Summer time is the silly season when most journalists and politicians take long vacations and news media are filled with stories that are trivial or nonsensical. During the past few months an art news story has emerged that at first appears to be a silly season news item: an art-market organisation giving 21 days written notice to its artist-clients of its intention to charge storage fees for works it had taken and held on consignment. Was this some kind of joke? And if not, was it lawful for such a significant change to be unilaterally imposed on artist-clients who had entrusted their works to the art-market professional?

For the artist-clients concerned it was (and continues to be at the time of writing) no laughing matter: some are considering completely pulling out of the original consignment agreement; others anticipate destroying works they cannot afford to pay to store; and many have used social media to encourage a united collective response to oppose the contractual change. Some have banded together to instruct lawyers to take legal action to defend their position jointly and individually. Who are the dramatis personae involved, what are the key ethical and legal and reputational issues, and what are the prospects for an amicable settlement of this conflict?

Art Pension Trust (APT) is the art-market professional involved. Established in 2004, APT is a business offering ‘long-term financial security and international exposure to select artists around the world based on a unique tailor-made financial model’. APT’s model is indeed unique: selected artists are invited to agree to consign one work annually to APT for minimum 20 years, after which time they will receive a share of profits APT has made from gradual sales from its entire pool of artist-consigned works. APT’s aim is to provide artist-clients with a ‘future financial security’ scheme along the following lines: funds from the net proceeds of each work sold are allocated 72% to the artists in the trust (40% to the individual artist and 32% among the other artists in the trust based on the number of artworks they have consigned); and the remaining 28% is paid to APT to cover its operational costs.

Over the past decade or so, APT has signed up around 2,000 artists based in 75 countries and claims it has ‘the largest global collection of contemporary art, comprising 13,000 artworks … with additional commitments totaling 40,000 artworks’ and that its collection is ‘growing by more than 2,000 each year, as artworks are deposited by artists chosen by APT’s distinguished international Curatorial Team’.  APT currently has offices in New York, Los Angeles, London, Leipzig, Mumbai, Hong Kong, Shanghai, Mexico City and Amman.

Selected artist-clients include nominees and winners of awards and prizes including the Turner Prize, the William H. Johnson Prize, the Hugo Boss Prize and the Future Generation Art Prize. Many artists were attracted to APT because it offered an attractive way of achieving what for most self-employed creatives is the holy grail – a retirement pension  –  to which they are able to contribute artwork rather than cash. Most participating artists also valued APT’s undertaking to hold and store consigned artwork until eventually sold for the benefit of the artists’ trust, so APT’s entirely unexpected move to now charge its artist-clients for storage of consigned works has alarmed many.

In its notice to amend the artist-client consignment contract APT says the following: in the company’s sole discretion it can impose on artists a ‘reasonable fee’ to store consigned work ‘in a safe and secure environment and shall observe any special requirements as to storage’ that the artist specified on initial consignment. The initial basic storage fee was quoted as US$6.50 per artwork each month, but APT reserves the right to charge the artist ‘additional costs arising due to the extraordinary scale and/or technical requirements of the storage’. If the artist fails to pay, APT reserves the right to deduct outstanding fees from the artist’s benefits entitlement from the trust. Instead of paying such new fees, APT’s notice also allows artist-clients to retake possession of APT-consigned works ‘either to themselves, their gallery or an external institution’ – if the artist pays for transport and handling.

These new provisions together implement APT’s new ‘Sales Policy’ in  ‘an effort to achieve the best sales price’; by allowing artist-clients to decide when and where and how to exhibit and/or sell – or to pay APT for storage. APT’s policy change may have been driven by difficulties encountered in April 2017 when it consigned 18 of its artist-client works to Sotheby’s London for public auction. Together these lots had an estimated value of up to £200,000 and were marketed as an APT ‘Contemporary Curated’ sale, including works by David Shrigley, Jeremy Deller, Richard Wright, Jane and Louise Wilson, Liam Gillick, Martin Boyce, Douglas Gordon, Ryan Gander, and Bob and Roberta Smith.

The APT lots were withdrawn from the sale, because according to an APT spokesperson ‘We had conversations with some of the artists, and the closer the auction got, the more the artists and their galleries said that auction was not in their best interests …they said they could get better prices.’ Artists operating in the western art market are commonly known to dislike their works being sold for the first time at public auction. The same spokesperson said APT was ‘not planning more auctions, though it might be a different story in Asia where artists are much more auction friendly.’ As for the new storage fees, one artist-client recently commented: ‘do the math: the new scheme could add nearly US$1 million to APT’s revenue stream annually.’

‘If you fail to respond to this notice within 21 days as of the date of this notice, your consent to the aforementioned will be deemed to have been given’. This capitalised warning at the end of APT’s notice gave artist-clients until 11 August to respond, because the new arrangement would be implemented from 1 September 2017. Hundreds of artist-clients subsequently formed the ‘APT Artist Solidarity’ group on Facebook. Typical posts included: ‘Artists pay for storage?! They already have our work. Why would we pay for storage too? This is not what we signed up for. I originally understood that APT was developed to protect artists and their futures. It makes me sad that it has become increasingly clear that it is about making a profit.’

Key legal considerations currently being explored by artist-client lawyers include the following. Which country’s laws govern disputes over the original consignment contract: in international contracts good practice would be for one country to be chosen by the parties and stated in the agreement. Whether relevant contract laws allow one contracting party to impose fundamental changes unilaterally on the other, to that other’s disadvantage: even if the original contract has a provision allowing such unilateral imposition by one party, many laws treat such provisions as oppressive and legally unenforceable. Whether relevant laws of trusts impose on trustees special legal duties of faithfulness to beneficiaries of the trust: such ‘fiduciary’ duties of trustees usually include at all times acting: prudently, responsibly, honestly, and impartially; and in the best interests of the trust’s beneficiaries.

Perhaps APT’s original model now needs a radical overhaul in consultation with its artist-clients.

© Henry Lydiate 2017

This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.