Spotlight: The Max Stern Art Restitution Project

By Ryan Igel*

screen-shot-2016-09-15-at-5-25-14-pmThe Max Stern Art Restitution Project (the “Project”),  established in 2002, is tasked with locating the paintings Jewish art dealer Max Stern (April 18, 1904 – May 30, 1987) was forced to sell during the Second World War, and return them to his heirs. The Project was established at the direction of the heirs of the Max Stern Estate. As Stern did not have children, his heirs consist of Concordia University in Montreal, McGill University also in Montreal, and Hebrew University in Jerusalem. The Project also serves an important educational and moral function, and seeks to educate both the general public and those in the art industry about art theft and the importance of provenance research in ensuring that artworks are returned to their rightful owners.  

The Project is housed at the Concordia University in Montreal, Quebec. The location of Montreal is significant, as this is where Max Stern settled once in Canada, and where he opened his Canadian gallery, the Dominion Gallery. Dr. Clarence Epstein, a Courtauld-trained art historian with experience in managing artists’ estates, was chosen by the heirs of Max Stern to be the Director of the project, and still holds this role. The project began with seed funding from the heirs of Max Stern, but is now largely self-funded through the sale of selected paintings.

The need for the Project stemmed from the cultural program aimed at confiscating and forcing the sale of art initiated by the Nazi Regime during the Second World War. The unprecedented art theft and destruction that occurred in Europe between 1933 and 1945 was a major part of the Nazi’s systematic efforts to establish a “new world order”. Works that were considered to be “degenerate” because they did not perpetuate Nazi ideals were confiscated from museums, galleries, and even from the homes of individuals. Moreover, because the Nazis believed that certain individuals, particularly those of the Jewish faith, should not participate in the creation and perpetuation of German culture, many Jewish art dealers were forced to sell or forfeit their artworks well below market prices. Many of these confiscated artworks were destroyed or purchased by German art dealers and private collectors while a number of them were sold internationally to finance the Nazi war effort.

Max Stern was one such person. Stern survived the war in Canada, but in the early years of World War Two, he lived in Düsseldorf, Germany, where he owned an art gallery and auction house that was established by his father, Julius Stern. On August 29, 1935, Max Stern received a letter from the Reich Chamber of Fine Arts – an organization tasked with ensuring that artistic endeavors within the Third Reich reflected Nazi ideals – informing him that he could no longer carry on the business of buying or selling art in Germany. Stern was given a deadline of December 15, 1937 by which to sell the 228 paintings that were in his possession. These paintings were later sold at auction at the Lempertz auction house. The extent of Stern’s involvement in the sale of his paintings is unclear as the Lempertz Auction houses records were destroyed when Cologne was bombed during the Second Word War. However, the fact that the catalogue used by the Lempertz auction house resembled those used by Galerie Stern, suggests that Stern was involved in the sale of his paintings.

After the war, individuals who were either forced to sell their art or whose art was confiscated, sought to have their property returned. Post-War restitution commissions were established by the governments of various countries to hear claims for these works, but the commissions were not always sympathetic to claims asserted by victims of the Nazis. This left a significant number of artworks in the possession of governments, state-owned museums, dealers and private collectors.

Like many, Stern began working on retrieving his paintings. On December 27, 1947, Stern filed a claim with the Central Office for Property Control to have 20 of the paintings he was forced to sell returned to him. Stern also placed advertisements in a German art magazine, Die Weltkunst, to publicize his efforts within the arts community. Through these efforts, Stern was able to recover a small number of his paintings. The Project was created to facilitate the return of the majority of paintings that were not recovered during his lifetime.

Restitution efforts call for different skills and much international cooperation between art historians, attorneys, researchers, political figures and scholars. The contentious nature of claims for restitution, and the lack of a consistent legal framework for dealing with these disputes makes relying solely on legal reasoning and other typical adversarial techniques less effective. Furthermore, the lack of proof of prior ownership makes international cooperation essential, as it is only with this cooperation that evidence of true ownership can be pieced together once again. Instances of international or trans-organizational cooperation are noteworthy.

While the Project employs both full time and part time staff, it also relies on assistance from other players in the restitution field, such as Holocaust Claims Processing Office (“HCPO”), which acts as an advocate for victims of the holocaust and seeks the return of their stolen assets. The HCPO plays a key role in the restitution process, and assists the Project by conducting provenance research, by acting as an advocate on its behalf, and by facilitating communication between the parties.

Dr. Epstein’s team also works with the National Archives in Ottawa, Canada, and lead investigator Willi Korte, a lawyer based in Washington, D.C., who is the co-founder of the Holocaust Art Restitution Project (link www.plunderedart.com). Both the team at Concordia University and the National Archives assist Dr. Epstein in the search for works that belonged to Max Stern. Lead Investigator, Willi Korte, who has worked on recovering each of the paintings recovered so far, assists with determining the provenance of paintings so that records of ownership can be established and later used in the restitution process. This task takes him all over the world.

The Project approaches the repatriation of Stern’s works through both legal and non-legal channels. However, Dr. Epstein emphasizes that the repatriation of most works is not actually achieved through legal avenues. This is because many countries do not consider forced sales to be theft and also because most countries do not have a specific legal mechanism to assist with these types of claims. Instead, moral arguments are used privately in what Dr. Epstein refers to as “a process of reconciliation” between the parties. The Project also presents more practical arguments such as pointing to the fact that a painting with tarnished provenance is not marketable. The success that has been achieved by using diplomacy and moral arguments demonstrate that shame on one hand and praise on the other are better suited to achieving the Project’s goals.

The reconciliation process utilized by the project is illustrated by the repatriation of Wilhelm Von Schadow’s Self Portrait of the Artist. This painting was discovered when a researcher from the National Archives in Ottawa, Canada found it in a catalogue for a 1967 Düsseldorf Museum Kunstplast exhibition. The catalogue for this exhibition listed the paintings location to be the Stadtmuseum. The Project contacted the museum directly, and the parties discussed the idea of returning the painting to the heirs of Max Stern. In the course of these discussions, both moral and legal arguments were presented and the museum ultimately agreed that the painting should be returned to Max Stern’s estate. However, instead of returning the painting physically, the parties agreed that the painting would remain in the Stadtmuseum Düsseldorf on the condition that the painting was acknowledged as being on loan from Stern’s estate. The parties also agreed that while on display, the painting would be used to remind those who visit the gallery of the painting’s history. As part of the educational component of the agreement, the parties agreed that the painting would be involved in two exhibitions: one on the life of Jewish people in Düsseldorf, and one specifically on Max Stern and his art collection. The museum also agreed to take on the role of providing education on provenance research.

Although reconciliation is preferred to the uncertainty and cost of litigation, the Project achieved a major legal breakthrough in the United States in the case of Vineberg v Bissonette. Vineberg v Bissonnette, 529 F.Supp.2d 300 (D.R.I 2007). Vineberg involved a claim by the Max Stern estate for the return of The Girl From Sabine Mountains by Franz-Xaver Winterhalter. At the time, the painting was owned by Maria-Louise Bissonette, the step-daughter of Dr. Karl Wilhelm, who had purchased the painting from the Lempertz Auction House in 1937. In this case, Chief District Judge Mary Lisi recognized that the forced sales of artworks under those circumstances were equivalent to theft, and ordered Bissonnette to return the painting to the Stern estate. Although the establishment of this legal principle is significant, Dr. Epstein cautions that the judgment is limited to the United States and does not assist with the repatriation of works that are in other countries such as Germany, where most looted paintings are still located.

To date, the Max Stern Art Restitution Project has recovered twelve of Max Stern’s paintings and continues to locate and negotiate the repatriation of his remaining collection . Stern’s works have been found in auction houses, a German casino, and in private collections. Some of these recovered works are now on loan to museums and foundations. Some examples being Aimee, a Young Egyptian by Emile Vernet-Lecomte which is on loan to the Montreal Museum of Fine Arts and  Portrait of Jan Van Everdyck by Nicolas Neufchatel which is on permanent loan to the Jakober Foundation. Other paintings, as previously mentioned, have been sold to finance the Project. Through the sponsorship of conferences and other educational events such as The Israel Museum Conference “Justice Matters: Restituting Holocaust-Era Art Artifacts” (2008), the Project has not only contributed significantly to ensuring that efforts to repatriate works of art stolen by the Nazis during the Second World War remain relevant, but has also become an important source of information and guidance for individuals and similar organizations that also seek the return of these precious works.

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*About the Author: Ryan Igel is a second year student at the University of Ottawa Faculty of Law, with an interest in the intersection of art and law. Ryan is particular interested in the restitution of artworks looted during the Second World War. He can be reached at rigel064@uottawa.ca.

The author would like to thank Dr. Clarence Epstein, Director of the Max Stern Art Restitution Project, for his time during telephone interviews.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Instead, readers should seek an attorney with any legal questions.

Whose Rights? Anish Kapoor’s “Dirty Corner” Exposes A Battle Between Artists’ Moral Rights and The Rights of the Public

By Adrienne Couraud*

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Anish Kapoor’s Dirty Corner, before and after vandalism.

In 2008, President of the L’Établissement public du château, du musée, et du domaine  national de Versailles, Jean-Jacques Aillagon debuted a series of solo art shows and temporary art installations at the house and gardens of the Chateau de Versailles. Beginning with the summer solo retrospective of American artist Jeff Koons, the program has grown both substantively, including past artists such as Takashi Murakami (Summer 2010), Joana Vasconcelos (Summer 2012), and currently, Olafur Eliasson (Summer 2016), as well as procedurally, expanding from a seasonal to a year long program. In 2015, the contemporary art program of Versailles offered artist Anish Kapoor a solo show to integrate his sculptures within the spatial challenges the house and Versailles gardens present. As President of the Palace of Versailles Catherine Pégard states, “[Versailles] is not a museum or a gallery or an exhibition space.”

In his own words, Indian-born but British-raised artist Anish Kapoor describes his raw-material born sculptures as “talking” about himself. Kapoor’s sculptures emulate a “void” straddling the duality of  “something, even though it is really nothing.” Kapoor originally described his 2015 “Dirty Corner” installation destined for Versailles , a steel-and-rock sculpture over sixty meters long and ten meters high, as “the vagina of the queen who is taking power,” but later retracted his statements to focus on his message: “to create a dialogue between these great gardens and the sculptures”.

After the sculpture was installed it was subject to repeated vandalism attacks and Kapoor declined to remove it “to bear witness to hatred”. Following the complaint about the Kapoor’s “Corner” launched by a right-winged politician and Councilor of Versailles Fabien Bouglé, an administrative French court ordered the covering of anti-Semitic graffiti on artist Anish Kapoor’s installation, Dirty Corner, at the Palace of Versailles [“Versailles”] in September 2015. Mr. Bouglé filed a complaint with a French public prosecutor against Mr. Kapoor and Catherine Pégard, President of Versailles, for “inciting racial hatred, public insults, and complicity in these crimes,” after Kapoor decided to leave the vandalism as a public testament, “belonging to anti-Semitism that we’d rather forget.”

The Dirty Corner Court Case

Prior to the court decision, Versailles announced plans to alter Kapoor’s installation by covering the vandalism with a shiny gold foil against the faded brass structure, leaving the defacement as an obvious disruption of the work – a process that was expedited following the court decision. Despite artist’s meeting with French President François Hollande, who declared the defacements “hateful and anti-Semitic,” Kapoor explained to the French newspaper Le Figaro, “I had already questioned the wisdom of cleaning [the installation] after the first vandalism.” The French Minister of Culture, Fleur Pellerin, stated she respects Kapoor’s decision but found the public debates thus spurred “extremely interesting and raise the question of creative freedom.”

The Tribunal Administratif de Versailles released a statement about the decision deeming the vandalism a “serious and clearly illegal breach of fundamental liberty.” Though the court acknowledged the moral rights of artists, “this freedom has to be reconciled with respect for other fundamental liberties,” alluding to the requisite for public peace. The public nature of Kapoor’s installation required that the court ensure protection to “everyone from attacks on their human dignity.”

Kapoor reacted to the court’s decision in a phone interview from Moscow at the opening of his exhibition at the Jewish Museum and Tolerance Center, declaring the court’s decision a “perverse reversal” of his accord. “Without proper public debate and proper public exposure for culture,” Kapoor proclaimed, “we are in a fascist state.” Kapoor’s installation was vandalized once prior to the court decision and, thereafter, three additional times, to which Kapoor maintained, “I don’t want to see it on the work; I find it vile.” In his steadfast battle against racial hatred, however, Kapor has “refused to remove it and pretend it didn’t happen,” raising important questions concerning the boundaries of  aesthetic taste and artistic value.

What Are Moral Rights?

“Droit moral”, or moral rights, stem from the Kantian and Hegelian concept of transferring an artist’s personality into a work and refers to the right of an artist to control his work. Moral rights protect the personal value, rather than the monetary value, of a work. Under American Law, inalienable moral rights are have more limited jurisdictional protections than in other jurisdictions, as they are protected under judicial interpretation of copyright and trademark law, coupled with 17 U.S.C. §106A, or the Visual Artists Rights Act of 1990 (VARA), which protect moral rights for the life of the artist.

Prior to VARA, U.S. legislative history reveals the American endeavor to define moral rights as “derivative works”, or artistic works based on the work of another artist, demonstrated within the Copyright Act and the Lanham Act, which defines trademarks and unfair competition. After VARA was passed, in the United States moral rights automatically vest within an artist but are limited to a “work of visual art,” granting two particular rights: the right of attribution and the right of integrity. The right of attribution allows an artist to associate or disassociate his name from his work of visual art. The right of integrity prevents both the intentional modification of his work of visual art if the modification is likely to harm the artist’s reputation and the destruction of any work of visual art protected by a recognized stature.

Under European Law, however, copyright law typically protects inalienable moral rights perpetually. Under French law particularly, copyright law protects four moral rights: the droit de divulgation; or the right of disclosure, the droit de repentir ou de retrait, or the right to affirm or disaffirm works previously publicized works; the droit de paternite, or the right of attribution; and the droit au respect de l’oeuvre, or the right of integrity. French courts have refined the right of integrity to allow owners of physical works the right of reasonable use and the right of reasonable adaptation without gross distortion.  For example, French moral rights do not expire, regardless of the number of created copies of a work, while American moral rights more rigidly limit works based on the number of copies created.

The Dirty Corner’s Effect on Moral Rights

The French court decision affecting Kapoor’s Dirty Corner appears to place two additional refinements on moral rights in France because of the work’s public location. First, the public installation of Kapoor’s work subjected it to a public order. Second, the public installation of Kapoor’s work subjected the public to “protections of human dignity.” Though the court recognized Kapoor’s moral rights, the moral rights could not outweigh “other fundamental liberties” of the public, alluding to the requisite for public peace over artistic scandal.

“It’s a terrible, sad thing,” Kapoor announced in his reaction to the court decision. “France is weird, I don’t understand it,” Kapoor added. “It doesn’t take in the full context. We’re going to take the case to appeal and we’ll see what happens.” Kapoor continued, “[w]e have to experiment in public, it’s our role as artists, that’s how society grows. If we stop that, we might as well live in a fascist state.” For now, however, Kapoor will have to channel his determination to test the creative and cultural limits of France outside of the Palace of Versailles.

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*About the Author: Adrienne Couraud (J.D. Candidate 2017) is a student at Brooklyn Law School. She may be reached at adrienne.couraud@brooklaw.edu.

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

It Takes Two to Tango: The Importance of Artist-Gallery Contracts

By Scotti Hill*

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Creative Commons.

Of course galleries are venues of intellectual engagement and social activity, but it can be easy to forget that they also act as hubs for commercial exchange. The same mechanisms that govern relationships between blue-chip artists and mega-galleries ought to be in place to protect emerging artists and pop-up galleries as well. Beneath the veneer of originality and artistic merit lie monetarily-driven representation agreements and consignment contracts. The status quo is driven by mutual interest: galleries need artists to create their inventory so their clients have something to buy, and artists need galleries for their infrastructure and access to art buyers. By creating a roadmap that enables both parties to navigate their working relationships, contracts are at once practical and imperative. So, given the importance of a well-drafted and carefully negotiated contract in almost all areas of commerce, why do artists and galleries often fail to formalize the nature of their relationships in contractual form?

On July 19, 2016, Center for Art Law hosted an art law mixer entitled “Good Fences Make Good Contracts” to explore the question of contracts between artists and galleries. As a follow up, this article examines the intricacies of standard representation and consignment agreements, while also delving into the legal basis for such contracts–namely the Uniform Commercial Code Sect. 9-102 and the New York Arts and Cultural Affairs Law §12.01, Artist and Merchant Relationships. To illustrate benefits of having carefully crafted contracts between artists and galleries, some high-profile relationships, such as the representation and the rumored split between Richard Prince and the Gagosian Gallery highlight select  issues that may arise in an artist-gallery relationship.

Introduction to the Standard Artist-Gallery Contract

Screen Shot 2016-08-15 at 1.04.59 PMWhen entering into a commercial relationship, an artist or gallery may choose to draft a standard representation agreement whereby the gallery agrees to work as an agent on the artist’s behalf. The scope of this agency is negotiated by the parties, as some galleries hope to serve as an artist’s exclusive agent in a geographic area (New York City, for example), while others agree to serve as agent for one specific medium or collection the artist produces. Such agreements set provisions for matters like how revenue is shared after a sale, whether the gallery receives commissions on work sold from the artist’s studio, and the duration and scope of consignment. The following items are also commonly included in artist-gallery contracts:

  • Duration of contract including renewal and termination clauses;
  • Commission structure, terms of payment and other accounting procedures;
  • Transportation procedures;
  • Gallery promotion, marketing and copyright;
  • Coverage and provisions of insurance policies.

After establishing representation with a gallery, artists then consign their artwork to them for safekeeping with the expectation the gallery will sell their inventory. By definition, consignment is the act of assigning the property of one party (consigner, be it an artist or a collector) to that of another (consignee, here a gallery), for sale under contract. As part of the larger representation contract, a consignment agreement should list all the works given to a gallery by the consignor, with an authority to sell a specified group of the artist’s work and providing an indexical record of works in the gallery’s possession.

Uniform Commercial Code (UCC) Sect. 9-102, and New York Arts and Cultural Affair Law §12.01, Artist and Merchant Relationships

While the Uniform Commercial Code is the overarching body of laws concerning the sale of goods and commercial transactions federally, each state has adopted its own commercial code. UCC Section 9-102 sets guidelines for parties engaging in commerce regardless of the existence of a written contract. As it relates to the consignment relationship between artist and gallery, the UCC dictates important provisions that have been upheld over time by case law, namely the criteria and value of goods classified under ‘consignment’ and consignor’s rights in the event of bankruptcy. See Jacobs v. Kraken Inv. Ltd., (In re Salander-O’Reilly Galleries, LLC), 506 B.R. 600 (Bankr. S.D.N.Y. 2014)

In addition to the UCC, thirty-one states have adopted statutes to address the specific circumstances governing art transactions. In New York, for example, the New York Arts and Cultural Affairs Law (NYACAL), Article 12, provides a governing structure for interpreting contracts between artists and galleries. On November 6, 2012, New York’s consignment law was updated to include additional protections for artists by imposing stricter measures on galleries and dealers as consignors. The updated NYACAL addresses three fundamental weaknesses in earlier consignment law: requiring dealers and galleries to place sale funds in a protected trust, awarding attorneys fees for successful petitioners and requiring that critical sections of the consignment agreement be memorialized in writing. The 2012 amendment directly addresses the UCC’s problematic rendering of consigned artwork eligible for seizure by creditors, which is perhaps one of the UCC’s most controversial points.

Before the 2012 revision to the law, creditors could legally seize artworks in a consigner’s possession in order to fulfill unpaid debts. Although galleries do not own artworks on consignment, the creditor exists as a third party outside of, and therefore not bound by, the terms of a contract forged between the artist and gallery. The lack of solid legal remedies for consignors is what has propelled many states to revise their laws to deal specifically with the consignment of art, while in New York, the mammoth Salander-O’Reilly Galleries lawsuit became a catalyst for the amendment.

As such, an important provision exists in many amended state laws: that the gallery be rendered trustees to the artist’s property, which necessitates they hold revenue from the sale of an artwork in a special trust–apart from other gallery funds–that will be paid in full to the artist at an agreed upon time. This amendment works to 1) prevent creditors from seizing consigned art because the value of such works is protected in a trust, and 2) protect trust funds from being improperly used by the galleries to fulfill other financial obligations.

Indeed both parties may take advantage of vague contractual terms or actively work against the creation of a contract. Amended laws aim to prevent this by adding specific fiduciary responsibilities for both parties. Ultimately, if the artist-gallery partnership exists in a state without a comprehensive consignment statute, the parties can, and should, provide through contract the provisions missing from state law.

Richard Prince and Gagosian Gallery Split

After more than a decade and a string of highly successful exhibitions together, news broke in June 2016 that Richard Prince and Gagosian Gallery were going their separate ways. Neither the  veracity of the news nor the details of the alleged split are known, but if true may be explained by the mounting costs from legal battles involving the pair in recent years, which implicate and name Larry Gagosian and his gallery as a contributory infringer.  See Graham v. Richard Prince, Gagosian Gallery, Inc., and Lawrence Gagosian, Cariou v. Prince, Gagosian Gallery, Inc. and Lawrence Gagosian, and Dennis Morris v. Richard Prince, Gagosian Gallery, Inc. and Does 1 through 10 inclusive.

As part of his famous appropriation work, Prince takes the copyright-protected work of other creators and repurposes it in new contexts. While critics and collectors have repeatedly lauded this process, photographers whose work has been used without permission have taken a different approach. From 2014-2016, three copyright infringement lawsuits were filed against Prince by photographers Patrick Cariou, Donald Graham and Dennis Morris. In Cariou v. Prince, 714 F.3d 694 (2nd Cir. 2013), the Second Circuit Court of Appeals held that Prince did not infringe the copyright of 25 of the 30 images he appropriated from Patrick Cariou’s collection of photographs under the fair use exception of copyright law. For his use of the remaining five images in the collection, Prince settled out of court. The infringement cases brought by Graham and Morris are ongoing.

As agents working on the artist’s behalf, galleries accompany artists through creative peaks and declines. While much is made about how important contracts are for artists, galleries are wise to incorporate a termination clause in the contract in order to guard themselves from potential problems that may arise in the course of the relationship. A well-drafted termination clause, for example, is helpful in providing a protocol for the  manner in which the parties can terminate their professional relationship; a termination clause affords the party on the receiving end of the “breakup” adequate time to prepare for the transition. This is particularly important in instances where the gallery has crafted an exhibition or otherwise made plans with specific artworks. A typical clause of this kind would require the party initiating the split to give notice of anywhere from one to three months to the other party.

We do not know if Prince had a contract with Gagosian, but at the very least, it is likely the two agreed upon such critical provisions as payment and consignment of inventory. Despite news of the split earlier this summer, Prince is still featured on Gagosian’s website, which may indicate the two have yet to part ways. And even then, the separation may only be temporary.  After all, artist Damien Hirst reunited with the Gagosian Gallery for 2016’s Frieze New York following a three year split.

Conclusion

Although many states have amended their consignment laws, still other states have yet to follow suit. In areas of the nation where art represents a decidedly small segment of the larger economy, less incentive exists to add in the necessary protections that have been greatly appreciated in large art markets. On a practical level, however, artists can protect themselves by being vocal about their desire for a consignment contract. Contracts create a roadmap for the artist-gallery relationship and can offer clarity  if/when any unforeseen grey areas arise in the course of doing business together. When entering into a business relationship with a gallery, artists are wise to seek out feedback from their peers about the gallery’s reputation and its willingness to negotiate mutually beneficial terms at the outset. Various resources exist online, most important of which are copies of the standard representation and consignment agreements that can serve as a starting point for both parties. Ultimately, if an artist is faced with unique circumstances relating to their practice or needs, they may wish to seek legal representation before, and oftentimes during, their formal acceptance of a gallery’s offer of representation.

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Photo by Luis Nieto Dickens | @vla_newyork

On July 19, 2016, Center for Art Law (the “Center”) hosted “Good Fences Make Good Neighbors,” a Summer Art Law Mixer made possible with support from the New York Volunteer Lawyers for the Arts. The event focused on contracts between artists and galleries and how attorneys negotiate on behalf of their clients. Moderated by the Founding Director of the Center, Irina Tarsis, the panel featured three speakers, all attorneys specializing in art law. Dean Nicyper, a litigator with Withers Worldwide, and involved with revising the NYACAL law, provided a general overview of the legal considerations of artist-gallery contracts, Amelia Brankov of Frankfurt Kurnit Klein & Selz, spoke about the ways in which artists can advocate on their own behalf in forging contracts with galleries and Katherine Wilson-Milne of Schindler Cohen & Hochman, commented on what considerations galleries have when drafting contracts with artists. Attendees, including practicing attorneys, students and artists, asked questions ranging from the appropriate etiquette of negotiating such contracts to how to best situate oneself to prevent and later reconcile potential legal issues that arise from this union. One main take-away from the evening was that that clear terms of a consignment agreement between artists and dealers make for good symbiotic relations between the two key players in the art market.

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About the author: Scotti Hill is a J.D. Candidate, 2018 from the S.J. Quinney College of Law at the University of Utah. She serves as a summer 2016 legal intern for the Center for Art Law, and works as an art critic and curator. Prior to law school, she received a Master’s Degree in art history and visual studies. She can be reached at scottiaustinhill@gmail.com

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

HEAR and the Guelph Treasure Recovery Efforts: Restitution in Review

By Nina Mesfin*

On June 7, 2016, the Senate Judiciary Committee heard a bipartisan-backed piece of legislation called the Holocaust Expropriated Art Recovery (HEAR) Act, S. 2763, 114th Cong. (2016). As recently reported by Center for Art Law and elsewhere, the HEAR Act aims to allow “civil claims or causes of action to recover artwork or other cultural property unlawfully lost because of the persecution during the Nazi era, or for damages for the taking or detaining of such artwork or cultural property.” In other words, the HEAR Act proposes a federal statute of limitations on restitution claims as opposed to statutes of limitation that vary by state in order to “lift unfair restrictions from heirs’ claims.” In addition to garnering support from both the Republican and Democratic parties, the HEAR Act also offers advocates outside of the political realm.

Screen Shot 2016-08-09 at 11.21.25 AMFollowing the bill’s introduction, on June 7th actress Helen Mirren testified before the Senate on behalf of the bill. Mirren’s support, in part, stems from her recent portrayal of Maria Altmann in the film Woman in Gold (released in 2015). Altmann was a Jewish woman who successfully reclaimed five Nazi-looted works by Gustav Klimt from the Austrian government in the landmark case Republic of Austria v. Altmann (03-13) 541 U.S. 677 (2004) 327 F.3d 1246, affirmed. The Altmann case set a legal precedent in which the Foreign Sovereign Immunities Act (FSIA) was applied retroactively, allowing a sovereign body to be tried in a U.S. court.

The timing of Woman in Gold, which has drawn public attention to Altmann’s success, coupled with recent congressional efforts to facilitate the restitution of Nazi-looted works, may impact the outcome of other restitution claims. One of these cases involves the Welfenschatz or Guelph Treasure– a collection of medieval art currently in the Kunstgewerbe Museum in Berlin—with an estimated value of $250 million dollars. On February 23, 2015, the heirs of the art dealers who sold the Guelph Treasure to Germany filed a civil action in a U.S. district court against Germany and the Prussian Cultural Heritage Foundation. The case of the Guelph Treasure will test further the limits of both the U.S. government’s dedication to Holocaust-era restitution claims and ability to broker restitution deals.

What is the Guelph Treasure?

The Guelph Treasure, consisting of 82 gold, silver and gem encrusted liturgical objects from the Church of St. Blaine in Brunswick, Germany, and according to art historian Christina Nielsen, it is considered to be “the greatest group of medieval objects ever offered for sale.” The objects range in date from the 8th to the 15th century and the majority are works of German craftsmanship while other notable pieces are Italian and Byzantine in origin. One of the most extraordinary characteristics of this collection is its indisputable authenticity; records indicate that prior to its auction, the Treasure has been in continuous care of the same noble German family for more than 800 years.

Subsequent Sales of the Treasure

Duke Ernst August was the last of his German ancestors to possess the Guelph Treasure. Due to economic hardship in 1928, the Duke was forced to put a price on what was considered a collection of “incalculable intrinsic value” because of “its antiquity and art-historical importance”(Nielsen, 442). To the dismay of many German citizens and the State itself, the Duke sold the Treasure to a consortium of Jewish art dealers in 1930: Julius F. Goldschmidt of Frankfurt, Berlin, and New York and Z.M. Hackenbroch and J. Rosenbaum of Frankfurt. Although the Duke intended for the collection to stay together, the consortium of art dealers, having failed to resell the collection in its entirety, began to sell off pieces of the Treasure.

After meticulously cataloging the collection, the dealers began selling, or rather attempting to sell, portions of the Guelph Treasure in Germany. As Germany frowned upon the sale of what it considered to be cultural patrimony, the new owners, a consortium of Jewish art dealers, then tried to sell the collection in the United States. The Guelph Treasure was first exhibited in New York in 1929, and by 1934, the consortium sold 40 of the Treasure’s 82 pieces to several museums in the United States, including the Cleveland Museum of Art (Nielsen 443). In 1935, the remaining 42 pieces of the Treasure were sold to the State of Prussia for 4.25 million Reich marks, or $1.7 million. High-ranking Nazi official Hermann Göring oversaw the acquisition and later gifted it to Adolf Hitler. It is the legality of the second sale in 1935 that the heirs of the consortium are disputing.

Appearing before the German Advisory CommissionScreen Shot 2016-08-09 at 11.27.45 AM

Before their U.S.-based lawsuit, the heirs of art dealers J. and S. Goldschmidt, I. Rosenbaum and Z.M. Hackenbroch appeared before the German Government Advisory, also called the Limbach Commission. The Commission is a joint initiative of the Federal Commissioner for Cultural and Media Affairs and the Länder and the National Association of Local Authorities; it invites claims concerning Nazi-looted property that public institutions in Germany currently possess. The Commission serves as a mediator between these public institutions and former owners as well as their heirs, hearing cases and offering resolution recommendations. The New York Times reported that the heirs’ lawyers cited the “climate of fear and uncertainty for the [dealers’] futures in which Jews in Germany found themselves in 1935,” arguing that these dire circumstances suggest that any “purchase by the state from Jewish businessmen must be considered as having taken place under duress.” The lawyers representing the heirs attempted to prove that the sale was, in fact, forced by explaining that the dealers sold the pieces for $4.3 million less than they had paid for it five years earlier. The panel attributed the ten percent market price decease to the economic downtown wrought by the Great Depression.

After contemplating this argument, in March of 2014 the Commission’s panel recommended that the 42 “jewel-encrusted, intricately wrought silver and gold crucifixes, altars and other relics of the Guelph Treasure should remain in the possession of the state-run foundation.” Bloomberg News noted that the Commission went on to state that “[f]ar from selling under duress, the consortium had been attempting to unload the Guelph Treasure for years,” pointing to the correspondence among consortium members celebrating the sale.” The Commission also noted that the Guelph Treasure is an exception to the Washington Conference Principles on Nazi-Confiscated Art, which all German museums have agreed to uphold. The Principles are a set of guidelines that maintain that “any art object sold by Jews for less than its fair value during this period (Jan. 30, 1933, through 1945) is a candidate for restitution,” a period that includes the Guelph Treasure.”

This ruling, in favor of the Kunstgewerbe Museum is one of many made by the Commission that has been met with criticism. As art journalist Catherine Hickley reports, the Limbach Commission has recently “come under fire for a lack of transparency, the length of time it takes, failure to appoint a Jewish member and the low number of cases it has mediated.” The Commission has only mediated thirteen cases since its founding in 2003, whereas its Dutch counterpart has issued more than 140 since 2002.** In July of 2016, Germany’s culture minister, Monika Gütters, actually announced plans to reform the Limbach Commission.

The Civil Lawsuit over the Treasure

Screen Shot 2016-08-09 at 11.32.39 AMAlmost a year after the Commission made its non legally binding recommendation, the heirs to the Guelph Treasure, filed a civil lawsuit in U.S. District Court for the District of Columbia. Philipp et al. v. Federal Republic of Germany et al., 15-cv-00266 (D. D.C.). According to a Washington Jewish Week article, the seventy-one page complaint alleges that the consortium sold the 42 pieces to the State of Prussia “via a manipulated sham transaction spearheaded by Dresden Bank, which was acting on behalf and by order of the two most notorious Nazi leaders and war criminals,” Göring and Hitler. The complaint further notes that the heirs used the fact that the alleged forced sale was made for less than 35 percent of its actual value and that the payment “was then subjected to flight taxes that were demanded so the Jewish dealers could flee Germany,” as evidence backing their claim. One of the dealers, Hackenbrock,was able to leave Germany in 1935, although died shortly thereafter in London in 1937. Details concerning the other two dealers, Rosenbaum and Goldschmidt, are unknown.

In order to justify filing this suit in a U.S. court, attorneys for the claimants invoked the Foreign Sovereign Immunities Act, which “provides jurisdiction over foreign states that conduct business in the U.S. via exhibitions and other museum-related activity.” According to O’Donnell, one of the attorneys representing the claimants, FSIA’s applicability to this case is straightforward, as “Jewish victims of persecution like the Plaintiffs’ ancestors are victims of takings in property in violation of international law.” He further explains, “[a]s a result, and because the Defendants are engaged in commercial activity in the United States, this case presents precisely the category of claims over which § 1605(a)(3) of the FSIA, the expropriation exception, creates jurisdiction.”

In March 2016, Germany and the Prussian Heritage Cultural Foundation responded by filing an eighty-five page motion to dismiss the case, contesting the jurisdiction of the U.S. courts. Within the motion, the defendants contend “that the persecution and expropriation of property from its Jewish residents were a sufficiently internal affair so as not to be a violation of international law.” O’Donnell has described this motion as “revisionist” and “troubling.” Most recently, on May 11, 2016, claimants filed an opposition to the motion to dismiss. The latest filing in the case was in June a reply to opposition to motion re motion to Dismiss the Plaintiffs’ First Amended Complaint. Now we are waiting for the court to review the filings.

Conclusion

The pending case involving ownership of the Guelph Treasure has brought two interesting issues into focus. The first is whether the blanket application of forced sales to an entire time period, in this case the years immediately preceding and spanning WWII, is legitimate, not taking into account the market or the profession of the seller, i.e. an art dealer who is almost always in the process of making a deal. The Guelph Treasure also tests the authority of advisory commissions with no binding power, as rulings made by the Limbach Commission are unenforceable. On the other hand, there are several other European arbitrating bodies whose opinions are binding, such as the Austrian Restitution Binding Commission and the Dutch Advisory Committee on the Assessment of Restitution Applications for Items of Cultural Value and the Second World War. As Hickley points out in her article “German minister promises to reform Limbach Commission after mounting criticism,” unlike the Limbach Commission, the Austrian and Dutch advisory committees do not require both parties to agree in order to mediate disputes.

In challenging the Limbach Commission’s clout, the case of the Guelph Treasure may bring a foreign body into conflict with the crux of the U.S. court system. It will be interesting to see if and how the U.S. judicial system, in its dealings with the Guelph Treasure, will impact the authority enjoyed by European advisory board’s ruling on contested art. As Elazar Barkan explains in The Guilt of Nations: Restitution and Negotiating Historical Injustices, restitution as a means of acknowledging gross historical injustices is a relatively novel phenomenon. Nowadays, it “is a large part of the growing attention being paid to human rights.” The question becomes: in which instances is restitution warranted and in which does it potentially exploit society’s overeagerness to atone for past atrocities? Furthermore, at what point, if at all, is it appropriate for a third party state to hear these claims and issue rulings? While the United States at times offers a venue to bring restitution claims, the outcome and the cost of these claims is unpredictable.

Select Sources:

**There are currently five restitution commissions: United Kingdom, Austria, France, Germany, and the Netherlands. In 2007, the United States government considered establishing its own restitution advisory commission, to no avail.

About the Author: Nina Mesfin is a Summer 2016 legal intern at Center for Art Law. She is a rising junior at Yale University majoring in Ethnicity, Race and Migration and concentrating in Art, Literature and Narratives of Race and Ethnicity. Nina is also a scholar in the Yale Multidisciplinary Academic Program in Human Rights.

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

5 Charged with Selling Non-Genuine Native Goods: A Violation of the Indian Arts and Crafts Act

*By Lillia McEnaney

Center for Art Law previously reported In Brief that, in March 2016, the U.S. Attorney’s Office in the District of Alaska charged a handful of individuals with violating the 1990 Indian Arts and Crafts Act (IACA). Following is an in depth background of the case and a discussion of relevant statutes

The Indian Arts and Crafts Act

Screen Shot 2016-08-05 at 4.07.08 PM.pngPassed in 1990, the Indian Arts and Crafts Act is a federal truth-in-advertising law that prohibits the sale of goods that incorrectly claim to be Native produced. In the United States, there are 1.9 individual Native people who are members of the 567 state and/or federally recognized tribes. If an artist or an art dealer fraudulently claims that any of their wares were produced by an individual or group of Native Americans, they are in direct violation of IACA.

The current law is based off a 1935 Act of the same name that aimed to “promote the development of Indian arts and crafts.” This original legislation also created the Indian Arts and Crafts Board (IACB). The IACB’s purpose is to enforce IACA and ensure the “genuineness and quality” of Native works on the art market. Today, the IACB has the power to refer complaints to the FBI or to the Secretary of the Interior for investigation. After reviewing the investigatory report issued by either the FBI or the Secretary of the Interior, the IACB may recommend to the Attorney General that charges be filed against individuals who violate the IACA. Additionally, the IACB can create and register trademarks that are authentically Native American or Alaskan. In 2000, Congress amended the IACA to improve its enforcement procedures.

If found guilty, an individual who violates the IACA may face up to a $250,000 fine or imprisonment for no more than five years. If found guilty of more than one charge, that person may be fined up to $1,000,000 and imprisoned for up to 15 years.

Past IACA Cases & Criticism

A 2011 Government Accountability Report showed that the IACB received approximately 650 violation complaints between 2006 and 2010. The report indicated that 150 of these complaints suggested substantial IACA violations and 117 cases needed additional investigation. After receiving a complaint, the IACB can either pass the information to the FBI, to the Secretary of the Interior, or recommend to the Attorney General that charges be filed. Despite the fact that a violation of Indian Arts and Crafts Act is a federal matter, none of these cases have ever filed in federal court.

In total, only five people in five separate cases have been found guilty of violating the IACA between 1990, the year  Congress passed the IACA, and 2010. Two of these cases were dismissed and violators in the remaining three were sentenced to either probation or up to 13 months’ jail time.

Few Indian Arts and Crafts cases result in prosecution because the IACB focuses on preventative education rather than practical enforcement of the law. Reportedly, one of the Board’s most common methods of investigation was to send a form letter to suspected offenders. The letter detailed the guidelines put forth by IACA and described the penalties of violation. However, at times these preventive “efforts are thwarted by public ignorance of the law, law enforcement priorities and the cost of legal action.”

Additionally, the U.S. Government Accountability Office (GAO) suggested that reliable and objective data on the size of the market for Indian arts and crafts is sparse. Limited market data makes it even more difficult to propose a plan to stop this practice  because it is not always easy to tell the difference between a fake and an authentic piece, even for experts. Wayne Bobrick of Wright’s Indian Art in Santa Fe has said that “[t]here are some things that are obvious, but if they do it well enough, anyone can be fooled.” Additionally, though it is most common for non-Natives to claim to be Native, it is also common for some Native Americans to buy imported goods and pass them off as their own, authentic work, according to Tony Eriacho, a Native artist and activist. Taking these factors into account, the GAO also determined that conducting a more thorough and complex study would be costly and would most likely produce similarly biased results.

One substantial criticism of the IACA is that the Act does not protect artists that do not belong to federally recognized tribes. Currently, there are approximately 250 tribes in the United States that are not recognized by the Bureau of Indian Affairs or by their respective state’s government. Artists that belong to any of these communities are not protected by the Indian Arts and Craft Act, and are not even able to market their arts and crafts as “Indian-made.” This has massive implications, as many non-federally recognized Natives are no longer able to sell their authentic wares in fear of criminal prosecution. Lack of representation here is, of course, just one of many legal disadvantages that unrecognized tribes currently face.

Case Study: Five Charged with Selling Non-Genuine Native Goods

In May 2014, a team comprised of the Department of Justice, the IACB, and the Alaska Attorney General’s Office Consumer Protection Unit began an investigation of four Alaskan business owners under the accusation of violating the Indian Arts and Crafts Act. The investigation was prompted by complaints filed by summer tourists in Alaska. The tourists were allegedly told that various bone carvings that were for sale were made by Alaskan Native peoples. This inspection, spearheaded by the DOJ, is the result of an investigation conducted by the United States Fish and Wildlife Service (USFWS) that previously found these businessmen guilty of misrepresenting their goods. An undercover USFWS agent paid $1,985 for the non-genuine pieces at the store.

The people charged include “Vinod ‘Vinny’ L. Sippy, 38, d.b.a. Diamond Island, Icy Strait, and Gemstone Heaven; Juneau resident and business operator Norma M. Carandang, 60, d.b.a. Northstar Gift Shop; Puerto Rican resident and Ketchikan business owner Gabriel T. Karim, 33, d.b.a. Alaskan Heritage; Skagway resident and business owner Rosemary V. Libert, 56, d.b.a. Lynch and Kennedy Dry Goods, Inc.; and Libert’s seasonal employee, a resident of Huntington Beach, California, Judy M. Gengler, 65.” They are charged with, according to the DOJ, “the illegal misrepresentation of bone art carvings as made by Alaska Natives or Indians, when in fact they were made by local non-native carvers.”

When brought before the court, Sippy pleaded guilty, while Carandang pleaded not guilty. Because Sippy pleaded guilty, the arraignment also served as his sentencing. He “agreed to pay a $3,500 fine, make a $3,500 donation to the IACB, distribute a public apology letter and he will serve five years of probation.”

The case is currently pending in the U.S. District Court for the District in Alaska.

Conclusion

In the 21th century, enforcement of IACA and regulating markets is becoming more difficult due to the growing online economy. E-commerce websites such as Etsy and eBay have “rapidly outpaced the law.” Though IACA protective mechanisms are strong, its Board may need  to reimagine the way in which the law is enforced in today’s digital economy.

The enforcement of IACA relies heavily on the public. When purchasing Native goods, purchasers should make sure to ask their art dealer for the artist’s information and for a written certificate for authenticity. If this cannot be provided, purchasers should consider giving this information to the IACB through a formal or informal complaint. Consumer information plays a vital role in the enforcement of the IACA and in maintaining a fair market for Native communities.

Sources:

*About the Author: Lillia McEnaney is an undergraduate at Hamilton College where she is studying Archaeology and Religious Studies and was recently appointed a Casstevens Research Scholar. Lillia is a research assistant in Hamilton’s Religious Studies Department, the Blog Intern for the Council for Museum Anthropology, the Webmaster for Art/Place Gallery, a 2016 Summer Intern for the Smithsonian’s National Museum of the American Indian, and an intern for the nonprofit organization SAFE/Saving Antiquities for Everyone. Lillia may be reached at: lmcenane@hamilton.edu.

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

Common European Heritage: The French and Dutch Government Joint Acquisition of Two Rembrandt Portraits

*By Ana T. Iacob

“Madame le ministre, Ladies and gentlemen, We hébben ze! Nous les avons! We have got them!’’

— Speech by Dutch Minister for Education, Culture and Science Jet Bussemaker at the official signing ceremony for the Rembrandt portrait purchase

On February 1, 2016, France and the Netherlands jointly acquired two works by Rembrandt van Rijn, the wedding portraits of Maerten Soolmans and his wife, Oopjen Coppit. This joint acquisition, otherwise known as the Rembrandt Treaty, was accomplished through an intergovernmental agreement signed by the French and Dutch Ministers of Culture, becoming thus one of the most expensive sales of Old Master paintings in history. Christie’s Private Sales channel facilitated the acquisition, which totaled €160 million for both portraits.

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Rembrandt van Rijn, Portraits of Maerten Soolmans and Oopjen Coppit (1634)

History of the Portraits

The two oil paintings, completed in 1634, represent the only full-length portraits painted by Rembrandt. In 1878, the portraits moved from the Van Loon collection in the Netherlands to France when they were purchased for the Rothschild Collection. The impending move to France spurred the  Dutch government to attempt to acquire the paintings for the first time in order to prevent them from leaving the Netherlands. However, that did not occur due to the exorbitant price of the works. Accordingly, the portraits remained in the Rothschild Collection in France until 2013, when the Rothschild family announced its intent to sell the pair.

Immediately, the Dutch government saw the opportunity to have both paintings return to their nation of origin: the Netherlands. In an interview with BNR Nieuwsradio, the Dutch Minister for Education, Culture and Science Jet Bussemaker said it would be “very undesirable” if the works were sold to “a rich oil state” instead of returning to the Netherlands. The Dutch parliament feared that if the Netherlands did not secure the works, the two portraits would remain outside their country of origin indefinitely.  

Sale of the Portraits

Both France and the Netherlands sought to individually purchase the portraits. According to Gary Schwartz, art historian and Rembrandt scholar, owning the portraits was a matter of national prestige for both the Netherlands and France. As early as September 2015, both the Rijksmuseum in Amsterdam and the Dutch government negotiated an agreement to bring €80 million to the table each in order to secure the paintings. Triggered by the eagerness of the Netherlands to acquire the works, the French Ministry of Culture, Fleur Pellerin, also offered €80 million to buy one of the portraits, with assistance provided by the Banque de France. According to Pellerin, France was ready to split the works with the Netherlands, even though there were no signs of agreement on the Dutch side and the uncertainty whether portrait owner Eric de Rothschild would even agree to separate the portraits.

The willingness of the Dutch government to massively contribute to the acquisition of the paintings surprised many. Arnold Witte, the head of art history at the Royal Netherlands Institute in Rome, noted that this would be the most expensive acquisition made by a public institution to this day. He further added that, given the current situation, if there is a will, there is a way to provide the necessary money. Indeed, the Dutch government had found a way to fund the purchase of a national treasure in the past: the government acquired Dutch national treasure “Victory Boogie Woogie” by Piet Mondrian in 1998 for 35 million. The public outcry in response to the government’s decision to spend such an amount at one time was widespread.

The desire of both countries to secure the masterworks for themselves clashed with the impossibility to pay the high asking price. A compromise was reached in the form of an intergovernmental agreement between France and the Netherlands, which stipulated that the Netherlands would own Maerten’s portrait and France would own the Oopjen portrait. The intergovernmental agreement further indicated that the works may never be separated from one another. To ensure that the portraits are always together, the pact contains firm provisions according to which the portraits will always be exhibited side by side, alternating between the Louvre and the Rijksmuseum. Both museums also agreed to incur joint responsibilities for the portraits. Furthermore, the agreement also allegedly memorialized the agreement to ban loans of the two portraits to institutions outside the two nations.

From a sequence of correspondence sent between the legal representatives of both parties, it turns out that the joint ownership transaction was supported by three legal documents. The documents included a protocol of cultural cooperation, which is a political document expressing the intent of the parties to engage; the intergovernmental agreement between the two countries; and, finally, the purchase agreement. The French representatives, in the explanations regarding French law, stressed the importance of mentioning that the contracts explain clearly that it is not a joint ownership, but rather a joint responsibility towards the paintings.  

Legal Ramifications of the Joint Purchase

Historically, France has been very protective towards its cultural heritage, as demonstrated by French patrimony laws regarding national treasures. In this fashion, article L 111-1 of the Code of French Heritage defines the notion of national treasure. Cultural assets that qualify as national treasures are works within public collections, historic monuments and those works of major interest for national heritage. If the work passes a set value and seniority threshold, it may be subject to an export license refusal. Accordingly, if an item is older than 50 years and valued at more than €150,000, it may not granted the export license and the work cannot leave the country for a period of 30 months–a period in which the French government or a private patron could raise the required amount to acquire the works. In this case, even though the two portraits satisfied the two national treasure qualification requirements, the export license was granted without even submitting documents for the review of the Advisory Board of National Treasures. The Louvre and the French Ministry invoked “lack of funds” as an explanation for the granting of the export papers, even though some questioned the influence of the Rothschild family on the expedience of the process.

According to French law, the joint purchase by two Museums and subsequent transnational ownership of the works would have been unprecedented and perhaps legally impossible. However, the French government circumvented this difficulty by the separate and individual ownership of each of the portraits by the two governments. Accordingly, the Louvre owns Oopjen’s portrait while the Rijksmuseum owns Maerten’s, which satisfied French acquisition legislation.

Reaction to the Sale

In France, the sale was met with harsh criticism. For example, the French publication, La Tribune de L’Art, had very strong opinion on the matter, and expressed disappointment that the Ministry of Culture and the Louvre did not declare the works as national treasures by 2013, thus making them then available for sale. Had the works been declared national treasure, the sale would have been delayed for 30 months, giving the chance to the French state or a private patron to acquire the works. However, the Louvre and the Ministry explained that even if they would have delayed the sale, it would not have been enough to raise the necessary funds.

Inevitably, Eric de Rothschild, the portraits’ owner before the sale to France and the Netherlands, was also targeted by criticism. La Tribune de l’Art accused him of betraying the spirit of his family’s patronage, going so far as to say that Rothschild “should have honored his name.” In their opinion, even though he had the right to sell the work to whomever offered the highest price, as a great patron of art and as a member of Société des Amis du Louvre, Rothschild should have approached the museum and settled for a price that would have allowed the paintings to remain in the country unconditionally.

   In the Netherlands, the opinion regarding this sale and the decision of the government to pledge such a big amount for the purchase varied. Dutch Parliamentary leader Alexander Pechtold played an important role in securing the Rembrandts. He led the campaign to raise the necessary funds for the sale and received praise for the fact that someone in his position would focus on works of Dutch cultural heritage. Dutch Minister Bussemaker explained that this was an opportunity that would never come again and, as such, had to be seized.

On the other hand, when asked on the street for their opinion, a number of individuals noted that in these times, such a great amount of money, spent at once, seemed excessive.

Conclusion

Joint ownership of artworks by two governments remains unusual and is not without complications. For example, in 2009 and 2012 respectively, two Titian paintings were purchased by the National Gallery in London and the National Gallery of Scotland for $147 million. Now, the status of this duo may be in jeopardy with the recent Brexit vote. Shared ownership of works, however, can be applied on smaller scales. Dual ownership of videos is occurring more often because it is logistically easier, such as with the joint acquisition of The Clock (Christian Marclay) by the Tate, the Centre Pompidou and the Israel Museum.

Although the examples above demonstrate other instances of dual acquisition, the joint purchase of the Rembrandt portraits is outstanding for a number of reasons: first, due to the record amount paid for the art by two nations and second, due to the unusual ownership arrangements between them. Pooling together extensive economic and political forces, both countries successfully secured two European masterpieces. It is unclear whether potential buyers of related artworks in the future will be able to use this dual acquisition model to guide their dealings, as the circumstances surrounding the Rembrandt portraits’ creation and ownership are unique in their own right. If nothing else, one positive outcome of the two nations cooperating is the the fact that for the first time in a long period, the portraits will be publicly displayed. Sales taxes, if any, seems to be owed exclusively to the French government.

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*About the Author: Ana T. Iacob is a jurist living in Amsterdam, the Netherlands. She has a Master in European Private Law from the University of Amsterdam and is interested in art and intellectual property law.

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

 

No Secrets about Money Laundering

By David Honig, Esq.*

Aside from drugs, art is the largest unregulated market in the world. ~ 

The Mona Lisa Curse  

Why does it seem like most notorious drug dealers and dictators have vast collections of art? Part of the reason is that most people love art and it happens to be easy to hide. Even though people’s interests and tastes may differ, the desire to collect or at the very least view art is consistent among large segments of the population. Read our recent review of “Possession: The Curious History of Private Collectors from Antiquity to the Present.”

There is however, a more sinister incentive to “collect” valuable art. Art, especially paintings on canvas by a select group of artists, is easier to move and store than other assets of similar value, such as precious metals or cash. Patricia Cohen, Valuable as Art but Priceless as Tool to Launder Money, N.Y. Times, (May 12, 2013), at A.1. As a moveable commodity, for example, if rebel forces are raiding a dictator’s palatial compound it would be very easy to pull a painting off the wall, remove it from its frame and escape with an asset worth millions of dollars.

In 2007 a Basquiat work titled Hannibal  was brought into the United States by Edemar Cid Ferreira, a Brazilian banker who purchased numerous works of art in a money laundering scheme. Id. Around the same time Ferreira smuggled art worth around $30 million out of Brazil to avoid paying debts owed. Id. At the time the painting was valued at $8 million USD – in order to match the value he would have needed to move 574.88 lbs of gold (using 2008 prices) or 176 lbs of $100 bills. A painting, then, is a more attractive commodity for holding value from illicit gains since both gold and paper money are heavier and harder to transport, and paper money can be traced. A painting on the other hand can be easily packed in one’s suitcase hidden between shirts, or rolled up into a yoga bag. In fact, it seems Ferreira did just that. According to the New York Times article, in order to enter the United States without documentation or taxation Ferreira had Hannibal declared as an unnamed painting worth $100. Id

More recently a gallery owner in Philadelphia pled guilty to money laundering. In 2011 federal agents raided the house of drug trafficker Ronald Belciano where they discovered $2.6 million dollars in a fish tank and art, worth $619,000, that was used to launder drug money. Jeremy Roebuck,  Philly.com (Jan. 25. 2015). After the raid, Belciano agreed to cooperate with the government to build a case against Nathan Isen, the owner of the gallery who sold him the art in order to launder money. Id. Roebuck introduced Isen to an undercover agent posing as a drug dealer. The agent, who was introduced as being a marijuana grower, made numerous references to growing marijuana and even apologized to Isen for the cash “smell[ing] like marijuana, [because] she stored it next to the drugs.” Id.

Art’s monetary value is not the only reason why it is often found in the homes of those with less than savory occupations. The secrecy and lack of regulation in the art market lends itself to a certain flexibility in the range of crimes such as money laundering. Money laundering is the process by which money obtained through ill means is “cleansed” and made to appear legitimately obtained. Often times in popular culture, businesses depicted as ‘fronts,’ such as restaurants, dry cleaners or other businesses are used for this purpose.

There is also the benefit of liquidity. When assets are liquid they can be traded more freely and turned into or used to purchase other assets. If someone has a net worth of $10 million but her net worth is solely derived from a painting that can never be sold is she really worth $10 million? If she can’t sell the painting she can’t obtain cash which means she can’t buy anything with the $10 million.

Just as beneficial as the relative liquidity of art is the notoriously secretive art market. There are various reason for this, such as avoidance of getting caught, embarrassment and safety. Some people are forced to sell their art collections because they need access to immediate cash or other types of transactions. Some do not want people to know they have enough money to purchase the works or that they own a particular work. According to an article cited by Fausto Martin De Sanctis’ Money Laundering Through Art: A Criminal Justice Perspective, “Christie’s only asks the sellers where the proceeds from the sale ought to be deposited…” Fausto Martin De Sanctis, Money Laundering Through Art: A Criminal Justice Perspective 115 (Springer 2013). Whatever the reason for this secrecy, it allows for the market to be abused.

One reason for this secrecy is the lack of legal requirements for artworks to be registered. De Sanctis points out that this feature makes art a better vehicle than real estate for money laundering. Real estate is often used for money laundering for the same reason as art, high value, market speculation and cash purchases. Id. at 58. Additionally, art and real estate “are classified as non-financial, and therefore lack the regulation and rigid, standardized controls in pace for the financial sector.” Id. at 58. A key difference is the incentive to record ownership in real estate with local government, to create security in ownership. In fact, De Sanctis notes that “regulatory agencies pay little attention to the art world.” Id. at 59

In reference to the art market, economist Nouriel Roubini points out, “there is no tracking of it through the financial system and you can park it into a freeport” Interview by Cristina Alesci with Nouriel Roubini, Professor, NYU Stern School of Business (May 11, 2015). A freeport is a warehouse where valuables are stored. By storing art in a freeport the owner of the work, or valuables, avoids paying taxes for as long as the work is stored there. David Segal, Swiss Freeports Are Home for a Growing Treasury of Art, N.Y. Times (July 21, 2012). Freeports are also notoriously secret. In fact, people who work there do not know what is being stored in the adjacent vaults. Id.

The secretiveness of both freeports and the art market makes money laundering through this avenue is so lucrative. Once a person purchases a piece of art, she can ship it to Geneva, Delaware or whatever freeport she chooses, store it there indefinitely and avoid paying taxes for as long as the art resides in that freeport. Since that work was purchased in secret, does not need to be registered, and is stored anonymously in a warehouse its existence as an investment is shielded until the owner finds an opportune time to sell. 

Although the regulations on the art market are minimal, it is not completely devoid of regulation or safeguards against money laundering. First, 26 U.S.C. 6050I and 31 U.S.C. 533 requires any party who receives cash in excess of $10,000 in the same, or two related, transactions to file a report with the IRS and Financial Crimes Enforcement Network respectively. Both of these laws require the recipient to state the amount of cash, the name of the paying party, the nature of the transaction and date of the transaction. Further, both have a catch-all provision that would allow either the IRS or the Financial Crimes Enforcement Network to ask for more information. The European Commission requires a similar filing for cash purchases over €7,500 and Switzerland’s Federal Assembly, its parliament, places restrictions on cash transactions that exceed CHF 100,000. Hili Perlson, Switzerland Cracks Down on Art Market with Tighter Anti Money Laundering Laws, artnet news (June 2, 2015).

The Federal Assembly also passed a law, which went into effect on January 1, 2016, that creates more regulation for freeports. Henri Neuendof, Switzerland’s Tough New Stance on Freeports Will Shake the Art World, artnet news (November 19, 2015). Among new regulations are a six month time limit for storage of goods to be exported and a requirement that freeport’s keep an inventory of goods stored and their owners. Id. Since the money laundering necessitates secrecy there is no real way to tell if preemption methods will be enough. According to the NYU Stern School of Business Professor, Nouriel Roubini, self-regulation is probably the best way to move forward. There may not be an easy solution but it is worth exploring new avenues that will prevent the use of art for the facilitation of illegal transactions and from those works being hidden away from the sight of the world.

Sources:

About the Author: David Honig is a post graduate law fellow at the Center for Art Law. He is a member of the Brooklyn Law School class of 2015. While attending law school he focused his studies on intellectual property and was a member of the Brooklyn Law Incubator & Policy (BLIP) Clinic. He is admitted to New York and New Jersey state bars. In the Fall of 2016 he will be pursuing an LL.M. in taxation from NYU Law.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advise. Instead, readers should seek an attorney.

Book Review: “Possession: The Curious History of Private Collectors from Antiquity to the Present” (2016)

Screen Shot 2016-07-07 at 12.07.49 PMBy Nina Mesfin*

While museums today seem to be gradually withdrawing from the purchase and sale of artworks on the private art market, private collectors have been able to capitalize upon fewer competitors in the field. As collectors are finding more acquisition opportunities, it is more imperative than ever that collectors demonstrate prudence in their purchases. Erin L. Thompson’s Possession: The Curious History of Private Collectors from Antiquity to the Present, published on May 24, 2016, analyzes private art collectors’ developing psyche and motivations through time in an attempt to combat the looting and trafficking of antiquities. While Thompson is not the first scholar to address these ongoing issues, her approach is fresh. Lorenzo de’ Medici, scion of an immensely powerful Italian family in the 15th century, Queen Christina of Sweden (1626-89), Thomas Howard, the Earl of Arundel in the end of the 16th century and Thomas Herbert, the eighth Earl of Pembroke in the early 18th century, both British, and early 20th century American industrialist J. Paul Getty are just some of the art collectors, all of whom possessed important art collections in their respective times, that Thompson introduces to readers throughout the course of the book. Utilizing historical anecdotes and provocative caricatures, Thompson constructs a new framework through which her non-exclusive audience can analyze and begin to understand illicit art dealings, their ancient underpinnings, and their contemporary implications viewed through the lens of the art collector.

Thompson begins her book by providing working definitions of such basics as “collectors” and “antiquities,” ensuring that the book is accessible to a wide audience. She also states her objective clearly: to investigate “the motives of antiquities collectors” in order to “help stop the ongoing looting and destruction of archaeological sites that currently supplies the market for collectible antiquities.”Id.at 2. Clear in the author’s aim and equipped with relevant terms, the reader is well-prepared to delve into Thompson’s exploration of the private collector’s internal motives. In the first two chapters, The Powers and Perils of the Antique: The Birth of Collecting and Collecting Identities, Thompson discusses how the objects one chooses to collect come to represent one’s identity. Collectors, therefore, are simultaneously constructing vast collections and personas. Thompson uses case studies, such as King Attalus I, who inherited Pergamon in 241 BCE and acquired Greek antiquities in order to ensure the kingdom’s “place in history,” to illustrate these points. Her use of case studies is an asset to her critique of private collecting because the case studies provide concrete examples of the effects collectors can have on the ways future generations understand past cultures. In addition to making the issues raised in Possession more tangible, these case studies and historical anecdotes establish multiple narratives, making Possession an engaging read, even for those already well-versed in art and artifact history.

Thompson then launches into a discussion of two issues that continue to plague the art market and private collections: restoration and forgery. In Chapter Three, entitled “By Means of a Little Castration”: Restoration and Manipulation, Thompson seamlessly progresses from the evolution of art restoration (superficial to invasive) into her analysis of art forgeries. Thompson describes Henry Blundell (1724-1810), an English collector who castrated a statue of Hermaphrodite, to illustrate just how “blurred was the line between restoration and forgery.” Id.at 49. As Blundell was having his statue restored, he ordered art restorers to castrate the piece. Thompson posits that the physical castration of the piece, or its “moralistic manipulation,” transformed what would have been a restored art piece into a forgery. Id.at 45. “Forgeries reveal collectors’ desire and motivation even more clearly than restoration,” she claims, and “[a] restoration must begin from some actual and perhaps unwieldy fragment of the past. A forgery can exactly mirror what the collector wishes were true about the past and his connection it.” Id.at 67. Thompson makes the point that although this “era of manipulative restoration” might be over, it is still hard to assess whether artifacts today look as they did in antiquity, challenging both the premium placed on authenticity and the definition itself. Perhaps the only thing that is indisputably authentic about a piece is the unique relationship between the piece itself and its collector. 

Thompson’s analysis of restored pieces versus forgeries is meant to provide insight into the collector’s infatuation with artifacts. What was, and continues to be so appealing about collecting is that it affords the collector an opportunity to craft his or her own narrative. Collectors are so motivated by their desire to defy the realities of the present that they not only seek to restore the past, but to reforge it in their own light. By comparing restoration to forgery, Thompson highlights the collector’s ever-increasing obsession with cultural artifacts because these artifacts allow collectors to refashion history, granting them authority over the past. Thompson explains that emphasizing the collector’s relationship with his or her artifacts may be a help to cultural heritage because “the collector’s love of the past must be understood and harnessed if we are to be able to have a past to love at all.” Id.at 182. In other words, Possession functions under the premise that in order to eradicate an issue, one must appreciate its complexity. The objects which scholars and other authorities on antiquities seek to preserve today are embedded in this collection history. In order to fully appreciate and save these objects, we must appreciate that history as well.

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The remaining chapters in the first half of Possession continue to focus mainly on the historical underpinnings of art collections. However, starting with Chapter Seven: The History of Looting and Smuggling—and What They Destroy, Thompson begins weaving in contemporary scandals and juxtaposing them against the historical accounts of infamous collectors she discussed in earlier chapters. Here, she reaches the crux of her argument: that informing modern collectors that their relationship with the contemporary illicit art market, similar to those of past collectors, perpetuates artifact looting and trafficking and thus cultural heritage devastation. Private collectors, even those pure in intention, are complicit in the destruction of the past they so desperately seek to preserve. Using the tools with which they were provided in the first half of Possession, readers can begin engaging in dialogue pertaining to antiquities trafficking and looting, more specifically how to most effectively preserve history through antiquities. Thompson uses the past to educate readers on the power private collectors wield over our understanding of history, urging her audience to recognize that society today stands at a critical juncture in the realm of cultural heritage given the new wave of destruction occurring all over the world, especially in the Middle East. By presenting issues pertaining to cultural heritage vis-a-vis art collecting, Thompson pushes readers to reassess how norms established in the private art market can negatively manifest in preservation efforts.

Chapter Eight: Collectors’ Failed Justifications for Looting and Smuggling introduces readers to some of the difficulties archeologists and other scholars have found in trying to persuade private collectors to stop collecting. Thompson laments society’s failure to acknowledge that collecting practices are deeply embedded in a social network. In order to communicate the ill-effects of collecting to the collector himself–in the hopes of shaping his or her behavior–one must understand that for the collector, “[l]ove for the members of the network is put into conflict with love for the past.” Id.at 139. Thompson’s proposed strategy refrains from alienating the collector because it recognizes that most collectors have “professed desires to be useful to scholars”. Id.at 173. Thompson acknowledges the collectors’ power and proposes treating them as allies as opposed to ostracizing them from the antiquities world. Despite the eccentricities of the figures Thompson describes, it is clear that like archaeologists and scholars, collectors also value the past. In Chapter 9: Collecting to Save the Past, Thompson suggests ways to mediate the differences between scholars and other authorities seeking to preserve antiquities. Perhaps one of the more provocative suggestions is rethinking attitudes toward touch. Id.at 179. In other words, Thompson points to the fact that many private collectors relish the intimate relationship that touch fosters between them and their objects, suggesting that individual collectors may be more inclined to stop collecting if public institutions allowed patrons to physically handle objects.

Possession is a well-crafted piece of writing in which the author, who earned her art history Ph.D. from Columbia University and her J.D. from Columbia Law School, takes her readers on a historical journey through the evolution of private art and artifact collecting. Although the balance between her own analysis and the carefully selected accounts of “history’s most infamous collectors” may seem to favor the latter, each anecdote is highly entertaining and provides the reader with a strong foundation for her later analyses. Thompson’s writing is elegant and provides the reader with a breadth of history and a valuable survey of the private art market. More importantly, Thompson demonstrates how the atrocities being committed against antiquities and cultural heritage sites today are rooted in history because “[w]e have not yet outgrown our beliefs in the power of antiquities, and the efficacy of destroying them to control these powers,” citing the demolition of the Buddha in the Bamiyan Valley of Afghanistan. Id.at 22. Thompson immerses her readers in the world of antiquities, one that knows no temporal boundaries, and by the end of Possession, readers cannot help but to develop a stake in contemporary art market debates.

Sources:

Erin L. Thompson, Possession: The Curious History of Private Collectors from Antiquity to the Present (2016).

About the Author: Nina Mesfin is a Summer 2016 legal intern at Center for Art Law. She is a rising junior at Yale University majoring in Ethnicity, Race and Migration and concentrating in Art, Literature and Narratives of Race and Ethnicity. Nina is also a scholar in the Yale Multidisciplinary Academic Program in Human Rights.

Disclaimer: Reading this book or its review is no substitute for getting your legal questions answered by a trained attorney.

Fine Art Storage Services v. Insurance Companies: A Cautionary Tale

By Scotti Hill*

Hindsight is 20/20, however, art storage facilities are supposed to be forward looking to make sure that property entrusted to them for safekeeping remains protected and unaltered while in their custody. Elements such as temperature, humidity and pest control are vital to preserve artworks from any damage or total loss. Certain mediums like paper, canvas, plaster, metal, and clay are of course particularly vulnerable to temperature and humidity fluctuations.

Christie’s Fine Art Storage Services (CFASS), an owned subsidiary of Christie’s auction house, has been named a defendant in multiple lawsuits for damage, incurred during 2012’s hurricane Sandy, to artworks housed at its Brooklyn facility. In late October 2013, three insurance companies: XL Specialty, Axa and Starnet, mounted suits against CFASS, for gross negligence, breach of bailment, negligence, breach of contract, negligent misrepresentation, and fraudulent misrepresentation stemming from CFASS failure to prepare for the storm’s onslaught.

The Storm of the Century

In the fall of 2012, weather prognostic reports warned of a superstorm headed for New York. Ultimately, artworks in many studios, galleries and storage facilities were severely damaged when Sandy, a tropical storm that was updated to a hurricane, hit the tri-state area on October 29, 2012.

The Red Hook area of Brooklyn, where CFASS’ storage facility is located, was labeled a high-risk flood area, securing the New York City Office of Emergency Management’s rating of a “Zone A evacuated flood zone.” With media reports circulating about the impending storm, CFASS, as alleged in the complaints, began reassuring clients that appropriate measures were being taken to protect their property from damage.

Unfortunately, certain works of art stored at CFASS were damaged during the hurricane. In the aftermath of the storm, some pieces were unsalvageable, others resulted in complete loss, while others still were sent to conservators for restoration. In such cases, damaged artwork claims require owners to report losses to insurance companies, who would seek compensation from the entity responsible for the damage.

The damages incurred to such an enormous concentration of wealth in one space resulted in significant losses for insurers. In a few instances when the insurance companies reviewed the circumstances that resulted in such unprecedented level of claims and sought to mitigate their expenses by refusing to pay claims resulting from gross negligence. After all, with 27,000 people per square mile, New York is the most densely populated city in the United States, with damage or full compensation for losses to multimillion-dollar property having the potential to increase premiums or drive out many of the insurance carriers.

The Waiver of Subrogation and Limitation of Liability Clause

In lawsuits resulting from damages to art stored at CFASS, the point of contention is the manner by which liability is allocated in CFASS’ storage contracts. Some contracts between the storage facility and its clients required clients to obtain an art insurance policy.  In other instances there may have been waivers of subrogation or a limitation of liability clause.

A waiver of subrogation relinquishes an insurer’s right to assert claims against the company responsible for the damage. Alternatively, a limitation clause generally limits the companies liability based on the weight of the goods.

According to U.C.C. § 7-204(2), a warehouse is bound by a reasonable duty of care when storing property in its space, however such clause cannot negate the elementary duty of care required. In the case of New York State law,  NY UCC § 7-204 (2014) (a), “a warehouse is liable for damages for loss of or injury  to  the  goods  caused  by  its failure to exercise care with regard to the goods   that  a  reasonably  careful  person  would   exercise   under   similar  circumstances.  Unless otherwise agreed, the warehouse is not liable for  damages that could not have been avoided by the exercise of that care.

Does Gross Negligence Alter Waivers of Subrogation and LLC’s?

In XL Speciality Ins. Co. v. CFASS, filed on October 29, 2013, petitioners sought reimbursement for a $700,000 payment to the damaged gallery, Chowaiki & Co. In this case, the New York supreme court granted CFASS’ motion to dismiss the complaint due to the adequate consideration provided by both XL Specialty Insurance Corporation and their client Chowalki. Similarly, in Starnet Ins. Co. v CFASS, filed on October 28, 2013, the estate of LeRoy Neiman brought suit to recover damages resulting from harm to 277 artworks. Plaintiffs in AXA insurance sued on behalf of Jacqueline Piatigorsky’s trust seeking $1.5 million, in which case the trust alleges that CFASS failed to alert them to a lack of safety measures and personnel in place to protect their art from damage.

Petitioners’ claims of gross negligence were based on evidence that art was left in staging areas on the warehouse’s ground floor and that despite a reassuring email stating otherwise, no action was taken to protect this property from imminent danger. In its March 17, 2016 decision to reverse the lower court’s dismissal of petitioner’s complaint, the court in XL Specialty noted that in 2011, CFASS took extra precautions, such as moving art above the ground floor and hiring extra personnel, to prepare for the arrival of hurricane Irene, a storm that largely avoided the city.

In all suits, Petitioners argue that CFASS’s gross negligence arose when, despite assurance that they would do so, they failed to raise artworks from the ground floor of the warehouse, leaving them in the direct path of flooding. Such failure to act, therefore constituted a material breach to the storage contract, as both the parties and their respective insurance companies reasonably relied on CFASS to safely house the art and provide accurate and reliable status updates about its condition. So far, CFASS points to the liability waivers and labels Sandy an ‘Act of God’ in rebuffing claims of negligence.   

While the plaintiffs in each case allege gross negligence, breach of contract and bailment, and fraudulent and negligent misrepresentation, the lower courts have maintained that subrogation waivers often negate claims for gross negligence. In response, the plaintiffs in each suit argue that the subrogation provision unfairly excuses CFASS gross negligence. Judge Saliann Scarpulla, who presided over each of the three cases, refuted this claim, arguing that instead of exempting CFASS from liability, the provision simply requires “one of the parties to the contract to provide insurance for all the parties.” Board of Educ., Union Free School Dist. No. 3, Town of Brookhaven v. Valden Assocs., 46 N.Y.2d 653, 657, 389 N.E.2d 798, 416 N.Y.S.2d 202 (1979); Abacus Fed. Sav. Bank v. ADT Sec. Servs., Inc., 18 N.Y.3d 675, 684, 967 N.E.2d 666, 944 N.Y.S.2d 443 (2012).

In all three cases, the New York Supreme Court, New York County, initially upheld the validity of such provisions in judgments in favor of CFASS. On appeal, however CFASS’ motion to dismiss XL Specialty’s complaint was reversed. Holding that the contract’s waiver of subrogation was unenforceable, the New York Supreme Court, Appellate Division, held “provisions purporting to exempt the bailee from liability for damage to stored goods from perils against which the bailor had secured insurance, even when caused by the bailee’s negligence have been held to run afoul of the statutory scheme of UCC Article 7.” XL Specialty Ins. Co. v. Christie’s Fine Art Storage Servs., Inc., 137 A.D.3d 563, 566, 27 N.Y.S.3d 528, 530 (N.Y. App. Div. 2016).

With the relief of knowing that one of their main grievances has been acknowledged Axa and Starnet are hoping that appeals will generate similar reversals in their cases.

Conclusion

The immeasurable cultural significance of art renders its destruction not only economic, but also sentimental. The unfortunate events surrounding the CFASS lawsuits provide stark lessons about the costs of collecting, which extends far beyond purchase and insurance premiums to include storage, shipping and when necessary-conservation. While there is a strong drive to preserve artifacts as assets, all artworks have inherent vices and are vulnerable to the elements, incentivizing collectors to perform due diligence when acquiring items and finding spaces to house them.

Select Sources:

About the Author: Scotti Hill is a J.D. Candidate, 2018 from the S.J. Quinney College of Law at the University of Utah. She serves as a summer 2016 intern for the Center for Art Law, and works as an art critic and curator. Prior to law school, she received a Master’s Degree in art history and visual studies. She can be reached at scottiaustinhill@gmail.com

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

WYWH: Legal Primer for Artists: Leasing Commercial and Residential Space & Dealing with Tax Issues

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Preoccupied with their work, artists often neglect reaching out to accountants and attorneys for advice on how best to brace themselves for possible issues they may encounter. Among an artist’s various legal considerations, contracts are perhaps the most important. Contracts can be forged for consignment agreements with galleries and auction houses or for the rental of commercial and personal leases. Although contracts are invaluable for artists, a litany of complications accompany the process of facilitating, signing and executing them.

On Thursday, June 9, 2016, New York Foundation for the Arts (NYFA), in cooperation with the New York State Bar Association’s Entertainment, Arts, and Sports Law Section (EASL) and EASL’s Committee on Fine Art, gathered a panel of attorneys to offer basic legal information to artists. Attendees also included attorneys and students. The two-hour information session featured three speakers, all of whom shared valuable insights into issues pertaining to leasing commercial space, the rights of artists as residential tenants, and income and sales tax issues. The discussion was moderated by the co-chairs of EASL’s Committee on Fine Arts: Carol Steinberg, Esq. and Judith Prowda, Esq.

The first panelist to present was Jill A. Ellman, Esq. She is currently an Associate at M. Ross Associates, LLC, a law firm that handles all aspects of complex commercial litigations as well as transactional matters. Ellman focused on commercial leasing and how artists can ensure that they are protected from predatory practices such as exorbitant rent hikes, unauthorized changes to the lease and liability.

The second panelist to speak was David Frazer, Esq., Of Counsel to Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP. Having dedicated much of his career to advocating the rights of tenants, Frazer offered important advice concerning how artists can obtain the best leases while also protecting themselves. Frazer took great care to stress that artists “should not cut corners,” as record keeping is crucial to protecting one’s own personal interests. If a landlord or tenant requests any modifications to the lease, artists are encouraged to have the alterations signed by the landlord in writing and corroborated by all affected parties. Creating a paper trail of alterations to consignment agreements or real estate transactions helps protect the artist/tenant from possible abuses and in the event of future litigation.

Patricia Pernes, Esq., a Tax Consultant in the Business Tax Services sector and Art & Finance Group of a Big Four accounting firm, echoed Frazer’s sentiments regarding an artist’s responsibility to exercise due diligence in all formal transactions. Pernes, however, shifted the conversation from leasing issues to tax deductions applicable to artistic labor and the pieces themselves. Throughout her presentation, Pernes emphasized the distinction between a business and hobby, with the former classification being adequate for the deduction of materials and work-related expenses and the latter not receiving such protection. The principle element is whether the work is created in furtherance of a profit-driven business, in which case tax deductions can be used to incentivize growth. As with contracts, good record keeping is important for tax deductions as well.

The formal discussion was followed by a lively questions and answers session where attendees were able to ask the attorneys about legal provisions specific to their craft. Questions ranged from deductions that can be claimed by musicians for research to leasing for art nonprofit organizations. Ellman, Pernes and Frazer took the time to delve into each question’s nuance, applying their expertise to a motley of hypothetical situations and concluding what was, indeed, a priceless evening.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Instead, readers should seek an attorney.