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January 10th, 2017
New Federal Law Clarifies Foreign Governments’ Immunity in Connection with Art Loans to US Museums
President Obama signed the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act into law on December 16, 2016 (the same day he signed the HEAR Act, which establishes a uniform, federal statute of limitations for claims seeking the recovery of Nazi-looted art). This new law clarifies when foreign states and fine art carriers can avoid a lawsuit in the US arising from loans of culturally significant artwork to US museums. The new law is important to museums and fine art carriers, and is expected to encourage art loans by foreign states. Here's what you need to know.
Background and Prior Law
To encourage loans of art from abroad, many countries have laws affording immunity from judicial seizure. In the US, a 1965 statute, the Immunity from Seizure Act ("IFSA"), has protected the custody of artwork loaned from a foreign owner to a not-for-profit US museum. To take advantage of the IFSA, a US institution applies to the US Department of State for a determination that the work is of "cultural significance" and its exhibition is in the "national interest." If the Department of State grants the application, the work is immune from seizure while on loan. For artwork owned by foreign governments, the intent of the IFSA was deemed by lawmakers to have been frustrated by the court's decision in Malewicz v. City of Amsterdam, 517 F. Supp. 2d 322 (D.D.C. 2007). In that case, the court held that the City of Amsterdam was subject to the jurisdiction of US courts in a restitution action brought by the heirs of artist Kazimir Malevich seeking to recover the works on loan. The court found that an exception to the immunity generally afforded to foreign governments provided by the Foreign Sovereign Immunities Act ("FSIA") applied because the City's act of lending the Malevich works to US museums was sufficient "commercial activity" to warrant the exercise of jurisdiction, even though the loan was made pursuant to a grant of immunity under the IFSA.
The Foreign Cultural Exchange Jurisdictional Immunity Clarification Act
In the aftermath of Malewicz, many foreign governments stopped lending works to US cultural institutions. In response, Congress essentially overruled Malewicz by amending Section 1605 of the FSIA. Under the new law, Section 1605 grants foreign states and carriers that transport the loaned work immunity from suit in the US for any activity associated with certain art loans. For this immunity to apply, (i) the work must be imported into the US from any foreign state pursuant to a loan agreement between a foreign state that is the owner or custodian of such work and the US or a cultural or educational institution located in the US, and (ii) the Department of State must have determined that the work is of "cultural significance" and the loan is in the "national interest." No such immunity exists, however, in cases of Nazi-era claims or claims based on other systemic campaigns of coercive confiscation which occurred after 1900.
The Take Away
This new law restores the protections that the IFSA was intended to provide — and harmonizes the IFSA and FSIA statutes. Foreign governments can once again rest assured that the lending of artwork of cultural significance to US institutions will not open the door to the jurisdiction of US courts over them.
If you have any questions about the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act, art lending or other art-related legal issues, please contact Amelia Brankov at (212) 826 5574 or email@example.com, Lily Landsman-Roos at (212) 705 4894 or firstname.lastname@example.org or any other member of the Frankfurt Kurnit Art Law Group.
Other Art Law Alerts
Appraisal Relied on by Estate Undervalued Paintings by $1.77 Million
Recently, in Estate of Kollsman v. Commissioner the U.S. Tax Court held that an art collector's estate significantly underreported the value of two artworks for estate tax purposes. The problem: the estate relied on appraisals by an auction house specialist who had an incentive to "lowball" the appraisals to win the right to later auction the works. In addition to this conflict of interest, the court found that the values reported by the estate were unpersuasive because the auction house specialist exaggerated the dirtiness of the paintings and failed to adjust his appraisals after one of the works sold at auction for approximately five times more than the reported value. Here's what you need to know about the case.
April 4 2017
Court Holds Art Advisor Must Pay Collector $1.05MM for Fraud
A New York court has ruled that an art advisor who brokered the sale of a collector's painting and secretly pocketed $1 million will have to pay the money back. Because the dispute turned on the advisor's agreement with the collector and what kind of legal duty the advisor owed to the collector, the case offers valuable lessons for people structuring art transactions. Here's what you need to know.
March 21 2017
New Federal Law Will Govern Timeliness of Nazi-Looted Art Claims
On December 16, 2016, President Obama signed into law the Holocaust Expropriated Art Recovery (HEAR) Act of 2016.
December 22 2016