What does it mean? A guide to key terms in art law

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02 Dec 2019

What does it mean? A guide to key terms in art law

Lawyers can sometimes forget that terms they have become familiar with can sound like another language to their clients.

Here is a handy guide to some common terms that crop up during the course of matters relating to art law, which we hope will provide a useful reference for those involved in such cases.

Acceptance in Lieu (AIL) – The Acceptance in Lieu scheme allows an inheritance tax bill to be paid by transferring artworks or other important cultural, scientific or historic objects and archives to the nation. Artworks accepted under the scheme is allocated to public museums, archives or libraries by the appropriate minister where it can be enjoyed by the public. In certain circumstances, if an object has a particular significance to a given place, it may remain in situ at that site, under the Acceptance In Lieu in Situ scheme. The schemes are administered by Arts Council England.

Absentee Bid – A method of bidding at auction for those who cannot or do not wish to attend the auction. Absentee bids are also called “written,” “commission” or “order” bids.

Agent – Someone who acts on behalf of someone else (the principal) and who may have authority to enter contracts between the principal and a third party, usually in return for a commission. As an agent does not contract on his/her own behalf (s)he may not have any liability to the third party and/or the principal under the contract, unless the agent acts without authority. When art is bought and sold, it is very common for there to be a buyer’s agent and a seller’s agent who act on behalf of the buyer and seller, in order to preserve their confidentiality.

Alternative Dispute Resolution (ADR) – Alternative methods for resolving a dispute that do not involve going to Court, including mediation and early neutral evaluation.

Art financing or art lending – Where a bank, auction house, or specialist art finance company lends money to someone, which is secured against their artworks, which are the collateral for the loan. The artworks either remain with the owner or are transferred to the lender for the duration of the loan, depending on the terms agreed, which serves to allocate risk between the borrower and the lender.

Art Loss Register – The world’s largest database of stolen art. It is used to check the provenance of items before they are bought or sold, to record lost or stolen items, and to register artworks as disputed.

Art loan – The loan of artwork to a museum or gallery, which is usually documented in a loan agreement which records the terms agreed between the borrower and the lender.

Art litigation – Disputes involving art, sculpture or other items of cultural property, including authenticity disputes, claims for breach of contract or breach of duty, damaged artworks, misattribution, ownership disputes, title disputes, auctioneer’s liability and recovery of artworks (see also restitution and spoliation).

Artist’s Resale Right (ARR) (or Droit de Suite) – A royalty applying in the EU, to EU artists, which is payable to the artist when an original artwork is re-sold for more than €1,000 by an art market professional, such as an auction house, gallery or dealer. ARR lasts for the same period as copyright, and since January 2012, it has applied to qualifying works by artists who died less than 70 years ago. ARR is calculated on a sliding scale depending on the sale price, but is capped at €12,500, and some sales are exempt.

Attribution – An assessment of, or opinion about, who created a particular work of art, which are made with varying degrees of certainty, depending on quality, style, connoisseurship, provenance or technical analysis. A painting may be attributed as follows (from highest to lowest certainty):

  • By an artist – also called an autograph work.
  • Attributed to an artist
  • Studio or Workshop of an artist – painted by a pupil of the artist, probably under his/her direction
  • Circle of – of a similar period to an artist showing the artist’s influence, but not necessarily painted by a pupil
  • Follower of or Manner of – in the style of the artist, but not necessarily by a pupil
  • Imitator of – may be created much later
  • After an artist – a copy of a work by an artist
  • Fake or forgery – a non-authentic, imitation or counterfeit artwork.

A painting can also be attributed using a combination of these terms, for example, by the artist and studio, if the work was painted partly by the artist (e.g. the face or hands), and partly by studio assistants (e.g. the background).

Auction – A public sale in which goods or property (which are usually catalogued) are sold to the highest bidder, subject to any reserve agreed with the consignor. Bidders can either be present in the room (in person or having appointed an agent to bid on their behalf), on the telephone, or in person, or who may have left an absentee bid before the sale.

Authentic – An original work of art, rather than a copy or reproduction. Some artworks come with a certificate of authenticity, either from the artist or a foundation or authentication body connected to the artist, as evidence of its authenticity. Authentic artworks are sometimes listed in a catalogue raisonné.

Autograph – An artwork which is painted entirely by the artist.

Back-to-Back Contracts – These are used where an artwork is bought and then immediately sold to someone else – e.g. A buys from B; B then immediately sells to C. This is either to keep the identity of A and C confidential from each other, or sometimes to keep the sale price to C confidential from A. B may make a profit on the re-sale to C, but not a commission.

Bailment – The transfer of possession (but not ownership) of artworks by the owner (the bailor) to another person (the bailee) for the artworks to be used for a specified purpose, on the condition that they are returned to, or in accordance with the instructions of, the bailor, or kept until (s)he reclaims them. The bailee does not own the goods, but has possession of them. The bailee has a duty to take reasonable care of the goods and return them in accordance with the terms of any express or implied contract of bailment. In the art world, a bailment can arise where someone consigns an artwork to auction, lends an artwork to a museum, borrows money secured against an artwork, passes an artwork to a conservator for restoration, or passes an artwork to a transport or storage company.

Bidder – Someone who makes an offer to buy an item at auction. An underbidder is the second-highest bidder at auction.

Bill of sale / Bills of sale – A written document which evidences transfers of title to personal property or chattels, for example when an artwork is sold or used as security for a loan. A bill of sale may contain certain representations, warranties or conditions connected to the transfer. A bill of sale is not required to transfer title, as title can be transferred by way of a gift, but a bill of sale provides evidence of the transfer.

Bought-In – If there are no bids on a lot at public auction, or if bidding does not reach the reserve price, the lot is “bought in” or “taken to house”, meaning it is left unsold and remains the property of the owner or consignor.

Bonded – a bonded warehouse, or bond, is a building or other secured area where artworks may be stored without the payment of import taxes or duty. Bonded warehouses and freeports can be used by collectors and dealers to store artwork for tax or other reasons.

Buyer’s premium – A charge payable by the winning bidder to the auction house in addition to the hammer price, which is calculated as a percentage of the hammer price, plus VAT.

Capital Gains Tax (CGT) – A tax on the profit when an asset (such as an artwork) is sold, or disposed of, that has increased in value. CGT is calculated on the gain or increase in value, rather than the sale price. It applies to some assets, such as artworks, but not others, such as classic cars, watches and wine.

(Auction) Catalogue – An auction catalogue sets out information about a lot offered for sale, such as the attribution, a description of the object, the year of its creation, its provenance, exhibition history, and any publications in which it has been documented.

Catalogue raisonné – a catalogue of works of art for a particular artist, often including images, a description, exhibition history and literature, and an opinion on attribution, produced by an artist, his/her heirs, the artist’s foundation or by art historians or scholars.

Chandelier bidding – Bids ‘taken off the chandelier’ by the auctioneer in order to get bidding started up to the reserve, to create the appearance of greater demand or to extend bidding momentum for a work on offer. It is legal to take chandelier bids up to the reserve. If no real bids are then received, the auctioneer will say “passed” or “unsold” when the hammer comes down – i.e. it is bought-in.

Chattel or Chattels – A personal, tangible, moveable item of property, such as a painting or a piece of jewellery.

Commission – Either:
(a) An amount or percentage fee – e.g. payable by a consignor to an auctioneer, or to a buyer’s or seller’s agent, or to a dealer, gallery or broker; or
(b) An artwork specifically commissioned by, and made for, a buyer. The commissioning of such an artwork is often documented in a commission agreement.

Conditional exemption – Under the Conditional Exemption scheme, heritage assets such as buildings, land, works of art and other objects that qualify are exempt from inheritance or capital gains tax provided certain conditions are met, in order to protect them from being sold off privately. Through the scheme, no inheritance tax is paid when an asset passes to a new owner on death or is gifted, as long as the new owner agrees to look after the item and allow the public “reasonable access” to it (at least 100 days a year, subject to the object’s condition) and keep it in the UK (if moveable). If the criteria are not met, the exemption may be withdrawn.

Condition – the physical state or appearance of an artwork, including any deterioration, damage or restoration.

Condition Report – A written description and record of the condition of an artwork, usually including photographs, prepared by a specialist conservator. A condition report may be prepared before an auction, private sale, exhibition or when an artwork is transported.

Conditions of Business (or Terms of Business) – The terms and conditions which set out the terms on which an auctioneer and consignor agree to sell a lot to the purchaser. They usually include terms relating to payment for the item, and terms setting out the extent of the auctioneer’s liability (e.g. for the attribution given to an artwork or for any damage to the item whilst in the auctioneer’s possession).

Connoisseurship – The knowledge, experience and skill which enables someone to give an opinion on which artist painted a painting, when they painted it, and how.

Consignment – The transfer of property by an owner (the consignor) to an auction or gallery (the consignee) for sale.

Consignment Agreement – Sets out the terms agreed between the consignor and auction house, which may include, for example, terms dealing with the minimum price the artwork may be offered for, the minimum net return price that the owner will receive from a sale, the commission due to the consignee, the minimum length of the consignment and how it may be terminated.

Conversion – In common law, where one person interferes with the personal property of another, by taking it or retaining it without lawful justification.

Copyright – An intellectual property right which subsists in and protects original literary, dramatic, musical or artistic works; sound recordings, films, or broadcasts; and the typographical arrangement of published editions. Copyright protects the expression of ideas, rather than the idea itself. In the UK, copyright applies automatically to all works recorded in any form that comply with certain requirements. It lasts for a set period of time, which is usually the life of the author plus 70 years from the date of his/her death.

Cultural Property or Cultural Heritage – Cultural property is defined in Article 1 of the 1970 UNESCO Convention as property which, on religious or secular grounds, is specifically designated by the State as being of importance for archaeology, prehistory, history, literature, art or science, and which can be categorised as one of eleven media or objects listed in Article 1.

Cultural Gifts Scheme – This scheme enables UK taxpayers (including companies) to donate important works of art and other heritage objects to be held for the benefit of the public or the nation. In return, donors receive a tax reduction based on a set percentage of the value of the item they donate. For individuals, tax reductions apply to income tax and capital gains tax. For companies, reductions apply to corporation tax.

Dealer (also gallery) – A person or company which buys and sells works of art.

Due Diligence – Actions taken to assess a work of art, often in advance of a purchase or loan. These steps can include checks to establish the provenance, title, authenticity and condition of an artwork.

Estate – A person’s property, money and possessions – the total of everything they own. An artist’s estate will include all unsold artworks and artworks which are in progress.

Estate Planning (or Tax Planning) – Planning during your lifetime how your estate will be passed on either during your lifetime or in your Will, usually with a consideration of taxation. Particular concerns for artists include what will happen to their works and how authentication will be dealt with after their death.

Export licence – A licence giving permission to export art or other items. For example, certain cultural goods that reach or exceed specific age and monetary value thresholds require an individual licence for export out of the UK, whether on a permanent or temporary basis. Export licences are issued by the Export Licensing Unit at the Arts Council, on behalf of the Secretary of State. In certain circumstances, export licences may not be granted due to certain export controls on objects of cultural interest. See the Reviewing Committee on the Export of Works of Art and Objects of Cultural Interest and the Waverley Criteria.

Fake/forgery – A non-authentic, imitation or counterfeit artwork.

Fraud – Where a person acts in a false, dishonest and deceitful way in order to benefit themselves or cause loss to others.

Free Circulation – Artworks are described as being in ‘free circulation’ when duty has been paid on their import into the EU. Duty is not payable on imports or purchases of goods that are in free circulation. Conversely, duty may be payable on the purchase and removal of an artwork that is bonded.

(Auction) Guarantee – Where an auction house (whether itself or jointly with a third party) guarantees to pay a consignor a certain amount for a lot before the auction, regardless of whether the bidding at auction reaches the reserve price. The guarantor benefits financially if a guaranteed lot is sold for more than the guarantee amount, and may “win” the lot if it is not sold, or sells for less than the guarantee amount at the auction.

Government Indemnity Scheme – a government indemnity for art and cultural objects on public exhibition in the UK which provides an alternative to commercial insurance.

Hammer Price – The winning bid for a lot at auction. It is the price upon which the auctioneer’s hammer falls, determining the sale price, but does not include the buyer’s premium or additional charges such as taxes or Artists’ Resale Right (ARR).

Immunity from seizure – Protection from seizure for certain objects which are loaned from overseas to temporary public exhibitions in approved museums or galleries in the UK, under the Tribunals, Courts and Enforcements Act 2007.

Import – When art is brought into the UK, import VAT may be payable. Currently, items imported to the UK from the EU are not subject to import VAT, but this could change following Brexit. Artwork and antiques imported from outside from the UK are liable for import VAT at 5%. Certain items are not subject to import VAT if temporary admission relief is granted at the time of import.

Inheritance Tax (IHT) – A tax on the estate (the property, money and possessions) of someone who has died.

Intellectual property – the expression or creation of ideas (rather than the ideas themselves), such as art and literary works, designs, symbols, names, images and inventions. The ownership of intellectual property can be legally protected by copyright, patents, trademarks, design rights and database rights. See also moral rights and orphan works.

Limitation period – The period of time in which a claimant must commence Court proceedings, as set out in the Limitation Act 1980. If the claim is not brought before the expiry of the limitation period, it may be time-barred.

Moral rights – The right of an artist or author to protect the integrity and ownership of works (s)he has created, including literary, dramatic, musical and artistic works and film, as well as some performances. There are four moral rights recognised in the UK: the right of paternity (also known as the right to attribution), the right of integrity (also known as the right to object to derogatory treatment of a work), the right against false attribution, and the right to privacy in certain films and photographs. Moral rights are personal to the author or artist and so cannot be transferred or ‘assigned’ to someone else during his/her lifetime, but they can be exercised after death by the author or artist’s beneficiaries and personal representatives.

Nail to nail or Wall to wall – Description for an insurance policy that covers an artwork from the moment it is taken off the wall, to the time that it is returned to the same place.

Orphan work – a copyright-protected work where the owner of the copyright cannot be located or is unidentifiable. There is a public register of orphan works. In the UK, it is possible to apply to the Intellectual Property Office for a licence to use an orphan work.

Private sale or private treaty sale – The sale of an artwork privately which may involve an art dealer or auction house, rather than by public auction.

Provenance – The history of ownership of an artwork or other item, ideally going back to the date an item was created (if possible). Provenance can impact on the value of an item and can also assist with determining an artwork’s attribution.

Restitution – Restitution is the return of artworks, including looted art, stolen art or Holocaust spoliation claims.

Reserve – A reserve for an item consigned to auction is the minimum price the consignor is willing to accept for it. The reserve price is confidential between the consignor and the auction house. A reserve cannot be less than the low estimate for the item. If the bidding does not meet the reserve, then an item is ‘bought in’ (i.e. unsold).

Reviewing Committee on the Export of Works of Art and Objects of Cultural Interest – An independent body of expert members, which advises the Secretary of State for Culture, Media and Sport on whether an object should be granted or refused an export licence. If an export licence is refused, the Committee advise on the market value of the object at which matching offers should be made to the owner. The permanent members are assisted in each case by, where possible, three independent expert assessors. If an object is refused an export licence but no matching offer is made, the export licence will usually be granted at a later date.

Settlement (also out-of-court settlement or confidential settlement) – Where the parties agree terms to bring a dispute or Court proceedings to an end.

Sleeper – An artwork that has not previously been attributed to an artist is rediscovered, often when it appears in a public auction sale.

Title (or legal title) – The legal right of ownership of an item.

Technical analysis – Technical analysis of artworks can include x-ray, infra-red or pigment analysis of the paint and/or layers of a painting.

Treasure – Treasure is defined in the Treasure Act 1996 and includes coins and metallic objects that meet certain thresholds for age and metallic content, or other items found in the same place as, or which had previously been together with, another item which is treasure. Under the Treasure Act 1996, all finds of treasure must be reported within the specified period.

Waverley Criteria – An expert adviser may object to an application for an export licence on the basis the artwork or object satisfies at least one of the Waverley Criteria, which are as follows:
(1) Is the object closely connected with the UK’s history and national life?
(2) Is it of outstanding aesthetic importance, and
(3) Is it of outstanding significant for the study of some particular branch of art, learning or history?
If an expert adviser makes an objection, the case will be referred to the Reviewing Committee on the Export of Works of Art and Objects of Cultural Interest.

Without Prejudice or Without Prejudice Save as to Costs – When a letter or email is marked “without prejudice” or “without prejudice save as to costs” it means it normally cannot be disclosed to the Court, except on the issue of costs once the proceedings are concluded. It could be described as “secret correspondence” which allows parties to make genuine attempts to settle the case while preserving their “open” position. For example, a claimant might ask their lawyer to make a “without prejudice” offer indicating that they would accept 75% of their total claim, in order to settle the proceedings. Parties may also have without prejudice meetings to attempt to narrow the issues in dispute or settle the case.