For centuries, the provenance of art was traditionally recorded only if it added cachet to the art itself. If a painting was once in the collection of a Pope, a King or a famous collector, that was worth recording. Anything else was not. Until the 1990’s, auction and dealers’ sale catalogues rarely included any provenance, unless it was special. In the last 25 years, there has been a radical shift: good provenance has become critical. Red flag names in the provenance of fine art but also antiquities and other collectible items such as silver, tribal art and South East Asian art can turn multi-million pound objects into assets with no market value. This is not about authenticity. It is about the fact that art that passed through the wrong hands cannot be sold.
Take a painting unlawfully appropriated by the Nazis or sold under duress by a person persecuted by the Nazis between 1933 and 1945. No respectable auction house or dealership will touch it with a bargepole unless there has been a settlement between the heirs of the dispossessed owner and the current owner. Take an antiquity that passed through the wrong hands. Even if its provenance shows that it was traded on the open market in the first half of the 20th century, a more recent association with red-hot dealerships or collectors often means that no one will go near it. And the list goes on. Today, the history of an artwork matters as much as its authenticity.
A collector who acquired European art between the mid 1940’s and the late 1990’s is more likely than not to find that inadvertently, he or she acquired artworks misappropriated by the Nazis. For 50 years after the end of WWII, the fact that the Nazis plundered and stole art on a massive scale was ignored. The Washington Principles on Nazi Confiscated Art adopted in 1998 caused a seismic shift. Prompted by international outcry, the main auction houses set up “Restitution Departments” that research the provenance of artworks before they make it to the auction room. If those departments identify Nazi red flags in the provenance, or if a claim is made by the heirs of the dispossessed owner during the Nazi era, the artwork cannot be sold. Loans to public exhibitions also attracted claims. Claims that fall in the public domain inevitably draw criticism of the collector whose artwork is the target of the claim, and negative publicity can taint the entire collection. Thus, the risk is not just that the art cannot be sold. Families can find their reputation trashed in the court of public opinion, especially if their reaction to claims is perceived as uncooperative.
Why is this an issue for fiduciaries?
Fiduciaries looking after European art created before 1945 and acquired between 1945 and the late 1990’s (or even later) are at risk of a claim that can destroy the market value of the art. If the artwork subject to a claim is part of a larger art collection, the entire collection can be tainted unless quick action is taken to isolate the claimed artwork from the collection, to avoid the entire collection from being contaminated by association. The risk is not limited to claims that the art was unlawfully appropriated or sold during the Nazi era. It covers a range of other situations, including art looted by the Soviets in the aftermath of WWII, art misappropriated by the East German Government after 1949, looted antiquities and art removed from Africa, Cambodia or other countries during colonial and other wars.
How should fiduciaries deal with this issue?
Fiduciaries caring for art collections have a duty to investigate whether artworks in their stewardship are potentially subject to an ownership claim. Collections should therefore be systematically audited, with the objective of identifying artworks with red flags in their provenance. The audit should be carefully planned, consideration should be given to the objective(s) of the audit, the audit process, how decisions are made and by whom, and guiding principles should be recorded in writing to ensure consistency in the decision-making process. More often than not, confidentiality is paramount, and communications between the auditors and the decision-making body should be considered with care, in case of litigation requiring disclosure of sensitive information.
Experience shows that potentially problematic objects can be identified through diligent provenance research and full market value can be restored by finding confidential out-of-court solutions to third party claims. Discretion is paramount. If the glare of public opinion unexpectedly falls on artworks in your clients’ collection, the media needs to be handled professionally - ideally with research, legal advice and PR support under one roof.
