Some of the contents of this article were originally delivered during a panel discussion hosted by Lockton on 11th October 2024.
New EU regulations to be introduced in June 2025 will ban cultural goods illegally exported from third countries from entering the EU. In addition, any party who imports cultural goods that originated outside the EU will face heightened due diligence requirements. The regulations are set to have a profound impact on dealers, collectors, and cultural institutions. Engaging with provenance research, legal advisors, and insurance professionals will be essential for anyone trading or collecting art.
June 2025: the new EU regulation
The EU Regulation 2019/880 (opens a new window) comes into force on 28 June 2025 (i.e. six years from the date on which the regulation was introduced). It is focused on ‘the introduction and the import of cultural goods into the EU.’ The term ‘cultural goods’ is a broad one, encompassing many categories of fine arts and antiquities, decorative arts, and collectible items.
Primarily, the regulation is intended to tackle the illicit trade of goods from countries affected by armed conflict, and where those goods may have been traded by terrorist or other criminal organisations.
How does the regulation classify cultural goods?
The regulation defines three categories of cultural goods:
Category A – cultural goods that have been unlawfully exported from third countries, which are prohibited from entry into the EU.
Category B – cultural goods covering products from archaeological excavations more than 250 years in age. Importing goods in this category will require an import license prior to entry into the EU, and must be made via a new dedicated EU-wide electronic system. Importers must supply either a) evidence that the cultural goods in question have been exported from the country where they were created or discovered in accordance with the laws and regulations of that country, or b) evidence of the absence of such laws and regulations at the time they were taken out of its territory.
Category C – various types of cultural goods not covered under category B greater than 200 years old and with a value above EUR 18,000. Importing goods in this category requires an importer statement prior to entry into the EU. This must include a) a signed declaration stating that the goods have been exported from the country where they were created or discovered in accordance with the laws and regulations of that country at the time they were taken out of its territory, and b) a standardised description of the goods.
There may be cases where: (a) the country where the cultural goods were created or discovered cannot be reliably determined; or (b) the cultural goods were taken out of the country where they were created or discovered before 24 April 1972. In such cases, the declaration for goods in either category B or C may instead state that the cultural goods in question have been exported in accordance with the laws and regulations of the last country where they were located for a period of more than five years and for purposes other than temporary use, transit, re-export, or transhipment.
Goods that originated within the EU, including imports of EU-origin goods that have been previously exported, are not caught by the legislation.
Impact of the rules on art dealers and cultural institutions
Crucially, the new regulation shifts the burden of proof to collectors, dealers, and museums, requiring them to provide evidence of the provenance of imported works.
In particular, importers of cultural goods are likely to face a significant administrative burden to comply with the new regulation. Organisations of all sizes may find need additional resources and capacity to meet the requirements of the regulation while maintaining existing business volume. For smaller businesses, their ability to meet the new requirements could be critical to long-term business resilience.
Practical and logistical problems may also arise as a result of the regulation. For instance, importers whose goods have free passage into the EU may nevertheless face delays or restrictions where those goods are placed in consolidated shipments with higher-risk items. Where importers lack the required documentation for such items, the entire shipment may be compounded. Alternatively, where importers submit false evidence in the course of an import license application, or make a reckless or knowingly fraudulent declaration, there may be criminal consequences. With a greater risk of confiscation, private collectors may also show more caution when deciding where, and to which institutions, to loan their works. This may hinder the efforts of certain institutions to secure works for loan.
The long-term impact of the regulation remains to be seen. Should the regulation inhibit or complicate the import of goods into the EU market, it is feasible that trade volumes into other global art market jurisdictions may increase. Any such transition may expose businesses to disruption as new suppliers and clients are onboarded, and could increase exposure to fraud.
Will private collectors be affected?
For private collectors looking to sell goods within their collection, the new EU legislation is likely to increase the need for provenance research.
Currently, many museums and galleries both within and outside the EU operate rigorous due diligence processes, requiring any acquisitions to be accompanied with robust provenance documentation. Following the new legal requirement, EU-based institutions may deploy heightened due diligence as a means to protect themselves against the potential threat of seizure.
These changes could make it increasingly difficult for private collectors to sell items to both EU and non-EU markets. Collectors may find themselves in a difficult position of conducting the appropriate provenance research on a given item, with the knowledge that such research could reveal gaps or inconsistencies in provenance that complicate their efforts to sell.
Nevertheless, conducting thorough research into provenance continues to be a beneficial exercise for collectors and sellers. Many objects appreciate in value in the wake of new evidence about their origins, craftsmanship, or prior ownership.
Insurance coverage for cultural goods
At the time of writing, insurers do not currently offer solutions specifically tailored to the risks posed by the new EU regulations, although this may change once the regulations come into force.
For private collections, insurance cover is usually on an agreed-value basis, in which the value of the artwork is pre-agreed by the insurer and policyholder. Should a loss of value occur as a result of physical loss or damage, insurers will pay the costs of restoration and any depreciation in value.
However, where an artwork loses value due to uncertain provenance, insurers would not deem this to be a physical loss and are unlikely to compensate the owner. This presents the market with a challenge because the client will perceive there to have been a loss.
A loss must be fortuitous and unavoidable, and therefore insurers will need to think broadly about whether they can provide cover for a loss in value, dependent upon the nature of the object and the level of research and evidence available. This may come in the form of an extension to Defective Title Insurance policies, which provide cover up to £50,000 to cover legal costs in the event of a dispute of title, and would need to be extended to cover defective provenance.
For dealers and institutions, seizure is excluded from insurance coverage as standard. As a result, policyholders will not be covered in the event that any works are seized upon entry into the EU. However, insurers may be able to grant exceptions on a case-by-case basis. For example, insurers may be more inclined to provide cover to borrowing institutions for a single loan for exhibitions in their home country, where that country has a clearly defined set of rules around seizure.
In all cases, insurers will expect dealers, collectors, and institutions to take measures to safeguard against risks, including the threat of seizure:
Undertake extensive provenance research in relation to all goods (especially those captured by the forthcoming regulations).
Prior to loaning artworks into Europe, check whether there is immunity from seizure legislation in the relevant country and, where possible, secure guarantees from the relevant ministry or state department that goods will not be seized.
For private collectors, undertake provenance research on a proactive basis. Waiting until prior to the point of sale, while commonplace, may limit the scope of what can be achieved through research. It may also expose irregularities that cannot be resolved prior to sale.
Discuss international loans with your broker to ensure that any loan agreements, and the cover you receive, is as broad as possible within reason.
For more insights, visit our Fine Art & Specie (opens a new window) page.
