Adrift on a sea of troubles: cross-border art loans and the specter of ulterior title.

• Jurisdiction: United States
• Author: Palmer, Norman
• Date: 01 October 2005

TABLE OF CONTENTS I. INTRODUCTION II. ART LOANS: A SITTING DUCK? III. A WORD ON "LOANS" A. General B. Museum Bailments as Contracts C. Bailment other than for Exhibition D. "Loan" as a Colloquial Term IV. THE LEGAL LANDSCAPE A. Some Recent Trends in England and Wales V. THE POSITION IN LAW A. The Common Law of Conversion VI. DISTRIBUTION OF LOSS BETWEEN LENDER AND BORROWER A. Terms as to Title and Quiet Possession 1. Express Terms 2. Implied Terms B. Unsafe Legal Environment VII. THE BENEFITS OF ADVANCE PROVISION A. General B. State Indemnity Schemes C. Anti-seizure Laws D. State Immunity E. Ad Hoc Responses; Handling Claims "On the Hoof" VIII. LITIGATING AGAINST POSSESSORS: TRANSPARENCY AND CONFIDENTIALITY IN TENSION A. The Alternative "Faineant" Policy IX. ADVANCE PROTECTION: EMPHASIZING THE OBVIOUS X. CONTRACT AS AN AID TO MEETING ETHICAL COMMITMENTS A. Borrowing museums B. Lending Museums XI. ETHICAL OBLIGATIONS OUTSIDE LAW A. Cultural Objects Displaced During the Period 1933-1945 B. A Collective Response 1. Non-national Museums 2. National Museums XII. THE GOVERNMENT INDEMNITY SCHEME--NATIONAL AND NON-NATIONAL MUSEUMS XIV. VOLUNTARY DISPOSAL OF OWNED OBJECTS XV. OVERSEAS LAWS REGULATING THE IMPORT OF CULTURAL OBJECTS, AND OTHER LAWS THAT THREATEN SEIZURE XVI. THE BARK ETCHINGS CONTROVERSY XVII. INTERNATIONAL CONVENTIONS AND OTHER INSTRUMENTS A. General B. The 1993 Directive C. The UNESCO Convention (1970) 1. Illegally Exported Objects 2. Stolen Objects XVIII. OBJECTS LOANED INTO THE UNITED KINGDOM FROM OVERSEAS A. Legislative follow-up to UNESCO B. The Dealing in Cultural Objects (Offences) Act 2003 C. The Iraq (United Nations Sanctions) Order 2003 XIX. OBJECTS LOANED FROM THE UNITED KINGDOM TO OVERSEAS COUNTRIES A. Borrowing Country Subscribing to UNESCO Convention B. Borrowing country Subscribing to UNIDROIT Convention XX. CONCLUDING OBSERVATIONS APPENDIX I. INTRODUCTION

It has long been accepted that art loans are a cardinal form of modern cultural exchange. (1) To some they are also a notable element in the "soft power" (2) exerted by civilized states. (3) In recent years, however, the lending of cultural objects across frontiers has been hindered and destabilized by a steep rise in third party claims. (4) Such claims normally seek to curtail the loan and dispossess the borrower by asserting a superior right of possession in the claimant. (5) Many claimants rely on an original theft of the work and the inability of any later alienation to extinguish the claimant's title. But claims can originate in events other than theft. (6) Some claimants are states, who assert that their domestic laws grant them superior rights of possession over undiscovered portable antiquities (7) or other cultural objects unlawfully removed from their territory. (8) Some claimants are victims of persecution9 whose dispossession, though morally repellent, may not on strict definition be theft. (10)

The purpose of this Article is to show how modern law responds to such challenge. In particular, it examines the means by which common law systems manage the return of unlawfully removed cultural objects to dispossessed parties, and the implications of those means for international loan agreements. Regard is paid to the remedies that may be available in the aftermath of a claim, and the "self-help" devices that are available to lenders and borrowers. Some of the measures examined are peculiar to cultural objects, but others are general. Some have no direct relation to law, but work on voluntary regulation. All of them contribute in some degree to the tension that exists between vindication of rights of ownership and encouragement of cultural exchange. This Article begins by surveying the general landscape against which cross-border loans are conducted, and then descends to measures peculiar to loans.

2. ART LOANS: A SITTING DUCK?

   There are many reasons why cross-border loans are particularly vulnerable to litigation. Public exhibition exposes cultural objects to widespread scrutiny, alerting potential claimants. The volume of art borrowing is vast and many borrowing museums lack the capability to research title for themselves. It can be diplomatically difficult to require a lender to give assurances about title, and museums may be tempted to avoid this. The risk of being sued is particularly strong where chattels have substantial value and an eventful or mysterious past, marked by gaps in provenance or unanswered questions. (11) A possessor may not know whether an older work was loaned or given, which can undermine resistance to claims. (12) A stolen object may not have been claimed in its "home" state because the law there is uncongenial to claims; the law of the borrowing state may be more congenial. (13) Artworks can be subject to intersecting interests, (14) and not all interested parties may have agreed to the loan. Some ulterior interests may be hard to detect: for example, a partner's interest in family assets, or a creditor's interest under a title retention clause; many such interests are not registered or otherwise published.

   Such circumstances can place the borrower in a serious dilemma. Many claims are morally compelling; to oppose them can seem callous or wanting in merit. Some claimants are elderly and unlikely to outlive a protracted voyage through the judicial system. Resistance by museums can imperil valuable relationships, (15) particularly where defensive arguments are perceived as casuistic or technical. Moreover, the consensual resolution of third party title claims (for example, by arbitration or mediation) cannot be provided for in advance; there is, by definition, no prior agreement between the borrower and the third party claimant. Without prolonged research, the borrower may have no way of knowing whether the object is stolen, or whether the title of an original theft victim has survived, or whether the claimant is the party entitled to possession, or whether a lender who himself borrowed the work had authority to sub-loan it. All these are matters that bear heavily on parties to cross-border loans.

3. A WORD ON 'LOANS'

   1. General

      The word "loan" is used more liberally in the museum context than a strict regard for its common law meaning would allow. In fact, the concept of "loan" is merely one of the several forms that a temporary disposition of cultural objects for purposes of exhibition or research can assume. In each case the underlying legal relationship is one of bailment, which denotes the relation that arises when one party is voluntarily in possession of goods that belong to another. (16) But the type of bailment, and its legal incidents, may vary according to circumstance.

   2. Museum Bailments as Contracts

      While it is common for museum agreements and other documentation to designate transfers of possession of cultural objects as loans, many such deliveries are not strictly loans but some other form of bailment. (17) The true chattel loan is a gratuitous bailment that benefits only one party, viz the borrower and bailee. The lender derives no advantage from the bailment, and grants possession solely as a favor to the borrower. (18) It follows that the simple lending of a chattel involves no contract at common law, (19) because the borrower supplies no consideration. (20)

      While the orthodox language of lending and borrowing is sometimes appropriate to describe museum bailments, (21) many bailments both from and to museums are in fact supported by contracts. Inherent in the agreement will be reciprocal promises and benefits which fulfill the contractual requirement of consideration. (22) The bailment of an antiquarian object by a private collector or investor to a university for research, for example, may yield valuable benefits to both the lender and the borrower: higher pecuniary value on the one side, enhanced learning on the other. While the label that the parties have applied to the transaction may be persuasive as to its legal character, it cannot prevail over the factual substance of the transaction. (23) Nor will a court necessarily assume that a word which has a settled legal meaning was used in that legal sense within the particular transaction. (24) In short, a bailment may be a contract though labeled a loan. (25)

      It must be emphasized that this question is not merely academic. The existence of a contract between lender and borrower can decisively influence the outcome of numerous legal questions: for example, the governing law of the transaction, the implication of terms into the transaction, the ability of the lender to recall the chattel at will, and the identity of the party having the immediate right of possession for the purpose of certain claims in tort.

   3. Bailment other than for Exhibition

      Cultural objects may of course be bailed for purposes other than public exhibition, and their bailment may involve entities other than museums. Recent claims involving bailments to auction houses offer guidance on the position of museums that receive stolen art on loan. Particular debate surrounds the taking of possession of displaced cultural objects by museums that designate themselves as museums of refuge or museums of temporary resort. The policy underlying such deposits is that a responsible museum should shelter displaced cultural objects until their place of origin becomes known, or until changed conditions render it safe to return them to a known place of origin. Such a policy is viewed by some as preferable to the rejection of such objects and their resultant loss to scholarship. The subject is controversial because the handling of looted material (and in particular, its direct commercial acquisition) can involve not only civil and criminal liability but a violation of published ethics. (26) There exists, moreover, a substantial body of professional opinion that condemns outright any act by a museum which, regardless of motive, can reasonably be expected to encourage the...