The Art Law Review: Turkey

Introduction

As Turkey hosted the world's oldest civilisations, cultural properties are a significant part of the Turkish art market. However, due to the limitations introduced under Turkish law, cultural properties are not a significant part of the art trade. Cultural properties are subject to strict state control and few may be owned by private parties.

The Turkish art market gained significant momentum with the sale of The Tortoise Trainer, a painting by Osman Hamdi Bey, for US$3.5 million in 2004. Momentum continued to grow between 2006 and 2013, and contemporary Turkish art reached significant turnovers at auction in Sotheby's London in 2009 and 2010. However, the art market has stagnated since Turkey's economy became unstable in 2016, which eventually resulted in a decline.2

However, with the joint efforts of all art market actors and philanthropists, Istanbul has become a significant centre for contemporary art. Contemporary Istanbul, one of the most important international fairs in Turkey, recently presented its 16th edition.

Some major Turkish organisations are bringing society and art together:

  1. established by the Eczacıbası family, Istanbul Foundation for Culture and Art (IKSV) has supported and enriched Istanbul's cultural and artistic life since 1973. The Istanbul Biennial and the Istanbul Design Biennial are among the international art events that have been organised by IKSV since 1987. The Eczacıbası family also established Istanbul Modern, the first modern and contemporary art museum in Turkey;
  2. Borusan Sanat, Borusan Holding's art foundation, supports digital art;
  3. owned by the Sabancı family, Sabancı Museum is another significant organisation in the Turkish art market with its permanent collection and regular, large exhibitions; and
  4. as a non-profit organisation, SALT conducts research-based exhibitions, publications, web and digitisation projects and carries out talks, conferences, screenings, workshops and interdisciplinary research programmes.

Portakal and Artam are the leading and long-established auction houses in Turkey. Nev, Versus Art Project, Zilbermann, Dirimart, Mixer, X-ist, Galerist and Arter are important galleries that stand out nationally and internationally and shape the art market.

The year in review

As in the rest of the world, the covid-19 pandemic and the changes it created in the art market also stand out in Turkey. The pandemic increased the number of online sales, which introduced new practices to the market. An increase in the number of online exhibitions and the digital awakening in the art market were the other notable topics of the past year.

Despite the rapid increase in online sales, the market was able to adapt to the changes it caused due to the existing sales infrastructure and experience of the large and long-established auction houses. The number of auctions organised by the auction houses through online sources was significantly higher when compared to the number of regular auctions organised before the pandemic. In addition, almost all antique dealers, second-hand book dealers and art galleries organised online auctions during the pandemic. While the number of entities organising auctions was around 30 in 2018, this number is now in the hundreds. In 2018, the total number of auctions organised was 38, including mixed antique and art auctions and painting auctions, whereas today, this number almost represents the number of auctions organised in a month.3

The downside of the increase in online sales is the difficulty in tracking sale numbers. There is no entity or central database recording sales and making this available to market players. While total sales in the secondary market was monitored until 2018, this information is not currently available as only large auction houses keep records. The total value of paintings sold in 2020 according to the Artprice.com database (and sales from other art and mixed auctions) was approximately 200 million Turkish lira. The pandemic caused a significant decrease in masterpiece painting sales. In 2020, there were no sales of paintings with a sale price exceeding 1 million Turkish lira.4

Another notable topic of the past year was the growth of non-fungible tokens (NFTs), which are now taking the art market in a different direction. NFT is becoming very popular among actors in the art market, particularly young artists. Many discussions concerning NFT are taking place. Opinions around how to fill regulatory gaps and the newly opened NFT marketplaces attract significant attention.

Important amendments were made in the legislation regarding prevention of laundering proceeds of crime and funding terrorist activities. Some of the amendments relate to liabilities of obligors. For instance, the threshold set for the identification requirement in transactions before obligors has increased from 20,000 Turkish lira to 75,000 Turkish lira, and from 2,000 Turkish lira to 7,500 Turkish lira for online sales. Remote identification became available. In addition, new rules concerning the information to be included in electronic money transfer messages and confirmation of this information were introduced. Finally, the scope of obligors has been extended to include crypto asset service providers and savings companies.5

Another amendment made in the Turkish legislation was the amendment of the Regulation on the Procedures and Principles regarding the Certification of Enterprises Filling, Reproducing, Selling or Distributing Materials Containing Intellectual and Artistic Works. Accordingly, entities that obtain the necessary certificate within the scope of the Regulation for opening booths for the sale of books or materials containing intellectual and artistic works at fairs, festivals or other cultural events, can make sales throughout the event by submitting a temporary sales certificate obtained by the organising entity from the Directorate of Culture and Tourism in the province in which the event is held.

Art disputes

i Title in art

General Turkish law principles applying to sales of movable property apply to the acquisition of title to artwork under Turkish law.

Pursuant to Turkish law, in sales of movable property, the seller must deliver the physical possession of the property to the purchaser while the purchaser must pay the agreed price to the seller. In principle, the purchaser obtains title to the movable property once it receives the physical possession. The same principle applies to the acquisition of title to an artwork. In the acquisition of title to movable properties by auctions, however, pursuant to the Turkish Code of Obligations (No. 6098) (TCO), the title is obtained once the bidder places a successful bid. Thus, in acquiring artwork by auction, the purchaser obtains title to the artwork once it places a successful bid.

It is possible for the parties to agree on retention of title. Accordingly, the seller may retain title of ownership until certain conditions are met, even though the physical possession of the property is delivered to the purchaser. However, the contract must be executed before a Turkish Notary Public and registered before the competent registry.

In general, Turkish law protects the good faith purchaser. Accordingly, in principle, the purchaser keeping the physical possession of a movable property is presumed to have acted in good faith, regardless of how title to the property is obtained in the first place. However, the purchaser should not know, or should not be in a position to know, of the absence of ownership at the time of the purchase to benefit from the good faith presumption. In addition, the position of the seller may change the good faith purchaser presumption in certain cases. Finally, it is worth noting that the concept of good faith does not apply in acquisition of cultural property.

Turkish law does not require the purchaser to investigate the provenance or originality of the artwork. The purchaser is under a general due diligence requirement. In Turkish practice, the purchasers usually ask for a condition report or a specific expert report when purchasing the artwork. While purchasing cultural property, however, the level of due diligence expected from the purchasers is higher when compared to the purchase of other artwork. Yet, there is no standard set for the level of due diligence expected from the purchaser; it is determined on a case-by-case basis.

Under Turkish law, the seller is deemed to give an implied warranty on title and that the property is free from any encumbrance. However, if the purchaser agrees, it may obtain title to the property with encumbrance, in which case the seller's liability for warranty on title ceases. It is also possible for the parties to limit or exclude the seller's liability. For this agreement to be valid, the seller should not act in bad faith.

ii Nazi-looted art and cultural property

Under Turkish law, there is no specific legislation governing or concerning Nazi-looted art and cultural property. There are no court precedents concerning these categories.

iii Limitation periods

Turkish law does not provide specific limitation periods for art claims. Accordingly, general limitation periods set out for breach of contract and claims in tort apply, depending on the nature of the claim.

In cases of forgery, for instance, the purchaser is entitled to seek indemnification, which is subject to a 10-year limitation period as of the date it has notified the seller that the artwork is forged. However, this is not applicable if he or she has already made a claim based on warranty.

In cases relating to art title, the original owner of the artwork (victim of theft) is entitled to request return of the lost artwork within five years of the date the artwork was lost.

iv Alternative dispute resolution

The main alternative dispute resolution methods for art disputes in Turkey are arbitration and mediation. However, there is no alternative dispute resolution organisation or institution dealing specifically in art matters.

Pursuant to the mandatory mediation regime, parties to a commercial dispute pertaining to monetary claims must take their case to mediation before taking the case to a Turkish court. The parties may apply to court if, upon completion of the mediation process, the mediator issues a report setting forth the parties' failure to settle the dispute. If the parties directly apply to court without applying to mediation, the case will be dismissed on procedural grounds without further examination of its merits.

Pursuant to the Turkish Commercial Code (No. 6102) (TCC), disputes arising from legislation regarding intellectual property constitute commercial disputes. Therefore, the mandatory mediation mechanism also applies to disputes arising from the contract price in licensing contracts and intellectual property-related monetary and indemnity claims such as those related to violation of intellectual rights and transfer of intellectual property rights.

Fakes, forgeries and authentication

Turkish law provides multiple protection mechanisms for purchasers acquiring fakes, forgeries and inauthentic art. A purchaser may base his or her claims on rules of warranty provided for the sales contract or on the presence of an error for rescission of the sale.

If all conditions applying to the seller's warranty liability exist, pursuant to the TCO, the purchaser is entitled to: (1) terminate the contract; (2) request a price reduction; (3) request repair; or (4) request replacement of the product with a similar one. In addition, the purchaser is entitled to seek indemnity under the general provisions for breach of contract unless the seller proves that it does not have fault, which is subject to a 10-year limitation period. If the defect leads to rescission of the sale, the purchaser is entitled to recover the contract price with interest and seek for indemnity for losses it incurred as a direct result of the defective product. Unless the seller proves that it does not have a fault, the purchaser may also seek indemnity for the indirect losses (e.g., loss of profit) it incurred due to the defective product. Any claims arising from the seller's liability for defects are subject to a two-year limitation period upon delivery of the product. However, this time limitation does not apply in cases in which the seller has demonstrated gross negligence (and, if the transaction is carried out between traders, special provisions exist under the TCC).

The purchaser may also base his or claim on the presence of an error for rescission of the sale; however, this is not applicable if he or she has already made a claim based on warranty. Finally, if the seller acts in bad faith, the purchaser may also base his or her claims on fraud, in which case the time limitation is one year from the date he or she discovers the fraud.

It is possible for the parties to contractually waive from or limit the seller's liability except for cases whereby the seller has demonstrated gross negligence or fault. This also applies in sales by auction. Pursuant to the TCO, in voluntary auctions, the seller may abolish its liability for defects by explicitly introducing a non-liability clause in auction terms and conditions. However, the non-liability clause does not apply to cases of fraud.

Art transactions

i Private sales and auctions

The TCO provides limited provisions that specifically regulate the sale and purchase of art, antiques or collectibles at voluntary live auctions. Therefore, general provisions provided under the TCO, the TCC and the Turkish Consumer Protection Law (Law No. 6502) (the Consumer Law) also apply to the sale and purchase art, antiques or collectibles.

The pandemic has had a significant impact on online sales in the Turkish art market. This has increased the importance of the Consumer Law and its secondary legislation, which governs distance sales.

Under the Consumer Law, any individual or legal entity purchasing art, antiques or collectibles for non-commercial purposes is a consumer. The consumer may cancel or withdraw from a sale contract defined under the Consumer Law without any reason. Off-premises sales and distance sales contracts are governed under the Consumer Law. Accordingly, the consumer may cancel the distance sale contract without any reason and without being subject to any penalties. Pursuant to the Consumer Law, in off-premises sales and distance sales contracts, the seller must notify the consumer that it has the right to cancel the contract within 14 days of delivery of the bought item. Failure to inform the consumer results in extension of the 14-day cancellation period by one year starting from the end of the initial 14-day period.

Under Turkish law, online auctions are also subject to provisions applying to traditional auctions. However, it is controversial whether the purchasers participating in online auctions qualify as consumers whereby they could benefit from the right to cancel the contract provided under the Consumer Law. Thus, the terms and conditions of auctions and the methods of notifying these terms and conditions to the participants of auctions must be reviewed in each particular case.

Finally, pursuant to the Law on Conservation of Cultural and Natural Property (Law No. 2863), public institutions and organisations, foundations, individuals and entities must inform and show public museums any movable cultural or natural property or collections that will be sold at auction. The Ministry of Culture and Tourism of the Republic of Turkey (the Ministry) is entitled to purchase the collections at a price to be determined by a competent commission to be established. Those properties that are determined to be a part of the museum collections are transferred to the Ministry pursuant to state property regulations.

ii Art loans

In art lending, public museums must provide the lender, the relevant public body or the relevant cultural institution with anti-seizure guarantees. The Ministry is the authorised body for issuing the necessary authorisations for art loans.

iii Cross-border transactions

Law No. 2863 permits the import of cultural property into Turkey. However, the import of cultural property is subject to customs control. The Regulation on Movable Cultural Property of Ethnographic Quality requires importers of cultural property to submit an inventory list consisting of photos and names of the relevant cultural objects as well as information on their sizes and classification, to customs. A copy of the inventory list must also be submitted to authorised museums given that under Turkish law, the trade of cultural property is subject to state control and, therefore, authorised museums are entitled to value the cultural property and have pre-emption rights.

In addition to the above, pursuant to Article 6 of the 1970 UNESCO Convention on the Means of Prohibiting and Preventing Illicit Import, Export and Transfer of Ownership of Cultural Property (the Convention), which Turkey has ratified and implemented without introducing any reservations, importers of cultural property must submit appropriate certificates evidencing due authorisation of export of the property, to customs. The lack of this certificate would result in customs seizing the relevant cultural property given that, pursuant to the Convention, the import from a state party without the appropriate certificates will be deemed illicit.

The export of any type of cultural property is subject to strict state control. Pursuant to Law No. 2863, cultural property, which is under state control, must be preserved within the borders of the Republic of Turkey. However, these cultural objects may be exported for temporary exhibitions upon receipt of necessary governmental approvals. In addition, any cultural property that is not listed under the Regulation on Movable Cultural Property of Ethnographic Quality, may also be exported subject to receipt of necessary authorisations from the museums. Finally, embassies and consulates are entitled to take back any cultural property that they have brought into Turkey, upon their departure. Failure to comply with these rules may result in five to 12 years' imprisonment and a daily pecuniary fine of between 20 Turkish lira and 100 Turkish lira for up to 5,000 days.

In general, the import of art, antiques or collectibles that are listed under Turkey's customs tariff is subject to VAT and certain other customs duties. However, the import of these objects solely for exhibition purposes in private or public museums is exempt from VAT and any customs duties. Turkish law also provides a temporary import regime, which permits the temporary import of property with an exemption for VAT and customs duties. Importers proceeding with an ATA carnet may import artwork for exhibitions, fairs, meetings, etc. without these being subject to VAT or customs duties. The temporary import regime (including with an ATA carnet) requires the importer of the property to provide a security to cover the taxes that may arise upon the sale of the relevant property. Finally, VAT may apply in export sales; however, it may be reclaimed from the seller upon the export of the property.

iv Art finance

Art financing is not widely practised in Turkey, and thus, there is no particular legislation governing art financing under Turkish law. In the past, some private banks have provided loans for financing of art prior to certain exhibitions organised in Turkey; however, these loans were standard consumer loans and were not specifically provided as part of the concept of art financing.

A limited number of Turkish private banks accept art as collateral due to legal and art- related risks. In circumstances whereby art is accepted as collateral, a pledge is established on the artwork, which is the main way to collateralise movable property under Turkish law. A pledge gives the pledgee limited right in rem on the movable property and, in principle, is established upon delivery of the physical possession of the pledged property to the pledgee or to a third-party trustee with an agreement between the pledger and the pledgee. However, the new Law on the Pledge of Movable Properties in Commercial Transactions (Law No. 6750) and its secondary legislation, introduced on 1 January 2017, permit the pledger to keep possession of the pledged movable property. This amendment has had a limited impact on pledges on artwork.

There is no specific procedure available for the establishment of a pledge on artwork and no public register is formed specifically for this purpose. Accordingly, pledging artwork is subject to the general Turkish law principles that are set out for the establishment of pledges on movable property. The pledge agreement must be in writing and signed before a Turkish notary public or a Pledged Movable Property Registry official. The agreement must then be registered with the Pledged Movable Property Registry, which was formed by law for perfecting, monitoring and disclosing pledge transactions.

The prevention of laundering proceeds of crime and funding terrorist activities through the art market is governed under the Law on Prevention of Laundering Proceeds of Crime (Law No. 5549) and its secondary legislation. The authorised body is the Financial Crimes Investigation Board, the financial intelligence department of the Ministry of Treasury and Finance of the Republic of Turkey.

Pursuant to Law No. 5549 and its secondary legislation, dealers and auction houses must conduct customer due diligence in certain cases. Accordingly, in sales of items valued at 75,000 Turkish lira or above (7,500 Turkish lira for online sales) or if a transaction seems suspicious, the dealer or the auction house must verify the identity of the customer through reliable and independent sources and inform the Financial Crimes Investigation Board. In addition, dealers and auction houses must keep records of the customer, the provenance and the description of and the price paid for the relevant artwork. Dealers' and auction houses' failure to comply with the due diligence obligation may result in criminal liability.

Artist rights

i Moral rights

Moral rights of artists are governed under the Law on Intellectual and Artistic Works (Law No. 5846) and consist of the right to disclose, the right of attribution, the right of integrity and the right to request to use the work.

Moral rights do not descend to heirs upon the artist's death. They cannot be waived or assigned to a third party. Any agreement to the contrary is deemed void. However, the copyright holder of the work is entitled to license the moral rights to third parties.

Moral rights and their protection start when the work is first introduced to the public (i.e., the creation of the work). Moral rights are not subject to a time limit.

ii Resale rights

Law No. 5846 governs the resale right of the artist. Pursuant to the Law, after the initial sale of the work, if (1) the work is resold through an art market professional within the protection period set out for the economic rights, and (2) there is an evident disproportion between the initial sale price and the resale price, the artist (or his or her heirs, if the artist has deceased) is entitled to receive a royalty from the difference between the initial sale price and the resale price each time the work is resold. However, the artist's resale right cannot be exercised for all works. The resale right is only available for original artwork or for original copies of the artwork bearing the signature of the artist.

In addition to the above, the resale right only applies to sales in which the sale price exceeds 5,000 Turkish lira. The royalty is calculated as follows.

Sale price difference (as % of original sale price) Royalty (% of the difference)
50–100

10
101–200 9
201 or higher 8

Although resale rights have been available under Law No. 5846 since the Law was first introduced in 1951, the Decree of Ministers governing royalty ratios was not introduced until 2006, meaning the right was not exercisable for almost 55 years. Despite the entry into force of the Decree of Ministers, the right is still not commonly exercised today because most artists and their heirs are unaware of its existence.

iii Economic rights

Economic rights of artists are governed under Law No. 5846 and consist of the rights of adaption, reproduction, distribution, representation and resale, as well as the right to publicise. Unlike moral rights, economic rights are transferable and descend to heirs upon the artist's death.

Economic rights and their protection start when the work is first introduced to the public (i.e., the creation of the work). With the exception of certain works, registration of artwork is not mandatory for economic rights to exist and become enforceable and protected. Cinematographic and musical works must be registered; however, this registration is not a prerequisite for the occurrence, enforcement or protection of economic rights.

Protection for economic rights continues for the life of the artist plus 70 years after his or her death. The 70-year period starts on 1 January of the year following the artist's death. If there is collective ownership of work, the 70-year period starts after the death of the last surviving artist.

Trusts, foundations and estates

In Turkey, art collections are usually held and administrated through foundations. The holding and administration of art collections through trusts or estates is unprecedented.

The Income Tax Law provides certain tax exemptions for cultural activities. For instance, deposits and donations provided for cultural activities that are authorised and supported by public authorities are exempt from tax duties. In addition, non-profit national and international cultural and artistic organisations may benefit from tax exemptions. The expenses of museums founded by equity companies that are supported or approved by the Ministry are exempt from corporate income tax provided that they are duly declared. Tax exemptions also apply in the following cases:

  1. the protection of manuscripts and rare cultural property, including their delivery to Ministry collections;
  2. the restoration, care, survey and transfer of cultural property;
  3. the delivery of cultural property (as defined by law) and other contemporary or traditional artworks to Ministry collections, as well as the process of securing these items;
  4. the production of items of intangible cultural heritage, fine arts, cinema and contemporary and traditional handicrafts;
  5. research and film production; and
  6. restitution of objects from abroad.

Finally, under Turkish law, the heritage of certain cultural property, such as personal belongings of deceased persons and family heirlooms such as paintings, swords and medals, is not subject to tax.

Outlook and conclusions

The pandemic had a significant impact on the Turkish art market, as it did on almost all markets around the world. It triggered a digital awakening, which looks set to continue. Online auctions and exhibitions are now becoming standard. It also seems that the popularity of NFTs will continue to grow given recent global developments in that area. However, these developments also take the art market to a new and undiscovered territory, which may bring up unprecedented cases and create a necessity for new legislative studies. Therefore, the legal implications of these developments, and how current legislation will respond to the needs that these implications may create, will require further discussion in the future.

Footnotes

1 Zeynep Hekim Bülbül and Zeynep Ökke are founding partners at Ökke & Hekim.

2 Aylin Seçkin, Sanatın Ekonomisi (HayalPerest Kitap, 2021), p .32.

3 Zafer Özdem, 'Türk Sanat Piyasası 2020', Business Life, 1 February 2021, www.businesslife.com.tr/Home/NewsDetail/389.

4 ibid.

5 Regulation on Measures regarding the Prevention of Laundering Proceeds of Crime and Financing of Terrorism.

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