Phoebe Kouvelas, LL.M., is partner at ArtSecure, a boutique law firm offering specialized advice on Art, Intellectual Property & Cultural Property matters. She regularly litigates and advises on a wide range of commercial and regulatory issues.
In June 2019, the European Union (EU) passed a Regulation on the ‘Introduction and the Import of Cultural Goods’. It aims to ensure the prevention of terrorist financing and money laundering through the sale of pillaged cultural goods to buyers in the EU. The means to this end has, however, elicited intense criticism from art market professionals as it imposes certain obligations on importers of cultural goods which are, in many cases, difficult – if not unrealistic – to attain.
More specifically, imports of certain cultural goods are subject to uniform controls upon their entry into the customs territory of the EU. Yet not all cultural goods are affected. The Regulation does not apply to cultural goods created or discovered in the customs territory of the EU itself. It mainly concerns cultural goods from East and Southeast Asia, Russia, the Middle East, South and Central America, Africa and Australia.
The objects targeted can be classified into two groups: archaeological items which are more than 250 years old (considered high-risk), and other items older than 200 years that have a minimum financial value of €18,000 ($20,000). The latter are considered to have lower risk (ancient coins, paintings, sculptures, prints, lithographs, rare manuscripts, old books etc.).
The import into the EU of higher-risk cultural goods requires an Import License, whilst the import of lower-risk goods requires a less-demanding Importer Statement.
Those required to apply for an import license will need to apply to the competent authority of the importing member state via a centralized electronic system (which has yet to become operational). Accompanying the application, the importer is required to provide either an export license or evidence of the absence of laws requiring the issuance of an export license at the time they were taken out of the originating territory.
For objects considered of lower risk, an Importer statement must be submitted via the same centralized electronic system. Such statement shall consist of a declaration signed by the holder of the object – stating that the object has not been unlawfully exported from the country of creation or discovery. Accompanying the declaration, the importer will have to provide a standardised description of the object in question (the standard not yet determined).
The five-year window
A notable derogation for both categories of objects is interesting. Where the country of origin cannot be reliably determined, or the export of the object took place before 24 April 1972, the importer need only provide evidence that the object in question was lawfully exported from the last country in which it was located more than five years previously.
This is certainly good news for those who legitimately own objects. However, it does open a window for abuse. Taking into consideration that the Regulation will not become operational for another four to five years (see below), smugglers may well place a looted object in one country, leave it for five years and then obtain an Import License invoking the five-year rule.
Further, the five-year rule also gives ideas for “jurisdiction shopping”, meaning that one may place a looted object for five years in a country which may have more lenient laws on the export of cultural goods, obtain the export license once the five-year requirement is met and import it into the EU taking advantage of the derogation.
A few paradoxes
As discussed above, to obtain an Import License, individuals need either to have an export license or give evidence that no such license was required at the time of export. And in order to satisfy either of these requirements, the importer must know the exact date that the object was exported from the country of creation or discovery.
This is rarely the case in reality. The provenance for objects that are of significant age is usually marked by a lack of detailed documentation. Often, one can only assume that an object was exported by the country of creation by a certain date by stringing together available information. It may seem that the Regulation is offering two options for those applying for an Import License when, in fact, it offers none for those unsure of the exact export date (arguably accounting for most cases).
Further, the frequent lack of knowledge in relation to the exact export date may also put importers at risk of making a false declaration in their Importer statement to the competent authorities. This is not a trivial matter, as the Regulation obliges Member States to impose penalties for such false statements and the submission of false information.
Art market professionals bear the costs
International dealer associations have opposed the Regulation since its inception, claiming that it would place a considerable administrative and financial burden on art and antiques businesses throughout Europe. Indeed, the Regulation will add operational costs by setting levels of due diligence that are hard to attain and will introduce lengthy delays (the competent authorities can take up to 90 days to decide on an import application) that could arguably slow business.
Participation in international art fairs will also be affected. Although an import license is not required for temporary admission of objects to be presented at art fairs (an importer statement suffices), if the object sells, the dealer would have to await receipt of the license before finalizing the deal – which could lead to a lost sale (both due to the delay itself and due to the uncertainty of obtaining the import license).
How can the art market prepare?
Although the Regulation is already in force, in practice it will not be fully implemented until the rules for the centralized electronic licensing system is established (scheduled for June 2021) and the system becomes operational. Therefore, the art market does have time to prepare. Here’s how:
First, collectors and institutions considering buying objects which fall under the scope of the Regulation must request export documentation and all the available provenance information.
It would also be wise for them to update their record-keeping practices to collect and retain as much export and transport documentation as possible. Where the previous owner is known to the possessor, they can make contact and collect any missing pieces of information relating to the object’s previous locations.
Equally, they might make compliance easier by coherently recording detailed information on the description, origin, dimensions and high-resolution images of the object.
Now is also the time to conduct provenance research to document all available information on the object’s origin, history of ownership, previous publications and exhibitions. As this may be time-consuming and costly, one can start by selecting the objects that are most valuable to the collection – both in terms of monetary and historic value.
Lastly, for objects whose country of origin cannot be reliably determined, one should consider taking advantage of the five-year provision by not moving the object to another country for at least five years.