Art disputes: why choose arbitration

Disputes in the art market rarely receive publicity in the world of international commercial arbitration, despite the art market being one of the industry sectors in which disputes could in most cases be resolved more efficiently through arbitration. Arbitration and art are perfect companions for a number of reasons, including:

1. The global art market

According to the Art Basel and UBS Global Art Market Report 2023, worldwide art and antiques sales increased 3% year-on-year to an estimated US$67.8bn (£54.8bn) in 2022. The US art market leads the way with 45% of sales by value, followed by the UK with 18% and China with 17%. Additionally, the Art Market Report suggests that UK art and antiques dealers make 60% of their sales to overseas buyers, with the remaining 40% being domestic sales.

2. The need for confidentiality

Confidentiality is highly prized in art transactions between private buyers and sellers. Even art sales and purchases at public auction are often conducted via intermediaries to preserve the anonymity of the ultimate buyer and seller. Artworks that become embroiled in court proceedings and public controversy are often considered ‘burnt’ by the art market, i.e. they become either unsellable or are devalued because of the adverse publicity.

3. The technical and complex nature of disputes

Art disputes can be highly technical and complex. Questions can arise about a wide range of issues, including title, provenance, authenticity, or historical restitution claims in relation to an artwork. In addition to more conventional contract disputes, there may also be issues around copyright, and their subject matter can span pretty much anything created in thousands of years of art history, from prehistoric artefacts to NFTs. Art law is a complex web of international conventions, national laws, soft law and trade customs, and disputes often entail laws across multiple jurisdictions.

The traditional advantages of arbitration, such as the confidentiality of the proceedings, flexibility of the process, the ability to choose a seat in any convenient jurisdiction, the ability to select the arbitrator based on their experience with art law and the art market, and the wide enforceability of arbitral awards under the New York Convention, are all intrinsically relevant and can be beneficial in such disputes.

Surprisingly, given this landscape, there are relatively few arbitral bodies which specialise in the resolution of art disputes, such as Art Resolve, the Court of Arbitration for Art, and the Camera Arbitrale di Venezia, with the latter two institutions having published their own dedicated arbitration rules and model clauses. There is of course no reason in principle why other arbitration institutions should not also be able to resolve art disputes, as indeed, can ad hoc arbitration proceedings.

Some of the obstacles to resolving art disputes through arbitration are common to the arbitration process generally, such as time and cost. However, some are more specific to the nature of art market participants: for example, even the most prolific private art collector will generally be categorised as a consumer under the Consumer Rights Act 2015 (CRA 2015).

The issue of consumer rights and arbitration has more recently become relevant in the context of NFTs. Over recent years, NFTs have become a prominent part of the art industry. The Court of Appeal decision in Soleymani v Nifty Gateway LLC saw the Court having to strike a balance between consumer protection and arbitration law in the context of the global market for NFTs. In this case, the claimant, Mr Soleymani, had acquired an NFT associated with an artwork in an online auction held on Nifty Gateway’s crypto trading platform. The agreement between Mr Soleymani and Nifty Gateway was governed by New York law and contained an arbitration clause. When Nifty Gateway alleged non-payment of the amount of the winning bid by Mr Soleymani, it referred the dispute to arbitration in New York under the JAMS Rules. Mr Soleymani responded by bringing proceedings in the English High Court, in which he sought inter alia a declaration that the arbitration clause relied upon by Nifty Gateway was unfair and therefore not binding upon him pursuant to CRA 2015, s62. This clause states that a term which has the object or effect of excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, in particular, by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, may be regarded as unfair. Nifty Gateway contested the claim and sought an order pursuant to CPR Part 11 for a declaration that the English courts did not have jurisdiction to hear the claim; and an order staying the English court proceedings under s9 of the Arbitration Act 1996 (AA 1996). Initially Nifty Gateway succeeded on both points but, on appeal, the Court of Appeal lifted the stay of proceedings and ordered a trial on the question of the validity of the arbitration agreement under AA 1996, s9(4). The Court of Appeal effectively found that, in cases where a UK consumer seeks to rely on domestic law consumer rights, the English courts are better placed than a foreign arbitrator to determine the validity of the arbitration agreement.

It remains to be seen whether arbitration will eventually become more widely accepted to resolve international art market disputes involving consumers. However, outside of the confines of consumer disputes, claimants and respondents will already be well advised to consider submitting their art market disputes to resolution by arbitration.

If you have questions about an art dispute, please contact Gregor Kleinknecht.