The Transformation of the Art Market: Law, Norms, and Institutions
Abstract: Over the last three decades, the art market has undergone a remarkable transformation. Before the 1990s, artworks were sold with hardly any concern about whether they had been stolen or looted, whereas now any reputable gallery or auction house checks the “provenance” of any substantial work before sale to ensure there is nothing problematic in the chain of title. This transformation reflects interlocking changes in law, norms, and institutions. New York’s and more broadly the U.S. courts’ application of American substantive law has destabilized title to stolen and looted goods worldwide because American statutes of limitations generally provide weaker protection for those who possess stolen or looted goods even in good faith. Application of American law has had a profound effect, especially for the high end of the market because even European or Asian investors who purchase art outside of the U.S. may eventually want to sell or display their works in the U.S. Defective title under American law thus affects prices world-wide. The tightening and broader application of American law reflects both long-standing legal principles and changes in social norms towards the redress of historical wrongs, most notably prominent campaigns relating to art confiscated or sold under duress in Nazi Germany. New institutions, most importantly the Art Loss Register (ALR) searchable database of stolen and looted art, have also changed perceptions about minimum standards for good faith purchase, which in turn affected both social norms and litigation. These new norms, in combination with the information provided by the ALR, have influenced the market even for less valuable art, for which sale or display in the U.S. is not a relevant consideration and for which the threat of costly legal action is not credible.
