CollectionsThe Legal Picture: New Shake-Up of the Art Market Drives Demand for Legal Advice

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With international dealing, online sales, complex restitution cases and issues of provenance shaking up the art market, a collector may require a good lawyer more than ever. Anetha from Arts & Collections talks to LALIVE’s art law and private client specialists to unearth the legal issues affecting the art market.

Anetha at Arts & Collections: What do you believe are the main legal challenges affecting the art world at the moment?

Sandrine Giroud, Art Lawyer and Litigator at LALIVE: Restitution claims continue to get traction as the new generation of heirs of art collectors, whose assets were looted during World War II, want to recover what belonged to their families. In addition, we also see new claims raised by former colonies, in particular African states, for the return of artefacts in their countries of origin.

The increased use of art as a financial investment and art-secured lending have also given rise to new expectations from art collectors and investors regarding the regulation of art market conduct and in particular price manipulation, anti-competitive behaviours and undisclosed conflicts of interest.

Events in recent years have given rise to new legal risks impacting art transactions, such as money laundering or terrorist financing, as highlighted by the UN Security Council banning all trade with Syrian antiquities considered a major source of income for the Islamic State.

Anetha at A&C: Is the art market likely to become more regulated in response to questions about transparency and authenticity?

Sandrine Giroud: Maintaining trust and credibility in a market which has discretion at its core without undermining the commercial interest of the industry, while promoting fair and efficient practices, remains a challenge. The Fifth EU Money Laundering Directive has brought art dealers and auction houses into the regulated sector for anti-money laundering purposes, and the industry’s own Responsible Art Market Initiative helps art market players identify risks and address them practically and adequately.

Anetha at A&C: How will new technologies including blockchain transform legal approaches to provenance and ownership?

Teresa Giovannini, Art Law and Arbitration SpecialistNew models for art and risk management are emerging as a result of technological innovation including blockchain, tagging technology or the development of title registers. Several art start-ups are already building applications based on blockchain. The challenge will, however, be to establish and use similar standards to ensure the widespread use of such tools.

Anetha at A&C: What are the key points to consider regarding an art collection when planning an estate?

Werner Jahnel, Estate Planning Lawyer: Experience has shown that art work as part of an estate can be an important source of potential conflicts and endless and costly litigation. Problems can emerge when the potentially diverging interests of heirs, their lack of knowledge of the specific collection and the world of art in general, clash with delicate issues of legal, administrative, fiscal and logistical nature.

In this respect, the collector’s vision and objectives are the core of any decision regarding the structuring of a collection. They may include preserving the collection’s unity, ensuring a regular income for surviving family members, contributing to an artist’s legacy or pursuing an exclusive philanthropic goal.

From a legal standpoint, depending on where the collection and the collector are located, different legal options might be available. In that regard, the law under which the estate falls is crucial in order to identify the best suited legal structure to host the collector’s needs. The applicable law and tax implications will form the basis for the decision of whether the collection should be transferred to the heirs during the collector’s lifetime, whether the transfer should be in a will or whether the collection should be held through a legal vehicle such as a company, trust or foundation, or even to give it away to a charity or a museum. Inventory and regular appraisal are key in limiting disputes.

Anetha at A&C: How does the prospect of Brexit affect the legal position of UK art collectors?

Teresa Giovannini: Despite the insecurity surrounding Brexit, recent reports have shown that the UK has regained its position as the second largest art market (around 21 percent) after the US (approximately 44 percent) and before China (around 19 percent).

It is far ahead of other European art market centres such as France and Switzerland. Art transactions to and from the UK are largely extra-EU trade and therefore minimizing the impact of post-Brexit trade policies, but such policies will impact those businesses in Europe which rely on supply (and sales) from the UK.

Nonetheless, Switzerland, as a non-EU member, wishes to ensure that existing mutual rights and obligations will continue to apply post-Brexit and has put in place a “Mind the Gap” strategy providing for the smooth continuation of Switzerland and the UK’s bilateral relationships.

 

LALIVE is an international and independent law firm based in Switzerland, with offices in Geneva, Zurich and London, renowned for its expertise and experience in international legal matters, in particular dispute resolution. We provide comprehensive advice to clients helping them to anticipate, avoid, manage and successfully address potential or existing disputes around the world.

The firm’s thriving art law practice has a long tradition dating back to the interest and engagement of the firm’s founders in this area. Today, we represent and advise collectors, galleries, dealers, museums, auction houses and governments. Our art lawyers negotiate, litigate and advise our clients on all legal issues related to fine art and the art world.

To learn more about LALIVE’s Art law practice, please see: https://www.lalive.law/sector/art-and-cultural-property/

See Also: 

Property Investment: Not Just for Big Hitters

Which Luxury Collectables Should You Spend Your Money On?

Art Collector Olyvia Kwok Shares The Secrets To Her Investment Success

 

Unique in its broad international coverage of both arts and cultural events, Arts & Collections covers fine art from antiquity to modern times, auction records, a special sale preview by Sotheby’s, as well as market trends that inform collectors of the world’s finest items.

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