German Supreme Court rules on claim to remove artwork from the Lost Art Database

In a long-awaited judgment published at the end of last week, the German Federal Court of Justice (the higher court of civil and criminal justice in Germany) has ruled that the registration of an artwork on the Lost Art Database, when based on true facts, does not constitute an infringement of property rights, accordingly a claim by the current owner that the party who registered the artwork should remove it from the database, was rejected.

This is a dispute about a painting by Andreas Achenbach (1815-1910).?The claimant, Dr Peiffer, bought the painting at auction in London in 1999.?Seventeen years later, in 2016, the painting was registered on the Lost Art Database. The Lost Art Database is a publicly available list of artworks lost by their owners between 1933 and 1945 as a result of Nazi persecution.?The database was launched in 2000.?Since 2015, it has been maintained by the Lost Art Foundation.?The Foundation is located in Magdeburg, Germany, and funded principally by the Federal government.

Once an artwork is registered on the database, it is virtually unsaleable unless either the registration is removed from the database, or there is a reference on the database to a resolution having been reached between the current owner and the party who registered it.?

If you search for other paintings by Achenbach on the database, you will see that some of them are labelled “Restituted”.?Artworks that are so labelled can be sold without Nazi-related concerns, in fact, the label is a sign that any Nazi-related issue has been resolved and the buyer of the artwork can (in principle) rest assured that no claimant from that period will disturb his or her peaceful ownership of it.?

In the case of the Achenbach painting bought by Dr Peiffer, the relevant page of the database records the “Search Request Person” as Dr Max Stern. Max Stern, a well-known gallerist in Düsseldorf, lost his collection in 1937 in one of the so-called Aryanizations of the Nazi era of Jewish art dealers. Dr Stern fled to Canada, and today the Max Stern Restitution Project at Concordia University in Montreal devotes itself to recovering his lost collection.

The painting is recorded on the Lost Art Database as:

Calabrian Coast – Sicilia

Andreas Achenbach

Lost Art-ID533378

The provenance listing reads as follows:

Dr. Max Stern, Dusseldorf;

1937 Gottfried Bischoff, Essen;

March 23, 1999 Phillips, London, Lot 25 (as "Vessels off a Coast at Sunset").

?We do not know if in 1999, the painting was published on any other public database of stolen art, but it is unlikely.?The Washington Principles on Nazi-confiscated art had just been adopted (3 December 1998) at the time of the Phillips auction and issues associated with Nazi-looted art were only just starting to come to the fore.?Phillips would have searched the databases regularly searched by the Art Loss Register at the time and the fact that they included the painting in that auction suggests that it was not recorded anywhere.

Dr Peiffer most probably qualifies as a buyer in good faith.?There is no evidence that he knew, or could or should have known, that the painting might be subject to a claim. Unfortunately for him, when 17 years later, the painting was registered on the Lost Art Database, Dr Peiffer found himself between a rock and a hard place:?he could not sell the painting whilst it was registered, unless he achieved an equitable resolution with the Max Stern Restitution Project.?He seems to have tried to find a resolution but failed.?He could not turn against Phillips or the consignor to Phillips because his claim for breach of implied or express warranties of good title was out of time as a matter of English law.

Dr Peiffer is not the first person to find himself in this invidious position. ?In 2010, a dispute arose in relation to the portrait of a man in Oriental dress attributed to Rembrandt’s circle. The history of the painting is somewhat complex but, in a nutshell, there were two groups of claimants.?The first group was said to have been deprived of the portrait in 1935 through an auction held in the context of Nazi persecution. ??They registered the portrait on the Lost Art Database in 2005.?The second group of claimants claimed for the former J. S. Bank who are said to have acquired the portrait at the auction in 1935. Subsequently, the bank's Jewish shareholders lost it in 1938 in the course of the bank's so-called "Aryanisation". ??They registered the portrait on the database in 2009.?Meanwhile the portrait was found in Namibia. In early 2010, the person in possession of the portrait and the first group of claimants agreed to auction the portrait at Sotheby’s in Amsterdam and to share the sale proceeds equally.??The auction did not go ahead because the Magdeburg Coordination Office, the public authority then in charge of the Lost Art Database, refused to delete the search request in the absence of consent of the second group of claimants.?

When the first group of claimants sought the assistance of the German administrative courts to delete the search entry on the database on the ground that the portrait had been found, at first, they thought that they would succeed.?By judgment of 17?January 2012, the German Administrative Court ordered the Magdeburg Coordination Office to delete the search entry for the painting from the database. The Higher Administrative Court confirmed the order. Essentially, the two lower administrative courts found that the function of the database was limited to publishing search requests and found-object reports.?The continued publication of the search request was unlawful because the portrait had been found.

The Supreme Administrative Court disagreed. First, it is important to understand that unlike the action brought by Dr Peiffer before the German civil courts, the action in relation to the portrait had been brought against the Magdeburg Coordination Office in the administrative courts.?The issue put to the administrative court was specific: “the continued publication of a search request in the Lost Art Internet Database by the Coordination Office” was unlawful if “it is not within the scope of the database's dedicated purpose or violates superior law, in particular basic rights”.?Was the continued publication of the search request within the scope of the database’s purpose or did it violate any basic (read fundamental) rights??The Court concluded that the continued registration of an artwork after it was found was within the scope of the database’s purpose and it did not violate any fundamental rights.

Turning to the purpose of the database first, the Court opined that “[t]he continued publication of the search request lies within the scope of the database’s designated purpose”. The purpose of a search request is not achieved when the artwork is found if “the ultimate fate of [the artwork] remains uncertain”. ?The Court continued “ the Court of [Appeal] overlooked the fact that (…) it is not merely a matter of identifying works of art that were confiscated by the Nazis and not subsequently restituted; [more importantly], pre-war owners and their heirs should be “encouraged to come forward and make known their claims” (..) and receive support in their efforts “to achieve a just and fair solution” (…). The deletion of search requests after a work has been found but before the person currently in possession of the work as well as - possibly competing - pre-war owners and their heirs have reached either an agreement on the work’s further fate, or at least [clarified] the question of ownership, would run counter to [the 1998 Washington] Principles.”?The Court concluded that “a search request or found-object report can only be deleted if the deletion has been requested by the applicant, the plausibility of the request has been called into fundamental doubt, or the deletion has been requested by a third party once their legal ownership has been established by a legally effective judgment of a German court of law”.?Presumably, although the Court does not say so explicitly here, a search request can also be deleted if it is outside the scope of database’s purpose.

The Court considered whether the continued publication of artworks on the database interfered with fundamental rights, including the right to sell the artwork.?The Court’s reasoning is somewhat tortuous on this point, at least for a non-German speaker reading an English translation of the decision.?The bottom line, as far as the Court is concerned, seems to be a moral one: “the publication of search requests and found-object reports simply intends to bring the pre-war owners and/or their heirs together with those currently in possession of the objects and to support them in achieving a just and fair solution.?[…] The continued publication of the search request up until such final settlement is reached is a suitable and necessary means of achieving this purpose. In particular, there is no obvious other way in which the purpose of the database could have been achieved by means of a less burdensome yet equally effective form of government information. Finally, it is equally not unreasonable since the parties involved have the possibility of settling the matter with final effect, if necessary by taking recourse to the civil courts”.???

Perhaps somewhat disingenuously, the Court added that “In contrast, the search request has no effects whatsoever on the assignment of ownership, the power to dispose of the painting, or the existence of any potential restitution claims”.?In practice, registration of an artwork on the database does affect the owner’s “power to dispose of the painting”, because the registration makes a sale difficult if not impossible.?

Dr Peiffer, probably frustrated after he tried to settle the matter with the representatives of Max Stern and failed, sought to persuade the German civil courts to order the representatives to remove the painting from the Lost Art Database.?The lower courts declined to grant the order.?Dr Peiffer took his claim to the Federal Court of Justice, the German supreme court.?

The highest Court began by reminding us that “the purpose of the publication [of an artwork] on the Lost Art Database website is to bring together the previous owners or their heirs and the current owners of a cultural asset and to support them in working out a just and fair solution in accordance with the Washington Declaration.?Based on this, the Court of Appeal rightly assumes that the search report only refers to the earlier ownership of the work of art and the circumstances of the loss;?a statement about the currently existing property or any associated claims is neither associated nor intended”.?In other words, the aim of the Lost Art Database is to bring claimants and current owners together with a view to agreeing a fair and just solution.?Further, by registering an artwork on the database, the registrant is simply recording elements of the history of the artwork during the Nazi era, and the mere fact of registering the artwork does not amount to asserting any ownership rights over it.?

The Court then turned to the presumption of “unjustified confiscation” that follows the loss of artworks by individuals persecuted by the Nazis in the period 1933 to 1945: “based on the restitution regulations in the former occupation zones […], in the event of property losses by victims of Nazi persecution due to a legal transaction (purchase, exchange, donation) in the period from January 30, 1933 to May 8, 1945 the actual presumption [is] that it is an unjustified confiscation of cultural property”.?That presumption can be rebutted: “According to the principles of provenance research, however, the presumption can be refuted by proving that the seller received a reasonable purchase price and was able to freely dispose of it;?In the case of sales after September 15, 1935, it must also be proven that the legal transaction would have taken place in its essential content even without the rule of National Socialism or that the protection of the financial interests of the persecuted person was carried out in a special way and with considerable success”.?The burden of proof rests with the claimant, Dr Peiffer in our case.?The Court stated that “should [Dr Peiffer] be able to provide this evidence - for example through an expert report on provenance - this could mean that the presumption would be refuted in fact […]”.??If so, this could justify a removal of the painting from the Lost Art Database.?But even then, said the Court: “the maintenance of the search report would not impair [Dr Peiffer]’s ownership of the painting by [the representatives of Max Stern]”.?This is because in the Court’s view, the owner of a painting presumed to have been unlawfully appropriated during the Nazi-era has a positive obligation to disclose this in the provenance, in the event of a sale.?Accordingly, the loss of value arises from the presumption of unlawful dispossession, not from the registration of the provenance on the database: “the publication of the search report in the Lost Art database only makes public what is already suspected based on the known circumstances of the sale of the painting in 1937 and - at least in the case of a commercial sale - requires closer clarification.?The court of appeal therefore correctly assumes that the blemish affecting the value of the painting is not first justified by the publication of the search report.?It does not even matter whether - as the Court of Appeal believes and much speaks for it – [Dr Peiffer] would also have a duty to disclose the faulty provenance in the event of a sale even without an entry in the Lost Art database”.

Dr Peiffer could be forgiven for feeling somewhat let down by the Court who may have taken pity on him when they acknowledged that the painting would be difficult to sell: “the publication of a search report does limit the marketability […] of the cultural property, which results in a negative impact on the value”.?However, the Court was not persuaded that the economic interests of the owner tipped the balance in his favour when compared to the interest of the legal successors of the previous owner and the public interest in having access to historically based information.

Thus, the Court rejected Dr Peiffer’s claim to remove the painting from the database: “the search report of a cultural property based on true facts on the website of the Lost Art database does not constitute an impairment of property […] and therefore does not justify a claim by the current owner against the person who initiated the report to request deletion”. ??

The Court then made a surprising statement. Echoing the decision of the Supreme Administrative Court in 2015, the Court repeated that the recording of information on the Lost Art Database was designed to disseminate information to the public. ?However, if the purpose of the publication was exceeded, one might consider either a public-law claim for remedial action in the administrative courts or, given that the database was now operated by a private-law foundation, a civil law claim to remove the entry in the database. Such claim could only be directed against the Foundation,?the Court said, not against the defendants (the Max Stern Restitution Project).?Then came this statement: “Exceeding the purpose of the [registration] seems at least conceivable with regard to the database entry in question [the entry for the painting by Achenbach] because - unlike in the case decided by the Federal Administrative Court [of 2015] - the question of who owns the painting [is] at least clarified according to German law and the agreement between the parties, which is supposed to promote the database, has not come about”.?In other words, the Court seems to be saying that: the purpose of the publication of the painting on the database is to bring the parties together to reach a just and fair solution; if the parties have attempted to reach a just and fair solution but failed, this might justify the removal of the artwork from the database because the purpose has been met (even if unsuccessfully).?This is odd because it seems to conflict squarely with the rest of the judgment: what happens to the right of the public to be informed? What happens to the interests of the registrant? What happens to the positive obligation apparently resting on Dr Peiffer to inform the buyer of the history of the painting during the Nazi-era? What happens to the fact that according to the Court, the loss in value is intrinsic given the history of the painting and does not result from the registration on the database?

The main difficulty with these situations is that two parties have a “good” moral claim to the same artwork: the first party are the heirs of the former owner dispossessed by an evil regime during one of the most brutal genocides in the world’s history.?The second is the buyer who did not know, and often could not have known, the recent history of the artwork and the potential claim hanging over it, yet he or she paid good money for the artwork and has cared for it for some time.?Who wins??The law is meant to come to the rescue of the parties by setting principles that the courts will apply to decide who is the rightful owner.?The Supreme Administrative Court and the Federal Court of Justice appear to acknowledge that the law and the 1998 Washington Principles (to which both Courts refer more than once) are not aligned.?Something is missing from the rulebook to achieve natural justice (bearing in mind that the Washington Principles are not legally binding).?We saw earlier how much emphasis the Supreme Administrative Court placed on the parties settling their claims to the same artwork amongst themselves.?The Federal Court of Justice made the same point with some force: “The purpose of publication on the Lost Art Database website is to identify the previous owners or?to bring together their heirs and the current owners of a cultural asset and to support them in working out a just and fair solution in accordance with the Washington Declaration of 1998 on how to deal with works of art that were lost during the Nazi era.”?The message is clear.?The parties have a moral obligation to reach a just and fair solution. ?If, as in the case of Dr Peiffer and the representatives of Max Stern, that is not possible, history, if it is recorded on the database as based “on true facts”, will be the deciding factor. The Federal Court of Justice is especially clear that history cannot, and must not, be suppressed, even if it negatively impacts the economic interests of the current owner.?

It is relatively easy to see why reaching a different conclusion would be difficult for the German Courts at this time.?Any decision resulting in history being “suppressed” or publicly unavailable to serve the economic interests of the current owner, would have been greeted with anger and disbelief.?Sadly, this has unhappy implications for buyers of art who find themselves in Dr Peiffer’s situation.?To minimize that risk, pre-acquisition due diligence is essential, but even then, historical facts can come to light months or years after you purchased the artwork, leaving you in Dr Peiffer’s unenvious position.?

Pierre Valentin

Boies Schiller Flexner

5 August 2023

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