Provenance, simply put, means the history of the whereabouts of an artwork from the day it was created by the artist to the present. While provenance is generally intended to be a ‘chain of title’ that includes every owner of the work since its creation, in practice, it typically tends to merely include a listing of some interesting facts concerning the background of the work, such as notable former owners and exhibition of the work at some prestigious venues.[1] An ideal provenance must, at the very least, contain important information such as the dimensions, medium, date of creation of the artwork and must provide documentary record of owners’ names, date of ownership, methods of transference – inheritance, or sale through a dealer or auction, locations where the work was kept, from the time of its creation by the artist until the present day.[2]

Why is Provenance Important?

Art disputes generally fall under one of the following three buckets: (i) disputes concerning ownership of the artwork; (ii) disputes concerning authenticity of the artwork; or (iii) disputes concerning valuation of the artwork. An assessment of provenance, being a complete chain of previous owners of an artwork, has a significant bearing on each of the aforementioned aspects of title to the artwork, authenticity and valuation.

  • Provenance and Ownership – Provenance provides insight into the origins of an artwork and has a direct bearing in determining the ownership of a work. In a potential title dispute scenario, a complete provenance is invaluable to any good faith purchaser of artwork. For example, in 2019, Marc Chagall’s ‘Wallflower’ was bought by three purchasers in good faith, from an art dealer based in New York. This work recently became a subject to an ownership dispute between the above-mentioned purchasers and a US Collector who had purportedly bought the same work for $1.2 million in 2015.[3] The US Collector claims that he had merely delivered the artwork to the seller art dealer with an intention to sell in the future, on the fulfilment of some conditions. Although, even a complete provenance may not provide a solution to such disputes, it may at the very least provide the buyer a heads up about potential problems that may arise in the future.

 

  • Provenance and Authenticity – Provenance should not be confused with authenticity, though it serves as a good base for any authentication. Authenticity simply refers to the genuineness of a work. Questions related to authenticity of an artwork may arise at any point in time. Experts may change their minds, new experts may disagree with old consensus, and new facts or technologies may emerge.[4] For example, in 2014, works of MF Hussain and Manjit Bawa (authenticated by their family members), were featured in an art festival, only to be removed as non-genuine soon after.[5] In this context, artworks that have a documented chain of ownership from the moment of creation to current ownership are likelier to be authentic.

 

  • Provenance and valuation – Provenance can be one of the biggest drivers of an artwork’s value. By helping to establish its authenticity and providing an insight into its history, a good provenance significantly increases the value of an artwork. If a work has passed through the hands of a celebrity, historical figure, prestigious collector or a famous gallery, then its value will only increase. Similarly, if the chain of owners includes a non-compliant name, the buyer may be more cautious, which may impact the valuation of the artwork negatively. However, this may not always be true as was recently observed in the auction of Nirav Modi’s art collection, where buyers gave more weightage to the quality and rarity of his art collection.[6]

Issues in determining Provenance

Artists do not always document their work, while private collectors of art may not always be meticulous about curating their collections. Parties to transactions in the art market do not always document art transfers with formal legal agreements. Few buyers in the art market conduct a formal diligence on provenance, instead they rely only on a combination of certificates from the artist, family members or other experts, which may not always be reliable. With older works in particular, there are a lot of conflicting opinions by art experts, in relation to attribution and authenticity of works.

Since transactions in the art market are often recorded with mere invoices or receipts rather than formal agreements, it is often unclear from these documents, whether a particular dealer is acting as an agent for the beneficial owner or as the beneficial owner himself. At times, parties insist on maintaining strict confidentiality, concerning details of the parties and the price involved in such art transactions, further clouding the provenance of the artwork.

Recognising the immense value that stakeholders in the art market attribute to good provenance, unscrupulous art dealers and sellers may themselves produce inaccurate and false provenance, in order to convince a potential buyer to overpay for an artwork. Such false provenances may include concocted ownership histories and sale documentation, going all the way back to the artwork’s alleged creation.[7] It may even be argued that it is much easier to fake provenance documents than to copy or resemble the work of an artist. This has resulted in the practice of placing forged signatures on unsigned paintings, in order to resemble the style of a well-known artist.

Blockchain and Provenance

The art market has had a lot of issues with proving chains of custody and verifying attributions, relying on inadequate processes and intermediaries for verification and authentication. There is a crying need for an improved, transparent, irrefutable evidentiary infrastructure for artworks and collectibles that is verifiable by anyone. Blockchain technology does promise to provide this. Blockchain is really just a ledger, a list of transactions chained together using cryptography. Each transaction in an artwork creates a block and appends to the previous block, with absolutely no ability to amend, modify or remove the previous blocks, making it tamper proof. The bedrock of this technology is that it is based on a decentralised network of computers called nodes. It is each of these nodes on the network that verifies the data each time.

In 2018, Christie’s, partnering with Artory, became the first major auction house to apply blockchain technology to its collection, to encrypt the provenance and sales records of the Barney A. Ebsworth collection (which sold for $323 million).[8] This initiative is aimed at creating a secure database, containing vetted information regarding the artworks. The idea is also to create digital records of transactions throughout the lifecycle of a particular artwork.

The art market is exploring ways in which blockchain technology can revolutionise the industry. Amongst other potential applications of blockchain technology in the art market, the technology is increasingly being used as a means of recording and sharing cryptographically secure, demonstrably authentic certificates of origin and provenance for artworks. Blockchain technology makes it possible for the origin of any artwork to be monitored. By creating a tamper-proof, trustworthy audit trail of the lifecycle of an artwork, the application of blockchain technology promotes greater transparency in the art market.[9]

The application of blockchain technology involves issuing a digital token, which is a unique string of numbers. A digital token forms a digital representation of physical assets, like artwork. Such digital tokens cannot be copied, forged or even altered, once created. They can be transferred from one person to another to signify a digital equivalent of a physical transfer. Such ‘transfer’ of token cannot take place without the consent of the parties involved.

Potential Challenges and the Way Forward

While it may be relatively convenient to track and record the provenance of contemporary artwork, in relation to older works of art, it is not only difficult to track provenance and attribute accurately, but the concern is that provenance sometimes gets altered over time as works and their transaction histories are reassessed in art-historical research.[10] However, blockchain technology does not generally allow for any alteration to the records at a later stage, which could actually result in less accurate and reliable transaction histories. It is important to note that the blockchain technology is only as good as the data input. It cannot correct wrong provenance history.

One of the other challenges is also finding solutions to connect real works of art to the blockchain registry, despite several technological solutions that are coming up in the market.[11] For example, Tagsmart creates DNA tags, which are stamped onto artworks, providing it a unique reference number, linking it to a certificate of authenticity and digital record of provenance.[12] On the other hand, Veracity Protocol using artificial intelligence based tools and computer vision, enables any camera to create a tamper-proof physical code unique to each artwork, based on the work’s material structure.[13] In the absence of a definite secure way to connect the physical work to the digital record, it may be replaced with fake works or the conditions of the artwork may be misreported.

While there continues to be several unanswered questions related to regulation, governance and secure application of blockchain-based technology, there is undoubtedly a heightened interest in its application in the global art market. In the Indian context, there is currently no dedicated law governing the use and operation of blockchain technology. There appears to be a dichotomy in the regulatory approach towards blockchain technology and its application in virtual currencies. While the Government has expressed concerns about the risks associated with virtual currencies[14], the approach towards blockchain technology has generally been favorable. The benefits of a transparent and more reliable art market would outweigh the concerns of an increased commodification of art that many art lovers have. As it has generally been the case with all e-commerce trends, there may be a gradual and phased adoption of the application of blockchain-based technology in the global art market, with tangible gains becoming visible only in the longer term.

 


[1] Ronald D Spencer and Gary D Sesser, ‘Provenance: Important, Yes, But Often Incomplete and Often Enough, Wrong – A lack of clarity can lead to uncertainty results’, June 26, 2013, https://news.artnet.com/market/the-importance-of-provenance-in-determining-authenticity-29953.

[2] International Research for Art Foundation, ‘Provenance Guide’, https://www.ifar.org/Provenance_Guide.pdf.

[3] Ownership woes: Legal Lessons from the $1.2m Chagall dispute’, March 28, 2019, Spear’s https://www.spearswms.com/ownership-woes-legal-lessons-from-the-1-2m-chagall-dispute/.

[4] Ronald D Spencer and Gary D Sesser, ‘Provenance: Important, Yes, But Often Incomplete and Often Enough, Wrong – A lack of clarity can lead to uncertainty results’, June 26, 2013, https://news.artnet.com/market/the-importance-of-provenance-in-determining-authenticity-29953.

[5] Indulekha Aravind, ‘Counterfeits, controversies mar $400-mm worth Indian art market’, Business Standard, June 29, 2014, https://www.business-standard.com/article/companies/counterfeits-controversies-mar-400-mn-worth-indian-art-market-114062900401_1.html.

[6] Benita Fernando, ‘It’s Art vs Taint as Nirav Modi’s collection is auctioned’, livemint, March 12, 2019, https://www.livemint.com/companies/news/it-s-art-vs-taint-as-nirav-modi-s-collection-is-auctioned-1552337107213.html.

[7] Enrique Liberman, ‘The Proof is in the Provenance’, ArtAsiaPacific, Nov/Dec 2014, http://artasiapacific.com/Magazine/91/TheProofIsInTheProvenance.

[8] Henri Neuendor, ‘Christie’s will Become the First Major Auction House to Use Blockchain in a Sale’, October 12, 2018, https://news.artnet.com/market/christies-artory-blockchain-pilot-1370788.

[9] Tom Lyons, ‘Three ways blockchain is reshaping the art world’, Juluis Bar, March 4, 2020, https://www.juliusbaer.com/es/insights/digital-disruption/three-ways-blockchain-is-reshaping-the-art-world/.

[10] Dr. Clare McAndrews, Art Basel & UBS Report, ‘The Art Market 2019’, https://www.artbasel.com/news/art-market-report.

[11] ‘Why Blockchain is the solution of the Art Market’, April 15, 2019, https://medium.com/dipchain/why-blockchain-is-solution-of-the-art-market-21c0ac5797b3.

[12] Dr. Clare McAndrews, Art Basel & UBS Report, ‘The Art Market 2019’, https://www.artbasel.com/news/art-market-report.

[13] https://www.veracityprotocol.org/.

[14] Department of Economic Affairs, Ministry of Finance, ‘Report of the Committee to propose specific actions to be taken in relation to Virtual Currencies’, February 18, 2019, https://www.prsindia.org/sites/default/files/bill_files/Report%20of%20the%20Inter-Ministerial%20Committee%20on%20Virtual%20Currencies.pdf; Deepshikha Sikarwar, ‘With a law, India plans lasting ban on cryptos’, Economic Times, June 12, 2020, https://economictimes.indiatimes.com/news/economy/policy/with-a-law-india-plans-lasting-ban-on-cryptos/articleshow/76330403.cms.

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Photo of Manisha Kumar Manisha Kumar

Partner in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Manisha specialises in cross border private equity investments and mergers & acquisitions, across diverse sectors. She also advises on art law.

Manisha is a ‘recommended lawyer’ by clients, as…

Partner in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Manisha specialises in cross border private equity investments and mergers & acquisitions, across diverse sectors. She also advises on art law.

Manisha is a ‘recommended lawyer’ by clients, as featured in London based RSG Consulting’s India Report for 2015. She can be reached at manisha.kumar@cyrilshroff.com

Photo of Kunal Gopal Kunal Gopal

Associate in the General Corporate practice at the Mumbai office of Cyril Amarchand Mangaldas. Kunal graduated from Gujarat National Law University in 2019. His experience includes advising on general corporate matters, private equity investments and art law. He can be reached at kunal.gopal@cyrilshroff.com.