What are Freeports?
Conceived as a relatively simple device to allow traders to transport goods with greater ease, Freeports in the art industry have become a quintessential aspect in the 21st Century. Freeports were created so goods such as tobacco or tea could pass through or be loaded onto another ship without importing the goods into that country and paying customs duties.
How Freeports are Used in the Art Industry
The extremely high value of works of art in the 21st Century has made the opportunity to defer import taxes unmissable to collectors and dealers in a market which is increasingly global. This system allows an art dealer to ship a painting to say Geneva and hold it in a sort of limbo where the customs duties are deferred. While it is in the Freeport, the work can be easily accessed, to show to restorers, Auctioneers or prospective buyers.
The service offered in the major Freeports looks and feels the same as that offered by an Art Logistics company or an Auction House. Your work can be seen in a private viewing room and will be unpacked and handled by Art Handlers working to the same standards.
The other key feature of the Freeport system is that canny operators have learned to conduct their business with the same degree of privacy offered by lawyers, banks and other facilities used by the wealthy. Each work which comes into the port is carefully photographed, condition checked and examined, to avoid any disputes, but this information would remain entirely confidential.
While the exact quantity and nature of artwork being held in Freeports is a closely guarded secret. We can confidently say that the artwork being held in Freeports globally is worth billions of dollars and includes works that any museum curator would love to add to his collection. This is based on the accounts of those who have left the industry and other occasions when legal disputes have allowed us a glimpse behind the curtain.
In December last year, the Swiss authorities seized several artefacts, including pieces looted from Palmyra; a Unesco world heritage site, which was seized and severely damaged by the so called Islamic state in Syria. The ongoing conflict in the Middle East has led to an increase in the looting of culturally significant artefacts and in some cases, those wishing to hide or sell these artefacts have used the veil of confidentiality offered by the Freeports to hide their crimes.
Another significant lawsuit concerning a Freeport was the case of Rybolovlev v Bouvier. Comity Rybolovlev was a Russian oligarch who had purchased several artworks from Yves Bouvier, who was running the Geneva Freeport and dealing in art on the side. The unprecedented access Bouvier had to the works being stored in the Freeport enabled him to offer Rybolovev works of art that were not publicly for sale.
Rybolovev has accused Bouvier of overvaluing the works of art he sold him, and the case is still ongoing. What is most illuminating for us, is the staggering quality and price of the works Bouvier sold him. Among the works Rybolovlev purchased was ‘Christ as Salvator Mundi’ by Leonardo Da Vinci, for which he paid $127.5 million and ‘Wasserschlangen II ‘ by Gustav Klimt, at $183.8 million.
Since purchasing these works, the art market has contracted to a degree and Rybolovlev has in some cases sold some of the works he purchased for a fraction of what he paid for them. Taking this into account, the sheer quality and value of these works is still amazing; even if we acknowledge Bouvier would have only shown Rybolovlev the best works held in his stores.
There has been a trend for serious collectors to display their collections, in recent years either as a loan to a major exhibition as this exposure increases a works provenance and value or in their own private museum. This has led to some trying to unlock the untapped resource of works held in Freeports so the public can see them. There have been various schemes to loan works to museums, or even display them publicly at the Freeports themselves. These have largely failed as the benefits of holding work in a Freeport are at odds with the idea of displaying them. For this reason, the works held in these ports are likely to remain in the shadows, outside the public’s reach.
Watching for New Freeports in the Art Industry
New York City will soon be joining the ranks of Geneva and Singapore with a Freeport slated to open in July 2017. The tax haven is being built by the storage company ARCIS. ARCIS reportedly went through a lengthy process to acquire the Free Trade Zone status needed for the Freeport. It remains to be seen if the arduous process will be a barrier to entry or if storage facilities will now flock to NYC to establish their own Freeports.
About the Author
Huw is an experienced art storage and shipping professional with an art history background.