art law blog

Art law blog

London art law firm Crefovi is delighted to bring you this art law blog, in order to provide you with forward-thinking and insightful information on top business and legal issues in the art world.

This art law blog provides regular news and updates, and features summaries of recent news reports, on legal issues facing the global art and culture community, in particular in the United Kingdom and France. This art law blog also provides timely updates and commentary on legal issues in the museum and visual arts sectors. This blog is curated by the arts’ lawyers of our law firm, who specialise in advising our ‟Art, artefacts & cultural” clients in London, Paris and internationally on all their legal issues.

Crefovi has been practising art law since 2003, in London, Paris and internationally. Crefovi advises a wide range of clients, from young artists in search of financing, gallery representation and exhibition spaces, to mature art players such as auction houses, established art collectors, galleries and museums, in need of legal advice to negotiate and finalise licensing or sales agreements and/or to enforce their intellectual property rights. Crefovi writes and curates this art law blog to guide its clients through the complexities of art law.

Crefovi’s international clients are mainly involved in contemporary art and antics, either as collectors, art galleries, museums or art foundations. Their legal needs, met by London art law firm Crefovi, range from tax issues raised by corporations’ investments in art works, to the execution of wills with a large proportion of art works to be distributed to heirs.

Crefovi’s art lawyers regularly attend, and speak at, important art events such as the TEFAF, Art Basel, Frieze, FIAC & Miami Basel art fairs.

Crefovi is also an active and dedicated collector of contemporary art, maintaining and managing a corporate collection in England and France.

Moreover, Crefovi has industry teams, built by experienced lawyers with a wide range of practice and geographic backgrounds. These industry teams apply their extensive sector expertise to best serve clients’ business needs. One of the industry teams is the ‟Art law” department, which curates this art law blog below, for you.

Crefovi regularly updates its social media channels, such as Linkedin, Twitter, Instagram, YouTube and Facebook. Check our latest news there!

Digital Services Act: the revolution will be televised

Crefovi : 20/03/2024 4:09 pm : Antitrust & competition, Art law, Articles, Banking & finance, Capital markets, Consumer goods & retail, Emerging companies, Entertainment & media, Fashion law, Gaming, Hospitality, Information technology - hardware, software & services, Internet & digital media, Law of luxury goods, Life sciences, Litigation & dispute resolution, Music law, News, Outsourcing, Private equity & private equity finance, Product liability, Real estate, Sports & esports, Technology transactions, Webcasts & Podcasts

The Digital Services Act is upon us and, with its bestie the Digital Markets Act, promises to force powerful changes in the digital ecosystem currently in place in the European Union and even globally. The power is shifting back to the people, with the Digital Services Act, and intermediary service providers better listen to its complaints about unclear and deceptive terms and conditions of service, its takedown notices for illegal content, products and services, as well as its concerns about bullying, breach of free speech, unfair targeting of minors, minorities, etc. Otherwise, the European Commission and national Digital Services Coordinators in the 27 European Union member-states, will take swift action to force online platforms, other types of intermediary service providers and search engines, to change their way and comply, with fines which can go up to 6 percent of worldwide annual turnover. Be warned, the Google, Apple, Microsoft and X/Twitter of this world: the revolution will be, is, televised.

1. What is the Digital Services Act?

Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market for Digital Services and amending Directive 2000/31/EC (Digital Services Act) (‟DSA”) is a regulation from the European Union (‟EU”) that regulates online intermediaries and platforms such as marketplaces, social networks, content-sharing platforms, app stores and online travel and accommodation platforms.

The DSA is part of a ‟package” of new EU rules focused on achieving Europe’s digital targets for 2030 and the digital ecosystem ‟Shaping Europe’s digital future”, along with the Digital Markets Act, the passed AI Act, as well as the Data Act and Data Governance Act, which form a single set of rules that apply across the EU, to implement the two following goals:

  • create a safer digital space in which the fundamental rights of all users of digital services are protected by setting clear and proportionate rules, and

  • establish a level playing field to foster innovation, growth and competitiveness, both in the European single market and globally.

More specifically, the DSA creates an EU-wide uniform framework dealing with four issues as follows:

  • the handling of illegal or potentially harmful online content;

  • the liability of online intermediaries for third-party content;

  • the protection of users’ fundamental rights online, and

  • the bridging of information asymmetries between online intermediaries and their users.

2. Who is affected and/or impacted by the Digital Services Act? Providers of online intermediary services

2.1. Intermediary services

The DSA applies to all intermediary services offered to EU users (natural persons and legal entities), irrespective of where the providers of these intermediary services have their place of establishment.

‟Intermediary services” are defined as:

  • a ‟mere conduit” service, consisting of the transmission in a communication network of information provided by a recipient of the service, or the provision of access to a communication network (for example, ‟mere conduit” services include generic categories of services, such as internet exchange points, wireless access points, virtual private networks, DNS services and resolvers, top-level domain name registries, registrars, certificate authorities that issue digital certificates, voice over IP and other interpersonal communication services);

  • a ‟caching” service, consisting of the transmission in a communication network of information provided by a recipient of the service, involving the automatic, intermediate and temporary storage of that information, performed for the sole purpose of making the information’s onward transmission to other recipients more efficient, upon their request (for example, ‟caching” services include the sole provision of content delivery networks, reverse proxies or content adaptation proxies), and

  • a ‟hosting” service, consisting of the storage of information provided by, and at the request of, a recipient of the service (for example, cloud computing, web hosting, paid referencing services or services enabling sharing information and content online, including file storage and sharing).

Intermediary services may be provided in isolation, as part of another type of intermediary service, or simultaneously with other intermediary services. Whether a specific service constitutes a ‟mere conduit”, ‟caching” or ‟hosting” service depends solely on its technical functionalities, which might evolve in time, and should be assessed on a case-by-case basis.

2.2. Providers of intermediary services

Therefore, all companies providing online intermediary services on the EU single market, whether established in the EU or not, must comply with the DSA. These include:

  • intermediary service providers offering network infrastructure (internet access providers, caching operators);

  • hosting service providers;

  • online platforms (including social media platforms, social networks, app stores, online travel and accommodation websites, content-sharing websites, collaborative economy platforms and marketplaces), and

  • search engines.

In the DSA, companies are subject to obligations which are proportionate to their size, role, impact and audiences in the online ecosystem, in particular:

  • micro-companies and small businesses (with less than 50 employees and annual sales of less than 10 million Euros) are exempt from some of the DSA’s obligations, and

2.3. Very Large Online Platforms (VLOPs) and Very Large Online Search Engines (VLOSEs)

The European Commission (the ‟Commission”) has begun to designate VLOPs and VLOSEs based on user numbers provided by platforms and search engines, which, regardless of size (except micro and small enterprises), they were required to publish by 17 February 2023. Platforms and search engines will need to update these figures at least every six months.

Once the Commission designates a platform as a VLOP or search engine as a VLOSE, the designated online service has four months to comply with the DSA. The designation triggers specific rules that tackle the particular risks such large services pose to Europeans and society when it comes to illegal content, and their impact on fundamental rights, public security and wellbeing. For example, the VLOP or VLOSE needs to:

  • establish a point of contact for authorities and users;

  • report criminal offences;

  • have user-friendly terms and conditions, and

  • be transparent as regards advertising, recommender systems or content moderation.

The Commission will revoke its decision if the platform or search engine does not reach the threshold of 45 million monthly users anymore, during one full year.

So who are those VLOPs and VLOSEs, identified by the Commission as early as April 2023, so far? Some of the most notable are, inter alia:

  • Alibaba (Netherlands) B.V. is a VLOP under the DSA, for the designated service AliExpress;

  • Amazon Services Europe S.à.r.l. is a VLOP under the DSA, for the designated service Amazon Store;

  • Apple Distribution International Limited is a VLOP under the DSA, for the designated service App Store;

  • Aylo Freesites Ltd. is a VLOP under the DSA, for the designated service Pornhub;

  • B.V. is a VLOP under the DSA, for the designated service;

  • Google Ireland Ltd. is a VLOSE under the DSA, for the designated service Google Search, and a VLOP under the DSA, for the designated services Google Play, Google Maps, Google Shopping and YouTube;

  • LinkedIn Ireland Unlimited Company is a VLOP under the DSA, for the designated service LinkedIn;

  • Meta Platforms Ireland Limited (MPIL) is a VLOP under the DSA, for the designated services Facebook and Instagram;

  • Microsoft Ireland Operations Limited is a VLOSE under the DSA, for the designated service Bing;

  • Pinterest Europe Ltd. is a VLOP under the DSA, for the designated service Pinterest;

  • Snap B.V. is a VLOP under the DSA, for the designated service Snapchat;

  • TikTok Technology Limited is a VLOP under the DSA, for the designated service TikTok;

  • Twitter International Unlimited Company is a VLOP under the DSA, for the designated service X;

  • Wikimedia Foundation Inc 3*** is a VLOP under the DSA, for the designated service Wikipedia, and

  • Zalanda SE is a VLOP under the DSA, for the designated service Zalando.

On 18 December 2023, the Commission opened formal proceedings to assess whether X may have breached the DSA in areas linked to risk management, content moderation, dark patterns, advertising transparency and data access for researchers. This decision to open proceedings was motivated by the analysis of the risk assessment report submitted by X in September 2023, X’s transparency report published on 3 November, and X’s replies to a formal request for information, which, among others, concerned the dissemination of illegal content in the context of Hamas’ terrorist attacks against Israel.

3. What are the obligations that providers of online intermediary services have, under the DSA?

The DSA establishes a new liability framework for companies in the digital sector, meaning they are now subject to a multitude of obligations.

3.1. Key obligations for all intermediary service providers

Here is a summary of the key obligations imposed on different levels of digital intermediary service providers by the DSA:

  • Governance: all providers at all levels must establish two single points of contact, one for direct communication with supervisory authorities, and the other for the recipients of the services. Providers not established in the EU, but offering services in the EU, will be required to designate a legal representative in the EU. Online platforms will need to have an out-of-court alternative dispute resolution mechanism, publish annual reports on content moderation, including the number of orders received from the authorities and the number of notices received from other parties, for removal and disabling of illegal content or content contrary to their terms and conditions, and the effect given to such orders and notices. VLOPs and VLOSEs must perform systematic risk assessments, share data with regulators and appoint a compliance officer;

  • Obligations for VLOPs and VLOSEs to prevent abuse of their systems, by taking risk-based action, including oversight through independent audits of their risk management measures. Platforms must mitigate against risks such as disinformation or election manipulation, cyber violence against women or harm to minors online. These measures must be carefully balanced against restrictions of freedom of expression and are subject to independent audits;

  • Responsible online marketplaces: online platforms and VLOPs will have to strengthen checks on the information provided by traders and make efforts to prevent illegal content so that consumers can purchase safe products and services;

  • Measures to counter illegal content online, including illegal goods and services: the DSA imposes new mechanisms allowing users to flag illegal content online, and for platforms to cooperate with specialised ‟trusted flaggers” to identify and remove illegal content;

  • New rules to trace sellers on online marketplaces, to help build trust and go after scammers more easily; a new obligation for online marketplaces to randomly check against existing databases whether products or services on their sites are compliant; sustained efforts to enhance the traceability of products through advanced technological solutions;

  • Ban on dark patterns on the interface of online platforms, referring to misleading tricks that manipulate users into choices they do not intend to make; providers must not manipulate users (commonly known as ‟nudging”) into using their service, for example, by making one choice more prominent than the other. Cancelling a subscription to a service should also be as easy as subscribing;

  • Wide-ranging transparency measures for online platforms, including better information on terms and conditions, as well as transparency on the algorithms used for recommending content or products to users; Also enhanced transparency for all advertising on online platforms and influencers’ commercial communications;

  • Bans on targeted advertising on online platforms: targeted advertising to minors or targeted advertising based on special categories of personal data, such as ethnicity, political views or sexual orientation, is prohibited for online platforms and VLOPs;

  • Protection of minors on any platform in the EU: for services aimed at minors, the providers of intermediary services must provide an explanation on the conditions and restrictions of use in a way that is understandable to minors;

  • Recommender systems: VLOPs will be required to offer users a system for recommending content not based on profiling. Transparency requirements for the parameters of recommender systems will be included;

  • ‟Notice and action” procedure: providers of intermediary services must explicitly describe, in their terms and conditions, any restrictions that they may impose on the use of their services, such as the content moderation policies, and to act responsibly in applying and enforcing those restrictions. Users will be empowered to give notice of illegal online content. Online platforms and VLOPs will have to be reactive through a clearer ‟notice and action” procedure. Victims of cyber crime will see the content that they report removed momentarily;

  • Protection of fundamental rights: stronger safeguards must be put in place to ensure user notices are processed in a non-arbitrary and non-discriminatory way, and safeguards must protect fundamental rights, such as data protection and freedom of expression;

  • Effective safeguards for users, including the possibility to challenge platforms’ content moderation decisions based on the obligatory information platforms must now provide to users when their content gets removed or restricted; users have new rights, including a right to complain to the platform, seek out-of-court settlements, complain to their national authority in their own language, or seek compensation for breaches of the rules. Now, representative organisations are able to defend user rights for large scale breaches of the law;

  • Accountability: EU member-states and the Commission will be able to access the algorithms of VLOPs and VLOSEs;

  • Allow access to data to researchers of key platforms in order to scrutinise how platforms work and how online risks evolve;

  • A new crisis response mechanism in cases a serious threat for public health and security crises, such as a pandemic or a war;

  • A unique oversight structure: the Commission is the primary regulator of VLOPs and VLOSEs, while other intermediary service providers are under the supervision of member-states where they are established. Indeed, national Digital Service Coordinators (‟DSCs”), designed by each one of the 27 EU member-states, are responsible for supervising, enforcing and monitoring the DSA in that country. In France, the ‟Autorité de régulation de la communication audiovisuelle et numérique” (‟Arcom”) is the DSC. The Commission has enforcement powers similar to those it has under antitrust proceedings. An EU-wide cooperation mechanism is currently being established between national regulators, the DSCs, and the Commission.

While the DSA does not define what illegal content online is, it sets out EU-wide rules that cover detection, flagging and removal of illegal content, as well as a new risk assessment framework for VLOPs and VLOSEs on how illegal content spreads on their services.

What constitutes illegal content, though, is defined in other laws, either at EU level or at national level – for example, terrorist content or child sexual abuse material or illegal hate speech is defined at EU level. Where a content is illegal only in a given EU member-state, as a general rule it should only be removed in the territory where it is illegal.

The DSA stipulates that breaches must be subject to proportionate and dissuasive penalties, determined by each member-state. Intermediary service providers can be fined up to 6 percent of annual worldwide turnover for breaching the DSA and up to 1 percent of worldwide turnover for providing incorrect or misleading information.

3.2. Key obligations specific to VLOPs and VLOSEs

Once they are designated as such, VLOPs and VLOSEs must follow the rules that focus only on VLOPs and VLOSEs due to the potential impact they can have on society. This means that they must identify, analyse and assess systemic risks that are linked to their services. They should look, in particular, to risks related to:

  • illegal content;

  • fundamental rights, such as freedom of expression, media freedom and pluralism, discrimination, consumer protection and children’s rights;

  • public security and electoral processes, and

  • gender-based violence, public health, protection of minors and mental and physical wellbeing.

Once the risks are identified and reported to the Commission for oversight, VLOPs and VLOSEs are obliged to put measures in place that mitigate these risks. This could mean adapting the design or functioning of their services or changing their recommender systems. This could also consist of reinforcing the platform internally with more resources to better identify systemic risks.

Those designated as VLOPs and VLOSEs also have to:

  • establish an internal compliance function that ensures that the risks identified are mitigated;

  • be audited by an independent auditor at least once a year and adopt measures that respond to the auditors’ recommendations;

  • share their data with the Commission and national authorities so that they can monitor and assess compliance with the DSA;

  • allow vetted researchers to access platform data when the research contributes to the detection, identification and understanding of systemic risks in the EU;

  • provide an option in their recommender systems that is not based on user profiling, and

  • have a publicly available repository of advertisements.

To conclude, the DSA is a first-of-a-kind regulatory toolbox globally, and sets an international benchmark or a regulatory approach to online intermediaries. Designed as a single, uniform set of rules for the EU, these rules will give users new protections and businesses legal certainty across the whole single market. Moreover, the DSA will complement the distance selling regulations and EU consumer contract legislation well, empowering consumers and businesses in doing more business and deals online. While we are super glad to be Europeans and therefore to benefit from these wonderful protections, we highly recommend that providers of intermediary services take the DSA very seriously, and work their socks off to become immediately compliant with it, even when online platforms, such as Easyjet, have not yet been designated as VLOPs by the Commission.
Crefovi’s live webinar: Digital Services Act – the revolution will be televised – 29 March 2024

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    Cultural assets restitution: why the British Museum & ‟Musée du Quai Branly”, amongst others, must act now

    Crefovi : 22/06/2023 12:24 pm : Art law, Articles, Entertainment & media, Intellectual property & IP litigation, Litigation & dispute resolution, Webcasts & Podcasts

    1. Cultural assets restitution: legal framework

    1.1. International law: UNESCO conventions and UNIDROIT convention

    Various UNESCO conventions, such as the convention for the protection of cultural property in the event of armed conflict dated 14 May 1954 (the ‟1954 Hague convention”), and the convention on the means of prohibiting and preventing the illicit import, export and transfer of ownership of cultural property dated 14 November 1970, were adopted to protect cultural property, such as monuments of architecture, art or history, archaeological sites, works of art, manuscripts, books and other objects of artistic, historical or archaeological interest, as well as scientific collections of any kind regardless of their origin or ownership.

    While France ratified both UNESCO conventions, in 1957 and 1997 respectively, the UK belatedly ratified the 1954 Hague convention in 2017 and ‟accepted” – but did not ratify – the 1970 UNESCO convention in 2002.

    The commitments made by the state parties to the UNESCO conventions serve to preserve cultural heritage through the implementation of the following measures, inter alia:

    • declaring the import, export or transfer of ownership of cultural property effected contrary to the provisions adopted under the 1970 convention by the states parties thereto, illicit;

    • declaring the export and transfer of ownership of cultural property under compulsion arising directly or indirectly from the occupation of a country by a foreign power, illicit;

    • adopting preventive measures such as preparing inventories, planning emergency measures to protect property against the risk of fire or the collapse of buildings, and preparing the removal of cultural property to places of safety;

    • developing initiatives which guarantee respect for cultural property situated on their own territory or on the territory of other states parties. This involves refraining from using such property in any manner that might expose it to destruction or deterioration in the event of armed conflict, and by refraining from all acts of hostility directed against it;

    • registering cultural property of very high importance on the International Register of Cultural Property under Special Protection in order to obtain special protection for such property;

    • marking certain important buildings and monuments with a distinctive emblem of the conventions;

    • providing a place for eventual refuge to shelter movable cultural property;

    • establishing special units within the military forces responsible for the protection of cultural property;

    • setting sanctions for breaches of the conventions, and,

    • promoting the conventions among the general public and through target groups such as cultural heritage professionals and military or law-enforcement agencies.

    These UNESCO conventions have a limited scope, with respect to artefacts taken and stolen before their entry into force.

    Indeed, many objects, now in museum collections, were acquired from their original owners via violence or deceit, or in conditions linked to the asymmetry of the ‟colonial context”, even before the Hague conventions of 1899 and 1907 entered into force, when the practices of looting and bringing back trophies were still admissible. The collection of foreign objects, by scientific missions financed by colonising states, during the exploration and conquest of new territories, was another way to unilaterally obtain foreign cultural assets, widely used, in parallel to, and jointly with, military operations orchestrated by these same governments.

    The acquisition context is therefore going to be determining in the treatment of restitution requests, because those above-mentioned acts are not legally qualified as crimes, pursuant to international law, contrary to nazi spoliations (against which the Inter-allied declaration against acts of dispossession committed in territories under enemy occupation or control dated 5 January 1943, a specific legal act, was adopted) and contrary to pillages and destructions in wartime posterior to the above-mentioned 1954 Hague convention.

    Secondly, many objects from public collections were gifted or bequeathed to museums, by the heirs of colons, military men involved in the conquest operations, colonies’ administrators or missionaries, sometimes several decades after the death of their ancestors. The terms of the initial acquisition of these objects – which spread over almost a century and a half – may be very diverse: spoils of war, of course, thefts, gifts more or less freely consented, but also barter, purchases, fair or not, or even direct orders made to local artisans and artists. Most of the time, the museum that is the beneficiary of those gifts, already ancient, has limited information on the terms of the first acquisition of these objects, and even sometimes on their exact provenance. These objects do not fall into the scope of the above-mentioned two UNESCO conventions.

    Also, those UNESCO conventions do not have any effect in relation to cultural assets which are held in private hands, as confirmed by the legal case relating to a restitution request, made for the Nok statues, by Nigeria: ‟The provisions of the 1970 UNESCO convention are not directly applicable in the internal public order of state parties, therefore M.X. is right in arguing that this convention only provides for obligations applying to state parties, and does not create any direct obligation against private citizens of these state parties” (Court of Appeal of Paris, 5 April 2004, Federal republic of Nigeria v/ M.X., case 2002/09897, confirmed by the Court of cassation civ. 1, 20 September 2006, nº04-115599).

    Finally, these two UNESCO conventions do not provide for any restitution mechanisms, in relation to any stolen or looted cultural property, thereby leaving a legal void, in international law, with respect to art restitutions.

    However, the UNIDROIT convention on stolen or illegally exported cultural objects, dated 24 June 1995 (the ‟UNIDROIT convention”), fills this gap and is therefore complementary to these UNESCO conventions. It is an important step of establishing a common mechanism, and minimal legal rules, for the restitution and return of cultural objects between contracting states, with the objective of improving the preservation and protection of the cultural heritage in the interest of all.

    Indeed, the UNIDROIT convention applies to claims of an international character for (a) the restitution of stolen cultural objects and (b) the return of cultural objects removed from the territory of a contracting state contrary to its law regulating the export of cultural objects for the purpose of protecting its cultural heritage (‟Illegally exported cultural objects”).

    But the scope of the UNIDROIT convention is limited in practice, because countries such as France and the UK, where a considerable portion of Illegally exported cultural assets and stolen cultural objects, taken during the ‟colonisation period”, is stored in national public collections, have either not ratified, or not even signed (for the UK), such UNIDROIT convention.

    Also, some time restrictions to claims for restitution of stolen, or illegally exported, cultural objects are set out in the UNIDROIT convention. Such claims may be brought in three years from the time the claimant or the requesting state knew the location of the cultural object, and the identity of the possessor, and in fifty years since the time of the theft, the export or from the date on which the object should have been returned (articles 3.3 and 5.5). However, there are exceptions to this rule for stolen objects. Cultural objects that form an integral part of an identified monument or archaeological site, or which belong to a public collection, are not subject to time limitation other than a period of three years from the time when the claimant knew the location of the cultural object and the identity of its possessor (article 3.4). In addition, a contracting state may declare that a claim warrants an extended time limit of seventy-five years or longer, if so stated in its national law (article 3.5).

    Besides, the UNIDROIT convention is not a retroactive treaty and, as such, it only applies to cultural property stolen, or cultural objects illegally exported, after the UNIDROIT convention entered into force (article 10). However, the UNIDROIT convention ‟does not in any way legitimise any illegal transaction of whatever which has taken place before the entry into force of this convention” and does not ‟limit any right of a state or other person to make a claim under remedies available outside the framework” of the convention (article 10.3).

    1.2. European Union legislation: Directive 2014/60/EU of 15 May 2014 on the return of cultural objects unlawfully removed from the territory of a member-state

    This issue of writing and adopting common rules, between states, to guarantee the restitution of cultural property, has first emerged in Europe, and more precisely within member-states of the European Union (‟EU”).

    EU member-states benefit from economic, cultural and legal integration tools, which are highly developed on certain aspects, and in particular on restitution of cultural assets.

    But the implementation, and benefit, from these automatic restitution mechanisms, for cultural assets which were stolen or illicitly exported, are limited to EU member-states only, of course.

    Directive 2014/60/EU of 15 May 2014 on the return of cultural objects unlawfully removed from the territory of a member-state (the ‟Directive”) provides for this EU-wide right of restitution of cultural assets.

    Since Brexit, the UK is no longer a member-state of the EU, and therefore the above-mentioned Directive no longer applies on its territory.

    However, the Directive applies in France, one of the remaining twenty-seven EU member-states, via its transposition into French national statutory laws.

    The above-mentioned Directive is a very ‟hands-on” framework, on how cultural assets should be returned, within which timeframe, and under which conditions.

    However, when the request for restitution comes from a third-party state (i.e. not an EU member-state), the protection of the buyer acting in good faith, as well as the principle of territoriality of laws (i.e. the principle pursuant to which the judge will rule only in compliance with the law of the country in which the object is located, at the moment of the restitution claim) usually block any successful outcome to such restitution request.

    So, in case the request for restitution comes from a state outside the EU, the above-mentioned UNESCO 1954 and 1970 conventions apply, but, as already stated, they have limited scope.

    The imbalance between the law applicable in EU member-states, and the principles that the judge uses against third party states located outside Europe, seriously impacts the future of cultural assets’ restitutions to countries located in Africa, Asia, Australasia and the Americas. Such imbalance could be addressed if France and the UK, as well as African, Asian and Australasian countries ratified the above-mentioned UNIDROIT convention. This convention sets out an automatic restitution mechanism, which would apply to its contracting states. It could be the foundation for a common right to restitution, in particular, and potentially, in relation to cultural assets taken during the ‟colonial period”. The ratification of the UNIDROIT convention may therefore be the key to set up an automatic restitution mechanism, not only in the EU, but also outside the EU.

    EU member-states have applied such ambitions by infusing the principles from the UNIDROIT convention within the Directive. Therefore, the extension of such principles to third party states, via the UNIDROIT convention, should be achievable.

    1.3. French rules

    The current French legal framework is set up in such a way that it blocks, and opposes, most restitution requests addressed to French museums, with respect to their museum collections, via its:

    • provisions from the ‟code du patrimoine” (‟CP”), which entered into force in 2004, and

    • provisions from the ‟code général des propriétés des personnes publiques” (‟CGPPP”), which entered into force in 2006.

    The French current legal framework sets out a definition of the public domain furniture which covers all cultural assets – in particular, public collections. Such definition of the French public domain furniture triggers some legal protection backed up by the rules of imprescriptibility and inalienability of the public domain, which blocks all restitution requests.

    Indeed, the statutory principle of inalienability of French public collections, enshrined in article L. 451-5 CP, is opposed to the transfer of ownership of any one of these assets preserved in these collections. This is because all assets belonging to the French public collections are national treasures, pursuant to article L. 111-1 CP.

    In France, the rare restitution cases which took place during the last twenty years were made possible via mechanisms designed to go around the rules relating to the French public domain. Two legal avenues were pursued, as follows:

    • enacting a law creating an exception to the principle of inalienability of French public collections, derogating to the above-mentioned rules applicable to French cultural assets and public domain. For example law nº2002-323 dated 6 March 2002 relating to the authorisation of the restitution by France of the mortal remains of Saartjie (Sarah) Baartman, also known as the ‟Hottentot Venus”, to South Africa, and law nº2010-501 dated 18 May 2010 relating to the authorisation of the restitution by France of the Maori heads to New Zealand, are such laws providing for exceptions to the principle of inalienability on the grounds of the principle of dignity and of the respect due to dead people, and

    • removing a cultural asset, from the scope of the laws relating to the French public domain, because such object does not belong to the museum’s collection. For example, art works stamped ‟Musées Nationaux Récupération” since 1953, which are comprised of 60,000 works pillaged by nazi occupiers and never restituted, were never added to the French public collections, precisely in order to allow their restitution once the owners or right-holders would be identified or recognised. Also, the restitutions of Chinese cultural assets, done in 2015, were possible via the withdrawal, at the request of the French state, of the gift made a few years earlier, by a private collector, to the Guimet museum. Consequently, rebranded as ‟private property”, these objects were able to be restituted, directly by the donor, to the Chinese state. Moreover, the removal of a cultural asset from the French public domain may be due to an irreparable original defect tainting its acquisition. Objects coming from illegal trafficking, entered into French public collections after 1997 (as France ratified the above-mentioned 1970 UNESCO convention on 7 January 1997), because of some negligence in controlling their provenance upon acquisition, or which illicit status was revealed further to discovering new facts, may be the object of a cancellation of their acquisition (by way of sale, gift or donation) via legal proceedings initiated by the defrauded French public entity, in compliance with law nº2016-925 dated 7 July 2016. The object is therefore deemed to have never entered the French public domain, and new article L. 124-1 CP provides that the judge may order its restitution to its original owner.

    1.4. UK rules

    Similarly, the current UK legal framework is set up in such a way that it blocks, and opposes, restitution requests addressed to UK museums, with respect to their museum collections.

    As mentioned above in this article’s introduction, London’s British Museum is fiercely targeted by growing calls for repatriation of cultural assets, with repeated requests from various countries, such as Greece, Ethiopia, Italy and Nigeria, to return items from its vast collection.

    However, the British Museum, and the UK government, have systematically opposed those restitution requests by citing the British Museum Act 1963, a national statute which prohibits the institution from returning works. Indeed, section 5 (Disposal of objects) from the British Museum Act 1963 provides that ‟the trustees of the British Museum may sell, exchange, give away or otherwise dispose of any object vested in them and comprised in their collections if:

    • (a) the object is a duplicate of another such object, or

    • (b) the object appears to the Trustees to have been made not earlier than the year 1850, and substantially consists of printed matter of which a copy made by photography or a process akin to photography is held by the Trustees, or

    • (c) in the opinion of the trustees the object is unfit to be retained in the collections of the Museum and can be disposed of without detriment to the interests of students (provided that where an object has become vested in the trustees by virtue of a gift or bequest the powers conferred by this subsection shall not be exercisable as respects that object in a manner inconsistent with any condition attached to the gift or bequest)”.

    Similar very limited exceptions to the principle that objects from UK public collections cannot be deaccessioned, are set out in the National Heritage Act 1983, which focuses on the collections from the Victoria & Albert Museum, the Science Museum, etc.

    The UK has enacted only two acts so far, which carve additional exceptions to the principle of prohibition of returning works from UK public collections.

    The provisions of the Human Tissue Act 2004 create a new exception to the provisions of the British Museum Act 1963. Indeed, pursuant to the Human Tissue Act 2004, the trustees of the British Museum have the power to deaccession human remains, and return them to their owners and/or the descendants of such deceased persons. Consequently, the British Museum has set up a pragmatic policy, which sets out the circumstances in which the trustees may consider a request for the deaccessioning of human remains. It gives guidance on the procedures to be followed by those seeking to submit a claim for the return of human remains in the British Museum collection that are less than one thousand years old to a community of origin.

    Also, the Holocaust (Return of Cultural Objects) Act 2009 opened up repatriation of artwork looted during the nazi era.

    Aside from those two above-mentioned ‟ad hoc” exemption acts and processes, the UK has stuck to its guns and objected to each one of the restitution requests, made by various third party states or indigenous communities in Africa, Asia and Australasia, a stern ‟no” because it is not allowed under the British Museum Act 1963 and/or under the National Heritage Act 1983, which provide that objects considered part of the country’s national heritage may not be taken out of the UK.

    In particular, with respect to the contested objects from the collection of the British Museum, the UK government and institution have muddled the waters, proposing the development of ‟long-term relationships with the communities” (sic) making the restitution claims, signing ‟memorandums of understanding to develop mutually beneficial projects with artists, scholars and other community members” (sic), suggesting that some new museums be built in the territories of third party states which have made the restitution claims to facilitate permanent displays of objects, while still fiercely opposing any attempt to restitute these objects.

    Many think that such backward attitude towards restitution of stolen or illegally exported cultural assets is no longer acceptable, with Vice’s ‟unfiltered history tour” being a very poignant illustration of how many communities are reeling at not being able to get their cultural objects back from the British Museum.

    Some stakeholders even use guerilla war techniques, to shock members of the public and make a point, in particular with respect to African cultural assets. Mwazulu Diyabanza, a Congolese pan-African political activist, expressed his support of cultural restitution and the removal of African artefacts from European museums obtained during colonisation by barging in the ‟Musée du Quai Branly in June 2020, and subsequently taking a 19th-century funeral post of the Bari people from this French institution.

    2. Cultural assets restitution: actions taken – or to be taken – to allow the return of stolen or illicitly exported objects to their countries of origin

    While French president Emmanuel Macron is widely disliked in France, in particular due to his autocratic and violent ways to impose ‟reforms”, he was surprisingly ‟avant-gardiste” in his approach to cultural assets restitution during his first five-year mandate. Indeed, he commissioned Senegalese academic, Felwine Sarr, and French art historian, Bénédicte Savoy, to research, and then write, an ethics report on the restitution of African cultural assets, which was issued in November 2018 (the ‟Report”).

    The Report, which is excellent, extremely well-researched and well-balanced, on the whole, to find an appropriate, lawful and systematic approach to ethical restitutions of African cultural assets – which are currently predominant in French public collections, that contain around 90,000 sub-Saharan African objects acquired in dubious circumstances by France – is a major step in the right direction.

    In particular, the Report suggests to amend the CP, in order to institutionalise the restitution process and enshrine it in law, in a new section 5 of such CP, relating to the restitution of cultural assets on the grounds of a bilateral cultural cooperation agreement with countries which used to be French colonies, protectorates or managed under French mandate. Such suggested new section 5 of the CP and such proposed bilateral agreement template are both enclosed to the Report, in its Annex 2. The Report does set out that such ‟ad hoc” restitution process would be an exception to the overarching principles of inalienability and imprescriptibility of the public domain, in particular to return African objects to their countries of origin.

    Helpfully, the Report sets out a list of restitution criteria, even providing a suggested timeline of the restitution programme in three stages. During the first stage, from November 2018 to November 2019, the Report suggests to return several African cultural objects, listed in the Report, to African countries such as Benin, Senegal, Nigeria, Ethiopia, Mali and Cameroon. During the second stage, from spring 2019 to November 2022, further works and initiatives should be implemented, relating to inventories, digital sharing, workshops, joint committees between France and each of the African states that wish to recover their cultural assets. During the third stage, from November 2022, the Report suggests that the restitution process, with respect to African cultural assets in particular, should become permanent and allow third party states to continue claiming back their objects.

    For now, the Report has been mostly wishful thinking. However, France has returned the sword of Omar Tall, a 19th century Islamic scholar and ruler, to Senegal in November 2019, and returned twenty six artworks looted from Benin during the colonial era, after its parliament adopted an ad hoc” law allowing such restitutions.

    The UK continues to have a ‟stiff upper lip” attitude, when it comes to restitution requests. However, many think that this is no longer acceptable, and push towards either the enactment of more acts providing for further exceptions to the British Museum Act 1963 and/or a complete overhaul of this act (even if, after such amendments, the trustees of the British Museum would deal with each restitution request on a case-by-case basis). A potential loophole in the UK legal arsenal had even be identified in the Charities Act 2022, with its new sections 15 and 16 allowing for charities, including national museums like the British Museum, to return objects if trustees felt a moral obligation to do so and gained approval from either the UK courts, charity commission or attorney general. However, in November 2022, the UK government deferred the introduction of these legal provisions which would enable national museums to deaccession items from their collections on moral grounds.

    With up to ninety percent of the sub-Saharan Africa’s material cultural legacy outside of the African continent, for example, according to the Report, much more needs being done, in France and the UK, to return cultural assets to their rightful owners and countries of origin, and put things right. Private initiatives, such as a recent USD15 million, four-year initiative by George SorosOpen Society, hope to spur momentum in reparation efforts through legal, financial and technical support to governments, regional bodies, museums, universities and civil societies.
    Crefovi’s live webinar: Cultural assets restitution – why the British Museum must act now – 29 June 2023

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      AI & copyright protection: lawmakers must swiftly adapt to save their creative industries

      Crefovi : 21/03/2023 10:41 am : Antitrust & competition, Art law, Articles, Copyright litigation, Entertainment & media, Gaming, Information technology - hardware, software & services, Intellectual property & IP litigation, Internet & digital media, Life sciences, Litigation & dispute resolution, Music law, Sports & esports, Webcasts & Podcasts

      Artificial intelligence (‟AI”) technologies, which developed exponentially in the last 5 years, are here to stay and thrive. Most legal frameworks, in particular the French and US ones, are not ready for these technological advances. Indeed, most courts still refuse to grant copyright protection and ownership, to AI-generated works, worldwide. This situation is not sustainable, as AI-generating tools and platforms will replace traditional methods of generating content, in a very short timeframe. Legal frameworks must therefore adapt and yield, in order to ensure that their national creative industries remain competitive and at the top of the class. How can this be achieved?

      1. The AI revolution: making AI the new normal

      1.1. AI technological advances

      AI technologies have exponentially developed, in 2022, making it possible to generate various creative outputs, in the literary field, music sector, art and illustration sectors, the film industry, the graphic novels’ sphere and the video gaming industry.

      For example, ChatGPT is a language model developed by OpenAI, a research organisation that specialises in developing cutting-edge AI technologies, founded in 2015. ChatGPT is based on the Generative Pre-trained Transformer (‟GPT”) architecture. Its self-described purpose is to ‟provide conversational assistance and answer a wide range of questions on various topics, from factual information to subjective opinions and advice”. It can be used as a powerful research tool, writing extremely coherent and detailed research reports, which may then be inserted verbatim in any article, research paper or blog.

      AI writing tools have become commonplace, and now assist humans in a variety of ways, in order to write better emails, blogs, articles and novels, to curate email newsletter content, to generate ready-to-write SEO outlines, to generate articles that are SEO friendly, etc.

      In the graphic design sphere, AI tools can produce outstanding illustrations and drawings just by merely giving written instructions to AI tools such as Dall-E 2 (also created by OpenAI), Midjourney, and The results are outstanding, as Midjourney’s community showcase demonstrates.

      These illustrations and drawings can, in turn, be used to create graphic novels, such as ‟Zarya of the Dawn” by Kristina Kashtanova (generated with Midjourney), video games, magazines’ covers, such as The Economist’s cover and Cosmopolitan’s cover for its AI issue, or films, such as ‟The Crow”, a short film generated with OpenAI’s CLIP, and which won the 2022 Jury Award at the Cannes Short Film Festival!

      In the music field, AI-generated music is become more prevalent, with AI music composition tools such as MusicLM, a model generating high-fidelity music from text descriptions from Google Research lab, Riffusion, an AI that composes music by visualizing it, Dance Diffusion, Google’s previous project AudioLM and OpenAI’s Jukebox. Soundful, a human aided AI music platform, aims at fulfilling the demand for music within the creator community and content-creator economy. At the click of a few buttons, you can have the tune you need for your project.

      1.2. Who are the main players in the AI field?

      As mentioned above, OpenAI, is at the forefront of AI innovation, with multiple AI tools created to be exploited on various creative medium such as:

      • the spoken word, via ChatGPT;

      • films, with CLIP;

      • illustrations, via Dall-E 2, and

      • music with Jukebox.

      OpenAI was founded in 2015 by a group of prominent tech industry figures, including Elon Musk, Sam Altman, Reid Hoffman, Ilya Sutskever, Peter Thiel, John Schulman, and Wojciech Zaremba. It is an American AI research laboratory consisting of the non-profit OpenAI Incorporated (OpenAI Inc.) and its for-profit subsidiary corporation OpenAI Limited Partnership (OpenAI LP). The goal of OpenAI is to create safe and beneficial AI ‟that can help to address some of the world’s most pressing challenges” (sic). OpenAI is an independent organization, and its research is funded by a mix of philanthropic contributions, corporate partnerships, and government grants. The organization is ‟dedicated to advancing AI technology while also promoting transparency, collaboration, and ethical considerations in the development and deployment of AI”.

      In 2023, OpenAI announced a partnership with Microsoft. On 23 January 2023, Microsoft announced a new multi-year, multi-billion dollar (reported to be USD10 billion) investment in OpenAI. Then, on 7 February 2023, Microsoft announced that it is building AI technology based on the same foundation as ChatGPT into its web search engine Bing, its web browser Edge, its productivity software Microsoft 365 and other products.

      Google is also prominent in the AI-tools’ manufacturing sector, in particular with its above-mentioned music-generating AI tools, MusicLM and AudioLM. On 6 February 2023, Google announced an AI application similar to ChatGPT (Bard, a conversational AI chatbot powered by Google’s Language Model for Dialogue Applications), after ChatGPT was launched, fearing that ChatGPT could threaten Google’s place as a go-to source for information. Google also launched Imagen, a ‟text-to-image diffusion model with an unprecedented degree of photorealism and a deep level of language understanding” (sic), to compete with Dall-E.

      For now, the media’s general impression is that Google fell behind in AI, in particular compared to Microsoft and OpenAI.

      2. AI’s legal challenges

      2.1. Do AI users have rights to the outputs?

      The question of AI authorship is particular important, especially if actors from the content-creator economy embrace it.

      The first port of call is to review the terms and conditions of the AI-generating tool, in order to clarify who owns what, as far as the AI-generated output is concerned.

      For example, in order to use OpenAI’s platforms, such as Dall-E 2, Jukebox or ChatGPT, the user must first agree to OpenAI’s terms of use. In the version dated 14 March 2023 of these T&Cs, it is set out that OpenAI assigns to the user all its right, title and interest in and to the output generated and returned by the OpenAI services based on the user’s input. This means the user can use the Content (defined as the input and the output together) for any purpose, including commercial purposes such as sale or publication, if the user complies with OpenAI’s terms. OpenAI may use the Content to provide and maintain its services, comply with applicable law, and enforce its policies. The user is responsible for the Content, including for ensuring that it does not violate any applicable law or OpenAI’s terms of use.

      This is an improvement on the OpenAI’s terms of use which were in force before 14 March 2023. These terms used to state that users assigned any ownership they had in any output created by the OpenAI’s system and services, and, in turn, the users had an exclusive licence to use the generated output for any purpose. Other AI platforms which can generate output, such as Soundful, still have similar contractual copyright and licensing arrangements.

      2.2. Who is the author of the AI-generated output?

      Was it the person who input the text prompt? Was it the AI? Was it the developer of the AI or the company that owns the AI?

      Most jurisdictions require a human to be the author, and a work is only capable of being protected by copyright if it shows intellectual effort, creativity, and reflects the author’s personality.

      As AI creative systems become more widespread, can we consider that a text prompt, such as ‟a cat wearing a turban gazing at the city landscape at night, from a window, in the style of Van Gogh”, constitutes enough human input and individuality, and is sufficiently creative and reflective of the human author’s personality to allow the resulting image to be protected by copyright?

      For example, UK law permits copyright protection of computer-generated works, with the author being the person who made the ‟necessary arrangements” for the creation of the work pursuant to section 9(3) of the Copyright, designs and patents act 1988. Other rare jurisdictions expressly provide for copyright in computer-generated works, such as Hong Kong, India, Ireland, New Zealand and South Africa.

      However, most countries, such as France, refuse to acknowledge copyright protection if the work is generated by anyone other than a human. Indeed, pursuant to article L. 112-1 of the French intellectual property code, ‟any work of the mind, regardless of its kind, form of expression, merit or purpose”, is eligible for copyright protection. French courts acknowledge the originality of a creation as soon as the said creation is endowed by the personality of their author. While the threshold of the originality requirement is low, the author of a work must be a natural person according to a well-established case-law. It cannot be a legal person, an animal or a software. The rationale behind this position is that French law only protects works of the mind and the creations at issue must bear the imprint of the personality of their author(s); legal persons, animals and AIs neither have a conscience nor have a personality that may come out of the works created by them.

      Time and time again, the United States Copyright Office (”USCO”) which is in charge of registering works for copyright protection in the USA, refused to grant copyright protection to AI-generated content, such as:

      • the above-mentioned graphic novel ‟Zarya of the Dawn”, because the images generated by Midjourney, contained within the work, are ‟not original works of authorship protected by copyright” (sic) and since ‟text prompts” are insufficient to qualify as ‟human authorship”.

      Since copyright protection is automatically granted in France, unlike in the USA where copyright protection is granted solely upon the USCO’s registration, no such case law exists in France or other European countries. We will have to wait a few more years, before copyright infringement litigation, relating to AI-generated content, lands in the European courts’ dockets (with the notable exception of the claim filed by stock image supplier Getty Images, against, for copyright infringement, with the High Court in London, UK).

      Considering the absence of a work of the mind and the lack of originality of an output resulting exclusively from an AI, such creations are thus today in the public domain and not intellectual property right is attached to them (with the notable exception, above-mentioned, of the regime applicable in the UK, Hong Kong, Ireland, India, New Zealand and South Africa, which permits copyright protection of computer-generated works, with the author being the person who made the ‟necessary arrangements” for the creation of the work).

      2.3. How can the law adequately address AI, in order to make it beneficial for the creative industries?

      In France, the ‟Conseil Supérieur de la Propriété Littéraire et Artistique”, an independent advisory body advising the French ministry of culture and communication in the field of literary and artistic property, provided recommendations in a report dated 27 january 2020. It suggests that a ‟sui generis” right could be created to the benefit of the one bearing the risks of the investment, like the specific regime benefiting to database producers.

      The European Parliament, from the European Union (‟EU”) also suggested that a legal personality be acknowledged to IA, so that copyright protection be granted to AI-generated works.

      For the time being, none of the above recommendations have been taken up by the French and/or European legislators.

      The European Commission (‟EC”) has proposed a four-step test in order to assess whether AI-generated output can qualify as protected work under the current EU copyright framework, as follows:

      • step one: the AI-generated output must be a production in the literary, scientific or artistic domain (article 2(1) of the Berne Convention for the Protection of Literary and Artistic Works);

      • step two: the AI-generated output must be the result of human intellectual effort (i.e. some sort of human intervention such as, for example, development of software, editing or gathering or choice of training data);

      • step three: the AI-generated output must be original, and

      • step four: the work needs to be identifiable with sufficient precision and objectivity (i.e. the generated output will fall within the creator’s general authorial intent).

      It is blatant that the current disparities in the various legal systems and frameworks, where one set of national legal frameworks strongly pushes back against granting copyright protection to AI-generated content, while the other set of national legal frameworks fully embraces AI-generated content and grants it full copyright protection, will create substantial inequalities of treatment for content creators worldwide.

      Indeed, content creators based in the UK or Ireland or India are incentivised to speed up their work flow, by fully embracing time-saving AI-generator tools and programmes, the output of which these creators will be able to claim copyright ownership and protection on. Meanwhile, creatives based in France or the USA will seriously struggle to enforce any type of copyright protection and rights over AI-generated content. Therefore, French and US content creators will prefer to stick to the ‟old methods” of work creation, refusing to use AI platforms which output will automatically fall into the public domain.

      This situation cannot perdure, and since AI is here to stay – big time – stubborn law makers and enforcers, such as the USCO which recently issued some narrow-minded guidance on copyright registrations involving AI, will inevitably have to yield and reform, in order to grant copyright protection to AI-generated works.

      Of course, lobbies and organisations representing music and other creative disciplines will try to delay the inevitable, by setting up mindless campaigns and lobbying plots, such as the ‟Human Artistry Campaign”, to prevent copyright offices and courts from finding that AI-generated works are protected by copyright.

      But the floodgates are now open. And there is no way back: the technological advances and jumps that AI-generating tools and platforms provide are so important and ground-breaking, that the creative content economy and stakeholders at large will fully embrace them in the next few months, never looking back.

      Lawmakers must adapt fast, in order to keep their creative economies and actors at the forefront of competition.
      Crefovi’s live webinar: AI & copyright protection – lawmakers to adapt to save creative industries – 24 March 2023

      Crefovi regularly updates its social media channels, such as LinkedinTwitterInstagramYouTube and Facebook. Check our latest news there!

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        Freedom of speech in the creative industries: how did it all go so wrong?

        Crefovi : 09/02/2023 11:34 am : Art law, Articles, Copyright litigation, Employment, compensation & benefits, Entertainment & media, Information technology - hardware, software & services, Intellectual property & IP litigation, Internet & digital media, Litigation & dispute resolution, Music law, Webcasts & Podcasts

        While cancel culture and culture wars are attacks on freedom of speech and freedom of press coming from the bottom, the virulence of the latest onslaught on freedom of the press and creative expression now comes from the top. States, government structures, public and private companies, oligarchs as well as other plutocrats are using all the legal tools in the box, and more, to silence, intimidate and neuter anyone who may as much as mouth a criticism about them, their behaviours, their actions and their track records. The creative industries are particularly targeted by these authoritarian top-down approaches and legal tactics to bland their creative outputs and works, despite the legal protections offered by copyright.

        1. A global context of seriously curbed free expression and free press

        In the aftermath of the COVID-19 pandemic, and in the midst of the thralls caused by the inflation crisis and recession, the population around the world, but the creative industries in particular, have seen many of their liberties curtailed, if not obliterated, in the last five years.

        In particular, the freedom of speech and the freedom of the press have all been extremely impacted, by the bullying, scaring and repressive tactics implemented by old – and dying – plutocratic, corrupted and totalitarian powers, economic entities, structures, regimes and governments.

        Indeed, the Index Index, a new pilot project and global index that uses innovative machine learning techniques to map the free expression landscape across the globe to gain a clearer country-by-country view of the state of free expression across academic, digital and media/press freedoms, has placed:

        • France in the second tier of its new global index of freedom of expression (2: ‟significantly open”);

        • the United States of America (‟USA”) in the third tier too, of its new global index of freedom of expression,

        with most countries in the world being in the 4: ‟partially narrowed” to 10: ‟closed” categories.

        China, Burma, Laos, Turkmenistan, South Sudan, Syria, Belarus, Cuba and Nicaragua are all ranked in this worst category 10.

        These very concerning rankings were confirmed by other indexes, such as:

        • the Economist’s Democracy Index 2022 (which ranked France and the UK as – just about – ‟full democracies” at ranks 22 and 18, respectively, and placed the USA as a ‟flawed democracy” at rank 30).

        2. How legal systems and tactics are used to silence the creative industries, via attacks on the freedoms of expression and the press

        2.1. Very wide – and widening – exceptions to freedom of speech in the French and UK statutory legal frameworks

        As explained in our 2020 article on cancel culture, while freedom of speech is enshrined in the French declaration of rights of the human being and citizen, dated 1789, in its article 11 (‟free communication of thoughts and opinions is one of the most precious rights of the human being: any Citizen may therefore speak, write, print freely, except where he or she has to answer for the abuse of such freedom in specific cases provided by law”), many specific cases where freedom of speech is curtailed, are also enshrined, under French law.

        These statutory limits and exceptions to freedom of expression include:

        • Law dated 1881 on the freedom of the press which, while recognising freedom of speech in all publication formats, provides for four criminally-reprehensible exceptions, which are insults, defamation and slander, incentivising the perpetration of criminal offences, if it is followed by acts, as well as gross indecency;

        • Law dated 1972 against opinions provoking racial hatred, which – like the four above-mentioned exceptions, is a criminal offence provided for in the French criminal code;

        • Law dated 1990 against revisionist opinions, which is also a criminal offence in order to penalise those who contest the materiality and factuality of the atrocities committed by the Nazis on minorities, such as Jews, homosexuals and gypsies before and during world war two, and

        • Law dated July 2019 against hateful content on internet, which provisions (requiring to remove all terrorist, pedopornographic, hateful and pornographic content from any website within 24 hours) were almost completely censored by the French constitutional council as a disproportionate infringement to freedom of speech, before entering into force in its expurgated finalised version later on in 2019.

        Since 2020, many more laws have been promulgated, in France, in order to kill freedom of speech and freedom of the press, by legitimating the use of artificial intelligence algorithms to collect, gather and process algorithmically personal data and content, to police speech and the media. This ‟total information awareness” (‟TIA”) empowers governments, tech companies and private surveillance companies into implementing surveillance capitalism, enshrined in new laws, such as, for example, the law relating to global security adopted in France on 25 May 2021. Because of this new law, it has now become a crime punishable by five years of prison and a Euros 300,000′ fine, to broadcast, by any means, the face or any other identification element of a member of the French police forces acting within the scope of a police operation. This new law is extremely detrimental to people who live in/go to France, since taking smartphone pictures and videos of French assaulting police officers (an occurrence which is extremely common, in France), while these assaults are occurring, was the only way to gather evidence of French police violences and acts of harassment. Indeed, nobody in their right mind wants to testify in court and/or at a police station that they witnessed someone beaten up by French police forces, in the middle of the street and/or in the privacy of their own homes, for fear of personal security jeopardy and ongoing acts of vendetta and reprimand by French policemen and their top brass.

        On the other side of the Channel, the legal framework around freedom of speech is no panacea either. Freedom of expression is usually ruled through common law, in the UK. However, in 1998, the UK transposed the provisions of the European Convention on human rights – which article 10 provides for the guarantee of freedom of expression – into domestic law, by way of its Human rights act 1998.

        Not only is freedom of expression tightly delineated in article 12 (Freedom of expression) of the Human rights act 1998, but there is a broad sweep of exceptions to it, under UK common and statutory law. In particular, the following common law and statutory offences, narrowly limit freedom of speech in the UK:

        • threatening, abusive or insulting words or behaviour intending or likely to cause harassment, alarm or distress, or cause a breach of the peace (which has been used to prohibit racist speech targeted at individuals);

        • sending any letter or article which is indecent or grossly offensive with an intent to cause distress or anxiety (which has been used to prohibit speech of a racist or anti-religious nature, as well as some posts on social networks), governed by the Malicious communications act 1988 and the Communications act 2003;

        • incitement (i.e. the encouragement to another person to commit a crime);

        • incitement to racial hatred;

        • incitement to religious hatred;

        • incitement to terrorism, including encouragement of terrorism and dissemination of terrorist publications;

        • glorifying terrorism;

        • collection or possession of a document or record containing information likely to be of use to a terrorist;

        • treason including advocating for the abolition of the monarchy or compassing or imagining the death of the monarch;

        • obscenity;

        • indecency including corruption of public morals and outraging public decency;

        • defamation and loss of reputation, which legal framework is set out in the Defamation act 2013;

        • restrictions on court reporting including names of victims and evidence and prejudicing or interfering with court proceedings;

        • prohibition of post-trial interviews with jurors, and

        • harassment.

        Lately, the UK government has also introduced in parliament the ‟Online safety bill” which proposes to hand to the UK’s communication regulator, Ofcom, the power to identify ‟lawful but harmful” (sic) content and punish social networks that fail to remove it. While these proposals to regulate social media are deemed to be a ‟recipe for censorship” by campaigners, the Bill passage is following its course in parliament, and is currently at the ‟Committee stage” in the House of Lords, with a view of obtaining royal assent this year, in 2023.

        2.2. The use of rap lyrics as legal confessions and evidence in court to ‟put away” and silence artists

        Always imaginative and tactically astute, criminal prosecutors and criminal attorneys around the world are using the lyrics and other creative output of artists and musicians as evidence in criminal cases, to put them in jail and stop them from expressing any of their ideas and views.

        Rappers in particular, whose lyrics are usually punchy, on point political commentaries and frank assessments of where respect of civil liberties is at in any society (remember ‟Fuck da police” from NWA released in 1988?), are viciously targeted by these legal proceedings’ tactics.

        For example, in the USA, this distorted and twisted use of rap lyrics as legal confessions in court is so widespread that:

        • another similar bill is under consideration in the state of New Jersey, and

        • the ‟Restoring Artistic Protection Act” (‟RAP”) was introduced in the US congress in 2022, in order to achieve something similar on a US-wide basis.

        In Europe, rappers are also being systematically neutered by using criminal proceedings against them.

        In the UK, Music Week reported that the UK rap star Digga D, who achieved a N. 1 album in April 2022, faced legal challenges to his career including a Criminal Behaviour Order, following criminal convictions and spells in prison. In recent years, UK drill music, a growing sub-genre of UK rap, has increasingly used in the courtroom as evidence of bad character, with the prosecution engaging police officers – who are notably not drill ‟experts” to decode slang-heavy lyrics for the court. In some cases, the videos presented as evidence of gang involvement and violent disposition pre-date the alleged offence by several years.

        France and its police forces, who have always had a difficult relationship with the rap genre and their authors, i.e. minorities from ethnic backgrounds (check ‟La Haine” to get a feel), have, also, clamped down on rap lyrics which may in any way challenge the French establishment and status quo.

        In particular, in relation to Franco-Italo-Senegalese rapper, Freeze Corleone, who was not only criminally indicted by the very controversial French minister of the interior, Gerald Darmanin – who was himself under criminal investigation for sexual coercion, harassment and misconduct in 2009, and then again between 2014 and 2017 – for provoking racial hatred and racial slander, upon the release of his first album ‟La Menace Fantôme” (‟LMF”), but whose songs were (unsuccessfully) requested to be pulled off from all streaming platforms such as YouTube, Spotify, Deezer, by the French government. As a result, Freeze Corleone – who, surprisingly, is still not in prison, probably because he resides in Senegal, rather than France – was dropped by his original label, Universal, and, more recently, by BMG, which forced him to self-release his third album ‟Riyad Sadio”.

        27-year-old stalwart French rapper, Moha La Squale, is currently rotting in prison, for breaching his ‟judicial control” (‟contrôle judiciaire”, i.e. the right to stay outside jail, pending the occurrence of a criminal court case) in June 2022. While Mohamed Bellahmed is certainly no angel, as he was indicted for alleged violences and sexual assault on several of his ex-girlfriends, it is quite obvious that the French government and judiciary are mostly concerned about his rap lyrics and videos, which one can only describe as eulogies to recreational drug use (‟Amsterdam”) and drug dealing (‟Ca débite”).

        2.3. SLAPP lawsuits to censor, intimidate and silence investigative journalists and authors

        Another institutionalised legal tactic to kill freedom of speech and freedom of the press are Strategic Lawsuits Against Public Participation (‟SLAPP”), especially popular – and effective – in the UK.

        Very prized by Russian oligarchs and other plutocrats, SLAPPs have – and still are – routinely lodged by mercenary law firms, such as Osborne Clarke, Mishcon de Reya, Schillings, Harbottle & Lewis, CMS, Carter Ruck and Boies Schiller Flexner, to censor, intimidate and silence critics by burdening them with the cost of a legal defence, until they abandon their criticism or opposition.

        In a typical SLAPP, the claimant does not normally expect to win the lawsuit. Their goals are accomplished if the defendant succumbs to fear, intimidation, mounting legal costs, or simple exhaustion and abandons the criticism. In some cases, repeated frivolous litigation against a defendant (usually an investigative journalist) may raise the cost of directors’ and officers’ liability insurance for that party, interfering with an organisation (i.e. the publisher or journal)’s ability to operate. A SLAPP may also intimidate others from participating in the debate.

        A common feature of SLAPPs is forum shopping, wherein claimants find courts that are more favourable towards the claims to be brought than the court in which the defendant (or sometimes claimants) live.

        The UK is just such a jurisdiction.

        For example, a 2021 libel action brought against Big 5 publisher, HarperCollins, and the author and journalist Catherine Belton, over the latter’s book, ‟Putin’s people”, was a SLAPP. Despite good prospects of winning the legal case brought by several Russian oligarchs, including Roman Abramovich, Ms Belton was left facing legal costs of GBP1.5 million. She settled the claims against her. Her publisher agreed to make edits to the book and a charitable donation, after agreeing that some of the information about one of the oligarchs was, allegedly, ‟incorrect” (sic).

        The rise of SLAPPs got so bad and stifling on civil liberties, in the UK, that the Solicitors Regulation Authority (‟SRA”) launched a crackdown on SLAPPs, saying it believed that some British lawyers were pursuing ‟abusive litigation” designed to ‟harass or intimidate” their opponents into silence. It set out a list of behaviour that could result in disciplinary measures. The SRA said it would take action if it found lawyers sending threatening letters advancing meritless claims or pursuing litigation that was ‟bound to fail”. The SRA has 29 probes underway based on complaints and tip-offs, and warned lawyers that ‟representing your client’s interests does not override wider public interest obligations and duties to the courts”. A model anti-SLAPP law was drafted by the UK anti-SLAPP Coalition but not much has come of it, yet.

        Of course, as one would expect, the USA has had a flurry of cases which are notable SLAPPs.

        Even French courts are routinely seeing SLAPPs in their dockets. For example, in 2010 and 2011, Mathias Poujol-Rost, a French blogger, was summoned twice by the communication company Cometik (NOVA-SEO) over exposing their quick-selling method and suggesting a financial compensation for his first trial. The company’s case was dismissed twice, but appealed both times. On 31 March 2011, the company won in court:

        • the censorship of any reference (of its name) on Mathias Poujol-Rost’s online blog;

        • Euros 2,000 in damages;

        • the obligation to publish the judicial decision for 3 months on Mr Poujol-Rost’s blog;

        • Euros 2,000 as procedural allowance, and

        • all legal fees for both first and appeal instances.

        SLAPPs are becoming so concerning that the European Commission has drafted a proposed directive to tackle abusive lawsuits against journalists and human rights defenders. It enables judges to swiftly dismiss manifestly unfounded lawsuits against journalists and human rights defenders, as well as establishing several procedural safeguards and remedies, such as compensation for damages and dissuasive penalties for launching abusive lawsuits.

        The short-term outlook is really troubling, as far as protecting freedom of speech and creative expression are concerned. Only decisive technological, legal, enforcement and political action from the people, and their future representatives, may reverse the course of these extremely worrying trends of annihilating freedoms of expression and of the press, coming from both the top, and the bottom. Let’s watch the space and see. I suspect, though, that the next few years will see violent riots, guerrillas and civil wars erupt, as the people grabs back power, and reclaims agency – as well as its civil liberties -, the hard way because obsolete structures, corrupt governments, the patriarchy and rotten individuals and companies refuse to relinquish their autocratic power and plutocratic control.
        Crefovi’s live webinar: Freedom of speech in the creative industries – 15 February 2023

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          Druet v Cattelan: a missed opportunity to capitalise on the legal framework for collaborative art works

          Crefovi : 26/10/2022 12:25 pm : Art law, Articles, Copyright litigation, Employment, compensation & benefits, Intellectual property & IP litigation, Litigation & dispute resolution, Outsourcing, Webcasts & Podcasts

          It’s the story of a baffling legal case, where neither of the parties come out on top, having lost either reputation, or money, or both, in the process. Daniel Druet lost an occasion to make a splash in the art world, because his statement of claims was extremely poorly drafted and badly structured. Emmanuel Perrotin and Maurizio Cattelan came out as a bunch of amateurs, no more than unsophisticated stakeholders of the contemporary art business, from this legal saga. Here is how this case could have boosted the ego and pockets of Mr Druet, and adorned the respective blasons of Mr Perrotin and Mr Cattelan.

          1. Facts

          Daniel Druet, a French sculptor of wax sculptures, in particular for the ‟musée Grévin” (i.e. the Paris equivalent to the Madame Tussauds‘ wax museum in London), was contacted by Emmanuel Perrotin, a Paris-based art dealer, specialising in selling contemporary art, in 1999. According to Mr Druet, it was at the request of Maurizio Cattelan, an Italian artist with a reputation as a provocateur and ‟outside-the-box thinker”, that Mr Perrotin (Mr Cattelan’s galerist) reached out, in order for Mr Druet to execute several wax sculptures between 1999 and 2006, as follows:

          • Him”, 2001;

          • Now”, 2004.

          By letters from the early noughties, addressed to Mr Perrotin and his art gallery company, D. Druet requested that ‟all distribution of (his) art works mention (his) name as the sculptor and director of the wax sculptures (in the same way that the name of the photographer, author of the distributed pictures, is set out)” (sic). He received no reply from Mr Perrotin.

          Then, between October 2016 and January 2017, the Paris museum ‟La Monnaie de Paris” hosted an exhibition entitled ‟Cattelan, not afraid of love”, which featured four of the above-mentioned artworks (i.e. ‟La Nona Ora”, ‟La Rivoluzione Siamo Noi”, ‟Him” and ‟The young Cattelan of Rotterdam”) (together, the ‟Litigious artworks”) – again, without any reference to Daniel Druet, notwithstanding his above-mentioned requests.

          Arguing that his quality as ‟exclusive author”, according to him, of the Litigious artworks, was yet again unrecognised, Mr Druet filed some summons against Mr Perrotin and his art gallery, Mr Perrotin’s publishing business, Turenne Editions SARL, and ‟La Monnaie de Paris”, with the Paris ‟tribunal de grande instance” (since renamed ‟tribunal judiciaire”) for copyright infringement and counterfeiting.

          By acts executed by a bailiff, in December 2018, ‟La Monnaie de Paris” filed some summons against Maurizio Cattelan and his Italian company Magis S.r.l., in forced intervention (‟intervention forcée”) and guarantee, pursuant to the terms of the partnership, loan and copyright assignment agreement, entered into between them, in relation to the Litigious artworks.

          2. Procedure

          The two above-mentioned legal proceedings (i.e. for copyright counterfeiting and for forced intervention and guarantee) were joined in January 2019.

          By judgment dated 28 February 2022, the Paris tribunal rejected the request of inadmissibility for lack of quality to defend, raised by Emmanuel Perrotin and his gallery, as well as Turenne Editions SARL.

          On 8 July 2022, after a hearing held on 13 May 2022, the Paris ‟tribunal judiciaire” handed down its judgment (the ‟Judgment”) setting out that:

          • Daniel Druet had not reversed the lawful presumption of authorship, granted to Maurizio Cattelan, by the provisions set out in article L. 113-1 of the French intellectual property code (‟IPC”), pursuant to which Mr Cattelan was deemed to be the sole author of the Litigious artworks since such artworks had been divulged in the public domain exclusively under the name of Maurizio Cattelan;

          • while Daniel Druet made the wax sculptures, the Litigious artworks were much more than these mere wax sculptures, and that it was Maurizio Cattelan who made all decisions, and gave all directives, relating to the scenography, positioning in space, lighting, destruction of various pieces of furniture on which the those wax sculptures were placed, for each one of the Litigious artworks;

          • Daniel Druet did not file any summons against Maurizio Cattelan, therefore he could not argue, in such legal proceedings, about some rights aiming at evicting Maurizio Cattelan from the benefit of the presumption of ownership, without Mr Cattelan being part of these proceedings;

          • Maurizio Cattelan was not a principal defendant to the joint proceedings, but was only brought in as a guarantor and ‟forced intervening party‟ for ‟La Monnaie de Paris”, therefore no legal nexus was created, by such ‟forced intervention” between Mr Druet and Mr Cattelan;

          • Consequently, and since Mr Druet did not file any summons against Mr Cattelan – the presumed author of the Litigious artworks – against who he argued the ownership of the rights on the Litigious artworks, Daniel Druet must be declared inadmissible in all his claims for copyright counterfeiting, and

          • the warranty claim raised by ‟La Monnaie de Paris” against Maurizio Cattelan and his company Magis S.r.l., without any cause, would not be reviewed.

          In its Judgment, the tribunal sentenced Daniel Druet to support his own expenses and legal costs, of course, but also to pay 10,000 Euros to Emmanuel Perrotin, his art gallery and Turenne Editions SARL, as well as another 10,000 Euros to ‟La Monnaie de Paris”, pursuant to article 700 of the French civil procedural code (‟CPC”). Mr Druet also had to pay full costs (‟entiers dépens”) to the law firm of Mr Perrotin, his art gallery and Turenne Editions SARL, pursuant to article 699 CPC.

          3. Mr Druet needs to reverse the authorship presumption, first and foremost

          While reading the Judgment, and the legal arguments developed by the claimant, I was baffled by the lack of legal sophistication of Daniel Druet and his legal ‟counsel”, Jean-Baptiste Bourgeois.

          Firstly, Mr Druet alleged, in his statement of claims, that he was the ‟exclusive author” (sic) of the Litigious artworks, as if these Litigious artworks were solely constituted by the wax sculptures made by him under the directives of Mr Cattelan.

          In this day and age, a large portion of contemporary art is made up by conceptual art (i.e. a branch of modern art, and contemporary art, which is defined not by the aesthetic properties of the art works, but solely by the concept or idea of art, with the ready-made created by Marcel Duchamp being the epitome of conceptual art).

          Maurizio Cattelan is recognised as a master of conceptual art, whose artworks are mostly valued for the message, and/or emotions, that they convey and/or trigger, in the viewer, rather than the aesthetic characteristics of such works. Most telling, is the controversy and mixed emotions created by one of the Litigious artworks, ‟Him”, when it was exhibited in Warsaw’s Jewish ghetto, while it represents the small version of the anti semitic dictator who attempted to erase the Jewish race from planet Earth, before and during World War II, Adolf Hitler (with many of the killings taking place in Warsaw’s ghetto, at the time).

          Mischievous Maurizio Cattelan conveys a message, triggers violent emotions, via his artworks – a lot of which are not made up of wax sculptures, such as ‟Trotski’s ballad” (1996) and ‟Naturalised male Ostrich” (1997), which are based on taxidermied animals (a horse, for the former, and an ostrich, for the latter), or ‟L.O.V.E.” (2011), a 11-metre white marble sculpture middle finger sticking straight up from an otherwise fingerless hand, pointing away from Borsa Italiana in Milan.

          Therefore, Mr Druet’s claims that he may be the sole and exclusive author of the Litigious artworks are outrageous, denoting a complete lack of understanding (and desire to understand) conceptual art.

          Secondly, Mr Druet and his counsel did not file any summons against Maurizio Cattelan directly: they filed only against his art dealer, this art dealer’s gallery business and art book publishing business. What a rookie’s mistake!

          It is evident that, if one’s legal claims are that one is the author of an artwork in lieu and place of someone else, one must file some summons against that someone else who has a presumption of being the sole author of that artwork, in court.

          This lack of summons against Maurizio Cattelan by Daniel Druet and his counsel did not deter them, though, from requesting, in their statement of claims, Maurizio Cattelan to:

          • pay Daniel Druet the sum of 100,000 Euros for damages, in alleged breach of the right to paternity of the Litigious artworks;

          • always associate the name of ‟Daniel Druet” with the Litigious artworks, under penalty of 5,000 Euros by infringement observed, and

          • set out on all media, of any nature, and in particular on the sites and and, the name and quality of author of Daniel Druet, upon the distribution and reproduction of the Litigious artworks, jointly with Emmanuel Perrotin, his art gallery, Editions Turennes SARL and ‟La Monnaie de Paris”.

          This lack of basic understanding of the CPC rules is so gross, it is actually shameful that a Paris lawyer (the bar to which I also belong, in France), allegedly steeped in intellectual property, was even allowed to send such a statement of claims to the ‟tribunal judiciaire” and the co-defendants.

          Of course, it was very easy for the co-defendants and their counsel to eat Daniel Druet and his ‟lawyer” alive, in their response to the statement of claims, especially since Mr Druet and his ‟counsel” disregarded a cornerstone principle of French copyright law enshrined in article L. 113-1 CPI: ‟The quality of author belongs, except in case of evidence to the contrary, to the person(s) under the name(s) of which the work is disclosed”.

          If Mr Druet wants to have any chance to win this case, first he must demonstrate that the presumption that Mr Cattelan is the author of the Litigious artworks – since these works were disclosed solely under the name of Maurizio Cattelan as author – is incorrect.

          THAT – requires skill and a thorough knowledge and understanding of copyright law. Mr Druet could argue – and prove – that Maurizio Cattelan never gave him any directives and instructions – to create the wax sculptures used in the Litigious artworks. He could even say – and prove – that he never had any dealings and contact with Maurizio Cattelan, all communications going through Emmanuel Perrotin and his art gallery – which would further show that there was no subordination link (and therefore no employer-employee relationship, or even principal-contractor relationship) between Mr Druet and Mr Cattelan.

          Daniel Druet could also argue that he is the sole author of the wax sculptures which, along with other creative elements provided, and decisions made, by Mr Cattelan – such as the scenography, the lighting, the destruction of pieces of furniture on which the wax sculptures are placed – would constitute the Litigious artworks.

          4. Mr Druet should bank on being a co-author in a collaborative work, as opposed to claiming that he is the exclusive author

          I was also baffled to read, in the Judgment, that Mr Druet and his ‟counsel” never thought it necessary to clarify that the Litigious artworks were collaborative works, i.e. works, which creations were made jointly by several natural persons (pursuant to article L. 113-2 CPI).

          This (more realistic) assertion would have automatically granted Mr Druet the status of co-author of the Litigious artworks, and allowed him to claim a share in the royalties earned on the exploitation of the copyright by Mr Cattelan and his gallerist Mr Perrotin (in particular, on the reproduction right used to publish the catalogue of the exhibition at ‟La Monnaie de Paris”, some postcards and all other merchandises featuring the Litigious artworks).

          While Mr Druet and his ‟counsel” made a show, in their statement of claims, of requiring the co-defendants to ‟provide all documents and informations that they held, allowing to value the economic prejudice of Mr Druet, i.e. the number of visits to the pages on the internet site in the last five years, the number of visits to the pages of the internet site specifically dedicated to Mr Cattelan during the last five years, the commissions received by Mr Perrotin and his gallery during the last five years, in lending and selling works created by Mr Druet and attributed to Mr Cattelan, the turnover made by Mr Perrotin, his gallery and his publishing business Turennes Editions SARL on the sale of books and art works in relation to Mr Cattelan from the store during the last five years”, they actually never demonstrated, and gave any evidence that Mr Druet was a co-author, let alone the exclusive author, of the Litigious artworks in the first instance!

          No wonder that the judges were tough on Mr Druet, sentencing him to pay 10,000 Euros to each co-defendant (except Mr Cattelan and his company Magis S.r.l. who did not ask for such compensation under article 700 CPC).

          This will teach Mr Druet and his ‟counsel” a hard lesson, because issuing such statement of claims which is so clearly devoid of any sound legal reasoning and argument, and completely lacks any evidence relating to any of these unsound legal points, is just a waste of everybody’s time, money, energy, and yet another way to suffocate the court docket of the Paris’ ‟tribunal judiciaire” which is still trailing a backlog of pre-covid cases to adjudicate, in its mist. I doubt that Mr Druet will appeal and/or use the services of the same ‟lawyer” should he decide to pursue his claims of copyright infringement against Mr Cattelan.

          However, the lesson for the co-defendants, and artists such as Mr Cattelan in particular, is that they need to put in place CONTRACTS with their contractors, before instructing them to do any work, which explicitly, clearly and transparently set out who owns the copyright of any artwork – or part of the artwork – created by the freelancer. In this sorry state of affair, Mr Perrotin, his gallery and Mr Cattelan have come across as a bunch of total amateurs, who dabble in the art business like mischievous schoolboys, through and through. That tarnished their reputation. This comes back to the message I have conveyed, time and again, with respect to the art sector, first in relation to art auctions and the ongoing issue of mismatch in pre-sale descriptions, and second about the use or arbitration to improve the security of art sales and transaction: contracts must be systematically drawn, in a clear, transparent and straightforward manner, and signed by all parties, before and concomitantly to any art transaction taking place.

          Crefovi’s live webinar: Druet v Cattelan legal saga – 28 October 2022


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            How to enforce civil and commercial judgments after Brexit?

            Crefovi : 14/06/2021 10:45 am : Antitrust & competition, Art law, Articles, Banking & finance, Capital markets, Consumer goods & retail, Copyright litigation, Emerging companies, Employment, compensation & benefits, Entertainment & media, Fashion law, Gaming, Hospitality, Hostile takeovers, Information technology - hardware, software & services, Insolvency & workouts, Intellectual property & IP litigation, Internet & digital media, Law of luxury goods, Life sciences, Litigation & dispute resolution, Mergers & acquisitions, Music law, Private equity & private equity finance, Product liability, Real estate, Sports & esports, Tax, Technology transactions, Trademark litigation, Unsolicited bids

            1. How things worked before Brexit, with respect to the enforcement of civil and commercial judgments between the EU and the UK

            Before the Transition date on which the UK ceased to be a EU member-state, there were, and there still are between the 27 remaining EU member-states, four main regimes that are applicable to civil and commercial judgments obtained from EU member-states, depending on when, and where, the relevant proceedings were started.

            Each regime applies to civil and commercial matters, and therefore excludes matters relating to revenue, customs and administrative law. There are also separate EU regimes applicable to matrimonial relationships, wills, successions, bankruptcy and social security.

            The most recent enforcement regime applicable to civil and commercial judgments is EU regulation n. 1215/2012 of the European parliament and of the council dated 12 December 2012 on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‟Recast Brussels regulation). It applies to EU member-states’ judgments handed down in proceedings started on or after 10 January 2015.

            The original Council regulation n. 44/2001 dated 22 December 2000 on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‟Original Brussels regulation”), although no longer in force upon the implementation of the Recast Brussels regulation on 9 January 2015, still applies to EU member-states’ judgments handed down in proceedings started before 10 January 2015.

            Moreover, the Brussels convention dated 27 September 1968 on the jurisdiction and the enforcement of judgments in civil and commercial matters (the ‟Brussels convention”), also continues to apply in relation to civil and commercial judgments between the 15 pre-2004 EU member-states and certain territories of EU member-states which are located outside the EU, such as Aruba, Caribbean Netherlands, Curaçao, the French overseas territories and Mayotte. Before the Transition date, the Brussels convention also applied to judgments handed down in Gibraltar, a British overseas territory.

            Finally, the Lugano convention dated 16 September 1988 on the jurisdiction and the enforcement of judgments in civil and commercial matters (the ‟Lugano convention”), which was replaced on 21 December 2007 by the Lugano convention dated 30 October 2007 on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‟2007 Lugano convention”), govern the recognition and enforcement of civil and commercial judgments between the EU and certain member-states of the European Free Trade Association (‟EFTA”), namely Iceland, Switzerland, Norway and Denmark but not Liechtenstein, which never signed the Lugano convention.

            The 2007 Lugano convention was intended to replace both the Lugano convention and the Brussels convention. As such, it was open to signature to both EFTA members-states and to EU member-states on behalf of their extra-EU territories. While the former purpose was achieved in 2010 with the ratification of the 2007 Lugano convention by all EFTA member-states (except Liechtenstein, as explained above), no EU member-state has yet acceded to the 2007 Lugano convention on behalf of its extra-EU territories.

            The UK has applied to join the 2007 Lugano convention after the Transition date, as we will explain in more details in section 2 below.

            b. Enforceability of remedies ordered by an EU court

            Before Brexit, the Recast Brussels regulation, the Original Brussels regulation, the Brussels convention, the Lugano convention and the 2007 Lugano convention (together, the ‟EU instruments”) provided, and still provide with respect to the 27 remaining EU member-states, for the enforcement of any judgment in a civil or commercial matter given by a court of tribunal of a EU member-state, whatever it is called by the original court. For example, article 2(a) of the Recast Brussels regulation provides for the enforcement of any ‟decree, order, decision or writ of execution, as well as a decision on the determination of costs or expenses by an officer of the court”.

            The Original Brussels regulation also extends to interim, provisional or protective relief (including injunctions), when ordered by a court which has jurisdiction by virtue of this regulation.

            c. Competent courts

            Before the Transition date, proceedings seeking recognition and enforcement of EU foreign judgments in the UK should be brought before the high court in England and Wales, the court of session in Scotland and the high court of Northern Ireland.

            Article 32 of the Brussels convention provides that the proceedings seeking recognition and enforcement of EU foreign judgments in France should be brought before the president of the ‟tribunal judiciaire”. Therefore, before the Transition date, a UK judgment had to be brought before such president, in order to be recognised and enforced in France.

            d. Separation of recognition and enforcement

            Before the Transition date, and for judgments that fell within the EU instruments other than the Recast Brussels regulation, the process for obtaining recognition of an EU judgment was set out in detail in Part 74 of the UK civil procedure rules (‟CPR”). The process involved applying to a high court master with the support of written evidence. The application should include, among other things, a verified or certified copy of the EU judgment and a certified translation (if necessary). The judgment debtor then had an opportunity to oppose appeal registration on certain limited grounds. Assuming the judgment debtor did not successfully oppose appeal registration, the judgment creditor could then take steps to enforce the judgment.

            Before the Transition date, and for judgments that fell within the Recast Brussels regulation, the position was different. Under article 36 of the Recast Brussels regulation, judgments from EU member-states are automatically recognised as if they were a judgment of a court in the state in which the judgment is being enforced; no special procedure is required for the judgment to be recognised. Therefore, prior to Brexit, all EU judgments that fell within the Recast Brussels regulation were automatically recognised as if they were UK judgments, by the high court in England and Wales, the court of session in Scotland and the high court of Northern Ireland. Similarly, all UK judgments that fell within the Recast Brussels regulation were automatically recognised as if they were French judgments, by the presidents of the French ‟tribunal judiciaires”.

            Under the EU instruments, any judgment handed down by a court or tribunal from an EU member-state can be recognised. There is no requirement that the judgment must be final and conclusive, and both monetary and non-monetary judgments are eligible to be recognised. Therefore, neither the UK courts, nor the French courts, are entitled to investigate the jurisdiction of the originating EU court. Such foreign judgments shall be recognised without any special procedures, subject to the grounds for non-recognition set out in article 45 of the Recast Brussels regulation, article 34 of the Original Brussels regulation and article 34 of the Lugano convention, as discussed in paragraph e. (Defences) below.

            For the EU judgment to be enforced in the UK, prior to the Transition date, and pursuant to article 42 of the Recast Brussels regulation and Part 74.4A of the CPR, the applicant had to provide the documents set out in above-mentioned article 42 to the UK court, i.e.

            • a copy of the judgment which satisfies the conditions necessary to establish its authenticity;

            • the certificate issued pursuant to article 53 of the Recast Brussels regulation, certifying that the above-mentioned judgment is enforceable and containing an extract of the judgment as well as, where appropriate, relevant information on the recoverable costs of the proceedings and the calculation of interest, and

            • if required by the court, a translation of the certificate and judgment.

            It was incumbent on the party resisting enforcement to apply for refusal of recognition of the EU judgment, pursuant to article 45 of the Recast Brussels regulation.

            Similarly, for UK judgments to be enforced in France, prior to the Transition date, the applicant had to provide the documents set out in above-mentioned article 42 to the French court, which would trigger the automatic enforcement of the UK judgment, in compliance with the principle of direct enforcement.

            e. Defences

            While a UK defendant may have raised merits-based defences to liability or to the scope of the award entered in the EU jurisdiction, the EU instruments contain express prohibitions on the review of the merits of a judgment from another EU member-state. Consequently, while a judgment debtor may have objected to the registration of a judgment under the EU instruments (or, in the case of the Recast Brussels regulation, which does not require such registration, appeal the recognition or enforcement of the foreign judgment), he or she could have done so only on strictly limited grounds.

            In the case of the Recast Brussels regulation, there are set out in above-mentioned article 45 and include:

            • if recognition of the judgment would be manifestly contrary to public policy;

            • if the judgment debtor was not served with proceedings in time to enable the preparation of a proper defence, or

            • if conflicting judgments exist in the UK or other EU member-states.

            Equivalent defences are set out in articles 34 to 35 of the Original Brussels regulation and the 2007 Lugano convention, respectively. The court may not have refused a declaration of enforceability on any other grounds.

            Another ground for challenging the recognition and enforcement of EU judgments is the breach of article 6 of the European Convention on Human Rights (‟ECHR”), which is the right to a fair trial. However, since a fundamental objective underlying the EU regime is to facilitate the free movement of judgments by providing a simple and rapid procedure, and since it was established in Maronier v Larmer [2003] QB 620 that this objective would be frustrated if EU courts of an enforcing EU member-state could be required to carry out a detailed review of whether the procedures that resulted in the judgment had complied with article 6 of the ECHR, there is a strong presumption that the EU court procedures of other signatories of the ECHR are compliant with article 6. Nonetheless, the presumption can be rebutted, in which case it would be contrary to public policy to enforce the judgment.

            To conclude, pre-Brexit, the EU regime (and, predominantly, the Recast Brussels regulation) was an integral part of the system of recognition and enforcement of judgments in the UK. However, after the Transition date, the UK left the EU regime as found in the Recast Brussels regulation, the Original Brussels regulation and the Brussels convention, since these instruments are only available to EU member-states.

            So what happens now?

            2. How things work after Brexit, with respect to the enforcement of civil and commercial judgments between the EU and the UK

            In an attempt to prepare the inevitable, the EU commission published on 27 August 2020 a revised notice setting out its views on how various conflicts of laws issues will be determined post-Brexit, including jurisdiction and the enforcement of judgments (the ‟EU notice”), while the UK ministry of justice published on 30 September 2020 Cross-border civil and commercial legal cases: guidance for legal professionals from 1 January 2021” (the ‟MoJ guidance”).

            a. The UK accessing the 2007 Lugano convention

            As mentioned above, the UK applied to join the 2007 Lugano convention on 8 April 2020, as this is the UK’s preferred regime for governing questions of jurisdiction and enforcement of judgments with the 27 remaining EU member-states, after the Transition date.

            However, accessing the 2007 Lugano convention is a four-step process and the UK has not executed those four stages in full yet.

            While step one was accomplished on 8 April 2020 when the UK applied to join, step two requires the EU (along with the other contracting parties, ie the EFTA member-states Iceland, Switzerland, Norway and Denmark) to approve the UK’s application to join, followed in step three by the UK depositing the instrument of accession. Step four is a three-month period, during which the EU (or any other contracting state) may object, in which case the 2007 Lugano convention will not enter into force between the UK and that party. Only after that three-month period has expired, does the 2007 Lugano convention enter into force in the UK.

            Therefore, in order for the 2007 Lugano convention to have entered into force by the Transition date, the UK had to have received the EU’s approval and deposited its instrument of accession by 1 October 2020. Neither have occurred.

            Since the EU’s negotiating position, throughout Brexit, has always been ‟nothing is agreed until everything is agreed”, and in light of the recent collision course between the EU and the UK relating to trade in Northern Ireland, it is unlikely that the UK’s request to join the 2007 Lugano convention will be approved by the EU any time soon.

            b. The UK accessing the Hague convention

            Without the 2007 Lugano convention, the default position after the Transition date is that jurisdiction and enforcement of judgments for new cases issued in the UK will be determined by the domestic law of each UK jurisdiction (i.e. the common law of England and Wales, the common law of Scotland and the common law of Northern Ireland), supplemented by the Hague convention dated 30 June 2005 on choice of court agreements (‟The Hague convention”).

            I. At common law rules

            The common law relating to recognition and enforcement of judgments applies where the jurisdiction from which the judgment relates does not have an applicable treaty in place with the UK, or in the absence of any applicable UK statute. Prominent examples include judgments of the courts of the United States, China, Russia and Brazil. And now of the EU and its 27 remaining EU member-states.

            At common law, a foreign judgment is not directly enforceable in the UK, but instead will be treated as if it creates a contract debt between the parties. The foreign judgment must be final and conclusive, as well as for a specific monetary sum, and on the merits of the action. The creditor will then need to bring an action in the relevant UK jurisdiction for a simple debt, to obtain judicial recognition in accordance with Part 7 CPR, and an English judgment.

            Once the judgment creditor has obtained an English judgment in respect of the foreign judgment, that English judgment will be enforceable in the same way as any other judgment of a court in England.

            However, courts in the UK will not give judgment on such a debt, where the original court lacked jurisdiction according to the relevant UK conflict of law rules, if it was obtained by fraud, or is contrary to public policy or the requirements of natural justice.

            With such blurry and vague contours to the UK common law rules, no wonder that many lawyers and legal academics, on both sides of the Channel, decry the ‟mess” and ‟legal void” left by Brexit, as far as the enforcement and recognition of civil and commercial judgments in the UK are concerned.

            II. The Hague convention

            As mentioned above, from the Transition date onwards, the jurisdiction and enforcement of judgments for new cases issued in England and Wales will be determined by its common law, supplemented by the Hague convention.

            The Hague convention gives effect to exclusive choice of court clauses, and provides for judgments given by courts that are designated by such clauses to be recognised and enforced in other contracting states. The contracting states include the EU, Singapore, Mexico and Montenegro. The USA, China and Ukraine have signed the Hague convention but not ratified or acceded to it, and it therefore does not currently apply in those countries.

            Prior to the Transition date, the UK was a contracting party to the Hague convention because it continued to benefit from the EU’s status as a contracting party. The EU acceded on 1 October 2015. By re-depositing the instrument of accession on 28 September 2020, the UK acceded in its own right to the Hague convention on 1 January 2021, thereby ensuring that the Hague convention would continue to apply seamlessly from 1 January 2021.

            As far as types of enforceable orders are concerned, under the Hague convention, the convention applies to final decisions on the merits, but not interim, provisional or protective relief (article 7). Under article 8(3) of the Hague convention, if a foreign judgment is enforceable in the country of origin, it may be enforced in England. However, article 8(3) of the Hague convention allows an English court to postpone or refuse recognition if the foreign judgment is subject to appeal in the country of origin.

            However, there are two major contentious issues with regard to the material and temporal scope of the Hague convention, and the EU’s and UK’s positions differ on those issues. They are likely to provoke litigation in the near future.

            The first area of contention relates to the material scope of the Hague convention: more specifically, what is an ‟exclusive choice of court agreement”?

            Article 1 of the Hague convention provides that the convention only applies to exclusive choice of courts agreements, so the issue of whether a choice of court agreement is ‟exclusive” or not is critical as to whether such convention applies.

            Exclusive choice of court agreements are defined in article 3(a) of the Hague convention as those that designate ‟for the purpose of deciding disputes which have arisen or may arise in connection with a particular legal relationship, the courts of one Contracting state or one or more specific courts of one Contracting state, to the exclusion of the jurisdiction of any other courts”.

            Non-exclusive choice of court agreements are defined in article 22(1) of the The Hague convention as choice of court agreements which designate ‟a court or courts of one or more Contracting states”.

            Although this is a fairly clear distinction for ‟simple” choice of court agreements, ‟asymmetric” or ‟unilateral” agreements are not so easily categorised. These types of jurisdiction agreements are a common feature of English law-governed finance documents, such as the Loan Market Association standard forms. They generally give one contracting party (the lender) the choice of a range of courts in which to sue, while limiting the other party (the borrower) to the courts of a single state (usually, the lender’s home state).

            There are divergent views as to whether asymmetric choice of court agreements are exclusive or non-exclusive for the purposes of the Hague convention. While two English high court judges have expressed the view that choice of court agreements should be regarded as exclusive, within the scope of the Hague convention, the explanatory report accompanying the Hague convention, case law in EU member-states and academic commentary all suggest the opposite.

            This issue will probably be resolved in court, if and when the time comes to decide whether asymmetric or unilateral agreements are deemed to be exclusive choice of court agreements, susceptible to fall within the remit of the Hague convention.

            The second area of contention relates to the temporal scope of the Hague convention: more specifically, when did the Hague convention ‟enter into force” in the UK?

            Pursuant to article 16 of the Hague convention, such convention only applies to exclusive choice of court agreements concluded ‟after its entry into force, for the State of the chosen court”.

            There is a difference of opinion as to the application of the Hague convention to exclusive jurisdiction clauses in favour of UK courts entered into between 1 October 2015 and 1 January 2021, when the UK was a party to the Hague convention by virtue of its EU membership.

            Indeed, while the EU notice states that the Hague convention will only apply between the EU and UK to exclusive choice of court agreements ‟concluded after the convention enters into force in the UK as a party in its own right to the convention” – i.e. from the Transition date; the MoJ guidance sets out that the Hague convention ‟will continue to apply to the UK (without interruption) from its original entry into force date of 1 October 2015”, which is when the EU became a signatory to the convention, at which time the convention also entered into force in the UK by virtue of the UK being a EU member-state.


            To conclude, the new regime of enforcement and recognition of EU judgments in the UK, and vice versa, is uncertain and fraught with possible litigation with respect to the scope of application of the Hague convention, at best.

            Therefore, and since these legal issues relating to how to enforce civil and commercial judgments after Brexit are here to stay for the medium term, it is high time for the creative industries to ensure that any dispute arising out of their new contractual agreements are resolved through arbitration.

            Indeed, as explained in our article ‟Alternative dispute resolution in the creative industries, arbitral awards are recognised and enforced by the Convention on the recognition and enforcement of foreign arbitral awards 1958 (the ‟New York convention”). Such convention is unaffected by Brexit and London, the UK capital, is one of the most popular and trusted arbitral seats in the world.

            Until the dust settles, with respect to the recognition and enforcement of EU judgments in the UK, and vice versa, it is wise to resolve any civil or commercial dispute by way of arbitration, to obtain swift, time-effective and cost-effective resolution of matters, while preserving the cross-border relationships, established with your trade partners, between the UK and the European continent.



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              Why getting an agent is critical, to make it in the creative industries

              Crefovi : 18/02/2021 12:35 pm : Art law, Articles, Consumer goods & retail, Copyright litigation, Emerging companies, Employment, compensation & benefits, Entertainment & media, Gaming, Intellectual property & IP litigation, Law of luxury goods, Music law, Sports & esports, Trademark litigation

              In the creative industries, the talent is often represented by middle men, who reach out to end customers, and find avenues whereby, and marketplaces on which, the products and/or services and skillset of the talent they represent are marketed, sold, distributed, licenced, etc. So, in the art world, these middle-men are art galleries and auction houses. In the book publishing sector, these middle-men are called literary agents, while in the film industry, those representing the above-the-line talent (actors, directors, writers) are called acting agents and agencies. Even music composers have their own composer agents, with a handful of players in this niche, in France and the United Kingdom (‟UK”). So, why do you need an agent, as a creative? How do you find an agent? How will your relationship with the agent work?

              1. Why do you need an agent, as a creative?

              As a creative, as a talent, you have mostly honed your creative skills, be it your painting skills, your sculpting skills, your acting skills, your writing and literary skills, your fashion design skills, etc.

              This is a completely different skill set than the one needed to:

              • getting substantial work in your creative field, relying on smooth marketing tactics, social media and public relations skills;

              • networking with the major players in your creative field, be it the most bankable film directors, the most skilled film producers, the stalwart book publishers, the most wealthy art collectors, the largest fashion brands who will hire you as a model for their catwalk presentations, etc.;

              • negotiating sales, licencing, distribution agreements;

              • negotiating service providers agreement to act in a film or write the musical composition and soundtrack to a film;

              • negotiating publishing agreements of a literary work with books publishers and online content providers;

              • managing, in a strategical and optimal manner, the career of the talent, and

              • doing some reputation management work, when and if the career and image of a talent is getting tarnished for some reason.

              Well, in a nutshell, you have the required job description of an agent, set out above!

              This is why you need an agent: because he or she will do all the things mentioned above, for you, in order to enhance your career as a talent, and get you some jobs, some bookings or some sales, depending on what you have to offer.

              Also, there are very low barriers to entry to most creative fields, since everyone can become a player in that field without having to obtain a particular practising licence or authorisation from one’s government to become an artist, a book author, a painter, an actor, a film director, etc.

              Indeed, unlike regulated industries, such as the legal profession, the medical profession, the accountancy profession, the banking and finance profession, creatives do not need to pass any stringent test or exam to be granted the right to work their creative jobs.

              Therefore, the gatekeepers in the creative industries are the agents: since it is in their interest to only work with the best talent, they will pick and choose only the most successful and skilled gamers, designers, artists, painters, actors, film directors, writers, models, music composers, etc. to represent.

              So, if you want to be part of the club, in your creative field, and land those big fat contracts, you must find yourself a good agent.

              2. How do you find an agent?

              Most of the time, it is by word of mouth, or through connections that one finds an agent.

              Of course, being an alumnus from a prestigious creative school, such as the National Film and Television School (‟NFTS”), in the UK, or the Royal Academy of Dramatic Art (‟RADA”) helps tremendously, especially since agents love mingling with young graduates there, attending their final and graduation presentations and reviewing their final graduation projects, to assess the amount of talent such graduates may have.

              Think Alexander McQueen, the famed, and now deceased, fashion designer who was immediately spotted as a major player amongst top fashion designers, by the most elitist fashion press, when he presented his MA graduation collection, at his college Saint Martin’s in 1992.

              Having a family member or friend in the business also helps, and there are countless examples of film actors who gave a major push to their offspring, in France, the UK and the United States (‟US”) by ‟connecting them” to their agents.

              If you are not one for nepotism, then you could also approach and cold-call the best agents for your particular creative field, and present them with your portfolio of works and CV, in the hopes that they will retain you as their client. However, this route is the toughest one, and you will probably get a lot of rejections, if and when you get picked by an agent.

              The web is an excellent source of information to find the best agents in your creative field, in France, the UK and the US.

              For example, on the best articles I have ever read on the highly-secretive agenting business is ‟Le fascinant business des agents de stars”, which dissects the rarefied group of famous acting agents in Paris, France.

              3. How will your relationship with the agent work?

              The agenting business is mostly an unregulated one, although France, ever the formalistic one, has put in place some rules and regulations relating to the agenting profession in its labour code and a decree on the remuneration of artistic agents, which caps the agents’ earnings at 10 percent of the gross remunerations paid to the talent.

              The excellent French streaming series, ‟10 pour cent (‟Call my agent” on English streaming channels) gives a great example of what acting agents do, for a mere 10 percent of the actors’ earnings.

              In the UK and the US, there is way more of a ‟laissez-faire” approach to the agenting business, although the UK has some statutory regulations set out in the Employment Agencies Act 1973 and the Employment Businesses Regulations 2003, which set some standards in terms of:

              • providing relevant information and advice to the agents’ clients (i.e. the talent);

              • conducting all affairs on behalf of the agents’ clients, and

              • keeping records, in particular of the contracts and visa application processes, entered into by the agents’ clients during the course of the creative activities.

              UK and US agents usually get 15 percent commissions, although I have seen percentage rates going as high as 50 percent, in the case of art galleries selling consigned art works on behalf of artists they represent.

              These discrepancies in the commission rates, and the various obligations owed by the agent to the talent, are caused by the variance in the provisions set out in the representation agreements entered into between the talent and his or her agent. Since the ‟freedom to contract” principle applies, the terms of the contractual agreements entered into between the parties are left mostly to the freedom of those parties, except for the rare statutory points mentioned above.

              Very often, at our law firm Crefovi, we get approached by creatives who signed very poorly drafted, and very unbalanced, representation agreements with their agents in the past. Therefore, we support them in terminating such agenting agreements, while attempting to recover any earning unpaid to them by these agents.

              Therefore, as a talent, it is always advisable to instruct an entertainment lawyer, in order to review, amend and negotiate the terms of any draft representation agreement sent by the agent, before such talent signs it.

              Also, it is useful to become a member of a trade union for creative practitioners, such as Equity, which may provide you with ongoing career, business and legal advice, along the way.

              If you want to be successful in the arts, you need a top agent in your creative field to represent you. However, an agent is not your friend, but your future business partner, so you need to establish some clear, transparent and fair working conditions with him or her, from the outset. The best way to achieve this is to instruct a seasoned entertainment lawyer, like us at Crefovi, to negotiate such a representation agreement for you. Then, it should be plain sailing, a lot of hard work and, hopefully, success and recognition at the end of the line, in your creative field!

               Crefovi regularly updates its social media channels, such as LinkedinTwitterInstagramYouTube and Facebook. Check our latest news there!

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                Cancel culture: how the creative industries should ride out the storm

                Crefovi : 19/09/2020 11:29 am : Art law, Articles, Consumer goods & retail, Copyright litigation, Emerging companies, Employment, compensation & benefits, Entertainment & media, Fashion law, Gaming, Intellectual property & IP litigation, Internet & digital media, Law of luxury goods, Litigation & dispute resolution, Music law, Sports & esports, Trademark litigation

                Cancel culture is upon us. This is what we are currently being told by British and French mass media, who have finally caught up with the content of the latest, and first non-fictional, book ever published by acclaimed, yet heavily criticised, American author Bret Easton Ellis, ‟White”. The polemic rages on both sides of the pond, ignited by more than 150 public figures signing a controversial letter denouncing cancel culture. So, what’s going on? What is ‟cancel culture”? Why should you pay attention to, and be cautious about it, as a creative professional? Is this even a thing in Europe and, in particular, in France and the United Kingdom? If so, how should you position yourself, as a creative, on, and about, cancel culture?

                1. What is it? Where does it come from?

                Following the 1990s’ culture wars, which sprang up in the United States of America as a way of denouncing and forbidding contemporary art exhibitions and other medium of creative expression judged by those instigating such culture wars as indecent and obscene, ‟cancel culture” has taken off in the early 2000s on social media, and has since become a cultural phenomenon in the USA and Canada – especially in the last five years or so – pervading every aspect of Northern America’s mass media.

                ‟Cancel culture” refers to the popular desire, and practice, of withdrawing support for (i.e. cancelling) public figures, communities or corporations, after they have done or said something considered objectionable or offensive. ‟Cancel culture” is generally performed on social media, in the form of group online shaming.

                Therefore, as a result of something said or done, which triggered negative reactions and emotions such as anger, disgust, annoyance and hate from some members of the public, a natural person or legal entity or group of natural persons ends up being publicly shamed and humiliated, on internet, via social media platforms (such as Twitter, Facebook and Instagram) and/or more localised media (such as email groups). Online shaming takes many forms, including call-outs, cancellation or cancel culture, doxing, negative reviews, and revenge porn.

                While the culture wars of the 1990s were driven by right-wing religious and conservative individuals in the US (triggered by ‟hot-button” defining issues such as abortion, gun politics, separation of church and state, privacy, recreational drug use, homosexuality), the cancel culture of our 21st century is actually a left-leaning supposedly ‟progressive” identity movement which has taken hold in recent years due to the conversations prompted by #MeToo and other movements that demand greater accountability from public figures. According to the website Merriam-Webster, ‟the term has been credited to black users of Twitter, where it has been used as a hashtag. As troubling information comes to light regarding celebrities who were once popular, such as Bill Cosby, Michael Jackson, Roseanne Barr and Louis C.K. – so come calls to cancel such figures”.

                Yep. Check out your Twitter feed by typing in the search bar the hashtags #cancelled, #cancel or #cancel[then name of the individual, company, organisation you think might be cancelled], and you will be able to review the top current cancellation campaigns and movements launched against Netflix, British actress Millie Bobby Brown, twitter user @GoatPancakes_, etc.

                So under the guise of defending laudable causes such as the recognition of the LGBTQ community and fighting against racism, sexism, sexual assault, homophobia, transphobia, etc., some communities of online ‟righteous” vigilante use violent methods, such as cancellation, in order to administer a virtual punishment to those who are on their radar.

                This call-out and cancel culture is becoming so pervasive and effective that people lose their jobs over a tweet, some upsetting jokes or inappropriate remarks.

                The Roseanne Barr’s story is the ultimate cancellation example, since her ABC show, ‟Roseanne”, was terminated with immediate effect, after Ms Barr posted a tweet about Valerie Jarrett, an African-American woman who was a senior advisor to Barack Obama throughout his presidency and considered one of his most influential aides. R. Barr wrote, in her litigious tweet, if the ‟muslim brotherhood & planet of the apes had a baby = vj”. Whilst Ms Barr’s remark was undoubtedly in extreme bad taste, it is fair to ask whether her tweet – which could have easily been deleted from Twitter to remove such kick well below the belt dealt to Ms Jarrett – justified wrecking Ms Barr’s long-lasting entertainment and broadcasting career in one instant, permanently and for eternity.

                To conclude, social media channels have become the platforms of virtual trials, where justice (i.e. cancellation) is administered in an expeditious manner, with no possibility of dialogue, forgiveness and/or statute of limitation. This arbitrary mass justice movement is not only cruel, but tends to put everything under the same umbrella, indiscriminately: so a person who cracked a sexist joke on Twitter would become vilified and even ‟cancelled”, in the same manner than an individual effectively sentenced for sexual assault by an actual court of justice.

                How did we get to this point? Why does a growing number of Northern Americans feel the uncontrollable need to call-out, cancel and violently pillory some of their public figures, corporations and communities?

                A pertinent analysis, although skewed by a European perspective, is that made by French sociologist Nathalie Heinich in French newspaper Le Monde and explained on the podcast ‟Histoire d’Amériques”, dedicated to Bret Easton Ellis’ ‟White”.

                According to Ms Heinich, there is no legal limitation to freedom of speech – a personal liberty which is enshrined in the first amendment to the US constitution, in the USA. As a consequence, the US congress cannot adopt laws which may limit or curb freedom of expression, as is set out in this first amendment. Therefore, according to N. Heinich, since the US authorities cannot forbid speech and freedom of expression, it is down to US citizens to take on the role of vigilante and organise spectacular information and public campaigns, in order to request the prohibition of such expression and such speech.

                This analysis made by this French sociologist needs to be nuanced: whilst it is true that no US statute or law may curtail freedom of speech in the USA, there is consistent and ample body of case law and common law, which rule on the categories of speech that are given lesser or no protection by the first amendment of the Bill of rights. Those exceptions include:

                • incitement (i.e. the advocacy of the use of force when it is directed to inciting or producing imminent lawless action, Brandenburg v Ohio (1969));

                • incitement to suicide (in 2017, a juvenile court in Massachusetts, USA, ruled that repeatedly encouraging someone to complete suicide was not protected by the first amendment);

                • obscenity (Miller v California (1973) established the Miller test whereby speech is unprotected if ‟the average person, applying contemporary community standards, would find that the subject or work in question, taken as a whole, appeals to the prurient interest”, and ‟the work depicts or describes, in a patently offensive way, sexual conduct or excretory functions specifically defined by applicable state law”, and ‟the work, taken as a whole, lacks serious literary, artistic, political or scientific value”), and

                • child pornography (New York v. Ferber (1982) which ruled that if speech or expression is classified under the child pornography exception at all, it becomes unprotected).

                Therefore, there are some common law exceptions to the first amendment consecrating freedom of speech in the USA, but they are few and far between, and they need to be hotly, and expensively, debated in court, probably months or years after the triggering content was made available in the public space in the first instance, before being found, by a court, unprotected by freedom of speech, in favour of higher public policy interests.

                As a result, many American and Canadian citizens resort to violent tactics, in order to request the immediate, swiftly-enforced and free of legal fees and court fees, prohibition of controversial art exhibitions, entertainment shows, movies, jokes, remarks, etc. first through the 1990s culture wars, and now through the 21st century’s cancel culture.

                This is paradoxical since cancel culture and call-out culture are some of the tools used to advocate for worthy causes such as fighting against racism, sexism, sexual predation and aggression, promoting LGBTQ rights. However, the methods used, through cancel culture and online shaming, to achieve those laudable goals, are very violent and totalitarian, all taking place in the virtual realm of social media, but with very serious and long-lasting ‟real-life” consequences such as loss of employment, loss of reputation, self-harm and sometimes, suicide.

                2. Can cancel culture enter through our European borders, in particular in France and the United Kingdom?

                I hate to break it to you, but cancel culture is already upon us in France and the United Kingdom. We are in a globalised world, all of us are online and check the media and social media from all over the world, thanks to the internet. So this Northern American trend has, of course, reached our European shores.

                It is worth noting that the recognition of ‟cancel culture”, and the realisation that is has become a sizeable part of online culture, took place in the United Kingdom (‟UK”) at the beginning of the year 2020, when British television presenter and socialite Caroline Flack committed suicide allegedly because she was vilified on social media and by British tabloids, further to being sacked from British reality show ‟Love Island”. This UK epiphany about ‟cancel culture” arrived earlier than elsewhere in Europe, probably due to the shared language, and culture, that the British have with Americans and Canadians.

                France is only now getting familiar with this new concept of ‟cancel culture”, further to hearing about the ‟letter on justice and open debate”, drafted, and signed, in July 2020, by more than 150 global intellectuals and authors (among whom Margaret Atwood, Wynton Marsalis, Noam Chomsky, J.K. Rowling and Salman Rushdie), and denouncing the excesses of online shaming and cancel culture. France is currently going through a phase of introspection, asking itself whether ‟la culture de l’annulation” could take off on its Gallic shores. And it is.

                Proof is, I was interviewed for the 8.00pm TV News of France TV on Sunday 20 September 2020, to discuss the attempts made by no less than the new very controversial French minister of the interior, Gerald Darmanin – who was himself under criminal investigation for sexual coercion, harassment and misconduct in 2009, and then again between 2014 and 2017 – to eradicate from all SVoD services platforms such as YouTube, Spotify, Deezer, Dailymotion, the release of the first music album created by Franco-Senegalese 28 years’ old rapper, Freeze Corleone, ‟La Menace Fantôme” (‟LMF”). On which grounds is such cancellation requested? Provoking racial hatred and racial slander, no less.

                Artist Freeze Corleone is an uncompromising rapper, abundantly peppering his raps with the French translations of ‟nigger” (‟négro”) and ‟bitches” (‟pétasses”) in the purest Northern American rap tradition (F. Corleone lived in Montreal, Canada, before settling down in Dakar, Senegal). He also obscurely refers to ‟Adolf”, ‟Goebbels”, ‟Ben Laden” and ‟Sion” in his rather enigmatic LMF lyrics. However, qualifying his body of work in LMF as racial slander and/or provoking racial hatred is a stretch. If you do not like it, because this content triggers you, just move on and don’t listen to it.

                Freedom of speech is enshrined in the French declaration of rights of the human being and citizen, dated 1789. Article 11 of such declaration provides that the ‟free communication of thoughts and opinions is one of the most precious rights of the human being: any Citizen may therefore speak, write, print freely, except where he or she has to answer for the abuse of such freedom in specific cases provided by law”.

                And such specific cases where freedom of speech may be curtailed, under French statutory law, include:

                • Law dated 1881 on the freedom of the press which, while recognising freedom of speech in all publication formats, provides for four criminally-reprehensible exceptions, which are insults, defamation and slander, incentivising the perpetration of criminal offences, if it is followed by acts, as well as gross indecency;

                • Law dated 1972 against opinions provoking racial hatred, which – like the four above-mentioned exceptions, is a criminal offence provided for in the French criminal code;

                • Law dated 1990 against revisionist opinions, which is also a criminal offence in order to penalise those who contest the materiality and factuality of the atrocities committed by the Nazis on minorities, such as Jews, homosexuals and gypsies before and during world war two, and

                • Law dated July 2019 against hateful content on internet, which provisions (requiring to remove all terrorist, pedopornographic, hateful and pornographic content from any website within 24 hours) were almost completely censored by the French constitutional council as a disproportionate infringement to freedom of speech, before entering into force in its expurgated finalised version later on in 2019.

                Therefore, according to French sociologist Nathalie Heinich, France does not need ‟cancel culture” because freedom of speech is already strictly corseted by French statutory laws. By this, she means that French individuals won’t have to take to social media platforms, in order to ‟cancel” whoever is misbehaving, since the all-pervading French nanny state will strike the first blow to the ‟offender”, in the same manner than French minister of justice G. Darmanin unilaterally requested all cultural streaming and video platforms, from YouTube to Spotify and Deezer, as well as all French radio and TV channels, to immediately and permanently remove the songs of Freeze Corleone’s LMF, further to opening a criminal inquiry against the latter, for allegedly committing racial slander and/or provoking racial hatred through his lyrics.

                Is this above-mentioned French regal method a better tool than having the populace publicly decrying and shaming an individual who ‟steps out of line”, by using ‟cancel culture”? By no means, because, at the end of the day, it’s our collective freedom of speech which is being breached and infringed, on a whim. And that is unacceptable, in a democracy.

                On the other side of the Channel, the legal framework around freedom of speech is no panacea either. Freedom of expression is usually ruled through common law, in the UK. However, in 1998, the UK transposed the provisions of the European Convention on human rights – which article 10 provides for the guarantee of freedom of expression – into domestic law, by way of its Human rights act 1998.

                Not only is freedom of expression tightly delineated, in article 12 (Freedom of expression) of the Human rights act 1998, but there is a broad sweep of exceptions to it, under UK common and statutory law. In particular, the following common law and statutory offences, narrowly limit freedom of speech in the UK:

                • threatening, abusive or insulting words or behaviour intending or likely to cause harassment, alarm or distress, or cause a breach of the peace (which has been used to prohibit racist speech targeted at individuals);

                • sending any letter or article which is indecent or grossly offensive with an intent to cause distress or anxiety (which has been used to prohibit speech of a racist or anti-religious nature, as well as some posts on social networks), governed by the Malicious communications act 1988 and the Communications act 2003;

                • incitement (i.e. the encouragement to another person to commit a crime);

                • incitement to racial hatred;

                • incitement to religious hatred;

                • incitement to terrorism, including encouragement of terrorism and dissemination of terrorist publications;

                • glorifying terrorism;

                • collection or possession of a document or record containing information likely to be of use to a terrorist;

                • treason including advocating for the abolition of the monarchy or compassing or imagining the death of the monarch;

                • obscenity;

                • indecency including corruption of public morals and outraging public decency;

                • defamation and loss of reputation, which legal framework is set out in the Defamation act 2013;

                • restrictions on court reporting including names of victims and evidence and prejudicing or interfering with court proceedings;

                • prohibition of post-trial interviews with jurors, and

                • harassment.

                In Europe, and in particular in France and the UK, there is already a tight leash on freedom of speech, whether at common law or statutory law. However, ‟cancel culture” is nonetheless permeating our European online shores, following the trend started in Northern America. As a result, it is a tough time to be a free and creative European citizen, let alone a public figure or corporation, in this 21st century Europe. Indeed, not only could you have trouble with the law, if you were to make triggering or contentious comments or jokes or lyrics in the public domain, but you could also be shot down in flames by the online community, on social media, for your speech and expression.

                3. How to ride the storm of ‟cancel culture”, while remaining consistently creative and productive?

                In the above-mentioned cultural and legal context, it is crucial for creative professionals to think long and hard before posting, broadcasting, speaking, and even behaving.

                As a result, book publishers use the services of ‟sensitivity readers”, before releasing a new work, whereby such consultants read books to be published, in order to look for, and find out, any clichés, stereotypes, scenes, formulations that may offend a part of the readership. This use of sensitivity readers is becoming more and more systematic, especially when the author speaks about themes which he, or she, does not personally master.

                For example, an heterosexual author who describes a gay character, or a white author who describes Mexicans, in his or her new book, will most definitely have a sensitivity consultant review his or her output before publication. Almost inevitably, such sensitivity reader will request that some changes be made to the written content, so as to avoid a boycott of the published book, or cancellation of the author and book, altogether.

                Whilst some of the classics of global literature were perceived as very shocking when they were first released (think ‟Lolita” from Vladimir Nabokov about the obsession of a middle-aged literature professor with a 12-year-old girl, which today would probably be described as a glorification of paedophilia), they would probably never see the light of day, if they were to be published in our era.

                Therefore, today’s cultural sensitivities push towards the publication and broadcasting, of written, audio and visual creative content which is bland, right-thinking, watered-down, in which the author only refers to what he or she knows, in the most neutral way possible.

                This need to use ‟auto-censorship” in any content a creator wishes to publish is compounded by the fact that today, consumers of creative content do not differentiate between the author of the work, and his or her creative output. There is no separation between the author and content creator, and his or her body of work and/or fictional characters. With Millennials and US universities becoming obsessed with identity questions (i.e. the identity or feeling of belonging to a group, such as the gay community, the black community, etc.), it is the person who writes the book, or song, or writes or directs a film, who is now also important, maybe even more important than the work itself.

                As a result, any content creator who writes or sings or produces an audiovisual work about a community other than his or her own, may be accused of cultural appropriation (i.e. the adoption of an element or elements of one culture or identity by members of another culture or identity) and even become the object of victimhood culture (i.e. a term coined by sociologists Bradley Campbell and Jason Manning, in their 2018 book ‟The rise of victimhood culture: microaggressions, safe spaces and the new culture wars”, to describe the attitude whereby the victims publicise microaggressions to call attention to what they see as the deviant behaviour of the offenders, thereby calling attention to their own victimisation, lowering the offender’s moral status and raising their own moral status).

                In this climate, it is therefore easier to publish or broadcast creative content if you belong to a minority (by being, for example, homosexual, black, brown, or a female), while white heterosexual male creators have definitely become disadvantaged, and more susceptible to being targets of ‟cancel culture”.

                To conclude, a lot of prior thoughts and research and preparation and planning need to be put into the creation, and then broadcasting and publication, of any creative content today, not only with respect to such output, but also in relation to the identity, and positioning, of his or her author. If this conscious effort of adhering to right-thinking and bland ideologies is appropriately and astutely done, you and your creative output may successfully ride the storm of, not only French and UK legal limitations to your freedom of expression, but also the nasty impact of cancel culture and online shaming, hence maximising your chances that your creative work generates a commercial success.


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                  Why the valuation of intangible assets matters: the unstoppable rise of intangibles’ reporting in the 21st century’s corporate environment

                  Crefovi : 15/04/2020 8:00 am : Antitrust & competition, Art law, Articles, Banking & finance, Capital markets, Consumer goods & retail, Copyright litigation, Emerging companies, Entertainment & media, Fashion law, Gaming, Hospitality, Hostile takeovers, Information technology - hardware, software & services, Insolvency & workouts, Intellectual property & IP litigation, Internet & digital media, Law of luxury goods, Life sciences, Litigation & dispute resolution, Mergers & acquisitions, Music law, Outsourcing, Private equity & private equity finance, Restructuring, Sports & esports, Tax, Technology transactions, Trademark litigation, Unsolicited bids

                  It is high time France and the UK up their game in terms of accounting for, reporting and leveraging the intangible assets owned by their national businesses and companies, while Asia and the US currently lead the race, here. European lenders need to do their bit, too, to empower creative and innovative SMEs, and provide them with adequate financing to sustain their growth and ambitions, by way of intangible assets backed-lending. 

                  Back in May 2004, I published an in-depth study on the financing of luxury brands, and how the business model developed by large luxury conglomerates was coming out on top. 16 years down the line, I can testify that everything I said in that 2004 study was in the money: the LVMH, Kering, Richemont and L’Oreal of this word dominate the luxury and fashion sectors today, with their multibrands’ business model which allows them to both make vast economies of scale and diversify their economic as well as financial risks.

                  However, in the midst of the COVID 19 pandemic which constrains us all to work from home through virtual tools such as videoconferencing, emails, chats and sms, I came to realise that I omitted a very important topic from that 2004 study, which is however acutely relevant in the context of developing, and growing, creative businesses in the 21st century. It is that intangible assets are becoming the most important and valuable assets of creative companies (including, of course, luxury and fashion houses).

                  Indeed, traditionally, tangible and fixed assets, such as land, plants, stock, inventory and receivables were used to assess the intrinsic value of a company, and, in particular, were used as security in loan transactions. Today, most successful businesses out there, in particular in the technology sector (Airbnb, Uber, Facebook) but not only, derive the largest portion of their worth from their intangible assets, such as intellectual property rights (trademarks, patents, designs, copyright), brands, knowhow, reputation, customer loyalty, a trained workforce, contracts, licencing rights, franchises.

                  Our economy has changed in fundamental ways, as business is now mainly ‟knowledge based”, rather than industrial, and ‟intangibles” are the new drivers of economic activity, the Financial Reporting Council (‟FRC”) set out in its paper ‟Business reporting of intangibles: realistic proposals”, back in February 2019.

                  However, while such intangibles are becoming the driving force of our businesses and economies worldwide, they are consistently ignored by chartered accountants, bankers and financiers alike. As a result, most companies – in particular, Small and Medium Enterprises (‟SMEs”)- cannot secure any financing with money men because their intangibles are still deemed to … well, in a nutshell … lack physical substance! This limits the scope of growth of many creative businesses; to their detriment of course, but also to the detriment of the UK and French economies in which SMEs account for an astounding 99 percent of private sector business, 59 percent of private sector employment and 48 percent of private sector turnover.

                  How could this oversight happen and materialise, in the last 20 years? Where did it all go wrong? Why do we need to very swiftly address this lack of visionary thinking, in terms of pragmatically adapting double-entry bookkeeping and accounting rules to the realities of companies operating in the 21st century?

                  How could such adjustments in, and updates to, our old ways of thinking about the worth of our businesses, be best implemented, in order to balance the need for realistic valuations of companies operating in the “knowledge economy” and the concern expressed by some stakeholders that intangible assets might peter out at the first reputation blow dealt to any business?

                  1. What is the valuation and reporting of intangible assets?

                  1.1. Recognition and measurement of intangible assets within accounting and reporting

                  In the European Union (‟EU”), there are two levels of accounting regulation:

                  • the international level, which corresponds to the International Accounting Standards (‟IAS”), and International Financial Reporting Standards (‟IFRS”) issued by the International Accounting Standards Board (‟IASB”), which apply compulsorily to the consolidated financial statements of listed companies and voluntarily to other accounts and entities according to the choices of each country legislator, and
                  • a national level, where the local regulations are driven by the EU accounting directives, which have been issued from 1978 onwards, and which apply to the remaining accounts and companies in each EU member-state.

                  The first international standard on recognition and measurement of intangible assets was International Accounting Standard 38 (‟IAS 38”), which was first issued in 1998. Even though it has been amended several times since, there has not been any significant change in its conservative approach to recognition and measurement of intangible assets.

                  An asset is a resource that is controlled by a company as a result of past events (for example a purchase or self-creation) and from which future economic benefits (such as inflows of cash or other assets) are expected to flow to this company. An intangible asset is defined by IAS 38 as an identifiable non-monetary asset without physical substance.

                  There is a specific reference to intellectual property rights (‟IPRs”), in the definition of ‟intangible assets” set out in paragraph 9 of IAS 38, as follows: ‟entities frequently expend resources, or incur liabilities, on the acquisition, development, maintenance or enhancement of intangible resources such as scientific or technical knowledge, design and implementation of new processes or systems, licences, intellectual property, market knowledge and trademarks (including brand names and publishing titles). Common examples of items encompassed by these broad headings are computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, fishing licences, import quotas, franchises, customer or supplier relationships, customer loyalty, market share and marketing rights”.

                  However, it is later clarified in IAS 38, that in order to recognise an intangible asset on the face of balance sheet, it must be identifiable and controlled, as well as generate future economic benefits flowing to the company that owns it.

                  The recognition criterion of ‟identifiability” is described in paragraph 12 of IAS 38 as follows.

                  An asset is identifiable if it either:

                  a. is separable, i.e. capable of being separated or divided from the entity and sold, transferred, licenced, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so; or

                  b. arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations”.

                  ‟Control” is an essential feature in accounting and is described in paragraph 13 of IAS 38.

                  An entity controls an asset if the entity has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits. The capacity of an entity to control the future economic benefits from an intangible asset would normally stem from legal rights that are enforceable in a court of law. In the absence of legal rights, it is more difficult to demonstrate control. However, legal enforceability of a right is not a necessary condition for control because an entity may be able to control the future economic benefits in some other way”.

                  In order to have an intangible asset recognised as an asset on company balance sheet, such intangible has to satisfy also some specific accounting recognition criteria, which are set out in paragraph 21 of IAS 38.

                  An intangible asset shall be recognised if, and only if:

                  a. it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and 

                  b. the cost of the asset can be measured reliably”.

                  The recognition criteria illustrated above are deemed to be always satisfied when an intangible asset is acquired by a company from an external party at a price. Therefore, there are no particular problems to record an acquired intangible asset on the balance sheet of the acquiring company, at the consideration paid (i.e. historical cost).

                  1.2. Goodwill v. other intangible assets

                  Here, before we develop any further, we must draw a distinction between goodwill and other intangible assets, for clarification purposes.

                  Goodwill is an intangible asset that is associated with the purchase of one company by another. Specifically, goodwill is the portion of the purchase price that is higher than the sum of the net fair value of all of the assets purchased in the acquisition and the liabilities assumed in the process (= purchase price of the acquired company – (net fair market value of identifiable assets – net fair value of identifiable liabilities)).

                  The value of a company’s brand name, solid customer base, good customer relations, good employee relations, as well as proprietary technology, represent some examples of goodwill, in this context.

                  The value of goodwill arises in an acquisition, i.e. when an acquirer purchases a target company. Goodwill is then recorded as an intangible asset on the acquiring company’s balance sheet under the long-term assets’ account.

                  Under Generally Accepted Accounting Principles (‟GAAP”) and IFRS, these companies which acquired targets in the past and therefore recorded those targets’ goodwill on their balance sheet, are then required to evaluate the value of goodwill on their financial statements at least once a year, and record any impairments.

                  Impairment of an asset occurs when its market value drops below historical cost, due to adverse events such as declining cash flows, a reputation backlash, increased competitive environment, etc. Companies assess whether an impairment is needed by performing an impairment test on the intangible asset. If the company’s acquired net assets fall below the book value, or if the company overstated the amount of goodwill, then it must impair or do a write-down on the value of the asset on the balance sheet, after it has assessed that the goodwill is impaired. The impairment expense is calculated as the difference between the current market value and the purchase price of the intangible asset. The impairment results in a decrease in the goodwill account on the balance sheet.

                  This expense is also recognised as a loss on the income statement, which directly reduces net income for the year. In turn, earnings per share (‟EPS”) and the company’s stock price are also negatively affected.

                  The Financial Accounting Standards Board (‟FASB”), which sets standards for GAAP rules, and the IASB, which sets standards for IFRS rules, are considering a change to how goodwill impairment is calculated. Because of the subjectivity of goodwill impairment, and the cost of testing impairment, FASB and IASB are considering reverting to an older method called ‟goodwill amortisation” in which the value of goodwill is slowly reduced annually over a number of years.

                  As set out above, goodwill is not the same as other intangible assets because it is a premium paid over fair value during a transaction, and cannot be bought or sold independently. Meanwhile, other intangible assets can be bought and sold independently.

                  Also, goodwill has an indefinite life, while other intangibles have a definite useful life (i.e. an accounting estimate of the number of years an asset is likely to remain in service for the purpose of cost-effective revenue generation).

                  1.3. Amortisation, impairment and subsequent measure of intangible assets other than goodwill

                  That distinction between goodwill and other intangible assets being clearly drawn, let’s get back to the issues revolving around recording intangible assets (other than goodwill) on the balance sheet of a company.

                  As set out above, if some intangible assets are acquired as a consequence of a business purchase or combination, the acquiring company recognises all these intangible assets, provided that they meet the definition of an intangible asset. This results in the recognition of intangibles – including brand names, IPRs, customer relationships – that would not have been recognised by the acquired company that developed them in the first place. Indeed, paragraph 34 of IAS 38 provides that ‟in accordance with this Standard and IFRS 3 (as revised in 2008), an acquirer recognises at the acquisition date, separately from goodwill, an intangible asset of the acquiree, irrespective of whether the asset had been recognised by the acquiree before the business combination. This means that the acquirer recognises as an asset separately from goodwill an in-process research and development project of the acquiree, if the project meets the definition of an intangible asset. An acquiree’s in-process research and development project meets the definition of an intangible asset when it:

                  a. meets the definition of an asset, and 

                  b. is identifiable, i.e. separable or arises from contractual or other legal rights.”

                  Therefore, in a business acquisition or combination, the intangible assets that are ‟identifiable” (either separable or arising from legal rights) can be recognised and capitalised in the balance sheet of the acquiring company.

                  After initial recognition, the accounting value in the balance sheet of intangible assets with definite useful lives (e.g. IPRs, licences) has to be amortised over the intangible asset’s expected useful life, and is subject to impairment tests when needed. As explained above, intangible assets with indefinite useful lives (such as goodwill or brands) will not be amortised, but only subject at least annually to an impairment test to verify whether the impairment indicators (‟triggers”) are met. 

                  Alternatively, after initial recognition (at cost or at fair value in the case of business acquisitions or mergers), intangible assets with definite useful lives may be revalued at fair value less amortisation, provided there is an active market for the asset to be referred to, as can be inferred from paragraph 75 of IAS 38:

                  After initial recognition, an intangible asset shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. For the purpose of revaluations under this Standard, fair value shall be measured by reference to an active market. Revaluations shall be made with such regularity that at the end of the reporting period the carrying amount of the asset does not differ materially from its fair value.”

                  However, this standard indicates that the revaluation model can only be used in rare situations, where there is an active market for these intangible assets.

                  1.4. The elephant in the room: a lack of recognition and measurement of internally generated intangible assets

                  All the above about the treatment of intangible assets other than goodwill cannot be said for internally generated intangible assets. Indeed, IAS 38 sets out important differences in the treatment of those internally generated intangibles, which is currently – and rightfully – the subject of much debate among regulators and other stakeholders.

                  Internally generated intangible assets are prevented from being recognised, from an accounting standpoint, as they are being developed (while a business would normally account for internally generated tangible assets). Therefore, a significant proportion of internally generated intangible assets is not recognised in the balance sheet of a company. As a consequence, stakeholders such as investors, regulators, shareholders, financiers, are not receiving some very relevant information about this enterprise, and its accurate worth.

                  Why such a standoffish attitude towards internally generated intangible assets? In practice, when the expenditure to develop intangible asset is incurred, it is often very unclear whether that expenditure is going to generate future economic benefits. It is this uncertainty that prevents many intangible assets from being recognised as they are being developed. This perceived lack of reliability of the linkage between expenditures and future benefits pushes towards the treatment of such expenditures as ‟period cost”. It is not until much later, when the uncertainty is resolved (e.g. granting of a patent), that an intangible asset may be capable of recognition. As current accounting requirements primarily focus on transactions, an event such as the resolution of uncertainty surrounding an internally developed IPR is generally not captured in company financial statements.

                  Let’s take the example of research and development costs (‟R&D”), which is one process of internally creating certain types of intangible assets, to illustrate the accounting treatment of intangible assets created in this way. 

                  Among accounting standard setters, such as IASB with its IAS 38, the most frequent practice is to require the immediate expensing of all R&D. However, France, Italy and Australia are examples of countries where national accounting rule makers allow the capitalisation of R&D, subject to conditions being satisfied. 

                  Therefore, in some circumstances, internally generated intangible assets can be recognised when the relevant set of recognition criteria is met, in particular the existence of a clear linkage of the expenditure to future benefits accruing to the company. This is called condition-based capitalisation. In these cases, the cost that a company has incurred in that financial year, can be capitalised as an asset; the previous costs having already been expensed in earlier income statements. For example, when a patent is finally granted by the relevant intellectual property office, only the expenses incurred during that financial year can be capitalised and disclosed on the face of balance sheet among intangible fixed assets.

                  To conclude, under the current IFRS and GAAP regimes, internally generated intangible assets, such as IPRs, can only be recognised on balance sheet in very rare instances.

                  2.Why value and report intangible assets?

                  As developed in depth by the European Commission (‟EC”) in its 2013 final report from the expert group on intellectual property valuation, the UK intellectual property office (‟UKIPO”) in its 2013 ‟Banking on IP?” report and the FRC in its 2019 discussion paper ‟Business reporting of intangibles: realistic proposals”, the time for radical change to the accounting of intangible assets has come upon us. 

                  2.1. Improving the accurateness and reliability of financial communication

                  Existing accounting standards should be advanced, updated and modernised to take greater account of intangible assets and consequently improve the relevance, objectivity and reliability of financial statements.

                  Not only that, but informing stakeholders (i.e. management, employees, shareholders, regulators, financiers, investors) appropriately and reliably is paramount today, in a corporate world where companies are expected to accurately, regularly and expertly manage and broadcast their financial communication to medias and regulators.

                  As highlighted by Janice Denoncourt in her blog post ‟intellectual property, finance and corporate governance”, no stakeholder wants an iteration of the Theranos’ fiasco, during which inventor and managing director Elizabeth Holmes was indicted for fraud in excess of USD700 million, by the United States Securities and Exchange Commission (‟SEC”), for having repeatedly, yet inaccurately, said that Theranos’ patented blood testing technology was both revolutionary and at the last stages of its development. Elizabeth Holmes made those assertions on the basis of the more than 270 patents that her and her team filed with the United States patent and trademark office (‟USPTO”), while making some material omissions and misleading disclosures to the SEC, via Theranos’ financial statements, on the lame justification that ‟Theranos needed to protect its intellectual property” (sic).

                  Indeed, the stakes of financial communication are so high, in particular for the branding and reputation of any ‟knowledge economy” company, that, back in 2002, LVMH did not hesitate to sue Morgan Stanley, the investment bank advising its nemesis, Kering (at the time, named ‟PPR”), in order to obtain 100 million Euros of damages resulting from Morgan Stanley’s alleged breach of conflicts of interests between its investment banking arm (which advised PPR’s top-selling brand, Gucci) and Morgan Stanley’s financial research division. According to LVMH, Clare Kent, Morgan Stanley’s luxury sector-focused analyst, systematically drafted and then published negative and biased research against LVMH share and financial results, in order to favor Gucci, the top-selling brand of the PPR luxury conglomerate and Morgan Stanley’s top client. While this lawsuit – the first of its kind in relation to alleged biased conduct in a bank’s financial analysis – looked far-fetched when it was lodged in 2002, LVMH actually won, both in first instance and on appeal.

                  Having more streamlined and accurate accounting, reporting and valuation of intangible assets – which are, today, the main and most valuable assets of any 21st century corporation – is therefore paramount for efficient and reliable financial communication.

                  2.2. Improving and diversifying access to finance

                  Not only that, but recognising the worth and inherent value of intangible assets, on balance sheet, would greatly improve the chances of any company – in particular, SMEs – to successfully apply for financing.

                  Debt finance is notoriously famous for shying away from using intangible assets as main collateral against lending because it is too risky.

                  For example, taking appropriate security controls over a company’s registered IPRs in a lending scenario would involve taking a fixed charge, and recording it properly on the Companies Registry at Companies House (in the UK) and on the appropriate IPRs’ registers. However, this hardly ever happens. Typically, at best, lenders are reliant on a floating charge over IPRs, which will crystallise in case of an event of default being triggered – by which time, important IPRs may have disappeared into thin air, or been disposed of; hence limiting the lender’s recovery prospects.

                  Alternatively, it is now possible for a lender to take an assignment of an IPR by way of security (generally with a licence back to the assignor to permit his or her continued use of the IPR) by an assignment in writing signed by the assignor[1]. However, this is rarely done in practice. The reason is to avoid ‟maintenance”, i.e. to prevent the multiplicity of actions. Indeed, because intangibles are incapable of being possessed, and rights over them are therefore ultimately enforced by action, it has been considered that the ability to assign such rights would increase the number of actions[2].

                  Whilst there are improvements needed to the practicalities and easiness of registering a security interest over intangible assets, the basic step that is missing is a clear inventory of IPRs and other intangible assets, on balance sheet and/or on yearly financial statements, without which lenders can never be certain that these assets are in fact to hand.

                  Cases of intangible asset- backed lending (‟IABL”) have occurred, whereby a bank provided a loan to a pension fund against tangible assets, and the pension fund then provided a sale and leaseback arrangement against intangible assets. Therefore, IABL from pension funds (on a sale and leaseback arrangement), rather than banks, provides a route for SMEs to obtain loans.

                  There have also been instances where specialist lenders have entered into sale and licence-back agreements, or sale and leaseback agreements, secured against intangible assets, including trademarks and software copyright. 

                  Some other types of funders than lenders, however, are already making the ‟intangible assets” link, such as equity investors (business angels, venture capital companies and private equity funds). They know that IPRs and other intangibles represent part of the ‟skin in the game” for SMEs owners and managers, who have often expended significant time and money in their creation, development and protection. Therefore, when equity investors assess the quality and attractiveness of investment opportunities, they invariably include consideration of the underlying intangible assets, and IPRs in particular. They want to understand the extent to which intangible assets owned by one of the companies they are potentially interested investing in, represent a barrier to entry, create freedom to operate and meet a real market need.

                  Accordingly, many private equity funds, in particular, have delved into investing in luxury companies, attracted by their high gross margins and net profit rates, as I explained in my 2013 article ‟Financing luxury companies: the quest of the Holy Grail (not!)”. Today, some of the most active venture capital firms investing in the European creative industries are Accel, Advent Venture Partners, Index Ventures, Experienced Capital, to name a few.

                  2.3. Adopting a systematic, consistent and streamlined approach to the valuation of intangible assets, which levels the playing field

                  If intangible assets are to be recognised in financial statements, in order to adopt a systematic and streamlined approach to their valuation, then fair value is the most obvious alternative to cost, as explained in paragraph 1.3. above.

                  How could we use fair value more widely, in order to capitalise intangible assets in financial statements?

                  IFRS 13 ‟Fair Value Measurements” identifies three widely-used valuation techniques: the market approach, the cost approach and the income approach.

                  The market approachuses prices and other relevant information generated by market transactions involving identical or comparable” assets. However, this approach is difficult in practice, since when transactions in intangibles occur, the prices are rarely made public. Publicly traded data usually represents a market capitalisation of the enterprise, not singular intangible assets. Market data from market participants is often used in income-based models such as determining reasonable royalty rates and discount rates. Direct market evidence is usually available in the valuation of internet domain names, carbon emission rights and national licences (for radio stations, for example). Other relevant market data include sale/licence transactional data, price multiples and royalty rates.

                  The cost approachreflects the amount that would be required currently to replace the service capacity of an asset”. Deriving fair value under this approach therefore requires estimating the costs of developing an equivalent intangible asset. In practice, it is often difficult to estimate in advance the costs of developing an intangible. In most cases, replacement cost new is the most direct and meaningful cost-based means of estimating the value of an intangible asset. Once replacement cost new is estimated, various forms of obsolescence must be considered, such as functional, technological and economic. Cost-based models are best used for valuing an assembled workforce, engineering drawings or designs and internally developed software where no direct cash flow is generated.

                  The income approach essentially converts future cash flows (or income and expenses) to a single, discounted present value, usually as a result of increased turnover of cost savings. Income-based models are best used when the intangible asset is income producing or when it allows an asset to generate cash flow. The calculation may be similar to that of value in use. However, to arrive at fair value, the future income must be estimated from the perspective of market participants rather than that of the entity. Therefore, applying the income approach requires an insight into how market participants would assess the benefits (cash flows) that will be obtained uniquely from an intangible asset (where such cash flows are different from the cash flows related to the whole company). Income-based methods are usually employed to value customer related intangibles, trade names, patents, technology, copyrights, and covenants not to compete.

                  An example of IPRs’ valuation by way of fair value, using the cost and income approaches in particular, is given in the excellent presentation by Austin Jacobs, made during ialci’s latest law of luxury goods and fashion seminar on intellectual property rights in the fashion and luxury sectors.

                  In order to make these three above-mentioned valuation techniques more effective, with regards to intangible assets, and because many intangibles will not be recognised in financial statements as they fail to meet the definition of an asset or the recognition criteria, a reconsideration to the ‟Conceptual Framework to Financial Reporting” needs being implemented by the IASB.

                  These amendments to the Conceptual Framework would permit more intangibles to be recognised within financial statements, in a systematic, consistent, uniform and streamlined manner, therefore levelling the playing field among companies from the knowledge economy.

                  Let’s not forget that one of the reasons WeWork co founder, Adam Neumann, was violently criticised, during WeWork’s failed IPO attempt, and then finally ousted, in 2019, was the fact that he was paid nearly USD6 million for granting the right to use his registered word trademark ‟We”, to his own company WeWork. In its IPO filing prospectus, which provided the first in-depth look at WeWork’s financial results, WeWork characterised the nearly USD6 million payment as ‟fair market value”. Many analysts, among which Scott Galloway, begged to differ, outraged by the lack of rigour and realism in the valuation of the WeWork brand, and the clearly opportunistic attitude adopted by Adam Neumann to get even richer, faster.

                  2.4. Creating a liquid, established and free secondary market of intangible assets

                  IAS 38 currently permits intangible assets to be recognised at fair value, as discussed above in paragraphs 1.3. and 2.3., measured by reference to an active market.

                  While acknowledging that such markets may exist for assets such as ‟freely transferable taxi licences, fishing licences or production quotas”, IAS 38 states that ‟it is uncommon for an active market to exist for an intangible asset”. It is even set out, in paragraph 78 of IAS 38 that ‟an active market cannot exist for brands, newspaper mastheads, music and film publishing rights, patents or trademarks, because each such asset is unique”.

                  Markets for resale of intangible assets and IPRs do exist, but are presently less formalised and offer less certainty on realisable values. There is no firmly established secondary transaction market for intangible assets (even though some assets are being sold out of insolvency) where value can be realised. In addition, in the case of forced liquidation, intangible assets’ value can be eroded, as highlighted in paragraph 2.2. above.

                  Therefore, markets for intangible assets are currently imperfect, in particular because there is an absence of mature marketplaces in which intangible assets may be sold in the event of default, insolvency or liquidation. There is not yet the same tradition of disposal, or the same volume of transaction data, as that which has historically existed with tangible fixed assets.

                  Be that as it may, the rise of liquid secondary markets of intangible assets is unstoppable. In the last 15 years, the USA have been at the forefront of IPRs auctions, mainly with patent auctions managed by specialist auctioneers such as ICAP Ocean Tomo and Racebrook. For example, in 2006, ICAP Ocean Tomo sold 78 patent lots at auction for USD8.5 million, while 6,000 patents were sold at auction by Canadian company Nortel Networks for USD4.5 billion in 2011.

                  However, auctions are not limited to patents, as demonstrated by the New York auction, successfully organised by ICAP Ocean Tomo in 2006, on lots composed of patents, trademarks, copyrights, musical rights and domain names, where the sellers were IBM, Motorola, Siemens AG, Kimberly Clark, etc. In 2010, Racebrook auctioned 150 American famous brands from the retail and consumer goods’ sectors.

                  In Europe, in 2012, Vogica successfully sold its trademarks and domain names at auction to competitor Parisot Group, upon its liquidation.

                  In addition, global licensing activity leaves not doubt that intangible assets, in particular IPRs, are, in fact, very valuable, highly tradable and a very portable asset class.

                  It is high time to remove all market’s imperfections, make trading more transparent and offer options to the demand side, to get properly tested.

                  3. Next steps to improve the valuation and reporting of intangible assets

                  3.1. Adjust IAS 38 and the Conceptual Framework to Financial Reporting to the realities of intangible assets’ reporting

                  Mainstream lenders, as well as other stakeholders, need cost-effective, standardised approaches in order to capture and process information on intangibles and IPRs (which is not currently being presented by SMEs).

                  This can be achieved by reforming IAS 38 and the ‟Conceptual Framework to Financial Reporting”, at the earliest convenience, in order to make most intangible assets capitalised on financial statements at realistic and consistent valuations.

                  In particular, the reintroduction of amortisation of goodwill may be a pragmatic way to reduce the impact of different accounting treatment for acquired and internally generated intangibles.

                  In addition, narrative reporting (i.e. reports with titles such as ‟Management Commentary” or ‟Strategic Report”, which generally form part of the annual report, and other financial communication documents such as ‟Preliminary Earnings Announcements” that a company provides primarily for the information of investors) must set out detailed information on unrecognised intangibles, as well as amplify what is reported within the financial statements. 

                  3.2. Use standardised and consistent metrics within financial statements and other financial communication documents

                  The usefulness and credibility of narrative information would be greatly enhanced by the inclusion of metrics (i.e. numerical measures that are relevant to an assessment of the company’s intangibles) standardised by industry. The following are examples of objective and verifiable metrics that may be disclosed through narrative reporting:

                  • a company that identifies customer loyalty as critical to the success of its business model might disclose measures of customer satisfaction, such as the percentage of customers that make repeat purchases;
                  • if the ability to innovate is a key competitive advantage, the proportion of sales from new products may be a relevant metric;
                  • where the skill of employees is a key driver of value, employee turnover may be disclosed, together with information about their training.

                  3.3. Make companies’ boards accountable for intangibles’ reporting

                  Within a company, at least one appropriately qualified person should be appointed and publicly reported as having oversight and responsibility for intangibles’ auditing, valuation, due diligence and reporting (for example a director, specialist advisory board or an external professional adviser).

                  This would enhance the importance of corporate governance and board oversight, in addition to reporting, with respect to intangible assets.

                  In particular, some impairment tests could be introduced, to ensure that businesses are well informed and motivated to adopt appropriate intangibles’ management practices, which should be overseen by the above-mentioned appointed board member.

                  3.4. Create a body that trains about, and regulates, the field of intangible assets’ valuation and reporting

                  The creation of a professional organisation for the intangible assets’ valuation profession would increase transparency of intangibles’ valuations and trust towards valuation professionals (i.e. lawyers, IP attorneys, accountants, economists, etc).

                  This valuation professional organisation would set some key objectives that will protect the public interest in all matters that pertain to the profession, establish professional standards (especially standards of professional conduct) and represent professional valuers.

                  This organisation would, in addition, offer training and education on intangibles’ valuations. Therefore, the creation of informative material and the development of intangible assets’ training programmes would be a priority, and would guarantee the high quality valuation of IPRs and other intangibles as a way of boosting confidence for the field.

                  Company board members who are going to be appointed as having accountability and responsibility for intangibles’ valuation within the business, as mentioned above in paragraph 3.3., could greatly benefit from regular training sessions offered by this future valuation professional organisation, in particular for continuing professional development purposes.

                  3.5. Create a powerful register of expert intangible assets’ valuers

                  In order to build trust, the creation of a register of expert intangibles’ valuers, whose ability must first be certified by passing relevant knowledge tests, is key. 

                  Inclusion on this list would involve having to pass certain aptitudes tests and, to remain on it, valuers would have to maintain a standard of quality in the valuations carried out, whereby the body that manages this registry would be authorised to expel members whose reports are not up to standard. This is essential in order to maintain confidence in the quality and skill of the valuers included on the register.

                  The entity that manages this body of valuers would have the power to review the valuations conducted by the valuers certified by this institution as a ‟second instance”. The body would need to have the power to re-examine the assessments made by these valuers (inspection programme), and even eliminate them if it is considered that the assessment is overtly incorrect (fair disciplinary mechanism).

                  3.6. Establish an intangible assets’ marketplace and data-source

                  The development most likely to transform IPRs and intangibles as an asset class is the emergence of more transparent and accessible marketplaces where they can be traded. 

                  In particular, as IPRs and intangible assets become clearly identified and are more freely licensed, bought and sold (together with or separate to the business), the systems available to register and track financial interests will need to be improved. This will require the cooperation of official registries and the establishment of administrative protocols. 

                  Indeed, the credibility of intangibles’ valuations would be greatly enhanced by improving valuation information, especially by collecting information and data on actual and real intangibles’ transactions in a suitable form, so that it can be used, for example, to support IPRs asset-based lending decisions. If this information is made available, lenders and expert valuers will be able to base their estimates on more widely accepted and verified assumptions, and consequently, their valuation results – and valuation reports – would gain greater acceptance and reliability from the market at large.

                  The wide accessibility of complete, quality information which is based on real negotiations and transactions, via this open data-source, would help to boost confidence in the validity and accuracy of valuations, which will have a very positive effect on transactions involving IPRs and other intangibles.

                  3.7. Introduce a risk sharing loan guarantee scheme for banks to facilitate intangibles’ secured lending

                  A dedicated loan guarantee scheme needs being introduced, to facilitate intangible assets’ secured lending to innovative and creative SMEs.

                  Asia is currently setting the pace in intangibles-backed lending. In 2014, the intellectual property office of Singapore (‟IPOS”) launched a USD100 million ‟IP financing scheme” designed to support local SMEs to use their granted IPRs as collateral for bank loans. A panel of IPOS-appointed valuers assess the applicant’s IPR portfolio using standard guidelines to provide lenders with a basis on which to determine the amount of funds to be advanced. The development of a national valuation model is a noteworthy aspect of the scheme and could lead to an accepted valuation methodology in the future.

                  The Chinese intellectual property office (‟CIPO”) has developed some patent-backed debt finance initiatives. Only 6 years after the ‟IP pledge financing” programme was launched by CIPO in 2008, CIPO reported that Chinese companies had secured over GBP6 billion in IPRs-backed loans since the programme launched. The Chinese government having way more direct control and input into commercial bank lending policy and capital adequacy requirements, it can vigorously and potently implement its strategic goal of increasing IPRs-backed lending. 

                  It is high time Europe follows suit, at least by putting in place some loan guarantees that would increase lender’s confidence in making investments by sharing the risks related to the investment. A guarantor assumes a debt obligation if the borrower defaults. Most loan guarantee schemes are established to correct perceived market failures by which small borrowers, regardless of creditworthiness, lack access to the credit resources available to large borrowers. Loan guarantee schemes level the playing field.

                  The proposed risk sharing loan guarantee scheme set up by the European Commission or by a national government fund (in particular in the UK, who is brexiting) would be specifically targeted at commercial banks in order to stimulate intangibles-secured lending to innovative SMEs. The guarantor would fully guarantee the intangibles-secured loan and share the risk of lending to SMEs (which have suitable IPRs and intangibles) with the commercial bank. 

                  The professional valuer serves an important purpose, in this future loan guarantee scheme, since he or she will fill the knowledge gap relating to the IPRs and intangibles, as well as their value, in the bank’s loan procedure. If required, the expert intangibles’ valuer provides intangibles’ valuation expertise and technology transfer to the bank, until such bank has built the relevant capacity to perform intangible assets’ valuations. Such valuations would be performed, either by valuers and/or banks, according to agreed, consistent, homogenised and accepted methods/standards and a standardised intangible asset’s valuation methodology.

                  To conclude, in this era of ultra-competitiveness and hyper-globalisation, France and the UK, and Europe in general, must immediately jump on the saddle of progress, by reforming outdated and obsolete accounting and reporting standards, as well as by implementing all the above-mentioned new measures and strategies, to realistically and consistently value, report and leverage intangible assets in the 21st century economy.

                  [1] ‟Lingard’s bank security documents”, Timothy N. Parsons, 4th edition, LexisNexis, page 450 and seq.

                  [2] ‟Taking security – law and practice”, Richard Calnan, Jordans, page 74 and seq.


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                    How to defend yourself in case the artwork bought at auction does not match its pre-sale description?

                    Crefovi : 28/10/2019 3:06 pm : Art law, Articles, Consumer goods & retail, Law of luxury goods, Litigation & dispute resolution, Product liability

                    While collecting art works is becoming an increasingly popular & sexy hobby for affluent individuals, the financial & legal risks involved in such activities are very high, especially when such art pieces are bought at auction. Indeed, it is in the interest of auction houses to depict a rosy & partial portrait of any artwork on sale, which often does not reflect the exact provenance and/or condition of such work of art. How can a collector prevent such partial disclosures and inaccurate embellishments relating to the condition or provenance of a coveted artwork on sale, at auction?

                    1. A real risk

                    Our art law firm Crefovi currently advises several individuals – all art collectors – who have fallen into the following trap: they all based themselves on the (proven, later, to be incorrect) information provided by the auction house responsible for the sale of an artwork, to enthusiastically and successfully bid at auction for such work of art. When, or shortly after, they went to collect the artwork, deception ensued, as they found out that they had been the subject of deceit, as far as the condition and/or provenance of the artwork were concerned. Therefore, the artwork you bought at auction does not match its pre-sale description.

                    For example, one of our clients is a keen collector of Chinese antics who resides in the United Kingdom, on his Chinese passport and work visa. In an auction sale organised by the French auction house Tajan, he mostly relied on the condition report provided by such auctioneer, which set out that the Chinese vase was in ‟good aged-related condition (and had) normal age-related traces of wear”, to successfully bid for that lot. When he came to Tajan’s offices in Paris to view this Chinese vase for which he was now the successful bidder, further to obtaining a travel visa to France, he was floored to discover that this vase was not as described in the condition report. The state of the vase is, indeed, poor, since it is damaged by several marks and traces of wear and tear, in many places; there is a large crack at the base of such vase, which means that no water stays in the vase because it escapes from that crack; several enamel parts are missing; certains parts, such as the panels on the inferior part of the vase and the enamels on the neck of the vase, seem to have been added after the manufacturing stage of the vase, etc.

                    Another example is the successful bid made by another client of our firm, for a painting ‟attributed to Alighiero e Boetti” as per the catalogue and website of the auction house Bellmans. While our client took the time to view and inspect the painting prior to its auction at Bellmans’ Sussex Room, he was in great turmoil when he was turned down by the Archivio Alighiero Boetti (a cultural association based in Rome, founded by the heirs of the artist Alighiero Boetti, in order to authenticate works of art which are alleged to have been made by Alighiero Boetti) to which he had asked for a certificate of authenticity for that art work. Indeed, when he spoke to Matteo Boetti, son of Alighiero Boetti and president of Archivio Alighiero Boetti, he was told that this painting had already been unsuccessfully submitted to the authentication committee three times before, in order to obtain a certificate of authenticity! Archivio Alighiero Boetti declined to provide such certificate of authenticity to the previous owners of the artwork because, according to Matteo Boetti, it was a fake, a forgery, a counterfeit, and therefore not of the hand of Alighiero Boetti.

                    This risk of falling prey to the deceit of auction houses (and of their anonymous sellers of such flawed artworks) is definitely not mitigated by the terms and conditions of sale of such auction houses. Indeed, these T&Cs are riddled with liability waivers, such as this one extracted from Bellmans’ T&Cs: ‟Please note that Lots (in particular second-hand Lots) are unlikely to be in perfect condition. Lots are sold ‟as is” (i.e. as you see them at the time of the auction). Neither we nor the Seller accept any liability for the condition of second-hand Lots or for any condition issues affecting a Lot if such issues are included in the description of a Lot in the auction catalogue (or in any saleroom notice) and/ or which the inspection of a Lot by the Buyer ought to have revealed” or these gems set out in Tajan’s T&Cs: ‟If no information on restoration, an accident, retouching or any other incident is provided in the catalogue, the condition reports or labels or during a verbal announcement, this does not mean that the item is void of defects. The condition of the frames is not guaranteed” and ‟Buyers may obtain a condition report on items included in the catalogue that are estimated at more than €1 000 upon request. Information contained in such reports is provided free of charge and solely to serve as an indication. It shall by no means incur the liability of Tajan”. Of course it is very likely that such liability waivers, which remove any liability from the shoulders of a deceitful auctioneer, are unlawful. But it will take a protracted, expensive and painful lawsuit to demonstrate that such liability waivers are in severe breach of English or French contractual law. Which art collector has the time or appetite for that?

                    2. To pay or not to pay the hammer price?

                    In the two above-mentioned examples, our clients faced several scenarios: our fervent Chinese art collector refused to pay for the price of the Chinese vase, immediately rescinding his successful bid by way of a formal email to Tajan, sent on the same day that he discovered that the Chinese vase was not as per the description made of it in the condition report and Tajan’s catalogue. However, our Italian modern art enthusiast client dutifully paid the price of GBP25,912 by credit card to Bellmans, on the day of his successful bid for the painting ‟attributed to Alighiero e Boetti” (sic).

                    While not settling the price and not collecting the deceitful lot was the right move to make, for the Chinese art collector who immediately spotted the fraud upon close inspection of the Chinese vase post-auction, it opened the way to court litigation since Tajan and its anonymous seller contested, of course, that their condition report and catalogue had hidden the truth about the poor condition of such lot. Indeed, further to an unsuccessful attempt to mediate this dispute with the (rather useless) ‟commissaire du gouvernement près le Conseil des ventes volontaires de meubles aux enchères” (i.e. the statutory body which role is to regulate French auction houses), Tajan lodged a lawsuit against our client with the Paris Tribunal de grande instance in early 2017 which is still ongoing, to this day.

                    Meanwhile, our UK-based collector also did the right thing, by settling the hammer price and buyer’s premium including VAT, and by collecting the painting ‟attributed to Alighiero e Boetti” since he was still convinced that this was a genuine painting made by the hand of Alighiero Boetti; until he was proved otherwise by the authentication committee of Archivio Alighiero Boetti, a few weeks later.

                    To conclude on this point, the logical rule is that, as soon as you discover the deceit or forgery, you should let the auction house know that you rescind the successful bid by way of a formal communication with them; be it before you have paid the hammer price and buyer’s premium, or after. Ideally, you want to make such formal disclosure of the deceit or counterfeit to the auction house as soon as possible, since most auctioneers set out, in their T&Cs, that they will not consider claims of forgery by the successful bidder, if these claims are made after a short period following the successful bid. Here is, for example, Bellmans’ liability waiver on this topic: ‟You may return any Lot which is found to be a Deliberate Forgery to us within 21 days of the auction provided that you return the Lot to us in the same condition as when it was released to you, accompanied by a written statement identifying the Lot from the relevant catalogue description and a written statement of defects”.

                    3. Preemptive measures to avoid being the unhappy successful bidder of a deceitful lot

                    Buyers of art works have no mandatory obligations to conduct any due diligence, under French or English law or case law.

                    However, the principle of caveat emptor (i.e. ‟buyer beware”, in Latin) applies, by which the onus is on the buyer to investigate the property or object he is acquiring. Since such burden of due diligence rests with buyers, they typically search the stolen art database of the Art Loss Register and conduct enquiries on ownership, authenticity, condition, provenance and lawful export of art. Due diligence depends on the type of asset, its value, and the information volunteered by the seller.

                    As a rule of thumb, any buyer should, at the minimum, conduct the following searches:

                    • attend the auction’s location in person and inspect the coveted art work before taking part into a bid for it;
                    • research the coveted art work on price databases, such as ArtNet, in order to find some historical data about past sales of such art work;
                    • research lost or stolen art databases, such as the Art Loss Register and Interpol, since such databases include data about art works which authenticity is challenged, and therefore report authenticity issues. The database of the Art Loss Register is not publicly available but it can be searched on request. Some data on the Interpol database can be searched by members of the public, and
                    • if in existence, read the ‟catalogue raisonné” of the artist who the artwork is attributed to, in order to assess whether such artwork has been indeed recognised by the field as being of the hand of such artist. 

                    If you, buyer, conduct such above-mentioned searches and due diligence steps, and provided that you are a consumer (and not acting as a professional, such as an art dealer or trader), the courts would probably find that you have complied with the principle of caveat emptor (buyer beware).

                    4. What are your options, after the successful bid and unhappy discovery that the artwork is unlike its description set out in the auctioneer’s documents?

                    As set out above in paragraph 2. above, you should send an official letter to the auction house, denouncing the forgery and/or poor condition (or any other undisclosed defect) of the art work, very soon after you have discovered it, rescinding the successful bid and requesting to return the disputed lot to the auctioneer, against the full refund of the hammer price, the buyer’s premium including VAT, any other costs associated with the bid (such as transport costs) and the costs relating to the authentication and/or inspection of the artwork.

                    While it is unlikely that the auction house, recipient of such formal letter of complaint, will accept to cover the authentication and/or inspection costs, any auctioneer who wants to keep his reputation intact would accept to take back the litigious lot and refund the rests of the requested costs; especially if you sent your official communication as close as possible to the date of the successful bid, and if you have gathered much strong evidence that the artwork is indisputably a forgery or not at all like it was described in the condition report and/or the catalogue.

                    If the French auction house and you, unhappy bidder, cannot see eye to eye, you can lodge a formal complaint and request for mediation with the ‟commissaire du gouvernement près le Conseil des ventes volontaires de meubles aux enchères” (i.e. the statutory body which role is to regulate French auction houses), bearing in mind, though, that the ‟Conseil des ventes volontaires de meubles aux enchères” may come across as biased, since it is not in its best interest to annoy its members, the French auction houses.

                    In the UK, there is no regulatory body in charge of watching and regulating UK auction houses. However, most UK auction houses belong to trade federations, such as the Society of Fine Art Auctioneers and Valuers, which have issued some guidance notes for good practice and often have complaint handling schemes in place, and even mediation services, when one of their members is the subject of a dispute with one of its buyers. Indeed, the strategy of ‟naming and shaming” is particularly effective in the UK, much less so in France where French auction houses act as if they were in contempt of any regulations or complaints handling schemes that may limit their ability to waive their liability vis-a-vis their buyers.

                    If the dispute between the auction house and the buyer escalates into a fully-fledged lawsuit, your defense, as a buyer, should be based around proving that the work of art was deceitfully sold at auction, because of gross misrepresentation and negligence committed by the auctioneer and, accessorily, the seller. As much evidence of the forgery, counterfeit and/or poor condition, as possible, should be provided to the court, even by way of requesting an expertise of the deceitful artwork, executed by an art expert, under supervision of the court. 

                    Meanwhile, you, as a buyer and defendant in the lawsuit, should request and attempt mediation all the way, during the lawsuit, in order to demonstrate that you are ready to compromise and find a constructive, time-efficient and cost-effective resolution to this dispute. The other side, however, may not agree to such alternative dispute resolution, out of cheer stupidity or because their legal fees may not be covered by their legal insurance policy, should a mediation or any other alternative dispute resolution process be put in place between the parties.


                    To conclude, you really want to avoid finding yourself in the situation of an unhappy successful bidder who discovers, post-auction, that he has overpaid for an artwork which is not at all what it seemed, or was presented to be, by the auctioneer and its anonymous seller. Our guidelines, above, should save you from that headache and situation. However, if that is not the case, don’t worry and call us, since we are here, at Crefovi, to service you to find a solution to your bad auction experience and deceitful transaction, in the most cost-efficient and time-efficient way.


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