Russia Expands on Import and Export of Art Objects

January 2, 2019

By Elena Gurevich.

In March 2018, amendments to Russia’s Federal Law “On Export and Import of Cultural Valuables” came into effect to facilitate the development of the Russian art market, and to open it up to international trade (“the Amendments”).^[i] This Federal Law, as amended, also introduces changes to several other laws, including “Certain Legislative Acts of the Russian Federation in Connection with the Improvement of State Administration in the Sphere of Export and Import of Cultural Property and Archival Affairs” and to the “Tax Code of the Russian Federation, Part II.”^[ii]

The Amendments regulate the import and export of cultural property between Russia and the countries that are not members of the Eurasian Economic Union (EAEU).^[iii] The approach taken by the new Amendments to import/export regulation to and from non-EAEU members will follow the one set forth in the EAEU import/export regulations.^[iv]

As compared to the previous legislation, the latest Amendments lift or lessen some of the restrictions that did not allow the Russian art market to develop in the same way as the Western art market. Overall, the Amendments were meant to promote art trade, encourage collectors and gallerists to import art into the country, and facilitate setting up exhibitions, art fairs and auctions in Russia. It remains to be seen whether this latest attempt to lessen regulation will be successful.

Background

Legislation regulating import and export of art and cultural property existed in Russia in one form or another since the 1960s. Various restrictions were first introduced to protect the interests of the Russian State, which acquired a large number of cultural valuables after the end of World War II. At that time, Russian Red Army established “trophy brigades” – consisting of art historians, artists, restorers, and other art experts – who acquired a large number of cultural valuables from the Russian zone of occupation as “compensation” for the damage caused to Russia by the war as well as the art lost by Russia during the war.^[v] In total, the Soviet Union transported over two million works of art from its zone of occupation in Germany back to the Soviet Union.^[vi] In 2007, ArtNews reported, based on their interviews with undisclosed sources, that “[a]lthough millions of objects were returned to the former German Democratic Republic in the late 1940s and throughout the ’50s, thousands more remain, in depositories in Moscow, Leningrad, Kiev, Zagorsk, and other cities.”^[vii]

Early Russian legislation placed strict restrictions on art exports as Russia resisted international efforts to return Nazi Looted Art to the original owners in Europe.^[viii] The practical result of the regulations, however, was that art transactions in Russia were risky and unprofitable, there were no incentives to bring auction houses and art fairs to Russia, and collectors preferred to amass their collections abroad.^[ix]

The current version of the Federal Law “On Export and Import of Cultural Valuables”, № 4804-1 was adopted in 1993. This legislation underwent multiple prior amendments amid criticism that Russian art market ​​was stagnant due to excessive regulation. These prior amendments, however, had a dubious level of success in promoting the growth of Russia’s art market.^[x]

To illustrate, previous legislation classified works of art created within the last fifty years as luxury goods, on which thirty percent import customs duties were levied.^[xi] Furthermore, anyone wishing to import artworks or items of cultural heritage also had to pay thirteen percent sales tax if the property had been owned by its present owner for less than five years.^[xii] With the heavy tax burden of up to forty three percent of the value of the artwork, art transactions in Russia were therefore unprofitable.^[xiii] 

Furthermore, private galleries and museums wishing to organize exhibitions in Russia with imported art also faced difficulties even if sales in Russia were not contemplated. According to the interview given to the Russian publication Rossiiskaya Gazeta by Mr. Anton Belov, director of the Garage Museum of Contemporary Art (Moscow, Russia), privately-owned galleries had to either collaborate with state-owned cultural institutions or pay immense insurance premiums.^[xiv]

The newest set of Amendments caused heated debate among art market participants and the members of the public at the drafting stage. The Ministry of Culture, Rosarkhiv (Russia’s Federal Archival Agency), the Ministry of Justice and the Federalnaya Sluzhba Bezopasnosti, or the FSB (Russia’s principal security agency), opposed to the Amendments, voicing concerns such as  lack of control of export, particularly with respect to the works of art that are less than 100 years old.^[xv]

The final draft of the Amendments addressed some of the criticisms. Specifically, the Amendments preserved the ban on export of cultural property that is over one hundred years old.^[xvi] Also clarified were the rules for exporting artworks and valuables that were created within the last hundred years, especially with respect to the Russian avant-garde and social realism works.^[xvii]

In 2017, when asked about the new Amendments being in the works and the transparency they were to bring to the import and export of art to and from Russia, Garage Museum’s director, Mr. Belov, agreed that having the Amendments implemented would definitely be beneficial to the art market participants.^[xviii] According to the interview Mr. Belov gave to the Russian publication Ross Business Consulting before the Amendments were adopted^[xix]:

Now […] when importing a work of art to Russia one cannot guarantee its unimpeded export: the object may all of a sudden be recognized as being cultural valuable, and then it will be necessary to secure new [export] licenses. The ensure their ability to export artworks, private museums have to expend “enormous sums of money”, while the Ministry of Culture’s mechanism of determining the objects of cultural value is not transparent […]

Substantive Changes Introduced By The Amendments

The Amendments introduce a new category of cultural property, the permanent export of which is entirely prohibited: these are the items ​​of particular historical, artistic, scientific or cultural significance that are both over one hundred years old and are classified as movable objects (as distinguished from fixtures and structures).^[xx] The following is the full list of items that may be included in this category:^[xxi]

• Movable objects of historical, artistic, scientific or other cultural significance that are recognized as especially valuable objects of cultural heritage of the peoples of the Russian Federation, regardless of the time of their creation;
• All antiques in existence for over a hundred years;
• Movable objects that are of significant value and are classified as objects of cultural heritage of significant importance to the peoples of Russia; and
• Objects that are a part of collections of libraries, museums, archives or other public repositories that are of significant value. 

The Amendments also clarified the legal definition of the term “cultural valuables”, which is included in the category of movable property.^[xxii] Cultural valuables may include:^[xxiii]

• Artworks, including applied art and sculptures;
• Icons, prints, and lithographs;
• Valuable manuscripts, rare books  and antique weapons;
• Antique scientific and technical equipment and tools;
• Antique coins, postage stamps and medals;
• Archival photographs, phonorecords, film recordings, and video archives;
• Unique and rare musical instruments; and
• Other items protected by the Russian Government as the country’s historical and cultural heritage.
  

The latest Amendments also stipulate that individuals importing cultural property for personal use are exempt from customs duties and taxes.^[xxiv]

Finally, the Amendments require the establishment of Council for the Preservation of Cultural Heritage and the Development of the International Exchange of Cultural Treasures that will participate in the development of proposals to improve legislation in this area.^[xxv] The Council, which has not yet been established, will consist of the museum representatives (at least fifty percent of the Council members), government officials, prominent cultural figures and independent art experts.^[xxvi]

As discussed above, the Amendments were intended to adopt the rules consistent with the EAEU regulations on export/import of cultural valuables. Under the EAEU rules, works of art that are less than fifty years old can be exported without any export license.^[xxvii]

Effects on the Art Market

Seeking to adopt consistent regulations, Russia is apparently hoping that the uniformity and transparency of the new Amendments will make art transactions in Russia easier and will attract art business to Russia. One of the drafters of the Amendments and the First Deputy Chairman of the State Duma’s (lower chamber of Russia’s Parliament) Committee on Culture, Ms. Olga Kazakova, highlighted that the main purpose of the Amendments was to facilitate import (including temporary imports, for example of artworks imported for a defined length of time for an exhibition, restoration, authentication, religious ceremony, or personal use) and not export.^[xxviii] The Amendments, according to Ms. Kazakova, strive to ensure that the owners of works of art that were subject to Western sanctions could bring the art into the country without fear of it being confiscated or “becoming hostage” to a European bank.^[xxix] Ms. Kazakova also stressed, however, that if the risks of exports of Russia’s cultural property increase, the regulations will be tightened.^[xxx]

As per Marina Molchanova, vice-president of the Moscow-based International Confederation of Antiquarians and Art Dealers of the CIS and Russia (MKAAD), in its current form, the newly amended law is still not a cure-for-all; nevertheless, its liberalization should help develop private initiatives, such as creation of private collections, museums and exhibitions as opposed to state-funded institutions.”^[xxxi]

Undoubtedly, non-governmental museums benefited from recent changes in legislation. Now they have the rights similar to those of the state museums when it comes to temporary imports and exports of cultural property (i.e., exhibitions, restoration and appraisal of artworks) and they do not have to pay taxes on such temporary imports and exports. The Amendments define temporary import and export as import/export of “cultural property into and from the Russian Federation from/to foreign states that are not member states of the EAEU, with the obligation to re-export/import them.”^[xxxii] In addition, the Amendments set forth a definitive list of documents required for the issuance of permits for the export and temporary export of cultural property to individuals for personal use, as well as a list of possible grounds for permit refusal.^[xxxiii]

Potential Inconsistencies Of The Amendments

The Amendments are somewhat difficult to interpret in conjunction with other legislative acts, such as the Customs and Tax codes. In particular, the provisions concerning exemption from Value Added Tax (VAT) on the import of cultural property are too convoluted and market participants are struggling to understand and follow them.^[xxxiv] Specifically, it is unclear whether VAT would apply to import of artworks for sale purposes or to import by legal entities, who were previously subject to the eighteen percent tax on the value of the imported work.^[xxxv]

The Amendments furthermore fail to provide a method of changing the import purpose on the licenses from personal to commercial. Furthermore, with temporary exports of artworks for international exhibitions or fairs, if an artwork is sold abroad, it will have to be returned to Russia in order to change the form of the export license from temporary to permanent.^[xxxvi] The newly-amended Federal Law, however, contemplates that regulations will be adopted by the Ministry of Culture to further facilitated implementation of the new rules. These regulations may clarify some of the inconsistencies and gaps that the Amendments appear to have created.

In sum, with implementing regulations pending, it is not yet clear how these Amendments will affect Russian art market in the long run but it appears that Russia is finally making first steps towards simpler and more transparent art market participation. At least as far as the imports are concerned.

On November 9, 2018, Russia also reported that it has signed the Council of Europe’s Convention on Offenses Relating to Cultural Property, taking another step towards combatting illegal art trade. According to the Russian Foreign Ministry “[t]he convention drafted with Russia’s active participation is a unique international treaty, which creates the legal framework for effectively protecting cultural property in Europe and beyond.”^[xxxvii]  Russia is the tenth state signatory to this convention, which was ratified by two countries to date – Cyprus and Mexico. It looks like Russia is beginning to acknowledge that it is time to join the world’s cultural property preservation efforts even as its stance on restitution of the cultural heritage looted during World War II has not yet changed.

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^[i] Sophia Kishkovsky, New Russian Law Recognizes Contemporary Art At Last (March 9, 2018), The Art Newspaper, available at https://www.theartnewspaper.com/news/new-russian-law-recognises-contemporary-art-at-last.

^[ii] Russian Federation’s Law “On Export And Import Of Cultural Valuables” of April 15, 1993 No. 4804-1 (last visited on Dec. 23, 2018), available in Russian (subscription or limited access) at http://www.consultant.ru/document/cons_doc_LAW_1905/.

^[iii] In existence since 2014, the EAEU, a political and economic union of several states located in central and northern Eurasia (including Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) already had a set of regulations in place pertaining to the exports and imports of cultural property. See Eurasian Economic Union, Official Information (last visited on Dec. 18, 2018), available at  http://www.eaeunion.org/?lang=en#about; see also, Movement Of Cultural Valuables, Federal Customs Service (last visited on Dec. 22, 2018), available in Russian at http://fl.customs.ru/index.php?option=com_content&view=article&id=18&Itemid=1794 .

^[iv] Russian State Duma Passed A Law On Import And Export Of Cultural Valuables, Ria Novosti (Dec. 21, 2017), available in Russian at https://ria.ru/20171221/1511411332.html.

^[v] Tracking The Trophy Brigade (Nov. 1, 2007), The Art News, available at http://www.artnews.com/2007/11/01/top-ten-artnews-stories-tracking-the-trophy-brigade/.

^[vi] Lina M. Monten, Soviet World War II Trophy Art In Present Day Russia: The Events, The Law, And The Current Controversies, 15 DePaul J. Art, Tech. & Intell. Prop. L. 37, 49 (2004), available at: https://via.library.depaul.edu/jatip/vol15/iss1/3.

^[vii] Tracking The Trophy Brigade, supra note 5.

^[viii] See generally, Monten, supra note 6; see also, Maria Golubkova, Art Without Borders (Nov. 21, 2016), Rossiiskaya Gazeta, available in Russian at https://rg.ru/2016/11/21/kollekcionery-prizvali-oslabit-zakon-o-vvoze-kulturnyh-cennostej.html.

^[ix] Golubkova, supra note 8; Kishkovsky, supra note 1.

^[x] Kishkovsky, supra note 1.

^[xi] Id.

^[xii] Golubkova, supra note 8.

^[xiii] Id.

^[xiv] Id.

^[xv]Vyacheslav Kozlov, Ministry Of Culture Opposed Simplification Of Export Of Artworks (June 10, 2016), Ross Business Consulting, available in Russian at https://www.rbc.ru/politics/10/06/2016/57597aa39a7947d4dce4138c; Nina Egorsheva, Packard Is Not Going Anywhere (March 20, 2018), Rossiiskaya Gazeta, available in Russian at https://rg.ru/2018/03/20/muzei-uravniali-v-pravah-na-vyvoz-za-granicu-kulturnyh-cennostej.html .  

^[xvi] Rules On Import And Export Of Cultural Valuables. List Of Cultural Valuables And Cultural Objects. Cultural Valuables Restricted For Export (last visited on Dec. 23, 2018), available in Russian at https://customsexpert.ru/practicum/individuals/vvoz-i-vyvoz-kulturnyh-tsennostey.htm .

^[xvii] Temporary Procedures For Import And Export Of Cultural Valuables In 2018 (March 21, 2018), Free-Ved, available in Russian at http://free-ved.com/vremennyj-poryadok-vvoza-i-vyvoza-kulturnyx-cennostej-2018/ .  [As of today, the Temporary Procedures are still in place and there is no information as to when the permanent ones are expected.]

^[xviii] Maria Makutina, Ivan Makarov, and Anna Kovalenko, In State Duma, A Proposal To Freely Export Cultural Valuables That Are Less Than 50 Years Old (July 7, 2017), Ross Business Consulting, available in Russian at https://www.rbc.ru/politics/07/07/2017/595a5be89a7947069cc85a91.

^[xix] Id., quote translated from Russian by the author, internal quotations marks in the original.

^[xx] Temporary Procedures, supra note 17. 

^[xxi] Id.

^[xxii]  Rules On Import And Export, supra note 16.

^[xxiii] Id.

^[xxiv] Egorsheva, supra note 15. 

^[xxv] Russian Federation’s Law “On Export And Import Of Cultural Valuables,” (first enacted April 15, 1993, last amended as of December 28,2017),  Article 11.1, Council For The Preservation Of Cultural Heritage And The Development Of The International Exchange Of Cultural Valuables, N 435-ФЗ,  available in Russian (subscription or restricted access) at http://www.consultant.ru/document/cons_doc_LAW_1905/63d73022f8ce41f9adcc6b417f952fbb5614f872/ .

^[xxvi] Information From the Ministry of Culture of Russian Federation, President Vladimir Putin Signed A Series Of Laws On Import And Export Of Cultural Valuables (Jan. 16, 2018), Garant.ru, available in Russian at http://www.garant.ru/products/ipo/prime/doc/71752226/#ixzz5a3LZn6wY.

^[xxvii] Makutina, et al., supra note 18.

^[xxviii] Egorsheva, supra note 15.

^[xxix] Id.

^[xxx] Id.

^[xxxi] Id.

^[xxxii] Russian Federation’s Law “Onn Amendments To Certain Legislative Acts Of The Russian Federation In Connection With Improvement Of State Administration In The Areas Of Export And Import Of Cultural Valuables And Archival Affairs”, Article 5, Definitions, Kodeks.ru, available in Russian at http://docs.cntd.ru/document/556175633 .

^[xxxiii] Id., Article 35_3.

^[xxxiv] Egorsheva, supra note 15.

^[xxxv]Id.

^[xxxvi] Id.

^[xxxvii] Russia Signs European Convention On Protecting Cultural Property(Nov. 9, 2018), Tass, available at http://tass.com/politics/1030131.

Disclaimer: This article is intended for general information only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Opinions expressed are those of the author.

About the Author: Elena Gurevich has obtained her law degree from Taras Schevchenko University of Kyiv, Ukraine. She received her L.L.M degree in Intellectual Property at Cardozo School of Law, NY. Currently, Elena works as a legal intern at the International Institute for Conflict Prevention and Resolution (CPR).

This article has been written under the review and guidance of Jana S. Farmer, Attorney at Law, Wilson Elser Moskowitz Edelman & Dicker LLP.