Updates From Across the Pond: New Developments In Two Major Stories From the European Art Market
01/08/2020As the new year begins, we write with some brief updates on two significant stories we’ve been following for some time. One involves the ongoing issues arising out of the discovery of several forged Old Master works on the European art market. The other involves a bitter, globe-spanning feud between a mega-collector and his onetime dealer. And both of these complex situations will continue to reverberate throughout the art ecosystem.
Monaco Court Ruling Marks the End (For Now) of One Battle in the Ongoing Rybolovlev-Bouvier War
We’ve written on multiple occasions (see here, here, here, here and here) about the rancorous dispute between Dmitry Rybolovlev, a Russian billionaire, and his onetime art dealer, Swiss businessman Yves Bouvier. In short , Bouvier helped Rybolovlev build a massive art collection over the course of several years. (Among the works Rybolovlev acquired was Salvator Mundi, a work that was attributed to Leonardo da Vinci around 2011 and which Rybolovlev bought in 2013 and later resold at a 2017 Christie’s auction for an eye-popping $450 million, setting a record for the most expensive artwork ever sold.)
The Bouvier-Rybolovlev relationship soured around 2014 when Rybolovlev allegedly learned that Bouvier had charged huge markups on some of Rybolovlev’s acquisitions. Rybolovlev says he was defrauded—he believed Bouvier was acting as his agent, negotiating the best price on artworks on Rybolovlev’s behalf and taking a flat fee in exchange for his services. Bouvier says he was an independent seller who was free to buy and resell art for as much as the market would bear, and that Rybolovlev, a sophisticated businessman, was capable of protecting himself. The feud has resulted in legal proceedings in no less than five countries, from Monaco to Singapore. Other art world players have become entangled in the fray as well; most notably, Rybolovlev has sued auction house Sotheby’s, alleging that it aided Bouvier’s machinations.
The latest developments come from Monaco, where two different but related processes are unfolding. In 2015, Rybolovlev’s accusations led to criminal charges against Bouvier of fraud and money laundering. But in 2017, a scandal broke in Monaco when the press obtained documents suggesting that Rybolovlev’s representatives had sought to improperly influence officials in Monaco in connection with the Bouvier investigation. On the heels of that scandal, an investigation formally commenced against Rybolovlev in connection with his alleged influence-peddling. Most recently, at the end of 2018, the charges against Bouvier were dropped entirely, with a judge concluding that the investigation had been so tainted that the case should not proceed.
Rybolovlev’s counsel reportedly intends to appeal, and also took care to remind the press that this does not represent a ruling on the criminal corruption-related charges still pending in Monaco against the Russian collector. It’s unclear, however, whether and to what extent this development might have at least some impact on the other legal proceedings still underway between the two in other jurisdictions. At least one report indicates that the Monaco decision “forbids anyone to use the acts which have been declared null and void in this proceeding”; it remains to be seen how the other courts will interpret and defer to that directive in adjudicating the disputes before them. We’ll continue to monitor those related proceedings, which raise important questions about the relationship between dealers and collectors, as well as what parties are obligated to disclose during art transactions. We’ll also continue to follow Rybolovlev’s related suit against Sotheby’s, still pending in federal court in New York, where discovery is now underway.
London Court Orders Consignor To Repay Sotheby’s Proceeds of Sale of “Hals”
The tail end of 2019 also brought a ruling from a London court presiding over a case involving an allegedly fake Frans Hals painting. We’ve written on several occasions (see here, here, here, and here) regarding a rash of apparently forged Old Master paintings that have surfaced on the European market in recent years. This particular work had been sold through Sotheby’s in a seven-figure private sale in 2011—but shortly after that, suspicion fell on another work (a purported “Cranach”) with the same provenance as the Hals. Because the two works shared a common source, Sotheby’s arranged to have the Hals tested by prominent forensic expert Jamie Martin. (Martin has served as an expert in, among other things, the Knoedler forgery scandal, and his lab has since been acquired outright by Sotheby’s.) When Martin determined that the Hals contained modern pigments and was thus a forgery, Sotheby’s took the work back from the 2011 buyer, and gave that buyer a full refund. Sotheby’s then turned to the consignors—London art dealer Marc Weiss, and his client, David Kowitz, a hedge fund founder and art collector, acting through his entity Fairlight Ventures—to recover the $10.75 million that they had received as proceeds from the 2011 sale.
But Weiss and Fairlight maintained that the Hals was genuine, and refused to return the money. So Sotheby’s sued. Weiss eventually reached a settlement with Sotheby’s on the eve of trial, and the case proceeded only against Fairlight. And in December, Sotheby’s prevailed. It’s important to note that, as is true in many cases involving alleged art forgeries, the judge did not actually officially rule on whether the work is a real or fake Hals. Rather, the decision hinged on the agreement between the consignors and Sotheby’s, and the circumstances under which that agreement permits a sale to be rescinded.
The case is a somber reminder that forgeries of both old and new works continue to plague the global art market, and that even prominent dealers and auction houses can be fooled by well-executed fakes, causing massive legal headaches when problems later surface. Parties engaging in art transactions need to understand how a sale contract accounts for and allocates that risk— and ideally, how they can mitigate the risk of dealing in forgeries in the first place.
After we published this blog post, Mr. Bouvier’s U.S. counsel provided us with a full translated copy of the December decision from Monaco. We also had the opportunity to review a letter submitted on behalf of Bouvier to the Southern District of New York, providing that court with information about the Monaco ruling. The letter emphasizes the Monaco court’s findings that the inquiries there had been “irreparably compromised” and the investigations “seriously prejudiced” by the corrupt activities that occurred on behalf of the Rybolovlev-linked parties. And the letter informs the Southern District of the Monégasque judge’s instructions “that all documents gathered or generated after the initial complaint by Accent Delight and Xitrans be cancelled, declared null and void, and removed from the case file,” including the order initiating the investigation as well as all documents gathered or generated after the initial complaint; the Monaco court, reasoning that all such documents were wrongfully acquired or generated, has prohibited anyone from using those documents in any manner. The precise impact remains to be seen, but the Monaco ruling may impact the Southern District proceedings to the extent that the Rybolovlev-related parties have relied or were planning to rely on any of those documents in the New York litigation. We’ll continue to follow these matters as they evolve.
Art Law Blog