MEMORANDUM SUBMITTED BY THE ART LOSS REGISTER
EXECUTIVE SUMMARY FOR THE HOUSE OF COMMONS
COMMITTEE
We hope that the Committee will consider the
following recommendations:
1. The ALR has developed the internationally
recognised central database of stolen and looted art and this
is a critical element in deterring theft or illegal export, helping
victims with recoveries, and improving standards in the art trade.
It is an advantage to the UK that the company whilst operating
internationally is based in London.
However, to be successful it is essential that:
(a) All governments and police forces enter
all stolen, looted or illegally exported items on the database
which is free of charge to them;
(b) The Committee make representations to
the Home Office on the importance of this type of crime in relation
to the theft as a whole, and reinforce the proposals for the transfer
of object information from the relatively small database held
by the Metropolitan Police to the Art Loss Register in order to
improve recoveries. This will often provide the necessary evidence
to make an arrest. There is no need for sensitive data in relation
to names and addresses of victims or criminal intelligence to
be transferred and this should be retained under police control;
(c) The art trade exercises due diligence
by checking the database in the same way as the major auction
houses already do. Trade associations should incorporate this
specifically in their code of practice;
(d) That police and trading standards officers
take a more aggressive line (for which the judiciary is already
lending its support) in relation to prosecuting those members
of the trade who handle stolen goods for which the test of due
diligence will include the use of the database where appropriate;
(e) All museums holding items with incomplete
provenance between 1933 and 1945 should enter these on the ALR
Museum Provenance Database;
(f) Government departments with missing or
stolen pictures should enter them on the database;
(g) Government departments concerned with
export licences or tax concessions should use the database for
checking provenance where appropriate.
INTRODUCTION
1. The Art Loss Register was founded in
1990 as an industry initiative by the art trade and the insurance
companies to tackle the problem of stolen art and increase recoveries.
Its mission is:
— to identify and recover stolen and
missing works of art;
— to deter art theft and unauthorised
sale of works of art;
— to provide a central "checkpoint"
to prospective purchasers and lenders; and
— to reduce the trade in stolen art.
Its shareholders include the major auction houses,
insurance companies, the Foundation for Art Research, and management
but it operates as an independent commercial concern. It is the
central internationally recognised database available for searching
of stolen and looted items of which there are, on the database,
in excess of 100,000 uniquely described and many others which
are not unique but which may have been stolen or looted at the
same time and may be recovered through "proof of association".
The company has a staff of 20 including 13 fine art graduates
speaking eight different languages, in offices in London, New
York and Cologne (see Annex B[3]).
2. RECOVERIES
The company has been responsible for the recovery
of over £75 million of stolen art including fraud over the
last 10 years, all of which can be fully documented. The company
is not merely a passive database matching operation but also has
extensive experience in the research of Holocaust-type losses
and in active recovery efforts including close liaison with the
police in many countries. For example, during 1999 the company
undertook 80 days' negotiations for the return of a Cezanne, sold
subsequently at Sotheby's for £18 million.
3. OPERATIONS
The recovery process begins with the registration
on the database of lost items by theft victims and their insurers
which are then systematically checked against the catalogues of
the major auction houses, enquiries and searches for major museums,
dealers and galleries, financial institutions and law enforcement
agencies around the world. When an item is matched with an item
on the database, the ALR notifies the theft victim and law enforcement
authorities. At that point the work of art is usually detained
and the parties negotiate a settlement often with the ALR's help,
or legal process commences.
4. INTERNET
The company is developing its operations so
that dealers, auction houses and police will be able to search
the database themselves on the Internet under close control with
a full audit trail so that the number of searches per year can
rise from 280,000 to excess of 1,000,000. This will be achieved
without allowing those who are deliberately trying to trade in
stolen goods to browse the database in order to find out what
is registered and what they can therefore sell without being identified,
or the items recovered.
Sales on the Internet both at Internet auctions
and on dealer websites, give the opportunity for the Art Loss
Register to research a large number of items which were previously
not available for searching and a number of these sites are already
being searched on a regular basis. As the art market becomes more
transparent the Art Loss Register will be able to undertake its
task more effectively.
5. HOLOCAUST
RESEARCH
The ALR does not charge its normal registration
or recovery fees for individual claimants but carries out this
work on a pro-bono basis. The art trade are charged for searches
of the Holocaust database since this is integrated with that for
stolen art and they are also charged for specific research.
6. A number of organisations particularly
the major auction houses have made donations to the ALR for this
work and many who have benefited from the ALR's assistance with
recovery of their art have committed themselves to further donations
when the ALR has established the Register of Looted Art (ROLA)
for which an application has been made to Charity Commissioners.
The objects of the Register of Looted Art will be:
To create, on behalf of claimants, a unified
comprehensive database of lasting value for Holocaust and other
war or similar claims involving looted or confiscated cultural
objects, so providing a permanent facility for identifying the
current whereabouts of those items in particular if they appear
on the international art market. ROLA will seek to ensure that
examination of the provenance of art between 1933 and 1945 becomes
routine procedure in any art transaction or exhibition and will
assist in helping equitable solutions between the claimant and
the current holder, be they private owners or museums.
7. US CONGRESS
The company through its Chairman in the USA,
Ronald Tauber, gave evidence to the Banking Financial Services
Committee for the United States House of Representatives (see
Annex C[3]).
Sarah Jackson was invited to join the US presidential
Advisory Committee for Art and Other Cultural Property in relation
to Holocaust Assets (see Annex D[3]—letter from Edgar M Bronfman).
A report of the work carried out on the Holocaust
is attached (Annex E[3]).
8. ARCHAEOLOGICAL
LOSSES
Many stolen antiquities have been identified
by the ALR and recently the International Association of Dealers
in Ancient Art (IADAA) signed a protocol whereby all potential
purchases by their members above a value of £10,000 must
be checked against the database. An audit trial of all checks
of the database is maintained. The ALR has been involved in advising
parties in relation to major archaeological losses. In one case
involving a dispute in excess of £20 million the company
developed the concept of an international trust financed by a
major museum which would have the items on display. The terms
of the trust would require the items to be exhibited in those
countries which had a reasonable claim and eventually repatriated
to the country should complete proof be obtained of their original
excavation.
9. PREVIOUS CONTACT
WITH PARLIAMENT
The All Party Parliamentary Arts and Heritage
group visited the Art Loss Register in 1996. Questions have been
raised in Parliament to the Home Office about the advantages of
the police use of the Art Loss Register, and the company maintains
close relationships with the Home Office, the Department of Trade
and Industry as well as with the Department for Culture, Media
and Sport.
10. We have restricted our evidence to those
areas in which our experience and expertise is most relevant ie
your first four questions as per the list of agenda points dated
10 February 2000.
THE ILLICIT
TRADE
The impact of the illicit trade in cultural property
11. The Art Loss Register does not have
accurate figures on the size of the trade in items which have
been illegally exported and we doubt that these are available,
but we do have statistics in relation to stolen items which may
give an indication of the seriousness of the problem. Although
there are many statements that stolen art is second only to the
illegal trade in arms or drugs, which cannot be fully substantiated,
we can demonstrate that there are many cases where stolen or illegally
exported art has been used as part of organised crime for the
funding of other criminal activities such as drugs.
12. Estimates on the value of stolen art
traded can be built up from the value of items logged on the ALR
database. The 10,000 or so stolen items logged per year are a
reasonably high proportion of the high value items stolen particularly
in the UK and USA, but a low proportion of the lower values.
The average value of items is under £5,000
and the annual value therefore approximately £50 million
but this is probably less than 20 per cent of the worldwide total,
so that the stolen value per annum could be of the order of £250
million minimum.
This would represent say 2.5 per cent of the
art trade turnover (Europe and USA) which is estimated at £11.4
billion (auction houses' and dealers' figures provided by BAMF
for 1998). These figures are the roughest of estimates, but this
2.5 per cent probably carries a higher profit margin than the
legal items since, of course, they carry a higher risk and are
offered to the trade by fences at well below market value. Gradually,
these items work their way up the chain of respectability until
they achieve full market value, but on the way they may well have
accounted for at least 5 per cent of the profits of the business.
13. The introduction of key performance
indicators for police forces has led to a tendency for them to
focus on those crimes which have an immediate impact on the ordinary
citizen and which can be measured. This may not be the best way
of tackling crime as a whole since we have ample evidence that
criminals target those areas where the risk reward ratio is favourable
to them as compared to other targets where greater police effort
is concentrated. There is a perception amongst many police forces
that the theft of cultural property is often a matter of concern
primarily to the rich or the insurance industry, or the State
in the case of illegal excavation and not the general population.
Methods of counteracting this illicit trade and
the impact to the legitimate trade
We concentrate our evidence on the effect of
a central database as part of the countering of this trade and
assistance to the legitimate trade.
14. Before the availability of a central
database for checking as a necessary but not always sufficient
condition of due diligence, the art trade was able to excuse any
failure to carry out effective due diligence by claiming that
their purchase had been made in good faith and they relied on
the representations given to them by the vendor.
15. COMPARISON
WITH OTHER
MARKETS/DUE
DILIGENCE
It is interesting to contrast this with the
second-hand motor car market in the UK where no reputable dealer
fails to check with the recognised database whether a car is stolen
or has an outstanding hire purchase commitment before they purchase
it. Indeed, many private individuals buying from other individuals
would also do so. Furthermore, the burden of proof is on the dealer
to show that they have done so by checking the central database.
16. It took many years for this to become
standard practice in the motor trade but it is now so well recognised
that if a dealer does not use the database, the police will tend
to take this as prime facie evidence of handling stolen
property. Our aim is to bring about the same position in the art
trade where, in general, Trading Standards Officers, as well as
the police have not taken action against dealers who have been
handling stolen property except in the most blatant cases. One
of the reasons for this has been the lack of an objective test
of due diligence which the central database goes some way to providing.
17. THE LAW
"The Case of De Preval v Adrian Alan
Ltd" shows that the law is ready to be used if the police
chose to do so or a victim of theft brought a civil action. See
Annex F[3]. In the USA and Switzerland there have been similar cases
where courts have ruled that the logging of stolen items and searching
by purchasers of the central database are essential to their respective
claims.
18. CENTRAL DATABASE
EFFECT
The effect of a central database can best be
seen by the statistics in relation to the number of stolen items
found in the catalogues of the main auction houses which in 1992,
when the ALR database was only some 25,000 items, was one in 3,000
lots and in 1999, when the database was over four times the size,
and one would expect, therefore, at least four times as many items
to be identified, the number of identified items has in fact dropped.
As important is that the average value of items has also reduced.
The reason for this is that it has become well known amongst the
less respectable members of the trade that they should not try
and consign items to the major auction houses because of their
searching policy and these items therefore circulate elsewhere
in the trade where they are less likely to realise their full
value. This in turn depresses the price at which the burglar or
the fence is able to achieve for the stolen property and this
becomes a significant deterrent.
19. The consignors of items to the major
auction houses which are found to be stolen are no longer thieves
or fences themselves, but increasingly more reputable members
of the trade who have failed to carry out due diligence and are
the fourth or fifth purchaser in the line.
20. CRIMINALS
There are specialist grave robbers and archaeological
thieves, and in Western countries some criminals who specialise
in stealing art and others who specialise as fences. However,
there are many others who are criminals driven by the Risk Reward
ratio and if there is greater police attention or it becomes more
difficult to sell items at a worthwhile price due in part to the
operation of our database, then they will focus on other targets.
21. We would anticipate that there would
be a reduction in the level of theft and illegal export as the
practice of due diligence becomes accepted with evidence being
provided through our search certificates. In due course the absence
of a search certificate particularly for sales on the Internet
will reduce the value of the item. Insurers expect dealers to
show evidence of due diligence if they wish to claim on defective
title policies.
22. ART FAIRS
An extremely encouraging development in the
art trade is the decision of the organisers of Europe's largest
and most prestigious art fair, held each year in Maastricht in
the Netherlands, to ask the ALR to check 4,000 items against our
database prior to the sale. This brings a very important group
of dealers in to the same standard of due diligence and responsibility
as the major auction houses. These dealers and others seek assurance
that works of art are neither subject to contemporary claims of
theft nor tainted by spoliation during the war. We are repeatedly
told that the art trade finds it useful to have a single point
of reference for inquiries concerning stolen as well as looted
art.
23. We would hope that the major art fairs,
such as Olympia, will follow the lead of the Maastricht, Grosvenor
House and the Basle Fine Art Fairs in requiring items offered
for sale to have been checked against the ALR database. The current
level of searching is 300,000 items/lots per annum of which the
major auction houses worldwide account for 95 per cent, but they
only handle about one third of the value of the art sold in a
year and therefore the two thirds which is handled by the dealers
are currently not searched unless the dealer has purchased direct
from an auction house.
24. ILLEGAL EXPORT—SCHEDULED
ITEMS
A database is required of all those items of
cultural importance already identified which a country designates
as being its international patrimony and as such not to be exported.
The ALR is in negotiation with the London art trade to compile
a database of items of Chinese art which have been offered for
sale in China which are not for export. These are shown clearly
in Chinese catalogues with a star and this would make them relatively
easy to place on the database. In another example, the Carabinieri
in Florence has notified 159 works of art which belonged to a
noble collection which were illegally exported for sale in the
1980s. This principle should then be extended to all other items
which would be illegal to export from other countries.
HOLOCAUST ERA
LOOTING RECOMMENDATION
25. The current problems in relation to
the Holocaust pose very significant issues for the art trade who
many find themselves holding looted items which should be restituted
on moral grounds. At the time they purchased these, the lack of
a central database might well have made it impossible to research
the provenance and discover that there was a claimant. In other
cases, individuals buying from the art trade may wish to return
items on the grounds that proper research was not undertaken or
advice given. Items may become tainted unfairly where the provenance
is not complete, unless the claimants position can be resolved
or research undertaken which proves that there are no claimants
and that the item was not looted during the Holocaust.
26. The legal position is less clear than
the moral one and may be in favour of the current holder rather
than the original owner from whom the item was looted. However,
the legal arguments are less important than the effect of buyers
not wishing to purchase an item once its Holocaust origins become
known and therefore the value of the picture drops dramatically
or may even become unsellable on the open art market.
27. The insurance industry may well become
concerned if there is an increase in fraudulent claims on items
whose value has been reduced because of these problems.
28. For private individuals and the art
trade this poses a greater financial problem than for museums,
who are not usually interested in selling items and who may be
able to return the picture (if de-accession allows) to the claimants
for them to sell if appropriate. The Committee will be well aware
of the legal costs, urgency and lack of progress on many cases.
29. We believe that this situation is very
similar to that which confronted the insurance industry in relation
to asbestosis. Initially the insurance industry did not believe
that this was a major problem but it did not go away and the public
relations effect became very damaging. There was an uncoordinated
legal defence by various insurers in the face of a multitude of
claims from individuals, many of them old and dying who were ill-equipped
to finance law suits and who therefore had to use lawyers on a
contingent basis. This problem was not confined to the US and
UK but developed worldwide.
30. In order to speed up the settlement
process, reduce legal costs and allow companies to estimate their
reserves in an orderly fashion, the insurance industry together
with claimant organisations brought in a respected Dean of a law
school, Wellington, to produce the so-called Wellington Agreement
which acted as a catalyst for faster settlement.
31. We believe that a similar concept should
be examined for the Holocaust issues in the art trade. A possible
part of the solution would be for the art trade to appoint an
individual to negotiate guidelines with the claimants' organisations
which would not be legally binding but which would have the full
moral force of the principle of restitution together with practical
guidelines on the resolution of individual cases. There could
be an arbitration panel set up under alternative dispute resolution
arrangements, and the results of these could be published without
names but in order that the guidelines became well enough known
to allow individuals to negotiate their own cases using such precedents.
32. Some may say that this is too ambitious
an undertaking. From our experience of handling many individual
cases, probably more than any other single organisation, and being
at the natural centre of trying to resolve such disputes, we believe
that this is well worth examining and we would be prepared to
play our role in developing it.
33. DEPARTMENT
OF HERITAGE
We understand that there are some 6,000 licences
for cultural goods which are issued for export every year but
in no cases have any of these been referred to us to check provenance
and we believe that in many cases this should be part of the due
diligence expected of a government department. The same applied
to items accepted in lieu of tax.
34. ITEMS MISSING
FROM GOVERNMENT
COLLECTIONS INCLUDING
THE MOD
We understand that there are a significant number
of items missing from government collections but very few have
been registered with us as missing or stolen. We would recommend
that this be rectified.
The policies and procedures of museums relating
to the acquisition and return of cultural property which has been
illicitly removed.
35. MUSEUMS
Searches by museums of potential acquisitions
or exhibitions of works in their collections have increased by
more than 300 per cent in 1999 as compared to 1998. Among museums
who routinely check are:
Metropolitan Museum of Art;
Art Institute of Chicago;
National Gallery, Washington DC;
Los Angeles County Museum of Art;
Victoria & Albert Museum;
National Maritime Museum; and
36. The ALR is creating a new database devoted
to art whose provenance is not entirely clear. Rather than claimants
having to search many different museum websites, it is proposed
that all of these be added to the ALR new database as per the
letter attached. See Annex F[3]
for the detailed proposal and museum letters.
The operational effect of European legislation
relating to the return of cultural objects unlawfully removed
and prospects for further European legislation.
The advantages, disadvantages, requirements
and consequences of United Kingdom ratification of the 1995 UNIDROIT
Convention on the International Return of Stolen or Illegally
Exported Cultural Objects and the 1970 UNESCO Convention on the
Means of Prohibiting and Preventing the Illicit Import, Export
and Transfer of Ownership of Cultural Property.
37. UNIDROIT
The ALR is involved in negotiating the return
of hundreds of items where the conflict of law, jurisdiction,
statute of limitation etc make the process costly to all concerned.
Items are often stuck in the legal process for up to 10 years.
Criminals take advantage of different laws by an active export
policy. The need for harmonisation in such an international problem
is obvious.
38. Market practice is running in the direction
of UNIDROIT as parties seek to resolve issues pragmatically without
reverting to legal due process, and this implies compromises along
the lines of the UNIDROIT principle of the owner/victim compensating
the good faith purchaser rather than gambling on an expensive
court case.
39. Clearly the ALR has a vested interest
in UNIDROIT which seeks to promote the use of an internationally
recognised centralised database but we do not believe that UNIDROIT
will pose major problems for the UK art trade. Indeed, we believe
that its acceptance would be in everyone's interests.
40. INSURANCE
OF DEFECTIVE
TITLE
We concur with Richard Crewdson's evidence that
the problem for the victim, in having to pay compensation or a
good faith purchaser losing part of his purchase price, are insurable
risks. We believe that if UNIDROIT was adopted, that the insurance
industry would continue its practice where insurers have paid
out on a claim and have subrogation rights to the item, that they
would consult with the original policy holder as to whether the
individual wished to purchase the item from the insurer following
recovery, taking into account compensation which the insurer may
have had to pay.
Some insurers are already prepared to write
policies in which the victim receives the item after recovery
provided that the amount of the claim is repaid, without charging
interest or taking into account increases in value.
April 2000
3 Not printed. Back
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