What is the Fate of the German Art Market after a New Restricting Law?

May 3, 2016

What recently seemed to shock the German art market is a discussion that took place in the German parliament on February 18, 2016, about the current draft of the new Cultural Heritage Protection Law (in German, Kulturgutschutzgesetz). Namely, the German Minister of Culture, Monika Grütters, proposed an initial draft of the law, which is going through its first (out of three) hearings in the lower house of the parliament, with expectations for it to be enforced mid-year.

German art market auction
The Law - Image via The Student Government Association

What is This All About?

To be specific, the aim of the amendment of the Cultural Heritage Protection Law (the Law) from 1955 is to prevent illegal trade of looted antiques, motivated by the ongoing Syrian and Iraqi conflict and terrorist attacks (financed by its sales, as stated in Lexology in February, 2016), and the destroying of its cultural heritage; as well as to prevent the artworksthat are significant for German cultural heritageto be moved out of the German art market. Although its initial goal had a good intention in a way, it seems like there is a lot of criticism made by art collectors, dealers, artists and other art lovers. And one could say rightfully so.

Export Licensing

What is making all the fuss is the provision stating that each artwork whose value exceeds EUR 300,000, or which is older than 70 years, should be accompanied by an export license, regardless of it being exported to European Union countries (which violates the free trade status quo inside EU) or elsewhere. There is one exception, and it relates to the works of living artists, whom will not need the export license regardless of the year of its creation. This license should be obtained by the dealer, followed by a proof of the piece’s authenticity and legal origin, with documentation dating back minimum 30 years (The Art Newspaper, April 2016).

Guidelines for Importing and Exporting Cultural Property into and out of Germany

Database of Cultural Property of National Significance

But that is not all folks. All artworks, antiques and monuments that are registered at the database of cultural property of national significance cannot obtain a permanent export license. The Law applies to both privately and publicly owned pieces. These works can only be traded within the German art market. The Law will have a provision on what should be considered as a work of national significance. Yet, remembering that such a definition is unclear, the state’s court will have the final say on this matter (Lexology, February 2016). Each state in the federation where the piece is located is responsible for listing them in the relevant register. However, the owner should take a photo of the work, register it at the state’s government, preserve the work, notify the state’s government in case he/she wants to change the location of the work, also notify it of the work’s new owner and locations in case it is sold, and all this at his/her own expense (The Committee for Cultural Policy, April 2016).

Museums and Public Galleries

Most of the museums/public galleries across the globe are forming their art collections from gifts and loans by private collectors (The Committee for Cultural Policy, April 2016). According to the Law, these permanently loaned artworks will retain a status of cultural protection until the agreement on loan expires or until they are withdrawn (Lexology, February 2016).

An Interview with Monika Grütters - The Price of Protecting the Arts

The Import of Cultural Property

Beside export licenses issued by the German government, The Law also requires an export permit from the country of origin, in case of importing a cultural good. The problem is that some countries do not issue such permits (The Art Newspaper, April 2016). The work’s origin should be inspected and documented whenever a sale occurs inside the federation. Keeping in mind the goal of preventing trade of illicit cultural property, a guarantee for such property return will be provided.

Other Regulative Burdens

If you thought that the above mentioned is quite enough for slowing down the German art market, you are right. But there is more. As of 2012, VAT rate rose from 7% to 19% in order to conform with the EU law. According to The Art Newspaper (April 2016), since 2012, 16 German states failed to pass into law a federal government measure aiming at compensating dealers’ loss. There are also social insurance contributions that a dealer has to pay on living artists’ works, which are increasing the overall costs (The Art Newspaper, April 2016).

German Art Market Fade-out

Germany is the founder of the first international art fair for modern and contemporary art in the world that took place in Cologne, back in 1967. Kunstmarkt Köln, widely known as Art Cologne, is considered the prototype of today’s dominating art sales channel – art fairs. But the organization, which is responsible for running Art Cologne, cited in February they believe that German art fairs are no longer going to be internationally competitive in the long run, bearing in mind the burdens of doing art sales business in Germany (The Art Newspaper, April 2016). Germany is an immense European economic force, and it is responsible for generating 7% of world’s export. But when it comes to art markets, as revealed by the TEFAF art market report 2016, German art market’s global share came down to 2%, with US (43%), UK (21%), China (19%) and France (6%) being the front-runners.

German art market auction auction
Kölner Kunstmarkt Galerie Heiner Friedrich - Image via Artblog Cologne

No More Room for Family Business in Art Trade

In the words of German art dealers, legal framework and conditions of doing business are killing the art market in Germany. Michael Haas, a dealer from Berlin focusing on 20th-century and postwar art (not to mention works of Otto Dix, Georg Baselitz and Marc Chagall) claims he’s lost few deals because of the approaching Law (The Art Newspaper, April 2016). Many of the art collectors are moving their collections to the warehouses in New York or London, in order not to lose value (because of the possible artworks’ decrease in prices influenced by the lack of demand for it) of artworks or the artworks themselves. Art dealers claim that nobody is bringing artworks to Germany anymore, they are only pulling them out (The Art Newspaper, April 2016). The dealers are even thinking about closing their businesses, because they are not going to be able to conduct auctions anymore. For example, the summer auction of Asian art at Nagel Auktionen in Stuttgart has been rescheduled for May instead of June because of the pending Law (The Art Newspaper, April 2016).

German art market auction auction
Max Beckmann - Self-portrait with Champagne, 1919 - Image via Acting-Out Politics

Cultural Heritage as the Number One Priority in German Cultural Policy

As cited by The Committee for Cultural Policy (April 2016), the Law will only achieve the impoverishment of German museum collections and alienation of dealers. An interesting fact is that a German artist, Georg Baselitz, as well as the family of Max Beckmann, have started a protest against the Law by withdrawing works from loans to museums in Leipzig and Dresden (The Committee for Cultural Policy, April 2016). In light of the migrant crisis, the persistent global financial crisis, the possible Brexit scenario, and the potential threat of the European Union dissolution, German government is making a step forward in protecting and preserving its cultural heritage and national identity. However, in my opinion, all of this is not just about conserving cultural goods of national significance. It is also about collecting and keeping extremely valuable goods – cultural goods – with an intrinsic value, which in time can only be increased. And guess what? Money is a denominator for value, and who has the money has the power of influence. So will you start collecting artworks? A tip: German contemporary art market seems to be safe. For the time being.

German art market
Otto Dix - Stormtroopers Advancing Under Gas, etching and aquatint, 1924 - Photo credits Study Blue

Minutes of the Parliamentary Hearing

Featured image: The Reichstag building in Berlin, seat of the Bundestag - Image via Wikipedia
Images courtesy of: Wikipedia, The Student Government Association, Artblog Cologne, Study Blue, Acting-Out Politics.

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