Despite the European Commission’s own report acknowledging that no evidence exists to show terrorist-related smuggling of cultural property within the European Union, it is pressing ahead with stringent new rules to tackle the issue
COMMENT: Following on from my last blog, the European Commission’s 199-page Deloitte report into tackling cultural property trafficking now confirms that there is no evidence at all that terrorism-related material is entering the EU.
It is even helpful enough to publish a bar chart showing this, which I reproduce above.
So where does that leave us?
To recap, the EC set about investigating this issue at the beginning of 2016, because it identified trade in cultural goods as a primary source of revenue for terrorists. It concluded that a common policy approach was the way to deal with this threat, but the first thing it wanted to do was to identify how big a threat this was within the EU.
More than a year later, and after extensive research, consultation and analysis, it has concluded that the evidence is “lacking”, or rather is non-existent.
So, does it also conclude that all the existing adopted measures – the Hague Convention, UNESCO Convention, emergency regulations covering Syria and Iraq and multiplicity of other legislation – are working in preventing crime in this way?
Apparently not; instead, it seems to conclude that the absolute lack of evidence points to the system not working, and so, of course, stringent new measures are needed. However, when you add in all the other initiatives undertaken to trace looted and trafficked material within the European Union – Operation Pandora among them – and the fact that nothing has ever been found, you have to start asking if the authorities will ever accept that maybe the problem lies elsewhere.
It is a little like the medieval trial by water for witches: if they sank and drowned, it showed that they were innocent, but if they escaped and floated to the surface they were guilty, and so burned at the stake. Either way, they were doomed. It’s the same for the art market: lack of evidence of wrongdoing is never taken as a sign of innocence and compliance, just as proof that scrutiny is not good enough and the rules need tightening.
It’s another case of flipping a coin on the basis of ‘Heads, I win; Tails, you lose’.
To show that this is, indeed, the thinking, take the following statement on page 127 of the Deloitte report: “Considering the qualitative and limited reliable quantitative data available, the relatively low level of seizures could indicate the weaknesses of the current import controls system, particularly with regard to the effectiveness of the measures in place.”
In other words, if they had found significant of evidence, it would have justified new measures, and the fact that they haven’t found anything means that the system must be at fault and so needs updating.
The options under consideration
Various proposals are under consideration in the report: declarations by importers/exporters of cultural objects accompanied by Object ID passports, import licences and exports certificates. All of this would be tied into some overarching international database, require a huge budget, enforced cross-border co-operation and access to often technologically incompatible national databases (good luck with that). That’s before you get each member state to upgrade the training and expertise of customs officials.
Is it really credible to make such an enormous commitment of resources, time and money to tackle a problem that your own detailed research shows doesn’t really exist?
Nonetheless the report continues to insist that the scale of the problem is huge, relying on dodgy stats, such as the utterly unsubstantiated April 2016 claim by the Russian ambassador to the UN that ISIS was making up to $200 million a year from looted antiquities – a claim completely at odds with reports from the World Customs Organisation, Europol, Interpol and other specialists in studying this area of crime.
Slightly more reassuring is what the report states on page 134: “Addressing the illicit trafficking in cultural goods cannot take place without engaging stakeholders in the art market and society at large, taking away ignorance or un-willingness to operate on the basis of agreed Codes of Ethics (UNESCO International Code of Ethics for Art Dealers).”
Well that’s great, but to engage with people, you need to relate to them properly, not ask them for evidence and then ignore it. What is being talked about here is not engagement but the handing down of orders in a dictatorial manner. There is ignorance, and even wilful ignorance here; however, it is not on the part of the trade, but those who refuse to accept the evidence that they have spent years collecting at great cost because it does not suit their agenda.
Where the report gets most interesting is in its analysis of the effectiveness of the options it proposes.
It recognises that certification could be difficult, for instance: “Especially in conflict areas, there is not always an authority available to issue a certificate; Especially in conflict areas, the third country authorities could be affected by negative influences, essentially resulting in the untrustworthiness of the certification.”
Certification also requires a pre-existing administrative cooperation agreement between the EU and the third country, which may not be in place.
On page 158, the report does at least acknowledge that its proposals might make life difficult for legitimate business interests: “Finding the balance between the interests of traders and the interests of the authorities to combat trafficking in cultural goods is difficult, particularly with regard to this topic. Imposing a too heavy burden on traders could result in the impediment of licit trade, potentially even enhancing the trafficking in cultural goods.”
But then it spoils it by adding: “Nonetheless, considering the current state of play, the authorities are not adequately covered by a legal framework safeguarding the respect for currently existing rules and to effectively act against the trafficking in cultural goods.”
An odd way to address the current state of play
The “current state of play”. The report has just admitted that the current state of play is that there is no evidence of a problem. If that is the case, then the balance is pretty easy to find: stick with existing measures because they seem to be working.
Import declarations fare little better in the report’s analysis (although they are what it finally goes on to favour). On page 164, it declares: “The system will rely on the importer’s good faith. Moreover the information about the good that the importer will have at his/her disposal will come from the exporter to a large extent. The identification could still result in false information on the good. The importer would however bear the responsibility for such false statements. This declaration will create a burden on all EU importers who want to import goods that potentially fit in the definition of the cultural goods.”
So perhaps the answer is the fourth option, licensing. Apparently not, as the report argues on page 166: “Time necessary for receiving the license would slow down trade of antiquities and other artefacts… The cost for EU authorities to set up and operate such a system would be quite significant and the delays for imports could turn out to be prohibitive. The cost will be disproportionate for the authorities and for the market. It would also increase the price of the goods.”
It also recognises the drawback that “many third countries do not provide for such certification [which] would effectively mean that all imports of cultural goods from these countries would be blocked”. (page 167)
And where countries do provide for such export certification, but no arrangements for administrative co-operation exist between them and the EU, which would allow verification (cross-checking with the exporting country’s customs) of the certificates by EU customs, “imports would de facto also be blocked”.
Pretty unsatisfactory all round really, as the report itself concludes, but still the European Commission intends to press ahead.
Of course, one of the fundamental aspects of these proposals is the definition of “source countries”. Does the Commission mean exporting countries or countries of origin? The report doesn’t say, but this is something that really matters. If it means countries of origin, how would that work for items that left the country decades or even centuries ago? And what about countries that have no certification process? Would a French collector importing a scarab bought in a New York sale have to ask Egypt for an export licence? What would they need to show?
When you look at the list of information required under the ObjectID process, including photography, it is clear that it would quickly become uneconomic to trade in lower-value items, so a significant section of the legitimate market would be blighted anyway. And taking all of the above into consideration, while creating a considerable challenge for dealers and auction houses, it would be all but insurmountable for most collectors and private buyers and sellers.
All in all, this set of proposals is a bit of a mess, and it is all so unnecessary if you take into account the Commission’s own reasons for looking into this.
What we have here is not the proposal for urgent measures to tackle a real problem, but a bureaucratic tidying up exercise, which misses the point because it will not be replacing other measures but adding another unnecessary layer of red tape to them.
The Commission announced its proposals in July, having taken delivery of the Deloitte report in June. So why did it not publish that report until September? Could it be because it didn’t like what it had to say?
Cultural property trafficking survey appears to be little more than an exercise in complacency and cynicism as EC plans damaging new law
COMMENT: I have no idea how much it has cost the European Commission to conduct the latest survey into the illegal importation of cultural goods used to finance terrorism, but it is clearly a shocking waste of money, as its own conclusions show.
The failure to check facts or take note of detailed submissions from industry experts has been so dire in this case one can only assume that this ‘consultation’ was a window dressing exercise in cynicism or a masterpiece of incompetence. Either way, the last thing it should be used for is a template for new and damaging legislation.
To show you what I mean, let’s take the ‘Fact Sheet’ that the Commission published on July 13 to accompany its press release announcing the crackdown.
Although neither the EU nor the US has conducted a single successful prosecution or seized any material confirmed to be linked to ISIS and terrorism in Syria and Iraq, the release itself focused on how the Commission is taking action to cut off such sources of financing.
To illustrate the scope of the problem, the ‘Fact Sheet’ asks the following question:
What is the value of the cultural goods that are imported illegally to the EU?
It then sets out the following answer:
‘The value of the illegal trade in cultural goods is difficult to assess, since it is a criminal activity.
‘Reliable data and instruments for measuring illicit commerce are scarce. According to Interpol, however, the black market in works of art is becoming as lucrative as those for drugs, weapons and counterfeit goods. Some estimates suggest that in 80-90% of sales of antiquities, the goods have illicit origins. Another study suggests that the total financial value of the illegal antiquities and art trade is larger than any other area of international crime except arms trafficking and narcotics and has been estimated at €2.5 – €5 billion yearly.
‘UNESCO has also stated that, together with the drugs and armaments trades, the black market in antiquities and culture constitutes one of the most firmly rooted illicit trades in the world.’
This seems credible enough until you check what Interpol actually says and where the Commission has sourced the other figures it quotes. Let’s take these in turn:
In quoting Interpol, the ‘Fact Sheet’ helpfully includes a link to the relevant page on the Interpol website. However, on clicking through to that link, although it makes the statement as reported, Interpol then contradicts this in its Frequently Asked Questions section on the same page. Click the link and it states the following:
Is it true that trafficking in cultural property is the third most common form of trafficking, after drug trafficking and arms trafficking?
‘We do not possess any figures which would enable us to claim that trafficking in cultural property is the third or fourth most common form of trafficking, although this is frequently mentioned at international conferences and in the media.
‘In fact, it is very difficult to gain an exact idea of how many items of cultural property are stolen throughout the world and it is unlikely that there will ever be any accurate statistics. National statistics are often based on the circumstances of the theft (petty theft, theft by breaking and entering or armed robbery), rather than the type of object stolen.
‘An enhanced information exchange could assist INTERPOL in determining the importance as well as the trends and patterns of this type of crime.’
This is followed by:
What is the cost of trafficking in cultural property?
‘It is not possible to put a figure on this type of crime, partly for the reasons mentioned above and partly because the value of an item of cultural property is not always the same in the country in which it was stolen and the destination country. Also, thefts of such property are sometimes not reported to the police because the money used to purchase them had not been declared for tax reasons or because it was the proceeds of criminal activity.
‘It is also impossible to assess the financial extent of the losses caused by clandestine archaeological excavations. Such excavations often only come to light when looted items appear on the international market. Illegal excavations destroy the scientific context of the single finds and seriously jeopardize future archeological research of the sites.
‘Even without considering the economic impact behind the illicit traffic of cultural goods, it is important to consider the damage caused by this type of crime to civilizations and their history. The cultural heritage of a country constitutes its identity. A country that is deprived of its cultural heritage because it is being looted or stolen is a country that is losing its identity and every component that is linked to it: national belonging, patriotism or national pride.’
And this is followed by:
Which countries are most affected by this type of crime and which objects are most frequently stolen?
‘Due to the lack of reliable and internationally harmonized statistics on cultural property thefts, it is impossible to identify one country being more affected than the others.
‘However, it is obvious that the following regions are particularly affected by this type of crime:
- Latin America,
- Middle East,
- North and Sub-Saharan Africa,
- South East Asia.
‘The majority of thefts are carried out from private homes. Museums and places of worship are also among the common targets.
‘The type of objects stolen varies from country to country. Generally speaking, paintings, sculptures and statues, and religious items are very sought after by thieves.
‘However, no category is spared, including such diverse items as archaeological pieces, antiquarian books, antique furniture, coins, weapons and firearms or ancient gold and silverware.’
Conflicting claims on trafficking of illicit cultural property that don’t add up
This detailed advice leads me to ask Interpol why on the page it links from it states: “The black market in works of art is becoming as lucrative as those for drugs, weapons and counterfeit goods.” By its own admission, it can’t possibly know this, and so neither can the Commission.
As noted, the Commission further states: “Some estimates suggest that in 80-90% of sales of antiquities, the goods have illicit origins. Another study suggests that the total financial value of the illegal antiquities and art trade is larger than any other area of international crime except arms trafficking and narcotics and has been estimated at €2.5 – €5 billion yearly.”
Although it does not say where these estimates and study come from, it immediately goes on to quote UNESCO, stating: “UNESCO has also stated that, together with the drugs and armaments trades, the black market in antiquities and culture constitutes one of the most firmly rooted illicit trades in the world.”
Again, it gives a helpful link through to a UNESCO report (The fight against the illicit trafficking of cultural objects the 1970 convention: past and future), which does identify the study and estimates.
The Facts and Figures listed on page 2 of the UNESCO report include references to values for illicit trafficking ranging from $2 billion to $6 billion. The footnotes attribute the $2 billion figure to the November 24, 1990 Independent newspaper article Great Sale of the Century by Geraldine Norman. However, for two reasons it is clear that UNESCO has never checked this source – and neither has the Commission. The first is that the article, which you can read here, includes no figure whatsoever, and the second is that in referring to it, UNESCO made the same mistake that Brodie, Doole & Watson made in referring to it in their 2000 report, Stealing History: The Illicit Trade in Cultural Material. On page 23 of that report, it states: ‘Geraldine Norman has estimated that the illicit trade in antiquities, world-wide, may be as much as $2 billion a year’. On page 60 of the report, under the relevant footnote, it gives the source as follows: Norman G., Great sale of the century. Independent, 24 November 1990 – exactly the same reference as UNESCO gives, which the Commission then quotes. However, the article itself is actually titled Great sale of the centuries, which indicates that in conducting the research for the Commission Deloittes have simply lifted the UNESCO report without checking its sources, while UNESCO, in turn, lifted the claim from the Brodie, Doole & Watson report without ever checking the Norman article.
No need for this as correct information was already available
What makes this all so unnecessary is that I personally supplied UNESCO with all the relevant information correcting these and other mistakes in March last year on behalf of the International Association of Dealers in Ancient Art (IADAA), with all the relevant links for independent verification, and it was posted on the UNESCO website, where it is still available.
So what we actually have presented as ‘Facts’ by the Commission to justify its position is an unchecked quote based on a 17-year-old report, which inaccurately bases its claims on a newspaper article that was already ten years old at the time and which says nothing of the sort anyway.
What Geraldine Norman’s 27-year-old article does state is her unsubstantiated opinion that “80 per cent of all antiquities that come on the market have been illegally excavated and smuggled from their countries of origin” – hence the additional figures quoted by the Commission.
The $6 billion figure quoted by the Commission also comes from the UNESCO report, but here things get even more confused. UNESCO states that the figure comes from “Research conducted by the United Kingdom’s House of Commons on [sic] July 2000”. However, the footnote referencing this quotes a 2009 report in Italian by F. Isman of Milan and deals only with Italian archaeology. Again, this source has clearly not been checked.
There are another two possible sources for the $5-6 billion figure. According to James McAndrew, the former FBI agent who set up the US Department of Homeland Security Antiquities Division in 2010, the first is an unsubstantiated claim made by an official at an ICOM conference in the 1980s. The other is a misreading of the estimate of global art crime – in other words all crime associated with the entire art market, from fraud and burglary to forgery and theft, not antiquities at all – as estimated by the Art Crime Team of the FBI, although they do not say how they arrived at this figure and have now downgraded it to $4 billion to $6 billion as the video from this link confirms.
Reports show that neither Interpol nor the World Customs Organisation back the EC’s position
Section 6 of The World Customs Organisation 2015 report covered the illicit trade in cultural objects for the first time. It noted nothing linked to ISIS, but page 147 does state that one of its largest ongoing cases, Hidden Idol, has resulted in the seizure of $100 million of stolen and looted artefacts from India, Afghanistan, Pakistan and Cambodia.
This means that neither Interpol nor the WCO recognise the unsubstantiated figures adopted wholesale, without checking, by the European Commission in setting out its ‘Fact Sheet’ to justify the new measures.
Now look at the Commission’s reasons for introducing new measures. According to its ‘Fact Sheet’, “Recent reports have also shown that valuable artworks, sculptures and archaeological artefacts are being sold and imported into the EU from certain non-EU countries, with those profits potentially used to finance terrorist activities. For example, two Syrian friezes that may have been intended for criminal gain were seized at Roissy airport, France last year.”
Note the wording: Even here there is no claim that these had any link to ISIS, terrorism or even any crime at all, just that they ‘may’ have been intended for criminal gain with profits ‘potentially’ used to finance terrorism.
In October last year, 18 EU countries co-operated in Operation Pandora, a Europol-led exercise to find and seize trafficked cultural property funding terrorism. The authorities searched nearly 50,000 people, nearly 30,000 vehicles and 50 ships. They arrested 75 people and seized just over 3500 pieces of cultural property, 1000 of which turned out to have come from a single seizure from an illicit metal detectorist in Poland and largely consisted of spent rifle cartridges and rusted rifle stocks from the Second World War. Now Europol has confirmed that despite this operation targeting terrorism financing, not one item seized came from a conflict zone. So what it actually showed was what a good job existing laws are doing in keeping this stuff out of Europe – precisely the arguments that the trade had made during the consultation period, which the Commission has chosen to ignore completely.
The Commission’s conclusions airily brush aside serious trade concerns
The ‘Fact Sheet’ also airily brushes aside any concerns that dealers might have about the impact of the new law on legitimate trade, again utterly ignoring the serious concerns detailed during the consultation process.
This whole consultation process appears to be little more than a box-ticking exercise that barely nods in the direction of democracy. It smacks of the Commission deciding what it was going to do before any of this started and acknowledging that it had to be seen to go through a consultation process, which it has then gone on to dismiss out of hand.
The first indication of this cynical approach came at the very beginning.
Instead of consulting the trade on the future of the art market in Europe, the Commission consulted the Arts Council, one of the most ineffectual UK quangos around, and which has nothing to do with the art market.
Then there was the matter of timing. The decision to consult the market was taken on January 28, 2016, with a deadline for responses of May 28, and yet no one found out about the consultation until May 22, with some relevant trade associations never being approached at all.
The Commission’s own Regulatory Scrutiny Board (RSB) failed the first draft Impact Assessment submitted for the new proposals, criticising it for not clearly circumscribing the problem nor substantiating its magnitude, nor providing an adequate evaluation of the associated costs. The revised Impact Assessment, which was eventually passed, still did not give an accurate description of the relative size of the illicit market (as shown above), despite this being a significant demand by the RSB, nor did it provide the other relevant statistical information the RSB asked for, nor a clear view of the magnitude of the problem. So one wonders how the revised Impact Assessment passed at all.
Stringent and effective rules already exist within the EU governing material from Syria and Iraq, while other regulations already address illicit material from anywhere else in the world. Why do we need yet more and inappropriate legislation that will only serve to hamstring the legitimate market?
How can we have confidence in the EU’s leading governing body if this is the way it conducts itself?
COMMENT: A perceived lack of regulation, the rise of art as an alternative asset class and conflict in the Middle East present a triple whammy for an unprepared art market. What has happened to the market? And what must happen now?
Antiques Trade Gazette’s current report on how the trade is fighting back against misperceptions and propaganda.
The international trade in antiquities has been the focus of sustained criticism over the past few years as a result of the wars in Syria and Iraq. Anti-trade campaigners – academics, archaeologists, politicians and others – who have been trying to shut down the legitimate trade for years, have seized this opportunity to lobby hard for new regulation, ever-tighter restrictions on trade and more draconian punishments for even slight infringements. There have been calls for the private ownership of antiquities to be made socially unacceptable.
The dissemination of biased or badly conducted research and questionable relationships with the media, much of which appears complicit, or at least complacent, has not helped. This is part of the widely recognised ‘fake news’ issue, as 24-hour rolling reporting combined with declining resources within the media – particularly in the press – rob journalists of the opportunity to investigate in any depth or check facts. This makes them increasingly vulnerable to unscrupulous interests that want to present propaganda as news. Outlandish figures relating to the size of the problem of looted material coming out of Syria, for instance, have been widely accepted as utterly unfounded by all sides in the debate for some time now, yet continue to be peddled by a number of quite prominent sources.
This has led to criticism from anti-trade campaigners themselves. Dr Neil Brodie’s article for the European Union National Institutes for Culture, says the propagandists exaggerate the problem to attract government attention and more funding. This leads to inappropriate policy, which in turn damages the very nations and cultural heritage institutions they seek to protect.
Even government research and publications, in the US, Germany and elsewhere fall short of the standards that should be expected. Recently, Homeland Security Today, the news and views website for the eponymous US department, published my critique of Homeland Security’s report last October, Cash to Chaos, dismantling ISIS’ financial infrastructure.
The report’s small section on antiquities was riddled with inaccuracies, the footnotes quoting out-of-date and long-discredited media articles as primary sources of evidence to support the claims. In some cases, the reports mentioned in the footnotes did not contain any of the evidence referred to at all. If this can happen with Homeland Security, whose report was leapt on by campaigners as further proof of the antiquities problem, who else can be trusted?
Many of those who want to see an end to any trade, legitimate or not, dedicate most of their working lives to this cause. They tend to be very well funded and organised, and have the ear of governments, law enforcement and NGOs, which do not appear to appreciate the distinction between those who trade lawfully and those who do not.
The effectiveness of these campaigners is not to be underestimated, especially as the antiquities sector in particular and the art market in general have been woefully unprepared to tackle such unrelenting criticism.
All of this is not helped by the perception that the wider art market is fairly lawless. True, it is not directly regulated in the way that finance, health, insurance and the law are, but there is direct regulation, and plenty of it (see the British Art Market Federation’s list of regulation. A dealer’s liability under the new Cultural Property [Armed Conflicts] Bill is a case in point: potentially, they can be jailed for up to seven years for even unintentionally breaking the law.
How it all changed in 2008
What the art market has failed to understand until quite recently is that everything changed in 2008. When the markets crashed and pulled the rug out from under gilts and bonds, those traditional safe havens of wealth, the relative risk of art as a store of value diminished, making it much more attractive as an alternative asset class. The banks and wealth managers started to advise clients to diversify their portfolios.
Where money heads, attention follows – and not just from investors. Regulators, governments and criminals also turned their gaze on the art market as a significant influx of cash created the potential for money laundering, market manipulation and other undesirable activities. Transparency became the buzzword of any discussion about the market, but transparency is just the outward manifestation of the real problem: lack of trust.
The market generally was unused to such scrutiny and ill equipped for what it would mean: media attacks, tighter controls, new laws and wider attempts at regulation. Many continue to bury their heads in the sand, but others have realised they must act now to build confidence with the authorities and public before it is too late.
Despite this, most have still not accepted that such a programme requires a significant investment of money and time, the sort of commitment on which the other side in the debate has long been able to rely.
Against this background, and the emerging Syrian conflict, the antiquities trade found itself in the front line. What makes life even harder for the trade is the role antiquities now play in international diplomacy. Nation states are using cultural property or heritage as a political tool in negotiations, to curry favour with other countries or to burnish their credentials as virtuous campaigners for the greater good.
The trade fights back
Around two years ago, the Antiquities Dealers Association (ADA) in the UK and then the International Association of Dealers in Ancient Art (IADAA) recognised that they needed to fight back. As such, they realised they must revisit their own codes of conduct and improve procedures and methods of communication, whether via their websites, direct mail, PR and media opportunities or their relationships with the various authorities.
They have been very effective in doing so, leading the way in raising wider art market standards – as parliament has recognised – and shaping debate with lawmakers, law enforcement and the media at national and international levels.
Their success can be attributed in part to their thorough research and presentation of arguments supported by independently verifiable evidence, in part to the dedication of their representatives, and in part to the fact that the anti-trade campaigners have not been used to having their propaganda challenged and so are sometimes inattentive when it comes to detail.
Nonetheless, rich and powerful anti-trade interests – supported by countries such as Egypt that wish to reclaim their cultural property, regardless of whether it now rightly belongs to others – have persuaded governments to introduce major changes in the law in Germany, the UK and the United States, laws introduced as a result of mistaken views of where problems lie.
The rather less well-funded antiquities trade is fighting an effective rear-guard action, but very much against the odds. What the trade does have is a network of knowledgeable experts, a sophisticated strategy and a wealth of evidence and data to support its case; it is also getting better organised, with disparate groups in the USA coming together to fight for better understanding and a fairer deal. It needs better financial and strategic support as the trade improves its own relationships with decision-makers further and continues to fight for recognition in national and international debate.
Trade organisations have already tried to engage with their fiercest critics, but the signs so far are that campaigners have no intention of giving any ground. I can understand this: they have had unrivalled success so far and can’t see any reason to compromise. It is clear that many simply believe that any trade whatsoever means providing cover for the crooks. What may surprise them is that legitimate trade is the arch-enemy of the crooks, as criminal activity damages the reputation of those who trade lawfully.
The wider art market needs to wake up fully to its challenges, as demonstrated so clearly already in the microcosm of the antiquities market. That means better self-regulation in the form of codes of conduct, ethical behaviour and transparency, as well as a more effective public charm offensive, with the trade associations taking a prominent role.
This article first appeared in the July/August 2017 issue of the RICS property Journal
COMMENT: I have serious concerns about the new report published by the University of Portsmouth’s School of Law on the UK’s antique trade in ivory.
The Elephant in the Sale Room, as it is titled, is an exercise in futility. The real ‘Elephant in the Room’ here is the study’s vast shortcomings, rendering any solid conclusions at best misguided, at worst dangerous.
First, let’s take the statistics. There are two measures to consider here: margin of error and confidence in accurate results.
Statistically, to be 95% confident that the answers were an accurate reflection of the whole population – in this case the UK art and antiques market – while allowing for a margin of error of plus or minus 4% in the spread of answers – the standard for such studies – the sample size for a population of 20,000 should be just under 600, or 3% of the population.
The sample size given here – 80 – is approximately 0.4% of the estimated population. Taken as a percentage of the Antiques Trade Gazette readership of 35,000, which I would see as a more accurate reading of the size of the market, that falls to 0.23% of the population, or just 7.5% of the minimum sample size needed to be confident of reasonably accurate results within a reasonable margin of error.
The sample size used in this case leaves a margin of error that allows you to drive two London buses through side by side.
Now add the fact that only around half of the sample actually answered a number of important questions and it gets worse.
For example, question 13 asked: How many of the following goods, either containing or made entirely from ivory, did you sell in 2015? This garnered a total of 39 replies, or 0.19% of the estimated population, rendering the response all but meaningless.
Questions 11, 12, 14, 15, 16, 17, 18, 19 and 21 met a similar level of response.
The researchers are struck by the fact that “none of the organisations that we researched had any specific advice on their websites regarding the laws and regulations on the sale of ivory”. The implication of this is that they are complacent or incompetent. However, at this point the report fails to acknowledge that the Government had removed its own advice from the internet because it was so confusing and misleading. If the Government can’t give accurate advice, how are the associations expected to?
The report does finally acknowledge the problem on page 42, where one of the 12 interviews supplementing the survey notes how “confusing” and “unhelpful” DEFRA’s website is on this.
Additional efforts, such as the 2016 CITES panel at the Art Business Conference, and Antiques Trade Gazette’s recent conference, which could have been added as a late footnote, are ignored entirely.
Perhaps most surprising and disturbing was the assumption made on page 25 of the report that the low response rate to the survey pointed to dishonesty among the trade, with dealers being “sometimes secretive regarding [their] commercial activities”, followed by a reference to Stuart Henry’s The Hidden Economy and “illegality” taking place in settings “which (on the surface) seem completely legal and this, in turn, makes participants disinclined to be open about their activities”.
This is staggering in its arrogance and complacency, blaming the failure of this poorly composed exercise on the “dodgy” trade, rather than looking to its own structure, methodology and execution for the true shortcomings.
How is anyone supposed to trust the authors as dispassionate and unbiased in this light?
At least, on the same page, the report goes on to admit: “with such a small sample it is difficult to make strong assumptions about the universe of the antiques trade”. Nevertheless, the report does just that, and unhelpfully too.
Turn to the next page, for instance, and immediately we are told: “The survey results show that some respondents failed to answer all of the survey questions [a huge understatement] suggesting that some questions were maybe too sensitive…”.
Page 32 makes the ‘astonishing’ discovery that auctioneers tend to sell more pieces than dealers, but this is hardly true of just ivory. If even a small-time auctioneer with only a monthly sale of 500 items and a 70% sell-through rate turns over 4200 lots a year, how many dealers could match that?
So does the report meet its three stated objectives?
- To evaluate types of ivory objects being sold in the UK, their source and the buyer’s demographic? (A: To a degree, no and no).
- To understand how traders appraise an item before sale to satisfy themselves whether or not it complies with the law (A: Partially, although until the conclusion on page 52, the report utterly ignores the crucial matter of the costs and time delay of carbon dating tests – recently estimated in parliament as averaging between £500 and £1000 per item).
- To evaluate the effect a total ban on the sale of ivory would have on the British antiques trade (A: Not even close, based on the sample size, response level and demonstrable lack of understanding of key considerations).
The report does make some sound recommendations – not least those to DEFRA – but none that has not already been mooted by the industry without having to resort to the time and expense of this exercise.
It at least acknowledges its own limitations under the first concluding recommendation: “The study highlighted the difficulties in obtaining information from the antiques trade about the nature of their practices regarding the sale of ivory. We would therefore recommend further research…”
Again the trade is blamed, whereas, in my view, the pointlessness of this study as executed is the real cause for complaint. How much did it cost? How could the money have been better spent?
What do the customs figures say?
UK exports of art and antiques fell by 13.6% to £4.95 billion in 2016, while imports declined by 37% to £2.23 billion.
Having just completed my annual analysis of the trade figures, which I compile from from raw customs data, I noted significant drop-offs in values for the first half of 2016, with additional significant falls in fine art imports and exports between July and December.
Sterling declined an average of 5.9% year on year for the first six months of 2016, but the six-month year-on-year average post-referendum fell by 16.3%. So to get a true picture of how the market has changed you have to take this into account.
Although customs returns fell across the board for the last half of 2016, the two areas where this appeared to be significant were in exports and imports of fine art beyond European Union borders – down 24.2% to £1.68 billion and down 55.2% to £524.5m respectively.
Movement within EU borders is assessed differently by HMRC because of the single market, but its figures showed a widening trade gap for fine art, with twice as many works by value heading across the channel from the UK as in the same period for 2015, while the value of works entering the UK from the EU from July to December 2016 fell by more than 60%. However, the figures are comparatively small in the context of the global market.
This year I conducted additional research to see if any Brexit effect could be detected in the second-half figures, but the picture is not clear.
On the basis of what I have seen so far, I would say that the jury is still out. The fine art side shows significant weakening beyond exchange rate issues, but the global art market contracted in 2016 anyway, so you would expect to see cross-border trade decline.
Frieze Week sales boosted confidence
However, Frieze Week sales at the beginning of October underpinned confidence in the UK market, with Christie’s alone netting over £90 million for Post-War and Contemporary Art, including 19 artist auction records.
With an exchange rate of $1.27 to the pound then – compared to around $1.53 at this time in 2015 – this series would have been a very attractive prospect to overseas buyers. It also shows London’s ability to attract great works for sale.
Having said that, fine art imports to the UK for the second half of the year fell by more than 50% in value on the same period in 2015, possibly reflecting not just the weakness in sterling but also the likelihood that this would make London a less attractive place for consignors in the short term.
Nonetheless, all of this needs to be taken in the context of the long-term trend upwards, and we will have to wait to see how the next two years pan out to see if our changing relationship with the European Union will alter the UK’s global market status.
Drilling down to the detail, not much has changed in the structure of the UK’s trading relationships.
The United States remains the most significant partner (see table above), but the figures show significant market shrinkage: the UK’s fine art exports to the US were down by 20% at £1.85 billion, while imports fell 40% to £552.3m. Exports of antiques to the US dropped by 24% to £431.1m, and imports declined by over 30% to £224.5m.
Fine art exports to Hong Kong remain stable amid global decline
The two great entrepots who dominate trade relations with the UK art market after the US, Switzerland and Hong Kong, also saw dramatic change, with fine art exports to and imports from the former down nearly 40% at £584.6m and £507.8m respectively, while fine art imports from Hong Kong crashed by almost three quarters. However, fine exports there remained very stable at £81.3m, showing an overall healthier trade gap for the UK with the former British territory.
One of the most significant changes in trading partnerships came with South Korea, now acknowledged as an increasingly strong buying base: exports of pictures there rose by more than £450% to nearly £90m.
It is important to remember that the trade figures measure the value of goods crossing UK borders rather than actual sales, but they tend to mirror much of the market’s trends and spheres of influence.
The UK faces one of the biggest threats to its democracy right now. It’s time to fight Section 40
Whatever else you are doing at the moment, stop. This is one of the most – if not the most – pressing issue facing us right now, and if we don’t deal with it immediately, it might be too late.
How important? So vital that on December 15, 1791, the Founding Fathers made it part of the First Amendment to the United States Constitution. Not the Second Amendment, Third, Fourth or Fifth, but the First. It even outranks that US holy of holies, the right to bear arms, which had to make do with the Second Amendment.
What I am referring to here is the freedom of the press. And in the UK it is under imminent and dire threat.
Section 40, as it is referred to, came in as a result of the Leveson Inquiry into press activity and is part of the Crime and Courts Act 2013 that deals with the award of costs in cases where individuals sue publishers for libel, harassment or other complaints linked to news-related material. In short, it orders courts to award costs against publishers, whether or not the claim succeeds, if the publisher has not signed up to be ruled by a Government-approved press regulator.
So, win or lose, every Tom, Dick or Harry with a grievance, however, unjustifiable, will be able to go to court knowing that they will have nothing to pay, because the bill for whatever costs they rack up in the process will be presented to the newspaper, magazine or website in question.
No publisher can afford to continue in business with such a Sword of Damocles hanging over them.
Where some of the problems lie
The Act became law in 2013, but Section 40 cannot be enforced until there is an approved regulator for the media to sign up to. Soon there will be – which is why the threat is imminent – so why doesn’t everyone just sign up and avoid the issue?
The problem is twofold. First, the introduction of a Government-approved regulator to which publishers must, in effect, sign up to by law also effectively gives the Government direct control over the media. Why is this a bad thing? Well if you consider that recent precedents for doing this are in Zimbabwe under Robert Mugabe and in Turkey under Reccep Tayyip Erdogan, you will begin to get the picture. On January 3, Rachael Jolley, editor of the Index on Censorship magazine, expressed her great fears of this development in the Daily Telegraph.
“There should be a clear distance between any government and the journalists who report on it,” she wrote.
Secondly, the approved regulator in question is IMPRESS, the body set up by Max Mosley, the hugely wealthy former racing driver who has gone after the press, bankrolling the campaign in the process, ever since the News of the World exposed details of an orgy in which he took part in 2008. IMPRESS fields a board of wide-ranging talents, expresses its commitment to press freedom and bills itself as “the first truly independent press regulator in the UK”.
It may be all of these things, but so far no national newspaper has signed up to its rules. Why so little confidence in IMPRESS? Go to their website and click through to IMPRESS Code Consultation for the first clue. This is what it says: “The IMPRESS Code Committee is in the process of drafting a new Standards Code for the press. IMPRESS ran a six week public consultation until 29th September 2016. IMPRESS received over 40 submissions. The Code Committee is considering the draft Code in light of these submissions.”
So, if I understand this correctly, the press must sign up to be ruled by an organisation that has not yet published its binding code of conduct. In other words, they would have no idea what they were signing up to.
Now check what it says under Our Regulatory Scheme on the website: “We have the power to direct the publisher to make a correction or an apology. We also have the power to award financial sanctions (fines) when a publisher has committed serious or systemic breaches of the Code or our governance requirements. We can award sanctions up to 1% of that publication’s turnover, to a maximum of £1m.
“If you believe that you have suffered real harm and you wish to pursue a legal claim for defamation, breach of privacy or harassment against a publisher regulated by IMPRESS, you may ask us to arrange arbitration for you.”
IMPRESS offers no clarity as it adopts sweeping powers
As I read this, then, an organisation that has not yet set out its code of conduct, expects publishers to sign up to that binding code and subject themselves to the whim of anyone who feels that they might have been harassed, without defining what that might be, whilst setting out the powers of enforcement. Don’t forget, the £1m fine would be in addition to the costs, however unjustifiable awarding them against a publisher might be.
Quite frankly, whatever other objections might arise, the lack of clarity across the board here is reason enough to dismiss this scheme out of hand, especially in light of the powers it adopts and the level of potential sanctions.
Section 40 itself is just as woolly. Paragraph 3 (a), for instance, orders that costs must be awarded against the defendant (the press) unless the court is satisfied that (a) “the issues raised by the claim could not have been resolved by using an arbitration scheme…” or (b) “it is just and equitable in all circumstances of the case to make a different award of costs or make no award of costs”.
Sub para (a) is a non starter, because any vexatious claimant would have no incentive to abide by any arbitration, safe in the knowledge that in pursuing an action in court it would be the defendant shouldering their costs regardless of the outcome.
Sub para (b) is so wide and undefined as to be meaningless as reassurance to any publisher hoping to stave off a vexatious claimant’s costs. Quite simply, none would take the risk of publishing in the first place under such circumstances.
The result of all of this? A hamstrung press, which either comes to the heel of those who want to muzzle it, or faces closure because it simply could not afford to continue under such threats and strictures.
Don’t forget, in all of this, that a great deal of other legislation regulates the press already, from the Contempt of Court Act to existing libel laws. When journalists were caught out hacking phones, they went to jail, including Andy Coulson, David Cameron’s former communications director. The law does work already. They won’t be doing that again.
Fighting Section 40 is about defending democratic freedoms
It is vital to understand that freedom of the press is not about protecting dodgy reporters intent on smearing the latest sex scandal across the Sunday tabloids; it is about protecting the very democratic freedoms that you and I have taken for granted as our right for centuries. The Fourth Estate’s most important role is in holding parliament to account and, beyond parliament, in acting as a democratic check and balance that makes the rich, powerful and unscrupulous think twice before acting against the common interest. The press does this by retaining the power to expose wrongdoing and the wrongdoer without fear or favour. Section 40 will remove that check and balance, while introducing fear and favour, and will close the essential democratic divide between the press and Government. It is not in my interests for this to happen, nor is it in yours.
How many times when scandal or tragedy breaks in public life have we heard the words: We must do everything we can to ensure that this never happens again?
MPs expenses; the current football sex abuse scandal; cash-for-questions and many other outrages would never have come to light if Section 40 had applied at the time.
Allow it to proceed and the chances are such horrors will not only happen again, but will continue to do so on a more frequent basis. The real scandal is that, under such circumstances, we, the public, would never get to hear about it. And so the malefactors would know they could act unfettered by the risk of public scrutiny.
As Rachael Jolley says: “If such laws were introduced in another country, British politicians would be speaking out against such shocking media censorship. There’s no doubt that authoritarian powers will use this example to bolster their own cases in imposing media regulation.”
There are peoples across the world fighting for such freedoms, and we are about to give it all up, and oh so casually.
Culture Secretary Karen Bradley needs to remember her responsibility not just to the British public in this, but also to other democracies across the globe; it’s more than a timely reminder for her as one looks out across the West now.
Hacked Off and those supporting Mosley’s stance are extremely well funded and have been making very loud representations to the Government in favour of enforcing Section 40.
You can do your bit to counter this by letting the Government know what you think.
Write to email@example.com NOW, giving your name and address and declaring that you are one of the following:
- A member of the public
- A lawyer
- An academic
and that you want your views to be considered in the public consultation exercise on this matter. Tell them the following:
- The Government should repeal all of Section 40 of the Crime and Courts Act now.
- That you believe Section 40’s implementation would seriously damage the press’s ability to hold power to account.
- That you do not believe Section 40 will incentivise publishers to join IMPRESS.
- That you believe there is no need for further investigation following the completion of Leveson One and the criminal investigations.
- That Leveson Two should be terminated.
Alternatively, you can write a letter containing all of the above and send it to: Press Policy, DCMS, 4th Floor, 100 Parliament Street, London SW1A 2BQ.
We haven’t got long to put a stop to this potential disaster. ACT NOW.
A new EU-inspired law is supposed to champion designers, but design itself, along with many others, will pay the price
COMMENT: The final nail has been hammered home in changing a small but important part of the Copyright Designs & Patents Act 1988 that will see a revolution in industrial design rights. Section 52 of the Act is about to be repealed. Sounds dry?
Maybe; however, it’s anything but, because the impact on consumer choice, design innovation, reprinting of books, reissue of films and many other facets of our cultural life will be far-reaching… and bad.
I have spent a fair portion of the last four and a half years trying to put a stop to this semi-suicidal, EU-prompted law change, which, like so many others, achieves the reverse of what it sets out to do, while causing even more disruption to our culture and way of life. The bit I focused on was replica furniture. The rights, balanced with trademark and patent, for original industrial designs – items produced in quantities of more than 50 – expired after 25 years. The idea behind this rule was to give creators sufficient monopoly to benefit financially from their designs before opening up competition in the market to the benefit of the consumer.
That meant that after the 25 years was up, quite a bit of post-war modern and contemporary furniture design could be copied in considerably less expensive replica form in an ‘inspired by’ format. Those wanting licensed design originals such as the Eames lounge chair and ottoman could still pay considerably more for them if they wished. As the Government acknowledged, the price differential was so great between the originals and the replicas that they served two separate and distinct markets.
What the replicas could not do legally was pass themselves off as the originals, as pirated copies do, and doubtless will continue to do; ‘inspired by’ was as close as they could get while staying on the right side of the law.
As of the end of January 2017, the replicas will be outlawed too, with a further tranche of designs added to the list as of April 6 next year. If you want anything that looks like an Eames chair and ottoman after that date, you will have to pay around £6,815 at The Conran Shop for a licensed original instead of the Eames-inspired version you can currently get at Wallace Sacks for £599.
I wonder how Charles and Ray Eames themselves would feel about that, having made it clear that they wanted “to make the best (designs) for the most (people) for the least (amount of money)”.
Certainly Design Museum co-founder Stephen Bayley does not approve, telling The Independent that the changes are “at odds with the principles of widely available democratised luxury which make design such an interesting subject”.
Retroactive rights are causing the real problem
Instead of waiting 25 years after the first year of manufacture or marketing for these designs to open up to the wider market, the public will now have to wait until 70 years after the death of the designer. That brings the law in line with copyright for artists, photographers and musicians, but rather upsets the applecart when additional trademark and patent protections are taken into account.
What is causing the real problem is that the law will be retroactive, reviving rights in designs that expired sometimes decades ago, while awarding rights to other designs that never enjoyed them in the first place.
To give you an idea of how massive this is, let’s take an example.
The Bauhaus table lamp was designed by Karl Jucker and Wilhelm Wagenfeld in 1923-24. Had the 25-year rule applied at the time, their right would have expired in 1949. However, Wagenfeld did not die until 1990 and Jucker not till 1997. So under the new rules the right is revived and lasts until 70 years after Jucker’s death: 2067. That’s an additional 118 years after 1949 when the right would have expired originally. And that is not even the most extreme example.
The other change is the one that is likely to hit designers, because the right has also been upgraded from design right to copyright. Why is this important? Because under design right it was permissible for a designer to incorporate an element of the earlier design of a work with artistic merit into a new design as long as the overall appearance and impact of the new design was substantially different. Copyright does not allow for this ‘inspired by’ element, known in the trade as ‘follow-on design’. Breaching this new rule risks committing a criminal offence and incurring a heavy fine and prison sentence.
While the Government has assured many that matters are unlikely ever to reach such a stage, designers in the know are likely to be less sanguine, especially as the rights holders of many of the most popular designs coming back into right are mega-wealthy and powerful international corporations and highly active when it comes to enforcement and civil claims. Notice I say ‘rights holders’. That is because some of the most active of the rights holders are not designers themselves but companies that have licensed the rights from the designers or their heirs.
This is not about protecting design. It is about money.
What will make the everything so uncertain is that for a work to qualify for revived rights under the rule change, it must be deemed to have ‘artistic merit’, but the law does not define what that is. Instead, the Government has said that it will be up to the courts to decide.
Now consider that it can take up to a decade and hundreds of thousands of pounds to develop a new design and test it on the market. Many designs fail to make their mark even after all of this, so it is a costly and high-maintenance process. Imagine, then, having succeeded in all of this and launched a blockbuster new design that the public flock to. Then imagine having it snatched away as the rights holder to an earlier design claims that your new design breaches their rights because of an unintended similarity between a small element of your design and theirs. Are you going to risk a costly court action fighting an international corporation without having any certainty at all about the prospects of the case because of the obfuscation over the definition of ‘artistic merit’ or even if the challenge of copying has any validity at all?
Changes would have a “chilling” effect on innovation in design – The Government
And what incentive will those same corporations, who declare themselves champions of design, have to invest in developing new designs that might suffer the same risks?
No wonder the Government stated repeatedly that the change in the law would have a “chilling effect” on innovation in design.
If you think this is fanciful, let me tell you that it has already happened several times in high-profile cases in the world of music, costing Pharrell Williams and Robin Thicke £5 million over their hit Blurred Lines and Richard Ashcroft all his royalties and even the writing credit for his 1997 composition Bitter Sweet Symphony.
The result of all this is that the wholesale and retail sector in replica design furniture has all but collapsed in the UK. The Government had promised a five-year transitional period to allow businesses to convert to new activity – deeming such a period ‘necessary’ – but pulled the rug out from under them in October last year after the powerful rights holders based in Switzerland, Italy and the US threatened it with a Judicial Review.
Having read the Government’s February 2015 findings after a lengthy consultation process, it was clear that it viewed anything earlier than an April 2020 enforcement as disastrous for business, jobs and taxes. The complete U-turn in October 2015 never even attempted to explain or justify the change in position. I use the word ‘position’ carefully, because my reading is that the Government clearly did not change its opinion at all in the interim, a fact confirmed to me in person when I met the former Business Secretary Sajid Javid when I met him in December 2015.
So where do the museums, books, films, photographic archives and the rest come into all of the this?
Quite simply, along with the introduction of copyright for these 3D designs comes the 2D rights in them. In other words, the designs also acquire their own image rights. So that means where an Eames lounge chair and ottoman appear in a magazine photo for a room set, or in a book on design, in the background of a film, on a tea towel or mug sold through a museum shop, or are represented in any other similar way, the rights holder acquires image rights to that representation. All was not lost until now thanks to an assumption made when copyright in images extended from 50 to 70 years: Regulation 24 stipulated that any works whose copyright was “revived” as a result of this increase in term were to be “treated as licensed by the copyright owner” if the person wishing to use them gave reasonable notice, subject to payment of a reasonable royalty. Now though, that assumption is seen as being at odds with a 2001 EU directive relating to copyright because it denies exclusive rights to the rights holder to control reproduction of their work.
The result? The Government is repealing the regulation. This is potentially disastrous for film and photographic archives, which must now actively check anything they want to republish, seek out rights holders to any potentially infringing images, secure a licence for them and pay the fee.
The British Film Institute has serious concerns for the future
The task is monumental. The British Film Institute, which is the world’s largest film archive, formally objected to the changes, pointing out: “The likelihood of any rights holder whose works appear in a film being aware of these renewed rights is very low,” meaning that they would be unlikely to come forward and register a claim, leaving the BFI with the obligation of seeking them out.
“The administrative cost on the current owner/distributor of the film of meeting this obligation by ensuring clearance for all embedded designs with revived copyright will be high, the level of remuneration available to license such use will inevitably be minimal,” it concluded.
The BFI raised further concerns, which explain why some treasured films may never see the light of day again: “For companies and archives involved in re-releasing films where copyright has been revived they will lead to additional burdens on an already financially challenged sector when it wishes to provide online access to materials in collections or prepare theatrical rereleases of titles. Simply put, the information needed to secure the necessary licences for embedded designs will not be available in most cases where archives hold a copy. This will discourage organisations from making such material available in order to avoid unwitting infringements.”
One museum, thought to be the V&A, estimated that the loss in revenue from its shop, together with new restrictions on its existing collection, resulting from the changes, would cost it £850,000 in the first year alone. And the change in law will affect its collections policy moving forwards, it says. In other words, it may well stop acquiring anything that would come with such rights, which would skew the view of cultural history at one of the nation’s leading repositories for it. Will the Government be forced to replace this loss of revenue? If so, it will give the lie to its own assessment that the new law will have no significant economic impact on the public purse. And that is just one public body affected.
The greatest irony, I suppose, is that all of this is coming into force on the back of an Italian court ruling linked to an EU harmonisation directive in the months after the Brexit vote.
Understandably, one of the biggest concerns of those who voted Remain is the potential threat to the UK economy of leaving the EU. What will such a move cost in terms of jobs and tax revenues? No one can be certain at this stage. However, what they can be certain of is that here we have a highly damaging EU policy that is already costing jobs and millions in tax revenues, while inflicting very significant damage on our creative industries.
And what the industry can do about it now…
In recent years, global media coverage of multi-million dollar auction prices, combined with the rise of art as an alternative asset class, has focused more attention on the international art market than ever before.
That increase in awareness has brought the issue of transparency to the fore, but what exactly do we mean by it?
To the public – the market’s client base – transparency largely means more clarity about terms and conditions, pricing, and consumer rights when buying and selling.
However, to politicians, interest groups, the media and the many and varied corners of the market itself, concerns over transparency focus on a far wider range of topics: provenance, finance, crime and market manipulation, to name the most obvious. The general attitude seems to be that improved transparency will boost confidence and reduce the risk of things going wrong.
With the trade in antiquities, concern gravitates towards looting and fakes, with money laundering and theft following close behind. With finance around high-end auctions, critics argue that a lack of transparency allows auction houses, dealers and collectors to skew the market to give themselves an unfair competitive advantage or create bubbles to sustain their holdings in artworks that might otherwise decline in value.
For the trade, though, increased transparency can cause problems. Thanks to the internet, it is far easier for potential buyers to find out what a dealer paid for an item, making it much more difficult for them to cover their costs and sell at a decent profit; most people are not interested in the time, effort, expertise, or the restoration, transport or other costs that the dealer has to account for in acquiring the item, as these are not seen as contributing to its value. How justified are concerns, and what should be done?
Focus on the four key variables in any transaction
Let’s deconstruct all of this a little. Every transaction really only has four key variables: the buyer, the seller, the goods, and the money. Each brings its potential to the deal, and its risks. Due diligence on behalf of both buyer and seller can tackle much of that risk, but not all of it. How can you be absolutely sure where the buyer’s money comes from? How robust is the seller’s paperwork? And who exactly are they? Surely the answer is to regulate the art market directly, like the worlds of finance, insurance and the law, so that officialdom can intervene where necessary and public confidence in honest trading does not have to rest on what some view as little more than a person’s word.
The first thing to understand is that hundreds of laws already regulate the market (you can download the list that applies to the UK art market from the British Art Market Federation website), but experience tells us that direct regulation rarely solves the problem.
The establishment of the Conseil des Ventes in France in 2000 to govern the market once France liberalised its auction laws did nothing to prevent the cols rouges scandal at the Drouot auction house nine years later, where the closed shop of portering services masked a criminal network of theft. Nor did the Wine Association’s establishment of a rigorous code of practice in 2003 prevent people from falling victim to rogue funds in the years that followed. Then we have the age-old issue of what exactly art is: if you can’t define something clearly, then you can’t legislate for it effectively.
But more pressing, perhaps, is where questions of art market transparency overlap with debates about public interest and the right to privacy. If politics is to intervene here, then the lawmakers as a whole need a better understanding of how to balance public interest with the practical needs of business. That means consulting trade professionals to a far greater degree than happens now rather than relying on the opinions of academics and others lobbying against art market interests. We also need more consistency on codes of practice across trade associations as well as with legal definitions for cultural property, what constitutes art and other loose terms.
Baroness Neville-Rolfe, the minister guiding the Cultural Property (Armed Conflicts) Bill through the UK parliament, recently declared that creating such passports would breach Article 8 of the European Convention on Human Rights, which covers the right to privacy.
In 2014, in a case involving the auctioneers William J. Jenack, the New York Court of Appeals overturned a New York Supreme Court ruling that an auction contract was null and void if it did not name the seller. The court clearly recognised the damage this would do to auctions and declared that having the auctioneer’s details on the paperwork as the agent of the seller was good enough.
How to use the art of persuasion when it comes to transparency
I have always believed that the most effective way of getting people to change their behaviour is to show them why it is in their interests to do so – and enlightened trade professionals are already demonstrating how and why this should be done.
Online aggregator Barnebys has just published research showing that transparency online at auction, along with ease of bidding and post-sale fulfilment, is the most important factor in building brand trust and improving sell-through rates. ‘The new generation of buyers and sellers expect all information to be easily at their disposal, without any barriers,’ says Barnebys co-founder Pontus Silverstolpe. ‘Withholding information, such as final prices, foments distrust and alienates users.’ Anna-Karin Laurell, CEO of Scandinavian auction house Bukowskis, echoes this sentiment: ‘Transparency and [improved] function increases credibility. Through our new website we have also reached new target markets we previously believed were very hard to reach – the youngest between 18–25.’
The Hiscox Online Art Trade Report 2014 concurs, while its 2016 report highlights the growth in businesses that are improving access to art market information online, while simplifying fulfilment services.
Enhanced condition reports for online auctions, accompanied by excellent images, certificates of authenticity and a clear summary of all charges are the building blocks to buyer confidence and brand trust for sellers and their agents. So you may not know exactly who you are buying from, but if the auction site handling the transaction effectively underwrites it with all of the above, then it is a form of transparency that addresses many buyers’ concerns. This reflects the appeal court ruling in the Jenack case.
Having assessed auction websites professionally for nearly 20 years, my first and most important test is how easy it is to find the buyer’s premium rates. If there is any difficulty at all with this, I simply will not buy from that auctioneer, nor recommend them. Newly launched Forum Auctions have made a virtue of publishing exactly what their charges are at the top of their advice page on buying, and they also promote a set of core values, including a pledge on dealing with complaints promptly and fairly. It’s a simple, cost-free and uncomplicated piece of marketing that immediately promotes confidence. It is also a wise move because the Advertising Standards Authority has just launched an investigation into charges at auction, including whether buyer’s premium rates, VAT and other charges should be reflected in auction estimates.
The transparency issue is not going to go away. The market needs to regulate itself better if it is to keep the legislators off its back. It also needs to be better organised and more proactive in developing relationships with government. If the UK industry is serious in this, it needs to increase funding to its lobbying arm, the British Art Market Federation, by a factor of ten. The US would do well to follow suit.
This article first appeared in the October 2016 issue of Apollo, the International Art Magazine
How the Milwaukee Journal reported the protest against the introduction of the buyer’s premium in 1975.
Self-interest among EU member states will prevail in the end, if history is anything to go by
Whatever your views on the big EU vote on June 23, now is the time to deal with its aftermath. Brexit leaders who left the stage almost the moment the fight was over did not do their supporters or anyone else any favours as they failed to provide the direction they had promised.
David Cameron announced his resignation but said he would steady the ship of state until his successor was in place. Having announced this, however, he left it as rudderless as all the others.
Andrea Leadsom let down her supporters by demonstrating instantaneously just how unfit she was to take on the mantle of PM, which fortunately meant that the anticipated summer limbo of the Conservative Party leadership election came to a swift end with the coronation of Theresa May. Like her or not, her appointment means more immediate stability and direction, providing the country with a leader that other European heads of state feel they can negotiate with.
Beyond the politicians, Bank of England Governor Mark Carney has not exactly covered himself in glory. Instead of being the voice of calm reassurance, he has consistently talked the economy down. He should know better than most that the best way to create a recession is to talk your way into it.
As I write, Angela Merkel has endorsed May’s decision not to invoke Article 50 until 2017, so as to allow for the groundwork to be done on the way forward. Both Australia and, most importantly, the US have started talks on trade deals, with Secretary of State John Kerry expressing enthusiasm for getting on with the job and telling the world that leaving the UK adrift now would be a bad idea for all. The German industry association has already called for existing trade deals with the UK to be ongoing without hindrance or penalty.
The FTSE 100 – ok not as good a bellwether on Brexit as the 250, but still – has just risen above 6700, and the pound has climbed back to $1.31 as the Bank of England has announced that there is “no clear evidence” to show a sharp Brexit slowdown and warns against a kneejerk interest rate cut, especially as consumer spending, in general, has held up.
Market researchers Gfk, who specialise in measuring consumer confidence, reported a sharp fall immediately following the vote – the sharpest since 1994 – but only to levels at or above historical averages.
Looking beyond the cloud of gloom
Let’s be clear on this: it’s way too early to declare the bumpy ride over, and potholes along the road may be deep and rocky. But with growth forecasts for the UK outperforming the EU by some margin for the year ahead on top of all the other good news mentioned above, maybe we should spend at least some time looking for the silver lining rather than insisting at pointing relentlessly at the cloud.
Legally, the UK and others cannot sign off new trade deals independently while we are still members of the EU, but as John Kerry stated, that doesn’t mean we can’t start negotiations now. What’s more, we can take those negotiations a long way down the road.
As for the desire to punish the UK for its decision to leave the EU, just how far will Eurozone countries go? Some facts we do know.
We know, for instance, that the UK has the fifth largest economy in the world. We also know that in 2015 the UK accounted for 17% of the EU GDP, second only to Germany at 20%. And we also know that the trade gap between the UK and EU stands at around £24bn and is growing to the EU’s advantage.
All of these facts tell us that punishing the UK over trade deals would do more harm to the EU than to the UK.
However, some argue that for sound political reasons the EU must hold firm and punish the UK on tariffs: let the UK off lightly and others may well follow the Brexit route.
This thinking fails to take account of two factors, however: the rest of the world and national interest.
Let’s take the rest of the world first. Taking the view that Brexit is at least partially about gaining freer access to a much bigger market, it is not unreasonable to assume that the UK’s ability to negotiate better trade deals independently with the US and burgeoning Far Eastern economies will lead to some redirection of both exports and imports. Less favourable terms from our EU neighbours are likely to encourage us to increase two-way trade with these other partners, for instance by importing more Japanese cars than German ones.
The net result is that the EU will be the loser. Punishment of the type that has been mooted only works if the UK has no alternative, but here it clearly does.
This means that it will not be that long before the balance of power on EU trade deals shifts towards the UK, which can then demand far more favourable terms than before.
National interest and the buyer’s premium
Now let’s look at the national interest. For all the talk of the EU being a convocation of nation states working towards a federal union, the evidence shows that national interest among members is as strong as ever. One only has to look at what is happening in Italy, with Matteo Renzi’s stand-off against Brussels over injecting state money in to the economy, to show what the EU is up against.
Interestingly, the art market and its reaction to the introduction of the buyer’s premium in 1975 provides one of the best examples of what can happen when trade interests come together to make a principled stand.
Dealers protesting against Sotheby’s and Christie’s decision to introduce the buyer’s premium at Sotheby’s organised selective boycotts of sales. At a pre-arranged signal, they stood up in the saleroom and tore up their catalogues before leaving in protest. However, self-interest paved the way for the BP’s establishment and survival because, as legend has it, so many of these same dealers had quietly ensured that they had placed someone in the room to bid for them after they left.
So it is likely to be with the EU. Technocrats in Brussels may make a lot of noise, and national leaders may announce firm stands for the benefit of media outlets and their electorates, but be sure that behind closed doors they will all be scrabbling to win the best deals with what remains – for now, at least – the EU’s second biggest economy.
Those who say that such jockeying for position among member states on trade is impossible under EU rules should remember which two countries first broke EU fiscal rules: Germany and France. And they have both continued to do so, with France again predicted to break Eurozone budget deficit rules by some margin this year.
Is this a cynical view of the world? Maybe, but I would argue it is also a fairly realistic one. For all the grandstanding, talk of treaties and unbreakable rules, a lot of the talk coming out of Brussels is little more than demagoguery.
The UK may have a limited time left in the EU, but it will always be part of Europe and thank God for that. The British may dislike bullying from Brussels, but when it comes to individual nations and their peoples, I find that we are pretty big fans on the whole and long may that last.
If individual nations states within the EU attempt to put themselves at a competitive advantage over trade with the UK in future, then they will simply be trying to do their best by their electorates.
In the end, that’s just human nature and we would do well to remember it.
The biggest advantage to those who champion
ARR is that so few people really understand it
One of the first issues to be raised in post-Brexit discussions with the art market was the long-running sore of Artist’s Resale Right.
Introduced in two stages (2006: living artists; 2012: artists’ estates for up to 70 years after their death), the combination of charges and red tape made it all but universally unpopular among auctioneers and, especially, dealers.
Artists, the collecting agencies who stood to benefit more than anyone and various others saw it as overdue compensation for those whose work goes on to sell for huge sums without them benefiting further.
The message in brief: Why shouldn’t artists share in the benefits their art brings to others?
Now that the UK is heading for the door, will this law – the result of a European Union harmonisation directive – survive?
Difficult to say, but with everything else on the agenda, scrutiny of it is hardly likely to be a Government priority.
Failing the fairness test
As someone who spent many years campaigning against the introduction and then extension of ARR, I have always believed that it is not only detrimental to the art market, but also to artists. I also think that it fails the fairness test completely in the way it is structured. The problem is that so few people understand its scope and impact that, as with many other measures that should never have made it onto the statute book, they can’t see why art market professionals have any reason to object to it.
Let’s try to clarify that with a few facts:
- ARR has nothing to do with copyright, which is an entirely different right subsisting with the artist for their lifetime and to their heirs for 70 years afterwards.
- It is charged every time a qualifying work resells in the commercial marketplace.
- ARR applies to qualifying works three years after the original sale when the price is the equivalent of €1000 or more and immediately if it is €10,000 or more.
- ARR is not charged as a percentage of profits on an artwork, but as a percentage of the entire price when the art is sold in the commercial marketplace.
- As long as the artist qualifies for ARR and the price is above the qualifying threshold (€1000 or equivalent), the charge applies, even when the seller makes a loss.
- ARR cannot be paid directly to the artist but must pass through one of the two collecting agencies that administer it in the UK, The Design & Artists Collecting Society (DACS) or the Artists Collecting Society (ACS), which each charge 15% of the sum collected in fees, except on overseas sales, for which they make no charge. Originally DACS wanted to charge 25%, but this was reduced in line with the ACS prior to ARR coming into effect in 2006.
- ARR is an inalienable right, which means a qualifying artist cannot opt to waive it, regardless of whether they think it is unfair or risks damaging the market for their work.
- Those involved in the transaction are jointly and severally liable for paying ARR, although in practice the auction houses pass on the charge to the buyer, while only some dealers pass it onto those who buy from them. This means dealers suffer from ‘double dip’ payments – one on buying and one on selling. So a levy across the deal can be as much as 8% of the entire price.
- There is no definitive list of qualifying artists.
- Failure to meet your obligations under ARR rules risks a criminal charge.
- The collecting agencies hold no liability for their mistakes, even if you are the loser as a result.
- If a collecting agency accepts an ARR payment for a transaction that may not qualify, or for which the artist or their heirs cannot be traced, they can keep the money for up to six years before returning it. In doing so, they still charge their 15% fee and keep all the interest accrued.
- ARR is primarily supposed to help poorer artists as they establish their careers. However, the vast bulk of sums collected go to the most successful and richest artists and their estates.
- 30% of all monies distributed go to artists’ estates.
- ARR is capped at €12,500 on any single work of art.
- ARR rates apply as follows: 4% from €1000-50,000; 3% from there up to €200,000; 1% from there up to €350,000; 0.5% from there up to €500,000; and 0.25% above that to the cap. The scale is cumulative, so on artworks selling for more than €500,000, you pay ARR according to the scale of rates up to that point.
- ARR applies to the hammer price for auction sales.
- The UK Government went against its own policy by ‘gold-plating’ the threshold at which ARR should apply. The EU directive stipulated that it did not have to apply under €3000, but the Government went further than that by reducing the threshold to €1000. Originally, the Government had actually campaigned in Europe for the threshold to be raised to €5000.
- Dealers complain as much about the paperwork involved as the fee.
- Failure to comply with the directive and pay ARR meant that many dealers could not show its impact when the UK Government carried out its impact study into ARR at the end of 2013.
- By DACS’ own figures, it has charged over £7m in ARR fees over the past ten years. If its overheads (taking into account other revenues it raises) are lower than this, then it may be not-for-profit, but will certainly be banking a healthy surplus.
- I have never made a penny out of ARR and have no financial or other material advantage in arguing my case.
All of the above is quite a lot to take in. People will argue the fairness of the concept of ARR till the cows come home and still not agree. However, a number of things concern me.
The first is that ARR in the UK has never met the terms of the directive that imposed it on the market. It is not harmonised with other ARR programmes across the EU in terms of thresholds and application. It is not supposed to continue if global harmonisation fails to take place (it has failed and is unlikely ever to take place, as recent events in the US show), yet there appears to be no political will by those who imposed it on the market to meet these terms.
It is not in the interests of the market, which is put at a competitive disadvantage in relation to the other leading global art markets (US, Hong Kong, Switzerland), which have not adopted it.
It acts against the interest of artists trying to establish themselves in the market because dealers are less likely to take a risk in buying collections of their work for resale, giving them a lump sum in the process. Now, most will only sell on commission, allowing fewer artists to rely on this as a source of income.
Most of all, though, I have found that almost no one I talk to about ARR understands it fully and accurately.
Of these, nearly everyone who is not a dealer or auctioneer thinks it is a levy solely on profit. Not one – artists included – thinks that paying it as a percentage of the entire price is fair. No one at all thinks that it is fair that it should be levied even if the transaction makes a loss – not even DACS could come up with an argument for that one when I first asked them about it shortly after its introduction.
A practicable solution that better meets the fairness test
The only argument for these conditions is that it makes it practicable to collect the levy. If you were to charge 4% above €1000 for an artwork where the profit was, say, €100, then ARR would be just €4. From that the collecting agency fee would be €0.60. In this case it would probably cost more to administer and distribute the levy than the sum raised by it.
However, the driving argument by the collecting agencies and the supporters of ARR has always been one of fairness. If fairness trumps all, then make it truly fair. This can be done by raising the threshold to where it should have been in the first place and charging only on profits. The flat rate percentage charged by the collecting agencies allows them to subsidise loss-making distribution activities at the lower end of the scale with the large surpluses made at the top end of the scale, a fitting arrangement for the self-declared not-for-profit organisations.
To my mind, it would also be fairer to poorer, less established artists who might, once more, find a healthy level of patronage among dealers willing to take a risk on them by purchasing collections up front and giving the artists lump sums to work on their next phase. Don’t forget, those same dealers invest considerably in helping boost the artists’ reputations. Successful artists’ reputations are rarely built in isolation, so why would you want to penalise the very people who can make it happen for them.
Do I think anything will change?
Probably not. All I hope is that those who declare ARR a great idea are fully aware of its parameters and potential consequences. I have been looking at them closely for almost 20 years and still can’t see how fairness or common sense applies.