Articles
20/04/2020
Corporate & Commercial Law

ART | During the exhibition the Gallery will be closed: the Nctm ArTeam at service of artists and gallerists.

[IMPORTANT NOTE: This document aims to provide a first simple illustrative guide to the recent regulatory changes, not providing a legal opinion. It is updated on 6 April 2020 at 5 pm. Considering that the state of emergency and the relative regulatory framework are constantly evolving on a daily basis, the contents of this note are subject to further changes].

1. Interventions in Italy to support culture

The outbreak of the COVID-19 pandemic forces the world to take strict containment measures to mitigate and slow down the spread of the virus. Italy, as well as many other European and extra-European countries, had to proceed with the isolation of the population, thus preventing non-essential work activities for the survival of the entire national community during the quarantine period. The cultural sector, and in particular the art system, is certainly among the most affected by the necessary emergency measures because of its deep need for social relations, events and public participation. If a part of this system is trying to transfer some of its activities on Internet, setting up virtual tours in online trade fairs (as in the case of the Art Basel Hong Kong’s experiment) and in the digitalized aisles of the most important museums (see MiBACT’s website for virtual tours of theatres, archives and libraries, museums and state archaeological parks), the most fragile part of the art system – consisting of artists, small galleries and non-profit spaces – risks to remain inactive indefinitely, threatening their existence.

National governments have provided support of different kinds, trying to give an initial response to the current economic crisis. In Italy, Articles 88, 89 and 90 of Law Decree 17 March 2020 No. 18 (the so-called “Cura Italia” Decree) provides for various support measures for the cultural sector. These, briefly, concern i) the procedures for the resolution of the contracts for the purchase of tickets for shows and museums, ii) the establishment of two emergency funds for entertainment, cinema and audio-visual, for a total amount of €180 million that MIBACT will be called to distribute within 30 days of the entry into force of the decree.

The public support is helped by the so-called voluntary sector, already active in supporting the national network of associations, foundations and other non-profit organizations for local activities. The important initiative of Associazione di Fondazioni e Casse di Risparmio S.p.A. (ACRI)is aimed at setting up a revolving guarantee fund with an initial endowment of €5 million to be allocated also to the culture sector. Bank foundations such as Compagnia di San Paolo[1] and Fondazione Cariplo have respectively allocated guarantee funds of €6 million and €2 million to support the financial needs of the third sector, including cultural entities.

2. Support for artists and galleries

The economic measures promoted by the Italian government aim to provide a general mitigation of the economic difficulties that the cultural sector, and in particular the art market, will face in the coming months. Further consideration can be given to those measures that could benefit artists and galleries most.

Generally speaking, it is useful to mention that, under the Cura Italia Decree, all artists and art market operators with a VAT number are entitled to claim the indemnity of €600 provided for all self-employed workers[2]. The legal requirements, included in the same article, require applicants to be enrolled in the INPS separate pension scheme for self-employed, and not to be retired or to receive other compulsory social security. The indemnity will not contribute to the realisation of the applicant’s income. More specific measures are provided in Article 90 of the abovementioned Decree, pursuant to which the share of the compensation referred to in Article 71-septies of Law No. 633/1941 (“Copyright Law”) will be intended to the support of authors and performers.

A first help comes from the Società Italiana degli Autori ed Editori (SIAE)[3], which intervenes in favour of authors and publishers, providing refunds for events cancelled due to the emergency, and solidarity funds to support cultural activities. The latter are structured in a fund of €500,000 to purchase 2,500 food parcels for SIAE members in precarious conditions and in an extraordinary fund of €60 million in favour of all members aimed at supporting the 2020 and 2021 distributions[4]. In addition, €50 million are allocated for the financing of multi-year interest-free loans to members in liquidity difficulties. Similar provisions have been adopted by other music and entertainment organisations, such as NuovoIMAIE[5].

3. Initiatives abroad

Looking abroad, Arts Council England, the UK’s leading public arts promoting body, has launched the “Emergency Response Package”, which provides an emergency fund of £160 million for organisations and people in need; £90 million goes to organisations, £20 million to freelancers and creative practitioners in need and £50 million to organisations not directly funded by the Arts Council England[6].

In France, the Ministry of Culture has provided emergency aid, including a solidarity fund of €22 million. The Centre National des Arts Plastiques (CNAP), a public body for the promotion of the visual arts, in addition to continuing to fund artists on a regular basis, has financed an emergency fund of €500,000 to compensate for the loss of earnings of artists, curators, critics and art theorists who would not fall under the rules of the solidarity fund, as well as for cancelled exhibitions, residencies, curators or mediation activities. The planned commissions are maintained – support for projects by artists, documentary photographers and exceptional aid – and the budget for these programmes is reinforced in order to support more artists. The CNAP has expressed its further willingness to organize an extraordinary session for French galleries to commission and purchase works by artists on the French scene who are forced to postpone or cancel their exhibitions or participation in fairs during the imposed quarantine[7]. The exceptional session will support private galleries, the most affected segment, in parallel with the actions and initiatives taken by the government in favour of businesses and the self-employed.

A similar measure has been provided by the Madrid City Council, which announced a plan to purchase works of visual art for €500,000, and by the government of the United Arab Emirates, which, following the announcement of the cancellation of the Art Dubai Fair, promoted the purchase of works of art by local artists for a total of $400,000[8].

The administration of the city-state of Berlin has adopted a different strategy, making already available since Friday 27 March €600 million for loans to artists and freelancers as a support for the current difficulties[9]; to date, it has been made applications for a total of €500 million. The German federal government, in turn, has proceeded with a package of initiatives worth €50 billion for self-employed workers and small businesses (including artists, artist studios and cultural enterprises). Unemployment insurance is available to the self-employed for the next six months.

Overseas, the federal government of the United States of America has allocated $377 billion to support small and medium-sized enterprises (with less than 500 employees), including cultural enterprises and non-profit organizations identified by law; in addition to this action, the National Endowment for the Arts and the National Endowment for the Humanities will be provided with $75 million, and part of this funds will be distributed directly to national art agencies and regional art organizations. Additional incentives are planned for the Institute of Museum and Library Services ($50 million), the Kennedy Center ($25 million) and the Smithsonian Institution ($7.5 million).

Private individuals are also contributing personally to supporting realities most affected by the emergency. Leading American foundations have launched programmes for the art system, such as the Getty Trust and the Helen Frankenthaler Foundation[10], which have respectively allocated $10 and $5 million to finance small and medium-sized cultural enterprises and artists living in the Los Angeles area. Anonymous Was a Woman, an award dedicated to American women artists over-40, has decided to allocate $250,000 to support female artists in need. The New York Foundation for the Arts, in cooperation with the Robert Rauschenberg Foundation, has launched an emergency funding program and activated, on its own website, a COVID-19 Emergency Resources webpage dedicated to the publication of the main economic resources allocated to private entities in the United States[11]. In turn, non-profit organisation Creative Capital has collected and indexed initiatives activated on American territory[12], while Artist Relief will distribute grants of $5 thousand each to artists in financial difficulty[13].

Meanwhile, other institutions try to directly involve artists, such as Magazzino Italian Art, which, from its headquarters in Cold Spring (NY), has launched an initiative called HOMEMADE, where eight Italian artists are invited to create an artwork at home and share the creative process with the public[14]. David Zwirner, one of the most powerful gallery owners in the world, has launched the project Platform, through which he makes available his online visibility to emerging galleries based in New York[15], in order to build a digital space for the online promotion of the artists represented.

There are also local initiatives with a strong social impact, such as the launch of a fundraising by Axisweb, a British charity based in Leeds committed to support emerging artists, in order to fulfill the large number of requests for help received following the announcement of the creation of a £5,000 fund to support, with small contributions, artists in need[16]. The artist Eric Fischl has created an edition of 50 copies of his painting Mix and Match to sell for $1,000 each to the New York Academy of Art[17].

Some people have decided to use art in order help others. Hauser & Wirth, the gallery on the podium of famous ArtReview Power 100[18], has announced its intention to donate 10 percent of the online sales derived from the next three exhibitions, which will be hosted virtually on the gallery’s website, to the World Health Organization. Similarly, the Parisian auction house Piasa has organised a charity auction for the French health system from 3 to 5 April with artists such Kamel Mennour, Levy Gorvy, Almine Rech, Galerie Thaddaeus Ropac and Galerie Eric Dupont.

4. COVID-19: Cancellations, postponements. The available contractual remedies.

The initiatives outlined so far, however, will not fully cope with the difficulties that art market operators will face during the economic crisis resulting from the current health emergency.

For many artists, gallerists, dealers, curators and non-profit spaces it will be necessary to terminate the contracts most at risk to avoid negative consequences in business relationships. The COVID-19 pandemic has become a force majeure event[19]. Anyone who is unable to honour the contracts and agreements for projects, events and activities planned in recent weeks, will be able to assess the recourse to the Italian civil law institutes of the supervening impossibility for reasons not attributable to the debtor (Articles 1218, 1256 and 1463 of the Italian Civil Code), the supervening hardship (Articles 1467 et seq. of the Italian Civil Code) and possibly, if the conditions are met, also the action of rescission for harm pursuant to Article 1448 of the Italian Civil Code.

A supervening impossibility is deemed to be any unforeseeable situation which prevents the performance of the contract and which is difficult to overcome with a legitimate effort on the part of the debtor. If the defaulting party proves that the supervening impossibility is due to causes not attributable to him, the defaulting party could not be held liable for the non-performance, causing the termination of the contract and the consequent dissolution of the obligations under the contract. The supervening impossibility may be definitive, temporary or partial depending on the nature of the impediment: in case of temporary impossibility, services may be suspended; in case of partial impossibility, only the services involved will be considered extinguished (or suspended, if the impediment is temporary), while the remaining services may be fulfilled as agreed.
On the other hand, the supervening hardship, pursuant to Articles 1467 et seq. of the Italian Civil Code, allows the termination of contracts whose bilateral balance of the relationship has failed due to external elements not linked to the relationship itself and that cannot be classified as part of the ordinary contract, making the services excessively onerous and/or debased in their value or utility. Furthermore, in case of contracts for services, may be applied Article 2228 of the Italian Civil Code – on supervening impossibility in performing the services – which specifies that the servicer who has partially performed the contract is in any case entitled to remuneration for the performed work, based on the utility of the part of the performed work.
Finally, the action of rescission for harm for injury allows to go in front of the courts in order to obtain the ab origine termination of unbalanced contracts where the disproportion is due to the state of need of one party when the other party took advantage of it.

It is essential, therefore, to ascertain the objective onerousness, that weighs on the defaulting party – such as the impossibility caused by the unavoidable bans on circulation and assembly –, to carry out a project, a work of art or a performance, to promote exhibitions, to sell in their own spaces in the gallery or in booth stands at fairs.

To this end, priority must be given to the collection of all the documentation suitable to prove the circumstances that make the fulfilment of one’s own contracts difficult, if not impossible, as well as the damage that the necessary containment measures have caused to the ordinary performance of contracts.

 

 

This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact your counsel or send an email to the following address: Alessandra Donati, Filippo Federici or Edoardo Mombelli.

 

 

[1] https://www.compagniadisanpaolo.it/ita/News/Emergenza-Coronavirus-l-impegno-delle-Fondazioni
[2] See Article 27 of “Cura Italia” Decree.
[3] https://www.siae.it/it/iniziative-e-news/emergenza-covid-19-le-misure-adottate-dal-consiglio-di-gestione-siae-favore-degli
[4] https://www.siae.it/it/iniziative-e-news/emergenza-sanitaria-coronavirus-%E2%80%93-tutti-i-provvedimenti-di-siae
[5] https://www.nuovoimaie.it/fondo-speciale-nuovoimaie-fai-domanda-online-dal-23-marzo-al-23-aprile-2020/
[6] https://www.artscouncil.org.uk/covid19
[7] https://www.cnap.fr/actualites/evenements/voir/mesures-exceptionnelles-de-soutien-et-plan-de-continuite
[8] See Taylor Dafoe, After Dubai’s Biggest Art Fair Was Cancelled, the UAE Government Swiftly Purchased More Than $400,000 of Work by Local Artists, on Artnet, 25 march 2020 (visited on 4 April 2020).
[9] See Kate Brown, Berlin’s Senate Is Rolling Out Up to $320 Million in Emergency Grants for Freelance Cultural Workers and Artists, on Artnet, 20 march 2020 (visited on 3 April 2020).
[10] https://news.artnet.com/art-world/helen-frankenthaler-foundation-getty-trust-relief-funding-1823466 (visited on 3 april 2020).
[11] https://www.nyfa.org/Content/Show/Emergency%20Grants.
[12] https://creative-capital.org/2020/03/13/list-of-arts-resources-during-the-covid-19-outbreak/.
[13] https://www.artistrelief.org.
[14] https://www.magazzino.art/magazzinodacasa/homemade.
[15] https://www.davidzwirner.com/viewing-room/platform-new-york.
[16] https://www.axisweb.org/thinking-and-ideas/2020/03/hardship-fund/.
[17] Cfr. Gabriella Angeleti, Artists and galleries help raise coronavirus relief funds through print edition sales, on The Art Newspaper, 25 march 2020.
[18] https://artreview.com/power_100/.
[19] Cfr. the article The impact of Coronavirus (i) on commercial agreements and (ii) on certain corporate law aspects for companies, by the Corporate & Commercial team of Nctm Studio Legale.

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