Restitution
The return of cultural artefacts stolen from countries, such as those invaded by European powers during colonial times, is a topic of continuous discussion in the worldwide art world. Emmanuel Macron, the president of France, surprisingly demanded in a 2017 address the “temporary or permanent restitution” of artefacts with African ancestry held by French institutions. In 2021, the German government declared that arrangements to restitute Benin Bronzes from about 25 of its museums in Nigeria were almost complete. The International Institute for Art Law has offered commentary on the international restoration initiatives’ broader political context.
Restitution will become more than just a string of isolated, disconnected events as the returns of cultural artefacts increase or continue.” Something far more significant is going on here, a sort of reckoning with history. It is up to nations, organisations, companies, and collectors to choose how they want to function in this new environment. Maybe some may just let the moment go by. At the same time, others will undoubtedly take advantage of it.
In English law, a remedy known as private restitution seeks to return the money that someone else has wrongfully taken from them to an innocent party. See Restitution and Unjust Enrichment—Overview for further details. For a while, it wasn’t clear what the foundation of reparation was—contract law or something else entirely. As a result of Lipkin Gorman v. Karpnale, it is now established that the law of restitution is founded on the idea that unjust enrichment must be reversed rather than an implied contract.
Restitution claims over artworks that the Nazi Party confiscated in Germany after Jewish collectors held them are a common occurrence. The Spoliation Advisory Panel attempts to settle claims by heirs seeking recovery of property lost during the Nazi era that is currently housed in UK national collections in the public interest. Parties are expected to abide by the Panel’s recommendations, even if they are not legally binding.
In restitution cases, various defences, such as limitation, commonly come up. See Practice Note: Defences to Restitutionary Claims for an overview. See News Analysis: Restitution—limitation, change of position, proper law (Dexia Crediop v Commune di Prato) for a recent example, in which the court addressed issues as to restriction and change of position defences and the proper law of restitution claims and counterclaims between an Italian bank and an Italian local authority in a dispute arising out of payments made to one another under several invalid swap contracts.
Authenticity
Is there a piece of art that appears to be by a well-known artist—like a painting or sculpture—truly an example of that artist’s work? If a buyer feels that an artwork they purchased was incorrectly ascribed to a specific artist after it was sold, they may be able to sue the seller. The intricacies that emerge in these conflicts are demonstrated by a series of cases, including Leaf v. International Galleries, Drake v. Agnew, Avrora v. Christie’s, and Sotheby’s v. Mark Weiss Ltd & Ors.
Avrora Fine Arts Investment Ltd v Christie, Manson & Woods Ltd
In this instance, the painting “Odalisque,” which Avrora purchased at auction in 2005, was at issue. According to Christie’s, which conducted the auction, the painting was attributed to Russian artist Boris Mikhailovich Kustodiev. The auction house felt sufficiently confident in the attribution to guarantee its accuracy. However, Avrora later began to think that “Odalisque” was not actually a piece by Kustodiev, and it attempted to return the painting by the warranty that had been provided.
Even though “certainty on the point is [not] possible,” Newey J. concluded that Kustodiev did not paint the item after a thorough technical analysis comparing the pigments and techniques used in the painting to another work by the same artist. Newey J found that “Avrora’s claim under the Ltd Warranty succeeds” based on this. As a result, it is qualified to return the money it spent and to cancel its acquisition of the painting.
Sotheby's v Mark Weiss Ltd & Ors
The protracted Sotheby’s v. Mark Weiss Ltd. & Ors [2020] lawsuit EWCA Civ 1570 examined an artwork titled “Portrait of a Gentleman,” purportedly by Frans Hals, Mr. Weiss, and Fairlight, a corporation jointly held that. The owners submitted the picture to Sotheby’s for sale, which cost US$10.75 million with a premium. A guarantee of authenticity was included in the contract. When it became known that the painting had been acquired from a person in 2016 who had been involved in a forgery scandal, Sotheby’s proposed that the painting be re-examined to confirm that it was a fake. Sotheby’s got the painting back and gave the buyer their money back.
But Weiss and Fairlight refused Sotheby’s request for reimbursement for various reasons. When the matter finally went to trial, the High Court determined that Sotheby’s had acted “in accordance with the contractual framework” by returning the purchase price and that it was “reasonable and rational” for Sotheby’s to decide that the painting was a fake.
Qatar Investments and Projects Holding Co and His Highness Sheikh Hamad Bin Abdullah Al Thani v Phoenix Ancient Art SA
Finally, the case of His Highness Sheikh Hamad Bin Abdullah Al Thani and Qatar Investments and Projects Holding Co. v. Phoenix Ancient Art SA is an intriguing example of the practical problems that occur with authenticity claims in the contemporary international art industry.
The claimant paid almost $5.2 million for two items from the Swiss company Phoenix Ancient Art SA (Phoenix): the first was a figurine of Nike, the Greek deity of triumph, and the second was a head of Alexander the Great dressed as Heracles. Subsequently, it was claimed that both relics were recently manufactured, essentially worthless, or significantly less valuable than the amount that was sold for. Based on this, the claimant accused Phoenix of careless misrepresentation or breach of contract.
In principle, Phoenix and the second claimant—a member of the Qatari royal family and the CEO of Qatar Investments—agreed that Phoenix would provide six objects with varying ages and values in return for the two artefacts under dispute. Everything was set up to ship the things to the UK, but difficulties occurred during the shipment from the US, where five were detained. US Customs seized the items because of a problem pertaining to import/export regulations.
The parties attempted to resolve the disagreement through commerce for a considerable time afterwards. To maintain talks, the claimants entered into a standstill agreement to protect their claims, but problems with the standstill’s conditions surfaced. The rulings highlight how difficult it may be to resolve authenticity disputes and the importance of being clear about any standstill agreements made during talks. For more information, see Practice Note: Standstill agreements to suspend or extend limitation.
Negligence
In some instances, a person may want to assert that a third party—an auction house, for example—owed them a duty of care regarding the appraisal of artwork and that violating that duty caused the claimant to suffer a loss. One helpful example is the Thwaites v. Sotheby’s case.
Mr. Thwaites had a painting that he believed to be an original Caravaggio. He brought the artwork to Sotheby’s, which determined after careful internal analysis that it was not by Caravaggio. After that, Mr. Thwaite and the parties from Sotheby’s signed a sale agreement, and the picture was sold to a scholar of Caravaggio.
After thoroughly analysing the painting, the Caravaggio expert concluded that it was painted.
The plaintiff filed a negligence lawsuit against Sotheby’s, claiming that the defendant’s experts had not done enough research on the painting and had overlooked some details that would have made them aware of its “Caravaggio potential,” which would have led them to do additional technical examination and consult with outside experts.
In this instance, Rose J rejected the allegation, concluding that:
- Sotheby’s was required to fulfil its duty of care by the skill and care requirements that are appropriate and justifiable for a premier international auction house;
- A reputable auction house was required to properly inspect a piece of art that was consigned to them and take the necessary time to reach a definite opinion;
- Sotheby’s had the right to depend on its exceptionally skilled experts;
- After closely examining the painting, Sotheby’s concluded with reasonable grounds that it was not by Caravaggio;
- Therefore, Sotheby’s was not negligent since it had performed its duties with the standards of competence and care that were rightfully and reasonably expected of it.
The question of whether the contested picture actually had Caravaggio’s potential was addressed in detail during the trial, along with the techniques and supplies used by both Caravaggio and the painter. As in all such circumstances, there is a good chance that several experts will come to rather diverse conclusions about who is to blame for a certain piece of art.
Wealth and tax planning issues
Of course, art is a type of asset. Owners of art should make sure that, about any valuable items they own, they have taken into account the standard estate planning issues, such as the terms of their Wills, powers of attorney, charitable intentions, and standard tax planning, such as using the spouse exemption and making lifetime gifts.
Furthermore, various tax breaks are intended to shield the nation’s most valuable cultural assets from being sold to private buyers, keeping them in the UK and safeguarding them for the good of the whole country.
Conditional exemption from inheritance tax (IHT)
A transfer of the value of a qualifying asset may result in a deferral of the inheritance tax (IHT) obligation under Section 30 of the Inheritance Tax Act 1984 (IHTA 1984).
HM Treasury must determine that the asset is significant to the country. This includes extraordinary pieces of art, land of exceptional scenic, historic, or scientific value, and historically or architecturally significant buildings.
The asset will remain privately owned, but to keep it that way, the owner (or another appropriate party) must agree on a management plan, provide guarantees about maintenance, and grant reasonable public access.
When a property is disposed of—by death, sale, or gift—IHT will become due (although the new recipient may provide additional undertakings to guarantee the exemption lasts for the duration of the exemption provisions).
The Acceptance in Lieu (AiL) scheme
IHTA 1984, ss. 230 and 231 permit individuals subject to UK IHT liability to pay the tax by presenting property pre-eminent for their national, scientific, historical, or creative importance in whole or in part as payment for the IHT liability; HMRC and the Secretary of State must approve the application.
Gifts to the Nation Scheme
The government included provisions in the Finance Act 2012 (FA 2012) to encourage lifetime philanthropic giving. These rules allow donors to reduce their UK tax burden if they transfer pre-eminent property to qualifying institutions over their lifetime. Unlike AiL, which solely applies to IHT, gifts may lower corporation tax, income tax, or CGT.
Gifts to national institutions, charities or regulated clubs
Gifts to clubs, organisations, or regulated charities like the National Gallery (as listed in Schedule 3 of IHTA 1984) are exempt from IHT under IHTA 1984. 23–25. In some cases, the disposal of cultural property to Schedule 3 bodies is also free from CGT.
Artworks are frequently held in trust for wealthy families abroad (see Practice Note: What is an offshore trust?). High-priced art is becoming more widely acknowledged as an asset that may hold its value or, in certain situations, appreciate significantly over time. Trusts can be used to maintain and manage art collections for designated beneficiaries, along with luxury goods, automobiles, real estate, and other investments.
The conditions of the trust deed will govern the trustees’ responsibilities for overseeing the artwork. Are they needed only to keep up an existing collection, or must they create one for the recipients’ benefit as well? Are there investing obligations and charitable goals to consider? People who live in the UK but have trusts that are not in the UK may need guidance on the offshore tax system.
NFTs and the future of art law
The field of art law is ever-changing. Development is done in one area: “non-fungible tokens” (NFTs). These are digital files that are encrypted and associated with an asset. They are typically exchanged on a blockchain using computer code. NFTs have created a new field of copyright and contract law conflicts. Refer to IAL: NFTS thinking about copyright and contract dilemmas, part I and IAL: NFTS thinking about copyright and contract dilemmas, part II.
Quentin Tarantino’s attempt to turn seven scenes from Pulp Fiction into NFTs served as a recent example. The filmmaker’s original script and brief audio commentary were to be included in the Pulp Fiction NFTs. However, each NFT’s public face would be a scene trimmed from the original movie; each NFT [was] meant to hold a hidden piece of content that could only be accessed by the purchaser.
On the grounds of breach of contract and copyright infringement, Miramax Films, the company that produced the movie, filed a lawsuit in California to stop the NFTs from being auctioned off on the OpenSea NFT marketplace. In the upcoming years, art law consultants will probably be busy with more disputes of this nature and ones pertaining to other developing fields.
