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Lawyer alerts industry to unwitting bribe risk

07 July 2008Written by ATG Reporter

AUCTIONEERS at the latest Society of Fine Art Auctioneers and Valuers (SOFAA) seminar were visibly shocked as they learnt how easy it is to become an unwitting party to a bribe.

Art market specialist lawyer Pierre Valentin of Withers LLP explained how easy it is to fall foul of the law when introducing clients to dealers and auctioneers.

The risk arises where there is a fiduciary relationship between the client and the intermediary and an introduction fee is paid. Importantly, both the party paying the fee and the party to whom it is paid are at risk here.

Mr Valentin took the example of a dealer consigning a painting to auction on behalf of a client. Following the sale, the auctioneer hands the dealer a gratuity for bringing them the business, which the dealer keeps. The client is not made aware of the gratuity.

In law, this constitutes a bribe and both the auctioneer and the dealer have committed an offence.

Under the law, both parties should make the client aware of the gratuity and the amount paid over, and it is at the client’s discretion as to whether the dealer should be allowed to keep it or should hand it over to them.

Nondisclosure could lead to a suit for the repayment of commission, damages and the cancellation of the transaction.

The law here also covers the buyer’s premium at auction, because it is a fee paid to the intermediary (the auction house) acting on behalf of a client (the consignor).

So terms and conditions to consignors and in catalogues need to explain that a buyer’s premium is charged and at what percentage.

Decorators acting on behalf of clients also need to be aware of the law and the risks.

Key to the law is that an offence can be committed even if there is no intent to do so.

Because both parties to any fee are liable, Mr Valentin advised that neither should rely on the other to make disclosure but ensure that they do so themselves.

He also gave an example of where the law would not apply: where a gratuity was paid to an individual simply for tipping off a dealer or an auctioneer about a business prospect with which they had no formal link.

For example, where an individual tells a dealer looking for a piece of furniture that they met someone at a dinner party the night before who might have just the thing.

Any resulting gratuity would not be a bribe.

By Ivan Macquisten

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