Spotlight on art transactions in Hong Kong


An excerpt from The Art Law Review, 1st edition

Artistic operations

i Auctions

The Ordinance on the Sale of Goods provides for auctioning. In the case of an auction, each lot is initially deemed to be the subject of a separate sales contract and the auction is terminated when the auctioneer announces its completion by the fall of the hammer, or in any other usual way. Until such an announcement is made, any bidder may withdraw their bid.

To avoid rigging of the results of an auction, where an auction is not notified as being subject to a right to bid on behalf of the seller, the seller is not permitted to bid on it. – even or employ a person to bid at such sale or for the auctioneer to knowingly take any bid from the seller or such person.

Any sale contravening this rule may be considered fraudulent by the buyer.

However, an auction may be notified at a reserve price or a starting price and an auction right may also be expressly reserved by or on behalf of the seller.

Finally, where a right to bid is expressly reserved, but not otherwise, the seller, or any person acting on his behalf, may bid at the auction.

Note, however, that auctions are done through an intermediary who is the auctioneer and his role is clearly stated in the extended auction terms which traditionally exclude implied warranties under the ordinance on the sale of goods.

Although the auctions and their results of major Chinese works of art in overseas territories like France were the result of very significant misrepresentation or disagreement, there is no such case. recent in Hong Kong.

ii Private sales

In another well-known case finalized in 2019, an established collector of Chinese porcelain from Hong Kong was persuaded by a fraudulent plot to invest in gold at the unofficial Hong Kong board of the London gold market. with repeated reports of substantial losses that the collector was only able to finance himself through the sale of valuable pieces from his Chinese porcelain collection. In the lawsuit brought by the collector against the alleged fraudsters, the Court was persuaded to prohibit any transaction by any of the alleged fraudsters with one of the collector’s collection items and the case continues.

It’s not uncommon for Chinese buyers to bid successfully on artwork at Hong Kong auction and not pay, but whether on principle, change of mind or impecuniosity is not always clear. This usually leads to legal action in Hong Kong by the auction house in accordance with its terms of sale.

The main difficulty resulting from such events is that the mainland Chinese buyer usually has a residential address in China and not in Hong Kong, and there are enormous complexities that arise when legal action is taken in Hong Kong with a defendant whose entire locus is in China, starting with a difficulty in organizing the meaning of the proceedings and then moving on to the fair and proper meaning of the interlocutory stages of the action and finally realizing the amount of any successful judgment.

iii Loans of works of art

Along with the healthy growth of public interest in the visual arts in Hong Kong, a very healthy art lending program has developed in both the public and private sectors.

Public sector

Hong Kong museums are in regular contact with major foreign museums for loan exhibitions. The British Museum and the Victoria and Albert Museum in London have both loaned superb works of art from special exhibitions from their collections for display in museums in Hong Kong. Major Chinese and American museums have also made substantial loans to museums in Hong Kong for public exhibitions.

An exhibition of major works by famous Renaissance artist Sandro Botticelli and his contemporaries, on loan from the Uffizi Gallery in Florence, is taking place at the Hong Kong Museum of Art from November 2020 to February 2021.

Private loans

Hong Kong museums are fortunate to be able to draw on local private collections, mainly Chinese art and archeology, for a highly effective cataloged exhibit in public and university museums.

iv Theft of works of art

Surprisingly, given the enormous market value of works of art exchanged, collected and preserved in Hong Kong, from authentic Chinese works of art from several millennia ago to non-Chinese works of art in many different media, art theft is not common in Hong Kong. Most collectors and others involved in the trade have excellent photographic records of assets.

However, in September 2020, a theft of massive monetary value was committed by a small group. Among the main targets stolen by thieves were a large calligraphy scroll written personally by Chairman Mao Tse-Tung, whose calligraphy is extremely famous, and a number of extremely rare postage stamps from the Chinese Cultural Revolution of the 1960s.

v Cross-border transactions

The main international cross-border restriction on “the illicit import, export and transfer of ownership of cultural property” is provided for in the 1970 UNESCO Convention as an international treaty signed on November 14, 1970. It entered into force. entered into force on April 24, 1972 and was ratified by China on September 25, 1989.

China’s accession to this Convention – as in all other countries and territories to which it has been extended – sets an earlier date on which all trade in cultural goods is prohibited. The Convention does not apply to any trade after 1970 and it has given rise to a fascinating body of practice relating to the provenance or lawful origin of the first commercialization of a work of art.

China subsequently released a report on the 1970 Convention stating that in its new Law of the People’s Republic of China on the Protection of Cultural Relics, amended in 2002, the definition of “cultural property” is broader than that of the 1970 Convention because it is broadened to include not only movable objects but also sites and monuments. This report was the first in a series outlining the broad scope and ramifications of China’s activities in the whole field of cultural goods.

However, China did not extend the 1970 Convention to Hong Kong. Indeed, therefore, and given that Hong Kong has been an integral part of the People’s Republic of China since the transfer from the United Kingdom to the PRC in 1997, the Hong Kong common law system remains a separate system from the legal system. civil law in China and Chinese law does not extend or apply to Hong Kong.

The result of this is, and has been for many years, active trafficking in cultural objects from China in Hong Kong markets although the position taken by the major auction houses in Hong Kong is that they will not sell any item that they consider to have been exported from China after the 1970 Convention.

vi Tax Considerations in Hong Kong Jurisdiction

There is no tax law applicable in Hong Kong regarding cultural objects acquired in Hong Kong or abroad and brought into Hong Kong after such acquisition.

vii Artistic funding

Art loans are available through internet offers from reputable foreign finance houses and finance houses in Hong Kong. As a rule, the granting of such loans and the transaction history of the execution of the loans is not a matter of public opinion and it is fair to say that the courts in Hong Kong do not often have the habit of deciding issues arising from loans of works of art.

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