Nazi looted art

The amazing discovery of over 1,400 pieces of Nazi era looted or forced-sale art, worth perhaps €1bn, in the flat of Cornelius Gurlitt in Munich, will probably be the art story of the year, and perhaps the decade.  Interest has naturally focused on the pieces themselves, although the German authorities seem slow and reluctant to release full details.

 

Also of interest is the potential for a bumper crop of restitution claims from the descendants of the original owners.  Usually, restitution claims present a difficult moral question as to whether the art should be returned to the original family, who suffered at the hands of the Nazis, or to the current owner who innocently and in good faith bought the art from an intermediate owner, who was probably also innocent.  US law is generally more ‘pro-original owner’, whereas in Europe we tend to be more ‘pro-current innocent purchaser’, which is why so many claims are brought in New York, where the courts take a rather liberal view of their jurisdiction.

 

However, it seems unlikely that claims to the Gurlitt art will be resisted by anyone claiming to be the current owner.  The most likely disputes will be between competing claimants.  For example, in 1930s Germany, a Jewish owner, needing to raise money in a hurry before fleeing, could have sold a piece, on what might arguably have been a ‘forced-sale’ basis, to a Jewish dealer or friend, who in turn lost the art in a forced sale or through confiscation.  Also, the passing of time leads to patchy evidence, which can cause all sorts of provenance disputes.

 

Here in London, there has recently been an issue about the Portrait of Amalie Zuckerkandl by Klimt, which is on loan from the Austrian Government to the National Gallery for its Facing the Modern exhibition.  That work was also subject to competing family claims. Although neither succeeded in an Austrian arbitration, there are still calls for the painting to be seized.  In this regard, my Boston art-lawyer friend Nicholas O’Donnell has just written a very interesting and informative article about the claims to the painting.  It is on his blog Art Law Report which I highly recommend.

Selling off the family silver

With the courts on vacation in August and September, and the summer exodus to art fairs, there have been few if any developments in English art law, which is my best excuse for the lack of recent posts.
 

However, I have noticed that the press and campaigners are increasingly focusing on something that has been going on ever since the recession bit in 2008, namely the sale of art by cash-strapped local government and other publicly funded organisations.  Christies’ appraisal of the contents of the Detroit Institute of Arts has led to a fear that the museum will be closed and the contents sold as part of the city’s insolvency process.  In England, many local councils have sold, or at least tried to sell, some of their art, from Henry Moore statues in public places (Tower Hamlets) to, most recently, the Chinese ceramics in a local museum (Croydon).
 

The campaigners rightly point out that the objects were usually given or bequeathed by benefactors with the intention that the local public should enjoy them.  There is also a political view against “privatisation”, or “selling off the family silver” as Harold Macmillan famously termed Margaret Thatcher’s denationalisations.  On the other hand, it is the valuable luxuries that should be looked to first when times get hard and, if the money cannot come from art sales, it will have to come from some further cut in services.  In the case of an insolvent public body, there will be deserving creditors to be paid, including local suppliers, staff and pension funds.
 

There are of course legal problems.

More on street art

My last post attracted quite a lot of interest.  So my colleague Ariana Issaias and I have produced an article on the legal issues relating to street art: Street Art: The Legal Issues

Selling Banksy street art

The Banksy “street art” hacked off a wall in Wood Green, North London is back in the press.  The piece, now known as "Slave Labour", depicts a Third World child working over a sewing machine making Union Jack bunting.

 

A few months ago it surfaced in Miami, where it was due to be auctioned. In the face of furore and protests from the bereft street art loving people of Wood Green, the piece was withdrawn from the auction.  Now it has returned to London, to be displayed, not far from my office, at the Film Museum in the old flower cellars in Covent Garden, where it is due to be auctioned on 2 June.

 

The brave organisers are a concierge business called The Sincura Group.  A statement on their website says:

 

“The Sincura Group do not condone any acts of wanton vandalism or other illegal activity, however after carrying out extensive due diligence with regard the works provenance and ownership we are entirely satisfied that the mural was legally salvaged and that its current owners and its representative are acting in good faith by consigning the piece to us to act as the centrepiece of our forthcoming art show 'Banksy at the Flower Cellars”.

 

It would be very interesting to have the details of the “provenance and ownership”, but even if the purchaser is also “entirely satisfied”, he will be taking a risk in buying Banksy street art.  I happened to advise a client last week who had bought a piece of street art attributed to Banksy and who had applied for an authentication certificate from Banksy’s certification body, which is called Pest Control.  In response they explained: “We do not authenticate street pieces [as distinct from prints and canvasses] because they were not created as commercial works of art”. According to its website: “Pest Control deals only with legitimate works of art and has no involvement with any kind of illegal activity”.  So clearly Banksy is not going to be helpful in establishing that he created Slave Labour, and he might at any time deny it or cast doubt on it.

 

Painting classed as "plant and machinery"

A judge hearing a tax case has held that Sir Joshua Reynolds’ painting Omai can be categorised as plant and machinery, as defined by the Taxation of Chargeable Gains Act 1992, and so is exempt from capital gains tax.

 

The painting was on display at one of England’s grandest stately homes, Castle Howard, which is open to the public,  and was said to be integral to the running of the house as a business.  It could therefore be treated as “apparatus” and in the circumstances the Act makes it clear that it is “deemed” to be a wasting asset that became worthless after 50 years of its acquisition by the business.  If something is “deemed” in law, then court must pretend it to be true, even if it is obviously not.

 

I’m sure this will be welcome news in the many stately homes that are run as businesses.  On the other hand, it will certainly not be welcome at HM Treasury, and I predict that the Act will be amended.  Until that happens, we might now see more valuable works put on the market, or changing hands to crystallise untaxable gains.

Sheikh Shaken

The reports of the asset-freezing injunction obtained in London against a member of the Qatari royal family, Sheikh Saud Bin Mohammed Bin Ali Al-Thani, for failing to pay for ancient Greek coins, where he had been the successful bidder at a New York auction, has sparked a lot of interest.

The recession and the conduct of the international rich, particularly from China, has caused a serious rise in payment defaults after auctions.  So are asset-freezing orders the answer?

In England you can get such court orders to freeze all assets in England and, if justified the whole world, to support proceedings brought overseas or in England.  They are not granted automatically; the court needs to be satisfied that there is a severe risk of dissipation, that is that the assets might be moved or disposed of to frustrate enforcement of an eventual judgment.  The court can exercise its power over the defendant and third party asset holders, eg banks, that are within the jurisdiction, over assets they control anywhere in the world, and require disclosure of what assets they hold, or what became of assets previously held. 
 

It’s not cheap to get such an order, and it may require more than one hearing. £20,000 would not be untypical.  However, although a freezing order is procedurally just a first step in aid of substantive proceedings, the successful obtaining of such an order usually leads to early settlement.

Back with two updates

I’m sorry it’s been a while since the last post.  My excuse is that I’ve been heavily tied up in a long trial.  My client is a well known Middle Eastern art collector, but the case was about investments other than art, so there’s nothing relevant to post.

Now I’m back, I can restart with two updates on previous posts.

My post Inspiration and Risk Management, on the fire risk of some installations, proved to be prophetic: one of my followers has pointed out this interesting report: Huffington Post.

There has been a happy outcome for the Henry Moore sculpture outside the Houses of Parliament, which was the subject of my post Res Nullius.   The Art Newspaper reports that ownership has now been “taken on by the House of Commons”.  I’m not sure how that can work as a matter of law, but let’s not challenge it.  The important thing is that this badly neglected sculpture is to be restored with money from the Parliamentary Art Collection and the Henry Moore Foundation.