Mark Stiebel and Anastassia Dimmek contribute to the third edition of The Art Law Review: United Kingdom chapter

  • January 16, 2023
  • By Mark Stiebel, Partner and Anastassia Dimmek, Associate

Mark and Anastassia’s UK chapter in the third edition of The Art Law Review was published on 6 January 2023 and can be found here


During 2022, the development of the art market in the United Kingdom was characterised by a combination of factors, including the aftermath of the pandemic and the new trading realities following the end of the Brexit transition period, Russia’s invasion of Ukraine, the ensuing energy crisis and attacks on art at public institutions. At the same time, headway was made in the arenas of digital art and the repatriation of cultural objects from the colonial era.

On the basis of the latest Art Basel annual market report, the UK remained one of the major centres of the international art market in 2021, but has slipped to third position, with a 17 per cent market share of worldwide sales by value, closely behind the US and China, the latter of which maintained its 2020 share of 20 per cent.2 Despite this change in global rank, the UK market saw a 14 per cent increase in value of sales to US$11.3 billion, following two years of declining sales in 2019 and 2020, and continues to dominate among the wider European art market.3

Auction sales accounted for just under US$3.5 billion in sales, with an increase of 23 per cent compared to the previous year, and the UK retained its market position for auction sales of third place globally, with a 13 per cent market share.4 The current auction trend for blended sales of modern and contemporary art continued at Christie’s, Sotheby’s, Bonhams and Phillips. Dealers in the UK also saw positive growth, with sales rising by 4 per cent.5 Those in the contemporary art market tended to do better than dealers in the other sectors of the market again, with a growth rate of 22 per cent compared to 21 per cent.6 Sales via in-person art fairs saw a significant increase in 2021, to 29 per cent of all sales made by dealers, following the pandemic-driven decline in 2020, but remaining below the 43 per cent recorded in 2019.7 The experience in the UK reflected an increase in sales made at art fairs globally. During 2021, regional and local art fairs tended to dominate, with many pandemic-related travel restrictions hampering international fairs.8

Like all other art market centres, the UK market was fundamentally affected by the covid-19 pandemic in 2020, with a large number of art fairs cancelled, galleries closed and economic uncertainty contributing further to declining sales. 2021 saw a continuation of the use of online sales, with 68 per cent of dealers reporting that they no longer felt that the shift towards online marketing was merely a transitory response to the lockdowns. There was a 13 per cent increase in the number of dealers seeking to expand their digital teams and presences with online exhibitions and viewing rooms compared to 2020, making the digitalisation of the art market set to be a permanent feature.9 At the same time, there has been a significant rise in the number of in-person events throughout 2021 and early 2022; 39 per cent of dealers indicated in an Art Basel report survey that they felt the share of sales made through digital platforms had reached a plateau and that there was still a significant place for in-person fairs and events.10

Frieze London 2021 had almost returned to similar levels of the number of exhibitors of pre-covid times, while visitor numbers were still comparatively low at 80 per cent of the numbers seen in 2019.11 An initial review of Frieze London 2022 showed that attendance increased even further, with many visitors from the US confident to travel again.12 The vast majority of dealers reported feeling positive about the return to live exhibitions in 2021, and dealer priorities over the next couple of years have seen a shift in focus back onto art fairs.

Non-fungible tokens (NFTs) continue to dominate news headlines. During the year, NFTs established themselves as a feature of the global art market, with 73 per cent of all NFT-related transactions by value being secondary market sales (as opposed to primary sales, which dominated the market in 2020). The sale of art-related NFTs reached a value of US$2.6 billion in 2021.13 An NFT is a digital asset whose underlying immutable code in the blockchain is being promoted as quelling authenticity and copyright concerns by recording a unique ownership signature. Smart contracts are used to set out rules as to which rights purchasers acquire and how the copyright in the digital asset can be licensed. The first transaction that drew wider attention to NFTs was the sale of Beeple’s Everydays: The First 5000 Days at Christie’s for US$69.3 million in March 2021.14 Sotheby’s and Christie’s sold an estimated US$230 million in NFTs in 2021, although the Art Basel report notes that NFT sales continue to make up only a small portion of these auction houses’ total sales.15

While stories of fraud and hackers have been making news,16 NFTs have found traction with established institutions, with the British Museum creating NFTs for its Hokusai exhibition, for instance.17 However, the NFT market has also proven to be volatile, when its value plummeted by 69 per cent in the autumn.18 The UK government has launched an inquiry into the future of the NFT market, which will close in January 2023. It will discuss ‘the operation, risks, and benefits’ of NFTs and the wider blockchain and is predicted to focus on the protection of vulnerable consumers.19 The English courts have, by now, also had a chance to deal with claims involving NFTs; in Osborne v. Others,20 the claimant’s NFTs had disappeared from her digital wallet, and the judge, being satisfied that NFTs could reasonably be treated as property under English law and that damages would be inadequate, granted an interim injunction restraining the dissipation of the NFTs, and a disclosure order for the platform OpenSea.21 In another case involving cryptoasset fraud, the High Court permitted the service of an interim freezing injunction by NFT to the anonymous defendant’s digital wallet.22 This signifies a step forward for the victims of cryptoasset fraud.

The year in review

While the impact of the energy crisis, the attack on works of art at cultural institutions and the fate of NFTs have been attracting most of the news headlines in the art industry over recent months, the implications of Brexit on the trade between the UK and the EU have become clearer and are starting to be felt in the art market. These Brexit-related changes are most noticeable in the areas of application of VAT to imports and exports of artwork, import and export licensing, customs procedures and cross-border dispute resolution, but have many more far-reaching implications on a wide range of factors beyond the trade in goods and services. These include the ability of art businesses and institutions to employ European staff and artists living and working in the UK, after the free movement of people came to an end. There has been a decline in the number of high-value sales being brought into London, with other European markets (most notably France and Germany) experiencing a boost in sales as a result.23

On the regulatory side, a year on from the deadline for art businesses who qualify as art market participants (AMPs) to register with His Majesty’s Revenue and Customs (HMRC), we now see a toughening stance by the authorities against AMPs who do not fully comply with the regulatory requirements of the Fifth EU Anti-Money Laundering Directive (5AMLD) and the implementing UK regulations.24 HMRC, as the sector regulator, has started to not only enforce registration following the 10 June 2021 deadline, but also conduct ‘interventions’ (audits) of registered AMPs to ensure ongoing compliance of their internal risk-assessment procedures and record-keeping of client due diligence information. There have been concerns over whether AMPs fully understand their obligations in respect of the personal data collected for anti-money laundering purposes under the Data Protection Act 2018. The government released further guidance for AMPs on 28 June 2021 to expand on practical issues, such as understanding different types of risk indicators.25 This was followed by updated guidelines by the British Art Market Federation (BAMF) in June 2022.26

The Ivory Act 2018 saga has come to a close this year, it seems, with the Act finally coming into force on 6 June 2022. It is one of the world’s toughest bans on the trade and cross-border movement of ivory. It is predicted to significantly hamper the trade in artefacts containing ivory, with proponents calling it landmark legislation in the protection of endangered species.27 The past couple of years have seen judicial review proceedings and an appeal made against the Act’s implementation being rejected, culminating in the Supreme Court’s further rejection of an application for permission to appeal on 30 July 2020.28 The ban applies to domestic dealings with elephant ivory, as well as exports from and imports into the UK, with only a limited list of exemptions available.29 A consultation on the possible extension of the Act to other ivory-bearing animals (i.e., hippos, walruses and whales) closed in autumn 2021. A response is set to be published at the end of 2022.30 The rules under the new Act are described in more detail in Section V.

Public institutions have recently been at the centre of attention following Russia’s invasion of Ukraine, with artwork currently on loan to UK institutions, along with other luxury assets, coming under public scrutiny in light of sanctions imposed by the UK against the Russian government and listed individuals. A prominent example was the loan of a Fabergé imperial Easter egg made for Tsar Alexander III to the Victoria and Albert Museum for a Fabergé exhibition in early 2022. It was lent by the Link of Times Foundation, which in turn was effectively owned by Viktor Vekselberg, a sanctioned Russian oligarch. Several other items on display were borrowed from Russian state-owned museums.31 A number of institutions had to rely on the immunity of seizure regime, which allows foreign objects on temporary loan for public display at certain museums or galleries in the UK to be immune from seizure by court order for up to 12 months.32 As part of this debate, the Cultural Objects (Protection from Seizure) Act 2022 came into force on 28 June 2022. Most notably, this Act allows the Secretary of State to extend the maximum period of protection due to unforeseen circumstances by a further three months and to exercise this power on more than one occasion.33 This could extend an item’s immunity for significant amounts of time. While deciding how to handle the display and return of these objects is a judgement call for individual institutions, it has been challenging for them to have to deal with public opinions, sanctions, legislation and contractual obligations with the lender.

At the same time, cultural institutions have come under pressure to terminate corporate sponsorships with companies that are subject to public criticism and controversy. Earlier in 2022, the National Portrait Gallery announced that it would terminate its partnership with energy provider BP with effect from December 2022.34 The Tate also terminated its affiliation with its corporate sponsor.35 The Victoria and Albert Museum recently announced the removal of the Sackler name from its galleries, with the Tate, the National Gallery, Serpentine Galleries and the British Museum also removing the name over the past year. Historically, museums considered corporate business affiliations as a good income stream; however, with public pressure mounting, we can see the growing importance of demonstrating independence as an institution with sustainable and ethical policies.

Recent months have also seen an escalation in art pieces being targeted in protests in galleries and art institutions all over Europe, with several incidents in the UK. Climate change protesters glued themselves to famous works of art at the Manchester Art Gallery, the Courtauld Gallery and the National Gallery in London.36 Just Stop Oil protesters threw canned tomato soup at Vincent van Gogh’s iconic Sunflowers painting in the National Gallery and were arrested for criminal damage and aggravated trespass.37 These attacks have raised a number of issues that public institutions and policymakers have to grapple with, including how to maintain the confidence of lenders of fine artwork, risk-allocation in this type of incident and how these attacks ought to be treated from a legal perspective. It remains to be seen how this apparent trend will develop.

This year was significant for the progress made in the field of repatriation of colonial objects. Museums in Oxford and Cambridge announced that they will return 213 Benin Bronzes held by them to Nigeria, and the Horniman Museum in London has confirmed that it will repatriate 72 Benin Bronzes.38 Emphasis has begun to shift towards ensuring constructive dialogue and transparency between institutions and claimants. In August 2022, Arts Council England published ‘Restitution and Repatriation: a Practical Guide for Museums in England’, which offers guidelines to cultural institutions on how to handle a claim for restitution.39 For further details on repatriation see Section III.ii.

Art disputes

i Title in art

Under the Sale of Goods Act 1979 (SGA), title passes when the parties to a transaction intend it to pass. Where this is not set out in the contract, various assumptions assist with ascertaining when the parties to a contract intended title to pass. In the case of a private treaty sale of an artwork, title would be assumed to pass when the contract is entered into. Parties will generally displace this rule in their contract for sale by stipulating that title passes on payment of the purchase price. Auction terms also generally stipulate that title to a lot passes on payment, rather than on the fall of the hammer, which is the point at which the contract is usually formed at auction.

The SGA implies certain terms into contracts of sale, including that, unless the seller expressly sells goods subject to limited title (or this can be inferred from the circumstances of the sale), the seller has a right to sell the goods, that the goods are free from any undisclosed charge or encumbrance, and that the buyer will enjoy quiet possession of the goods.40

There have been a number of recent high-profile cases of art agents and dealers acting dishonestly, including by selling artwork more than once to different parties, or without permission from their owners, or by fraudulently securing loans against artwork. London, being one of the centres of the international art market, has attracted its share of these fraudsters. Inigo Philbrick, who was arrested by the US Federal Bureau of Investigation in the summer of 2020,41 had a gallery in Mayfair. Matthew Green, part of the Green dynasty of art dealers in Mayfair, was sentenced in May 2022 by a US District Court to seven years in prison for committing, in the words of the judge, ‘one of the most significant frauds in the art market in history’.42 In July 2021, art intermediary Angela Gulbenkian was sentenced to jail by Southwark Crown Court for stealing more the US$1.4 million as part of an art deal and art investment transaction.43

Although the buyer has no legal duty to enquire into title under English law, this is of no comfort if the buyer has been the victim of fraud. Ultimately, the buyer, for their own protection, is responsible for performing due diligence in relation to the transaction and establishing good title. This includes making sufficient enquiries into the identity and reputation of the seller and the provenance of the artwork, and checking registers of lost or stolen art. A buyer who fails to perform due diligence may also unwittingly expose themself to a claim by the true owner in conversion if an artwork is discovered to be stolen or otherwise misappropriated. In that case, the burden of proving that the purchase was made in good faith rests with the buyer.

A buyer who knowingly purchases stolen or illicitly excavated or exported cultural objects faces potential sanctions under criminal law. Under the Dealing in Cultural Objects Offences Act 2003, the Theft Act 1968, the Cultural Property (Armed Conflicts) Act 2017 and the Proceeds of Crime Act 2002, a dishonest buyer might commit various offences, including dealing in cultural objects that are tainted, handling stolen goods or acquiring or possessing criminal property.

ii Nazi-looted art and cultural property

Restitution of Nazi-looted art

Claims involving art looted or otherwise forcefully appropriated during the Nazi regime are less frequent in the UK compared to other European countries. They do often arise in the London art market when works of art with tainted provenance are consigned for sale at auction or otherwise offered for sale. These claims are generally resolved through negotiation between the claimants and present owners of the artwork, where appropriate, involving mediation. Historic claims are unlikely to succeed in civil court proceedings where the Limitation Act 1939 applies and claims have invariably become time-barred.

The Spoliation Advisory Panel was established for the purposes of the Holocaust (Return of Cultural Objects) Act 2009 and considers claims from anyone (or from any one or more of their heirs) who lost possession of a cultural object during the Nazi era (1933–1945), where the object is (1) now in the possession of a UK national collection, or (2) in the possession of another UK museum or gallery established for the public benefit. The Panel’s recommendations are not legally binding but have, to date, in each case been accepted and implemented by the Secretary of State. The Panel operates under its own terms of reference and rules of procedure.44 The Panel’s paramount purpose is to achieve a solution that is fair and just both to the claimant and to the institution. The Panel’s proceedings are an alternative to litigation, not a process of litigation. The Panel will therefore take into account non-legal considerations, such as the moral strength of the claimant’s case.

If the Panel upholds the claim in principle, it may recommend:

  1. the return of the object to the claimant;
  2. the payment of compensation to the claimant, the amount being in the discretion of the Panel having regard to all relevant circumstances including the current market value, but not tied to that current market value;
  3. an ex gratia payment to the claimant;
  4. the display alongside the object of an account of its history and provenance during and since the Nazi era, with special reference to the claimant’s interest therein; or
  5. that negotiations should be conducted with the successful claimant to implement the recommendation as expeditiously as possible.

The Panel also provides a private mediation service and may be designated to advise about any claim for an item in a private collection at the joint request of the claimant and the owner. In May 2022, a landscape painting by Courbet in the Fitzwilliam Museum in Cambridge, was referred to the Spoliation Advisory Panel to investigate its provenance to establish if it was seized by Nazi agents during the Second World War.

Following the London Spoliation Conference in 2017, the Spoliation Advisory Panel and restitution committees of France, Germany, Austria and the Netherlands came together to form a Network of European Restitution Committees for the purpose of enabling greater collaboration and information sharing between the committees.45

Repatriation of cultural property from the colonial era

Over the past couple of years, the public debate about the return of colonial-era cultural artefacts by UK and European institutions to their countries of origin has intensified. It has brought into focus the role of the museum as a custodian of cultural objects and the UK’s reassessment of its colonial history, and there is now a growing awareness and support for cultural restitution.

There have been calls to find an appropriate process to review museum collections, and discussion as to whether a panel, such as the Spoliation Advisory Panel (which deals with Nazi-looted art), should be involved based on an expanded mandate, or whether an approach based on self-evaluation by individual institutions would be best suited to identify and analyse claims for the return of these items.46 For the time being, there is no uniform process based on modern and updated guidelines. That is why individual decisions vary significantly on a case-by-case basis, with university museums pursuing increasingly liberal repatriation policies.47

Earlier in 2022, museums in Oxford and Cambridge announced that they will return 213 Benin Bronzes held by them to Nigeria, and the Horniman Museum in London has confirmed that they will repatriate 72 Bronzes.48 The British Museum received a freedom of information request in September 2022, which asked for details on historical requests made for the return of the Ethiopian sacred Tabots since 1990 and how these requests were handled by the Museum’s trustees.49 These developments highlight how attention has shifted towards ensuring constructive dialogue and transparency between institutions and claimants.

In August 2022, Arts Council England published ‘Restitution and Repatriation: a Practical Guide for Museums in England’, which, while not legally binding, offers guidelines to institutions on how to approach a claim for restitution, how to prepare in advance by collating and publishing detailed provenance of items held in their collections, and the types of outcome that may be agreed with the group requesting the return.50 The guidance distinguishes between claims based on legal and ethical grounds, and while some claims exhibit a mixture of both, it is more common to see claims that have to be made on ethical grounds, with no objective standard to assess these. The guidance proposes to consider, inter alia, the significance of the object to the claimant, how the object was removed from its place of origin, how the museum engaged with the object and the identity of the claimant when considering repatriation.51 Repatriation does not necessarily mean the transfer of legal ownership and physical delivery of the object, but can entail a plethora of bespoke arrangements suited to the individual object’s specific circumstances, such as loans or rights of access or control.

The UK has strict rules on deaccessioning, which means that some national museums are prevented by statute from permanently removing artefacts in their collections, and therefore face significant hurdles if they wish to repatriate cultural objects. A prominent example is the British Museum Act 1963, which restricts the British Museum’s ability to deaccession items. The Charities Act 2022 initially included provisions in relation to ex gratia payments, which effectively would have allowed museums to deaccession objects in their collections if the trustees considered there was a moral obligation to do so. However, while the first wave of the Act came into force in late October 2022, these particular provisions have been set aside for further consideration.52 A House of Lords debate in mid-October confirmed that the government currently has no intention of amending the National Heritage Act 1983 to remove the restrictions on deaccessioning.53 It remains to be seen whether the provisions in question will be implemented at a later stage.

iii Limitation periods

Limitation periods for art claims are governed by the Limitation Act 1980. The general time limit for an action founded on tort or contract is six years from the date on which the cause of action accrued. The start of the limitation period can be deferred in cases where an action is based on the defendant’s fraud or concealment of the claimant’s right of action, or in cases where a mistake has taken place. In these cases, the limitation period runs from the time when the claimant discovered, or could with reasonable diligence have discovered, the fraud, concealment or mistake. The general limitation period still applies in cases of theft but, to prevent time running in favour of the thief, the limitation period is suspended in cases where a chattel has been stolen until the chattel is purchased in good faith by a third party, at which point time begins to run.

The position was different under the previous Limitation Act 1939, which applied until May 1981. Under that legislation, the six-year limitation period started running from the original conversion, rather than a good-faith purchase. This is particularly significant in relation to historic claims involving the looting of objects during the Nazi era as legal title will inevitably have been extinguished where a conversion can be established.

A recent High Court decision in a case concerning a claim over allegedly fake antiquities highlights the importance of timely service of process once a claim form has been issued, to prevent proceedings from becoming time-barred.54

iv Alternative dispute resolution

Alternative dispute resolution (ADR), including mediation, arbitration and expert determination, has become an established part of the dispute resolution toolkit in the UK. The fact that ADR proceedings can be agreed to be confidential, and lend themselves to the resolution of cross-border and multiparty disputes much more readily than proceedings before a national court, makes them particularly suited to the resolution of art and cultural heritage disputes.

It is now a well-established principle under the Civil Procedure Rules that a party to court proceedings that refuses to engage in ADR at the request of another party may be ordered to pay some (or even all) of the other party’s costs of the proceedings if the court determines that the refusal to mediate was unreasonable, even if that party is successful at the trial.

The Civil Mediation Council serves as an independent body to represent and promote civil and commercial mediation in the UK; it promotes best practice and operates an accreditation scheme for organisations that provide mediation services.55 Art Resolve provides specialist art mediation services in the UK.56

Fakes, forgeries and authentication

The principle of caveat emptor, or buyer beware, applies to the purchase of artwork. The level of due diligence that is required by the buyer will depend on factors such as the relative experience of the buyer and the seller, and the reliance placed by the buyer on the seller’s expertise in the subject matter. The outcomes of authenticity disputes usually turn substantially on their facts.

If an artwork turns out to be a fake or forgery, a buyer’s recourse may depend on whether the artwork was bought through a dealer or at auction. Most major auction houses offer a limited contractual authenticity guarantee in relation to items catalogued without qualification as being by a particular artist, which entitles the buyer, subject to various conditions being fulfilled, to return an artwork within a set time period if the work turns out to be a fake or forgery.

These authenticity guarantees also usually extend to private treaty sales via auction houses. This was recently illustrated in a dispute involving a painting attributed to Frans Hals. In 2010, Sotheby’s brokered the sale of the painting between co-owners, Fairlight Art Ventures and London dealer Mark Weiss, and US collector Richard Hedreen, who paid US$10.75 million for the painting. A few years later, following scientific analysis of the painting, Sotheby’s accepted that the painting was a forgery, rescinded the contract for sale, and refunded the full purchase price to the buyer. Litigation ensued over whether the sellers were, in the circumstances, legally liable to repay their portions of the sale proceeds to Sotheby’s. The sellers maintained that the painting was genuine and refused to agree a refund. Mr Weiss eventually settled out of court while Fairlight and Sotheby’s continued to trial. The High Court found in Sotheby’s favour in December 2019.57 In November 2020, the Court of Appeal dismissed Fairlight’s appeal, upholding the lower court’s decision that Sotheby’s was entitled to a reimbursement. The Court was not asked to consider whether the painting was indeed a forgery.58

Dealers may offer a contractual warranty or, if the contract is silent on these points, certain statutory warranties in relation to the quality of an artwork, its fitness for purpose and whether it matches its description, will be implied into the contract for sale either under the SGA in business-to-business sales59 or under the Consumer Rights Act 2015 (CRA) in business-to-consumer sales.60

If a sale is deemed a sale by description, and the artist is wrongly identified, the buyer will, in principle, have the right to cancel the sale. Traditionally, however, the English courts have not regarded sales of artwork, even if the artwork is clearly attributed to a particular artist, as sales by description. The case law in this regard has consistently concerned sales between art market professionals on both sides of the transaction and it remains to be seen whether the courts would be prepared to imply more readily a sale by description in a transaction between a dealer and a consumer, given the protections now afforded to consumers by the CRA.

Art transactions

i Private sales and auctions

The increasing shift from face-to-face transactions to online dealings during the pandemic has had far-reaching legal and practical implications for art businesses of all types and sizes. Similar to other jurisdictions, the UK has seen an increase in online auctions and private treaty sales, both in the primary and secondary markets, being executed by remote means, as well as artists and dealers making greater use of online viewing rooms, online exhibitions and social media platforms to market and sell items directly to an expanded and often global client base.

Many auction houses offered online sales before the pandemic but nevertheless faced a logistical challenge in moving more sales to an online format, due to the lack of opportunities for presale viewings and changes to collection and delivery processes. Sales that try to preserve a traditional format with an auctioneer standing at a rostrum and taking bids on commission and via telephone, as well as online, are still classified as ‘online only’ sales if members of the public are not able to attend in person. This has implications, in particular, for the application of consumer protection legislation to these sales.

Sales of artwork to individuals are regulated in the UK through a range of consumer protection legislation, of which the CRA and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 are of primary importance. The effect of this legislation is to impose requirements on art businesses selling to individuals, including to make prescribed information available to the consumer in writing before a contract is entered into, to imply various seller warranties into any contract for the sale of an artwork, and to inform the consumer about applicable cancellation rights if the sale is made off-premises (away from the trader’s usual business premises) or by distance means (e.g., telephone, email or via a website). Consumer protection legislation in the UK is largely derived from EU directives and regulations and it remains to be seen whether they will eventually be amended or revoked altogether in the wake of Brexit.

ii Art loans

Loans of artwork for exhibition from private lenders to public museums will typically be insured under the Government Indemnity Scheme, which is administered by Arts Council England.61 Importantly, certain risks are excluded from cover under the scheme and borrowers and lenders should consider taking out additional commercial insurance cover for excluded risks.

Sections 134 to 138 of Part 6 (Protection of Cultural Objects on Loan) of the Tribunals, Courts and Enforcement Act 2007 provide immunity from seizure for the loan of certain works of art usually kept outside the UK and not owned by a person who is resident in the UK, when the work enters the UK for temporary, public, not-for-profit exhibition at an approved museum or gallery. They are supplemented by the Protection of Cultural Objects on Loan (Publication and Provision of Information) Regulations 2008. The Cultural Objects (Protection from Seizure) Act 2022 has now expanded the power of the Secretary of State to extend the maximum period of protection from seizure due to unforeseen circumstances and to exercise this power on more than one occasion.

iii Cross-border transactions

The importation of cultural goods into the UK is not currently subject to any licensing regime, although certain imports are prohibited (e.g., on the basis of United Nations sanctions (see further below) or in the case of material originating from endangered species under the Convention on International Trade in Endangered Species of Wild Fauna and Flora or the Ivory Act 2018).

The trade in artwork and cultural artefacts between the UK and the EU has been fundamentally affected by Brexit. From a practical point of view, the changes affecting the VAT treatment of imports and exports, and new customs entry and exit procedures, have had the most significant impact on the art industry. Artwork sold from the UK to the EU will now generally be subject to import VAT in the destination country and vice versa. UK export licences continue to be issued by Arts Council England. Imports of (qualifying) artwork from the EU into the UK will require an EU export licence. The UK and the EU will continue to facilitate the return of cultural objects illicitly removed from the UK or EU after 1 January 1993, or not returned at the end of a period of lawful temporary removal (previously governed by EU Directive 1993/94), but the direct right of action in the courts of another Member State has been removed.

The cross-border movement within the EU of cultural goods originating from outside the EU is affected by Regulation (EU) 2019/880 (the Regulation), which came into force on 27 June 2019. The Regulation requires the creation of a central electronic database for the licensing and registration of cultural goods, which must be implemented no later than 28 June 2025 and which now prohibits the import into the EU of certain cultural objects of particular importance, whether for archaeological, historical, literary, artistic or scientific reasons, that have been illegally removed from their country of origin. Cultural objects that have been legally introduced to the EU and meet certain age and value thresholds will require a licence or importer statement. While the Regulation initially formed part of retained EU law under the EU (Withdrawal) Agreement Act 2018 following Brexit, the UK government repealed the Regulation by Article 2 of the Introduction and the Import of Cultural Goods (Revocation) Regulations 2021, which came into force on 24 September 2021.62 It is, however, important to note that the revocation will not impact the continued application of the Regulation to Northern Ireland as part of the Ireland/Northern Ireland Protocol.63

From 1 January 2021, European Council Regulation (EC) No. 116/2009 on the export of cultural goods (as amended) no longer applies to the UK, and UK rules now govern all exports, regardless of their destination. EU licences granted prior to that date will continue to be valid for their term (up to a limit of 12 months) and restrictions relating to any licences already in operation, such as temporary EU licences, will continue to apply. Following the end of the transition period, a UK licence to export cultural objects to any destination outside the UK will be required. This does not apply to the export of goods of cultural interest from Great Britain to Northern Ireland.64 Exports from Northern Ireland directly to non-EU countries continue to require an EU export licence.

The established framework for the UK export control regime is found in the Export Control Act 2002 and the Export of Objects of Cultural Interest (Control) Order 2003 (as amended). Export licences are also subject to any sanctions in place and goods cannot be sent to embargoed destinations. Currently, the Iraq (United Nations Sanctions) Order 2003 prohibits the import or export of cultural property illegally removed from Iraq since 6 August 1990, and the Export Control (Syria Sanctions) (Amendment) Order 2014 prohibits the import or export of cultural property illegally removed from Syria since 15 March 2011.

The requirement for an export licence under the UK rules is linked to the type of cultural goods in question, their age, value and how long they have been in the UK. The export control system operates by placing temporary export bars on items of ‘national importance’ to allow public institutions in the UK to raise funds to make a matching offer to purchase them at a fair market price. National importance is judged by a group of experts in accordance with the Waverley criteria, to establish whether the item in question has a particularly close connection with the UK’s history and national life or is of outstanding aesthetic importance or scholarly significance. If one or more of the criteria is met, and the Secretary of State temporarily defers the decision to grant the export licence, public institutions are invited to put forward offers. The owner of the item is not compelled to agree a sale to any interested institution but is unlikely to be granted an export licence if they refuse an offer.

The new Ivory Act 2018 is one of the strictest of its kind. Since it came into force on 6 June 2022, it is prohibited to buy, sell, hire, export or import any object that contains or is made of ivory in the UK, unless it is registered as exempt or an exemption certificate is issued.65 There are a handful of exemptions to the ban, such as pre-1918 items that are of outstandingly high artistic, cultural or historical value, or musical instruments made before 1975 with less than 20 per cent ivory by volume.66 Exempted items need to be declared and registered before any transaction can be commenced, and owners can check the eligibility of their objects containing ivory online under the government’s digital ivory service.67 While it is permitted to leave items containing ivory in a will or gift or lend them (provided no exchange or payment is involved), trading with unregistered items is an offence that carries a maximum fine of £250,000 or five years’ imprisonment.68

Import and export law rarely features in case law. A recent exception is R (Simonis) v. Arts Council England,69 which was dismissed by the Court of Appeal in March 2020. The appeal concerned a painting entitled Madonna con Bambino, attributed to Giotto, which had made several journeys to and from Italy, where it was purchased in 1990, before the owner sought a permanent export licence to send the painting from the UK to Switzerland. Arts Council England decided that Italy, rather than the UK, was the competent authority under EU law to determine whether the export licence should be granted, given that the painting’s earlier dispatch from Italy to the UK in 2007 had not been ‘lawful and definitive’ within the meaning of the Regulation. Both the court at first instance and the Court of Appeal agreed with Arts Council England. The result was that the owner of the painting would either be forced to return the painting to Italy, and to apply to the Italian authorities for an export licence to Switzerland, or for the painting to remain in the UK subject to restrictions on its movement.

The Council of Europe Convention on Offences relating to Cultural Property (the Nicosia Convention) came into force on 1 April 2022. It sets out to create specific criminal offences to combat and deter the unlawful exportation of cultural objects from ‘source countries’, including the illegal acquisition of these objects to trade them on the international art market, to prosecute the destruction or trafficking of cultural property.70 The Nicosia Convention has so far only been adopted by a number of source countries and very few importing countries, such as the UK. The UK is a member of the Council of Europe, but it remains to be seen whether it will sign and ratify the Convention, which could mean clearer punishments for those trafficking or destroying cultural property.

iv Art finance

Art lending (i.e., the borrowing of money secured against art, antiques or other collectibles as security) is underdeveloped in the UK compared to other major art market centres, such as New York. Under English law, there is no fit-for-purpose non-possessory security interest for works of art where the borrower is an individual, although corporate borrowers can create a chattel mortgage. The Law Commission has produced a Goods Mortgages Bill, which has not yet, however, been brought forward by the government; the legal position is therefore unlikely to change in the foreseeable future. It remains to be seen whether the Bill will be brought forward to support the development of the London art market.

On 10 January 2020, AMPs (including dealers, galleries, agents and auctioneers) became part of the ‘regulated’ sector for anti-money laundering purposes under the new Money Laundering and Terrorist Financing (Amendment) Regulations 2019, which implemented the 5AMLD into UK law. Members of the art trade who carry out transactions, or a series of linked transactions, involving works of art valued at €10,000 or more must conduct ongoing risk-based due diligence on the parties involved in those transactions. The definition of works of art is in line with current VAT legislation and excludes antique furniture and some decorative objects.

HMRC is the supervising body responsible for overseeing AMPs, keeping a register of supervised businesses and checking that they are complying with their obligations under the new Regulations. Since 10 June 2021, AMPs must be registered with HMRC, as the sector regulator. AMPs were required to carry out risk assessments and put policies and procedures in place to ensure they are compliant before that date. Failure to comply with the Regulations is an offence, which can result in a range of sanctions, including fines, suspension from dealing in high-value transactions and imprisonment. HMRC is also expected to publish details of non-compliant AMPs on a publicly available penalty list, as it does with other regulated, non-compliant businesses. Compliance includes putting into place risk assessments for new and existing clients, implementing anti-money laundering policies and procedures (and ensuring that they are followed), appointing a nominated officer and a compliance officer, where appropriate, and continually monitoring and training staff.

Importantly, the new money laundering compliance regime has ramifications beyond the UK and EU insofar as it affects non-European buyers who seek to purchase works of art in galleries, at fairs or at auction in the UK, as much as non-European dealers who transact as buyers and sellers in the London market, whether in person or online. Overseas dealers must also register, even if they are not UK-based. In June 2022, the BAMF released updated guidance (the BAMF Guidelines) to assist AMPs with interpreting their obligations under the Regulations. The BAMF Guidelines clarified that the Regulations do not apply to shippers, first sales by artists, ‘introducers’ (unless a commission is received directly by virtue of their active participation in the transaction) or sale by an artist’s estate.71 A government consultation on an extension of the Regulations, bringing, inter alia, digital art and cryptoasset businesses within their scope, closed on 14 October 2021.72 It will be interesting to see how digital art and the increase in online transactions post-pandemic will be reflected in any updates decided by the government.

Artist rights

i Moral rights

Moral rights are personal rights granted to the creators of artistic work, pursuant to Chapter IV of the Copyright, Designs and Patents Act 1988 (the 1988 Act). The four components of moral rights are identified as:

  1. the paternity or attribution right, which is the right of an artist to be identified as the creator of a work;
  2. the right of integrity, which is the right of an artist to object to derogatory treatment of their work;
  3. the right not to have a work falsely attributed, which entitles an artist not to be identified as the creator of a work created by someone else; and
  4. the right to privacy in certain photographs and films.

Similar to the economic rights associated with copyright described further below, moral rights arise automatically, except for the right of attribution, which must be asserted by the artist. Moral rights can be waived by the artist but are not capable of assignment.

There is a scarcity of recent case law in the UK on the treatment of moral rights, and most of it is dealt with under the question of ‘derogatory treatment’ within the meaning of Section 80(2) of the 1988 Act.73 The recent burning of Banksy’s Morons in the United States to sell an NFT of the artwork for a higher price has flagged questions of moral rights in the context of cryptoassets.74 The scope of moral rights protection under UK law in similar circumstances remains uncertain; it is arguable that the right to integrity under the 1988 Act would not be infringed by the destruction of an artwork.75

ii Resale rights

Artists’ resale rights (ARR) were introduced to the UK via the Artist’s Resale Right Regulations 2006 (the 2006 Regulations), implementing a European directive. The rights were originally restricted to living artists, until January 2012 when amending legislation came into force entitling successors of deceased artists to exercise any inherited resale rights. Subject to certain exceptions, ARR entitles artists and their heirs to claim a percentage of the sale price on any resale of an original artwork in the secondary market (i.e., through an auction house or other art market professional), while copyright in that artwork subsists. ARR is collected and distributed through two entities in the UK: the Artists Collecting Society (ACS) and the Design and Artists Copyright Society (DACS).

Since their introduction, ARR have been subject to criticism by art market professionals and it remains to be seen whether they will be retained in the longer term. Thus far, however, the UK government has guaranteed that artists and their heirs can continue to benefit from ARR following Brexit.76 In spring 2022, the ACS and DACS made headlines when they announced they would bring an action in the high courts against collector Ivor Braka and Ivor Braka Ltd. The two societies claimed that Mr Braka and his company failed to disclose information on secondary market transactions on which royalties were potentially due over a period of 16 years. A judgment on this matter would be helpful to address non-compliance with the ARR rules under the 2006 Regulations in the UK.77

iii Economic rights

Copyright is the most significant intellectual property right subsisting in an artist’s work and is designed to protect the artist’s economic interests. Under UK law, unlike in certain other jurisdictions, copyright arises automatically at the point when an original artwork is created if the artist meets the criteria for protection under national law and does not require registration. For artistic objects, copyright protection lasts for the life of the author plus 70 years from the end of the calendar year in which the author died. Copyright can be transferred by inheritance, licensed or assigned.

In view of Brexit, the UK government decided not to implement the controversial Directive (EU) 2019/79078 into national law, but has stated that any future changes to the UK copyright framework will be considered as part of the usual domestic policy process.79

More unusually, artists may seek to protect their creations, brands or names by registering a trademark. Street artist Banksy attempted, through their representatives Pest Control Office Limited, to trademark a series of their well-known images and to create a trademark portfolio to address the problem that their anonymity prevents them from asserting copyright protection for their work. Following a challenge by a greeting card company, Full Colour Black, the European Union Intellectual Property Office (EUIPO) invalidated a number of these registered trademarks, including for Flower Thrower80 and Monkey Sign81 on the grounds of bad faith. The EUIPO concluded that Banksy showed no intention to use the respective trademark to commercialise goods at the time of its registration. The decisions throw into question whether other trademarks in the artist’s international portfolio will now face similar challenges.82

Trusts, foundations and estates

Trustees holding and managing art collections are not subject to wealth tax in the UK, but they may be liable to inheritance tax (IHT) or capital gains tax (CGT) on certain events.

The IHT treatment of art collections will depend on the nature of the trust. Where the trust is subject to the ‘relevant property regime’ (broadly speaking, discretionary trusts), the trustees will generally be liable to IHT every 10 years or on appointments out of the trust, currently at a maximum rate of 6 per cent on the value of the trust fund, if the assets do not qualify for exemption. If the trust is a life interest trust, then no IHT will arise until the death of the life tenant or earlier termination of the life interest.

Relevant IHT exemptions include the following.

  1. Conditional exemption, which is an IHT deferral scheme. The tax may be clawed back on a subsequent transfer or failure to observe the terms of the undertakings. To qualify for this exemption, the assets must meet a pre-eminence test and the owner is required to provide undertakings as to public access and the maintenance and preservation of the assets. The exemption can be claimed on certain chargeable events, including when assets are transferred by an individual into a trust, preventing an immediate IHT charge. In certain circumstances it can also be claimed to defer CGT. Conditional exemption was historically regarded as a good way to hand down family heirlooms to the next generation in a tax-efficient manner, but the rules have tightened significantly in relation to public access and can often be burdensome on a new owner. It should be noted that, due to the pandemic, requirements for public access were relaxed from 2020 to 1 April 2022, so that any public access undertaking was not to be considered breached if the property owner was not able to provide reasonable public access due to government guidance on social distancing. Until 1 April 2022, HMRC considered temporary adjustments to agreements on an individual basis, including any reduction in the number of visitors and the closing of certain rooms.
  2. The acceptance in lieu scheme allows trustees to offer artwork to public institutions in exchange for IHT tax credit. A wish can be expressed as to the ultimate destination of the property. To qualify for this exemption, the objects must either be of pre-eminent importance on the grounds of their national, scientific, historic or artistic interest, or associated with an important historic building.
  3. Business property relief may be available at 100 per cent if the artwork is situated in a building that is open to the public and run as a business.

Trustees are liable to CGT (currently at 20 per cent) on the disposal of chattels exceeding £6,000 in value (although there are special rules about the treatment of sets of chattels). However, no CGT is payable on ‘wasting assets’ (i.e., assets with a predictable life not exceeding 50 years, including fine wines, antique clocks and watches, and some motor vehicles), provided the disposal is not deemed to be made as part of a trade or business.

Outlook and conclusions

The year 2022 has been one of great upheaval, the consequences of which have left their mark on the UK art market. In particular, the war in Ukraine, political uncertainty, the ensuing energy crisis and environmental concerns have meant a shift in trade patterns and the public’s focus on institutions’ accountability and ethical policies. The government has aimed to react quickly to the challenges, as seen by fast-tracking the Cultural Objects (Protection from Seizure) Act 2022, the inquiry into the future of the NFT market and the House of Lords debate on amending deaccessioning provisions in the National Heritage Act 1983. It remains to be seen whether vandalism of works of art in museums and galleries will continue in the coming months, and how legislators and policymakers intend to address this issue.

Despite the crises, global sales have been booming in 2022 and the revival of international fairs have seen collectors and exhibitors flock to London, which no doubt will continue to thrive as a leading centre of the international art market – especially as the art market returns to in-person dealings.83 But there will be other developments to watch as we enter 2023 – in particular, the impact that the Ivory Act’s implementation will have on the antiques trade and the progress made by institutions in relation to the repatriation of colonial-era artefacts. The year 2022 has already seen meaningful developments in terms of greater dialogue and transparency. It will be interesting to see what will become of the halted provisions of the Charities Act 2022, and whether they will be implemented at some stage, in one form or another. Finally, artificial intelligence and its legal treatment are expected to play a greater role, not only in the creation of art and its dissemination, but also in other parts of the art market.

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