Transactions on works of art of great value, though lucrative, are often a source of concern for all parties involved, who may not be sure if their efforts will come to fruition. In response to certain irregularities in these operations, a legal figure has appeared at the international level whose presence is increasingly desired in the Spanish territory: the “escrow”.
The so-called escrow contract allows two parties to buy and sell goods or services with security, providing a easy-to-use, safe and cost-effective payment option both for the buyer and for the seller.
Therefore, the escrow agent forms a separate trust account that provides financial protection for the buyer and the seller. An escrow transaction can be started both by the buyer or the seller.
The objective, as is easy to deduce, is to give the customer the peace of mind that their money is safe by keeping his or her funds in the custody of a neutral third party. Once the customer receives the goods or services that have been agreed upon and the agreed terms have been fulfilled, then, and only then, are the funds released to the seller.
The escrow process is generally used to disburse cash, but can also be used for exchanging other items of value, such as manuscripts, art objects, and software codes. An escrow can be used in any transaction in which it is important to ensure that all aspects of the contract or any other agreement are met before making a final disbursement.
As one of the few Spanish law offices that specialises in Art Law, we can confirm that the intervention in the complex world of Works of Art and Cultural Goods necessarily requires expert advice. In this field of expertise, several areas of practice are involved: Criminal Law (smuggling, crimes against Historical Heritage and crimes against Intellectual Property); Private Law (cultural goods conveyancing and use and enjoyment of cultural goods); International Private Law (international conveyancing of cultural goods, export and import of cultural goods); Administrative Law (procedure of sanctioning dockets, administrative authorizations) and Intellectual Property Law (especially with regards to the works of living authors).
It is our experience that many clients that arrive at our office are unaware of the existence of such strict rules governing Cultural Goods. In fact, it is unfortunate that many only became aware of these rules once they were already iinvolved in contraband crimes or in expropriations proceedings.
The Market of Works of Art and Cultural Goods (movable or unmovable ones) is a market with an important volume of business. Cultural Goods reach astronomical prices in auctions or in merchant conveyancings. The possession, moving, conservation and conveyancing of these kinds of goods must be accompanied by intelligent decisions. This is why the intervention of a lawyer should be mainly preventive.
We work together with real estate appraisers, art appraisers, economists and, of course, other legal experts, both Spanish and from other nationalities. Our field of work is the whole of Spain, although frequently we make business visits to other countries, especiallywithin the European Union or Switzerland.
Our professional intervention is designed to include integral legal advice, both to institutions (museums, foundations, corporations, etc.) and to private individuals, in those matters in which cultural goods (and works of art) are involved. We act in all jurisdictions in Spain.
As a legal specialist in the Art Market, Antonio Pedro Rodriguez Bernal has taken part in many international transactions on behalf either of the parties or the art dealers, contributing to their successful completion with regular advice, negotiation, document and contract-drafting, and revision. He is frequently invited to radio programmes or interviewed in newspapers to discuss current issues related to the Art Law, Heritage and Antiquities and has solid knowledge not only of Spanish Law but also of those legal systems often applied to art transactions, such as English and Swiss Law. We offer the services of escrow agents for those cases in which the work is and could be inspected in Spain or, exceptionally, in London.Administrative Interventions:
- Export and Import of cultural goods.
- Administrative proceedings relating to cultural goods (inclusion in official catalogues and registries).
- Subsidies, tax subsidies, economic aid for restoration and maintenance.
- Administrative authorizations: restorations, maintenance and change of use.
Conveyancing:
Title checking.- First steps of Conveyancing (rights of preemption and buyout).
- Auctions.
- Hidden defects liability.
Judicial Interventions:
- Expropriation.
- Plundering. Confiscation.
- Administrative sanctioning proceedings.
- Assistance in criminal proceedings.
- Smuggling.
Legal Advice in Cultural and Art Law
Intellectual Property
The record achieved on November the 13th by a work of Francis Bacon, Three Studies of Lucian Freud (1969), in an auction held at Christie’s, New York, has caused widespread astonishment, featuring on the front pages of newspapers, and, above all, it has revealed to the public just how juicy the art business has become and to what extent it´s profits have and continue to increase even in these times of economic uncertainty.
The auction set an astronomical price, 142.4 million dollars, the highest ever paid at public auction, and the third highest throughout history, beaten only by The Card Players (Paul Cézanne, 1890), which sold for 191.6 million euros, and The Dream (Pablo Picasso, 1932), sold for 116 million euros, both works adquired by private sale.
At the same time, the opening of new markets in the Far East as well as the multimillion-dollar promotion of new artists from those emerging countries deserve some considerations. Large auction houses open branches in continental China (Sotheby’s in September of 2012 and Christie’s a year later) that serve to raise altars to local artists. Perhaps more surprising than the auction of the Bacon, is the price reached in October 2013 for The Last Supper, by the Chinese artist Zeng Fanzhi (born in 1964), and based in Beijing, which recreates the homonymous painting of Leonardo da Vinci, where guests eat watermelons. The 23.3 million dollars paid in Hong Kong for the painting, through Sotheby’s, reveal that the art bubble is far from bursting and that, on the contrary, a gap has even opened for the works of “unknown” living authors.
It is significant that the same day that the news of the bankruptcy of Lehman Brothers became known, in September of 2008, the versatile British author Damien Hirst (born in 1965) established a record at Sotheby’s with the sale of 200 works for 177 million dollars.
All of this adds to the panic caused in some countries, such as Spain, by the excessive exportation of works of art, which disappear without a trace, lost due to the weakness of national economies and the thriving market of investors, eager collect new works. Not long ago, I was interviewed on this matter by the newspaper “Veinte Minutos” after the auction of a painting by Sorolla in London.
However, all this flow of capital has been of no benefit to the general public, whose opportunities to enjoy these works have declined drastically due to lack of public funding and private exhibition sponsorship. Carmen Giménez, curator of the Guggenheim in New York, said in an interview to the EFE agency, in August 2013, “to get 1 or 2 million dollars (0.7 or 1.4 million euros) for an exhibition is much more difficult now than ever before”.
The global economic crisis and the effervescence of the art market, even though they might appear to be contradictory events, are perfectly intertwined, as we will explain in part two of this article.
As you may already know, the regulation of the work of household employees had already been modified by the Law 27/2011, of 1 August, which integrated these workers in the General System of Social Security. However, given the low success of this reform and the large numbers of employees who are still working irregularly, the Government issued the Royal Decree 29/2012, of the 28th December, that entered into force on the 1st of April.
The main innovation of the reform has been the reintroduction of the possibility that a household employee can register him or herself directly in the Social Security, facilitating the possibility that they can work for several employers at once. To do so, there must be an agreement between the worker and the employer and the monthly working time must not exceed 60 hours.
Similarly, the scale of contributions owed to Social Security and introduced by the reform of 2011 has been simplified. Currently, the contribution rate will be 22 ‘ 90%, corresponding 19′ 05% to the employer and 3’ 85% to the employee.
For more information on the law governing domestic work, residence permits and work permits, visit http://www.rodriguezbernal.com/2011/index.php?lang=en or contact us directly at mathos@rodriguezbernal.com
In response to the uncertainty existing in international transactions, the European Union has issued two legal instruments of great interest.
In 1984, Spain issued the General Law for the Defence of Consumers and Users; a law that was intended to establish a set of measures able to resolve the various conflicts that could arise in this matter. Along with the judicial system, a “Consumers´ Arbitration System” was established as a means of resolving conflicts, which meant that out-of-court alternatives to the court system had been strengthened by our public authorities.
However, the European panorama of out-of-court resolution has left much to be desired in comparison with its Spanish equivalent.
It is Article 169 of the Treaty on the Functioning of the European Union (TFEU), which establishes that the Union should contribute to achieving a high level of consumer protection, ensuring access to simple, effective, fast and affordable ways to solve national and cross-border disputes arising from contracts for the sale or provision of services.
With this problem in mind, the European legislator has published two new legal instruments; the Directive 2013/11/EU, of the European Parliament and of the Council, of 21st may 2013, regarding alternative dispute resolution in the field of consumption, and the Regulation (EU) 524/2013, of the European Parliament and of the Council, of 21st may 2013, regarding online consumer dispute resolution.
The Directive 2013/11/EU provides for the promotion of institutions of alternative resolution (RAL) whose task would be to solve contractual disputes for consumers and traders online or offline, applying this legislation only regarding complaints from consumers against traders. It will be up to Member States to adjust their internal legislation in accordance with the Directive before July 9, 2015.
More ambitious is the Regulation (EU) 524/2013, which seeks to eliminate much of the trade barriers on the internet. Unlike the Directive, it covers both complaints from consumers and from traders and is expected to create a digital platform for the resolution of conflicts. The procedure will start on-line with a complaint and subsequently the parties must agree about which RAL entity will resolve the dispute. The regulation shall enter into force on the 9th of January 2016.
The introduction of these two instruments will no doubt be an important tool in the consolidation of safe international transactions.
Article by Mark Athos Franklin, native English lawyer at the Rodriguez Bernal law firm. Rodriguez Bernal has ample experience dealing with both national and international consumer disputes. For more information, visit our website at http://www.rodriguezbernal.com/2011 or contact us directly at mathos@rodriguezbernal.com.Related articles
As you may already know, on the 20th of September a draft for a reform of the Spanish Penal Code was published, which, according to Minister for Justice, Alberto Ruiz-Gallardón, promises to “transform” this branch of the Spanish legal system.
The text covers a multitude of facets of criminal law, although its most distinctive feature seems to be an effort to stiffen penalties and create new offences.
In an effort to be concise, we could sum up the proposed reforms in the following manner:
1) Penalties are increased in cases of theft in the countryside.
2) New offences have been created, such as forced marriage or the disclosure of intimate images without consent of the victim.
3) There is a decriminalization of the minor offenses (faltas) of title III of the code. Some have been elevated to the status of more serious crimes, while others have been channeled into disciplinary administrative law.
4) The reform provides for a new form of punishment, called “reviewable permanent prison”.
5) The judge is given greater discretion with regards to crimes committed by minors.
6) The age of sexual consent is raised to 16 years old (from 13, one of the lowest in the world), although exceptions are suggested, such as when there is a similarity in the ages of the two participants.
7) The text envisages reforms with regards to other sexual offences, punishing customers of child prostitution, even if the offence is committed abroad and criminalizing the creation of internet pages that include links to illegal sites.
Nevertheless, some of the proposed amendments deserve special consideration:
1) Reviewable Permanent Prison: a punishment applied only for particularly serious crimes, such as genocide, crimes against humanity and the killing of the head of State or his heir or heads of State of foreign countries. In these cases, it is permitted to impose an undetermined term of imprisonment, although, upon the fulfillment of a significant part of the penalty, the sentence could be reviewed and changed depending on the circumstances.
2) Specific Criminalization of “Link Websites”: A specific criminal category has been created for these cases. Some commentators criticise this modification, which introduces a greater penalty (up to 6 years of prison) than that foreseen for violent sexual assault or facilitating child prostitution.
At the Rodriguez Bernal office, we have a department specialised in criminal law. For questions or doubts, visit http://www.rodriguezbernal.com/2011/index.php?lang=en or get in contact with us directly by email: mathos@rodriguezbernal.com. Article by Mark Athos Franklin, native English lawyer at the Rodriguez Bernal legal practice.
The European Court of human rights (ECHR) ruled on October 10 that an Estonian court was correct when it condemned Delphi, a news web site featuring anonymous comments, as a result of the offensive nature of some of the comments that could be found there.
Delphi had published a story about a ferry company that decided to alter some of their routes and it´s website allowed visitors to the page to post their own comments. After realizing the threatening content of some of these comments, the company filed a case, obtaining an award of 5,000 krons. The Estonian Supreme Court supported the decision, followed also by the ECHR.
It is article is 10 of the European Convention of Human Rights that protects the right to freedom of expression, a right that has been violated by the ECHR according to opponents of censorship. They point out that the new precedent could affect any web page that lets visitors leave anonymous comments, affecting the very viability of this medium.
However, the content of article 10 of the ECHR should also be taken into account, as it includes “the protection of the reputation or rights of others” as the limit of the right to freedom of expression. Also, as noted by the ECHR, the web site had taken commercial advantage of the comments and did not take appropriate measures to filter them.
It remains to be seen to what extent this decision can alter the situation in other European countries, like Spain or the United Kingdom.
Article by Mark Athos Franklin, native English-speaking lawyer at the Rodriguez Bernal legal practice.
In response to the many doubts caused by the new Entrepreneur Support Act (Ley de Emprendedores), we offer the following answers to frequently asked questions about the fifty euro flat rate to be paid to Social Security under the new legislation, along with practical examples of it´s application.
1) Who can benefit from the €50 flat rate bonus? What are the requirements?
– The self-employed or the partners of associated work cooperatives in the RETA (Régimen Especial de Trabajadores Autónomos).
– 30 or more years old (a bonus already exists for people under the age of 30).
– Sign up to the RETA for the first time or sign up after not having been in the RETA in the five years immediately before.
– Not employ workers.
2) How much do you have to pay per month and for how long?
– 80% of the Social Security fee during the 6 months following the inscription in the RETA.
– 52% of the fee during the 6 months following the previous period.
– 30% of the fee during the 6 months following the previous period.
That is, these percentages are applied to the contribution base chosen by the self-employed person. For example, if you contribute to Social Security at the minimum rate, which is around €256 per month, this means that you will pay roughly €50 for the first six months, €130 for the following six and €180 in the following six. In total, 18 months reduction in the contribution to Social Security of the self-employed.
3) If someone has signed up to the RETA before the 29.09.2013, under what circumstances can they take advantage of the bonus?
The bonus is applicable for “new inscriptions” in the RETA and not those that took place before the 29.09.2013. However, if the self-employed person has not been signed up during the 5 years immediately preceding the date of new inscription, he or she can benefit from the bonus.
For example, a self-employed person signs up to the RETA on the 27.07.2013 and cannot take advantage of the bonus. Another self-employed person had been signed up for 6 months in 2002 and registers again now in October of 2013 and can take advantage of the bonus (he or she has been more than five years without being signed up to the RETA).
4) What about administrators (self-employed) of new companies and their family members? How much do they have to pay per month?
With regards to corporate administrators, it should be noted that, although the law does not expressly forbid the application of the bonus to this group, in practice the Social Security has chosen not to include them. Therefore, administrators of companies cannot take advantage of the bonus.
Being a family member of the owner of a company does not qualify you for the new bonus either. However, there is another bonus which was established in the labor reform of 2012 which created the figure of “self-employed contributors” (family members of company owners) and that applies a reduced rate of 50% to this group. This means a reduced fee of 128,37 euros a month instead of the usual 256,74 for those self-employed that collaborate in the companies of their relatives.
Again the highly controversial “Preferential shares” (or preferentes), are a subject of debate in all public forums, this time as a consequence of a judgement of the Provincial Audience of Vizcaya with regard to the bank “Santander”.
For those who are not aware of the evolution of these shares, perhaps it is convenient to sum up the situation which their owners have been left in.
Preferential shares are a hybrid product between equities and fixed income. This means that the remuneration that corresponds to the owner depends on the profit made by the bank or company that sold the share. Moreover, having no date of expiry, their owners are forced to sell their shares on the market if they want to recoup their investment.
The preferentes became fashionable for a time and were purchased by customers who were not usually engaged in the buying and selling of complex banking products. Sometimes these buyers invested their life savings believing that they would have a fixed remuneration or that the product had an expiry date. Following the economic downturn, the profitability of the preferentes disappeared and the only way to recover the investment was to sell them at an extraordinarily low price or exchange them.
Faced with this panorama, it is pleasant news that the Provincial Audience of Vizcaya has sentenced Banco Santander to return 100,000 euros to a buyer of preferentes, minus the amounts received and yields paid.
Initially, the Bank argued that the customer had sufficient financial expertise to acquire the preferentes, since he had a university degree and had bought a similar product before. However, quite rightly, the audience rejected this approach, considering that the mere fact of having completed higher education and having already bought some kind of banking product does not connote that the Bank does not have to inform the client thoroughly about the nature of what is being bought.
On the contrary, the Provincial Audience declares that banks are obliged to provide “sufficient customer information about the creation, operation and management of complex financial products “.
This judgement is promising for all those affected by the preferentes, though it is unknown to what extent other judicial bodies share the opinion of the Provincial Audience of Vizcaya. From this blog, we will keep stakeholders informed of any news on the subject.
For any doubts or queries, do not hesitate to leave a comment or to contact us at: mathos@rodriguezbernal.com.
Article by Mark Athos Franklin, native English lawyer at the Rodriguez Bernal legal practice.
Businessmen and the self-employed who undertake a business venture in Spain have reason to rejoice. The highly anticipated “Entrepreneur Support Act” has finally arrived, a legislative reform that promises to revitalize those sectors of the Spanish economy most affected by the economic crisis and facilitate both the day to day existence of entrepreneurs who are already in business as well as those who would like to start one up.
For too long, those who create the most jobs in this country have pointed out the great difficulties that exist in establishing oneself as self-employed or in creating a viable company. These obstacles are of many kinds, although overwhelming tax burdens and bureaucratic red tape figure highly on the list of complaints.
For this reason, the Spanish Parliament has given special attention to areas such as VAT, the protection of home ownership against liability, facilitating the creation of companies or the encouragement of foreign investment through easily obtainable residence permits. All these measures promise to unleash a vast entrepreneurial potential that probably will make its impact on the Spanish economy in the coming years.
In short, the most relevant aspects of the “Entrepreneur Support Act” are as follows:
1) Limited Liability Entrepreneurs.- Law 14/2013 recognizes the vulnerability of entrepreneurs´ homes, and therefore protects them against the claims of creditors up to the amount of 300,000 euros. However, as it stands, the new figure of the “ERL” (emprendedor de responsabilidad limitada) excludes cases of fraud or grave negligence.
2) Culture of Entrepreneurship.– Both in school and in the University, the law aims to promote attitudes and skills that will create the next generation of entrepreneurs. Take special notice of the so called the “mini company” which will allow students to learn how business activities take in a practical environment.
3) Residence Permits for Foreigners.- Existing administrative obstacles for investors or businessmen from non- EU countries that wish to install themselves in Spain have been simplified. This measure seeks to attract talent and investment from outside our borders. Also, advice will be provided to those entrepreneurs who would like to benefit from some kind of subsidy from international institutions.
4) Inclusion of More Companies in Public Contracts.- In response to the often excessive conditions that companies must meet to qualify for an administrative contract, the Government has sought to open this possibility to a larger range of companies. For this reason, the previous classification of companies in public competitions for contracts will only be required for those contracts which exceed 500,000 euros, while it will also seek to establish unions of companies that can compete more successfully in these competitions.
5) Simpler Creation of Companies.- The creation of businesses using electronic means has been promoted and a series of simpler forms have been envisaged, streamlining the creation of companies to the point that it should be possible to complete the entire process in under 48 hours. The law also seeks to encourage employers to try again after a first business failure, introducing a series of measures and settlement agreements with creditors.
6) Delayed Payment of VAT.- Both the self-employed and businesses may not have to pay their VAT to Treasury until the bill in question has finally been paid by the consumer.
7)Gradually Established Limited Companies.- Before the reform, the law called for an initial outlay of 3,000 euros for the creation of a Sociedad Limitada. With the new law, the initial outlay will be reduced, allowing for subsequent contributions of 20% of the profits to make up the rest.
8) 50 Euro Flat-Rate: New self-employed workers can enjoy a bonus of 80% in the payment of their Social Security during the first 6 months of their activity, while there will also be financial bonuses for the disabled.
9) Tax Supports.- All kinds of tax incentives have been envisaged, whether they be with regards to the investment of profits, research, development and technological innovation activities, with regards to income from certain intangible assets or for the creation of employment for workers with disabilities.
For any doubts or queries, do not hesitate to leave a comment or to get in contact with us at mathos@rodriguezbernal.com.
Article published by Mark Athos Franklin, native English lawyer at the Rodriguez Bernal law practice.
