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Good Faith, Due Diligence and Acquisition of Title to Works of Art The Swiss Law Approach Carolyn Olsburgh. L A L I V E Avocats. Good Faith and Acquisition of Title – Swiss Law INTRODUCTION. Titre Sous-titre. Purchase of a work of art from a person without title

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

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

  3. Good Faith and Acquisition of Title – Swiss Law INTRODUCTION TitreSous-titre • 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 L A L I V E Avocats

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

  5. Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH TitreSous-titre 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 L A L I V E Avocats

  6. Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH TitreSous-titre • 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) L A L I V E Avocats

  7. Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH TitreSous-titre • 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) L A L I V E Avocats

  8. Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH TitreSous-titre 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 L A L I V E Avocats

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

  10. Good Faith and Acquisition of Title – Swiss Law I. NOTION OF GOOD FAITH TitreSous-titre • 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. L A L I V E Avocats

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

  12. Good Faith and Acquisition of Title – Swiss Law II. CONSEQUENCES OF GOOD/BAD FAITH TitreSous-titre • 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 L A L I V E Avocats

  13. Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH TitreSous-titre • 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 L A L I V E Avocats

  14. Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH TitreSous-titre • 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 L A L I V E Avocats

  15. Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH TitreSous-titre • b) Stolen or lost object – Claim (Art. 934 CC) • within one year after the owner becomes aware of the place where the cultural assetis 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 L A L I V E Avocats

  16. Good Faith and Acquisition of Title – Swiss Law II.2 CONSEQUENCES OF GOOD FAITH TitreSous-titre • 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) L A L I V E Avocats

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

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

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

  20. Good Faith and Acquisition of Title – Swiss Law CONCLUSION TitreSous-titre • 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 L A L I V E Avocats

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