Auction house

New law to root out counterfeit artwork in Korea

The Ministry of Culture, Sports and Tourism announced Thursday that it will legislate a new law regarding artwork distribution in an effort to root out the distribution of counterfeit works, recover public trust in Korea’s art market, and establish a healthy trading platform for creative crafts. The law will be implemented in August 2017.

The new law will divide art distribution into three major categories: art galleries, which will be subject to a registration system; art auctions, to a permit system; and other sales of artworks, to a reporting system.

Currently, art galleries or art auction houses can operate with only a business license, and without official registration or approval, which led to criticism that they lacked transparency and engaged in unfair practices in their art distribution process.

With the new law, however, art galleries will have to submit plans to prevent counterfeit artworks as well as a list of all of their affiliate artists. Auction firms will also have to provide counterfeit prevention measures, while possessing certain qualifications including at least 200 million won in capital, an official auctioneer, and an auction house.

Furthermore, artwork distributors will be obliged to maintain records for each of their artworks, and issue an official warranty when they’re sold. Failure to do so will also be result in fines and cancelled business licenses.

The law will implement stronger punishment for counterfeit crimes as well, by stipulating that these types of crimes be punishable by up to five years in prison or 50 million won in fines. The ministry will also consider the potential implementation of special judicial police specific to artwork fraud.

Meanwhile, the ministry is to establish a national body for artwork authentication, which will function as the official agency responsible for developing new authentication technology and professionals in related fields.

“The institute will be operated not as a government agency but as a public one, and will help improve Korea’s art authentication technology, as well as aiding with crimes, investigations, and trials related to counterfeit artwork,” said Jung. “It will be staffed by professional researchers and appraisers.”

The full details of the law are to be revealed in the first half of 2017.

Caveat emptor: why the art world is a legal landmine

It is a privilege afforded to lawyers to observe the problems faced by individuals, families and trustees in respect of their assets and seek to find solutions. Disputes concerning art, antiquities and cultural assets – sometimes more colourful and interesting than the object in question – can be particularly emotive.

One aspect that differentiates the market for art and antiquities from the trade in other valuable assets is that it is largely unregulated; anyone can buy and sell freely without having to comply with any prescribed formal requirements. As the value of such assets increase and the stakes get higher, so does the potential for things to go wrong. This can lead to interesting issues concerning, provenance, attribution, legal title and forgeries (to name a few examples).

The provenance and attribution of an artwork or antiquity are often key considerations. A connection to a well-known historic collection, or authorship by a renowned artist or maker can enhance desirability and thus add significant value. Of course, the reverse is also true in cases where the provenance or attribution turn out to be incorrect.

One can imagine the disappointment of finding out, as one of our client’s did, that artworks, which had been sold as being by a highly regarded artist whose works were in a European royal collection, were actually by a minor artist of no significance and worth many times less than the price paid.

Navigating between fact and ‘sales puff’ can often be a challenge. Does a statement that an artwork is of exceptional quality mean that it is unusually good, or is this just a statement of opinion by the seller? Buyers of art have to be cautious about readily accepting statements made about it. Even pre-eminent experts can sometimes have differing opinions. Matters such as attribution, and the physical condition of an artwork can be difficult to assess when restoration and underlying issues are not always visible to the untrained eye.

The case of Thwaytes v Sotheby’s provides a noteworthy example. Mr Thwaytes consigned a painting, The Cardsharps, to Sotheby’s for sale by auction, putting them on notice that it may be a work by the renowned old master, Caravaggio. Sotheby’s experts examined the painting, but took the view that it was a copy by an unknown artist. The picture could, of course, have sold for many multiples of the sale price had it been sold as a work by Caravaggio.

The buyer, a renowned art scholar, later identified the picture as being an autograph copy by Caravaggio himself. Mr Thwaytes sued Sotheby’s for negligence, but was unsuccessful; the court found that Sotheby’s had not breached their duty since there was nothing that would have been visible on a visual inspection that should have counteracted Sotheby’s view that the painting did not have Caravaggio ‘potential’. The case illustrates just how subjective authenticating a work of art can be.

Unscrupulous sellers - of which, unfortunately, there are a few around - will often make grandiose statements about the artworks/antiquities they are selling in order to secure a sale. It is, therefore, vital for any buyer to make sure that the object being sold is what it purports to be, or at least ensure that there is adequate protection in place should things go wrong.

Jeff Koons' Gazing Ball sculpture at centre of legal tussle between art dealers

Lawyers for Blue Art Limited filed an amended complaint Wednesday night  against David Zwirner and his gallery, which Fabrizio Moretti says failed to deliver a work of art he bought for $2m. The new complaint comes after Zwirner’s motion to dismiss named the previously anonymous purchaser and called the lawsuit “a case of buyer’s remorse”. In response, Moretti’s recent court filings reveal the work at the heart of the case—Jeff Koons’ Gazing Ball (Centaur and Lapith Maiden) (2013), from the gallery’s show that year. And while he previously asked for the original purchase price for the work plus fees, Moretti’s updated suit seeks $6m in total damages.

In the new filing, Moretti’s lawyers say Zwirner and the gallery played “a kind of ‘three card monte’ in which the numbered casts of the sculpture”—an edition of three, plus an artist’s proof—“were distributed to their buyers willy-nilly”.

On 24 June 2014, according to the complaint, Moretti made a purchase agreement and soon put down a deposit of $400,000 on edition 2 of 3, his lawyers say. By early 2015, the gallery told Moretti that the sculpture was nearly complete and the collector started paying off what he owed. In April 2015, the work was ready but instead of being delivered to Moretti, it was labelled as edition 3 of 3 and taken to the Contemporary Art Evening Auction at Sotheby’s in May, where it carried an estimate of $1.5m to $2.5m—and failed to sell.

On 29 June 2015, the court papers say, Moretti paid the final $200,000 he owed and around that time, another sculpture was completed. This one, however, was labelled edition 1 of 3 and went to another buyer, who still owed the gallery $1.6m. Moretti, faced with a bad art market and a sculpture from a series that had now been unsold at auction, says he still had not received his piece by the time he filed his lawsuit on 4 August this year.

Further complicating matters is the fact that the editions that were made are not the same as the one shown at the Gazing Ball show at David Zwirner Gallery in May 2013, the complaint says. That is now classified as a “prototype” and the dimensions of the sculpture ready for collection by Moretti are different from the object he purchased, the collector says.

Moretti’s amended suit alleges that Zwirner’s dealings violate the New York Arts and Cultural Affairs Law, updated in 1991 to “augment the laws protecting art purchasers from the slippery practices of some art dealers”, according to the court papers, and to outline the information that must be provided to the buyer of a sculpture. Moretti is seeking additional damages because Zwirner violated the law in the vagueness of the purchase agreement and in the editioning, the court documents state. The complaint also accuses the dealer and gallery of breach of contract and fraud, among other charges.