Should Luxembourg law be reformed ?

Between January and June 2015, an sales by public auctions worldwide generated 8.1 billion US dollars! the biggest markets for public auctions are the United States, the United Kingdom and China with France and Germany completing the top 5 (ref Arnet). Record sales occur on a regular basis.

During their public auctions in London in February 2015, Sotheby’s benefited from a strong market with masters of impressionist and modern art (Monet, Matisse, ToulouseA� Lautrec) where one sale reached 247.3 million Euros.The”Abstraktes Bild” from German painter Gerhard Richter was sold for 46.3 million US dollars (estimated at 14A�20 million). Sold in May 2015 for 179.3 million US dollars, “Les Femmes d’Alger” by Pablo Picasso became the biggest sale in history for paintings presented in public auctions.

Following the recent opening of the Freeport, the GrandA�Duchy of Luxembourg asserts its place as an international player in Art&Finance. Revitalising the Luxembourgish auction market becomes a necessity with interesting financial stakes. However, Luxembourg ancient legislation in this regard seems now unfit for today’s international market.


  • Monopole of notaries, bailiffs and Court clerks: The Decree passed by the Directoire executif of 27 nivose year V (January 16th 1797) restates the application of previous legislations by granting notaries, bailiffs and Court clerks the exclusive right to hold public auctions of movable assets. It is forbidden for any other then notaries, bailiffs or Court clerks to meddle with the valuation and public sale by auction of movable assets whether they occur on a voluntary basis, after inventory or pursuant to a judicial decision in any way and without any exception (Article 1, Decree of 12 Fructidor year IV of the Directoire executif (August 29th 1796)). Infringements are prosecuted and sanctioned financially
  • Procedure: Furnitures, commodities, goods, woods, harvests and any other movable assets or property can only be publicly sold or auctioned by and in presence of public officers with qualifications to proceed. A declaration made to the bureau d’enregistrement competent in the judicial district where the auction is to take place must be made prior to the public auction. The public officers transcribe a copy of this declaration at the head of the auction’s minutes. Every auctioned object is listed in the minutes and the price written in plain letters and in figures. Each session is closed and signed by the officiating officer and two resident witnesses (law of 22 pluviose year VII (February 10th 1799).
  • Stamp duties: The Law of December 21st 2001 modifying certain provisions regarding direct and indirect taxes states, amongst others, that the auction of real estate and movable assets of any nature are subject to stamp duties; the amount of which is calculated on the basis of the total consideration of a particular session not withstanding other applicable taxes. The scamp duty is proportional. The applicable rate is 5% plus two tenth which makes a aggregated rate of 6%.
  • Online auctions: Online sale services are regulated by specific provisions related to consumption law and electronic commerce.


  • Risks of an imposed reform: Union law (Article 169 of the TFEU) imposes to maintain competition. The European Commission may intervene in order for Member States to respect this principle.Thus, pursuant to a claim introduced by Sotheby’s which could not participate to public auctions in France, the European Commission addressed the French Republic with an opinion motivated on the basis of Article 169 of the TFEU regarding the voluntary auction of art pieces. In this opinion, the European Commission pointed out the specific French regulatory provisions concerning public auctions which it deemed contrary to Union law (particularly the a priori control of professional qualifications, the requirement to be hold a public office of cornmissaireA�priseur and the restrictive conditions for those who wish to exercise this profession as a company).It demanded the French Government to amend its legislation accordingly. This was achieved with the Law of July 10th 2000 which was amended in 2011. Certain provisions in Luxembourg law granting notaries, bailiffs and Court clerks the exclusive right to organise public auctions do present similarities with the French legal provisions of which the European Commission demanded the suppression.What type of reform can be contemplated in order for Luxembourg law to comply with Union law and make it attractive for the art market while ensuring the security of transactions?

Refurm nA�1: Introducing competition: the adoption of a new Law regarding the liberalisation of sales in public auctions furthering the rise of Luxembourgish players and allowing European ones to operate in Luxembourg would harmonise national law with Union law while helping this sector in grow in Luxembourg.
On the other hand, it would be possible to keep the existing monopole and limit its scope of application to judicial public auctions. Voluntary and judicial sales by public auctions would then become two separate activities.

Reform nA�2: Professional organisation: In case of a liberalisation of public auctions, it becomes necessary to regulate the profession in order to ensure the security of transactions. In that regard, several rules can be contemplated:

– Adoption of corporate forms (S.A., S.a r.l.) for companies dealing in voluntary sales by public auctions of movable assets and restriction of the corporate object to the valuation of those assets, to the organisation and completion of sales by public auctions and prohibition to exercise any other activity (and in particular to buy or sell for their own account). This rule should equally apply to shareholders, directors and employees of those companies.
– Public registration of those companies, and maybe the application for a license under certain conditions (the opening of a bank account aimed to receive clients funds, contracting a professional insurance and an insurance or pledge guaranteeing representation of the deposited funds and having a qualified individual person with their employees).
– To be subject to deontological obligations.A�
– Individual persons in charge of the sales should meet respectability, qualifications and experience requirements.A�- The regulation should ensure the integrity and the security of transactions by introducing transparency rules that will apply to relationships between professionals on one hand and the buyers and sellers on the other hand (guarantees, origin of goods, … ).

The regulation should provide for a liability regime applicable to professionals. Their liability for any fault committed in the valuation or in the sale might be engaged within a maximum time period still to be determined (10 years for example).
The claim for the cancellation of a sale based on the lack of authenticity introduced against the seller might be subject longer time period.

Reform nA�3: Fees and prices: In order for the Luxembourg art market to comply with foreign market and enhance free competition, it would be best to introduce certain rules concerning sales, especially about fees. The liberalisation of auction houses’ fees, as applied now in France, might be an option.
In order to facilitate transactions, the seller might be granted the possibility to ask for an advance on the starting price. Reservation price as a practice may also be regulated: in case of a valuation, the reservation price may be superior to the lowest valuation submitted to the buyers, in writing (catalog) or orally. Under the condition that the said amount be guaranteed by a bank, the auction houses might grant the seller with a guaranteed price for an amount no higher than the lowest valuation submitted to the buyers.

Reform nA�4: A�Online auctions:A�The growth of auction websites worldwide A� and the position of the GrandA�-Duchy of Luxembourg as a major digital player A�requires to scate whether or nor these activities enter the scope of public auctions regulation. It is important to make the distinction between public auctions and market brokerage which is not subject to specific regulations.The last merely introduces buyers to sellers and vice versa by means of a website; the said website only hosts the auction process and does not offer any guarantee of delivery to the buyer, of payment or of authenticity contrary to an auction house.
Only brokage in cultural assets should be regulated under the Law on sales by public auctions. It would be fitting as well to include disclosure requirements for auction platforms to the benefit of consumers: general information on the nature of provided services and specific information on circulation of cultural assets. The details of the disclosure are yet toA� be determined. The dynamics of the Luxembourg market is favourable for GrandA�-Duchy of Luxembourg to become a reference in the art market.

Opening public auctions to market players is essential. In the present situation, the European Commission needs no more than a claim introduced by Sothebys or any other player wishing to exercise in Luxembourg for it to demand that the GrandA�-Duchy set its legislation in line with Union law.

It is not too soon to begin necessary reform in this regard and for which we here suggested a few ideas.

Catherine Cathiard, Avocat au barreau de Luxembourg (Wildgen) A�
Membre de l’lnstitut Art & Droit (France)