International Society of Primerus Law Firms

Lending Art Benefits and Risks

By: Paul W.L. Russell, Esq.
Russell Advocaten B.V.
Amsterdam, Netherlands

Corporate art collections, private individuals and museums lend art to one another. This involves benefits for both parties, however, there are also risks involved in lending art.

One benefit of lending art may be that the owner may include the exhibition to the “provenance” (history) of the work of art and that new, positive aspects will be discovered during the preparation of an exhibition or that there may be an upward effect on the value of a work of art.

Some of the drawbacks include that there are risks involved in the transport of a work of art, the work of art may be damaged (discoloration) it becomes generally known, however, there are also less obvious risks involved, such as, for instance, the US “use tax”, which is not widely known.

In some cases the provenance of a work of art may also pose a problem and lead to the attachment of a work of art. Subsequently, there will be lengthy legal proceedings, often in a different country and under a different legal system. Think, for instance, of the Crimean gold displayed in the Allard Pierson Museum, on which Russia and Ukraine are conducting legal proceedings before a Dutch court in the Netherlands as to who is entitled to the return of these unique golden artefacts from different museums in Ukraine displayed in the Netherlands in 2014.

Upon borrowing, big museums will often include a clause that a work of art may not be sold within a certain period of time by the lender (this may vary from a period of a few months to several years).

In addition, the security of the borrowing institution will always be a source of concern. Who does not remember the thefts of the Portuguese Crown Jewels from The Hague and the multimillion dollar art theft from the Kunsthal Rotterdam?

Questions still remain with regard to the copyright and publishing of a work of art, and, not least, on whether the lender is prepared to accept exclusions in the insurance policy in the event of war, political unrest, natural disasters or terrorist attacks. A so-called standard clause included in insurance policies that are offered for the loan.

In case of damage, will the lender only be compensated for the restoration costs or also for loss in value of the lent work of art and how is the loss in value to be assessed? This could be seen from the Rotterdam Museum Boymans van Beuningen, where a photographer seriously damaged a valuable painting that was supposed to be photographed. A superficial restoration was presumed to be sufficient, but the compensation of a major loss in value was “forgotten”.

The lender will always have to balance the benefits against the potential risks, and thus the negative aspects for the lender. These may have far-reaching consequences if they were not well assessed beforehand. The lender will have to make sure in advance whether he or she is willing to lend a work of art under these conditions.

For more information about Russell Advocaten B.V., please visit the International Society of Primerus Law Firms.

The general information contained herein is intended for informational purposes only. It is not intended to be, and should not be construed as, legal advice or legal opinion on any specific facts or circumstances.

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