Art
Don’t Be Duped - Disputes In The Art World
Art fraud is a major problem when the sums in question run into millions, so due diligence and legal safeguards are essential.
A recent shocking case of art fraud in France underlines how due diligence on art sales and purchases is vital. With some fine art works commanding stunning figures and making the headlines, it is easy to see how fraud can be a big problem. With this in mind, Robert Ryall, joint head of SA Law's commercial litigation and dispute resolution department, explores the issues. The editors are pleased to share these thoughts and invite readers to respond. Email tom.burroughes@wealthbriefing.com
Just this month, an auction at Christie’s set a new record for a
private collection, with pieces from the Rockefeller’s collection
raising $646 million on the first night. It’s clear the art world
is booming, with auctions like this continuing to break records
and push prices sky high.
However, there’s a darker side to the art world – a thriving
underworld full of fake pieces and false promises. The number of
forged artworks on the market cannot be underestimated –
recently, experts at the Terrus museum in Elne, France,
discovered that 82 of the 140 works displayed were worthless
fakes. This discovery was made after it was spotted that one of
the paintings included buildings which were actually constructed
after the artist’s death. This shocking discovery has led to
experts fearing that many museums and galleries around the world
are unwittingly displaying fakes, with it reported that around 20
per cent of artworks are probably forgeries. Unsurprising really,
when you hear about famous forgers such as Elmyr de Hory, a
Hungarian artist who sold over 1,000 fake paintings which
convincingly imitated Picasso, Modigliani and Matisse.
This sort of news understandably makes those thinking about
investing in artwork feel nervous. With so many incredibly
high-quality fakes floating around, it can be difficult (not to
mention time-consuming and costly) to prove a work is genuine,
but of course this process is often necessary as it can be the
difference between actually owning a million-pound work of art,
or a worthless canvas.
In the case of Thomson v Christie Manson & Woods Ltd, Christie’s
was sued over the accuracy of their description of a "pair of
Louis XV porphyry and gilt bronze two handled vases." The
Claimant, having successfully bid £1.75 million for the urns,
contended that they were actually of a later date and therefore
worth drastically less. Ultimately, after a bitterly contested
court case the court held that, on the balance of probabilities,
the urns were probably correctly dated by the auctioneers.
Whilst a victory for the auctioneer, this case demonstrates the
difficulties and risk around inaccurately determining the origin
of art works and ornaments, even for the experts.
Sometimes legal issues can also arise when an artwork is genuine
- there are doubts as to the seller’s ownership or legal right to
sell it. For example, has a painting been previously stolen such
that the vendor cannot pass good legal title for the piece. The
rightful owner is entitled to the return of the art piece leaving
the innocent purchaser with nothing but an empty space on their
wall. The Art Loss Register comes into play here - an
international database which captures information about alleged
lost or stolen artworks which is used by experts to check pieces’
provenance.
If you find yourself in possession of art that you later learn
has been stolen, all is not lost. The first step is to find out
who actually holds legal title by consulting the Register. You
may find that the original owners are happy to sell their
interest in the piece and this isn’t necessarily as expensive an
exercise as it sounds. A client-purchaser who discovered their
new piece of art (worth some few hundred thousand pounds) had
been previously stolen from its owners during World War II by the
Nazis was able to buy out the original owner’s interest for a
fraction of the piece’s worth.
Legal disputes in the art world are fairly common, as evidenced
by the news that The Hague will soon open its Court of
Arbitration for Art. This is the first court of its kind - a
specialist body devoted to dealing with art disputes and run by
the Netherlands Arbitration Institute and the non-profit
Authentication in Art. This new court just goes to show how
frequently art disputes arise and the need for technical and
legal expertise.
However, whilst art remains a specialised field, many of the
legal issues are similar to other disputes. By way of example, a
client purchased an expensive piece for €950,000 ($1.124 million)
as part of a syndicate. They later found themselves pursuing a
breach of contract claim after their fellow investors failed to
pay them their share of the profits from the €4.1million onward
sale. It is noteworthy that the piece’s incredible increase in
value appeared to be attributable to the extensive provenance
assessments undertaken by the investors following purchase.
Thankfully, there are legal mechanisms to protect buyers of art -
both individuals and galleries - from being stuck with a forged
or stolen work of art. This is essential, as for many galleries
their reputation rests on their ability to source high-quality,
genuine works – if word gets around that a gallery has sold a
fake their standing in the art community would be ruined.