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Why potential buyers of valued artwork must get a provenance review first

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The Economic Times 15 October 2017
By Shweta Mallya and Alexandre Zielinsky Arregui

Wolfgang Beltracchi was arguably the world’s most famous forger of European art. Several of his fakes are still believed to be circulating in the market today although he was sentenced to prison in 2011. In one embarrassing situation, a Beltracchi forgery slipped into a Sotheby’s catalogue earlier this year, only to be hastily removed after it was spotted by a German journalist. The Indian art market has seen its share of forgeries as well. In one infamous incident in 2009, the late SH Raza went to inaugurate a show displaying works contributed by his nephew, only to discover that a substantial number were fake. In another case in 2014, works by MF Hussain and Manjit Bawa were featured in the India Art Festival, after being authenticated by family members of the artists, only to be removed as non-genuine soon after.

Stories like these leave art enthusiasts jittery. If high-value art is involved, managing risk and getting the paperwork right is vital. An evaluation of provenance, being the chain of previous owners of the piece, is important to determine questions of authenticity, valuation and title to the art work.

Authenticity can also be determined through a variety of sources, such as a diligence on certificates from the artist/artist’s family, catalogue raisonné, expert opinions, gallery certifications and written representations from the seller. However, none of these are foolproof. A written declaration from the artist, when available, is the highest proof. All other evidences, including confirmation of genuineness by family members have been challenged in the past as in the SH Raza and MF Hussain cases. Authenticators of art in India are not required to possess any formal qualifications, so it is often difficult to figure out who to invest faith in. This is why the “provenance”, or the chain of previous owners is often relied upon to determine authenticity.

By providing persuasive information relating to the origin of the art, good provenance leads to an increase in negotiated value. Value may also increase on account of a distinguished ownership history as unveiled by the provenance. For example, in 2016, David Bowie’s art collection of 400 paintings, sculptures, design objects went under auction. Artists such as Damien Hirst, Jean-Michel Basquiat and other lesser known artists were sold at high values due to their celebrity owner.

Similarly, a provenance review may reveal a negative or suspicious history of ownership. If the list of owners includes a non-compliant or blacklisted name, such as a person convicted of misappropriation, money laundering, the buyer may “be aware” of such a piece. This is because, a suspicious provenance may indicate to the buyer that the seller’s title is not healthy. In Europe, one example of this relates to art works that were at some point owned by Nazis, several of which were revealed through Hermann Göring’s personal art log.

In the more established art markets there is an industry of service providers who assist potential buyers with the determination of provenance. Even in these markets, establishing provenance is often easier said than done. Art forgers often convincingly falsify documents that constitute provenance information such as receipts of sale, ownership marks, dealers’ records, exhibition labels, collectors’ stamps, family letters, leaving even the experts confused. In India, the nature of the problem is different.

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A significant number of artists do not document their work, while private collectors aren’t always meticulous about curating their collections. Legal agreements for art transfers weren’t historically common and aren’t always easily available, and insurance covering provenance is non-existent. Few buyers undertake a formal diligence on provenance, choosing instead to rely on a combination of certificates from the artist, family members and experts, which are not reliable.

For artists, it may result in financial loss and reputational concerns. For collectors, it may lead to uncertainty and buyer’s remorse. More stringent laws deterring art forgers could be one solution, considering this absence of an assured method for authenticating art. For example, in some countries, the mere attempt to sell a forged artwork constitutes a crime. Under the more rigorous laws of France, the creation of a forgery is itself a crime. Legal responses may be designed to be either civil or criminal in nature. What is most important is that they should be adaptable and responsive to technological advancements in the art world that enable forgery.

India does have some legislated standards for older works of art. Paintings and sculptures that have been in existence for at least a hundred years are considered to be “antiquities” under the Antiquities and Art Treasures Act, 1972. They are mandatorily required to be registered before the concerned registering officer and their authenticity is determined by the Archaeological Survey of India (ASI).

However, having a legislated standard is by no means a guarantee against forgeries. In one incident 2011, the Calcutta High Court was called upon to determine the authenticity of 20 Tagore paintings, displayed by the Government College of Art and Craft (in Calcutta) on Rabindranath Tagore’s 150th birth anniversary. It was held that unless the owners of the disputed paintings were joined as parties to the suit, the ASI would be the appropriate authority to resolve the dispute. An expert committee was constituted and it was then discovered that the intention behind holding the exhibition was solely to get the counterfeit paintings authenticated as the original works of Tagore, thereby increasing its value based on provenance.

Courts have also tended to involve experts to comment on authenticity. Under the Indian Evidence Act, 1872, an “expert” is widely defined to include any “person specially skilled in such art”. However, there are no qualifications mandated for such experts, and even a well-qualified expert may sometimes not be able to confirm the authenticity. In Europe, the art world is currently split in its opinions about the genuineness of a Caravaggio painting, a second version of Judith Beheading Holofernes, which appeared in a private attic. Closer home, in a recent case between Bid & Hammer Auctioneers and Kiran Nadar, the arbitrator emphasised that art experts could not be relied upon if they are indecisive.

In this case, Kiran Nadar bid on a Raja Ravi Varma painting titled Jatayu Vadham (or Ravana Carrying Sita). She later repudiated the contract of sale (upon completion of part payment), relying upon the opinion of an expert who harboured doubts regarding the legitimacy of the painting, As the expert was unable to form a conclusive opinion on whether the painting was counterfeit, the ruling went in favour of Bid and Hammer and against Kiran Nadar. It is unclear from the ruling whether the sale agreement contained representations of authenticity, but this is one situation where stronger documentation may have protected the buyer.

So where does this leave a prospective buyer? If the terms of sale are adequately documented, and the work is subsequently found to be not authentic, the buyer can claim that he/she was induced by ‘fraud’ and ‘misrepresentation’ to enter into a contract for a non-authentic work. If successful, the buyer may claim damages, although this may be limited in situations where the seller is an innocent party having no knowledge of the forgery.

Due diligence by means of establishing provenance would prove to be useful as well, as it would indicate the protections that need to be worked into a contract of sale. There has also been some discussion around title insurance being made available in India, although this is still at a nascent stage for art assets. The risks involved in buying art are different from those applicable to other investments, but a little prudence still goes a long way.

(Mallya is a lawyer with Rao Law Chambers; Arregui is a private wealth lawyer based in Switzerland)

 


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