The Art Law Review: Recent Developments in the Art Market

The year 2020 has been one of uncertainty and challenge for the art market at least as much as for any other sector, with the market having to address the challenges of significantly increased levels of regulation while at the same time dealing with the real-time effects of the covid-19 pandemic and the uncertainties around the looming departure of the UK from the EU. With the UK accounting for the second largest share of the global art market,2 the fact that all these factors bear most directly on the market in the UK will have both positive and negative effects on its competitor markets, while they in turn face their own political and regulatory challenges and seek to respond to the exigencies of the post-covid-19 world.

Only time will tell how the art market responds to these pressures; at the time of writing, it remains uncertain whether there will be a trade deal between the UK and EU, what form such a deal might take and the impact on the art market this might have. Covid19 appears to be resurgent in many parts of the world, and plans to open markets and build a return to normality are subject to constant revision. Over and above these uncertainties, the introduction through 2020 for the EU art markets (including the UK) of anti-money laundering and counter-terrorism regulatory controls under the EU Fifth Anti-Money Laundering Directive requires art market participants to re-evaluate their way of doing business in a fundamental manner, going to the heart of the art market's core values of informality, flexibility and discretion.

This chapter evaluates current progress and speculates about likely impacts of the triumvirate of trials of Brexit, covid-19 and greater regulation. The outcomes may be uncertain, but it is becoming clearer that the art market in five years' time will look different in many respects from the one we thought we knew on 31 December 2019.

At the time of writing, the UK and EU negotiators remain locked in the second or third last chance saloon for negotiations around a trade deal and it is difficult to predict whether there will be a comprehensive deal, a limited deal, a limited deal with grounds for later expansion or no deal at all. As with all sectors, this makes planning for art market participants extremely difficult and the effects of increased restrictions on trade between the UK and the EU would be significant for the art markets on both sides of the English Channel.

Not all cultural goods have enjoyed the freedoms offered by the EU single market, with items deemed by individual Member States to be 'national treasures' reserved to Member States' own policies by Article 36 in Chapter III of the Lisbon Treaty and its forebears. Nevertheless, the loss of the single market rights will impact on UK dealers' and auctioneers' ability to move art easily and quickly around the EU and even if a trade deal is reached, Brexit is likely to result in significant delays and additional bureaucracy for those UK art market participants who have relied upon trade around the EU without customs declarations and border checks. Customs checks, transport delays and inadequate port facilities on either side of the Channel are likely to impede the swift movement of goods; by way of example, the UK has issued a list of 'designated ports' through which items requiring CITES licences must be shipped.3 Reversing an earlier decision to exclude Dover and Eurotunnel from the list of CITES-designated ports was a welcome response to outcry from the art market, which relies heavily on these ports for art movements to and from the EU. However, the need for CITES licences for what had previously been intra-EU trade, and the requirement for licence verification at the port, will add to portside delay. This will be significant for an art market that has become accustomed to real-time transfers of works of art for auctions, art fairs, travelling exhibitions and private views between London and other art market centres around the EU.

Another Brexit-related challenge for the UK art market will be the likely restrictions on the movement of people to and from the EU. In maintaining its global entrepôt status for art transactions, and the key relationships that underpin such transactions, London has relied upon its ability to draw upon a reservoir of diverse and suitably educated personnel from across the EU, with wide-ranging linguistic and cultural skills to service an international clientele. While the ICM Unlimited and SQW report into the impact of Brexit on the arts and culture sector4 was prepared for the Arts Council and concerned with the art world beyond the art market, its findings have resonance for the trade as well. A key finding of the ICM Unlimited report was that 'while only a minority of the organisations included in this survey employ EU nationals, this rises to a majority of the workforce among larger organisations and among organisations based in London'.5 A similar situation applies for the London art market catering for an international clientele, often with EU nationals playing important client-facing and relationship-building roles, in many cases having come to London through the wide-ranging arts-related education programmes run by the major institutions and auction houses.

While the UK government has taken steps under its EU Settlement Scheme to protect the status of EU citizens wishing to remain in the UK at the end of 2020, it remains to be seen whether the London art world will be able to maintain the flow from the EU of culturally well-informed talent coming to work in London in the years ahead. This challenge presents itself for the art market and also the body of educational establishments that up to now have fed it with culturally diverse talent.

A corresponding challenge for UK art businesses will be to maintain their EU connections, be they associates and partners or clients and potential clients, with the greater restrictions on travel in the EU for UK citizens that will involve visa waivers, permits and potentially, in some cases, specific licences. In an art world dominated by personal interaction and relationships, underpinned by short-term, often immediate, travel and fast-moving deals, the bureaucracy and delay caused by these arrangements may prove to be a significant trading disadvantage, over and above the additional costs incurred.

It remains to be seen whether these changes in the trading landscape will lead to changes in the structure of the European art market. Paris would appear to be the most likely art market to gain from any increase in obstacles to communication and trade between the EU and the UK, particularly at the middle and lower price points in the market. Paris has a long-standing and well-developed infrastructure of auctioneers, dealers, agents and ancillary services and also an extensive collector base, making it an attractive environment within the EU single market for trade in medium- and lower-value items. Paris has long held a primary position within the EU (including the UK) in categories such as the decorative arts and ethnographic art, and some commentators predict that Brexit might provide an opportunity to extend this dominance across the spectrum, even to include contemporary art, which had been a particular strength for London.6

The same may or may not be the case at the top end of the international art market. For sales of works of art over US$5 million, the market is markedly global and London enjoys a dominant role in terms of the overall EU art market,7 competing directly with New York and China. With much of the art at these levels being owned and traded across the world, London's ability to maintain its significant entrepôt role may be affected by Brexit less than sometimes feared; the 2020 Art Basel report estimated that EU sales only represented 20 per cent of total imports and exports from the UK,8 with the lion's share of sales (by value) coming from and returning to the rest of the world and (presumably) without direct effect from Brexit.

One of London's traditional advantages over Paris has been its relatively lighter regime in areas such as general business administration and taxes. It is possible that London's ability to leverage its greater independence from EU-inspired regulation might allow it to maintain and develop these advantages.9 This approach does have historical precedent, with the international art market effectively moving from Paris to London in the 1950s and early 1960s, driven by regulatory and fiscal administrative burdens imposed on the Paris market. One area in which the UK might benefit from regulatory advantage post-Brexit is in relation to the introduction of the EU Cultural Goods Import Regulation10 discussed below. Equally, matters might go the other way as a result of separate developments, such as the announcement in October 2020 that the UK might reduce or withdraw the value added tax (VAT) Retail Export Scheme (VAT-free retail for tourists) from 1 January 2021. As the art trade pointed out, this would put the UK art market at a disadvantage compared to its EU counterparts.11 Similarly, the coming into force of the Ivory Act 2018 (following the Supreme Court's decision denying a claim for judicial review) will introduce controls on ivory sales in the UK market that will be substantially more far reaching than in the EU or elsewhere, Furthermore, extra-EU regulatory advantage might also be partially offset for the London market by the effects of the new anti-money laundering regulations that are taking effect across the EU and the UK, as discussed below.

At this point several leading galleries, including David Zwirner and White Cube, have moved to open new premises in Paris and others are rumoured to be following them. Sotheby's and Christie's have maintained active salerooms in Paris since the French auction market was opened to foreign competition in 2001. Recent Paris sales at both auction houses have grown significantly, with Sotheby's increasing its French sales by a surprising 41 per cent from 2018 to 2019.12 These developments indicate that major art market participants are hedging their bets between London and Paris; perhaps this might lead to the development of two leading European markets, with London continuing to offer a venue for art at higher price points for a global audience and Paris developing a leading role in the higher-volume middle and lower price ranges, catering for a strong domestic and intra-EU market.

Drawing the EU art market into the ambit of anti-money laundering and counter-terrorism regulated sector under the Fifth Anti-Money Laundering Directive will have an impact on both the EU and UK art markets, as the UK has made clear that Brexit will not interfere with its implementation of the Directive. Indeed, the regulations might have a disproportionate effect on the London market and its greater focus on international transactions, potentially reducing its historical regulatory advantage over its continental rivals.

The new anti-money laundering regulations apply to individual or linked transactions above a threshold of €10,000, where such transactions are for 'works of art', which (in the UK iteration) catches paintings, sculptures, limited edition ceramics, photographs and tapestries but does not include works of decorative art, furniture, jewellery and collectibles such as coins, stamps and cars.13 The regulations, which in the UK came into force for the art market in January 2020, will have three principal effects: additional administration and bureaucracy for regulated entities; two levels of customer diligence (depending on the nature of the transaction and the parties); and levels of disclosure and transparency not hitherto seen in the art market (and not seen in competitor art markets outside the EU).

The regulatory requirements for nominated money laundering reporting officers and staff training programmes, as well as for procedures to identify, record and track clients, will presumably be helpful in combating potential money laundering through the art market in the EU. To banks and other financial institutions, these may appear to be extensions of normal practice, but to the art market they constitute cultural change and not insignificant cost for a market largely consisting of small businesses often dealing in high volumes at relatively low values. The largest area of cultural change concerns the identification of clients behind the parties with whom the art market participant is transacting, be they the principal acting through an agent, the ultimate beneficial owner of a corporate entity or chain of entities, or the principal beneficiary of a trust. While this may appear entirely sensible when looking to identify malefactors operating through third parties and behind corporate veils, it causes considerable difficulties for a market that has always depended on individual relationships and where many participants' assets are not the art being sold but their client lists and client contacts; disclosure of these to competitors represents a material business risk. Existing regulations were written for the financial sector and sit uncomfortably with the structure and business model of the art market, which is struggling to adapt to the regulations in an effective manner while preserving levels of business.14 It is particularly unfortunate that this process of reconstruction is required at the very time covid-19 is having such a widespread impact on the art market and its related businesses, with many having to fight to stay afloat.

It remains to be seen whether the EU art market will be able to adapt to operate effectively under the new regime, particularly in the absence of similar regimes in competing markets around the world. In the UK, there have been attempts to create an effective and balanced interpretation of the regulations for the art market, in the form of the British Art Market Federation's Guidance on Anti Money Laundering for UK Art Market Participants15 (the Guidance) and through continuing discussions with HM Treasury and HM Revenue and Customs, which is the new anti-money laundering supervisory body for the UK art market. However, there remain several areas of uncertainty over important aspects of the regulations, in particular concerning the extent of disclosures required to ensure effective due diligence while preserving the exclusivity of relationships that underpins the art market. In the relationship chains that characterise many art transactions, a due diligence free-for-all would lead to significant duplication, while unnecessary disclosure of client identities to competitors would be a serious threat to many businesses. The existing 'reliance' provisions in the regulations (which seek to avoid duplication of effort by allowing one regulated party to rely upon the due diligence carried out by another) do not appear to assist in the art market context. The Guidance seeks to address the issue by identifying the 'customer' on whom due diligence is required and the party responsible for that due diligence, thereby avoiding the need for all participants in a transaction to conduct due diligence on all the other participants. The Guidance effectively seeks to identify the 'hub' in each transaction, at the point the participants acting on the buyer's side meet the participants who in one way or another act for the seller. That hub – the clearest example being the auctioneer in an auction – has responsibility for investigating both buyer and seller and their intermediaries, but the due diligence obligation of those on either side of the transaction is restricted to other parties on their side of the deal. However, the matter remains complex and to an extent uncertain in the context of the wide variety of art market transactions. It will be a challenge to achieve a successful balance between the apparently contradictory forces of effective due diligence and client confidentiality between competitors, but this will be fundamental to enable regulated art markets to operate effectively in the UK and in EU Member States.

The money laundering regulations might have a disproportionate effect on the London (as opposed to the wider UK) art market, which by its nature is likely to give rise to a higher proportion of circumstances requiring 'enhanced' due diligence. This possibility arises from the high-value and highly international nature of the London art market. The major auction houses have dedicated compliance teams and long experience of many of the obligations of the new regulations, but this is less the case among the dealer and gallery community who make up more than half the market. Both dealers and auctioneers in London benefit from a dazzlingly wide array of clients from almost every continent and it is this that underpins London's entrepôt status and its dominance in the EU art market. However, it is also this factor that requires greater focus on due diligence, with a more challenging clientele requiring resources and expertise, delay, uncomfortable client interactions and, always, cost. The ability of the London market, and its supervising authority, to address these issues in an effective but commercially sensitive manner will be particularly important.

London's principal competitors on the international stage are not at the time of writing subject to equivalent anti-money laundering rules. In the United States, dealers and auctioneers are not subject to the equivalent regulations under the Bank Secrecy Act 1970 and although the recent Senate inquiry into sanctions breaches16 indicated that tighter regulation might be needed, the focus was on the authorities' domestic enforcement of international sanctions regulations and not on money laundering per se. There have been attempts to introduce anti-money laundering regulations for the US art market, the most recent being in 2020,17 and it is likely that the United States will in time enact regulations that are similar to those of the EU, but progress is difficult to predict in the current political climate.

In September 2020, the Securities and Futures Commission of Hong Kong issued a formal consultation on proposed revisions to the province's money laundering and counter-terrorism guidelines for licensed corporations and associated entities. The proposals were prompted by the Risk-Based Approach Guidance for the Securities Sector, published by the Financial Action Task Force in October 2018, and bear a resemblance to many of the provisions of the EU Fifth Anti-Money Laundering Directive except that they do not appear to propose adding the Hong Kong art market to the regulated sector.

One future regulatory development for the EU is already in place, the Cultural Goods Import Regulation,18 adopted in 2019 but which will come into effect over the next few years (with parts contingent upon the development of necessary electronic licensing processes). The regulation is complex and was much criticised by the art market during consultations, principally for its breadth and lack of detail.19 In essence, the Regulation requires EU importers of 'high-risk' items (such as archaeological finds that are more than 250 years old) to provide the necessary export licences from the country of origin or discovery and, for other objects (cultural objects that are more than 200 years old with a minimum value of €18,000), they must provide an 'importer statement' in standardised form, confirming that the object has not been unlawfully exported from its country of origin or discovery. In both cases, there are provisions addressing objects that have been in countries other than their source country for more than five years, but failure to meet the requirements will prevent the importer from obtaining an EU import licence. In imposing high barriers to entry for non-EU cultural goods, the regulation will make it much more difficult to import such goods into the EU. The UK might have a regulatory advantage in this area post-Brexit; it will not be required to implement the Cultural Goods Import Regulation and has intimated that it will be unlikely to do so. The UK already has an effective cultural goods export licensing system acceptable to the EU (a key requirement for goods imported into the EU under the new regulation) so might become a useful location for EU buyers of cultural goods with international origins to bring them into the UK or to sell them from the UK, thus underpinning the UK art market's traditional status as an international entrepôt and entry point to important EU markets.

Covid-19 continues to provide a stern test for all aspects of the art market, as with all areas of the global economy, and it is too early to assess with confidence what the economic effects of the pandemic will be. Art businesses rely heavily on personal and group interaction and have been hard hit by lockdowns, travel restrictions and social distancing restrictions around the globe. In the first half of 2020, it is estimated that art gallery sales fell by an average of 36 per cent20 and leading auction house sales fell by 49 per cent.21 Art fairs have been particularly hard hit for obvious reasons, with galleries reporting that in the first half of 2020, 16 per cent of their income came from fairs, down from 46 per cent in the previous year,22 with this also having a wide impact on the range of ancillary businesses dependent on art fairs.

Within these undoubtedly dire figures there have been interesting developments. While major auction sales may have declined by 49 per cent in the first half of the year, this may be partially explained by the postponement of major sales in the hope of a release of restrictions or while alternative sale platforms were developed. In June 2020, Sotheby's held a five-hour hybrid 'live-online' auction for buyers and sellers across the world, which achieved US$362 million; Christie's followed in July with a similar format amassing US$420 million with 100,000 online viewers.23 For some years the art market has been grappling with the opportunities and challenges presented by the online world, with growth in the lower price ranges and to some extent in the middle market, but relatively little change in approach at the top end of the market. The restrictions prompted by covid-19 have compelled art businesses to re-evaluate how to reach existing and new customers. Additionally, back-room sale processes, costs and traditional mechanisms (for example, lavish printed sale catalogues) have had to be vigorously pruned to meet an environment dominated by furlough, staff working from home and reduced sale volumes. As Bruno Vinciguerra, the chief executive of Bonhams, remarked 'It was bound to happen over a few years, and it only took a few months – never let a good crisis go to waste.'24 In the first half of 2020, the Artnet Price Database estimates that Christie's, Sotheby's and Phillips held more than 131 online sales – more than twice as many as in the equivalent period in 2019.25

Galleries have similarly turned to online strategies where possible, with total online sales estimated to have grown from a 10 per cent share of galleries' business in 2019 to 37 per cent for the first half of 2020.26 At the time of writing, Asian Art in London 2020 is planned to be a mixed live and enhanced online event, with many galleries and the event organisers creating Instagram videos, blogs and virtual galleries to engage with existing and potential clients. A few art fairs have managed to open on a reduced footfall and organisers continue to experiment with new partnerships and online fair equivalents. Direct-to-consumer sales models such as Instagram have long been used by new artists who lack gallery representation, but there are signs that more established artists have also been using online sale platforms to approach buyers without intermediaries,27 and setting up online viewing rooms.28

There is no doubt that covid-19 has had and is continuing to have a significant impact on art businesses across the spectrum, and that 2020 will go down as a year of reduced sales and a struggle to survive. For some, that struggle may be terminal, particularly those without the resources or business model to adapt to a socially distanced online world. However, it is quite possible that covid-19 has also pushed art firms into an in-depth re-evaluation of their businesses and that a restructuring of parts of the art market will necessarily follow. The combination of this existential threat to much of the market with the effects of Brexit and the exigencies of new and anticipated regulation will mean that the art market in 2025 may well look very different from that of 2019.


1 Tom Christopherson is a consultant, Emelyne Peticca and Samuel Milucky are trainee solicitors and Mona Yapova is a paralegal at Constantine Cannon LLP.

2 The Art Market 2020, Clare McAndrew, Art Basel and UBS report, p. 17.

3 Trading CITES-related specimens through UK ports and airports from 1 January 2021: Designated land, sea and air ports for trading or moving CITES-listed endangered animals, plants, or their parts and derivatives from 1 January 2021, Department of Environment, Food and Rural Affairs, 14 October 2020 (

4 Impact of Brexit on the arts and culture sector, ICM Unlimited report, 20 February 2018.

5 ibid., p. 51.

6 'Paris, the new London?' Louise Darblay, ArtReview, 11 October 2019.

7 The Art Market 2020, Clare McAndrew, Art Basel and UBS report, p. 47. Clare McAndrew points that the EU's 32 per cent share of the global art market in 2019 would have dropped to 12 per cent with the UK's contribution removed for that year.

8 ibid., p. 47.

9 'Why Brexit Is a Golden Opportunity for the U.K. Art Market', Clare McAndrew, Artsy, 30 August 2018.

10 'Brexit: what's next for the UK art market?' Daniel Dalton, The Art Newspaper, 31 January 2020 (

11 'Trade fears axe of VAT-free shopping for tourists after Brexit', Frances Allitt and Laura Chesters, Antiques Trade Gazette, 31 October 2020, p. 4.

12 The Art Market 2020, Clare McAndrew, Art Basel and UBS report, p. 134.

13 The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 [SI 2017/692], as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 [SI 2019/1511]. The definition of works of art derives from Section 21(6) of the Value Added Tax Act 1994, as amended.

14 'UK Dealers Are Scrambling to Make Sense of “Burdensome” New Anti-Money Laundering Regulations Quietly Passed Over the Holidays', Naomi Rea, Artnet (

15 Guidance on Anti Money Laundering for UK Art Market Participants, British Art Market Federation approved by HM Treasury, 24 January 2020 (

17 'Senate investigation finds that oligarchs use art industry to avoid sanctions', Buckley LLP, 27 August 2020 (

18 Regulation (EU) 2019/880 of the European Parliament and of the Council of 17 April 2019 on the introduction and the import of cultural goods PE/82/2018/REV/1.

19 'The Proposed EU Regulations on the Import of Cultural Goods', Pierre Valentin and Fionnuala Rogers, [email protected], 15 January 2019 (

20 The Impact of COVID-19 on the Gallery Sector: A 2020 mid-year survey, UBS and Art Basel report, Dr Clare McAndrew, p. 7 (

21 'Art market report shows the severe impact of Covid-19', Melanie Gerlis, Financial Times (

22 ibid.

23 'Art Auctions Embrace a Future of Socially Distant Bidding', New York Times, 22 October 2020 (

24 ibid.

25 'Business as Usual Went Right Out the Window: How Lockdown Forced Auction Houses Into the Future – for Good', Eileen Kinsella, Artnet (

26 'Art market report shows the severe impact of Covid-19', Melanie Gerlis, Financial Times (

27 'The Future of the Art World Is Direct-to-Consumer: As the Market Shifts Online, a Growing Number of Artists Are Thriving Without the Middle Man', Sarah Cascone, Artnet (

28 'How Artists are Adapting their Work to Virtual Fairs and Online Viewing Rooms', Anny Shaw, The Art Newspaper, 17 June 2020 (

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