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30 May 2017

Protecting artworks on loan to the US from foreign states - new US law attracts mixed response

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​The FSIA (Foreign Sovereign Immunities Act) contains a number of exceptions to the general rule that foreign states and institutions owned by foreign states cannot be sued in the US. One of the exceptions – known as the “expropriation exception” – provides that a foreign state will not enjoy immunity from suit in the US courts in respect of claims which relate to rights in property which has been taken in violation of international law where the property is present in the US in connection with a “commercial activity” being carried on in the US by the foreign state.

On 16 December 2016, another piece of legislation of importance to the art world was introduced in the US - the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act (the “Clarification Act”), which amends the FSIA.

The need for the Clarification Act arose from a US ruling in 2007 that the heirs of artist Kazmir Malevich - considered the pioneer of geometric abstract art - were entitled to sue the City of Amsterdam to recover 14 artworks. The painter had taken the artworks to Berlin in the 1920s and left them behind, fearing they might be destroyed by officials in the then Soviet Union. Amsterdam's Stedelijk Museum reportedly acquired the paintings from an acquaintance of the artist in the 1950s. When the museum loaned the paintings to institutions in the US, the heirs commenced proceedings against the City of Amsterdam, relying on the “expropriation exception” as the source of their entitlement to sue. The court concluded that by loaning the works to museums in the US Amsterdam had engaged in a “commercial activity” for the purposes of the FSIA, even if the loans were purely educational and cultural in purpose.

Following this ruling institutions were concerned that, if they loaned works to US institutions, they would run the risk of becoming embroiled in lengthy and costly ownership disputes in the US courts. The passing of the Clarification Act means that, if a work is imported into the US from any foreign state pursuant to an agreement that provides for the temporary exhibition or display of the work between a foreign state that is the owner of the work and either the US government or a US cultural or educational institution (provided the President or his designee has determined the work to be of cultural significance and that its exhibition is in the national interest) and notice of the exhibition has been published, any activity in the US of the foreign state relating to the temporary exhibition will not be considered a “commercial activity” for the purposes of the “expropriation exception”.

This means that a foreign state lending a work to a US institution cannot be sued in the US courts unless the claim which is asserted against it falls within one of two categories of claim exempted under the Clarification Act, being claims relating to Nazi-looted objects taken between 1933 and 1945 and claims relating to objects allegedly taken after 1900 as part of a systematic campaign of confiscation of property from a “targeted and vulnerable group”. There has been criticism that the exemptions are not wide enough, and would not, for example, cover works seized during the Bolshevik regime.

Institutions have expressed the hope that the amendment, which was supported by the American Association of Art Museum Directors, will encourage more loans by foreign states to US institutions.

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