Christie's Dilemma: Sue When Buyer Refuses To Pay?

By Dave Rein

If you are an average Joe the plumber who happens to have an extra $40 million laying around to bid on an item or two at an auction and you don't pay, the auction company will sue you and will likely win.  The terms at most auction houses are such that it will probably win attorney fees as well.  But, things get a bit more complicated when the refusal to pay is done at the instigation of or has the support of the Chinese government.

I wrote about the recent legal circus surrounding two Chinese bronzes sold as part of the Yves Saint Laurent art collection that the auction house, Christie's held last week.  The latest twist is either a brilliant bit of patriotism or unvarnished commercial sabotage -- depending upon your perspective.

The winning bidder for the bronzes, Cai Mingchao, announced on Monday that it was his patriotic duty to scuttle the auction of the items and that he could not and would not pay for the bronzes.  A video clip of his announcement is found here.   As a prominent bidder of Chinese art, he was allowed to register the day of the auction.  Closer scrutiny would have shown that he was an adviser to the National Treasures Fund which is a group backed by the Chinese government to recover Chinese art.

The contract terms are clear that Christie's could bring an action to enforce the sale, it could sell to the next highest bidder and seek the difference from Mr. Mingchao, or return the bronzes to the seller and sue to recover the expected commission.  Or it could walk away.

But, if Christie's walks away, does it open itself and other auction houses to future games whenever someone decides an item should be returned even if there is no legal basis for requiring the item's return?

Jackie Chan, I get it.  You are upset that items were looted from China and there is no legal recourse.  I'm not weighing in on the moral rights China may or may not have to demand the bronzes' return.  Make your movie about a quest for stolen Chinese relics.  I, for one, will likely go and see it.

I am, however, weighing in on the legal questions.  Unless a reader can point me to some fact that I am missing, Christie's has strong legal arguments to pursue Mr. Mingchao although business concerns may weigh more heavily than the legal ones.  Will pursuing Mr. Mingchao cause Christie's a greater financial loss

Given that Christie's wants to maintain a strong presence in China and has a publicity mess on its hands, it may decide not to antagonize the Chinese government by pursuing damages against Mr. Mingchao.  China has already stated that the sale is going to have "serious affects on Christie's development in China."  Christie's does not have many other alternatives.  It could prohibit Mr. Mingchao or his own auction house from bidding in future auctions, but he could simply use an agent or a shell company to do his bidding.

One potential way that this may hurt the legal efforts to reclaim looted Chinese art is that an attorney representing an auction house or seller can cite this incident to argue that the National Treasures Fund, the Association for the Protection of Chinese Art in Europe or the Chinese government itself are simply trying to scare potential buyers and is again engaging in frivolous litigation.  The tactics that these organizations engaged in this time may encourage a future court to impose the strongest penalty available to discourage others from using the courts for what amounts to a publicity stunt.

What would you do now if you were Christie's?  Would you pursue Mr. Mingchao?  Do you think the recent events will help or hurt China's efforts to reclaim looted art?

No Legal Basis For The Return of Looted Bronzes

By Dave Rein

Not Your Ordinary Garden SculpturesIt is not surprising to find drugs and fashion in bed together and last week was no different.  Opium, a rat, a rabbit, and a  fashion house took center stage at the "Sale of the Century".  Even those whose art budget leans towards items painted on velvet may have heard about the sale of what has been called one of the most important art collections in private hands.  Items owned by the late fashion designer Yves Saint Laurent and his partner, Pierre Berge, received enormous attention even before they hit the auction block in Paris.

Among the items that received unusual attention were two bronze sculptures carved by a Jesuit priest that had been a part of a water-clock at a Chinese summer palace.  China formally protested the sculptures' sale and APCA (the Association for the Protection of Chinese Art in Europe) asked a Paris court to block the sale.  The court ruled that APCA did not have standing and ordered it to pay $1,274 US to both Mr. Berge and the auction house, Christie's.

The decision seems to have sparked strong emotion from the Chinese because the two statutes were looted by the British and French from the the Emperor's Summer Palace during the Second Opium War in 1860.  Putting aside the moral debate however, what struck me was the insistence that the Chinese government has strong legal claims to the bronzes.

Even if the Chinese government instead of APCA had filed the lawsuit, it is difficult to see how the case was anything more than an attempt to garner public attention.  The Shanghai Daily mentions that the UNESCO Convention on Stolen and Illegally Exported Cultural Objects would not apply a statute of limitations in this case -- suggesting that other provisions would obligate the bronzes' return to China.  If that is the argument, then it is a silly one.  The UNESCO Convention does not apply at all as it  would only apply to objects taken or exported after the convention became effective for the respective parties.  I think it is safe to say that nobody needs to run to the appendix of the the convention to see if China and France signed the UNESCO Convention (or any other convention) during the Qing Dynasty.  The first countries to sign the UNESCO Convention signed it in 1970 and everyone agrees that the bronzes were taken in 1860 -- long before there was any notion of a convention.  The same is true for those who point to the Uniroit Convention on Stolen or Illegally Exported Cultural Objects which was signed in 1995.

I know enough that I would be lost if opposing counsel started talking about the Napoleonic Code, but courts in most states in the U.S. would probably throw the case out too.  The sculptures were not exactly hidden away in the attic of a recluse.  Rather, it was well known that Laurent  and Berge owned the sculptures and only when the bronzes came up for auction was any effort made to demand their return.  Suffice to say, that most courts would likely hold that the statute of limitations would have run under state law in that if the Chinese government had exercised due diligence in searching for the sculptures, it would have had no trouble learning of their whereabouts.

It appeared that the bidders were not concerned about the legal ramifications as the sculptures sold for about $40 million US -- multiples of the initial estimates, but we learned on Monday that  the winning bidder had no intentions of paying.  His actions are discussed in a separate blog posting.  Is the combination of a lawsuit and fake bidding an effort to scare real bidders?

Perhaps the weak legal arguments or simple taunting prompted Mr. Berge to offer to return the sculptures if China "only" agreed to abide by human rights and allow the Dali Lama to return to Tibet. 

What do you think?  Did China have stronger legal arguments or was it resigned to making a moral appeal that at the end of the day, the items were admittedly looted?