1L A L I V E Avocats Good Faith, Due Diligence and Acquisition of Title to Works of Art The Swiss Law Approach Carolyn Olsburgh

2 Titre Sous-titre L A L I V E Avocats Good Faith and Acquisition of Title – Swiss Law INTRODUCTION Subsequent purchaserOriginal owner Purchase of a work of art from a person without title Conflict of interests: Civil law v. Common law systems Good faith has an effect on title (e.g. possibility to acquire title on a stolen object)

3 Titre Sous-titre L A L I V E Avocats Issue: Good faith or bad faith of the purchaser? Consequences on:  Original owner’s claim to recover the work of art  Acquisition of title by the purchaser Good Faith and Acquisition of Title – Swiss Law INTRODUCTION

4 Titre Sous-titre L A L I V E Avocats Section I Was the purchaser in good or bad faith? Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH

5 Titre Sous-titre L A L I V E Avocats Knowledge about the lack of title at the time of the purchase? Yes  bad faith No  good faith unless he should have known  bad faith Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH

6 Titre Sous-titre L A L I V E Avocats 1.Relevant moment: at the time of the purchase 2.Presumption of good faith (Art. 3(1) CC) Burden of proof that there was no good faith: former owner 3.No protection of the purchaser when: He was in bad faith; or His ignorance is due to the fact that he did not pay the required attention (Art. 3(2) CC) Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH

7 Titre Sous-titre L A L I V E Avocats 4.Degree of attention: Matter of appreciation Objective test: honest man in the shoes of the purchaser? 5.Duty to inform oneself about the title General rule: only if « concrete reasons capable of putting the title into doubt » Exception: businesses/trade involving goods of doubtful origin (e.g., second-hand goods, antiques, art) Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH

8 Titre Sous-titre L A L I V E Avocats On the art market: The purchaser must inform himself « when he should be suspicious given the circumstances » Higher standard of care Irrelevant factors: dealer/non-dealer; purpose of resale or not Relevant: knowledge of the market in question Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH

9 Titre Sous-titre L A L I V E Avocats Original Manuscript of the Marquis de Sade (Swiss Supreme Court, 28 May 1998, SJ 1999 I 1) Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH A (former owner) D (intermediary renowned specialist in manuscripts) C (seller) B (purchaser) Stolen manuscript Claim to recover manuscript Sale of manuscript France Switzerland

10 Titre Sous-titre L A L I V E Avocats Solution for the case -Renowned intermediary (D) -Personal relationship between former owner (A) and seller (C) -High purchase price (= value according to expert) -BUT: Manuscript not delivered in a case -HELD: Good faith of B  A’s claim was dismissed. Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH

11 Titre Sous-titre L A L I V E Avocats Section II Consequences of the distinction between good faith and bad faith Good Faith and Acquisition of Title – Swiss Law II. CONSEQUENCES OF GOOD/BAD FAITH

12 Titre Sous-titre L A L I V E Avocats Issue 1 Was the purchaser in good or in bad faith at the time of the purchase?  Bad faith:  object may always be recovered (Art. 936(1) CC)  no possibility to ever acquire title (Art. 728 CC)  Good faith: second stage of the reasoning Good Faith and Acquisition of Title – Swiss Law II. CONSEQUENCES OF GOOD/BAD FAITH

13 Titre Sous-titre L A L I V E Avocats Issue 2 Was the possession lost willingly or unwillingly?  Object ‘subject to a bailment’ (‘entrusted object’):  object may never be recovered  immediate acquisition of title  Stolen/lost object:  object may be recovered during 1 year / 30 years  acquisition of title may occur after 30 years Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH

14 Titre Sous-titre L A L I V E Avocats a) Object ‘subject to a bailment’ (‘entrusted object’) Art. 933 The good faith purchaser « must be protected in his acquisition, even if the transferor lacked capacity to pass title » (see also Art. 714(2) CC).  No claim is possible  Immediate acquisition of title Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH

15 Titre Sous-titre L A L I V E Avocats b) Stolen or lost object – Claim (Art. 934 CC)  within one year after the owner becomes aware of the place where the cultural asset is located and the identity of the possessor,  but at the latest 30 years following its removal (new statute of limitations since 1st June 2005)  Against reimbursement if the object was bought at a market, at a public auction or from a dealer of objects of the same nature Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH

16 Titre Sous-titre L A L I V E Avocats b) Stolen or lost object – Acquisition of title (Art. 728 CC)  Acquisition of title through operation of the limitation period  Peaceful and uninterrupted possession  During a period of 30 years (since 1st June 2005) Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH

17 Titre Sous-titre L A L I V E Avocats Good Faith and Acquisition of Title – Swiss Law CONCLUSION Good faith purchaser Entrusted objectStolen/lost object Bad faith purchaser Claim within 1 year / 30 years Claim at any time No claim Immediate passing of title Passing of title after 30 years No passing of title If market/ public auction/ dealer of objects of same nature: reimbursement of purchase price

18 Titre Sous-titre L A L I V E Avocats 1.Evolution in case-law Stricter standards of good faith  more easily bad faith 1)No statute of limitations for claim to recover goods 2)No possible acquisition of title by purchaser  Security of transactions?  Security about title? Good Faith and Acquisition of Title – Swiss Law CONCLUSION

19 Titre Sous-titre L A L I V E Avocats 2.Recent amendment in the Swiss Civil Code Longer limitation periods (for good faith purchasers of stolen/lost cultural assets) 1)Extension of the absolute limitation period to 30 years 2)Extension of the period required to obtain title through operation of law: 30 years  Problem: discrepancy between relative limitation period of 1 year and statute of limitations to acquire title Good Faith and Acquisition of Title – Swiss Law CONCLUSION

20 Titre Sous-titre L A L I V E Avocats 3. Further steps in the future? Art. 4(1) of the 1995 Unidroit Convention: Good faith Relevant for compensation, but not for the issue of title Burden of proof lies on the current possessor Good Faith and Acquisition of Title – Swiss Law CONCLUSION