Expert opinions, Mutual mistake – Legal issues in appraisal and authentication

There are a variety of legendary art dealers including Paul Durand Ruel, Ambroise Vollard, Paul Cassier, and Daniel Henry Kahnweiler. Dealers provide appraisals which are informed opinions or expert estimates of the monetary value of an object based on the information at hand. Although, how does an erroneous opinion affect the market?
In a recent case 1st October, Lisa Schiff, a former New York-based art adviser, is facing two civil lawsuits alleging that she defrauded clients. The US Attorney's office is investigating her companies Schiff Fine Art and SFA Advisory, and two civil lawsuits seeking at least $1.8 million. There were 108 missing works of art with a fair market value of more than $1.1 million.

A qualified appraiser works in accordance with generally accepted appraisal standards, if, for example, the appraisal is consistent with the substance and principles of the uniform standards of Professional Appraisal Practice (USPAP), as developed by the Appraisal Standards Board of the Appraisal Foundation. The work of an appraiser could result in the artwork being sold for too little or too much, affecting insurance purposes and incurring tax penalties.
An appraiser's level of expertise should include the degree of learning and skill ordinarily possessed by reputable members of the profession, practicing in the same or similar locality and under similar circumstances.

It is unregulated and there is no state license required, no specialized degree in personal property appraisal required and it is the responsibility of the client to vet the appraiser's qualifications. As a result, an appraiser's advice should be approached with caution and neutrality. The profession is self-regulated, and standards are formalized by professional appraisal associations such as the American Appraisers Association, American Society of Appraisers, and International Society of Appraisers. Furthermore, due to the fast-paced nature of the art market, an up-to-date assessment is necessary; even if pre-existing inventory or appraisals exist, the valuation would be dependent on changes in fashion or trend, as well as increasingly stringent duties regarding provenance and due diligence.
What factors affect the value of a work of art?

The authenticity, rarity, and quality of an artwork, such as Picasso's Blue, Rose, or Cubist period, are characteristics that boost its worth. Whether the artwork fulfils a certain "need," such as a complete suite of works or fills a gap in a particular collection. The artwork's pristine condition, provenance, clear title, celebrity ownership, size, style, medium, geographical context, narrative, and trend are factors which increase its value. However, some reasons that reduce the value of an artwork include flooding the market with works of art by the same artist in a short period of time, generating a blockage, bought-in or burned artworks, and damage. In some cases, damaged artworks increase in value, such as Steve Wynn's elbow accidentally injuring Picasso's La Rêve and Dennis Hopper's gunshots destroying Andy Warhol's print of Mao Zedong.


Similarly, authentication of works of art is the process by which experts attribute an artwork to a specific artist, culture, or era through documentation, stylistic inquiry and scientific verification.
Whether a work of art is authentic - that is, real or original - is always a vital topic for a collector to consider while completing due diligence. This is because the art industry values what is authentic and original. Connoisseurship, provenance research, and forensic analysis are the three lines of investigation. Connoisseurship is developed by visual perception, art historical knowledge, familiarity with technique, and empirical experience.

Furthermore, provenance research entails tracking the chain of ownership or possession from the artist to the current owner or possessor to guarantee that the work of art is the same one that left the artist's hand. The final strategy could be forensic analysis, which involves scientific testing of the physical components of a work of art, such as paint samples and canvas fibres, using tools such as Raman microspectroscopy, x-ray diffraction, scientific photography, radiocarbon dating, thermoluminescence, and fingerprint analysis. This would assist in determining whether a work of art was created in the time and place claimed by the seller, or whether the materials are anachronistic.

However, there are instances where experts can shield themselves from liability by not directly stating that a work of art is inauthentic and in order to avoid authentication problems it is important to understand what avenues exist for seeking an authentication opinion, consult with appropriate authorities before consummating a purchase. Therefore, proactively manage the risk of authentication issues early in the process, for example, by negotiating a sale/ purchase contract with appropriate representations and warranties about the work of art’s provenance and authenticity.

Copyright and Art

Photography of Pablo Picasso's Guernica (1937) is now available to visitors at Madrid's Reina Sofa Museum. Manuel Segade, the museum's new director, revoked the photography
prohibition. Picasso's depiction of the Spanish Civil War was restricted for more than thirty years, and it was only recently available. Visual artists' copyrighted artworks have been published online and used in AI systems, yet artists are not given adequate recognition.

According to a Goldman Sachs study, “generative AI has been used in efforts to determine an artwork’s authenticity and value… They are virtual collaborators, assisting artists in creating artworks of unique aesthetic value.” Companies such as Stable AI Ltd have been charged with copyright infringement for downloading millions of copyrighted photos from artists, as the system relies on enormous volumes of copyrighted artworks.
Regarding intellectual property: “I came here to say that I do not recognize anyone’s right to one minute of my life. Nor to any part of my energy. Nor to any achievement of mine. No matter who makes the claim, how large their number or how great their need.” - The character of Howard Roark, Ayn Rand, The Fountainhead.

There are two main types of intellectual property: industrial property and copyright. Trademarks, patents, design patents, trade secrets, and copyright are all examples of intellectual property. Copyright is a type of intellectual property (IP), which is the creation of the mind such as inventions, designs, literary and artistic works, symbols, names, images, and performances. This safeguards materialized forms of artistic expression for a specific period of time. It satisfies specific criteria and statutory rights, applying to works of art as tangible objects and works of art in digital forms. Copyright is important to the artist as it would allow the artist to have exclusive rights to the image, the artist can license the image for a fee and restrict others from using the image.

Within the UK, Act.27 Universal Declaration of Human Rights states that:

1. Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits.

2. Everyone has the right to the protection of the moral and material interests resulting from any scientific, literacy or artistic production of which she/he is the author.
The European concept of copyright is based on the artist's moral rights (droit moral). The non-economic and personal aspects of an author's creation are protected by European law. Only the expression of the idea is protected by copyright. According to the merger doctrine, copyright protection will be denied to even some expressions of ideas if the idea behind the expression is such that it can be expressed only in a very limited number of ways. This prevents an author from monopolizing an idea merely by copyrighting a few expressions of it. Scènes à faire Doctrine refers to any expressions that are standard, stocks or common to a particular topic that are excluded from copyright protection under the statute.

“Droit de suite” clause
When referring to artist resale rights, it is the right to receive a percentage of the resale of the work, and this right 'follows' the work of art even if ownership and possession change. Since 1948, a droit de suite clause has been inserted in Article 14 of the Berne copyright convention. The artist's royalty is determined by the selling price. The higher the sale price of the artwork, the lower the overall royalty rate. The royalties are calculated using a sliding scale ranging from 4% to 0.25%. Royalties are calculated on the sale price minus VAT for galleries and at auction houses royalties are calculated on the hammer price. The maximum an artist or their beneficiary can receive is capped at 12,500 pounds for one sale of one artwork, which is reached by works sold for 2 million pounds or more.
There are several exemptions for example, if the work of art is resold for €10,000 or less, and less than three years after it was bought directly from the artist (bought as a stock exception). The sales between private individuals without an art market professional would not be able to have artist resale rights. The last exemption would be the sales to public, non-profit museums.

There are many exceptions, such as if the work of art is resold for €10,000 or less within three years of being purchased directly from the artist (acquired as a stock exception). Private sales between individuals without the assistance of an art market specialist would not be eligible for artist resale rights. The final exception would be sales to non-profit public museums. The right to royalty lasts for the same period as copyright and since January 2012 artist resale rights have applied to qualifying works of art by artists who have been dead for less than 70 years.

By Joy Serena Evenden - Finance Monthly Magazine