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.

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