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.