Art & Law Insights - Global Legal Briefing / Chapter Russia3 August 2021
Art may be understood broadly. There are visual arts, such as painting, sculpture, other 3D articles. There are performing arts, music, literature and films. The list is not exhaustive. Other manifestations of human creativity are possible.
Without false modesty, we can say that Russia has a rich cultural heritage and the contribution of Russian artists into the world culture is significant. In particular, we may recall the names of such well-recognized painters of the 19th – 20th centuries as Karl Bryullov, Ivan Kramskoy, Wassily Kandinsky, Marc Chagall, Kazimir Malevich, Konstantin Korovin, Petr Konchalovsky, Natalia Goncharova and others. Their works are exhibited at auctions and many collectors want to buy them. Thus, in June 2020 the painting “The Bay of Naples” by Ivan Aivazovsky was the most expensive artwork sold online through Sotheby’s (£2.3 million / $2.8 million).
Russia is a party to the main international conventions and treaties in the field of protection of works of art. Namely, our country is a signatory to the Bern Convention for the Protection of Literary and Artistic Works as well as the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property and the 1972 Convention Concerning the Protection of the World Cultural and Natural Heritage.
Being a member state of the Commonwealth of Independent States (CIS), Russia has adopted certain regional treaties and agreements including the Agreement of 15.04.1994 “On cooperation of customs services on the detention and return of illegally exported and imported cultural values" and the Agreement of 05.10.2007 on cooperation in the fight against theft of cultural values and ensuring their return.
All kinds of art are protected and regulated by the Civil Code of the Russian Federation. Part IV of the Code is exclusively dedicated to intellectual rights. Chapter 70 of the Civil Code is dedicated to the rights of authors. It sets forth that subject matters of copyright are: Literary works, dramatic and musical works, choreography, music with and without text, audiovisual works, paintings, sculptures, designs and other works, works of architecture including those represented in drawings and pictures, photographic works.
There is also a “Basic Law of the Russian Federation on Culture” which ensures the rights for creativity of people.
Also the Law “On Objects of Cultural Heritage (Historic and Cultural Property) of the Peoples of the Russian Federation” and the Law “On Export and Import of Cultural Values”.
Aside from the above laws there are many subordinate acts that concern tangentially the issues of creation, protection and disposal of the works of art and cultural heritage.
The works/objects of art and the copyrights therein may belong to individuals or legal entities.
They may be subjects of various contracts. The copyright owner holding the exclusive right to the work may assign/sell his right to another person. A copyright assignment should be explicitly provided in the sale agreement apart from the transfer of the property right to the work/object itself. They may also conclude a license agreement (exclusive or non-exclusive). In a paid license agreement, the parties must show the amount of remuneration or procedures for calculating remuneration by the licensee. Open and shrink-wrap licenses are also possible. Loan agreements are allowed. The parties may conclude a commissioning agreement.
Copyright covers the works of science, literature and art regardless of the merits and purpose of the work, as well as the way of its expression.
The author of the work is a person who created it. Regardless who owns the work, the author reserves his moral rights to the work: the right of attribution, the right to author’s name, the right of integrity, the right of promulgation and the right of withdrawal. The author’s moral rights are perpetual and not transferrable. The author has the right, in the manner prescribed for the appointment of the executor of the will, to indicate a person to whom he entrusts the protection of authorship, the name of the author and the integrity of the work after his death. This person will exercise his powers for life.
In the absence of such instructions or in the case of refusal of the person appointed by the author to exercise the relevant powers, as well as after the death of this person, the protection of authorship, the name of the author and the integrity of the work shall be carried out by the heirs of the author, their legal successors and other interested persons.
The term of duration of the copyright is life of an author plus 70 years thereafter. Upon expiration of the copyright the work moves into the public domain and any interested person may freely use it provided that the right of attribution, right to author’s name and the right of integrity are respected. Infringement of copyright may entail civil, administrative and criminal liability. Most of the cases involve civil liability. In this case a court action may be initiated by the copyright owner, by his exclusive licensee and by collective management organizations.
It is worth noting that instead of damages the copyright owner may demand a so called compensation in which case no proof of damages is required (but strongly recommended). The amount of compensation (up to five million rubles) shall be determined by court depending on the circumstances of the case. The plaintiff may also claim double the cost of copies of the infringing works or double the cost of a license.
Administrative and criminal liabilities are provided by the Code of the Russian Federation on Administrative Offences and the Criminal Code of the Russian Federation respectively. Considering the appropriation in art, it should be noted that the law protects integrity of a work and provides the copyright owner with the exclusive right for adaptation of the work. Therefore, the appropriation of protected works can constitute the infringement of the author’s moral right and the copyright infringement. Resolution of the Plenum of the Supreme Court of the Russian Federation No. 10 of April 23,2019 sets forth that the right of integrity concerns such changes in a work that are not related to the creation of a new work on the basis of the existing one. Whereas, adaptation of a work involves the creation of a new (derivative) work on the basis of the existing one.
The law has no special regulations on street art, though sometimes such works appear on the streets. AIl artworks are at its inception in Russia. The issue is discussed sometimes but there are no cases to discuss in connection with this kind of creative art.
The author of a work of fine art has the right to demand from the owner of the original of the work to provide a possibility to exercise the right of reproduction of his work (the right of access). In this case, the owner of the original of the work cannot be required to deliver the work to the author.
Authors of works of fine art have the right to receive remuneration in the form of a percentage of the resale price in case of each resale of the original work in which a legal entity or an individual entrepreneur participates as an intermediary, buyer or seller (in particular, an auction house, a gallery of fine art, an art salon, a store).
The law provides for certain fair use exceptions according to which the use of copyrighted works is allowed without copyright owners’ consent and payment of royalties.
The Russian court practice includes many precedents related to disputes in the art sector. Below is a few examples thereof.
In case “CD Land contact” LLC v. “Fortes” LLC the commercial courts admitted the fact of the copyright infringement and awarded the compensation in the amount of 5 million rubles. The action was filed by the exclusive licensee of Dutch artist Margriet van Breevoort who is the author and the holder of the copyrights in the statue Homunculus Loxodontus. By satisfying the claim the courts recognized actions of the defendant on selling notebooks, bags, plates and other consumer products on which images of the copyrighted statue had been reproduced, as infringing. The compensation was calculated by the plaintiff on the basis of double the cost of his sub-license concluded with a Russian sub-licensee (Resolution of the Intellectual Property Rights Court dated November 11, 2019 on case No. A40-57804/2019).
In another case initiated by an individual entrepreneur Mr. Sergey Babenko against Mr. Maxim Ustinov the commercial courts dismissed the claim by recognizing the plaintiff’s action as the abuse of rights.
The claim was grounded on the plaintiff’s rights to the trademark under Russian registration No. 606740 which the courts found as a reproduction of the Swedish cultural heritage Mjöllnir from the collection of the Swedish History Museum. Based on the provisions of the UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property the courts judged that the plaintiff’s action on registration of such the trademark and his further enforcement actions should be qualified as knowingly bad faith exercise of the civil rights (Resolution of the Intellectual Property Rights Court dated April 07, 2021 on case No. А60-582/2020).
Considering civil court actions, it is worth noting that the law provides the limitation period which normally is three years from the moment when the plaintiff knew or should know about the infringement.
There is also a requirement related to the mandatory pre-trial stage with sending a warning letter in case the copyright owner claims damages or monetary compensation.
Speaking about criminal cases, we can mention a case in which by the verdict of the Tverskoy District Court of Moscow an individual B. acting by prior conspiracy with other persons, was recognized guilty in committing a crime – fraud and convicted to punishment in the form of imprisonment for a period of 3 years and 6 months. He sold a painting by an unknown artist passing it off as a painting by Karl Huhn “Gypsy with a child” for $620,000. There were several fine art expert reports collected during the police investigation, which confirmed that the painting was falsification. The court also ruled to reimburse to the victim the money paid for the imitation (Resolution of the Moscow City Court of March 31, 2011 No. 4u/5-2013).
V. INTERNATIONAL TRADE
Copyrighted artworks are protected by the Federal Law “On Customs Regulation in the Russian Federation” and the Customs Code of the Eurasian Economic Union. There is a Customs IP Register into which the copyright owner may include his work. The database of copyrighted works is available at all customs offices so that the customs will detain the work entered in the register and will inform the owner of the work who may decide to sue the infringer. There is also a Eurasian Economic Union (EAEU) which includes several post-Soviet countries (Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan). The member countries plan to introduce a Unified Customs Register, however, it is not yet in place.
In general, import and export of artworks is regulated by the CIS Agreement “On cooperation of customs services on the detention and return of illegally exported and imported cultural values" and the Law “On Export and Import of Cultural Values”.
The work of art is an object having aesthetical value. There is no legal definition of the work of art. The work of art may be an IP subject matter or an object of cultural value. Cultural values can be movable objects of the material world, regardless of the time of their creation, that have historical, artistic, scientific or cultural significance. In order to recognize an object as an object of cultural value an expert on cultural values should draw a report. There are certain limitations on export of objects of cultural value having “special importance”. There are cultural values that may be imported and exported without certificate of a cultural value. A certificate of cultural value may be issued on request of a physical or legal person.
Based on provisions of the Code of the Russian Federation on Administrative Offences providing the administrative responsibility for contraband and infringement of rules on prohibitions and(or) restrictions on the import/export of goods into/from the customs territory of the Eurasian Economic Union or the Russian Federation the Russian Customs authorities actively supress violations at the border.
Works of art may intersect with intellectual property. They are copyrighted works and may also be a design or a trademarks.
There are zones of free trade of Russia with CIS and other countries however there is no information specific to artworks in connection with free tradezones.
VI. NEW TECHNOLOGIES
Russia is aware of NFT opportunities however there are only scattered cases of NFT deals. E.g. one of the artists sold his work for $29,000.
Copyright law covers all kinds of works however augmented reality is making its first steps in Russia E-commerce is developed in Russia and is regulated by the Civil Code (Article 497) and the Law “On Protection of Consumers’ Rights” (Article 26.1) and by several subordinate acts which, among other things, also provide the legality of click-wrap-agreements. However these are general provisions and they do not concern specifically works of art.
For regulation of the rapidly developing sphere of blockchain and smart contracts the list of civil rights objects provided by the Civil Code of the Russian Federation has been amended with the digital rights which means digital financial assets. This sphere is also governed by the special Federal Law “On Digital Financial Assets and Digital Currency…” adopted in 2020.
VII. MANAGEMENT OF ART COLLECTIONS – ESTATES, TRUSTS AND FOUNDATIONS
Art collections may be managed by private investment funds. They may buy, manage and sell the works of art. Investment activities in general are regulated by the Law on Investment Activities in Russia. Article 3 of the law sets forth that any property, also proprietary rights and IP subject matters may be involved in investment activities.
There is the Federal Law “On attracting investments using investment platforms…” which regulates business activities for the organization of attracting investments.
It should be noted that the activities in connection with art foundations are regulated by the Civil Code of the Russian Federation and the special Federal Law “On non-commercial organizations”.
The vendor acting as a physical person not conducting the business shall pay the tax in the amount of 13% of the income. If the amount of tax exceeds 650,000 rubles, the part of the tax that exceeds 650,000 rubles and concerns the tax base above 5 million rubles shall be paid independently of the tax paid on the amount not reaching 650,000 rubles referring to the tax base up to 5 million rubles. (Article 228 .4 of the Tax Code of the Russian Federation).
Russian and foreign organizations which sell artworks and are considered as tax residents in Russia, shall pay the tax in the amount of 20% of the income (Article 284.1 of the Tax Code of the Russian Federation).
The Tax Code of the Russian Federation also provides a range of official fees for issuance of a permission for the export of cultural values (Article 333.33 of the Tax Code of the Russian Federation). If the vendor, e.g. museum sells a work of art and earns commission VAT is paid from the amount of the commission.