[This article is authored by Tanisha Prashant and Rachit Khamparia, penultimate year law students at Institute of Law, Nirma University]
Keywords: Art Arbitration, Indian Art Industry, Court of Arbitration for Art, CAfA.
Indian art and culture bind the multi-dimensional cultural ethos of India in one fabric. The art industry provides flexible means for reflecting India’s heritage and culture. The artist and the collector-base have expanded proportionally in the last decade, giving more depth and recognition to the Industry. Newer technologies have made the discovery and sale of art easier. The Indian art industry has been generating approximately $14.6 Billion in revenue since 2017.
In order to harness the existing potentials of the industry, it is vital to understand the challenges it faces. The visual art industry today has become a potential source of investment for its forecasted value in the future. Reports suggest that individuals with a high net worth in India are increasingly investing in art and have promoted recognition for exhibitions, art festivals and collectibles. This newfound interest of these individuals have ignited investment potential in the art industry making it a crucial player in the nation’s developing economy. With this new commercialization and trans-national dealings, the art industry is facing numerous challenges like forgeries, lack of transparency, sale disputes, lack of governing rules and regulations, lack of infrastructure, exploitation of artists and buyers, quality of products, and ownership. All of these provide a fertile field for disputes between stakeholders at different levels.
Efficient adjudication of disputes has come out as one of the most significant problems that the industry faces. With growing contractual relations and a lack of proper governing laws, disputes have become a substantial barrier to art investment in India. Art disputes have a unique nature as they carry the idea of not just rights and obligations but also sensitive issues of culture, religion, history, and integrity. An important insight in this regard comes from observations made by USA Court in the case of Thome v. Alexander & Louisa Calder Foundations wherein the judge noted that “Determination of authenticity of art disputes are complex and involve subjective assertions. These disputes are ill-suited to be done through declaratory judgments”.
Legal battles result in questioning the authenticity and integrity of the art and the artist. This can be categorically noted in the Greenberg Gallery Inc v. Bauman case where the legal battle ensued regarding authenticity issues of artwork, dramatically dropped the price of the artwork in the market.
Litigation remains costly and the lack of specialized mechanisms acts as a deterrence to people for not suing reprehensible practices but also hinder the growth. Another reason for prolonged and unresolved disputes plaguing the art industry is the Courts’ approach, especially in cases of resale royalty wherein the interplay of Section 53A of Copyrights Act and Intellectual Property Board tend to give a stricter interpretation of the law rather than harmonizing the law with the cultural and heritage values of the artwork. This often leads to the non-acceptance of courts orders by the art community leading to ambiguous situations. The artifacts exchange multiple hands of auctioneers, foundations, and museums before coming to the customer and the lack of well-drafted contracts between them eventually leads to disputes. In badly drafted contracts the artists and buyers become open to exploitation at multiple levels. Disputes in these circumstances range from ownership, copyright infringement, fraud, and consumer rights violations. These issues get more complex when they become subject to culture, religion, and heritage.
The issue is not just national but rather an international one. The United States of America (USA) contributes up to 44% to the global art market also reflects a similar position as India. The Martin Hilti Family Trust v Knoedler case and the issues surrounding it have reflected that the US art market is plagued with issues of fraud, forgery, breach of warranty, and especially financial crimes by means of art transactions. There is no statute in the US dealing specifically with art disputes and is dealt by a combination of federal and state laws. It works majorly through copyright laws and contract laws. In the United Kingdom ("UK") which remains the centre of the art market for the globe, the issues concern those in the nature of title disputes, some infamous ones being the Angela Gulbenkein and Mathew Green. There are no statutes dealing specifically with art transactions in the UK as well, and such issues are governed under the Sale of Goods Act and Consumer Rights Act for the consumers and certain copyrights aspects for artists. However, post-Brexit the laws in the UK post a dilemma owing to the uncertain relationship between the European Union and the UK at this point.
Arbitration as the way out
A major step to develop the Indian art industry is to strengthen the dispute resolution mechanism to promote collaborations and investments to boost the economy. In the current era where contractual relations are being established by the hour, there is a growing recognition of alternate dispute resolution mechanisms. Internationally, arbitration has been recognized as a solution to art disputes. In the UK, arbitration has become an “established toolkit for dispute resolution” and promoting contractual relations. In the USA, although there has been no specialized organization for dealing with art matters but confidentiality in arbitration has seemed to promote arbitration in art disputes.
Arbitration in the current transnational world has seemed to promote commercial relations and peace by limiting disputes and introducing friendly adjudication systems. The trend has transformed into necessity and most commercial dealings are resolved through arbitration. Art arbitration though still at a nascent stage has seemed to resolve legal problems for the art industry to a great extent.
Two fundamental reliefs that arbitration provides for the art industry are of speed and confidentiality. Speedy adjudication helps the visual arts industry in maintaining its investment potential, as opposed to litigation where prolonged court proceedings depreciate the value of art. By maintaining confidentiality, the art is not open to criticism and public backlash which would have further opened ground for exploitation. Moreover, arbitration involves a tailored dispute resolution which helps to contest parties to appoint arbitrators who are experienced in the technical know-how of the field and adjudicate accordingly as opposed to litigation where matters are dealt with in an abstract manner.
In India however, art arbitration looks at an interplay between, intellectual property rights and arbitration laws. As per the Arbitration and Conciliation Act, awards are unenforceable if they arise out of an “in-arbitrable” dispute. Art disputes involve issues of ownership, authenticity and copyright infringement, succession, and testamentary matter, therefore are often contested as being in-arbitrable.
The test of arbitrability was laid down in the landmark case of Booz Allen Hamilton v. SBI Home Finance Ltd, wherein it was laid down that, “disputes involving adjudication of action in rem, and disputes whose adjudication is exclusively reserved for public forums as a matter of public policy, are both arbitrable but disputes that concern right in personam are arbitrable.” When we place the issue of IP disputes in this context, disputes arising out of contracts are arbitrable if the rights of third parties are not affected by the decision of the arbitrator. Moreover, the jurisdiction of arbitral tribunals will not be ousted unless a statute concerning the subject matter specifically ousts it.
Apart from the issue of intellectual property rights, the position of art arbitration in India seems to have hit a clash with the Antiquities and Art treasures Act, 1972 ("AATA"). Antiquities are paintings that are more than 100 years old. A look at the art industry reveals that a significant part of its dealings comprises antiquities and treasures. The age of the painting becomes significant while dealing with ownership and fraud issues. While considering the question of the age of the painting the courts rely on the opinions of the Archaeological Survey of India ("ASI"). The issue with ASI is that often these opinions owing to bureaucracy are provided without making any sound inquiry. In the case of SR Kiran v. CBI where the antiquity of the paintings was in question, the ASI concluded their opinions without conducting any forensic tests, thus raising the issue of reliability of such opinions. Moreover, the issue of public policy and provisions of AATA act as a significant bar to arbitration. AATA was specifically enacted by the government to protect the Indian cultural heritage which directly hits issues of public policy. In NAFED v. Alimenta, the award was not enforced as it went against certain governmental orders and hence was against public policy. It has been noted that the government has exclusively placed reliance on ASI for the determination of objects as antiques for the purposes of public policy. What amounts to public policy is left open-ended for the courts to decide. This not only creates a vague position of disputes involving arbitration but also gives excessive powers to the judiciary.
Court of Arbitration for Art ("CAfA")
In contrast to the ambiguous situation in India, the international realms seem to have a welcoming approach towards the arbitrability of art disputes. World Intellectual Property Organization(WIPO) Alternative dispute resolution for art and culture heritage services was established in 1994 has been considered as the first step towards art arbitration. Although it dealt largely with galleries, producers, museums, yet it helped in kickstarting a new regime for art arbitration. Art arbitration has gained new standards with the establishment of the Court of Arbitration for Art which was established because of collaboration between Netherland’s arbitration institute and the foundation of Authentication in Art. Established in the year 2018 it gives way for specialized arbitration and mediation for art disputes. It undertakes a wide variety of disputes under it which range from arbitrating on title disputes to moral and copyright issues. It fundamentally resolves the problems of experts in the field, by introducing a panel of arbitrators who are the experts in the art field and thereby introduces an element of trust among the stakeholders.
The CAfA further resolves the problem of confidentiality in art disputes wherein awards by CAfA are published anonymously thereby keeping the interests of the market and confidentiality of parties and art balanced. Earlier, the art community did not always welcome court rulings as it often went against the industry practices. CAfA in this regard has introduced the rule to govern the disputes by applicable laws and along with industrial practices, thereby promoting industry practices and making the awards easier to enforce by increasing market acceptability of disputes and outcomes. One of the most significant provisions on which CAfA operates is regarding expert evidence on issues of science and provenance. The rules provide for taking expert opinions on such issues from a selected panel of experts which will have experts like historians, analysts, forensic scientists, scholars, and artists. The provisions not only increase the acceptability of proceedings, as these experts are held in high regard but also give wide powers to the tribunal regarding admissibility of evidence. With the establishment of the CAfA and increasing acceptability of art arbitration what is fundamental to question is that can Indian truly resonate with the culture of art arbitration in its domain?
Scope in India
Arbitration in India with the 2019 Amendment Act has been made more comprehensive and at par with international standards. However, when it comes to art arbitration the situation seems perplexing. Although the CAfA and its awards have been welcomed extensively by the art community and lawyers, its implications in the Indian art regime are still at a nascent stage. Without sound legislative and administrative backing in India, art arbitration would not be able to achieve its true potential and goals. Clearing positions regarding arbitrability, establishing institutes dedicated to art arbitration by drawing from CAfA rules would mark the beginning of the journey. Rules and regulations must be introduced to govern art transactions as they lack transparency. The Indian art industry holds significant potential for future growth in the economy. The industry has become not only instrumental in the promotion of culture and heritage but also in impacting the economy. From providing employment to people to developing skills in the craftsmen, the art industry has opened new channels for India nationally and internationally. Therefore, the problems of the art industry must be dealt with comprehensively and independently if India must truly reflect its art and cultural heritage.