Arbitration and Art

By Gregor Kleinknecht LLM MCIArb, Keystone Law, London

Art market disputes very rarely receive publicity in the world of international commercial arbitration even though there can be very few industry sectors in which disputes lend themselves more squarely to resolution by arbitration. 

There are a number of reasons why arbitration and art are perfect companions.  First, the international art market is big business. According to the Art Basel and UBS Global Art Market Report 2023, worldwide art and antiques sales increased 3% year-on-year to an estimated US$67.8bn (£54.8bn) in 2022, with the US art market leading the way with 45% of sales by value, followed by the UK with 18% and China with 17%.  Second, the art market is truly global in nature: the Art Market Report suggests that UK art and antiques dealers, for example, made just 40% of their sales to UK buyers, with 60% of sales going to overseas buyers. Third, confidentiality is highly prized in art transactions between private buyers and sellers, and even art sales and purchases at public auction are often conducted via intermediaries to preserve the anonymity of the ultimate buyer and seller.  Artworks that become the subject of court proceedings and public controversy will often be considered ‘burnt’ by the art market, i.e., they become either unsellable altogether, or are at least devalued as a result of the adverse publicity.  Fourth, art disputes can be highly technical and complex, concerning questions such as title, provenance, authenticity, historical restitution claims, and issues of copyright; in addition to more conventional contract disputes, and their subject matter can span pretty much anything created in thousands of years of art history, from pre-historic artefacts to NFTs.  And, finally, art law is a complex web of international conventions, national laws, soft law and trade customs.

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

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

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

This provides an elegant segue into the world of NFTs, without reference to which no article about art can seemingly be complete these days, and to the Court of Appeal decision in Soleymani v Nifty Gateway LLC [2022] EWCA Civ 1297, in which the English court had to strike a balance between consumer protection and arbitration law in the context of the global market for NFTs.  In this case, the claimant, Mr Soleymani, had acquired an NFT associated with an artwork in an online auction held on Nifty Gateway’s crypto trading platform.  The agreement between Mr Soleymani and Nifty Gateway was governed by New York law; and, like those of many other NFT marketplaces based in the United States, Nifty Gateway’s terms of business contained an arbitration clause.  When Nifty Gateway alleged non-payment of the amount of the winning bid by Mr Soleymani, it therefore referred the dispute to arbitration under in New York under the JAMS Rules. Mr Solyemani responded by bringing proceedings in the English High Court, in which he sought inter alia a declaration that the arbitration clause relied upon by Nifty Gateway was unfair and therefore not binding upon him pursuant to CRA 2015, s 62which states that a term which has the object or effect of excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, in particular, by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, may be regarded as unfair.  Nifty Gateway contested the claim and sought an order pursuant to CPR Part 11 for a declaration that the English courts did not have jurisdiction to hear the claim; and an order staying the English court proceedings under section 9 of the Arbitration Act 1996 (AA 1996). At first instance, Nifty Gateway succeeded on both points but, on appeal, the Court of Appeal lifted the stay of proceedings and ordered a trial on the question of the validity of the arbitration agreement under AA 1996, s 9 (4). The Court of Appeal effectively found that, in cases where a UK consumer seeks to rely on domestic law consumer rights, the English courts are better placed than a foreign arbitrator to determine the validity of the arbitration agreement. 

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

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