The Art Law Review: Spain
The Spanish art market, with a sales value of almost €400 million, represents 2 per cent of the EU market and 1 per cent of the global art market. Spain is the fifth-largest contributor to the EU art market (behind the UK, France, Germany and Italy). With 650 art galleries and 50 active auction houses, it is estimated that 80 per cent of sales are made through the gallery channel and 20 per cent through auctions. Art fairs currently account for 40 per cent of gallery sales. Online sales have grown in recent years but represent less than 7 per cent, although it remains to be seen how this parameter will evolve as a result of the coronavirus pandemic. The sale prices of works of art and antiques are relatively lower than those of the surrounding countries. The cancellation of fairs, gallery closures and capacity limitations during the pandemic have had a strong effect on the Spanish art market, which is facing the challenge of reorienting its strategies and expanding its reach.
The resolution of disputes in contracts of sale of works of art, when between individuals, is governed by the general regime of the Civil Code and the Law on Civil Proceedings. This legislation also applies to transactions between professionals in a subsidiary manner to the Commercial Code, but if the buyer is a consumer, the special regime of the Retail Trade Law,2 designed, in principle, for auctions and extending to any sale of works of art to the public, must be taken into account. For the interpretation of contracts for the sale of works of art, case law refers to the principle of good faith and the standard professional practice in Spain.
With regard to transactions in cultural goods, the Spanish Historical Heritage Law3 is protective with regard to the classification of goods that form part of the Spanish historical heritage and the granting of export permits. Competencies are shared between the state and the regional governments. The public administration has a pre-emptive right to buy the works of art classified as assets of cultural interest and the goods whose exportation permission has been refused under the Spanish Historical Heritage Law. Owners of works of art must notify the public administration of their intention to sell the artwork, specifying the price and conditions of the transaction. Within a maximum period of two months, the public administration must inform the seller if the right of pre-emption will be exercised. In the case of sale at auction, the auctioneers must notify the competent administrations, within four to six weeks of auctions in which they intend to sell any object belonging to the Spanish historical heritage. The public administration may exercise the right of first refusal by the appearance of a representative of the Ministry of Culture in the auction. The right of withdrawal can be exercised when the private sale of any object belonging to Spanish historical heritage has not been correctly communicated to the state. This right must be exercised within six months of the sale being officially announced.
The Spanish Historical Heritage Law is in the process of being amended and the amended version is expected to be published in the first half of 2021. The new law will provide a unified regulation of cultural heritage, intangible treasures and industrial patrimony. It is hoped that some restrictions, such as the tax on exports of cultural goods outside the European Union, will be abolished or reconsidered.
The year in review
During 2020, the Spanish art market encountered some interesting matters:
- the effects of the new requirements concerning provenance and transparency before providers and clients derived from the EU Fifth Anti-Money Laundering Directive (5AMLD).4 5AMLD will soon be fully transposed into Spanish law; and
- the consequences of the lockdown that the global pandemic has generated in all economic sectors, including art galleries and auction houses, specifically in terms of the regular development and execution of transactions and contracts related to the selling, loaning, deposits and insurance of works of art. Some signs of a partial market recovery can now be seen.
i Title in art
The title of ownership of a work of art is acquired, in the first place, by transfer of possession of the work,5 although the Spanish system also contemplates transfers made by means of a symbolic delivery as valid, such as the delivery of the keys of the premises where the work is located.6 For greater security, a deed of sale can be made public. The Spanish system also establishes the acquisition of title by usucapion or acquisitive prescription in such a way that public, peaceful, uninterrupted possession of the work of art during the periods established by law confers the title of ownership on the holder. In ordinary usucapion, the law establishes a period of three years of possession to acquire ownership of the movable property when there is good faith and fair title in the acquirer. Extraordinary usucapion occurs when there is neither good faith nor fair title in the acquirer, who obtains ownership of the property after a six-year period has elapsed.7 Usucapion does not apply if the possession originates from an illicit or criminal action. The claimant will have to reimburse the possessor the amount paid for the artwork.
Neither the buyer nor the seller is obliged to conduct due diligence enquiries. Usually, the buyer carries out a legal due diligence on the ownership of the object, to establish whether it is free of encumbrances and its authenticity and provenance.
ii Nazi-looted art and cultural property
There are no specific rules within the Spanish legal system for Nazi-looted art, so the rules of acquisitive prescription of the Civil Code are applicable (see Sections III.i and III.iii). Furthermore, there is no specific body to hear claims of Nazi-looted art.
The Cassirer v. Thyssen Bornemisza Foundation case, decided by the Court of Appeal of the State of California in application of Spanish law, has recognised the ownership of Camille Pissarro's painting, Rue Saint-Honoré, dans l'après-midi. Effet de pluie, by the Spanish public collection at the Thyssen Bornemisza Museum, despite the fact that it was proven to be stolen by the Nazi regime from the Jewish Cassirer family.8 The application of the statute of limitations on acquisition of the Spanish Civil Code, the measures of diligence taken by the Spanish government in relation to the acquisition of the collection from Baron Thyssen and the non-binding nature of the Washington Principles of 1998, which have not been developed into a specific Spanish law, have led the judge to reject the Cassirer family's claim. Nevertheless, the sentence confirms some kind of 'moral condemnation' against the Thyssen Bornemisza Foundation, according to the Washington Principles.
iii Limitation periods
In Spain, the limitation period for the action to claim is six years from the loss of possession of the property, unless the possessor had acquired the property title by means of usucapion (i.e., three years with good and fair title possession or six years without good faith or fair title).9 However, in the case of theft or robbery of the work of art, the acquisitive prescription cannot be effective in favour of those who stole or robbed, nor in favour of accomplices or accessories after the fact.10 In such cases, the statute of limitations does not expire after six years for actions to claim damages nor for actions to demand civil liability, born of the crime or misdemeanour. Therefore, when the heirs of the legitimate owner of a stolen or misappropriated work of art file a claim, the judge may consider that the six-year period for filing an action begins to run from the moment they have become aware of the location and identity of the illegitimate holder.
Furthermore, statutory limitations cannot be applied to crimes qualified by the Spanish Criminal Code as genocide, crimes against humanity, crimes against protected persons, assets acquired in armed conflicts or piracy.
iv Alternative dispute resolutions
The mediation system is barely used in Spain for the resolution of disputes. Law No. 5/2012 on mediation establishes the voluntary option of resorting to mediation in a series of civil and commercial matters and is currently being reformed through the 2019 draft law on the promotion of mediation, which is pending approval. There is no specialised institution for the mediation of disputes related to art matters. Arbitration is applicable for solving private disputes but conflicts with the government are out of the scope of the Law.
Fakes, forgeries and authentication
There are two possible legal pathways when dealing with fakes and forgeries, depending on the quality of the contracting parties: for transactions between merchants and private individuals, the Civil Code or the Retail Trade Law applies and, for transactions between art dealers, the Commercial Code applies. The Civil Code protects the purchaser, but in practice courts adopt a very strict approach when determining the satisfaction of the requirements for granting nullity, namely with regard to the excusable nature of the error, which ultimately means that in many cases the judicial practice fails to grant such protection. Pursuant to Article 1266 of the Civil Code, which regulates material error in contracts and its effects, the purchaser of a forgery or of an artwork whose provenance, authorship or value has been falsely determined can contest or void the sale by producing evidence of the following:
- first, that the buyer has been falsely misled with regard to the authenticity or the features of the artwork;
- second, that the buyer's defective consent was crucial to the acquisition (i.e., had the purchaser been aware of the forgery, he or she would not have entered into the contract); and
- finally, that the buyer's lack of awareness of the forgery is excusable because even through diligent actions (e.g., requesting an expert opinion), the forgery could not have been identified at that moment.
The action for annulment of the contract in cases of error has a time limit of four years from its execution, and the parties must reciprocally return to one another the assets that constituted the subject matter of the contract, including refunding the price to the purchaser.11 It is possible to resort to the application of the Retail Trade Law, which contemplates the specific case of public sales of works of art that, by establishing for the seller (whether it is an auction house or an art gallery) the legal obligation of providing a truthful description of the item, with identification of whether their qualities are true or, simply, assessed as being such (or not) by a certain expert,12 which makes the seller the guarantor of the quality of originality of the authorship of the work of art when it is sold as such.
In commercial law, the main focus is the protection of the seller (to the detriment of the purchaser) because the agreement is interpreted in accordance with the 'custom of trade'. In view of the above, the purchaser of a forgery or of an artwork whose features have been erroneously determined can only be effectively protected against such eventualities when it has been so agreed, which is usually the case for artworks acquired in auction where the auction house guarantees the authenticity of the work.
i Private sales and auctions
Generally, the main auction houses offer a post-auction private sales service but only a few offer items for private sale. The works of art sold in public auction cannot be challenged – unless there is bad faith conduct either from the auction house or from the buyer – by the previous owner or authorities. There is an exception regarding goods declared by law as 'out of commerce' because they belong to the state or other public or semi-public institutions such as religious institutions.
Special rules are applicable to public auctions of works of art.13 The offer for sale in public auction must include an accurate description of the relevant goods, including a reference to whether the specified features are certain or merely estimated, or if they have been assessed by an expert. In particular, where the object for sale in a public auction is an imitation, or a piece that appears to be a precious object but in reality is not, this fact must be expressly disclosed publicly, as well as in any invitations for bids. This obligation will also apply to the sale of works of art that are offered to the public other than in public auction.
Law No. 43/2007 for the protection of consumers in purchases of goods with an offer of restitution, will apply to the legal relations between the consumers and the businesses or professionals engaging in the sale of works of art, antiques, jewels and other goods, with the offer to return at a later stage, in one or several instalments, all or part of the purchase price settled by the consumer or an equivalent sum, with or without a provision for the appreciation of the amounts involved. Distance and off-premises sales, in which the purchaser is a consumer, are regulated by the applicable provisions of the Consumer Defence Act.14 Contracts concluded by electronic means are governed by the rules on distance contracts and by Law No. 34/2002, on information society services and electronic commerce.
Pursuant to the Retail Trade Law and the Consumer Defence Act, the consumer shall have a period of at least 14 calendar days, counted from the date of delivery of the goods, to withdraw from the contract. In distance and off-premises contracts, with the exception of contracts concluded at a public auction, the consumer will also have the right to withdraw from the contract within a period of 14 calendar days without giving any reason and without incurring any costs other than as specified below. The withdrawal period shall expire after 14 calendar days from the date on which the consumer, or a third party other than the carrier and indicated by the consumer, acquires physical possession of the goods.
ii Art loans
In 2011, Spain decided to accede to the United Nations Convention on Jurisdictional Immunities of States and their Property (2005). In 2015, Spain incorporated Law No.16/2015 on the privileges and immunities of foreign states, which regulates the immunity of foreign states from jurisdiction and execution, closely following the United Nations Convention.
iii Cross-border transactions
Licensing regulation for exports of cultural goods is regulated in the Spanish Historical Heritage Law. Cultural goods are structured in three levels according to their relevance, which directly affects the restrictions imposed on their movement and the obligation to apply for the corresponding export permit:
- property of cultural interest: non-exportable goods that can only be exported temporarily upon request to the Ministry of Culture;
- general inventory of movable goods: the exporter must always apply for an export permit regardless of the age of the goods; and
- historical heritage goods of the general category that, in principle, can be freely disposed of without notifying the public administration, except if:
- they are over 100 years old; these always need an export permit; or
- if they are between 50 and 100 years old and their destination is a country outside the European Union; these need an export permit if their value exceeds the thresholds established by Council Regulation (EC) No. 116/2009 on the export of cultural goods.
There is also an 'extraordinary' proceeding for goods that have been legally imported and declared to the Ministry of Culture because they can be re-exported within a renewable 10-year term.15
The export of artworks belonging to the Spanish historical heritage without the required export permission results in the goods becoming the property of the state.16 Furthermore, pursuant to Law No. 12/1995 on the repression of smuggling, a person commits a smuggling offence if he or she exports an item with a value higher than €50,000 without permission, which is punishable by one to five years' imprisonment and a fine of up to six times the value of the item. A person commits a smuggling infraction if the value of goods exported without permission is less than €50,000. The infringement will be punished by a fine of four times the value of the item.
In the recent Spain v. Coll & Cortes Ltd case, two works of art over 100 years old, David and Goliath and Los Mendigos, were seized at the French border while circulating with an expired export permission. The works were not intended for sale, only for a temporary exhibition, and were located in France in transit. Contrary to the claims of the Public Prosecutor's Office, the Provincial Court of Madrid has considered in appeal that there is no crime of smuggling (as the two works did not exceed the value of €50,000) and that, therefore, the two works of art do not become public property.17
Regarding import control, there are two categories of cultural property imports: temporary and permanent. The proceedings for temporary imports are usually carried out by customs and police officers. Temporary imports coming from third countries require an administrative document, and those coming from within the EU require proof of their entry and exit dates into the country.
Law No. 16/1985 establishes the payment of a fee for the issue of export permissions, applicable to the export of cultural goods to countries outside the European Union,18 which is applied to the value of the exportable good, in instalments, according to the following rates:
- 5 per cent for values up to €6,000;
- 10 per cent for values of €6,001 to €60,000;
- 20 per cent for values of €60,001 to €600,000; and
- 30 per cent for values of at least €600,001.
The fee is accrued by and settled with the Ministry of Culture.
iv Art finance
Auction houses in Spain do not currently offer advances, loans or guarantees on artworks. The type of security interest taken against art or antiques could be a non-possessory pledge. Its regulation expressly contemplates its use for art, antiques and collectibles. It is a security granted over movable property, where the collateral continues to be in possession of the owner (debtor) as a deposit. It requires execution in a public deed and must be registered in the Chattel Registry. The prevention of money laundering and the financing of terrorism in the art trade is regulated by Law No. 10/2010 and its Regulation of 2014, which oblige art and antiques dealers, in the case of such transactions of value equal to or exceeding €1,000, to:
- formally identify the client;
- put in practice due diligence measures regarding the transaction;
- provide training to managers and employees;
- register the transaction's documentation for 10 years; and
- provide a suspicious activity report to the Spanish Financial Intelligence Unit after verifying suspicious transactions by special examination.
5AMLD is pending transposition. On 12 June 2020, the Draft Law for the prevention of money laundering and terrorism financing was published; unlike 5AMLD, this does not contemplate a minimum transactional threshold of €10,000 for exemption from anti-money laundering regulations. The new Law is expected to be published in the first quarter of 2021.
i Moral rights
Moral rights are regulated in the Intellectual Property Law.19 Article 14 of the Law provides the seven moral rights for artists, which are recognised without any time limitation:
- the right to decide whether a work is to be made available to the public and, if so, in what form;
- the right to determine whether the work should be released under the author's name, under a pseudonym, a sign or anonymously;
- the right to claim authorship of the work;
- the right to demand respect for the integrity of the work and to object to any distortion, modification or alteration of it or any act in relation to it that may be detrimental to the artist's legitimate interests or to his or her reputation;
- the right to alter the work subject to respect for the acquired rights of third parties and the protection requirements of goods of cultural interest;
- the right to withdraw the work from circulation owing to changes in his or her intellectual or ethical convictions, after paying damages to the holders of the exploitation rights; and
- the right of access to the sole or a rare copy of the work, when it is in another person's possession, with the intention to exercise the right of communication or any other applicable right.
These rights cannot be waived or assigned.
ii Resale rights
The right of participation in the resale price of works of art is recognised in Article 24 of the Intellectual Property Law. The artist's resale right will apply whenever 'art market professionals' participate in the resale and when the resale price exceeds €800 (before the amendment to the Law in 2019, the minimum resale price was €1,200). There is an exception for the resale of works purchased by an art gallery directly from the creator, provided that the period between that first purchase and the resale does not exceed three years and the resale price does not exceed €10,000, excluding tax. The artist's resale royalty depends on the purchase price:
- 4 per cent of the first €50,000;
- 3 per cent of the part of the price between €50,001 and €200,000;
- 1 per cent of the part of the price between €200,001 and €350,000;
- 0.5 per cent of the part of the price between €350,001 and €500,000; and
- 0.25 per cent for any part of the price over €500,000.
However, the artist's resale right can never exceed €12,500.
The duration of the artist's resale right is 70 years after the author's death and 80 years if the author died before 7 December 1987. In both cases, the period begins the first day of the year following his or her death. The person liable to pay is the seller (art market professionals involved in the resale are jointly responsible), and the beneficiary of the artist's resale right is the author during his or her lifetime and, after his or her death, the person expressly nominated or the legal heirs. Beneficiaries can collect the artist's resale royalty directly or entrust a collective management company to collect it.
iii Economic rights
According to the Intellectual Property Law, the following economic rights are exclusive to the author and cannot be exploited without his or her authorisation:
- the right to reproduce his or her work, in any format, except for educational purposes;
- the right to distribute the work and its copies by sale, rental, loan or other means;
- the right to public communication or presentation to an audience outside the private sphere. The purchaser of a work has the right to display it publicly unless the author has expressly stated otherwise in the sales agreement or objects on the ground that the manner in which it is displayed is prejudicial to his or her honour or professional reputation; and
- the right to transformation, or any modification of its form from which it results in something different.
The author may assign his or her economic rights to a third party or assignee, but this must always be done in writing. If no assignment period is mentioned, it is limited to five years, and if no territory is mentioned, it is limited to the country in which it is signed.
Infringement of copyright is sanctioned by the Intellectual Property Law with compensation for damages, calculated according to the economic consequences for the author of the infringement. In the criminal field, the reproduction, plagiarism, distribution and public communication without the author's authorisation constitutes a crime if the infringer has the intention of obtaining a direct or indirect economic benefit to the detriment of a third party. The penalty, set out in Articles 270 and 271 of the Criminal Code, shall be a fine and imprisonment for six months to four years.
In a recent judgment, F Mateo & Mateo v. SEAT,20 the court had to determine whether the artist's copyright for the video installation I travel to know my geography had been infringed by a SEAT advertisement. In 2018, the court ruled in favour of the artist, F Mateo, stating that the similarities between both works reached mathematical certainty; therefore, the SEAT advertisement was to be considered plagiarism.
Trusts, foundations and estates
Foundations are a useful structure to either own or manage art collections. Foundations are governed, from the national sphere of competence, by the Law on foundations21 and, from the regional sphere of competence, by the laws on foundations of each of the 17 autonomous communities. The Law on incentives for patronage22 provides for a series of direct and indirect tax exemptions that benefit artwork holders' foundations.
The tax incentives for patronage have been modified by Royal Decree-Law No. 17/2020, which introduced tax measures to support the cultural sector to deal with the economic and social impact of covid-19. Since 1 January 2020, individuals have been able to deduct up to 80 per cent of the first €150 donated and 35 per cent of the remaining amount from their personal income tax. This last percentage of deduction will rise to 40 per cent if donations for the same amount or more have been made in favour of the same entity in the two immediately preceding financial years. Legal entities (corporate) may deduct 35 per cent of the amount donated from corporate tax, rising to 40 per cent if, in the two immediately preceding financial years, donations of the same amount or more had been made in favour of the same entity.
Outlook and conclusions
Spain provides a clear system for residents who import works of art from abroad. These goods may be exported without limits for a 10-year period,23 which can be renewed at the end of the first 10-year period.
1 Rafael Mateu de Ros is a founding partner and Patricia Fernández Lorenzo is a consultant at Ramón & Cajal Abogados.
2 Law No. 7/1966.
3 Law No. 16/1985.
4 Directive (EU) 2018/843.
5 Article 1462 of the Civil Code.
6 id., Article 1463.
7 id., Article 1955.
8 Judgment of 18 August 2020.
9 Articles 1962 and 1955 of the Civil Code.
10 id., Article 1956.
11 Article 1303 of the Civil Code.
12 Article 58 of the Retail Trade Law.
14 Royal Legislative Decree Law No. 1/2007.
15 Article 32 of the Spanish Historical Heritage Law.
16 id., Article 29.
17 Resolution of 20 September 2020.
18 Article 30 of the Spanish Historical Heritage Law.
19 Law No. 1/1996.
20 Resolution No. 10/2018. Ordinary Proceeding 250/2014, dated 8 January 2018.
21 Law No. 50/2002.
22 Law No. 49/2002.
23 Law No. 16/1985.