Sunday, July 23, 2017

How to improve the global art market: a proposal

Is it time to create an International Art Market Practice Board to assess and appraise controversial issues and promote best practice? 
What might such a board look like? Who would sit on it? Would they be appointed or elected, and how often would they convene? Who would decide which issues would be explored and why? 

In May 20017, the BBC broadcast a documentary about the murders in rural Kent in 1996 of Lin Russell and her daughter Megan, along with the attempted murder of Megan’s sister, 9-year-old Josie. Director Matt Rudge’s programme invited a panel of experts, including forensic scientists, former detectives, barristers and criminologists — some of whom had been directly involved with the original case — to re-visit the evidence relating to the notorious Chillenden Murders. They did so with admirable diligence and deep moral concern. It made for compelling television; but it prompted other thoughts too.

Happily we don’t have many brutal homicides in the art world, but we do have other crimes. Could a similar methodology be adopted for exploring the legal, ethical and moral problems that arise in the art market? Variants on advisory panels and mediation agencies are already being explored in cultural heritage disputes, but not for the professional practices of the broader art market, certainly not for the contemporary art market. 

No group of experts could reasonably be expected to address every case of allegedly unethical behaviour, every questionable business practice or disagreement between parties. In any event, such matters are often decided amicably between individuals, or through the market’s own Darwinian logic, which is not dissimilar to the kind of self-regulating systems that operate in other commercial sectors. Even in more serious cases where these mechanisms are inadequate to the task, there are options through civil action or criminal law. Problems do arise. Problems get resolved. 

However, there are many issues that are specific to the art market, some of which are a source of dismay to outsiders and which could therefore be having a detrimental effect on wider participation. These issues often revolve around an ethical axis rather than a strictly legal one, but transparency is always at the core.

Three or four examples might suffice: 

Firstly, art is notoriously susceptible to cross-border manipulation by ‘grey market’ participants. This has led to a general acknowledgement that in an increasingly financialised market, tighter regulation of insider trading would be constructive. In fact, international regulation of insider trading is gradually taking shape. But will business practices in the art market be properly covered by it? We hear much of the auction guarantee system, but few know how it actually operates, how often a very small group of individuals share privileged information among themselves, which can drastically effect prices. The participation of auction houses on both sides of the transaction in guarantee situations ought to be a cause for concern.

Secondly, in one or two recent cases concerning art forgery, the legal system has failed to clarify the precise nature of what occurred. This is essentially a failure of enforcement. The Knoedler scandal made it to court, but was then abruptly concluded before the most significant figures had taken the stand. Thus, thanks to out-of-court settlements, no explanation was ever forthcoming on how the scam was actually mobilised throughout the supply chain, nor what the implications of the case might be for the broader art trade. 

Thirdly, while international press coverage has drawn attention to the problematic business techniques used by some art recovery agencies, the market in general has been largely silent on the issue, preferring instead to draw a blind eye, or to view such approaches as a mere occupational hazard: “At least we got the pictures back.” Perhaps, but do the ends always justify the means? If market participants were to conclude that the real moral hazard may lie in actually doing business with the more problematic companies in this sector, then one might reasonably see that as a form of self-regulation in practice. Unfortunately, the art recovery market still operates as a virtual monopoly. And monopolies are not a feature of mature markets. 

Elmyr de Hory, 
Portrait of a Woman, 1974
Finally, as prices have risen exponentially in recent decades, many connoisseurs and experts have ceased offering opinions on high-value works of art coming to market or to exhibition. When a respected compiler of an artist’s catalogue raisonné is forced to abandon the project following death threats from disgruntled collectors unhappy with his opinions, we know we’re not in Kansas any more. Similarly, the multi-million dollar “lawyering up” by foundations to intimidate owners against consigning works for sale, usually on grounds of disputed authenticity, has begun to resemble the kind of practices we associate with gangster movies.  

A public discussion at this year’s Art Basel, ably moderated by András Szántó, sought to address some of the perennial issues of art market transparency and whether or not current market regulations were sufficient to confirm its maturity as an “industry”. 

The consensus seemed to emerge that the informal, ‘handshake’ nature of art market business transactions should be treated simply as a given, and moreover that any attempt at further regulation of matters such as information disequilibrium (which is widely acknowledged as rife across the art market) would surely have a detrimental effect on business. 

It was also pointed out that relative to other business realms, the art market is relatively small in dollar terms. The sociologist Olav Velthuis referred to the size of Walmart’s turnover in the US alone — $500 billion, he reports — compared to the estimated size of the global art market — “somewhere between 40 to 60 billion US dollars”. Unfortunately, while we have relatively reliable benchmarks for assessing the size of Walmart, no comparable reliability can be applied to the global art market. Its inherent secrecy and confidentiality — sometimes referred to as a kind of omertà — preclude accurate statistical appraisal.

How, then, to move the art market forward on structural issues of this kind, without throwing the proverbial baby out with the bath-water? 

One practical suggestion might be to create an International Art Market Practice Board, perhaps something akin to the Financial Services Authority, that convenes in certain agreed instances. The potential implications of each case would need to have been recognised as significant to the broader market, its professional practices, and reputation. The panel might convene either before a case progresses to civil proceedings or criminal court, perhaps even with a view to obviating the need for future court action. Or its deliberations might be used to provide expertise to subsequent hearings. This might be particularly helpful given that judge-led court hearings are often improperly equipped to deal with the delicate nature of art market-related issues concerning authenticity, connoisseurship, agency, moral rights, and so forth. The Board might also convene once a year to review the general state of the market, to identify potential causes for concern and to suggest ways the market might be improved (and not necessarily through more regulation). 

The aim here is not to bring more law into the market, however critical specialist art lawyers are to a healthy market, but rather to pool expertise across all relevant domains: law, the art trade, forensic science, art history, museum management, academia, journalism, connoisseurship, art criticism, insurance, art fairs, and auction houses.

An interesting outcome of the BBC documentary referred to above was the disclosure that the barristers who participated in the programme, Stephen Kamlish QC and Sheryl Nwosu, have offered to represent, at his forthcoming appeal, Michael Stone, the man now thought to have been improperly convicted of the crimes in 1996. Kamlish and Nwosu’s decision was a direct result of having collaborated with other impartial experts from cognate fields of enquiry, which led them to question the judgement handed down in 1996. By reviewing the evidence in this way, the panel threw light on the professional practices of the relevant agencies and hinted at ways investigative procedures could be improved. 

Could a similar methodology and ethical purpose provide the foundation for an International Art Market Practice Board?

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