Friday, December 31, 2010

ARTINFO interviews Gagosian HK director

ARTINFO's "Conversations with" series has recently published an interview with Nick Simunovic, the director of Gagosian's newish Asian outpost in Hong Kong. The growing importance of the Asian market and the buying power of collectors in the East cannot be ignored (this blog has followed the trend closely since its launch in September) making the interview not only interesting but also incredibly relevant. In particular, I agree with Nick's view that "to think that every Chinese collector is going to end up collecting Western art is a canard. A small percentage of people will end up doing so, but my guess is that a much larger percentage will stick to what they love and know best: Chinese antiquities and Chinese painting."

UPDATE: could the UK's new Bribery Act 2010 really capture finder's fees?

LONDON. In a previous post, I discussed the UK's new anti-bribery legislation and how according to several commentators, it could be applied to capture certain payments by or to art dealers. I've now had a look at the actual text of the Bribery Act 2010 (found here) and I'm not certain it could be applied to prosecute payments of finder's fees by art dealers. In a nutshell, for the payment to fall under the Act, the dealer must (i) either be expected to act in good faith and/or impartially or be considered a fiduciary of the collector (the Act says one or more of these three conditions but the first two are fiduciary duties already so really it's one or both of conditions 1 and 2 where the dealer is not considered a fiduciary) and (ii) the payment (i.e. the "relevant function or activity" for purposes of the Act) must breach the "relevant expectation" of the person to whom the duties are owed, meaning it was offered, promised or made in bad faith and/or partially or in breach of trust, depending on which condition/s brought the function or activity under the Act. If we look back at the example cited in The Art Newspaper about the dealer who pays a collector's decorator for having aided the sale of an artwork to said collector, not only do I remain sceptical about the dealer being considered a fiduciary, even if he were or, alternatively, one or both of the other two conditions were satisfied, would it really breach the "relevant expectation"? I would imagine these payments are quite frequent in the market and if I were a collector regularly operating in the art market, I don't think that the payment of a finder's fee or the failure to disclose such payment would be contrary to my expectations of the dealer. Pierre Valentin is a leader in the field so am I missing something here? I would be very grateful to hear your views on dealers as fiduciaries of collectors (that is, collectors buying from the dealer as opposed to a collector or artist who consigns art for sale), the prevalence of finder's fees in the market and the new Bribery Act generally in the context of the art market.

Saturday, December 25, 2010

"The lines between gallery and museum, corporate and curated, keep getting blurrier and blurrier"

The author Sarah Thornton once described the art world as "a loose network of overlapping subcultures held together by a belief in art." While an astute observation, those overlaps are becoming more frequent and more profound with the divide between the public (institutional) and the private (commercial) becoming ever-more blurred. A corollary of this mish-mash of roles in the art world are the glaring conflicts of interest that arise, a running theme too of this blog (e.g., see here). The latest conflict to catch my eye is the Whitney Museum's announcement that one of the two curators for its 2012 Biennial comes from the ranks of the commercial rather than the institutional or academic sphere: Jay Sanders, "a veteran art dealer who was previously director of New York's Greene Naftali Gallery." On the one hand, the co-curator of the show is clearly conflicted because he has a vested interest in promoting those artists represented by the gallery where he formerly worked, especially given the financial and reputational gains that flow from an artist being included in such a prestigious (albeit controversial) show. On the other, Jay Sanders is, according to ARTINFO, "a highly-regarded art dealer whose sophisticated approach to showing art has been evidenced in such gallery shows as one last year spotlighting the late experimental filmmaker and "flicker" pioneer Paul Sharit." I think in cases like this one a conflict of interest should not trump talent -- careers and talent would otherwise be excessively constrained and wasted -- but Sanders should have left the gallery before last month. Carol Vogel had reported that he left the Naftali Gallery in 2005 but Tyler Green reports that Sanders actually left the art market only last month...

Friday, December 24, 2010

Another auction record price expected, albeit tainted by claims of illicit provenance

2010 was the year of record auction prices: for painting and any artwork generally (the Picasso sold at Christie's for $106.5m); for sculpture (the Giacometti sold at Sotheby's for $104.3m); for rare books (the Audubon classic "Birds of America" sold at Sotheby's for $11.5m) and for Chinese art (the Qianlong vase sold at Bainbridges for $85.9m). The market has undoubtedly shown remarkable depth in buying power emanating largely from Russia, China and the Middle East (it is widely believed that the mysterious buyer of the record-breaking Picasso could only have been either Russian or Middle Eastern) and it is no wonder that this has been accompanied by the rise of art funds, art securitization and even the launch of an art "stock exchange" in Paris.

The Art Newspaper is now anticipating what could be the first record auction price for the new year: £3.5-4.5m for a Benin ivory mask, which would make it the highest price ever paid for an African artwork. The top-end of the market for Chinese art has been dominated by Chinese buyers making patriotic purchases so it will be interesting to see if a similar trend arises in the case of the iconic mask when it is auctioned at Sotheby's in London on February 17. That the mask is believed by many to have been looted by the British "in the infamous punitive expedition of 1897 when the British invaded Benin, looted thousands of artefacts, burnt Benin City and sent Oba Ovonramwen, the King, into exile" makes it much more likely that the buyer will indeed be African. But what of the allegation that Sotheby's is actively participating in trafficking illicit antiquities? When it comes to antiquities, the statistics are staggering -- it's been held that the provenance of approx. 80-90% of antiquities on the market would raise legal issues (S.M. Mackenzie), the resolution of those issues often being impossible given the origins and age of the antiquities. While it would not make sense to freeze virtually all sales of antiquities, sales of those that are suspected to have been illegally exported from their country of origin should not take place unless and until those suspicions are put to rest. Otherwise, the auction houses and dealers involved will be feeding the market demand fuelling looters all over the world (the causal link between market demand and supply for looted antiquities has been conclusively proven in my opinion).

Wednesday, December 22, 2010

Finally, a serious response to the potentially unconstitutional censorship by the Smithsonian

WASHINGTON DC. Although First Amendment issues generally fall outside this blog's main focus within art law, I had to write this post to commend the Warhol Foundation's decision to pull its funding of the Smithsonian if David Wojnarowicz's 1987 video "Fire in My Belly" is not reinstated in the exhibition "Hide/Seek." The Smithsonian's capitulation to the pressure exerted by the Catholic League and two certain Republican lawmakers (who threatened to pull federal funding of the nation's preeminent art institution) by conceding to the removal of the work from the show is a lamentable assault on the First Amendment. Protesting liberals have since voiced their concern about this infringement of the nation's most sacred constitutional right but none have gone as far as the Warhol Foundation. It's all very well to protest and point a finger but what was really needed was a serious and genuinely meaningful reaction like the Foundation's. Artworld Salon commends it and so do I. I just read in The Art Newspaper that "Jim Hedges, a hedge-fund specialist and art aficionado, has written to Martin Sullivan, director of the National Portrait Gallery in Washington, DC, requesting that his loaned work "Untitled, Self-Portrait" by Jack Pierson be removed from the Hide/Seek NPG exhibition "until such time as the David Wojnarowicz video is reinstated in its full unedited version."" Hedges is also urging others who have loaned works to the institution for said exhibition to do the same. Another commendable reaction. The one I'm most hoping for is a constitutional attack on the institution's conduct in a court of law. Question is whether a federal court will hear such a claim. The constitution applies to governmental actors so the fact that the institution receives federal funding will help but who will have standing to bring the claim? The deceased artist's estate on his behalf is the best bet but potentially others too. Do we think the courts will rule that the video is "hate speech" (i.e. unprotected speech under the First Amendment)? Hopefully a landmark decision for the arts and for our constitutional right to freedom of speech.

UPDATE: artist AA Bronson had asked that his work be removed from "Hide/Seek" in protest of the Wojnarowicz debacle arguing that to not do so would violate his moral rights under Canadian and US law. Sergio Sarmiento (author of the blog "Clancco" and Associate Director of the VLA) and Donn Zaretsky do not agree at least from a US law perspective. Sergio writes: "it does not seem to us that under the 1990 Visual Artists Rights Act the NPG would be violating Bronson’s moral rights simply by exhibiting the work within a context and/or exhibition that Bronson did not like or approve of. If this were the case, artists could dictate and–ironically–censor the speech of individuals whom they did not identify with ideologically. Interesting move though."

New anti-bribery legislation to change the way dealers earn commissions

LONDON. The Bribery Act 2010, which is set to come into force in the UK next year, is likely to change the way dealers do business in the UK but potentially also abroad given its wide territorial reach. The payment of commissions will continue to be a legitimate business practice though subject to increased scrutiny; the payment of finder's fees, on the other hand, will require disclosure to and consent from the collector or otherwise constitute "bribery" under the new legislation. The example cited in the article is illustrative: if a dealer were to pay a decorator a commission for making possible a sale of a painting to the collector the client of the decorator, the dealer would have to disclose the payment to the collector and it seems also obtain his consent. The rule is an "information-forcing" rule in that it penalizes the failure to disclose certain behavior thus forcing the payor (what about the payee?) to reveal what lawmakers consider to be "improper performance." However, the example is not correct if, as the article also states, the Act captures payments to (and by?) intermediaries "owing a duty of trust to art collectors" -- I don't think dealers are fiduciaries of art collectors (at least not in the US) but I will look into it.

Other crucial details of the legislation include the fact that it is a strict liability offense (i.e. the prosecution need not prove intent, only that the defendant's conduct was that prohibited under the Act) and the maximum penalty is ten years' imprisonment or, in the case of an organizational defendant, unlimited fines. The first of these is particularly important because intent is the hardest element to prove in a fraud action and the enactment of the Act will mean individuals can instead be charged and prosecuted more easily for "bribery."
That the Act is not aimed at the art trade but at eliminating corruption generally does not preclude it being applied to prosecute those operating in the art world. As Pierre Valentin (leading art lawyer of Withers, London, and cited in Art Meets Law on other occasions) warns: “it only takes one prosecutor to receive a complaint from a collector or a dealer in competition with another dealer for an investigation to be launched.”

I am currently traveling but when I return, I will review the legislation itself and update this post. I will also look into whether dealers owe collectors a duty of trust and are therefore held to the highest standards at law. I know auction houses do owe their clients (i.e. those consigning art to the auction house for purposes of selling it) a duty of trust but I was under the impression no such duty was imposed on dealers or galleries, the policy reasons being that such actors, unlike auction houses, are not "affected by a public interest" (Cristalling case) and it would be unduly onerous to hold dealers and galleries to such high standards. In the US, to mitigate the effect of this general rule, the majority of states have passed "consignment statutes" that impose a duty of trust on dealers and galleries when artists consign their work to them for sale. However, where such a statute applies, the duty flows to the artist and not to the collector buying the art. The principal of caveat emptor -- "buyer beware" -- is just as relevant to art sales as it is to real property sales and save for known defects, the person selling the art does not owe any dutires to the prospective buyer.

Saturday, December 18, 2010

In the art world, everyone is in bed with each other anyway

This week the Guggenheim Museum Bilbao defended an upcoming exhibition of artworks belonging to a museum trustee, Greek businessman Dimitris Daskalopoulos. The director of the Guggenheim Foundation, Richard Armstrong, said the show will be presented "with huge integrity" but there's no way around the fact that the museum has a "huge" conflict of interest in deciding whether to showcase a trustee's work. The art world is a breeding ground for conflicts of interest: art dealers are invariably art collectors, at times competing with their own clients over an artwork (case in point, Larry Gagosian); a former gallery owner goes on to become the new head of a major institution on the West coast (Jeffrey Deitch named new director of MOCA); an art critic is simultaneously the managing director of two commercial art fairs (art critic for the Village Voice Christian Viveros-Fauné, also managing director of "Volta" and "Next" fairs)... The truth is that the art world is small, very knowledge-intensive and poorly paid - can you blame an art critic for supplementing his earnings as a journalist with earnings derived from other art-related activities? And what of the art dealer or museum trustee who is also an art lover and major collector? As the saying goes, in the art world "everyone is in bed with each other."

The question is how to deal with the conflicts of interest rather than trying to avoid each and every one of them all together (sorry but you just can't, granted some conflicts do have to be prevented e.g. art fund managers valuing the art securitized for investment purposes). At the very least, there should be full disclosure of the conflict but depending on the conflict, affirmative checks are likely to be warranted. For example, when Deitch became the new director of MOCA it was on the condition that he divest his collection and though many were appalled by the appointment, I found it brave and possibly genius especially since the institution was in dire need of successful management having been mismanaged for years and nearly going under. In the case of the Guggenheim show, there has been complete transparency and the choice of curator makes it stand in stark contrast to the "Skin Fruit" show at the New Museum (it's hard to think of a more conflicted person to curate "Skin Fruit" than Jeff Koons, whose every period was represented in the collection and who was also a personal friend of Joannou). Another safeguard is the agreement between Daskalopoulos, the Guggenheim and the Whitechapel Gallery restricting the collector from selling any of the works from the exhibitions for a period of three years following their display. The agreement is better than nothing but I don't think it prevents Daskalopouls from realizing the financial gains to be made as a result of the works being exhibited at two major institutions. In three years time the gains may not be as great as if the benefactor had sold a piece during the running of the show but the market price will almost certainly be inflated and Daskalopoulos free to reap the benefits should he want to. Three years seems like an arbitrary number and not nearly long enough but if someone were to propose five it would seem equally arbitrary. No number of years can change the fact that the works will have an institutional "imprimatur" almost certain to increase their market price and you can't (legally) alienate the property indefinitely. There's just simply no complete way around these issues but personally, I'm satisfied the Guggenheim has adequately dealt with the conflict and I don't think it's a strong enough reason to oppose the exhibition.

European Commission declares light and video-sound installations not "art"

The classification is crucial for it means that "full VAT (value added tax, which goes up to 20% next year) and customs dues" will be payable when video and light works are imported from outside the EU to any EU member state since the decision is binding on all members. In this case, the works in question were six Viola video-sound installations imported by Haunch of Venison from the US in 2006 and a Flavin light sculpture. Had the European Commission agreed with the UK's VAT and Duties Tribunal that ruled such works were indeed "art", their import would only have given rise to a 5% VAT charge. The Art Newspaper reports on the questionable grounds for the decision and includes commentary from leading art lawyer Pierre Valentin (of Withers, London).

Friday, December 17, 2010

Spain and Thyssen-Bornemisza seek review of jurisdictional question by US Supreme Court

Defendants in the Cassirer lawsuit to recover Pisarro's Rue Saint Honoré- après-midi, effet de pluie (1897) have filed a petition to the US Supreme Court to review the Ninth Circuit Court of Appeals decision ruling that Spain and the Thyssen-Bornemisza Collection Foundation, an instrumentality of the state, are not immune from civil suit in US courts under the "expropriation" exception to the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1605(a)(3). Claude Cassirer sued defendants in 2005 to recover the painting which his grandmother, the late Lilly Cassirer Neubauer, was allegedly forced to hand over to the Nazis in exchange for the right to flee Germany.

Camille Pissarro Rue Saint-Honoré, après-midi, effet de pluie 

The question of immunity is central to the lawsuit moving forward since case law dictates that the sole basis for invoking jurisdiction over a foreign state in federal court is the existence of an exception to the FSIA. The "expropriation" exception provides that "a foreign state shall not be immune ... in any case... (3) in which rights in property taken in violation of international law are in issue..." Defendants argue that they are immune because they were not party to the expropriation -- Nazi Germany was -- and that they merely bought the painting years later. However, on a plain reading of the statutory language, there is no express requirement that the defendant nation be the entity that took the property in violation of international law. All parties are in agreement that neither Spain or the Thyssen-Bornemisza are responsible for the looting of the painting but rather Nazi Germany is solely to blame. But the question for purposes of determining the jurisdictional question, is whether the property the subject of the litigation was taken in violation of international law and the answer to that seems to be a resounding yes. The only other requirement under the "expropriation" exception is that either (i) the property be located in the US in connection with commercial activity (which it is not for the painting is on display at the Thyssen in Madrid) or (ii) the defendant be an instrumentality of the state (which the Thyssen is, with several government officials serving on its board as required by law) engaged in commercial activity in the US. Further to the limited discovery allowed by the court, plaintiff was able to amply demonstrate this with reference to the museum "transacting business as a purchaser and seller of goods and services and as an advertiser in distributing marketing and other commercial promotional materials" (see complex litigation post).

Regarding the defendants' other argument based on the purported requirement that plaintiff exhaust all foreign remedies, again they are reading words into a statute that is unambiguous. If Congress had intended the exhaustion of foreign remedies to be a condition precedent to invoking the jurisdiction of US federal courts, it would have drafted the statute to that effect. A fundamental principle of statutory interpretation is that courts, in giving effect to Congress' intent, must give statutory legislation its plain meaning and it would be a flagrant violation of the separation of powers if a court, including the highest court in the country, were to effectively re-write an unambiguous piece of federal legislation (or state legislation for that matter). Yet, where legislation is silent as the "expropriation" exception is with respect to exhaustion of remedies, the Ninth Circuit Court of Appeals cited the Sarei case (550 F.3d at 828) which established that "where principles of international comity and rules of customary law require exhaustion," court should exercise "sound judicial discretion and consider exhaustion on a prudential, case-by-case basis." The district court had failed to engage in such prudential analysis and the Court of Appeals remanded the case instructing the district court to consider exhaustion of remedies to the extent affirmatively pleaded by the defendants. Instead, the Supreme Court will have the final word on the jurisdictional question following defendants' filing of a petition on December 14.

But what do we make of the merits of the case and the very fact that this case is being litigated in the first place? On the former, the Art Newspaper reports that "Spain and the Foundation commented publicly for the first time on the factual background of the claim, saying that historical evidence shows that in 1958, Lilly Cassirer received full payment for the work at its then fair market value, under a legally binding, court-approved final settlement of a lawsuit over the painting in Germany. The settlement barred her from any future restitution claims to the Pissarro, they say, and also resolved a competing claim made by another German Jewish family to the same Pissarro painting." But if that's the case, surely Spain and/or the Thyssen would have informed Claude Cassirer of the settlement and he would not pursued expensive and lengthy litigation? And if the evidence did not sufficiently support the existence and substance of the 1958 settlement, I would have expected Spain, a country known for its commitment to the restitution of Nazi-looted art and a signatory to the Washington Principles on Nazi-Confiscated Art, to have returned the painting without the plaintiff having to resort to litigation. Assuming the US Supreme Court resolves the jurisdictional question, as I believe it will, in favor of the plaintiff, it'll be interesting to see what evidence is presented by each side when the case finally gets to the merits stage of the proceedings.

Wednesday, December 15, 2010

It was only a matter of time: art "stock exchange" due to launch in Paris

The notion of art as an alternative investment asset class is gaining unprecedented momentum this year: record auction prices were set for painting, sculpture, rare books and Chinese art; several market participants (and Russian regulators) affirmatively backed the rise of art funds and art securitzation (see for example, Deloitte Art & Finance conference and Skate's new art securitization services) and now Art Exchange is launching a "stock exchange" for works of art in the coming days. The exchange will function just like a traditional stock exchange except investors will buy shares in publicly listed artworks instead of companies. Participating galleries will sell artworks valued at €100,000 or more (similar to the concept of the minimum "market capitalization" for a company's shares to be publicly traded) and investors will be able to acquire shares initially valued between €10 and €100 per share. So far, six Parisian galleries and six artworks (4 are unknown, the other two are a Sol LeWitt and a Mike Kelley installation) are lined up for the launch of the exchange though its founders intend to enter the US, UK and Chinese markets. Aside from a 5% commission payable to the exchange, participating galleries have little to lose (at least financially) since they are entitled to retain the proceeds from any shares sold if after six months fewer than 20% of shares are sold and the work is "returned" to the gallery. The risk of a work being de-listed is borne by the investors (presumably a sunken cost for them as I can't imagine the idea being that they hold illiquid shares). However, investors also have the option to purchase a work outright once they acquire an 80% stake plus share prices will be publicly available at as the exchange will be "completely transparent" say its founders.

Whether or not the commoditization of art is loathsome to you, it cannot be denied that art will play an increasingly important role in the diversification of investment portfolios as returns on "blue-chip" works continue to rise and, crucially, returns on traditional investments traded on the stock market continue to be volatile, stagnant or decline further. It's a difficult debate: the appeal of the egalitarian principle that anyone can own a "fraction" of a Rembrandt (just like through an art fund or art securitization) vs. the slippery slope of art being reduced to dollar signs. One of my biggest fears is the impact the exchange will have on the long-term career of a living artist whose work is traded (interestingly, one of the two known artists whose works will be traded is living whereas the other is not). The hazaards of a living artist getting "burnt out" on the secondary market are well known and something tells me that trading works on the exchange with prices fluctuating daily will put enormous pressure on the artist and undoubtedly affect how and what art he/she creates.

Sunday, December 12, 2010

First the former electrician, now the chauffeur. Just how generous was Picasso?

FRANCE. When I read about the French government's seizure of 271 Picassos worth an estimated $79 million from the artist's former electrician pending investigation of their provenance, I initially decided not to cover the story because the likelihood of 271 never-before-seen authentic Picassos making their way into the market seemed so small. Undoubtedly, the story would make a fascinating civil and/or criminal case -- Le Guennec was Picasso's electrician for just 3 years and there are allegedly no written records meaning the decision will ultimately rest on an assessment of the artist's practises. However, the fact that only one of the 271 works was signed and dated, combined with the peculiarity of it all, suggested to me that only a very mild interest by the art market was warranted at this stage.

Then a second related story came to light -- the unexpected withdrawal from auction of several Picassos given by the artist to his former chauffeur and bequeathed to his wife, Jacqueline Bresnu, cousin of Le Guennec -- and I knew then that I had to cover both! The heirs, which include Le Guennec and his wife, decided to postpone the sale unexpectedly without giving any explanation. ARTINFO reports: "Drouot auctioneer Pierre Blanchet told Libération that "there is no problem with provenance or authentication" and that "the sale will probably take place in another three months." However, it is not known whether Claude Picasso, the only heir recognized by the Picasso Administration to have the authority to sign certificates of authenticity [meaning he holds the droit morales for the artist] authenticated the Bresnu collection. Maya Widmaier-Picasso, the artist's daughter, participated in writing the catalogue for the Bresnu sale, copies of which are now."

The market loves a good story and it doesn't get much better than this so expect higher prices than would otherwise be the case if and when any of these works make it to auction.

Wednesday, December 08, 2010

Miami Heat?

Links to cliff notes on Art Basel Miami 2010.

UPDATE: Fisk appeal could mean it ends up with nothing

I guess I spoke too soon when I posted that the fate of the Stieglitz Collection (and Fisk University) was finally resolved. Fisk University has announced that it will appeal the Chancery Court's decision allowing it to sell a stake in the Collection subject to Fisk having discretionary use of only $10 million of the proceeds and the balance being placed in an endowment fund to be used solely for the costs of displaying and maintaining the art. I agree with Fisk that the $20 million endowment is excessive for purposes of maintaining the 101-piece Collection (as mentioned in my previous post and now confirmed by Fisk's estimate of annual costs at $130,000). Surely the Court can come up with a plan that makes far better (and more logical) use of the proceeds. But appealing the decision does of course mean that Fisk is taking the risk of being left with nothing, a very real risk in fact given how erratic and unpredictable the Chancery Court's decisions have been since the summer.

Tuesday, December 07, 2010

"The world didn't come to an end"

LONDON. The title makes reference to the experience to date of the UK Museum Association's ("MA") "relaxed ethical stance" on deaccessioning since its adoption in 2007. The UK's experience illustrates how "slippery slope" arguments against taking this position on deaccessioning don't necessarily hold true, at least not in all cases. In an article in The Art Newspaper, the MA's head of policy Maurice Davies defended the organization's stance against the strong criticisms and concerns of museum directors worldwide who called for greater safeguards to prevent the dissipation of public collections. The deaccessioning debate has resurfaced recently in the UK with the announcement of the seminar on the subject to take place at the National Gallery on May 10, 2011. To read more about the proposed schemes that will be debated click here.

The current restrictions in the UK are "voluntary and depend largely on moral persuasion" which may make the "deaccessioning police," as Donn Zaretsky calls the contingent, uneasy but in my view, are preferable to blanket prohibitions against deaccessioning (for example, to cover operating expenses) that place little, if any, faith in museum trustees to do their jobs. Yes deaccessioning practices should not be left unchecked but checks should be flexible enough to consider proposed sales on a case-by-case basis. The expert panel idea has been proposed before (I was a fan, as was Judith Dobrznski) but I appreciate the comments made in the article that at least in the UK, there are enough committees as it is and plus, an expert panel would require the enactment of legislation.

Sunday, December 05, 2010

Cutting out the "unscrupulous" intermediary

LONDON. Stories of artists being hard done by their dealers are well known: the artist is a starving genius, the dealer, an unsavory intermediary operating freely on an opaque and unregulated market. As a result, artists are increasingly exploring alternative ways of selling art that challenge today's traditional model such as direct sales from the artist's studio (it's worth noting that collectors, tired of "blacklisting" practises and snooty art world conventions, are likewise often eager to cut-out the middleman). All Visual Arts ("AVA"), a "commissioning agency" launched in 2008 by hedge fund billionaire Mike Platt and art dealer Joe La Placa, represents a recent venture moving away from the artist-dealer consignment model towards the "old days of art patronage." AVA provides its artists (currently six, all British) with upfront funding on a long-term basis and then lines-up buyers, "offsetting the advances against a final sale price and splitting the excess 50:50 with the artist." So in fact the only real novelty of the venture is the upfront funding since the 50/50 split is already the standard in the market (the 70/30 split referred to is not and for the sceptics out there, see Edward Winkleman in defense of the 50/50 split). Notwithstanding the reality that there can be no creation of art without the necessary funding, I fear AVA-participating artists may be trading-in the routinely overlooked important functions of a dealer for the sake of short-term financial stability. Case in point: the sale of seven Wateridge paintings to François Pinault, two of which sold for 10 times their price before AVA's involvement. This to me suggests that AVA is possibly more concerned with maximizing financial returns in the near future (understandable given its upfront investment in the artist) than with "placing" an artist's works with a view to ensuring his/her long-term career and ultimately gaining institutional recognition. To increase the going-rate for Wateridge's works tenfold may sound fantastic now but there's a real risk that the artist will not be able to sustain the market at that level and he will crash and burn just like others have in the past (e.g. Cecily Brown at the hands of Gagosian). Not to mention the impact this arrangement could have on the artist's creative freedom of expression for as Rebecca Salter points out, there may be "eventual pressures on artists to produce work guaranteed to sell" (a phenomenon that arises more and more with living artists selling on the secondary market in the past traditionally reserved for deceased artists). That's putting an unwarranted amount of faith in the market to distinguish between a passing trends in taste and truly great art.


Tips for Artist's Who Want to Sell (1966-68)
(Image courtesy of The Metropolitan Museum of
Art and © John Baldessari)
   "John Baldessari: Pure Beauty" 
      Metropolitan Museum of American Art, New York 
      Through January 1, 2011

One word to describe the Met's major retrospective of the SoCal pioneer of conceptual art: "EDIT!," both in terms of the quantity and quality of the works displayed. The exhibition spans from the hugely prolific artist's earliest surviving paintings (in 1970, he burnt and destroyed the works painted between 1953 and 1966 as part of the piece titled "The Cremation Project") to his most recent works with what appears to be very little editing in-between. I find excessively voluminous surveys tend to be a sensory-overload which leave you with only a faint recollection of individual works but in this case, the lack of editing is especially unfortunate since on the whole the later works are, in my opinion, not nearly as insightful or innovative as those produced in the 60s and 70s. That was the period during which the artist lived isolated from any (East coast) art scene, enabling him to create art free from judgment or rejection. In this regard, I agree with Jerry Saltz' review though I don't see 1980 as being such a clear-cut turning point in the quality of Baldessari's work. 

Highlights of the early period include the photo-text works, where the artist experiments with  textual versus visual language and a method of disclaiming authorship in a traditional sense by outsourcing the texts to local painters (either the paintings are left unsigned or the text itself attributes authorship to the local painter). The photo-texts accomplish exactly what Baldessari set out to do: that is, to make things "look simple but to raise issues, and to have more than one level of comprehension." The choice of photography as the visual language most people understand best and its juxtaposition with poignant texts appropriated from existing popular sources results in wonderfully thought-provoking works; the accompanying humour and wit -- purportedly never the artist's aim -- are an added bonus. Other texts such as the one featured in the image above touch on art maxims that go to the heart of the meaning, creation and consumption of art -- issues that are even more pertinent today with the consolidation of a globalised multi-billion dollar art market. The smaller but no less appealing pieces composed of series of miniature photographs ("Aligning Balls" (1972); "Goodbye to Boats" (1972-73); "A Movie: Directional Piece Where People are Walking" (1972-73)) are charged with a charming innocence and touching sentimentality. These "small masterpieces" beautifully depict movement (hand waves, clouds, a floating balloon, passersby walking) and the emotions bound-up in the movement (pain, anxiety, expectation, loneliness). To be sure, the simplicity of many pieces would not be so effective were it not for the corresponding titles; the two are inextricably linked and essentially continue the theme of textual versus visual language.

By the time you reach the fifth or sixth gallery (this likely roughly coincides with Saltz' "1980" defining moment), the movie stills -- always a rich source from which Baldessari appropriated images -- take center stage and the style becomes repetitive, far less conceptual and in most cases, devoid of any real meaning or emotion. The stills or photographs that are combined with splashes of color (for example, spheres of color covering the faces of the  human subjects) say little or nothing to me, granted the titles do help make the experience more worthwhile. There are a few exceptional works in the last few galleries: in "Man and Woman with Bridge" (1984), the subjects are not the man and the woman looking into each others eyes but rather the space between them, filled by a superimposed image of a wolf making its way across what looks like a log on a misty night. According to the artist, whether two people are apart because they are attracted or repulsed by each other, a magnetic field is created in the space between them and the choice of filling such space with a wolf is genius. However, I don't think I would have found the work as captivating had it not been for the accompanying notes explaining the concept behind it. Other noteworthy pieces are those reminiscent of the "small masterpieces" where color is used one again as the fluid, unifying link between a series of small photographs (in "Five Yellow Divisions: With Persons (Black and White)" (2004), a yellow line flows from image to image filling the familiar subject of the space between people).

For those who have not yet seen the exhibition, make sure to leave plenty of time or alternatively, skim through the final galleries. And be sure to pay close attention to the titles and notes -- without them the concepts are often lost and the experience is largely forgettable.

Wednesday, November 24, 2010

UPDATE: NY's donor-friendly version of UPMIFA

Donn Zaretsky has posted on another article that accurately discusses the donor-friendly notice requirements under NY's version of UPMIFA. It also becomes apparent on reading the article how cumbersome it will be for institutions to comply with. For background see here.

Tuesday, November 23, 2010

Public photo archive of looted antiquities vital to eradicating grave problem of looting

A reader wrote to the Editor of The Art Newspaper this week calling for the need to have a public photo archive of looted antiquities to aide prospective buyers in their provenance research of potentially looted objects. When it comes to purchasing antiquities today, the volume of undocumented/ looted antiquities (the two terms have become synonymous) on the market is such that tainting an object's provenance by way of publishing photos of similar/identical looted objects will in most cases ensure it does indeed remain unsold. The importance of this reality goes beyond an individual prospective buyer avoiding the purchase of illicit objects -- ensuring that looted antiquities remain unsold is crucial to eradicating looting itself. Results of ethnographic studies around the world have shown that looting is a profit-making business that is the direct result of market demand (see Patty Gerstenblith article) and with the antiquities market being valued at $2-6 billion annually, the stakes are high. The causal link between market demand and looting has, in my opinion, been conclusively proven (as I've previously written in the context of Marion True's trial) and one highly effective way of controlling market demand is through a public photo archive of looted artworks. In fact, this method is probably more effective at combating looting than the body of piecemeal legislation enacted in the US over the last decade with a view to deterring trade in illicit art (notably, the NSPA, the ARPA and the CPIA). The Art Loss Register is the obvious candidate to fulfill the mission of public archive and I would urge it to expand the scope of its valuable services to include this much-needed archive (to some extent it already does as looted artworks are by definition stolen). Much of our understanding of the evolution of human civilization has been attributed to stratigraphic excavation and as Patty Gerstenblith points out, "this full body of contextualized information is a destructible, non-renewable cultural resource," forever destroyed by looters. Not to mention the harm caused to the objects themselves and the distortions to the historical record resulting from flooding the market with undocumented artworks.

Monday, November 22, 2010


  • PARIS. Artworld Salon reports on the Deloitte "Art & Finance" conference held at the end of last month. It highlights three themes: I agree with the first, disagree with the second and would modify the third. The final paragraph is by far the most astute: "before we continue to develop art into an investment vehicle (in whatever way), let's take a step back and think about what makes art different to other assets and markets, not what makes it similar" (my own emphasis added).
  •  "Whose painting is it anyway?" Pop quiz on what constitutes good title to art.
  • LONDON. Another deferral of an export license to allow public instutions to match the sale price and keep the art in the UK. At least this case involves a painting by "simply the greatest British painter of the 19th century" which foreseeably meets the Waverely Criteria (unlike the case of the export of the Fatimid ewer where it's far less obvious).

Sunday, November 21, 2010

UPDATE: Record-breaking sale of Quianlong fish vase was the "product of a perfect storm of new money, national pride, and unique historical cachet"

LONDON. This blog previously reported the staggering $85.9m sale of a Qianlong-era fish vase at Bainbridges auction house in London. Now Art Info has an interesting article on the "7 reasons why a gaudy fish vase broke a world record for Chinese Art." The last paragraph considers the alternative of "market juicing" as the reason behind the high price tag: "perhaps (goes the theory) there was collusion by interested parties in China -- auction houses or others -- who aimed to boost the market in advance of the auction season which is just about to begin in China... "If it was really a patriotic act, what's the point in boosting the price? Fifty times higher than the estimate smells more like they were cooking the price than fighting for a piece of artwork they like.""

Saturday, November 20, 2010

The Beuys case's wider significance for the relationship between "documentation" and "performance"

A German court has ruled that the Museum Schloss Moyland in North Rhine-Westphalia may not lawfully display a collection of its photographs of the late Joseph Beuys performing in 1964. According to The Art Newspaper, "the judge ruled that the pictures of the performance were an “incorrect deformation of the original performance” and by exhibiting them the museum had violated Beuys’ copyright." Since the performance was never filmed and no other photographs were taken, it's a wonder how the court came to the conclusion that the photographs were not true to the original performance, such conclusion and the resultant prohibition against their display also implying a piece of art historical material will be inaccessible to the public for the foreseeable future. The case highlights the problematic relationship between "documentation" and "performance" and the central issue of who controls the documentation of an artistic performance -- the artist, the photographer, the artist’s estate or the museum?

The ruling demands close scrutiny from both a factual and a legal perspective. On the one hand, the alleged facts are that Beuys granted the photographer, Tischer, permission to document the performance though no explicit authorization was given to subsequently display or publish the photographs. According to the museum's director, the late artist "always wanted photographers at his performances so his work could reach a wider audience" and it seems entirely reasonable for the museum to have assumed it was implicitly authorized to display the photographs it was expressly permitted to take. Why else would the photographs have been taken if not to be publicly displayed? The fact that the German news agency PDA has not been similarly restricted in the display of its photographs of Beuys' performances seems at odds with the ruling's purported premise: the artist's copyright (however, the (legal?) requirement of asking a late artist's estate for permission to display unpublished photographs may explain this). On the other hand, the court's expansive view of the performing artist's right not only stands in stark contrast to the "limited protection" of performing artists in other jurisdictions (as noted in a second article on the legal significance of the Beuys case) but also in light of the photographer's right to freedom of expression under the European Convention of Human Rights (by which German courts are bound). Can it really be the case that copyright under German law is so expansive as to not require the court to engage in a balancing of competing rights?

Wednesday, November 17, 2010

UPDATE: Warhol Foundation drops counterclaim against Joe Simon

According to Businessweek, "the Foundation [has] decided not to try to recover its own legal costs from the collector because a search turned up no assets." That's $7 million in legal costs that could have gone towards the Foundation's "charitable mission of promoting the visual arts and preserving the legacy of Andy Warhol."

For background, click here.

Tuesday, November 16, 2010

LINKS: Monitoring tastes

  • NEW YORK. Art sales go virtual as big names back launch of exclusive site The site will monitor collectors' needs and tastes with the help of its "art genome technology" based on the technology of "custom music-curating site Pandora."
  • NEW YORK. Collectors continue to embrace lighthearted art as Lichtenstein, Warhol, Koons and Calder top Christie's post-war/ contemporary evening sale... while bidders at Sotheby's were "buzzed with Coca Cola and ice cream"... and Phillips de Pury's stellar $137 million debut was largely thanks to a 1962 Warhol.
  • According to The Art Newspaper, this means we are experiencing times of "economic optimism."
  • LONDON. Meanwhile, the other main trend, traditional Chinese art, is hotter than ever as a Qianlong fish vase fetched $85 million, "a world record for any work of Chinese art at auction." The trend is largely in response to a growing contingent of Chinese buyers (there are now 128 billionaires in China) who are making nationalistic purchases of art and antiquities. The buyer of the Qianlong fish vase was no exception.

Sunday, November 14, 2010

"Returning the missal seemed a symbolic gesture to help heal the wounds"

LONDON/BENEVENTO. The return of the Benevento Missal marks a milestone -- it "will be the first item of Nazi-era loot from a UK national museum to be restituted to its pre-war owner." Astonishingly, legal restrictions had prevented the enforcement of the Spoliation Advisory Panel's original decision in 2005 recommending that it be returned to its rightful owner. In the UK, artworks that form part of a public institution's permanent collection are owned by the State (as is generally the case in all European countries) and "it is not within the power of the collecting institution to deaccession any of its collection unless it is legislatively empowered to do so; it is not a matter for the discretion of the institution" (see MLA). Non-statutory bodies lacking the power to deaccession normally obtain the necessary power by looking to the Charity Commission for an order and/or consent but the British Library was created by statute, the British Library Act 1972, and is governed by its terms which constrain the Board's deaccessioning powers in several ways. Such constraints prohibited the deaccessioning of the missal and a change in law would inevitably be needed if it was ever going to be returned to Benevento (I wonder why it is that counsel spent 3 years preparing and pursuing the claim presumably aware of the enforcement issues that would ensue if the Panel adjudicated the claim in their favor). The change finally arrived with the passing of the Holocaust (Return of Cultural Objects) Act 2009 conferring power to bodies including the British Library Board "to return certain cultural objects on grounds relating to events occurring during the Nazi era." The name of the statute is misleading since it is drafted broadly enough so as to include non-Holocaust cases such as this one provided the "event" (undefined but usually the misappropriation of the object) occurred during the "Nazi era" (widely defined as the period beginning January 1, 1933 and ending December 31, 1945). The claimant is still required to seek an Advisory Panel's recommendation and its approval by the Secretary of State but the barriers to enforcement of the recommendation have been completely removed. The Benevento Missal restitution is therefore likely to be only the first case of its kind to culminate in the successful return of the looted object.

Saturday, November 13, 2010

Market stands behind title insurance as Argo Group acquires Aris

This blog (among others) has previously reported on how title insurance is "still not broadly accepted" in the art market, especially when compared to its prevalence in real estate transactions. Possibly refuting this view is the recent acquisition of Aris, the sole provider of title insurance for art sales, "by a major publicly traded insurance company, Argo Group, showing confidence in that fledgling market."  Although ARIS title insurance will now carry an A rating and look to a balance sheet with $6.7bn in assets, the concept of art title insurance itself remains fundamentally weird. Evidence suggests that the market had effectively recognized this by showing considerable reluctance to add to transaction costs by purchasing insurance. After all, ARIS is only expected to sell its 1000th policy next year since its inception in 2006, that's roughly a mere 200 policies annually which is peanuts given the size of the New York art market. In a market where the major auction houses and dealers guarantee title --exactly what the insurance policy covers -- there just doesn't appear to be any real need for it (granted it can prove useful in specific, isolated situations e.g. art sales on behalf of bankrupt collectors). It would be an entirely different story if the policy covered forgery/authenticity-related claims but in response to those who were asking precisely that, the answer is no: title insurance does not cover forgery, otherwise translated as "affirmative misrepresentations" (see also here).

Friday, November 12, 2010

"This is a time when extreme creativity is needed in philanthropy"

Non-profits are facing increasingly uncertain times as private donations on which they rely almost entirely for funding and gifted artworks are growing smaller by the day. The combined effect of the financial crisis and the shrinking demographic of wealthy donors due to low birthrates in the Depression era was already a major blow to institutions but add to that the anticipated tax reforms (including the "hiatus from the estate tax") and the blow may well be crippling. The New York Times discusses how charities (and donors) are wrestling with tax uncertainty. Highly recommended for donors thinking about estate planning and alternative cost-efficient ways of making much-needed bequests.

Thursday, November 11, 2010

Rethinking valuations of artworks following UK export of Fatimid ewer

LONDON. A rock-crystal Fatimid ewer -- described as "the Holy Grail for any collector or museum of Islamic art" -- sold at Christie's for £3.2 million but was eventually exported from the UK to the Museum of Islamic Art in Berlin with a price tag of £20 million. The export license application originally stated a value of £15 million for the ewer which the Export Reviewing Committee rejected for failure on the part of its owner, De Unger, to substantiate such claim. The Committee instead looked to the recent auction price as the appropriate figure, consistent with what had been to date past practice in calculating the fair market value of artworks the subject of export applications. Aside from the obvious tax implications, the value attributed to an artwork is crucial in the context of exporting it from the UK because it will likely determine whether a buyer (usually a public institution) can match that price in cases where an offer to purchase is required to be made. In the UK, when an artwork meets what are known as the Waverley Criteria (history, aesthetics and scholarship), the Export Reviewing Committee "recommends to the Secretary of State that a decision on the license application should be deferred for a specified period [normally 2-6 months] to enable an offer to be made at or above the fair market price, ... also recommended by the Committee" (see MLA guidance). In this case, following De Unger's direct representations to the Department of Culture, Media and Sport ("DCMS"), a valuation was sought from the head of Islamic art at none other than Sotheby's. Edward Gibbs' final valuation coming in at £20 million was subsequently accepted by "the newly-installed culture minister Ed Vaizey" thus sealing the deal for De Unger as "at £20m no public collection could even contemplate trying to raise the funts." A few months later, the Fatimid ewer made its way to Berlin and is scheduled to go on display early next year.

The case of the Fatimid ewer is important in a number of ways. Firstly, the government's decision to turn to Sotheby's for an independent valuation is a cause for concern from the perspective of conflicts of interest. A conflict of interest arises when there is "a real or seeming incompatibility between one's private interests and one's public or fiduciary duties" (Blacks Law Dictionary). Clearly, Sotheby's is conflicted when asked to value an artwork recently auctioned by their number one rival for there are very real incentives to "talk up the price" in order to attract business. On the other hand, it's uncertain whether the auction house owes the government any fiduciary duties (they unequivocably do to their clients who sell at auction) and the reality is that to begin with there are only so many places the government can turn to to obtain an expert valuation. Secondly, the case is unfortunate to the extent that it will create uncertainty in the increasingly global art market -- at least for as long as it remains unclear how strong a precedent it has set. Uncertainty in any market can only be a bad thing and in this instance, it's a very bad thing given how cumbersome, time-consuming and expensive export applications already are and the unstoppable pace at which the traditional Western art market is becoming a global one.

Sunday, November 07, 2010

LINKS: The autumn auctions are upon us

NEW YORK. The November auctions have started and buyers have expressed how they are finding the art market "particularly competitive, even for works that are not considered top flight." Keep up-to-date with this week's auctions results by clicking on the links below:

Finally, the fate of the Stieglitz Collection (and Fisk) are resolved

Of all the Chancery Court's rulings over the past few months in the ongoing Fisk litigation, the latest ruling this week was no less shocking. First, the Chancellor rejected the Crystal Bridges agreement as then-written and invited the Tennessee Attorney General to come up with a more donor-friendly alternative, which he did in accordance with the Court's decipherment at the time of the "donor's intent." Then, she rejected that proposal and instead embraced the Crystal Bridges agreement in an unexpected reinterpretation of the donor's intent (turned out Georgia O'Keeffe did actually care about Fisk) but requested it be revised as per the Court's explicit instructions. That the parties did (the Attorney General made a second proposal but to no avail) and now the Court has approved the terms of the revised agreement and thrown in one major revision of its own for good measure. The Bentonville, Arkansas, museum "will pay the financially troubled university $30 million to acquire a one-half interest in the Collection... but Fisk may have discretionary use of only $10 million of the proceeds [Chancellor Lyle's newest twist to this saga]... The rest is to be placed in an endowment fund and used solely for the costs of displaying and maintaining the art." $20 million to cover the costs of displaying and maintaining a 101-piece collection?!! The reason for the split is none other than the ever-elusive notion of "donor intent." The problem of donor intent is a recurring theme in this kind of litigation but this week's ruling apportioning actual percentages between the donor's intended beneficiaries is pure guess work. Having decided that O'Keeffe did care about Fisk in a prior ruling, the Court has now gone one step too far into the abyss of "donor intent" by stating that the "role" (yes, "role" believe it or not) the donor intended for Fisk was exactly one third of the "total roles" for the gift. Pure guess work I tell you.


People love numbers. Numbers are objective, informative (if accurate), concise and universal. They cut to the chase and tell us instantly what we need to know, not what we want to hear. As the proverbial saying goes, "numbers don't lie." Or do they?

Based solely on an art market analyst's measurements of the Return of Capital Employed (RoCE) for 56 contemporary galleries in the UK, an article in The Art Newspaper reported  "solid long-term returns" for different segments of the art market. As such, the article is representative of the kind of quantitative financial reporting that purports to tell the reader the bottomline when in fact it tells him very little at all. Simply regurgitating a single analyst's calculations, the article fails to break-down the financial index into its component parts to figure out exactly what the numbers mean and exactly how much they really tell us. Well, it made a small attempt along the lines of "RoCE is a frequently used measure of profitability that takes into account the amount invested into a company." Let's dig a little deeper... defines RoCE along similar lines as "a ratio that indicates the efficiency and profitability of a company's capital investments." But it goes on. RoCE is "calculated as EBIT / Total Assets - Current Liabilities." EBIT is earnings before interest and tax and current liabilities refers to a company's debt obligations falling due within one year. Another way of thinking about it is pre-tax operating income divided by net assets or how many dollars a company gets out of each dollar's-worth of assets held. Access to the financial accounts of galleries is notoriously hard to obtain but I presume that a gallery's assets are the gallery itself if it owns it and its inventory -- the art it holds on consignment for artists until it is sold. Title usually remains with the artist but galleries make their profits by selling artworks on behalf of artists so again I presume that for accounting purposes the artworks consigned constitute inventory. If you snoop a little around the backroom of a gallery, you are likely to see rows and rows of paintings stacked up against the walls. In order to calculate the RoCE, it is the book value of the paintings that is used in the denominator. This means that as the assets are depreciated (i.e. their book value goes down), the RoCE increases. I don't know whether galleries (or their accountants) depreciate artworks as inventory but even if they do not, how one comes up with a relatively accurate book value to assign to the artworks is unclear to me. Furthermore, RoCE doesn't take into account inflation which increases revenues (the numerator) but does not affect the book value of assets (the denominator) with the artificial result of RoCE increasing.

I'm getting slightly sidetracked here as this is, after all, intended to befundamentally an art law blog (albeit, commercial art law). However, when people make purely quantitative statements suggesting these are indicative of some underlying trend or reality, the schewed reality painted needs to be heavily tempered. Indices can be helpful but they are only one more way of looking at something far more nuanced and complex that simply cannot be reduced to numbers. It's like when people say they made X amount of money from a re-sale of a painting by simply subtracting the original purchase price from the re-sale price, completely ignoring the other crucially significant numbers: transaction costs (fees, artist's resale rights (if any), taxes, transportation), conservation costs (framing/ installation, preservation, insurance, and, in some cases, restoration and security) and transaction costs, again (seller's/dealer's fee, transport, taxes). Depending on your choice of numbers, you'll come to one conclusion or another about the profitability of the very same transaction.

Saturday, October 30, 2010

"It is important the integrity and provenance of established and aspiring artists is not undermined by the deliberate forgery of their endeavours"

A Tracey Emin forger has been sentenced to 16 months imprisonment by the Manchester Crown Court for making "at least 11 forgeries" and selling works on eBay for £26,000. Given the nature of some living artists' works today, a forgery of a contemporary work can be easier to create from a technical perspective than say a fake of an Old Master painting, especially since a forger is far more likely to obtain the same materials living or recently deceased artists use than those artists used centuries ago (fakes are often discovered as a result of forensic evidence revealing that the pigments in a painting were not available at the time the artist was supposed to have painted the work -- see link from "gold standard" fakes post). However, from a provenance perspective, it's far riskier to pass off as authentic a work by a living artist than it is for a centuries-old painting whose provenance may be undocumented or incompletely documented.

In this case, the forger not only chose to imitate the work of a critically-acclaimed YBA who is also a highly public figure, he then proceeded to auction the work in the most public manner imaginable! That's not just risky, it's plain stupid. And particularly "distressing" for Emin since the forger learnt his trade working alongside the artist herself in her gallery in London.

Thursday, October 28, 2010

Eastward bound via Paris and Marrakech

To the East we go! As I've mentioned before, Paris and above all the East (Beijing, Hong Kong, Russia) are the new hotspots in the art world. Not only are the traditional art centers in the West feeling the pressure to compete with their younger Eastern counterparts, a taste for the East has also been palpable in recent auctions with a growing contingent of buyers demanding Chinese art. Below are a few recent links on the emergence and growth of thriving new markets.
  • PARIS. France's "premiere" art fair: FIAC. The five best booths according to ARTINFO.
  • MARRAKECH. "Morocco is developing economically and will be very important in the Middle East." It only makes sense then that it should get its first art fair in Marrakech.
  • DUBAI. Mahmoud Said's 1929 painting sold for $2.5 million at Christie's Dubai, setting a world record for Middle Eastern Art. The modern and contemporary auction netted $14 million, far exceeding the estimate of $6.7 million.
  • BEIJING. Poly auctions opens fall season with strong sales of diverse Chinese antiquities.
  • SHANGHAI. "Dizzying array of art" at the Shanghai Biennale.

Tuesday, October 26, 2010

Warhol authentication and a lesson in litigation strategy

NEW YORK. The U.S. justice system is hardly the breeding ground for David and Goliath-type endings so when Joe Simon went up against the Warhol Foundation and Art Authentication Board all guns blazing, it was only a matter of time before "money, power and legal expertise" dictated the outcome of the litigation. Instead of limiting the complaint to challenging the Board's rejection on two occasions of myandywarhol's authenticity, Simon also sought damages and injunctive relief in federal court "alleging anti-trust violations, collusion and fraud." Despite the abrupt, unsatisfactory ending to the three-year long litigation (not to mention the waste in litigation costs), the case should lead to increased scrutiny of the Warhol Foundation's exercise of its leverage in the market. Technically, the Art Authentication Board's opinion on the authenticity of a work is but one more opinion; however, the reality on the market is vastly different as the major players, including Sotheby's and Christie's, will not sell a purported Warhol without Board authentication. The mere existence of the power to manipulate the entire market for Warhols is not, in and of itself, sufficient to prove the unlawful exploitation of such power. Still, given how prolific Warhol's oeuvre is and the fact that there is more than one collector out there feeling hard done-by the Authentication Board and/or Foundation, this may not be the last time the organization has to retain the services of the preeminent legal minds in the country.

Joe Simon intend to abandon his claims against the Warhol Foundation at the next hearing scheduled for November but counsel for the defendant has made a statement making it clear that the Warhol Foundation will continue to pursue its counterclaim against Joe Simon. According to The Art Law blog, the Foundation's attorneys made the following statement:
"The resources Mr. Simon forced the Foundation to expend litigating against these meritless claims would have otherwise gone to funding its charitable mission of promoting the visual arts and preserving the legacy of Andy Warhol. While Mr. Simon may now prefer not to face Defendants’ legitimate counterclaims, the Warhol Foundation is fully committed to pursuing all its legal rights and claims against Mr. Simon to recover the funds it has been forced to waste and give them back to the charitable causes to which they always belonged."

UPDATE: the Fisk saga continues

The Tennessee Attorney General filed last Friday a second proposal regarding the future of the Stieglitz collection. Background to and the Chancery Court's rejection of his first proposal can be found here and here (Fisk went on to revise its prospective agreement with the Crystal Bridges Museum in light of the Court's ruling). The AG's latest filing is the product of the establishment of a fund by Fisk alumna Carol Creswell-Betsch that has already received commitments sufficient to "allow Fisk University to keep its Stieglitz art collection and display the works on campus at no cost to the school" (approx. $130,000 a year). Assuming Judge Lyle is still of the view that the winning proposal must secure the long-term financial health of Fisk, I, like Donn Zaretsky of The Art Law Blog, suspect the AG's second proposal will be rejected. However, given Judge Lyle's past record and the ever-illusive notion of "donor intent," of course, who knows what the next installment of Fisk news will bring. Meanwhile, Fisk University has already knocked-down the AG's second proposal.

Sunday, October 24, 2010

Blair Di Donna gallery to open in uptown New York

NEW YORK. For those active or interested in the secondary market, former Sotheby's vice chair Emmanuel Di Donna is joining forces with London dealer Harry Blain to open the Blair di Donna gallery. The venture represents the teaming up of two artworld moguls -- Di Donna was with Sotheby's in New York for 17 years and Blain co-founded the London galleries Haunch of Venison (bought by Christie's in 2002) and very recently, Blain Southern (focused exclusively on the primary market and set to open in New York after closing its doors in Berlin). The Blair di Donna gallery is due to start trading next month and "the ambition is to have the doors open, and the first exhibition up, in time for the New York auctions in May." Keep you posted (no pun intended).

Insurer v. Insured

Donn Zaretsky of The Art Law Blog points us in the direction of an insurance case about which party, the insurer or the insured, should get a stolen artwork when it's recovered years after the insurer made a payment in the amount of the policy's limit. Since in this particular instance the valid and enforceable written agreement governing the relationship between the parties had a "plain and unambiguous" provision directly on point, the resolution of the dispute turned out to be a straightforward application of basic contract law principles. Now the really interesting question is in favor of whom would the Massachusetts court have ruled had there been no contractual provision determining who gets what in the unlikely situation that a stolen artwork paid for under an insurance policy is found decades later.

UK public funding for the arts cut by almost 30%. "Can, and will, British collectors make up the shortfall?"

LONDON. As many had been fearfully anticipating for months, yesterday the British government announced that Arts Council England ("ACE") - "which distributes money to hundreds of arts venues, theatre groups and galleries" - is to have its budget cut by 29.6% (representing a £100 million cut in funds by 2014). National museums will take a 15% cut over the next four years assuming the ACE complies with the government's request that it limit cuts to "arts organisations" up to this amount. The government is alleged to have said that funding of the arts should follow in the steps of the US model and make up the cuts in public funding by increased private giving. What the government has thus far failed to do is introduce the tax incentives upon which the US model is predicated. US institutions are able to "survive" (an increasingly debatable statement) on private donations not because the system or society successfully encourage altruisim but because they reward it financially. The former Tate Britain director, Stephen Deuchar, said he knew of "certain donors [in Britain] who are just waiting for this to happen." As Boris Johnson, the Mayor of London, put it speaking at Frieze: "we need to be incentivised to give."

So what US tax incentives are British collectors waiting for then? There are several tax benefits for the private philanthropist making a charitable donation to a tax-exempt organization in the US (one falling under any of the tax-exempt categories in IRS 501(c)(3), (4), (6) or (19)). The most important of these is the immediate federal income tax deduction the donor gets when he itemizes the charitable donation in his tax return (the other two main forms of tax relief are the avoidance of capital gains tax on appreciated assets and an estate and gift tax deduction). The amount deductible depends on whether the donated art constitutes capital gain property or ordinary income property. If the artwork donated was owned for a minimum of 12 months and during this time it appreciated in value, it falls within the category of capital assets referred to as capital gain property and the donor can deduct the full fair market value ("FMV") of the donation on the date of the contribution subject to certain rules and conditions (including the requirement to file an appraisal in support of the deduction if the FMV is greater than $5,000). This means that a taxpayer can actually gain an advantage if he donates capital gain property obtained at a discount to the FMV. If, on the other hand, the artwork does not constitute capital gain property either because it was owned for less than a year prior to the contribution or it did not appreciate in value, it will constitute ordinary income property and the donor can only deduct his/her investment in the art (i.e. the cost of purchasing the art). In addition, the amount of the deduction in any individual tax year may be limited.

According to The Art Newspaper, "in Britain you get most tax breaks from the grave: the Acceptance in Lieu system reduces death duties by the value of the work of art donated. When alive, people who give over £25,000 a year (or £150,000 in six years) earn a tax deduction of 25% under the Gift Aid scheme, but if they give a work of art, they get nothing." Then there's the issue of public awareness of any existing tax advantages. Having lived in the US now for just over two years, I strongly agree with the article's statement that "tax incentives are known to everybody" in the US. This is true of people of all ages and backgrounds, personal and professional. However, the lack of knowledge in the UK should be a relatively minor concern because not only is it fairly easy to correct, it's also going to be the case that the donors who are likely to make the most meaningful donations (in quantitative if not also qualitative terms) will be well-versed on the subject and if not, their tax advisers will be.

Despite the case for incentivizing private giving through tax reforms in the UK being stronger than ever, I want to take this opportunity to draw attention to the often overlooked problem of institutions accepting excessively restricted private donations. Gifts, more often than not, come with strings attached. Museums, generally heavily biased towards collection-building, accept donations to hold on trust for the public only to find decades later that it is the donor who controls the artwork from his/her grave for the indefinite future. While I don't want to discourage private funding of institutions and I'm aware of and sensitive to the recent financial struggles of many institutions, in the US and the UK, in my opinion, a museum must retain a certain amount of flexibility in art collecting and should reject a donation if it reasonably foresees difficulties in the future in giving effect to the donor's intent. But most importantly, it is donors who must refrain from tying-up the art they donate. Gifts should be made outright, free from vague or cumbersome conditions that can, and often do, result in expensive litigation for the recipient institution. The UK should undoubtedly incentivize private funding of institutions to avoid the announced public funding cuts materializing into "redundancies, fewer exhibitions and programmes, reduced opening hours and smaller acquisition budgets." On the other hand, it is imperative that they consider the particular costs associated with private vs. public funding (I assume English trust law is as donor-friendly as common law in the US and NY State's recently enacted version of UPMIFA).


What's the difference between a "fake" and a "copy"? And what about an "exhibition-related copy" and an "exhibition copy"? A story on the Warhol Authentication Board's recent report on Hultén’s Warhol Brillo boxes may shed some light. Personally, I'm still a little confused.

Over 10% of "gold standard" forgeries of 20th century paintings went through Christie's

More than 30 paintings collectively worth an estimated £30 million were recently found to be forgeries of major 20th century artworks. Unsurprisingly, the forger's strategy is believed to have been "to create compositions that would relate to titles of documented works whose whereabouts are not currently known." Experts described the forgeries as "gold standard" but some of the works' inauthenticity possibly could and should have been discovered by the leading dealers and auction houses that sold them -- especially since a painting's provenance or history can apparently be discerned from labels or drawings on the back of it. For example, one of the four forgeries auctioned by Christie's had a fake label for "Flechtheim Collection" and it was this very label that aroused suspicions. I don't doubt how seriously the major auctions houses take issues of authenticity and provenance but it seems to me that failing to detect a fake label is hard to excuse and not comparable to not undertaking the (hugely expensive) expert scientific analysis prior to auctioning a painting (plus, I can imagine that having an expert do so is a double-edged sword because you can inadvertently taint a work that was authentic to begin with).

Sunday, October 17, 2010


LONDON. Another year, another Frieze Art Fair... and so much to cover! Here's a selection of the best links on the fair.

The estate tax's return explained

Art collections = estate planning = estate taxes... state AND now federal again?

The anticipated return of federal estate taxes- repealed as part of the Bush tax cuts of 2001- will affect many art lovers, and not in a good way. I would go into it in more detail but Forbes and Professor Bainbridge do a great job and offers some useful tips on how to minimize the impact of the dreaded return of this painful tax. NB- I could be wrong but shouldn't any and all trusts set-up always be irrevocable to avoid federal estate taxes?