Steve and Katie speak with Swiss art lawyer Anne Laure Bandle about the subject of her book “The Sale of Misattributed Artworks and Antiques at Auction” – the problem of “sleepers,” or misattributed and undervalued works of art sold at auction. We all dream of buying a painting at a yard sale that we later discover to be worth millions of dollars. On this podcast, we discuss the market incentives and structures that prevent discovery of sleepers.
Resources:
https://www.borel-barbey.ch/en/member/anne-laure-bandle/
Episode Transcription
Steve Schindler: Hi, I’m Steve Schindler.
Katie Wilson-Milne: I’m Katie Wilson-Milne.
Steve Schindler: Welcome to the Art Law Podcast, a monthly podcast exploring the places where art intersects with and interferes with the law.
Katie Wilson-Milne: The Art Law Podcast is sponsored by the law firm of Schindler Cohen & Hochman LLP, a premier litigation and art law boutique in New York City.
Steve Schindler: So hi, Katie. How are you?
Katie Wilson-Milne: I’m just trying to stay distracted, you?
Steve Schindler: Yes, I’m trying to stay distracted too, which is why we do a podcast.
Katie Wilson-Milne: An art law podcast.
Steve Schindler: Exactly.
Katie Wilson-Milne: Not that there’s no intersection with culture and politics, but generally, it’s a nice distraction. So nice to be back, Steve.
Steve Schindler: Yes, it’s great to be back.
Katie Wilson-Milne: And today, we’re going to go back to Europe, as we’ve been doing more frequently recently.
Steve Schindler: We’re very pleased to have with us today a colleague who we know, Anne Laure Bandle, who is a partner at the Swiss law firm Borel & Barbey, where she advises and represents private and institutional clients in the areas of art law, copyright law, philanthropy, as well as contract and commercial law. She received a Bachelor of Law degree from the University of Geneva, a Master of Law degree from the University of Freiburg, and a PhD in law from the University of Geneva. In addition to her work at Borel & Barbey, today, Dr. Bandle is a lecturer in copyright, art, and entertainment law at the University of Freiburg, Switzerland, a lecturer in art and philanthropy at the University of Geneva, and a guest lecturer in cultural heritage and art law at the London School of Economics and Political Science. She’s also involved in various foundations and associations, including the Art Law Foundation, of which she is the director. But why is she here today? Other than the fact that we love talking to her, she’s here because the second edition of her book, entitled The Sale of Misattributed Arts and Antiques at Auction, was just released last year. The subject matter of that book is something she calls “sleepers” at auctions, which will be the topic of our conversation today.
Katie Wilson-Milne: Yes, welcome. I don’t think we’ve talked about, quote unquote, “sleepers.”
Steve Schindler: We have never talked about sleepers, so this is a first.
Katie Wilson-Milne: Right.
Steve Schindler: So, Anne Laure, welcome to the podcast. And maybe just start by telling our listeners a little bit of something about your background and what led you to write a book about the topic of sleepers.
Anne Laure Bandle: With pleasure. Thank you for having me. So I actually, during my law studies, I did an internship at Christie’s legal department in London. I think I was one of the first interns. I was very bold back then and I thought that would be my dream job, so I absolutely wanted to work there. And having this opportunity to look into the back office of such a big auction house inspired me to write my PhD about auction sales. So this book is actually the result of my PhD studies that I then had the pleasure to undertake between Geneva and London. And very recently, my publisher asked me if I would be interested in doing an updated version of the book. And that’s how this came into being.
Katie Wilson-Milne: And can you tell us also a little bit about your practice? We know that you’re based in Switzerland. You know, we’re based in New York. I think we have a lot of similarities in what we do, but obviously some differences as well. But maybe you can tell us a little bit about why you ended up getting into this field of art law and what you’re focused on now.
Anne Laure Bandle: It was actually out of my PhD studies. So I first did an academic career, if I can call it like this. I researched a lot about the art market. I’ve wrote a lot about it. And I had great interviews and discussions with people from the market. And that gave me this desire to also work as a practitioner in parallel to keep on writing, keep on lecturing, as was mentioned. And as a lawyer, I really enjoy the other side basically of this reality. As an academic, you do a lot of research. You’re not focused on any client interests. So you can really look at things from a greater distance, and you can make an assessment overall than rather than just really targeted to a specific issue. And you have obviously these exchanges with students that are very enriching for your own knowledge. And as a practitioner, you see the realities, and you have lots of examples that will also feed into my lectures and vice versa. So I really enjoy working on both fronts.
Steve Schindler: We hear you. Katie and I both practice and also, on the side, teach. So it’s a really thrilling thing to have that kind of interaction between practice and students and their questions and all that.
Anne Laure Bandle: It’s very gratifying. And I think for students, it’s also the best way to get prepared about the real world, is that we can tell them about the real world. So I will tell them this is theory, and this is the reality.
Katie Wilson-Milne: Right. I totally agree. And that’s the benefit of having a practitioner, I think, as a professor, too.
Anne Laure Bandle: Now, it made sense for me to be in Geneva because Geneva has one of the biggest markets. If you look at the numbers, it’s obviously not as big as the US., but it’s part of the 10 biggest markets in the world. We have the freeports, who are probably also one of the reasons why a lot of art passes through Geneva. We have many collectors. So that raises many, many issues as you are familiar with cross-border transactions, loans, but also estate planning. And I really think of Geneva as an ecosystem, an art ecosystem, where you have a lot of actors involved in the market or related to art. So it’s very, it’s great actually for me to be able to rely on these people as soon as I need other expertise than a legal one.
Katie Wilson-Milne: Right, yes. We feel the same about New York. We can understand that. So what are sleepers?
Anne Laure Bandle: So sleepers are not slippers.
Steve Schindler: Should we spell it?
Anne Laure Bandle: That’s the joke I came across a couple of times.
Katie Wilson-Milne: Sleep.
Anne Laure Bandle: And it’s not making you fall asleep, as someone quoted on the back of the book. Sleepers are misattributed artworks and antiques that have been wrongfully identified by the oversight of an expert. And when I say wrongfully is that they have been under-qualified, basically. So we think of them as being not worth much, although they are a work of art by a master artist, for example.
Katie Wilson-Milne: Sort of the mythology of the art market, right? That you could buy something at a flea market. It had been in some family’s basement for 100 years, and then realize it’s actually a work by some old master. So obviously that happens. I think we all sort of realize it doesn’t happen as much as people who buy these works at flea markets, which they did, but it’s very sort of mythical in the art world that this happens. One reason this topic is so interesting and I realize we don’t talk about it is because often in our practice, we’re much more confronting the opposite, right? Which is something being sold as a very expensive work by a certain artist and then mid sale or after the sale, there’s questions about the authenticity of the work. And there might be disagreement, but that question disrupts the market to such a degree that the sale is either canceled or the work is returned and the sale undone. So that comes up more in our practice. And that might be for a variety of reasons, not even that it happens more often, but just that there’s sort of contractual provisions in place to deal with that. And there are more protections for the buyer when they buy something that then isn’t worth what they thought it was.
Anne Laure Bandle: So that was part of the study. And probably also the purpose I had initially of delving into this topic is there was so little known about it. And I was really interested in exactly what you said, where we focus so much on fakes and forgeries, and there are contractual schemes being designed for these works to protect the buyer. But no one ever considered the seller. So, this book is obviously about auction sales, where you have three parties involved, the auction house in the middle. And so the seller comes to the auction house and trusts in the auction house’s expertise. But we all know as lawyers, then when you sign a consignment agreement, you disclaim all liability of the auction house with regards to the attribution it makes of the lots that you’re consigning.
And so there is really a dichotomy between what is offered to the buyer, which is this authenticity guarantee referred to, and what sellers can expect, meaning not much actually, or really just that much that they are offered this platform. And very often, sleepers are only being discovered during the sale, so during the bidding process or right after. Why? Because obviously, I spoke to dealers who specialize in sleepers. And so they go through auction catalogs, now all online, and they really developed an eye to identify sleepers, well what they think could be sleepers. And they have made a name for themselves, so they can’t just show up at the viewing days and have a look for themselves. So they sent someone to do some reporting.
Steve Schindler: Yes.
Anne Laure Bandle: And obviously, they always take a risk, because you only have very limited days available to make your own assessment, and you never know. I mean, it’s quite a process to analyze very thoroughly a work of art. So they take that risk, but they’re happy to overbid the estimate that is being set, because that’s obviously far too low, should it be a real work or a work by that master artist.
Katie Wilson-Milne: And we did do a podcast…
Steve Schindler: I was just thinking about that.
Katie Wilson-Milne: …on the most famous example of this recently, the Salvator Mundi that sold at Christie’s. So refer our listeners to that fascinating tale.
Steve Schindler: We had one of the purchasers from the…
Katie Wilson-Milne: One of the dealers who specializes in sleepers.
Steve Schindler: Who did exactly what you’re saying, who combs through catalogs and then spotted this work and bid on it and bought it for very little money.
Anne Laure Bandle: He wrote a great book about this in which he explains the process they went through to authenticate it, to put it back into the range of works by that artist. And I think it really speaks for the great length of this process and the complexity of it.
Katie Wilson-Milne: And the expense, right? I mean, how much you have to invest, and you won’t know that the market will care about all the work you did. There was just an article in the New York Times too about the Van Gogh Museum, and how they’re inundated with requests for authentication of works that might be by Van Gogh. And this is a subjective analysis. I mean, that’s the tricky thing. It’s not like a blood test, and you’re not 100% sure. You can be 100% sure sometimes that something is not authentic, right, if the canvas or the paint post-dates the author’s life. But to be sure it’s authentic, there’s so much disagreement in the market, and it creates so much friction that it often shuts down sales when, let’s say, there’s an 80% chance something’s authentic, but the party that the market looks to is highlighting that 20% doubt, so.
Anne Laure Bandle: That’s something that I was very interested about, is that 20% voice you mentioned, this person or this committee who basically silences all other voices. Because as you say, there can be many experts on an artist, but very often only one or very few will be regarded as such by the art market and accepted as such. So it can be very frustrating for an owner to understand that this is the system that is in place, which can be reassuring because you basically only need to turn to that specific expert and gather judgment and it’s either yes or no. But it’s very frustrating if you believe that that expert did not thoroughly assess the work of art or doesn’t have the right qualifications to understand the artist and so on.
Steve Schindler: Right, and then you run into the sort of parallel issue or problem, which is that the courts have a very difficult time dealing with these issues, because nobody- and I think you point this out in your book, Katie and I have written about it- ultimately, the market really doesn’t care very much about what some judge decides in hearing different experts about whether something is authentic or not authentic. The market generally listens to the experts and the designated experts, whether it be a committee or a catalog, that generally the market respects. So it can be very frustrating, because at the end of the day, that expert is only a person or a committee with an opinion about something, and those things change over time, and so it’s tricky.
Katie Wilson-Milne: If you’re an owner of a work and you haven’t been inundated with how the art market works previously, this seems insane, right? That you feel like you have a lot of evidence about the authenticity of a work. You recognize that there’s a difference of opinion, and nobody cares about that, right? Nobody will look into it. They just care about what one person or one committee says. In the United States, of course, this is much more of a market problem than a legal problem, and the lawsuits are very difficult, because people are allowed to have bad opinions, and it’s really a market problem that we rely so heavily on one authority reflexively. In Europe, Anne Laure, that’s a little different, right? Because the moral rights structures are perpetual in a way that they aren’t here- in some countries- and that creates a legal right in a certain person or body to talk about the authenticity of a work. And my understanding is also that the courts review those decisions in a more sort of independent fact-based way than perhaps they do in the US.
Anne Laure Bandle: Yes and no. I mean, I think the big difference resides in the fact that in the US and also in the UK, the lawsuits are exposed publicly. So the parties are named, the experts are named, and you can basically access to the court decisions, all information included. In Europe, most of the court cases are not published, or if they are, they are anonymized. So you would not expose an expert, for example, who testified in a court case. Now going back to the thing you mentioned about moral rights, that’s true for France, but that’s very French. So France has the strongest artists’ rights protection in place, with this moral right component that is indefinite. Most other countries would limit it to 70 years after the artist’s death.
And I even would like to say that you don’t need to be the holder of artists’ rights to be able to be an expert, but you’re right that it is quite standard for artists’ heirs to endorse that role because they feel that responsibility and because they have access to know-how, no one else would probably access to. They have inventories, they have photographs, they have evidence of the artists’ creation. And based on that, they work and they offer their authentication services.
Katie Wilson-Milne: Right. So I guess back to the sleeper problem or the topic at auction houses, I mean, how prevalent is this problem that auction houses are selling works that they’re undervaluing or misattributing to the detriment of the value of the work? I mean, it’s interesting, because as you point out in your book, you know, there are two things that you would think would favor the sellers. One is the auction houses are their fiduciaries, right? That they represent the sellers, not the buyers legally. And yet they disclaim all this fiduciary responsibility in their contracts, which you’re allowed to do, parties can agree to that. But still, they represent the buyer. And they have independent provenance researchers, right?
So the auction house makes more money when a work is by a famous artist and sells for more. So you think they’d be highly invested both as a fiduciary representative of the seller, but also because they make more money when they are selling a work at top value. And that’s why they hire all these specialists to research a work and look at the archives and call, as we said, the market authorities. So in a way, it’s surprising that the auction house incentives aren’t well aligned.
Anne Laure Bandle: I agree. And I think there is a balance that they need to set between obviously their own interest, but also the fear of liability coming from the buyer. So I went through court cases where this was exactly the topic. Can we attribute this fully to the master artist? Or should it be by that artist and studio? So this is a topic that comes up quite often with old master paintings. But it could be basically any kind of object. And there were even carpets or porcelain. I mean, there’s so many examples that exist. But basically with old master artists, because of the way they were created, these paintings and the way they worked and shaped their studios with apprentices, but also admirers, etc., makes the task much more difficult.
And so for the auction house, it’s an assessment between should we be too confident or not enough? Should we be too positive about this attribution or a bit more conservative? And I think that’s a very difficult judgment to make. And in my opinion, I believe that they’d rather be too conservative in fear of any potential litigation that might come from the buyer, rather than thinking we could make more money out of it. But there are cases where that’s what the consignor was obviously happy about because the auction house was more confident than expected. And in that case, it’s obviously then a risk that they take, and they have to be comfortable with the assessment that they make. That can also happen, but it’s really a tough call, I think, for the auction house if there is some doubt about it.
Steve Schindler: And I think another point you make in the book, which I didn’t really focus on too much in my own thought, was just the practical one, which is that auction houses take in so many works of art, right? And sure, if something is coming in and is proposed to be a work by Leonardo, they’re going to put the full force of the auction house resources toward authenticating, establishing, making sure that they’re correct. But you think of the thousands of works that come in with much, much lower values, right? That they just don’t have the staff, the time, the ability to devote to all of those many works, the kind of attention that it would take to sort of ferret out some of these authentication issues. And it’s only sometimes, as you say, later in the process after the auction, sometimes some years after the auction, when it comes up again for sale and someone takes a fresh look at it, that it comes out. But it is sort of understandable that given the resources available and the number of artworks that come in to an auction house, that they’re not going to be devoting that level of scrutiny to every single work that comes in.
Anne Laure Bandle: And the typical example is an estate sale. So you’re emptying a house, and you have no idea what’s in there. And often, sleepers are dirty, they’re covered with dust, they are ill conserved. And so you have to go through a cleaning process, obviously, to first look at it. You know, what is actually behind that layer of dirt? And that also explains why these pieces are just overlooked.
Steve Schindler: Right. And I think you even referenced, this is a case that Katie and I have taught, the Luxmore-May case back in the 1990s in England, right? Where you had a country auction house looking at an entire estate, missing a significant work that later turns out to be much more valuable. And then the lawsuit is brought against the auctioneers. And in that particular case, the court basically said, we’re not going to hold these country auctioneers to the same standard as we might, say Christie’s or Sotheby’s, in London, because they don’t have the expertise necessarily to make that calculation.
Anne Laure Bandle: What was interesting in this case was that the local auctioneer went to Christie’s for a second opinion. So they basically outsourced part of the process to an agent who then went to Christie’s and asked Christie’s, what do you think of these paintings? And Christie’s said, we don’t think of it as much more valuable than you do. So, interestingly, the judge here had also to assess whether it could be expected from a local auctioneer to routinely have a second opinion from one of these international auction houses by way of a backup. And the judge said, no, that would be too much of a responsibility on these big auction houses who do that as a free service. So they make these first over-the-counter assessments. As a business-guessing incentive, and that would be too much to expect from them to bear that sort of responsibility.
Steve Schindler: Right. And actually, there was a similar case in the United States around the same time called the estate of Querbach, which involved another estate sale worked by the American artist J.F. Cropsey. And in that case, the auctioneer who was doing the appraisal seriously miscalculated, but missed a whole bunch of signals, including the signature of J.F. Cropsey. And so, unlike the case in England and here in the United States, the court said that, no, you auctioneer have a duty to be- a standard of care that you have to meet. And you didn’t rise to that standard of care, because you advertise yourselves as experts, you missed some very significant clues, and therefore, we’re going to hold you responsible for the misattribution for this sleeper in that case.
Katie Wilson-Milne: But I guess the question is, with a great contract, can they disclaim that responsibility barring gross negligence, right?
Steve Schindler: Right. Well, that was a case of negligence, and it’s interesting. I don’t recall whether there was a defense relating to the contract, but…
Katie Wilson-Milne: There might not have been in these smaller…
Steve Schindler: But the court had definitely found that the auctioneer didn’t meet its standard of care and therefore held them liable for the difference between what the work sold for and then what it later sold for.
Katie Wilson-Milne: Right. I mean, as you’ve analyzed, Anne Laure, one of the issues is how the contractual provisions that larger auction houses make sure they have interact with these underlying duties. And so that may be something that ensnares smaller dealers and appraisers in a way that the larger auction house legal departments make sure don’t, because of these disclaimers in the contracts. When you’re thinking about this, you’re, I can understand that sort of smaller estate sale companies, appraisers, dealers and smaller auction houses that deal with estates are not going to have the research departments are not going to be looking and analyzing and paying for scientific testing and all kinds of experts for works. That makes sense.
What’s more surprising is that a Sotheby’s or a Christie’s or a Phillips that has all these specialists on staff that does sell the type of works- you know, does sell the top old masters, so has that expertise- that they would also fall into this trap. I mean, that’s what’s so interesting about your analysis, that you’re not making a statement just about smaller, more regional sellers. You’re making a point about auctions in general, even the most well-resourced with provenance researchers and specialists. And even in those cases, it often takes a third-party player, right? Like, we are seeing the growth of these groups, third-party groups that are spending a lot of money trying to authenticate what you call sleepers, so that they bring that evidence to Christie’s and Sotheby’s, right? And say, look, I’ve done the research, take me seriously. But why we require those third-parties to do that is really interesting.
Anne Laure Bandle: Yes. And I think it’s really a question of approach. How do auction houses approach this? Are they willing to make a thorough analysis of these lots? Or are they more focused on bringing new business in and organizing sales and having these sales? And you would think that it’s in their interests to look at the potential of these items, but ultimately, it’s also a business decision that they have to make and they have to look at how much effort it would cost them to have these pieces undergo such a deep assessment. The question also arises when the consignor, for example, ask for technical analysis, X-ray or any other type of analysis, that obviously can lead to exclude negative assertions such as the work has not been made during that period. It will never allow you to do a positive attribution, and it has a cost point. So the auction house also has to understand, is it worth it? What are we going to find out with these assessments? Obviously, consignors would want the auction house to spend as much money and manpower or women power available to do these sorts of research, but they can’t do it, and that’s also what is in the conditions of sale. They put it bluntly, you need to hire your own people, your own experts to do that sort of work.
Steve Schindler: It’s interesting, I agree with most of what you said, but there have been at least one case that I can think of in our experience where the consignor doesn’t necessarily want the auction house to be doing scientific forensic testing on their work. There’s that risk out there that they’ll find something that is going to upset the sort of established wisdom about the work. Not in the case of sleepers necessarily, but in the case of the work that’s being advertised as something more exceptional, where a consignor might say, oh, don’t do that, because it might damage the work. We just don’t trust you doing that kind of scientific exploration of the work.
Katie Wilson-Milne: That makes sense if there’s something to lose. If your painting is selling for $200 and it was from a basement, maybe you have nothing to lose.
Steve Schindler: That’s right. That’s where the auction house probably wouldn’t want to spend the resources, as we’ve said.
Katie Wilson-Milne: Right.
Steve Schindler: So let me ask a question. One of the points that you make in your book about how to deal with this issue around sleepers is that the auction houses enjoy a privileged position in the art market, and therefore there’s a level of trust and confidence in them, both by the consignors and the public at large. How does that play into dealing with how to try to improve the situation with respect to sleepers?
Anne Laure Bandle: The auction houses are the only ones publishing the sales information on their website. That is obviously very valuable data that is being shared with anyone, and that is simply being relied upon by dealers, collectors, experts who are trying to evaluate a work of art, but also look back at the provenance history of work. So this information is a basis, also aggregated into databases we know about, price databases. And that was the first aspect of this privileged position that they take. And the other aspect is auction houses, very few of them generate most of the sales on the market. So you only have very few players at the top end of the market conducting most of the sales.
And so if only these few players would change their approach, it would really have a huge impact on the art market as a whole. So in my opinion, because of that privileged position that they enjoy, because of the visibility that they allow us to have on the market, they should take on a different approach towards consignors. And actually, same as the approach they endorse now towards buyers, simply saying, look, we want to be responsible, we want to have a responsible practice in attributing the lots that are consigned with us. And we would like to be responsible for the information we provide in our catalogs also towards the consignor.
Steve Schindler: I mean, let’s just explore that for a second, because as a practical matter, I know we represent consignors, sometimes very big consignors, consigning lots to auction houses. And particularly if there are dealers in the world who have expertise in the works that are being consigned. I mean, very often, if you have somebody just who is not in the business of buying and selling art, it’s just someone who happens to have a picture, they may not have a lot of information. But a lot of times, the auction houses are doing their research off of the information being supplied by the consignor. I mean, a lot of times, that’s the focus of a lot of research, because the consignor is the one that has the most immediate documentation and information about the work. So how do you sort of navigate that situation where the auction house is, in fact, relying on the consignor? Sure, they’re bringing independent expertise to it, but they’re getting information from the consignor. And in fact, they make the consignor and most contracts make representations about the providence and the authenticity of the work. So how do you sort of navigate those two poles?
Anne Laure Bandle: Well, you may be naïve, but, and I obviously wrote this before I became a practitioner. Actually, interestingly, most of the things I said, I still endorse them today, now having a much greater look into the market. So you’re right. You’re absolutely right. That’s also my experience that auction houses rely on the information provided. Are they verifying it? Big question mark. Are they doing further research? I’m not sure. I don’t think so. They have a very good internal database that they are using. That is obviously a very interesting resource. But it would be, I think, an added value to the client to undertake that sort of art historical analysis. Where has the work been exhibited? Who was it owned by? And they do that in the context of Nazi-looted art claims. So why not just set up a department that does that art historical analysis? Again, I think it would serve the client, and it would serve also the buyer who knows exactly what he’s buying. And it would obviously indirectly also serve the art market as a whole.
Katie Wilson-Milne: Maybe the underlying question is how many sleepers are there? Because if there are a lot of sleepers, and the auction house stands to profit from discovering many more that they know are there, then maybe it’s worth paying extra specialists building in that research process. But if we suspect that most works found in the basement or at a garage sale or whatever, you know, if it’s one in a thousand that are going to be a sleeper, then that expense to extend, as you said, the research, which is not always perfect, put into questions of Nazi-era art transactions to every old master, you know, that just may not be feasible for a for-profit business.
Anne Laure Bandle: Yes, you might want to isolate the kinds of works and antiques that are mostly exposed to that risk. And now on your question, how many sleepers are there? I remember when I interviewed the general counsels of the big auction house, they said, oh, we never get these. With a big smile on their face.
Katie Wilson-Milne: And you’re like, the whole point is you wouldn’t know, right?
Anne Laure Bandle: First of all, you don’t know. Second, scholarship evolves over time. So you might have an opinion today that will be different in two years from now. Or an expert might be the prevailing voice 10 years ago, but no longer.
Steve Schindler: Right.
Anne Laure Bandle: So this is also something that makes it quite vulnerable, is this exposure to the evolving scholarship around such works. And also, these works date back more and more. Information might not be easily available any longer. And so the more we move on, the more distant we are from the date of creation of these pieces, which obviously increases the risk also.
Steve Schindler: Right. Also think from the point of view of the auction house, the downside risk of making a mistake can be huge, right? And probably would have to be insured in some way. But also, as you say, there is this notion of the passage of time. And we see some of the published cases that we’ve seen of real sleepers are brought, not just soon after the sale as you hypothesized, but also sometimes years after the sale.
We had the Marchig versus Christie’s case, which I think you also referenced, where you had someone who came in in the late 90s to Christie’s with a work of art, the expert examined it, said it was a minor work by a 19th century German artist. And then in around 2010, she brought it back for auction at Christie’s and they said, oh, you know what? It turns out it’s a Leonardo and it sold for something like $150 million. But that was a case where the court said, too much time has passed and therefore your claim is barred by the statute of limitations. So there is that protection built in when you discover these things years after. But if you just look at the numbers of that case, you had $25,000 on the first sell side and then $150 million on the second. So if you’re assuming responsibility for that, it’s a lot of millions of dollars.
Katie Wilson-Milne: Right, and think of the Salvator Mundi.
Steve Schindler: Salvator Mundi, right.
Katie Wilson-Milne: That gets even broader. Yeah. I mean, it feels particularly egregious for the original consignor…
Steve Schindler: Yes.
Katie Wilson-Milne: When the same auction house 10 years later, or whatever, gets to sell it for the enhanced price, but you didn’t get that, right? So that feels- people want to sue all the time for wrongs in the art market when the claims aren’t good or they’re not great. But that doesn’t mean that it feels less outrageous or less unethical. You do also make the point or the distinction in your book between what market changes need to occur and what the law is equipped to do, which is a recurring theme on this podcast and in kind of all art market discussions. But what is the solution to this? I mean, I guess that depends on how big the problem is. But to what extent is this a legal problem? Or is this a problem at the structure of the art market and the culture of these relationships?
Anne Laure Bandle: I think the shift can come based on the legal side of things, because it’s a guarantee that is provided in your auction terms, you will change your approach. And of course, you cannot be held liable for changes that occur in many years of time. And auction houses, they have understood that very well. As you’re familiar, the authenticity guarantee provided to buyers is limited to not more than five years. And you cannot offer evidence that wasn’t available at the time of the sale. So obviously, with all these new, also new technologies coming into play, with new information being made available, that’s greatly helpful to us all, but it will not allow you to put into question an attribution that was made years before. So we have to distinguish according to the circumstances and the factual situation that allows you to bring such a claim. And we see it in other contexts, for example, in our transactions.
I’ve experienced a big change throughout the past years where transactions were mostly concluded without a contract, without any questions asked. And now since banks are becoming so vigilant about the art market and are asking questions and want documents to be in place, the art market reluctantly for some had to abide by these new rules and had to implement these new practices. And I think it’s benefiting them, but benefiting many and also their clients. So they know exactly what they’re buying or what they’re selling.
Katie Wilson-Milne: So what is the legal shift that precisely that could occur to help address this problem?
Anne Laure Bandle: I’m not in favor of regulation, more regulation for the art markets. I think the art market would benefit greatly from a self-conscious approach, from a responsible approach. And that’s why my proposal would be to adopt simply a guarantee towards consignor on these sales. So really the change would come from the auction houses themselves as they see fit and as they think would also be aligned with their practice and they can choose as they do for the buyer’s guarantee, they can simply choose which lots would fall under that warranty if they are comfortable in providing it or not. So the change should really come from inside the market rather than being imposed by legislators who have little understanding of the dynamics that exist, the interests that are in place, the rules that the art market has established and is following. And I think also the many news that we read in the newspaper about the fraud scandals, the record-breaking sales, give a very wrong view of the art market, the way we see it practicing in this market every day.
Katie Wilson-Milne: But that would be totally voluntary, right? I mean, it’s legal in the sense that they would self-impose a contractual obligation. But why would they ever do that? Why would auction houses ever do that?
Anne Laure Bandle: Because it would benefit, first of all, their reputation. That’s one of their biggest asset is their reputation. It would certainly really underline the fact that they are taking their role also as an experienced art platform seriously. Ultimately, if they happen to identify a sleeper, they benefit from a greater commission out of that sale. And so, certain auction houses also advertise on their website the great discoveries that they have made. So, they know exactly what comes out for them if they manage to do that.
Steve Schindler: Right. Have you had any conversations with any of your in-house lawyers at the auction houses and gotten any kind of reaction to this? I know there’s reference in, I think, maybe in the introduction to your book by our good friend Martin Wilson. Have you spoken to him or others about the receptivity that the auction houses might have to your proposal?
Anne Laure Bandle: Yes. It’s very interesting when you speak with people on the legal side versus people on the business side. Yes.
Steve Schindler: And now Martin has switched, so, but putting him aside for a moment.
Anne Laure Bandle: Well, he’s exactly, he’s switched. So I’ll be curious to find out whether that has an impact. But no jokes aside, interestingly, I also received positive feedback from people managing auction houses. But obviously never, they would never publicly say that, but they fully endorse some of the criticisms that I raise and also the change. I mean, the auction market is now under great pressure. And there’s a high competition at the very high level. So it’s been difficult to implement new standards that at first would cost them money, as you said, Katie. So I don’t see this change being implemented in the near future, but nonetheless, maybe simply endorsing a more responsible approach towards consignors rather than making things at a very fast pace the way we experience it now. I mean, I’m involved in a couple of transactions that are supposed to be running in the next months, and we haven’t even signed a contract yet.
Katie Wilson-Milne: Yes, yeah.
Anne Laure Bandle: So I see that things are increasingly processed at a very fast pace, and that’s obviously not helpful.
Steve Schindler: Right. I know the other thing that you propose in your book is that maybe the auction houses and consignors should embrace more alternative dispute resolution mechanisms in order to resolve disputes. And maybe one positive thing that the auction houses, another positive thing that the auction houses can view this as, is that right now, notwithstanding the contractual language, there are duties that the auction house has under the law, principally fiduciary duties, and you highlight those in your book. And so any kind of lawsuits that are brought now, are brought under much more complicated and expensive and public sort of mechanism. So you have to prove breach of fiduciary duty, you have to prove gross negligence, all things that you can do to get around the disclaimer. But that’s expensive for both parties. It’s public and it goes on for a long time. So maybe one- some horse trading that can be done here is a kind of more of a certainty, and mechanisms to resolve disputes over sleepers.
Anne Laure Bandle: Many disputes are being settled amicably before we even know about them. So that is probably, I’m convinced, one of the reasons why ADR mechanisms are the favored approach when it comes to any such issues. And as you said, you have probably greater control over the process, especially if you negotiate something. If you have a mediator in place, then the mediator can really interact and focus on interests rather than positions and really try and find some sort of a, find a link between both, find an agreeable solution. And most of it, the parties are not exposed, publicly exposed. Things are not being brought out in the wide open, because that would not only damage the reputation of the auction house, but also the reputation of the work. So there’s obviously a huge risk tied to that for both parties. And ultimately having someone in charge could also not just a mediator, but if you decide to go through arbitration, having someone in charge who knows the rules of the art market, who is sensitive to the dynamics of the market greatly, I think greatly helps in processing these sorts of disputes.
Katie Wilson-Milne: I think that is intuitively correct, but Steve and I have also discussed there is a downside to having someone who’s overly specialized, adjudicate a dispute, and that we form opinions, right? We have had our cases, we’ve had the clients, we’ve formed an idea about what we think should be happening, and that can lead to bias in interpreting parties’ arguments about the art market. I guess what I’m saying is that, which Steve really made this point to me just like two days ago, if you have too much knowledge of how the art market works, and you’re too opinionated, and let’s say you’ve been writing and speaking about these topics, you’re not really able to give the neutral, you may not be able to give a neutral, dispassionate assessment of the dispute and the party’s interests in a way that a mediator or an arbitrator coming into a dispute without a lot of that background reasoning would have. So I mean, I see the benefit of both, but it’s just interesting.
Steve Schindler: Right.
Katie Wilson-Milne: I think there’s a potential downside.
Steve Schindler: Right. I think it came about, because I’m going to be on a panel at Harvard in a week, I think, about alternative dispute resolution in the art market. There is, as you know, because I think you cited in your book, an arbitration panel in the Netherlands right now called the Court of Arbitration for Art, CAFA. As far as I know, they haven’t arbitrated any cases yet, because no one has submitted any cases to them. And the whole premise behind that was to have specialists available to hear disputes in the art market, which sounds great. But I do think there’s a kind of countervailing notion- and maybe as advocates, we embrace this more than others- which is that you don’t necessarily want somebody who has a very predetermined point of view on everything as an advocate. You want to be able to persuade them. And so is it better to have someone who is in our world, or is it better to have, say, even a retired magistrate or other more neutral person who both sides educate? And I realize that’s coming from a bit more of an American jurisprudential kind of perspective, but it is something I think about, but I am on the panel of CAFA, and I…
Katie Wilson-Milne: You’re open to…
Steve Schindler: I’m open to it. I would love to be able to participate in it, but it’s an interesting question.
Anne Laure Bandle: Yeah. Probably very much depends on the context. I mean, I had different experiences and frustrating experiences with people also generation-wise, who were doing things the old way versus we’re trying to do things the current way. And trying to explain things, how things are being done today, I think that is the most frustrating part. Whereas if you deal with someone who is used to that, things go much smoother. I mean, but it also reminds me of one of the sleeper cases I attended at the Royal Court of Justice in London, which was the Caravaggio case- Lancelot Thwaytes’s case- and here I remember the judge trying to understand at great length, the whole process of attribution, how they came to that conclusion, what is expected from an auction house, and the court ruling is about 100 pages long, because the judge really detailed her understanding of the whole process. Now, obviously, that could have been much shorter if you were in front of someone who is used to that. Now, is it good or bad? We will never know for this case. At least you have to go through all the steps of the process and explain them rationally before you can actually come to the merits of it.
Katie Wilson-Milne: I wonder, too, when we’re thinking about non-legally regulatory imposed changes, one thing that comes up a lot when people, clients come to us with a problem that may not have a great legal solution, they often, the leverage does not come from the legal position. It comes from their relationship as an important customer of the auction house or client of the auction house. I wonder, just having this conversation, if those really big consignors, as you said, this world is so competitive, getting these big lots is a cutthroat competition between Sotheby’s and Christie’s and to some extent. Phillips- if the very biggest consignors decided they were going to require some kind of authenticity guarantee, and maybe there’s outs and caveats, and I haven’t thought this through, but some kind of requirement that there be an analysis and a backup to what the auction house lists as the provenance of the work, and the author of the work, that that would actually be the most effective possible avenue.
Steve Schindler: Yeah, and well maybe to look at it on the flip side, and I hadn’t really thought about this, which is that because we’re often in a situation where clients are going to one auction house, going to the other auction house, seeing what the best deal is, and from the auction house perspective, maybe on the positive side of the ledger, as opposed to just considering exposure is, maybe it’s a carrot that we can use to get consignor.
Katie Wilson-Milne: Like a percentage of the buyer’s premium.
Steve Schindler: We look at us because we’re also going to, not only will we give you a good deal in many other respects, but we’re also going to give you this guarantee that the other auction house is not giving.
Katie Wilson-Milne: Maybe they don’t give it to everyone, just like they don’t give a guarantee to everyone. They don’t give an advance to everyone. They don’t give an enhanced hammer to everyone, but it can be one of those tools for the really biggest consignors that normalizes that practice going forward.
Anne Laure Bandle: I wish that could be, in fact, an additional incentive. In reality, these sleepers are not consigned by very important, high value net worth people. So it could be a great sale point, but the reality, I think, is different. These are mostly over-the-counter works that are consigned or smaller estate sales. But you’re right, it could be another point to offer to consignors. If it’s an important enough sale, the auction house absolutely wants to win for itself.
Katie Wilson-Milne: That’s a good point, that consignors for these types of works are not going to have that market power, but it might introduce the practice, at least at some level.
Steve Schindler: Right, place to start.
Katie Wilson Milne: Okay.
Steve Schindler: Alright, well I think that’s it. Anne Laure, thank you for being with us. It was a pleasure. Always enjoyable to talk to you.
Katie Wilson-Milne: Yes, and hopefully, we’ll meet again on another topic.
Steve Schindler: We’ll post information at the book with the program notes, and we encourage people to buy it and read it. And that’s it for today’s podcast. Please subscribe to us wherever you get your podcasts, and send us feedback at podcast@schlaw.com. And if you like what you hear, give us a five-star rating. We are also featuring the original music of Chris Thompson. And finally, we want to thank our fabulous producer, Jackie Santos, for making us sound so good.
Katie Wilson-Milne: Until next time, I’m Katie Wilson-Milne.
Steve Schindler: And I’m Steve Schindler, bringing you the Art Law Podcast, a podcast exploring the places where art intersects with and interferes with the law.
Katie Wilson-Milne: The information provided in this podcast is not intended to be a source of legal advice. You should not consider the information provided to be an invitation for an attorney-client relationship, should not rely on the information as legal advice for any purpose, and should always seek the legal advice of competent counsel in the relevant jurisdiction.
Music by Chris Thompson. Produced by Jackie Santos.