Saturday, 12 April 2014

Priceless art discovered in US storage facility

Almost 80 paintings which went missing in 1998 have been uncovered by the FBI in a storage facility in the San Francisco Bay Area.

The artworks were all created by Polish artist Hanna "Kali" Weynerowska. Before she died, she bequeathed all the works to a Polish museum in Switzerland. At this point, it seems, the paintings all mysteriously disappeared. It was not until a few years ago, when the Polish Ministry of Culture established a fund to locate them, that the search for the artworks was reignited.

The San Francisco Chronicle reports that:
"...the FBI, contacted by the Polish government, tracked down a relative who led agents to a storage facility in Santa Rosa that held 75 Weynerowska originals. On Thursday, they arrived at the museum in Rapperswil, Switzerland, where Polish and U.S officials will attend a Ceremony of Restitution on June 16. 
The paintings, in the artist's distinctive pointillist style, have such titles as "Boy on Donkey," "The Cobbler" and "Walking a Bird." Their financial value is modest, perhaps $12,000 each, but "they are priceless emotionally ... very important to the legacy of Polish excellence," Caria Tomczykowska, an envoy of the Polish Consulate in Los Angeles, said Friday at a San Francisco news conference called by the FBI. 
"The FBI is proud to stand shoulder-to-shoulder with our Polish counterparts in ensuring safe passage of these lost national treasures," said David Johnson, special agent in charge of the FBI's San Francisco office.  
He said the male relative, whom he didn't identify, had handed the paintings over voluntarily and isn't in legal trouble. Despite the artist's bequest, Johnson said one or more of her local relatives had apparently held on to the works since 1998 because of the costs of shipping them, and "perhaps a bit of emotional attachment."
All's well that ends well. It does, however, seem very odd that the FBI and Polish governmental institutions were required to intervene to recover the paintings which were actually just being held by Weynerowska's relatives. Efficient allocation of resources??

Source: San Francisco Chronicle, 12 April 2014

Thursday, 10 April 2014

Snowy Mountain meltdown as precious artwork vanishes

If you see something like this, be sure to tell the HK police
"HK police seek 'thrown away' painting worth $3.72m" is the title of a BBC news post today which reads, in salient part, as follows:
"Hong Kong police are investigating the disappearance of a painting worth $3.7m (£2.2m) from a hotel, amid reports it may have been accidentally thrown away. The painting is believed to be a Chinese ink work by artist Cui Ruzhuo entitled Snowy Mountain.

It was reported missing by auctioneers Poly Auction on Tuesday, having been successfully sold on Monday. Several local media reports suggest cleaners at the Grand Hyatt could have thrown the painting out as rubbish.

According to the South China Morning Post, CCTV footage showed a security guard kick the packaged painting over to a pile of rubbish. Citing a police source, the paper said that cleaners were then seen throwing the rubbish away, with the rubbish taken to landfill. In a statement, the hotel said it was working with investigators.
"As the organiser has rented our event venue for this auction, Grand Hyatt Hong Kong is doing its best to offer assistance to Poly Auction including letting the police view the CCTV footage along with our security team," it said.
The hotel said the auctioneers were responsible for items they sold ...".
This blogger is not sufficiently familiar with the facts, the terms of any contract between the hotel and the auctioneers or the details of local law to be able to make any confident pronouncements as to who is responsible -- and for what. However, it seems to him that paintings and other artworks are so frequently disposed of, damaged or destroyed by cleaning staff that the risk of this happening is as much a foreseeable outcome of hosting an exhibition or auction that one might wonder why there isn't some regular routine or protocol that should govern what cleaners can and can't do in circumstances in which artwork is being exposed within their establishments.

Another point to ponder relates to the artist's resale right.  No such right appears to exist in the law of Hong Kong but, if it had, would an artist be able to secure a proportion of the auction price of the resale of a painting that was lost or destroyed before it ever reached its intended purchaser?

Friday, 4 April 2014

Kitchen art a bargain at 23 euro

The two paintings shown above, displayed under police guard, were found hanging on an Italian factory worker's kitchen wall, where they had been for the past 40 years. According to the BBC's version of the story, here, the art works -- by Paul Gauguin and Pierre Bonnard -- are said to be worth at least 10.6m euros (£8.8m). The story goes that they were stolen from a collector's London home in 1970 and, having been left on a train in Italy, with no indication of origin, they were purchased by a Fiat worker at a lost-property auction in 1975 for the princely sum 45,000 Italian lire (that's around 23 euros, or £19).

Italian culture minister Dario Franceschini claims this as something of a triumph:
"It's an incredible story, an amazing recovery. A symbol of all the work which Italian art police have put in over the years behind the scenes".
It's not immediately clear, though, what the Italian art police have been doing since 1970 since their involvement only appears to have started when the factory worker's son, who had a suspicion that one might be an original Gauguin, contacted art experts. If they'd attended the same lost property auction as the works' purchaser they might have been able to intervene a little earlier ...

Wednesday, 26 March 2014

Auction Houses already moving against ART Act

Since the American Royalties Too Act was introduced in the US Senate at the end of last month, it appears that Sotheby's and Christie's have already stepped up their lobbying efforts in Washington DC, with Sotheby’s sending lawyers to visit some lawmakers in the Capitol. Indeed, the New York Times notes that "Sotheby’s and Christie’s have spent about $1 million in the last couple of years to hire well-known legal and lobbying talent in Washington..."

In light of the failure of the earlier version of the bill (the Equity for Visual Artists Act), supporters of the ART Act have a tough fight ahead to get it through. However, Sotheby's and Christie's clearly do not want to take any chances.

The auction houses' arguments against a resale royalty are essentially the same as those that have been trotted out in other countries around the world against equivalent laws: that the royalty would damage the art market with little benefit to the majority of artists. However, while there may be artists who support the claim that they see little benefit from the right, there has still not been conclusive evidence to show that an artist's resale right has an negative effect on an art market.

It is still early days. Will it be best arguments or most money thrown at the issue that wins?

Source: The New York Times, 23 March 2014

Tuesday, 25 March 2014

Henderskelfe Round 2: Still no tax to pay on Reynolds' portrait of Omai

A year ago I reported on the case of Henderskelfe, in which the Upper Tribunal for tax announced an apparently odd decision: that an iconic portrait by Sir Joshua Reynolds, which had been sold for £9.4 million, was a “wasting asset” and that the sale proceeds were therefore exempt from capital gains tax.

The painting’s owners were saved a fortune. HMRC was not pleased, and appealed. More bad news for HMRC: the Court of Appeal’s decision, announced last week, agreed with the Upper Tribunal’s previous judgment and dismissed the appeal.

Sir Joshua Reynolds' Portrait of Omai, c.1775
Briefly, the reasoning behind the Upper Tribunal’s decision of last year was as follows. Since 1952, Castle Howard – the ancestral home of the painting’s owners - had been open to the public as a business. From 1952 until its sale the painting was on display in the Castle for the public to see. As a famous painting, it was one of the Castle’s attractions. The painting was therefore in the nature of “plant” – that is, an object retained and used for the purposes of a trade. Anything in the nature of “plant” is automatically deemed by the capital gains rules to be a “wasting asset”, and in turn wasting assets are exempt from capital gains tax. (See last year’s report for more detail.)

HMRC’s arguments that this exemption did not cover the painting were rejected by the Court of Appeal. The Court pointed out that, despite the fact that the painting was clearly not in any factual sense a “wasting” or depreciating asset (quite the opposite), it nonethless passed the tests set out by case law to be “plant” and as a consequence was clearly deemed by the capital gains tax rules to be a “wasting asset” for tax purposes. 

The Court also pointed out that the rules which exempt wasting assets from capital gains tax are not intended to be a generous measure allowing the "very occasional gainer from the disposal of a wasting asset to keep the gain tax-free”. By definition, wasting assets will normally be sold at a loss. Take a common example of a wasting asset: an ordinary car. On sale, its owner will almost certainly make a loss, not a gain. But since the car is exempted from capital gains tax, any gain on the sale would not be a chargeable gain, and – crucially – neither is any loss an allowable loss. In other words, the rules prevent the sellers of wasting assets from creating allowable losses which they could use to reduce any tax payable on other chargeable gains made during the year.

The present case is just one of those rare occasions when these normally HMRC-friendly rules work in the taxpayer’s favour.

Thursday, 20 March 2014

ArtsScape launched

This blogger's friends and former Slaughter and May colleagues Caroline Barnett and Bernadette Thomas have just let him know that they have set up their own legal and business affairs consultancy, ArtsScape, which is dedicated to the arts and creative industries. Caroline and Bernadette say:
"You’ll see from our website that we are now jacks of all trades rather than IP specialists, but IP forms a major part of the work we do".
This blog too is for art-oriented jacks of all trades rather than IP specialists, so we share the same footprint.  Good luck, Caroline and Bernadette, we're curious to see how this venture fares.

Wednesday, 19 March 2014

Good news for national heritage property in today’s budget announcement

Today’s 2014 budget announcement included some good news for the UK’s national heritage: the combined annual budget for the Cultural Gifts Scheme (CGS) and the Acceptance in Lieu scheme (AIL) is to be increased from £30 million to £40 million.

Head of a Peasant Woman, Vincent Van Gogh c. 1884.
Credit: The National Gallery. Donated under the CGS scheme in 2013

Under the well-established AIL scheme, a person who is liable for inheritance tax can offer pay that tax liability by means of giving “national heritage property” (broadly, art works and other objects which are deemed to be pre-eminent for their national, scientific, historic or artistic interest) in full or part payment of tax, instead of paying cash.

The newer CGS complements the AIL scheme by allowing UK taxpayers to make lifetime gifts of important works of art to the nation in return for reductions in their tax liabilities.

The two schemes currently share a budget of £30 million so that, in any given tax year, the reduction in tax effected under both schemes cannot exceed £30 million. If an artwork for was offered under either scheme whose value would cause the annual limit to be exceeded, it could not be accepted. That budget was raised from £20 million for the AIL scheme alone to £30 million when the CGS was launched, following criticism that the CGS would eat into the AIL scheme’s budget.

Today’s increase means that the potential amount of tax allocated to increasing the UK’s national heritage collection in public hands has doubled since the days since before the CGS was introduced.

Recent donations under the CGS include an early Van Gogh entitled Head of a Peasant Woman (reported on Art and Artifice here), now on display in the National Gallery. 

Tuesday, 11 March 2014

ArmaLite in Italy's sights over Gun-Toting David ad

Here's a guest post from Ironmark Law Group IP attorney and blogger Lucas Michels on some of the copyright-related aspects of a news item that has attracted a lot of attention in European copyright circles -- ArmaLite Inc's decision to harness the iconic image of Michelangelo's David in a recent marketing campaign.  This is what Lucas has to say:
U.S. Gun Manufacturer in Copyright Dispute With Italian Government Over a Gun-Toting David

Several news outlets reported earlier this week that U.S. weapons manufacturer ArmaLite Inc. is in a copyright dispute with the Italian government over ArmaLite’s advertisement depicting Michelangelo’s David brandishing an ArmaLite AR-50A1 rifle. The ad first came to the Italian government’s attention when ArmaLite published it in the Italian magazine L’Espresso. Following the ad’s publication, Italian cultural minister Dario Franceschini warned ArmaLite that, beyond being offensive, their ad violated Italian copyright law and that the Italian government would take action to stop the ad.

The Italian government can likely take such action because it claims ownership to Michelangelo’s David and the moral rights associated with the famous work. Although no legal claims have been filed in Italy or the United States, the Italian government would likely claim that the ad constitutes a moral rights violation under Italian copyright law because it is “prejudicial to the honor or reputation” of Michelangelo and it is a “distortion” and/or “mutilation” of David pursuant to Article 20(1) of the Protection of Copyright and Other Rights to Exercise (Law No. 633 of 22 April 1941).

This possible claim is by no means novel, even for an IP attorney from a weak moral rights jurisdiction like United States. Yet, what makes this dispute interesting is the possible defenses that ArmaLite could assert. ArmaLite could not likely argue that their ad is permitted as fair use, even under more lenient U.S. fair use standards (17 U.S.C. § 107), because the ad has a commercial purpose and uses the work in its entirety. An Italian Court would accept a fair use defense even less as Italy does not recognize the fair use doctrine under its statutory law, and has only acknowledged a few permissible exceptions to the unauthorized use of a protectable work.

Absent fair use, one of the only potential defenses that ArmaLite may assert is that the Italian federal government does not own Michelangelo’s David. It was reported in 2010 that the City of Florence (where David now resides) disputed the Italian government’s claim of ownership over David. The federal government asserts that they own David by having paid for moving the statute to its current location in Florence after Italy was unified in 1873. In contrast, Florentine officials claim that the Florence City Hall originally commissioned David from Michelangelo in the 16th century, thereby entitling the City of Florence to ownership over the work. To date, the Italian government and the City of Florence have yet to settle their dispute as to the ownership of David. 

Although it remains to be seen how the Italian federal government will pursue their dispute against ArmaLite, or who has valid title to Michelangelo’s David, the one thing no one disputes is that ArmaLite should have known that displaying David with an assault rifle in an Italian publication would have an adverse fallout in Italy.

Friday, 7 March 2014

Keith Haring Foundation sued by collectors claiming $40 million in damages after "fake" label

Keith Haring, "Untitled (Radiant Baby)", 1990
Nine art collectors have recently filed a $40 million lawsuit against the Keith Haring Foundation, which publicly labelled roughly 80 works as fakes, apparently refusing to consider additional information that would have helped to establish their provenance.

The collectors said that they started purchasing Haring's artworks from some artist's friends in 2007. In the same year, a dealer working with Elizebeth Bilinski, one the collectors, submitted photographic transparencies of dozens of the works and letters of provenance to the foundation's authentication committee, which rejected the works as "not authentic", without  any explanation, according to the suit.

In March 2013, the plaintiffs exhibited these works at a Haring show in Miami and the foundation sued the show's organizers claiming that the majority of the works were fake and that many of them had already been found to be "not authentic" by the foundation back in 2007 when Ms. Bilinski had submitted them.

The plaintiffs argue that the foundation's actions have "limited the number of Haring works in the public domain, thereby increasing the value of the Haring works that the foundation and its members own or sell." In this regard, they report that the foundation sold more than $4.5 million worth of Haring's artworks between 2008 and 2011, and then, in 2012, the foundation disbanded its authentication committee.

The plaintiffs seek $40 million in damages, saying that they lost sales because potential buyers were deterred by the foundation's statement and actions. The collectors said that their works were effectively unsalable in major auction houses if they were not first certified by the foundation.

The case is Bilinski et al. v the Keith Haring Foundation Inc. et al, U.S. District Court for Southern New York, No. 14 - cv-1085.

Thursday, 6 March 2014

American Royalties Too Act

A quick note further to our story last week.

For those that are interested in reading the full text of the ART Act, which was introduced in the US Senate last week, it is now available here.