This article is written by Anshal Dhiman, pursuing BA.LLB (Hons.). The article talks about the issues relating to arbitration in Art and cultural aspects, along with Art Arbitration and the Antiquities and Art Treasures Act, 1972.
Disputes arising out of art and cultural heritages are usually of a wide nature, and can involve certain specific issues related to intellectual property rights. What makes these issues much more complicated is that they involve sensitive issues like culture, history, ethics, morality etc. and these issues are not the easiest to solve with the help of legal procedures. And therefore, in this case Alternate Dispute Resolution acts as a flexible mechanism to help resolve these issues, and help the parties get solutions which may even go past compensatory provisions, which are viable and enduring for the time being. ADR is an efficient way of solving problems related to art, but, when we are talking about a field that is as vast as art, there is no limit as to the issues that could arise, which would be covered under this article.
Identifying issues related to art arbitration in India
Although globally there exist specialised agencies such as WIPO (World Intellectual Property Organization, initiatives such as CAFA, AiA,, and so on, art sales and transactions largely remain unregulated. As far as India is concerned, there are no courts which are set up specifically which are solely for resolving such issues, although there are provisions for arbitration tribunals in The Arbitration and Conciliation Act, 1996. A report in 2018 by FICCI shows that the art industry of India has been massively afflicted with legal problems, along with absence of transparency from transactions. With the rise of the number of artists in India, with high net worth, the field will always be a fresh place for disputes.
In the last century, India was very much behind the world in matters relating to arbitration, and especially in an area like art, which is very dynamic in nature, India has not really been an example which the world could have thought of following. But in the modern times, with growing awareness amongst the artists themselves, and inclusion of arbitration clauses in most contracts which involve sale of visual art, the concept of art arbitration has seen some developments in the country, although it is still very rough. The establishment of CAFA in 2018 has given another option to the parties involved, and it’s noticeable in the modern contracts, which now include an arbitration clause specifically in the CAFA. Now although art arbitration is not as pellucid in the present times, there still remain issues which must be dealt with for better, transparent deals regarding art.
Disputes arising due to lack of proper terms and conditions
One of the most major concerns of artists making sales is the absence of proper terms and conditions while making deals with the dealers, which may then further lead to exploitation of the artists’ work through sales outside dealers’ authority, without any remuneration to the artist. Badly drafted contracts are another issue which the art buyers and the artists themselves have to be aware of while making deals with dealers. Disputes may arise due to differences in the quality of the product received as compared to the details given to the buyer, origin claims, or issues related to defects in the art bought. In such cases, if the contract is badly drafted and there is lack of transparency in the terms and conditions of the contract, then the buyer or whichever party which may suffer losses under any such contract, cannot use the contract or rely on the contract to get out of the dispute.
This also brings to our notice the need for seasoned and experienced arbitrators in the field of art, to get parties out of disputes in situations where they might be exploited by the contracts or the deals that have been made in an unregulated manner. There’s also a need for regulated arbitral awards. In India arbitration is regulated by The Arbitration and Conciliation Act, 1996, which provides for the setup of arbitration courts, along with their mode of conduct, and also relevant provisions related to arbitral awards.
Lack of legal reforms in the field of arbitration in India
The Arbitration and Conciliation Act is more than 2 decades old as it was enacted in 1996, and its last amendment was introduced in 2015, which shows us that there have not been many developments in the arbitration field as a whole in India, let alone arbitration in art. It’s important to keep up with the modern trends so that arbitration is seen as a final solution and not another barrier before eventually going to court. In India, there is a lack of research studies involving art arbitration, and it is the need of the hour that there should be more studies regarding the needs and requirements of the artists and the buyers involved.
Under the Arbitration and Conciliation Act, there are provisions for setting up of Arbitration tribunals, along with their conduct and jurisdiction. The main aim of arbitration is to avoid court proceedings and deal with disputes outside the court. However, in India, it is seen that there are interventions by courts regularly during arbitration proceedings, which may either be due to actions of any party or by the call of the arbitrator or mediator involved in the dispute, which again arises due to lack of experienced arbitrators in the field of art. The scope of arbitral awards under Section 34 of the Arbitration and Conciliation Act also gets massively affected due to court interventions. The case of White Industries vs. Republic of India was the first judgment involving investment ruling of a bilateral investment treaty in India.
It was also one of the first cases where investment arbitration was discussed by the Supreme Court of India. In this case, two important issues involving arbitration processes were discussed i.e. intervention of courts and hindrances in arbitration. The debate led the judiciary to a conclusion that intervention of the judiciary in arbitration matters must be limited to a point. Although this observation of the judiciary has not been a big change in real life practice where there are still regular interventions of courts.
Disputes regarding resale royalty
In India, the capacity to solve problems involving resale royalty prices is with the Intellectual Property Appellate Board, IPAB, which gets its statutory powers from the Section 53A of the Copyright Act, 1957, which officially acknowledged the right to resale royalty in India. The IPAB has remained debilitated for the majority of its history, and is not seen as a reliable authority which can help in officiating effective arbitration for disputes. Resale royalties are another aspect of deals between artists and any dealer or a buyer which may lead to exploitation of the artist. The trend of resale after purchase has evolved massively in the last couple of decades and has now been recognized by many governments around the world.
The pecuniary value of an art piece rises significantly when they are resold after a purchase, and the original artist of such an art object can suffer monetary losses in the absence of a related resale clause under the contracts. Most modern contracts now contain royalty clauses to make sure that they receive their share of the price from the resale. These clauses have also led to the belief that resale royalties are moral rights of the artists and should be recognized at the time of contracts and deals being made.
The Booz Allen test
There arise questions whether resale royalties, which arise from contractual clauses and may lead to future contractual disputes, pass the Booz-Allen test. The Booz-Allen was developed in the matter of Booz-Allen and Hamilton Inc. vs. SBI Home Finance Ltd. The Supreme Court of India, in this case held that any dispute that involves judging in rem actions and any dispute of which the judgment is related to public matters and is a question of public policy any such dispute is non arbitrable. At the first reading it is noticeable that this concept is not very clear in itself and it has shown in real-life practice too. There have not been any strong cases or legislation which help in the interpretation of this test.
The courts of India, however, in recent times have followed a certain trend where it has been observed that all such contracts are arbitrable in nature as such and they do not affect the rights of any third party through any decision or arbitral award concluded by the arbitrator. But in a bigger sense, the courts have not shown uniformity in deciding cases which differ a little in nature. Intellectual Property disputes have been given a different way of approach as concerned with arbitration while determination of arbitration in trust disputes is followed by a different form of reasoning.
Art Arbitration and the Antiquities and Art Treasures Act, 1972
- The Art Arbitration and the Antiquities and Art Treasures Act, 1972 was enacted in 1972 by the Indian government.
- It was brought in to control the trading of antique arts and art treasures in the country. The Act also makes it necessary for the Archaeological Survey of India (ASI) to check if an object is of antiquity under the definition of the Act. Paintings older than 100 years are termed as antiquities under the Act.
- Age of the painting is an important fact in the determination of the outcome of disputes relating to antique arts.
- In a case involving a painting of Ravi Raj Varma, an arbitrator appointed by Karnataka High Court gave importance to the certification of antiquity authorized by the ASI presented by one of the parties while determining the case where the question was whether the Ravi Raj Varma was authentic or fake. The ASI certificate overlooked the opinion of archaeological experts brought in by the other party.
- The competence of the Archaeological Survey of India has been challenged in many cases where the reporting of the ASI have been proven either wrong or invalid because of their failure to use appropriate forensic tests to verify the age of the artifact in question, along with other criticisms that it had faced for its structure and its non-conformity to official rules.
- This has led to less reliance on the ASI relating to cases under the AATA, 1972, and the courts have thought it better to follow the opinions of experts outside of the ASI.
- But even in such conditions, if a court or a tribunal does not acknowledge the findings of the ASI, or terms it invalid for any reasons as such may, such a decision is probably expected to be challenged in higher courts.
- Arbitration cases are also subject to be in line with public policy, as AATA was enacted to preserve Indian cultural and art heritage, which is directly or indirectly a matter of public interest.
- In NAFED vs. Alimenta, the Supreme Court refused to entertain a foreign reward as it violated an Indian government order, which the Supreme Court observed, that was a part of India’s public policy.
- This observation may be used by the judiciary in future cases to suggest that influence of reports of ASI is fundamental in cases related to AATA, as the Act has been enacted to preserve the cultural heritage of the country.
It is understandable from the article that there is a need for reforms in the arbitration and dispute resolution schemes in the country in order to regulate trades and businesses involving art in a better and a structured way. The article talks about major issues lying in the country, which acts as a hindrance to the growth of not only the visual artists in the country, but also in a direct or indirect manner, to the economy of the country. The ambiguities and vagueness in Indian laws related to arbitration have been criticized and have been done rightly so because of such damping provisions, which might hamper the interests of parties to include arbitration clauses while doing business. Positive legal developments are always the need of the hour, along with awareness amongst the parties themselves, so as to avoid exploitation on contractual terms.
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: