Seminar on International Art Transactions

Posted on: May 26, 2015 by

On 13 May, the Institute of Art and Law with the generous support of Maurice Turnor Gardner LLP hosted a seminar exploring a variety of legal issues surrounding international art transactions. Here is a brief summary:

The first speaker was Professor Norman Palmer (3 Stone Buildings), who discussed the various risks associated with the international transfer of cultural objects. Professor Palmer mentioned the case of the Shiva Nataraja statue as an example of an acquisition flawed by deficient provenance research. The National Gallery of Australia (NGA) bought this statue from a New York art dealer for USD 5.6 million. When it later transpired that the statue was looted from a temple in Tamil Nadu, the Indian Government requested its return. The Australian Prime Minister, with the cooperation of the NGA, returned the statue. The NGA is now left with the task of claiming the purchase price for the statue from the dealer. Australian law is very rigorous in that it empowers the Australian authorities to seize illegally imported cultural objects and return them to the state of origin (see Sections 14 and 36-38 of the Protection of Movable Cultural Heritage Act 1986 (Australia)).

Up next were Jenny McKeown and Dan Saunders (Maurice Turnor Gardner LLP), who recounted the recent Caravaggio case with a focus on the duty of auction houses. Lancelot William Thwaytes sold the painting The Cardsharps catalogued as “by a follower of Caravaggio” through Sotheby’s in 2006 for GBP 42,000. The purchaser was the renowned collector Sir Denis Mahon who claimed the painting was a genuine work by Caravaggio with a value of GBP 10 million shortly after the sale. Mr Thwaytes then sued Sotheby’s for negligent assessment of the painting. The Court dismissed Mr Thwaytes’ claim, but it did look into the duties of auction houses. Ms McKeown and Mr Saunders went on to explore a number of principles that could be drawn from the case, including (i) the duty of auction houses is not enhanced even if the client insists on his painting being genuine, (ii) the duty of auction houses remains the same for both regular inspection and valuation for sale, and (iii) leading international auction houses are held to a higher standard of care.

The next speaker was Kristian Hitchinson from Constantine Ltd, one of the UK’s premier fine art packing, installation, transportation and storage companies. He explained in detail the import duties and VAT that apply when importing an art work to the UK. For art works, a reduced VAT of 5% applies (the standard rate in the UK is 20%). This is slightly above the current global average of 4.5% VAT for importing art. Mr Hitchinson shared practical insights into the work of customs warehouses in the UK and explained their advantages which include suspension of VAT and customs duties and capital gain tax. He also talked about freeports which offer the same fiscal advantages as customs warehouses, but also allow for sales transactions directly on the premises.

The next speaker was Ed Powles (Maurice Turner Gardener LLP) who discussed working with foreign legal rules in art transactions. He focussed on the following private international law issues: (i) a domestic court may take jurisdiction over a dispute, but apply the internal laws of a different jurisdiction, (ii) different jurisdictions may not just have different substantive rules, but they may treat questions of private international law differently, and (iii) where you bring proceedings has the potential to make a significant difference. He finished with a review of the famous case of Altmann v Republic of Austria, in which an Austrian arbitration panel awarded Maria Altmann the Gustav Klimt portrait of her aunt, Adele Bloch-Bauer, which had been held by the Austrian state since the Second World War.

Wendy Philips (Sotheby’s) explained the UK export licensing procedure for cultural objects. The procedure “aims to strike a balance between the protection of national treasures and their retention in this country, the rights of the owners, and the preservation of the position and reputation of the UK as an international art market”. After explaining the historical background, Ms Philips summarised the three so-called Waverley criteria which form the basis of the export licensing decision procedure: (i) the object is so closely connected with our history and national life that its departure would be a misfortune, (ii) the object is of outstanding aesthetic importance, and (iii) the object is of outstanding significance for the study of some particular branch of art, learning or history. If an object satisfies one or more of the Waverly criteria the export licence is deferred to allow time for an offer to purchase to be made to keep an object in the UK. Ms Philips highlighted the need to educate international buyers who may be less aware of this procedure and the implications this may have on the transaction timeline.

The seminar was concluded by Harry Martin (3 Stone Buildings) who spoke about temporary export licences for cultural objects. After elaborating on the different kinds of temporary export licences, Mr Martin presented the case of Sir Joshua Reynolds’ Portrait of Omai as an example of how the long-term use of temporary licences can be seen by some to undermine the export licensing system. The Portrait of Omai was bought by the Irish business magnate John Magnier. Mr Magnier’s application to permanently export the painting to Ireland was refused, after he rejected an offer from the Tate to keep the portrait in the UK. He then applied for a temporary export licence to display the portrait in the National Gallery of Ireland. The temporary export licence was granted and the painting was on display for more than six years. However, a further temporary export licence was refused on the grounds that this national treasure had already been out of the country for a long time.