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In private sales involving a professional seller and concluded remotely (such as online sales) or off the professional seller’s premises, the buyer (if he or she is not a professional) has the right to cancel the sale within a period of 14 working days. The consumer’s right of withdrawal does not apply to auction sales (including phone or online bids). It also does not apply to private sales concluded in fairs and salons. However, two legislative bills were introduced in June 201930 to grant consumers in art fairs and salons the benefit of the withdrawal right. One is still under scrutiny.

In contrast to private sales, auction sales are strictly regulated in France. The law defines what types of goods may be sold at auction, who may sell at auction, who may conduct the auctions and the modalities of the auction sales. Online auctions are subject to the same rules.31 All auction houses must declare their activity to the regulatory authority for auction sales, the Voluntary Sales Council (CVV), which notably has disciplinary powers. A reform of this institution is currently under scrutiny by the Senate.32

One specific warranty granted by the professional seller to the consumer in art market transactions – whether private or at auction – should be mentioned. In art market transactions, the professional seller warrants to the consumer that the description of the artwork put up for sale is accurate.33 For instance, the title or denomination of a work directly followed by a reference to a historical period, century or era warrants to the buyer that the work or item was actually produced during the period of reference; the use of the term ‘attributed to’ followed by the artist’s name indicates that the work or the object was executed during the period of production of the artist mentioned and that serious assumptions indicate that this artist is the likely author; the use of the term ‘school of’ followed by the artist’s name warrants that the author of the work has been the pupil of the master cited or has been known to have been influenced or have benefited from his or her technique.

ii Art loans

Art loans involving French public institutions – whether as lenders34 or borrowers35 – are governed by a set of detailed rules in the French Heritage Code. These rules notably provide an obligation for a contract to be signed.36 A commission oversees the lending or borrowing process and renders opinions on the condition of the artwork and the safety guarantees. Loans of artworks to public museums must be granted for free. Insurance may be requested and it is specified that a guarantee37 may be granted by the French state to national public institutions for the liability they may incur towards lenders of artworks for temporary exhibitions when the total insurance value of artworks that do not belong to the state exceeds a certain amount.38

30National Assembly bill No. 2000, 5 June 2019, Senate bill No. 574, 13 June 2019.

31Commercial Code, Article L.321-3.

32Senate bill No. 14, 23 October 2019.

33Decree on the prevention of frauds in art and collectible sales, 3 March 1981, No. 81-255 (commonly known as the ‘Marcus decree’).

34Heritage Code, Article R.451-26 to R.451-28.

35Heritage Code, Article R.451-29 to R.451-34.

36Heritage Code, Article L.451-11.

37Law No. 93-20 on the institution of a state guarantee for certain temporary exhibitions of works of art, 7 January 1993.

38Valued, by the French Heritage Code, at 300 million francs.

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Artworks that are loaned to a public museum in France may be protected against seizure for the period of the loan if the lender is a foreign country, public body or cultural institution, in which case, a request must be filed with the Ministry of Culture to obtain an anti-seizure order made jointly by the Minister of Culture and the Minister of Foreign Affairs.39 The request must describe in details the art, antiques or collectibles for which the anti-seizure order is requested and provide pictures of the item.

This process is not applicable to foreign private individuals or foreign private for-profit organisations. For instance, the heirs of a businessman wrongfully dispossessed during the Nazi occupation in France took advantage of the fact that a Pissaro painting, La cueillette des pois, was on loan to the Marmottan Monet Museum in Paris to have it seized to file a Nazi restitution claim before the French courts for its return. The lenders, a couple of American collectors, could not benefit from the immunity from seizure regime.

Other art loans not involving public institutions are subject to the general rules of the Civil Code. The disputes that arise most regularly have to do with lack of safety measures taken by the borrowing party. For instance, an association that had organised a temporary exhibition of photographic works by Joan Fontcuberta that were stolen during the exhibition was found liable for having insufficiently protected the premises and had to pay damages to the artist.40

In a recent case heard by the Paris Court of Appeal,41 the owners of a bronze cast attributed to Brancusi consigned the work to an expert to confirm the authenticity of the work and monitor its sale. The expert had signed an agreement with a Belgian institution for the loan of the work. However, the owners of the work, who had recovered their property in the meantime, refused to lend it. The expert filed a summary claim against the owners of the Brancusi work to compel the owners to proceed with the loan (the expert notably claimed that his reputation and the extent of his consideration were undermined by the owners’ attitude). The court rejected the expert’s claim on the grounds that it had been agreed between all parties that the work would only be loaned if its authenticity were definitely asserted by art historians, and there still remained some uncertainty on this count at the date of the loan.

iii Cross-border transactions

Artworks are subject to export controls outside and inside the European Union. For the protection of national treasures, Article 36 of the Treaty on the Functioning of the European Union provides for an exception to the prohibition between Member States of customs duties on imports and exports on goods.42

Items belonging to public collections and French museum collections, as well as items classified as historical monuments, are automatically considered national treasures under French law. There is also a secondary category of goods that may be considered national treasures if they are ‘of major interest for national heritage from a historical, artistic or archaeological point of view’.43 The permanent export of national treasures is forbidden.44

39Law No. 94-679, 8 August 1994, Article 61.

40Nimes, 28 April 2016, No. 14/04887.

41Paris, 3 October 2019, No. 19/16317.

42Treaty on the Functioning of the European Union, consolidated version 2016 (OCJ 202, 7 June 2016).

43Heritage Code, Article L.111-1.

44Heritage Code, Article L.111-2.

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The temporary or permanent export of cultural goods from the secondary category is contingent upon the issuance of an export certificate (and an export licence if the item is exported outside the EU) if the items fall within the 15 categories listed by the French Heritage Code.45 The major interest for national heritage is defined in this list according to two criteria: age and value. For instance, the following are subject to the prior issuance of an export certificate: paintings, sculptures and drawings that are more than 50 years old and worth more than €15,000; photographs that are more than 50 years old and worth more than €50,000; and archaeological objects that are more than 100 years old and worth more than €1,500.

The procedure for the issuance of an export certificate is designed to give time to the French administration to review the cultural value of the items and decide whether to classify the goods as a national treasure (i.e., to ensure that the item remains permanently on French territory). For instance, in December 2019, the French state blocked the export of a Cimabue masterpiece, Christ Mocked, which had been discovered in the house of an old lady in Compiègne a few months prior. The painting had sold at auction in October 2019 for €24 million, making it the highest bid of 2019 and the world’s highest bid ever for a primitive painting.

The owner of goods intended for export must file an application for an export certificate including a photograph of the item, in person or through an agent, with the Ministry of Culture. The Ministry of Culture has four months to review the application. At the expiration of this four-month period, the Minister must issue or refuse the certificate.

When granted, the certificate permanently attests that the item is not a national treasure. This certification is final (except for items less than 100 years old).

Upon refusal of an export certificate, a 30-month period commences, during which the cultural goods may not leave French territory. The applicant cannot claim any compensation for the refusal of the export certificate (but the applicant can challenge the decision through an administrative tribunal). Upon the expiration of this 30-month period, a new application for the issuance of an export certificate cannot be denied unless the cultural goods have either been classified as a historic monument or the state has made an offer to purchase them. If the owner refuses a purchase offer from the states, the refusal to issue an export certificate is renewed with no compensation (i.e., the item remains blocked on French territory).

Penalties for failing to apply for an export certificate or failure to comply with refusal of export authorisation are the same: a fine of €450,000, three years’ imprisonment and confiscation of the item.

Import of cultural goods is in principle free of any controls. However, following a July 2016 law, some controls have been implemented on the import of cultural property of archaeological, prehistoric, historical, literary, artistic or scientific interest from non-member states of the EU that are party to the 1970 UNESCO Convention. The import of such goods is now subject to a requirement for a certificate or equivalent document authorising the export from the exporting state when this is provided for by the exporting state’s legislation. In the absence of such a certificate, the import will be forbidden.46

The import of cultural goods that have left the territory of a state unlawfully is also forbidden.47 Cultural goods that have been seized at customs because they left the territory

45Heritage Code, Article L.111-2.

46Heritage Code, Article L.111-8.

47Heritage Code, Article L.111-9.

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of a non-member state of the EU may be placed in a museum accredited by the French state for the purpose of their conservation and presentation to the public while the research of the legitimate owner by the competent authorities is ongoing.

Current French tax legislation has not been modified and will not be, as the French government is protective of the art market, especially in the present circumstances. In any event, French law derives mainly from EU regulations and case law.

We anticipate Brexit being an issue for auction houses with offices in Paris, as formalities and tax consequences of the transfer of pieces of art from or to the United Kingdom will in all likelihood be more burdensome as a result.

One notable event relating to the covid-19 crisis is that France’s national furniture collection intends to sell off items at auction in aid of French healthcare workers.

iv Art finance

Art market professionals (auction houses, art dealers, gallerists, etc.) are subject to anti-money laundering obligations. In particular, art market professionals must carry out anti-money laundering checks such as the identity, domicile and profession of their clients, and gather information on all relevant elements of the client’s estate and the provenance of the sums involved. Art market professionals must declare to TRACFIN, the French anti-money laundering unit, any sums that they suspect may be the product of a criminal offence punishable by a prison sentence of more than one year or that may be connected to the financing of terrorism.

In recent years, and particularly since 2016,48 the French authorities have strengthened anti-money-laundering measures considerably, assisting art market professionals to combat the illicit traffic of cultural goods and the financing of terrorism. Guidelines for persons habitually engaged in trade in antiques and works of art were adopted in May 2019.49

VI ARTIST RIGHTS

i Moral rights

French law grants authors moral prerogatives on their works. These rights are directly attached to the author as a person and they are perpetual, inalienable and imprescriptible.50

The author may thus not waive nor transfer his or her moral rights during his or her lifetime (the author may, however, bequeath it to a third party upon death) and any contractual stipulation providing otherwise would be null and void.

There are four types of moral prerogative:

athe right to paternity allowing the author to command that his or her name be associated with his or her works;

bthe right of integrity of the works, which allows the author to oppose any alteration of his or her works and any misuse of the works;

cthe right of disclosure, which allows the author to decide when and how his or her works will be communicated to the public and to oppose the exploitation of a work that he or she has not made public; and

48Ordinance No. 2016-1635, 1 December 2016; Decree No. 2018-284, 18 April 2018.

49www.economie.gouv.fr/files/2019-02-05_LD_Antiquaires.pdf.

50Intellectual Property Code, Article L.121-1.

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dthe right of withdrawal or to reconsider, which allows the author to decide either to discontinue the exploitation of, or to alter, the work (right of withdrawal and right to reconsider respectively).

A 10-year dispute between an auction house, its photographer and a private company operating an online database on the art market on the question of the protection of auction catalogues by intellectual property rights was recently the occasion for the courts to address the questions on the paternity and integrity aspects of the moral rights of the author.51 After having obtained from the courts the recognition that auction sale catalogue photographs are protected and that their reproduction amounts to a violation of the photographer’s and the creator of the auction catalogue’s intellectual property rights, the photographer working for the auction house also obtained a judgment in his favour against the database company for violating his moral rights.

The Paris Court of Appeal52 found that the database company had infringed upon the photographer’s right of integrity by presenting cut out or cropped versions of the original photographs displayed in the auction catalogue, and for having added a watermark above the pictures. The photographer’s right of paternity was also found to have been infringed by the database company for not having credited each and every picture displayed on the online database with the name of the photographer (despite the fact that the French Supreme Court53 had apparently considered that a single mention of the artist’s name for various pictures could suffice).

ii Resale rights

The resale right is an inalienable right for the author of a work to receive a share of the proceeds of any resale of an artwork after its first sale made by the artist or his or her successors.54 The resale royalty is levied on sales involving art market professionals as sellers, buyers or intermediaries (i.e., art galleries, art dealers and auction houses).

The royalty right benefits the artist (who can neither waive nor transfer the right because of its inalienable character) during his or her lifetime and his or her heirs and legatees for 70 years after the artist’s death. It should be noted that the option for an author to bequeath his or her royalty right was forbidden until fairly recently (July 2016).

No royalty is levied on first direct sales by the artist or the artist’s heirs nor on the resale by a seller of artworks acquired directly from the artist less than three years before that resale and where the resale price does not exceed €10,000, nor on any resale for a price lower than €750.

The rates of the royalty applicable are regressive:

a4 per cent for a sale price of between €750 and €50,000;

b3 per cent for a sale price of between €50,000 and €200,000;

c1 per cent for a sale price of between €200,000 and €350,000;

d0.5 per cent for a sale price of between €350,000 and €500,000; and

e0.25 per cent for a sale price over €500,000.

51Paris Court of Appeal, 1 October 2019, No. 18/20049.

52E Marcilhac, ‘Suite et peut-être fin de l’affaire Camard contre Artprice’, Le Journal des Arts, 9 October 2019, www.lejournaldesarts.fr.

53Supreme Court, Commercial Chamber, 5 April 2018, No. 13-21.001.

54Intellectual Property Code, Article L.122-8.

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The total amount of the royalty may not exceed €12,500. In other words, all artworks sold for €2 million and over are subject to a flat €12,500 royalty.

The Supreme Court (in its most solemn composition) finally decided in a 9 November 2018 decision55 – after almost 10 years of contradictory case law – that the burden of the royalty could be transferred contractually from the seller to the buyer despite the fact that Article L.122-8 of the Intellectual Property Code clearly provides that ‘the royalty shall be payable by the seller’. In any event, an art market professional who acts as an intermediary in a sale (i.e., an auction house) is always responsible for collecting the royalty from whomever is responsible for its payment, and for passing it to the relevant collecting agency.

iii Economic rights

Aside from the resale right, French law recognises two economic rights: representation and reproduction rights.

The representation right entails the right to communicate an artwork to the public by any means56 while the reproduction right entails the right to materially fix the artwork by any process making it possible to communicate it to the public in an indirect manner.57

Any representation or reproduction – whether full or partial – of an artwork must be authorised by the author.58 Any unauthorised representation or reproduction of an artwork amounts to copyright infringement.

Both economic rights may be freely transferred, in contrast to the moral right and the resale right.59 Economic rights last for the duration of the author’s lifetime plus 70 years after his or her death, after which time his or her works fall into the public domain (in terms of intellectual property law) and may be freely used.60

The Paris Court of Appeal,61 for example, recently found that the sculpture Naked made by Jeff Koons in 1988 infringed a photograph taken by Jean-François Bauret called Enfants. The Court found that the Koons sculpture appropriated the combination of characteristics that made Bauret’s photograph original. Koons was unsuccessful in his freedom-of-speech and parody defences. The Court found that the artist did not prove that the use of the photograph without its author’s authorisation was necessary to express his freedom of artistic expression and thus did not justify appropriating another’s work. Nor did Jeff Koons give any evidence of the work having a humorous character. For having reproduced the sculpture in documents related to an exhibition of the sculpture to the public, the Pompidou Centre was found jointly liable for an amount of 10 per cent of the fines imposed.

55Supreme Court, Plenary Assembly, 9 November 2018, No. 17-16.335.

56Intellectual Property Code, Article L.122-2.

57Intellectual Property Code, Article L.122-3.

58Intellectual Property Code, Article L.122-4.

59Intellectual Property Code, Article L.122-7.

60Intellectual Property Code, Article L.123-1.

61Paris Court of Appeal, 17 December 2019, No. 17/09695.

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VII TRUSTS, FOUNDATIONS AND ESTATES

Structures appropriate for art collections depend mainly on the jurisdiction of residence of the owner and on applicable tax treaty provisions. French residents generally opt for direct detention. Foundations have been used by families for protecting and transferring art collections for generations, with wealth and inheritance tax exemption benefits. Regulations applicable to trusts introduced by the previous government may generate difficulties for families whose assets are structured on the basis of fiduciary relationships, considering the substantial reporting obligations and the absence of inheritance tax exemptions.

Companies and groups may create art foundations and through these enjoy specific tax deductions from their taxable profits, amounting to 60 per cent of the funds donated up to a ceiling of 5 per mille of their annual turnover.

French law provides several specific tax breaks of benefit to public institutions and private charities, notably inheritance tax exemption on transfers made through a lifetime gift or upon death to the benefit of the state, public institutions and charities as defined by applicable legislation.

In contrast, although transfer by reason of death is free between spouses, art is subject to substantial inheritance and gift tax between family members (45 per cent in lineal descendance above €1.8 million) and non-related persons (60 per cent from the first euro). This motivates collectors to structure their collections using civil partnerships where they wish to keep control over the collection through generations and avoid successive (taxable) transfers between family members, or in foundations for securing the family collection.

VIII OUTLOOK AND CONCLUSIONS

Laws on the liberalisation of auction sales are currently under legislative scrutiny. Their adoption may be one of the hot topics in art law in 2021 and may notably impact the online sales that auction houses have increasingly resorted to during the coronavirus pandemic.

Also under scrutiny is the furthering of France’s policy on the return of cultural heritage objects taken to African countries during colonial times, which is one of President Macron’s undertakings before the end of his presidential term. However, the covid-19 crisis may modify the contemplated legislative calendar.

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Chapter 15

GERMANY

Katharina Garbers-von Boehm1

I INTRODUCTION

Germany has many internationally recognised world-class public museums, a growing number of superb private museums and a thriving contemporary art scene. Nevertheless, from a global perspective and compared to markets like China or the United States, the German art market is relatively small, according to the Art Basel and UBS report The Art Market 2020, with only slightly more than 2 per cent of worldwide turnover being made in Germany.2 One of the highlights in the UBS report regarding the emerging online art market is that German collectors seem to be open to buying art online, even in the higher price segments.3

II THE YEAR IN REVIEW

Three major issues are currently being discussed – and criticised – by German art market participants and by art law policymakers, since these issues are considered to be competitive disadvantages for the art market in Germany.

aFrom 1 January 2020, new regulations derived from recent European anti-money laundering legislation have required art dealers to fulfil certain formalities for almost every transaction.4

bGerman cultural protection legislation underwent a broad reform in 2018, which introduced a rather bureaucratic system of export licences that have to be obtained before exporting cultural goods located in Germany. Several complaints against numerous provisions of the new law have been filed with the Federal Constitutional Court. The decision on whether these complaints will be upheld is due in 2020.

cOn 1 January 2014, the value added tax (VAT) rate in Germany on sales of artworks increased from 7 per cent to 19 per cent. This topic reappeared at the top of the agenda during the covid-19 pandemic as the rate of VAT was temporarily reduced.

1Katharina Garbers-von Boehm is a partner at Büsing Müffelmann & Theye.

2Art Basel and UBS report, The Art Market 2020, p. 36.

3Art Basel and UBS report, The Art Market 2020, p. 276.

4Gesetz zur Umsetzung der Änderungsrichtlinie der 4. EU-Geldwäscherichtlinie.

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Mention must also be made, however, of some very positive policy developments, such as the state loans granted to art galleries during the covid-19 crisis5 and the increase in the federal budget for art purchases.6

III ART DISPUTES

iTitle in art

Passing of title

In general, according to German law, the purchase of any goods has two aspects.

aFirst, the parties have to conclude a valid contract (oral or written) containing all the essential components of the transaction, such as which object is being bought for what price or which object is to pass to another owner by way of a gift.

bSecond, the passing of property requires that the parties agree that (1) the title should pass, and (2) the item should be handed over to the buyer. Instead of physically handing over the object to the buyer, it is sufficient that the parties agree on the passing of title if the object is already in the possession of the buyer. There are, however, also alternatives to the physical handing over of the object: if the seller is in possession of the work, it is sufficient that the seller and the buyer agree to a contract that has the effect that the buyer acquires indirect possession. This could be, for example, a loan either between the buyer and the seller or between the buyer and a third party. In addition, if a third party, such as a museum, is in possession of the object, the physical transfer of the object can be replaced by passing on the claims against the third-party possessor (e.g., a museum) to the new owner.

Good-faith acquisition

The issue of whether title is acquired does not necessarily depend on whether the person in possession of the object, and who wants to transfer it to another person, is actually the owner of the object – unless the recipient of the object is not acting in good faith. The recipient of the object is not acting in good faith if either (1) he or she knows that the person from whom he or she is receiving the object is not the owner of the object, or (2) the circumstances of the ownership of the object are unknown to the recipient because of gross negligence on his or her part. There is no general obligation in civil law to investigate the title of the seller, but under unusual circumstances (e.g., deals at flea markets, cash deals or other suspicious circumstances) due diligence becomes necessary. In addition to the rather lax due diligence obligations found in general civil law, new due diligence requirements were recently introduced in the Cultural Property Protection Act, which prohibits putting stolen items on the market.7

Nevertheless, as a principle, acquisition in good faith cannot take place if the item was stolen, lost or otherwise left the owner’s possession against his or her will.8 An exception to

5https://news.artnet.com/market/german-commercial-galleries-bailout-1911212.

6https://news.artnet.com/market/german-neustart-acquisitions-1899176.

7§ 40 ff German Cultural Property Protection Act (KGSG).

8§ 935 Abs. 1 German Civil Code (BGB).

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this rule (i.e., whereby acquisition in good faith is possible even for stolen goods) is made for money (coins, notes, etc.) and for items that are sold at public auction9 – an extremely important, and often criticised, exception for the art market.

Furthermore, German civil law recognises the legal principle of usucapion. According to this principle, it is possible to become the owner of any item (even a stolen item) after receiving and directly possessing it for 10 years in good faith. The institution of usucapion often plays an obstructive role in restitution cases, when looted or stolen art has been in the hands of the current possessor for a long time.

In addition to usucapion, there can generally be a transfer of property if an item is sold at public auction, even if it was stolen.10

Burden of proof

There are several provisions in the law regarding the burden of proof that make it difficult for a former owner who was dispossessed to reclaim an artwork from the current holder.

According to the general principles of German civil law, the burden of proof lies with the person who is making a claim. As a consequence, the person who argues that the current holder of an object is not the owner, but that he or she instead is the owner, has to prove that: (1) he or she acquired ownership; (2) he or she did not lose the ownership; and (3) the current holder is not the owner but, rather, acquired the object in bad faith.11

Moreover, German civil law provides for a presumption that the possessor of an object is actually the owner of the object. Thus, as far as stolen objects are concerned, the burden of proof lies in principle with the previous owner, not with the current holder.12

Finally, as far as usucapion is concerned, it generally suffices if the current holder proves that he or she has had the item concerned in his or her possession for 10 years or more. It is up to the previous owner to prove that the current holder acquired the object in bad faith or that bad faith occurred during the 10-year period.13

A recent case that went up to the German supreme court, the Federal Court of Justice, concerning a Purrmann painting gave occasion for the Court to issue some general guidelines regarding the burden of proof of the current holder when the current holder is defending a restitution claim by arguing that he or she acquired a work of art by possessing it in good faith for 10 years or more: the Supreme Court emphasised that, despite the rather relaxed rules on burden of proof mentioned above, the current holder at least has to explain how he or she acquired the work. If this explanation proves to be wrong, he or she cannot claim that he or she acquired ownership through usucapion.14

9§ 935 Abs. 2 BGB.

10§ 935 Abs. 2 BGB.

11Federal Court of Justice, the German supreme court in criminal and private law matters (BGH), NJW 82-38; BGH NJW 91,1415, Palandt-Herler, 78. Aufl. 2019, § 932 Rn. 15.

12§ 1006 BGB.

13§ 937 BGB.

14BGH, judgment dated 19 July 2019, Az. V ZR 255/17.

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