may provide an answer to restrict the flow of antiquities from the origin country. In addition, if museums and collectors take the proper measures to conduct due diligence, demand for looted objects may be subdued. More extensive criminal investigations and policing efforts in destination countries may also prevent the facilitation of this illicit trade. Presently, there is legislation pending in Congress imposing import restrictions from Syria. Ms. Gerstenblith recommends that those wishing to make an impact in restricting trade from Syria call their representatives to pass the appropriate legislation. See H.R. 1493- Protect and Preserve International Cultural Property Act.

Nonetheless, the above efforts are only a beginning to arrest the flow of the illicit antiquity trade. Satellite imagery shows the vast destruction of looted archaeological sites, in which centuries of information regarding past cultures is lost. The universe of looted antiquities from such immense plunder will be resurfacing for years to come. Consequently, the message from this year’s conference was clear: education, transparency of collection practices, and meaningful dialogue between origin countries and market participants are the strongest means to keep cultural heritage intact.

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About the Author: Jill A. Ellman is an attorney in New York interested in the preservation of cultural heritage. She may be reached at jillaellman@gmail.com.

WYWH: NYCLA Discussion of Forensic Art Analysis

Screen Shot 2015-04-28 at 5.14.46 PMby Megan Noh, Esq.*

On Wednesday, April 1st, the New York County Lawyers Association (NYCLA)s Art Law Committee hosted James Martin, founder of Orion Analytical LLC, an independent laboratory dedicated to examining cultural property in authenticity studies and legal proceedings. Martin is a frequent guest in New York City; he recently gave a lecture at Center for Art Law’s “Youve Been Served” event, and is also an adjunct professor at the New York University School for Continued Education. Martin uses a range of scientific techniques – including technical photography, microscopy, elemental analysis, and chemical analysis of materials – to compare questioned and documented works, and identify anachronisms and anomalies in fraudulent and misattributed works. Mr. Martins presentation focused on his work in the context of several prominent art authenticity claims.

The first such instance was the widely-reported controversy surrounding 32 canvasses claimed by owner Alex Matter to be previously-unknown Jackson Pollock “drip/pour” works dating from 1946-1949. Mr. Matter purportedly discovered these works in an East Hampton warehouse in approximately 2002, and although the Pollock-Krasner Foundation officially ceased issuing authenticity opinions in the mid-1990s, its then-remaining members did express opinions about the Matter canvasses. Unfortunately, those opinions conflicted; as a result, three of the works were sent to Harvards Straus Center for Conservation, and more than twenty to Orion, so that both laboratories could conduct independent analyses. Mr. Martin found at least six anachronistic materials in the Matter canvasses he studied, including an automotive pigment first used on Ferrari automobiles in the 1980s, well after the works supposed date of execution. Orions official conclusion was that this scientific evidence indicated that the date and attribution of the works were not as alleged by Mr. Matter. Mr. Martin presented these findings, which were consistent with Harvards report of its own analysis (issued in January 2007) at an IFAR symposium in November 2007 and in a 2008 volume of IFARs journal, thus putting the matter to rest in New Yorks art community.

The second authenticity claim Mr. Martin discussed with NYCLAs ALC members was Lagrange v. Knoedler; Mr. Martin was cautious to limit his discussion to non-privileged information. (See our Knoedler Obituary). In this 2011 suit filed in the Southern District of New York, billionaire hedge fund manager Pierre Lagrange brought claims for breach of contract, fraud, and unjust enrichment against the then-venerable American gallery where he had purchased a work attributed to Jackson Pollock. According to the complaint, at the time of purchase, Knoedler told Mr. Lagrange that the Pollock catalogue raisonné was in the process of being updated, and would ultimately include the painting in question. However, several years after his purchase, Mr. Lagrange tried to consign the painting for auction, and two major auction houses rejected it on the basis that it was not included in the catalogue raisonné. Mr. Lagrange sought to rescind the Knoedler sale, alleging that there were in fact never any definitive plans to update the catalogue raisonné to include the painting in question, and that Knoedler had knowingly misrepresented these facts in order to sell him the work. Orion was retained to analyze the painting, and found at least three paints that were produced later than its purported 1950 date of execution. Apparently Knoedler shut its doors a day after receivingOrions report and the two sides subsequently reached a confidential settlement, while other cases brought against Knoedler are still pending.

This NYCLA meeting was a wonderful opportunity for members to learn more about the importance of scientific analysis in what Mr. Martin refers to as the “three-legged stool” model of authentication, where connoisseurship and provenance are supported by a third essential element: technical and scientific examination of physical substance. As the art market grows in complexity and commercial value, and questions of attribution become increasingly contentious and convoluted, authentication methodology will continue to evolve. It is likely that collectors and the attorneys who represent them will place more weight on this leg of the so-called stool, and Mr. Martins presentation was a welcome primer in that area.

Suggested Reading:

  • De Sole v. Knoedler Gallery, LLC, 974 F. Supp. 2d 274 (S.D.N.Y. 2013).
  • The Martin Hilti Family Trust v. Knoedler Gallery, LLC et al., 1:2013-cv-00657(S.D.N.Y. Jan 29, 2013).
  • White v. Freedman et al., 1:2013-cv-01193 (S.D.N.Y. Feb. 21, 2013).
  • David Mirvish Gallery Limited et al v. Knoedler Gallery, LLC, 1:2013-cv-01216 (S.D.N.Y. Feb. 22, 2013).
  • The Arthur Taubman Trust et al v. Knoedler Gallery, LLC et al., 1:2013-cv- 03011 (S.D.N.Y. May 3, 2013).
  • Rosenfeld v. Knoedler Gallery, 653030/2013 (Aug. 30, 2013).

About the author: Megan E. Noh, Esq. is the Assistant General Counsel of Bonhams and an active member of both the New York City Bar Association’s Art Law Committee and the New York County Lawyers’ Association.

Disclaimer: This and all articles are intended as general information, not legal advice, and offer no substitution for seeking representation.

Case Review: Rybolovlev v. Bouvier

By Chris Michaels*

Amadeo Modigliani, Nu Couche au Coussin Bleu (1916)

Amedeo Modigliani, Nu Couche au Coussin Bleu (1916)

A criminal complaint filed in the principality of Monaco on January 12, 2015 sent shockwaves through the international art market. In it, Russian oligarch Dmitry Rybolovlev, businessman and owner of the AS Monaco football club, reportedly alleged fraud and money laundering against Yves Bouvier, a Swiss art dealer and president of Natural Le Coultre S.A., a storage business operating freeports in Geneva, Luxembourg, and Singapore. Bouvier was detained in Monaco in February and his assets were frozen by a Singapore court in March.

The dispute erupted following a pre-New-Years-eve conversation between Rybolovlev and Sandy Heller, Steven Cohen’s art advisor. During their conversation, Heller informed Rybolovlev that Cohen, a billionaire hedge fund manager, sold a Modigliani from his collection to an anonymous buyer for $93.5 million. Unbeknownst to Heller, Rybolovlev had recently purchased the Modigliani from Bouvier for $118 million, which represented a markup of more than $24 million that went to Bouvier.

This case not only highlights the tax implications surrounding freeports, which allow for luxury goods to be stored and sold tax-free, but also emphasizes the need for greater transparency in private sales. Commonly, private sales of art, especially those of high value, are shrouded in secrecy. Confidential components of private sales typically include identity of the parties, purchase price, as well as commissions collected by dealers. A problem for collectors arises when collectors and dealers enter into an agreement whereby a net return price is set, which guarantees the amount that the selling collector will receive for the art. The issue here is that the seller may never know the actual final selling price for the art and/or the amount of the commission received by the dealer. In Rybolovlev’s case, this situation was reversed, as he, the buyer, found out the “real” final selling price post-sale. As an aside, it would be interesting to know if Steven Cohen was aware of either the price Rybolovlev paid for the Modigliani or the commission paid to Bouvier. I would speculate that he did not.

To solve the problem of unreasonably inflated commissions, transparency is paramount in private art sales. When collectors and dealers enter into consignment agreements, it is imperative that the agreement include terms that specifically outline the total commission to be collected by the dealer OR that the selling collector agrees to the net return price and also agrees that the dealer may collect any commission that is above the net return price. Handling the issue of commissions in private sales will alleviate any concerns of dealer impropriety that may arise after a sale.

According to the April issue of The Art Newspaper, a temporary order against Bouvier disallows sales of personal assets worth up to $550m and asks Bouvier to surrender Mark Rothko’s No 6 (1951) as a collateral to his would-be-debt to Rybolovlev if the court finds that the transaction was unconscionable.

Sources:

About: Chris Michaels is a litigation attorney in the Philadelphia office of the Atlanta, GA-based law firm, Cruser & Mitchell, LLP, where he actively pursues his interest in the field of art law. He may be reached at (267) 888-2842, cmichaels@cmlawfirm.com, or on Twitter @CMichaelsartlaw.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.

Artists, Not Judges, Should Decide Fair Use: Select Implications of the Cariou-Sconnie Nation Deviation

by Sekou Campbell, Esq.*

This piece will focus on two implications of the Cariou and Sconnie Nation analyses: (1) the inherently factual nature of “fair use” analysis and (2) fair use as an affirmative defense. “Fair use” started as a judge-made remedy to technically correct legal conclusions that led to absurd results, a practice commonly known as “equity.” Generally, and in the case of “fair use,” equity requires a court to make a significant factual investigation so as to demonstrate why the technical law should not apply. “Fair use,” however, is odd because despite its equity origins, it has been codified as a technical law for the last forty years in the U.S. Copyright Act. Moreover, “fair use” can only be found if (a) a defendant has been found to infringe a plaintiff’s copyright, and (b) a defendant proves that “fair use” should be applied. Although the burden of proof is traditionally on a plaintiff, “fair use” is an affirmative defense, meaning the defendant must prove each element. Courts frequently delve into their analyses without acknowledging the significance of the fact that they are making equitable, not technical, decisions that the defendant, not the plaintiff-creator, must fully prove. Sconnie Nation serves as a good reminder of the pitfalls to treating equity like a technical law and ignoring that the defendant bears the burden to prove “fair use.”

Over the last two decades, a single doctrine has garnered much of the attention of “fair use” case law: “transformativeness.” “Transformativeness,” first introduced by Southern District of New York District Judge Pierre N. Leval, suggests that when a subsequent user “adds value” to an original piece of artwork by using that original as “raw material,” rather than “repackaging” or “republishing” the original, that subsequent use deserves protection under the “fair use” statute.[1] As more and more artists “quote” other artists and artwork, “transformativeness” has become more and more central to the “fair use” decisional law. Indeed, it can be argued that Cariou, the 2013 Second Circuit decision, held that transformativeness is a dispositive “fair use” factor.

The case law generally ignores the equity origins of “fair use” and by necessary implication “transformativeness,” and jumps right into a “legal analysis” by comparing the plaintiff-creator’s work to the defendant-second user’s work. Focusing the analysis on which facts best show “fair use” by relying on art experts and fact testimony and documents from artists rather than other judges will result in two favorable outcomes: (1) fewer judges acting like art critics and (2) more private negotiations between artists about the use of each other’s work.

It seems that thee Seventh Circuit’s criticism of Cariou, in Sconnie Nation, highlights the shortcomings of relying too heavily on works that are technically “transformative” in order to conclude that a defendant has proven “fair use.” Specifically, Judge Easterbrook reasoned that “transformativeness” is actually codified as a protected right in 17 U.S.C. § 106(2), the statute that establishes what uses constitute “copyright infringement.” That statute protects “derivative works,” which is defined to include a “transformed work.” Therefore, as Sconnie Nation points out, an expanding “transformative use” doctrine threatens to extinguish the derivative work right. But, as will be discussed below, a more nuanced and fact-intensive inquiry can save both the transformativeness doctrine and the derivative work statute.

Tale of Two Circuits: 2nd and 7th

Cariou and Sconnie Nation both purportedly involved “appropriation art,” whereby the defendant-second users copied or otherwise used the plaintiff-creator’s copyrightable artwork as “raw material.”[2] In Cariou, the “raw material” came from Patrick Cariou, a professional photographer who lived in Jamaica for six years. During that time, Mr. Cariou developed a relationship with Rastafarians that allowed him to take “extreme classical” and not “pop culture” photographs. In Sconnie Nation, Michael Kienitz photographed Madison, Wisconsin mayor Paul Soglin during his inauguration. In both cases, the defendant-second users (Richard Prince in Cariou and Sconnie Nation in Sconnie Nation) modified the original, taking elements away and adding others to them. Thus, both defendants admitted to “appropriating” or infringing upon their adversary’s work. Both parties also asserted “fair use” defenses by incorporating a “transformativeness” argument.

Cariou

cariou-princeCariou represents a tension between the “reasonable observer” test, on the one hand, and the oft-quoted dictum that “it would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of [a work],” on the other.[3] The “reasonable observer” test requires the Court to “examine how the artworks may ‘reasonably be perceived’ in order to assess their transformative nature.”[4] Without a fully developed factual record, however, judges serve as rather inept observers because they generally do not “assess transformativeness from multiple perspectives, with attention to what different audiences might see in a work and in an allegedly transformative remix of that work.”[5] The dissent in Cariou takes a similar position.[6] Thus, to resolve the tension between the “reasonable observer” test and the judge-as-art-critic problem, appellate courts, like the Cariou dissent, should defer more to lower courts, pushing litigants to trial and not merely dispositive motion practice.

This adjustment will lead to two developments. First, the higher courts will have more facts on appeal. Specifically, they will have experts’ testimony, actual professional art critics, upon which to base their opinion. Second, more settlements will occur, encouraging artists to resolve these disputes on their own. In either case, an artist or art professional gets a much more prominent voice in decisions affecting artwork, a welcomed development.

Sconnie Nation

Screen shot 2015-04-02 at 10.41.13 AMJudge Easterbrook points out that “[f]air use is a statutory defense to infringement.”[7] This is almost correct.[8] It highlights, without saying it, the fact that a defendant has the burden to prove fair use. Judge Easterbrook stated that transformativeness cannot be a significant factor when considering a “derivative work” protected by 17 U.S.C. §106(2). This statement, taken together with the fact that fair use is an affirmative defense, suggests that “transformativeness” cannot do much work in a fair use analysis because a “transformed work” is defined as a “derivative work” in the Copyright Act.[9] Therefore, if a plaintiff argues that its derivative work copyright has been violated, it may also be conceding fair use, rendering 17 U.S.C. § 106(2) useless. Sconnie Nation solves this problem by largely ignoring the “transformativeness” analysis. However, another solution exists; require the defendant to distinguish between an infringing transformation (e.g. translation or summary) and fair transformation (e.g. parody and satire).

Of course, such a distinction requires a court, preferably the U.S. Supreme Court, to provide a principled rule of law. However, this could also be a factual inquiry, governed by some basic principles that mirror current copyright law, like a modicum of creativity and originality, an effect on the commercial market of the plaintiff-creator and the amount and substantiality of the transformation (e.g. is the change subtle or bold). Ultimately, when courts require defendants to prove more, they may also help artists to fashion more developed arguments that lead to better rules that guide the fact finders below.

Conclusion

Judge Easterbrook seems to have done a good job stoking the flames of controversy over fair use and hopefully triggering Supreme Court analysis in Sconnie Nation. This piece hopefully highlights some additional considerations that will make the doctrine more clear.

 

Select Sources:

About the Author: Sekou Campbell is an attorney in private practice in Philadelphia, Pennsylvania, where he litigates commercial matters in state and federal courts throughout the country.

  1. The Cariou Court adopted the Tate Gallery’s definition of appropriation art as “the more or less direct taking over into a work of art a real object or even an existing work of art.” Cariou, 714 F.3d at 699.
  2. Cariou, 714 F.3d at 714 (quoting Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251 (1903)).
  3. Cariou, 714 F.3d at 714 (“because the district court takes the primary role in determining the facts and applying the law to the facts in fair use cases, after which we exercise our appellate review if called upon to do so, I conclude that as to each painting, the district court is best situated to determine, in the first instance, ‘whether Prince is entitled to a fair use defense in light of the correct legal standard.’”).
  4. Sconnie Nation, 766 F.3d at 758.
  5. Fair use is derived from equity and merely codified in the 1976 Copyright Act. See Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 448 (1984).
  6. A ‘derivative work’ is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a ‘derivative work.’
  7. 17 U.S.C. § 101.

Help Wanted: Miami’s Alarming Number of Directorship Successions

FL MUSEUMS COLLAGE

by Emily Behzadi*

With the musical chairs of museum and auction house directors moving from one institution to another, series of announcements about Miami art museums losing their directors in quick succession seems distressing. How important is it to have a director and how long can an institution survive with an interim leader at the helm?

A growing trend in museum management shows the likelihood of directors moving from one institution to another. However, this is particularly alarming as a large number of museums in Miami, one of the art world’s most prominent cities, have or will have concurrent current vacancies in 2015.

Over the past decade, Miami has become one of the premier destinations for contemporary art. Miami boasts several museums in its orbit, which cover a broad range of interests. However, four of Miami’s museums experienced directorship successions in the past year. On February 11, 2015, Suzanne Weaver, former-interim director of The Institute of Contemporary Art (ICA), stepped down just over four months after her arrival. The reason for her departure is a mystery. The Pérez Art Museum Miami (PAMM) has been without a director since March of 2014. Its past director, Thom Collins, stepped down last March to become executive director and president of the Barnes Foundation in Philadelphia. Furthermore, Cathy Leff, the former director of Florida International University’s Wolfsonian Museum, has been absent for nearly a year. Lastly, the Cisneros Fontanals Art Foundation (CIFO), is absent a director after Jesús Fuenmayor, who led the organization for less than three years, left.

With this news, a formidable question to answer is how important is it to have a director and how long an institution can survive with an interim leader at the helm. A director must wear many hats. He or she must be a shrewd business person, an art scholar, a teacher, a publicist and fundraiser. In today’s wavering financial climate, museum leaders are moving more to fields of business or administration than to the arts. A reason for this may be that museums are conspicuously trying to employ strategies to raise funds and widen their audiences.

The management’s knowledge and skill can be beneficial or detrimental to the health and survival of the museum. For example, the Corcoran museum faced a plethora of legal difficulties due to “peculiar and egregious mismanagement,” according to the Save the Corcoran (STC) coalition.  Some of Corcoran’s officers, such as the former chief operating officer, Lauren Garcia, were not trained and educated in the arts or museum management. Perhaps this is one of the many reasons the museum faced years of financial and management troubles before ultimately closing in 2014.

Furthermore, although many of the responsibilities of a director, such as overseeing the museum’s policies and assets, are shared with an institution’s trustees, the director has its own responsibilities. A director’s role varies according to the mission of the museum. The museum director’s role is not limited to the programming of the institution. The director has its hands in many aspects of a museum’s day-to-day operations. Although the board of trustees is important in evaluating a museum’s acquisitions and dispositions, a director acts as the figurehead and the chief administrative officer of the institution.

The director must not only see that the institution’s operations are running smoothly, but also must manage the trustees’ expectations and demands. Without a director at the helm to run the museum, the future of an institution is uncertain. This is evident in the case of CIFO, which is an institution that does not have a board of trustees or an endowment and relies solely on the management of a board of directors and the president.

Most notably, the director is in charge of fundraising. The director’s fundraising practices must be in compliance with the professional standards articulated by the Association of Art Museum Directors (AAMD). This includes avoiding any fundraising practices that could damage the public’s trust. The director serves as a figurehead at donor fundraising events and represents the museum to potential donors. Successful directors must be able to secure private funding in order to keep an endowment, which ultimately ensures the survival of the museum.

For example, PAMM’s absence of a director comes at an especially precarious time as its endowment is currently at $14 million, which is well below its announced target of $70 million. This is difficult because PAMM now must struggle to compete with ICA and Miami’s other institutions. Likewise, a vacancy at ICA is problematic because the institution needs a mouthpiece to obtain funding for its new facilities, which the museum purports will be ready by Art Basel 2016.

As briefly mentioned above, directors and the museums they govern must abide by a set of codes of ethics, policy statements and guidelines of the American Association of Museums (AAM) and the AAMD. The director is responsible for staff appointments, in which the AAMD emphasizes a director “should build and sustain a high level of morale and productivity.” If a director does not “[uphold] the highest standards of professional practice and ethical conduct,” he or she is subject to censure and or a sanction by the AAMD. For example, the former director of the Wolfsonian, Cathy Leff, was rumored to have left in April 2014 due to complaints of her creating a “hostile work environment” and inappropriate behavior towards her employees. If true, she and the museum may be subject to censure and/or sanctions by the AAMD.

Additionally, the AAMD holds the director responsible for the “daily monitoring of the institution’s compliance with laws and regulations. Legal matters that arise in the operation of the museum include those concerning the collections, exhibitions, personnel and labor relations, contracts, governance, finances, facilities, taxes, rights and reproductions, and events. The museum also has legal counsel, who is available to advise on general and specific matters. According to the AAMD, the board, the director, and general counsel all work together “to share current information about legal issues and legislation relevant to the institution and museum standards.”

A museum can face legal troubles if its management is not run correctly. The management of a museum relies on a director, a board of trustees and a curatorial staff. Museum trustees and some directors owe fiduciary duties to the museum in order to further its enumerated nonprofit and charitable purposes. These duties are divided into two categories: the duty of care and the duty of loyalty. A fiduciary’s duty of loyalty entails the obligation “to remain loyal to the purpose of the charitable or nonprofit organization.” Thus, the fiduciary must give to the public the benefit to which the entity earned its tax-advantaged status, i.e. the educational value of a museum. These purposes should be articulated in the organization’s incorporation documents and bylaws which the fiduciary must work to carry out.

The fiduciaries also have an obligation to exercise reasonable care and diligence in the management of the museum and its assets. If the fiduciaries fail to do this, they may be liable for negligence to the beneficiaries of the trust or for financial losses due to the mismanagement. This duty may be comprised of many aspects including the duty to take possession of and to protect the trust property, the duty to make the trust property productive through prudent investment, and in some cases, to sell trust assets to render the trust more profitable. For example, the Delaware Art Museum in March 2014 decided to sell up to four works from its collection, “to right its finances and save the museum from closing.” This is a particularly contentious issue because it is acceptable for museums to sell works of art in order to buy other works, however, selling works to pay for operations is regarded as an ethical violation. Issues may also arise in regards to the proper investment of institutional funds and accounting.

In the absence of a director, the board of trustees is responsible for operating the museum in a fashion that complies with its mission and incorporating documents. This may be especially hard to do if the director is in charge of the day-to-day tasks of an institution. The trustees may not be equipped to adequately complete these tasks. This is because although the trustees and the director share some of the same tasks and responsibilities, the trustees are only present intermittently. For example, the board carries full responsibility of investment policies, however, the director prepares the budget of the museum with the hands on knowledge of the museums daily expenditures. Thus, the fiduciary duties to the public could be breached in the absence of a director, putting the management of a museum into peril.

Sebastian Smee, Pulitzer Prize-winning art critic for The Boston Globe, claimed in an interview with Radio Boston, that directors cannot just be art lovers and scholars; they have to be visionaries and fundraisers. In the end, it is easy to conclude that directors are massively important to the management of a museum. Although they share responsibilities with the trustees and curators, they contribute to the funding and programming of an institution, which are two of the most important aspects of running a successful museum. The museum industry is self-regulated through its own membership in professional membership programs such as the AAM and the AAMD. Museums are self-regulatory in function; as such they have the discretion to determine whether in the absence of a director, they are complying with their individual organizations’ mission and purpose. The absence of a director may impact the prosperity of the museum and raise doubts among those benefiting from the public trust.  Again, this also depends on the contractual duties the board entrusted upon the director’s position.

Legal issues in Museum Administration are varied and few, if any, are specifically art related. The director’s duties are just one of many issues that lawyers in the field of art law will need to know to diligently represent potential clients in the museum administration profession. The annual conference on the subject of “Legal Issues in Museum Administration” (scheduled for DC in Spring 2015) will cover employee diversity, visitor access, fair use developments and trends, copyright (global and virtual), managing collections and financial challenges, social media and technology, authentication, museum mergers, tax and legislation updates, federal grants updates and strategies for gift agreements.

As for the museums currently without directors or with interim directors, best of luck with the interviews.

Select Sources:

About the Author: Emily Behzadi is a 3L at Georgetown University Law Center.

How do you solve a problem like Gurlitt?

By Irina Tarsis*

As Hollywood is celebrating the 50th Anniversary of “The Sound of Music,” set in Salzburg, Austria and the public release of “Woman in Gold,” a film based on successful legal actions to recover Nazi-looted art scheduled for release April 1, 2015, the Gurlitt saga continues to permeate the media and the legal scene. The News Wires are alive with the name of ‘Gurlitt,‘ and every related court decision and legal filing is music to our ears.

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Cornelius Gurlitt (1932-2014), was born into a family of artists, art historians and musicians. He was a son of one of the four infamous art dealers who had been involved in sales of “degenerate art” and purchases of works for the Führermuseum in Linz, among other transactions during the Third Reich. In 2013, the story broke that Cornelius, who was under a tax investigation, inherited a large art trove of paintings, drawings and prints, split between his apartment in Munich, Germany and a house in Salzburg, Austria. The insiders of the German-speaking art world, and probably beyond, must have known of the collection, particularly since the 2011 Lempertz auction of the Max Beckmann’s “Lion Tamer,” that was stolen from Alfred Flechtheim during World War II and was consigned by Cornelius Gurlitt.

Having vacillated between refusing to part with his collection and agreeing to allow researchers access to determine provenance of the works, Gurlitt passed away in 2014. Reportedly, he reached an agreement with the German government regarding access to the art; however, in his Will, Gurlitt bequeathed the contested art collection to the oldest fine art museum in Switzerland, Kunstmuseum Bern. Validity of the Will was challenged by Gurlitt’s relative, Uta Werner, who reportedly had promised to make Gurlitt’s documents public.

On March 25, 2015, it has been reported that the German court reviewed the challenge to Gurlitt’s will and ruled it valid.

Only days earlier, in two separate instances, Monika Grütters, Germany’s culture minister as of December 2013, announced that she approved and signed restitution agreements to release two of the paintings, a Matisse and a Liebermann, that have been affirmatively determined months ago as to have been looted from victims of the Nazi prosecution. Matisse’s “Seated Woman” is expected to be returned to the heirs of Paul Rosenberg and Liebermann’s “Two Riders on the Beach” should be sent to the heirs of David Friedman. The agreements are expected to be approved with the Munich court that is in charge of the Will and thus the Gurlitt estate.

After much dissonance and delay, let the next movement in the Gurlitt concerto be more of restitution agreements and release of documents – “these are a few of my favorite things.”

Select Sources:

About the Author: Irina Tarsis, Esq., specializes in art law, provenance research and cultural heritage law. She may be reached at itsartlaw@gmail.com.

Disclaimer: This article presents general information and is not intended as legal advice.

The European VAT: Good for Tax Revenue, Bad for the Commercial Art Market?

by Elizabeth R. Lash, Esq.

As an American, one might be forgiven for assuming that Europe, with its traditional support for the arts (at least, as a cultural phenomenon), would be equally supportive in its tax regime for the same. While in some limited instances, the European Union continues to provide a more favorable regime for the independent artist, the trend towards an ultimately higher value-added tax (“VAT”) on the sale, import and export of artwork, particularly with respect to art sold by galleries and in the resale market, may discourage the growth of an EU-wide commercial art market in comparison with more favorable tax regimes outside the EU.

VAT was initially intended to be used as a single tax rate applicable to all goods and services across all European Union member states. While the standard rate was originally set at 15% in 2006, member states could theoretically request reduced rates in one or two categories, set at no less than 5%. In reality, as each member state negotiated the terms of its entry into the EU, the list of categories has expanded to at least 21, with rates above and below the standard rates (which already varies from 17% to 27%), along with multiple categories of rates below 5% (zero rates, “parking rates” (i.e., rates negotiated with entry into the EU), and super reduced rates). As well, categories of rates are inconsistently drawn, from too narrow to overly broad: it includes, among others, such categories as printed books, e-books, cultural institutions, household cleaning, sporting facility use, bicycles, and writers and composers.

When it comes to artwork, VAT rates vary widely, ranging from 5% (Malta) to 25% (Sweden) (although there is a reduced rate for independent artists’ sales). In addition, VAT may be calculated on the margin (i.e., the difference between the original sale price and the purchase price), instead of under the standard or reduced rate (whichever is applicable to artwork in that particular member state). In a number of member states, the VAT may be set at multiple rates: one for independent artists; another for galleries and dealers; and still another for the import or export of art.

Further complicating this picture, the EU Commission may not only pressure (or even sue) a member state as to the categories for which reduced rates are permitted, but may also regulate individual tax cases affecting artists and collectors. One example in particular is the Flavin case, whose outcome confounded the international art community (and sets an unfavorable precedent in future, similar circumstances). In 2006, a British gallery (named the “Haunch of Venison”) imported two well-known American conceptual artists’ sculptures: Dan Flavin’s light sculpture, and Bill Viola’s video installations. The former consisted of several tubes of fluorescent lights, while the latter consisted of several audio-visual productions playing on various projection screens. The British customs office imposed a 20% rate instead of the reduced 5% rate for artwork. However, upon appeal to the British VAT and Duties Tribunal (the “Tribunal”), the reduced rate was re-instituted in 2008.

But despite this local regulator’s final decision (with no further appeal by the parties to the EU courts), the EU Commission weighed in anyway with its own regulation, issued in September 2010, which specifically overturned the Tribunal’s decision, ostensibly to effectuate the uniform taxation rules on imported goods. The EU Commission found that it was not the installations themselves which constituted artwork, but the results of such installations, whether of the “light effect” of Dan Flavin’s light sculpture, or the videos screened on Bill Viola’s video installations. Thus, in effect, the EU Commission found that the installations should have been taxed just as if a hardware or electronics store had imported lightbulbs and video components. For conceptual artists, this represented a major blow to the sale in and import of their artwork into Europe.

Then take Germany. Germany formerly assessed a reduced VAT of 7% on sales of art (other than photography). However, due to pressure from the EU Commission, which had opened proceedings against Germany regarding this reduced rate category, Germany passed legislation to raise the rate to 19%, effective January 1, 2014 (Germany’s standard VAT rate since 2007). In response, German federal legislators passed a national directive that permitted the tax to be assessed on only 30% of the purchase price, relying in part on an exception to the VAT directive that had been used in France for several years. But the application of this directive was restricted less than a year later by the German states to artwork priced under 500 Euros, and a few other categories, essentially undercutting the law’s essential purpose—to provide a more favorable rate for the commercial art market. Meanwhile, artists selling out of their studios remain subject to the 7% rate. While this may be acceptable for those select artists who sell out of their own studios, it does not bode well for those who are represented by galleries.

In 2014, in another instance of muddying the tax waters, the French government increased VAT on the sale of art in France from 7% to 10%, while still permitting imports of non-EU artwork to be taxed at 5.5%. Only a year later, the French legislators acknowledged this inconsistency, and reduced the VAT on direct sales by French artists to 5.5%, effective January 1, 2015. Meanwhile, in Spain, the current VAT on artwork was raised from 8% to 21% in September 2012, initially as part of the general rate assessed on goods and services related to “culture.” Within a year, after much hue and outcry, Spain decreased the rate again to 10%. Meanwhile, in Italy, the VAT on the sale and import of artwork is still 22%.

The dust may eventually settle on the various VAT rates and their application, but the newest wrinkle is a regulation (Council Implementing Regulation (EU) No 1042/2013) which changes how VAT is assessed—from the place of supply to the place of purchase. While this does not affect traditional visual artists and sculptors, it does impact those who are considered to supply services or goods digitally to consumers—for instance, freelance website designers. The regulation, effective January 1, 2015, requires such businesses to assess VAT based on the country of the purchaser, rather than the VAT of their own country, placing yet another burden on artists in figuring out the application of VAT—even though the regulation was meant, in part, to apply to the likes of e-retailers such as Amazon.com.

In light of the fluctuations in tax rates and their applications, with the ultimate trend inching towards a uniformly high VAT rate, the art market looks nowhere near as enticing in the EU as it does in those countries and locales not subject to the vagaries of the VAT rate debate. In the U.S., for instance, no VAT exists (although, of course, the U.S. does have a sales tax), and there is no import duty assessed on original works of art. Hong Kong does even better—it has no sales tax, import tax, or export tax on artwork. To some degree, the numbers back this up: according to an annual study conducted by Arts Economics for the European Fine Art Foundation, in 2013, the U.S. accounted for 38% of the global market by value, while the EU as a whole dropped 3% points to 32%. (The UK ranked separately at 20%–perhaps not a surprise in light of its 5% reduced VAT rate on artwork, the Flavin case notwithstanding.) Moreover, in the EU itself, the numbers for those member states with the highest VATs declined or remained the same. And while Hong Kong and Singapore did not rank individually as the top winners in 2013 (having perhaps to do with factors other than VAT or customs duties), still, such figures may show in part the effect of applicable tax regimes.

Then there are the so-called “free ports,” located around the globe, which have become popular as a way to store works of art intended primarily as an investment. A free port is essentially a tax haven: artwork may be shipped directly to the free port, and as long it is stored there, VAT will not be assessed on the import. (Of course, once the work is shipped outside the free port to its new destination, any applicable tax will be assessed.) An additional benefit for potential purchasers (depending on the local laws applicable to the free port) is that VAT may not be assessed on any sales of artwork made within the free port—at least not until the artwork has left the free port. (So, hypothetically speaking, if a sale has been made, but the work never leaves the free port, VAT will never be assessed.) Arguably, the art fair Art Basel became popular just for that reason, having made its initial home base in a Swiss free port. As of right now, there are free ports located in Switzerland, Luxembourg, Singapore, and Beijing. (One of the best indications of how popular the Singapore free port has become is that Christie’s auction house now has an office located there.)

The EU Commission has previously expressed that VAT rates are not to be used to control social and economic policy in the EU, and clearly is increasingly attempting to pressure member states, whether through regulation, litigation, or other alternative avenues, to raise VAT rates to a uniformly high rate. However, in the face of global competition, one can only wonder what this trend may mean for the EU in the future as a major player in the commercial art markets.

 

Sources:

About the Author: Elizabeth R. Lash, Esq., serves as in-house counsel at Kroll, where she focuses on reviewing agreements relating to cyber security and data breach notification.

DISCLAIMER: This article was prepared by Ms. Lash in her personal capacity; the opinions are the author’s own, and do not reflect the view of Kroll Associates, Inc. or of its affiliates.

Lessons learned from the Sacking of the Summer Palace in China: Diplomacy and Restitution Revisited

One day two bandits entered the Summer Palace. One plundered, the other burned….Before history, one of the two bandits will be called France; the other will be called England…I hope that a day will come when France, delivered and cleansed, will return this booty to despoiled China. Meanwhile, there is a theft and two thieves.

– Victor Hugo, “The Sack of the Summer Palace”

by Merve Stolzman

Built between 1750 and 1764 during the Qing dynasty, the Yuanmingyuan Garden in Beijing, commonly known as the Old Summer Palace, was a masterpiece of imperial garden design. A variety of halls, pavilions, palaces, temples, bridges, fountains, lakes, and hills dotted across this “Garden of Gardens.” The buildings within it were elaborately carved and decorated, and housed thousands of Chinese paintings, antiquities, and other works of art. However, in 1860, during the Second Opium War, British and French forces looted and burned down the Old Summer Palace.

Chinese emperors restored the gardens, first in 1886 and then in the early 1900s, and the government designated it as a public park in 1924. Nevertheless, over 150 years later, thousands of looted Chinese artifacts remain on display in foreign museums around the world, such as the British Museum and Château de Fontainebleau. (Read about recent (Mar.1, 2015) theft of “Asian” artifacts from Chateau de Fontainebleau here). Some, however, have found their way back home.

In February 2014, the KODE Art Museum in Bergen, Norway entered into a trilateral agreement with a Chinese businessman, Huang Nubo, and Peking University to return to China seven marble columns that once decorated the Western-section of the Old Summer Palace for permanent displayed at Peking University. The columns were part of a 2,500-piece collection of Chinese antiquities housed at KODE. Johan Wilhelm Normann Munthe, a collector of Chinese artifacts who settled in China in 1886, donated the collection to the KODE between 1907 and 1935, but how he obtained the looted columns remains a mystery.

International law mandates the restitution of illicitly exported cultural artifacts to their states of origin. Article 7(b)(ii) of the UNESCO 1970 Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (“1970 Convention”) requires states parties to recover and return cultural property within their territory that was illegally exported out of the territory of another state party, should that state request restitution. As of January 2015, 127 states have ratified this convention, and enacted national legislation giving effect to the obligations contained within.

One such example is the Australian Protection of Movable Cultural Heritage Act (1986). Part II, Division 2 of this legislation provides that where a foreign country’s moveable cultural property was illicitly exported and subsequently imported into Australian territory, the government can seize the property and return it to that country. The export of the property in question from the host state must have been prohibited at the time of export. While this provision is permissive, Australia has implemented it on several occasions to honor restitution requests from foreign governments. It has set up bilateral agreements with the Republic of Korea and China’s State Administration of Cultural Heritage regulating the import, export and return of the cultural property of those countries. The government has also accepted several standing requests for seizure and return of illegally exported artifacts from countries such as Argentina, Egypt, Cambodia, and Greece.

Notably, in September 2014, the Australian government complied with India’s request for the return of two statues of Hindu deities stolen from temples in Tamil Nadu. The National Gallery of Australia bought one in February 2008 from New York-based art dealer, Subhash Kapoor. The Art Gallery of New South Wales bought the other in 2004 from the same dealer. India Kapoor is currently on trial in India for allegedly stealing many antiquities, including the two statues, and smuggling them out of India.

While Australia’s conduct illustrates how the international restitution regime can effectively be implemented, the Norwegian-Chinese context exposes a gap in the legal regime. This gap centers on the non-retroactive nature of the 1970 Convention and national restitution laws. Both Norway and China are parties to the 1970 Convention. However, the convention does not contain any provisions that apply it retroactively to cultural artifacts that were smuggled out of the territory of a state party before the convention came into force. Recognizing this, UNESCO set up the Intergovernmental Committee for Promoting the Return of Cultural Property to its Countries of Origin or its Restitution in case of Illicit Appropriation (“ICPRCP”) in 1978. This permanent advisory body, comprised of twenty-two UNESCO member states that rotate every four years, encourages and helps facilitate bilateral negotiations between UNESCO member states for the restitution of cultural property of “fundamental significance” illicitly exported out of the host country before 1970. ICPRCP also advises on mediation and conciliation procedures to the member states concerned. However, in order for the host state to request the restitution of cultural property through the ICPRCP mechanism, it needs to initiate bilateral negotiations with the other member states concerned. These negotiations also must have stalled or failed before the request. Since 1983, the ICPRCP has assisted in six successful restitution negotiations.

Norway’s restitution laws, found primarily in § 23a of the Cultural Heritage Act (1979), require that Norway return unlawfully exported cultural objects to their state of origin. However, it is important to acknowledge that the KODE case is not one where the cultural artifacts in question were unlawfully exported. Section 9 of the Regulations on the export and import of cultural objects defines unlawful export in part as “any export from the territory of a State in breach of this State’s legislation on the protection of cultural objects.” KODE acquired the columns between 1907 and 1935, and the Law of the People’s Republic of China on the Protection of Cultural Relics, which governs the export of movable Chinese artifacts, was first enacted in 1982. Consequently, Munthe did not export the Old Summer Palace columns illegally because there were no laws at that time that regulated their export. The timing of KODE’s acquisition of the columns prevents China from obligating Norway to return its national treasures through the 1970 Convention or Norway’s restitution laws. Moreover, unlike Australia, Norway has not entered into a bilateral restitution agreement with China. In effect, the existing framework does not provide China with a legal basis to claim restitution of its cultural objects looted before the mid-to-late 1900s.

Whether China and Norway attempted to negotiate the return of the columns is unknown, and given that diplomatic ties between both countries have been frozen since 2010, it is unlikely that Norway and China would have initiated bilateral negotiations over the return of the columns. These circumstances prevent China from soliciting the ICPRCP’s help in resolving the matter, since, as mentioned above, the intergovernmental body requires the two states concerned to have initiated bilateral negotiations, and these negotiations need have failed or been suspended, before requesting the cultural property’s restitution through the ICPRCP’s mechanism.

In the context of the seven columns at KODE, China’s inability to compel Norway to restitute its artifacts through legal or diplomatic measures is not problematic because KODE agreed to return the columns to China through private negotiations. Such mechanisms are potentially effective alternatives to legal claims or bilateral agreements between governments, and China has benefitted from them on several occasions. For instance, French billionaire, François-Henri Pinault, purchased two bronze heads, one of a rat and the other of a rabbit that were once part of a fountain clock in the Old Summer Palace, and donated them to the National Museum of China. However, these private agreements are contingent on the will of museums and individuals to enter into such arrangements, which may be difficult to obtain. The Chinese government explicitly recognized this in its 2011 periodic report to UNESCO on its implementation of the 1970 Convention. In response, it has attempted to negotiate the return of its cultural property with foreign museums. Such efforts are commendable and necessary.

International and domestic law have set up an enforceable framework for the return of illicitly exported cultural property. However, this regime has failed to address the restitution of artifacts stolen and imported into other countries before the early twentieth century. The laws that regulate the modern import and export of stolen cultural property will likely never be applied retroactively. After all, non-retroactivity is a fundamental legal principle, particularly in the international context where states are only bound by the laws to which they agree. For this reason, it is important for states, and the rest of international community, to support and promote bilateral negotiations, voluntary donations and/or private restitution agreements. In the absence of mandatory obligations to restore looted objects to their state of origin, such arrangements are essential to the success of the international restitution framework, and may spearhead efforts to promote restitution at the national and international level.

Note from the Editors: Despite the wide acceptance of the 1970 Convention, United Nations Security Council still finds it necessary to issue Special Resolutions to prevent illicit traffic in cultural property. See for example, UN Security Council Resolution 2199.)

Sources:

About the Author: Merve Stolzman is a third-year law student, American University Washington School of Law; she is the current Symposium Editor of the American University International Law Review. Her areas of interest include: international humanitarian law, the use of force, cultural heritage law, international investment law, and international development law.

Funding Public Art with Brick and Mortar: The Success and Failure of “Percent for Art” Laws

Jorge Luis Rodriguez, Growth (1985)

Jorge Luis Rodriguez, Growth (1985)

By Emma Kleiner*

Although the thought of East Harlem in 1985 may not immediately spark considerations of aesthetics and community, that was the location and date of the first Percent for Art Project in New York City. In that year, Jorge Luis Rodriguez’s Growth was unveiled there in the East Harlem Artpark, a sculpture dedicated to the intersection of nature and man. Funding for public art works historically came from various sources, including private donors and nonprofit organizations. However, since 1982, New York City’s Percent for Art (PFA) law mandates that one percent of the budget for certain building projects be set aside for public art. Former New York City Mayor Ed Koch, who initiated the law, stated: “For generations to come, it’s a wonderful thing, and I’m very proud of that.” This type of public art law has been mirrored across the nation by many cities and states, and this article analyzes the structure of what makes a successful Percent for Art law. 

New York City’s Percent for Art Program remains one of the strongest in the nation as it strives to bring public art to all corners of the city. Other states, counties, and municipalities around the nation with similar laws include: Chapel Hill, North Carolina; New Haven, Connecticut; Pittsburgh, Pennsylvania; Philadelphia, Pennsylvania; Oro Valley, Arizona. The laws in these cities follow the PFA theme but vary in terms how each program and disbursement is structured and carried out. For example, in some cases, as with the law in New York City, only municipal or City-funded construction projects are mandated to abide by the PFA law, but in other cases, as with the law in Oro Valley, Arizona, public art is compulsory for “all new non-residential and public development projects.” While some public art laws have flourished, like the one in New York City, others have floundered and never gained a strong foothold in the community, like the one in Pittsburgh.

One main feature of a PFA law that affects its ability to succeed is whether the law creates an automatic set-aside for public art or whether the funding must be actively requested. The divide between these types of PFA laws has become particularly apparent in Pittsburgh. The Pittsburgh ordinance, passed in 1977, ceased being enforced about twenty-five years ago, when the city “began including a public-art line item, of about $50,000, in its annual budgets.” Pittsburgh’s PFA law, which requires publicly funded construction projects to set aside 1% of the cost for public art, has gone unenforced for years, and the public started to petition for the law’s enfoncement. One of the main critiques of Pittsburgh’s law is that it became essentially unenforceable because, as reported by the Pittsburgh City Paper in August 2014, the law “requires the department head overseeing a given construction project to actively request artwork for that project — seldom a priority, especially in cash-strapped times.” A possible solution is to make the arts funding automatic, instead of asking for an artwork-funding request that is unlikely to appear in economically difficult times. As a result of Pittsburgh’s PFA law, the community at large has suffered from a deficit of public art and “lost out on thousands, perhaps millions of dollars [worth of art].” The systemic failure of PFA law in Pittsburgh has deprived a city of many public arts projects, and created a situation in which a complete overhaul of the PFA ordinance is necessary in order to enforce any percent for art projects.

In contrast to the situation in Pittsburgh, Oro Valley in Arizona has developed a robust public art law that does not allow developers to shirk the public art requirement. In Oro Valley, the public art law, which has been on the books since 1997, states, “[p]ublic art is a required element for all new non-residential and public development projects.” To aid developers in finding artists and commissioning artwork, Oro Valley’s website contains a public art inventory, which includes the budget for various public art project and the artists’ contact information. The centralization of data has helped Oro Valley’s PFA law to succeed. While making the public art set-aside mandatory in Pittsburgh’s PFA law would be a big step towards enforceability of the law, it would also be necessary to create a database of information about public art in the city. Many developers may have never interacted with public art in the past and may find it daunting to discover and hire an artist. By creating a centralized database with that information, however, developers may be more encouraged in approaching the public art component of their development.

James Turrell, The Color Inside, 84th Skyspace (2008)

James Turrell, The Color Inside, 84th skyspace (2008)

In considering the success and failure of PFA laws, it is critical to be mindful of the many communities that may be impacted by these laws. For example, many Texas universities, including University of Houston, Texas Tech University Systems, University of North Texas, and University of Texas at Austin, have instituted percent for art policies to invigorate the public arts community and cultural landscape on campus. As state legislatures across the country have slashed funding for public universities, oftentimes aimed at cutting the arts and humanities, PFA laws remain a viable way for a public university to inject its campus with an aesthetic component. The strong PFA laws in Texas are stunning examples of how PFA laws can be important for securing public art. The state’s public universities have become some of the most vocal and visual supporters of the law. Several prominent artists have been funded through this program to contribute to the aesthetic landscape of public universities in Texas. James Turrell, who skyrocketed into the public eye over the last few years due to three major retrospective exhibits, recently installed a skyspace at University of Texas at Austin. The universities’ adoption of PFA laws suggest that a strong statewide PFA law that applied to public institutions, including universities, which are chronically underfunded in the arts, could generate the opportunity to for public institutions to grow art collections.

As states, counties, and municipalities struggle to establish strong PFA laws, lawmakers must consider the ultimate enforceability of such laws. The shortcomings of Pittsburgh’s law are good examples of how a PFA law ought to be structured in an enforceable way or risk reaching a tipping point where it is habitually ignored by developers. In contrast, the example provided by Texas demonstrates how the success of a PFA law can bring together different segments of the community to appreciate artwork to which they might not otherwise have access. 

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About the author: Emma Kleiner is a second-year student at Stanford Law School.

Disclaimer: This and all articles are intended as general information, not legal advice, and offer no substitute for seeking representation.

Case Review: Red Rothko Suit, a.k.a. Hoffman v. L&M Arts (TX)

Mark Rothko, Untitled (1961)

Mark Rothko, Untitled (1961). Source: http://www.wikiart.org.

By Chris Michaels, Esq.*

A private art sale involving a Rothko painting is the subject of a bitter lawsuit in the Northern District of Texas. Inadvertently, the dispute sheds light on the often hidden intricacies and nuance of confidential deals. Hoffman v. L&M Arts, et al, deals with an alleged breach of contract relating to a confidentiality provision of a Letter Agreement that provided for a private sale of artwork. The lessons to be learned from this controversy may protect future sellers and buyers who may wish to enter into private sale agreements.

The painting at the heart of the sale is a 1961 Mark Rothko oil, Untitled, executed in bold red and orange (hereinafter the “Red Rothko”), which was owned by the Plaintiff, Marguerite Hoffman, a prominent art collector from Dallas. Plaintiff and her late husband pledged to donate their collection to the Dallas Museum of Art upon their death, although they retained the option to sell paintings during the lifetime. The Red Rothko was on loan to the Dallas Museum of Art, of which Ms. Hoffman is a trustee, prior to the sale, and Hoffman made a conscious decision to use a private sale option to safeguard from the public her decision to dispose of the work instead of donating it to the museum. In April of 2007, Hoffman sold the painting under the terms of a Letter Agreement, which served as an agreement between the Greenberg Van Doren Gallery acting for Hoffman and L&M Arts, a California gallery that has since closed, acting on behalf of the buyer. Principals for the Van Doren Gallery and L&M Arts signed the letter, which contained the following confidentiality provision: “[a]ll parties agree to make maximum effort to keep all aspects of this transaction confidential indefinitely. In addition, the buyer agrees not to hang or display the work for six months following receipt of the painting.” Contractual agreements between Hoffman and Van Doren Gallery and between L&M Arts and the buyer, David Martinez are still confidential. But for the resulting controversy, the terms of the sale as well as the sale itself would have remained hidden from the public.

According to the complaint filed by Hoffman in May of 2010, the private April 2007 sale was finalized for a total price of $17.6 million. Subsequently, L&M invoiced David Martinez and Studio Capital, Inc. (also defendants in this case) for the painting. Studio Capital thereafter took possession of the painting and put it in storage. Three years later, the painting was consigned to Sotheby’s for sale, and on 12 May 2010, the painting was sold at auction with great publicity for $31,442,500. The Hammer price exceeded Hoffman’s earnings from the private sale by $13,842,500. As a result of the sale at auction, Hoffman brought suit against L&M, Martinez, Studio Capital, and others, alleging, among other things, that the defendants breached the confidentiality clause of the Letter Agreement and that subsequently Hoffman suffered damages because, “when she sold the Rothko painting privately, she did so at a substantial discount in exchange for the promise of strict confidentiality, forfeiting the additional millions of dollars the painting would have brought if sold at public auction.” The great chagrin and displeasure of Hoffman is easy to understand but whether her position has legal basis was left to the courts to decide.

In the December 2013 trial that followed, the jury found that the defendants did, in fact, breach the contract and awarded damages of $1.2 million to Hoffman. (The damages award itself presents a thorny procedural issue that will not be explored here). After the award was entered on behalf of Hoffman, all defendants moved for judgment as a matter of law, meaning that defendants were of the opinion that no reasonable jury could have found for the Plaintiff based on the available evidence. Of particular note for the purposes of this article, Martinez and Studio Capital, the buyers in the private sale, moved for judgment on the ground that a reasonable jury could not have found that L&M was either acting as their agent or that they were bound by the Letter Agreement. Essentially, Martinez and Studio Capital argued that they could not breach the confidentiality provision of the Letter Agreement because they were not bound by the Agreement in the first place, or were even aware of its existence.

In reviewing the Martinez and Studio Capital motions, the U.S. District Court for the Northern District of Texas, Dallas Division was faced with two issues: 1) whether there was legally sufficient evidence for a reasonable jury to have found that Martinez and Studio Capital conferred actual authority on L&M to enter into the Letter Agreement on their behalf; and 2) whether there was legally sufficient evidence for a reasonable jury to have found that L&M had apparent authority to enter into the Letter Agreement on behalf of Martinez and Studio Capital.

The Court, analyzing Texas law on actual authority, noted that “[a]n agent’s authority to act on behalf of a principal depends on some communication by the principal either to the agent (actual or express authority) or to the third party (apparent or implied authority).” (Emphasis added). With respect to apparent authority, the Court noted that “one seeking to charge the principal through apparent authority of an agent must establish conduct by the principal that would lead a reasonably prudent person to believe that the agent has the authority that he purports to exercise.” (Emphasis added).

Martinez and Studio Capital argued that L&M had neither actual nor apparent authority to enter into the Letter Agreement on their behalf. Regarding actual authority, the defendants maintained that L&M acted merely as an intermediary in purchasing the painting. Testimony by Martinez and the Principals of L&M backed up the argument that L&M was never authorized to sign the Letter Agreement on behalf of Martinez or Studio Capital. Hoffman presented several arguments in favor of finding that L&M had actual authority to act as the agent of Martinez and Studio Capital, including that the Letter Agreement itself stated that L&M was acting “on behalf of the buyer.”

On the issue of actual authority, the Court found in favor of Martinez and Studio Capital. Simply put, the Court reasoned that there was no evidence that Martinez or Studio Capital directly communicated to L&M that it had authority to enter into an agreement with Hoffman that would be binding on either Martinez or Studio Capital. Additionally, the Court agreed with testimony of one of the Principals of L&M, who maintained that for private sales such as these, there are typically two transactions taking place; one between the seller and the intermediary and one between the intermediary and the buyer. The Court held that a reasonable jury could not find that either Martinez or Studio Capital communicated to L&M or otherwise implied through its conduct that L&M was authorized to enter into a contract with Hoffman that would be binding on the defendants in perpetuity and impose limits on their rights to alienate their property.

On the issue of apparent authority, the Court ruled that, in order to be liable, Martinez and Studio Capital must have engaged in conduct that reasonably led Hoffman to believe that L&M had this authority. The Court further noted that because neither Martinez nor Studio Capital had any direct interaction with Hoffman or her agent, among other reasons, the evidence did not permit the jury to have found that the defendants held L&M out as their agent. As such, the Court granted the motions of Studio Capital and Martinez and dismissed Hoffman’s claims against them with prejudice.

As of 2 February 2015, the case is still active given that Attorneys for Hoffman appealed the latest ruling dismissing Hoffman’s claims against the purchasers of the Red Rothko. There are, however, already a few important takeaways of which buyers, sellers, and dealers should be aware. One is that sophisticated buyers should be very clear with their dealers and intermediaries who purchase artwork as part of a private sale. An agreement in writing with respect to what the dealer is authorized to do, or not do on behalf of the buyer would, in light of the above case, be prudent. Additionally, buyers should be considerate of what they communicate or promise to a seller in private sales.

Hoffman is represented by Willkie Farr & Gallagher LLP, L&M Arts is represented by Susman Godfrey LLP, and Studio Capital is represented by Cleary Gottlieb Steen & Hamilton LLP.

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About: Chris Michaels is a litigation attorney in the Philadelphia office of the Atlanta, GA-based law firm, Cruser & Mitchell, LLP, where he actively pursues his interest in the field of art law. He may be reached at (518) 421-7238, chriswmichaels@gmail.com, or on Twitter @CMichaelsartlaw.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.