Free-ports or the elusive treasure chests of art
Discretion, confidentiality, security, financial franchise and customs, the free port has everything it needs to attract collectors, as well as international art dealers and museums. Historically created to store raw materials and later to hold manufactured goods for a short period of time before their transportation, transit and reshipment, some have now made use of the ‘abandoned cemetery’ for works of art.
Currently, suspicions of deviance are weighing on these ‘lawless zones’: money laundering, smuggling stolen cultural goods…Their recent history is punctuated with scandal, while the Commission for the Federal Control of Finances spoke of the need to increase the customs controls in a press interview from 14 April 2014, following the Yves Bouvier affair which has not ceased to attract extensive press coverage. Zoom onto these hallowed haunts shrouded in mystery where millions have flocked to.
At this moment in time, there are several tens of free-ports in the world and in Europe, but five of them have specialized in stocking works of art. The oldest, founded in 1850 and located since 1965 in the area, La Praille, is found in Geneva, Switzerland; the second, in Singapore, was created in 2010; the one in Monaco in 2013; while the two most recent ones opened during summer 2014 in Peking and Luxemburg. A sixth one, in Shanghai, is planned for 2017.
What can explain this explosion? These zones remove the obligation from the reseller to pay the tax corresponding to the custom and income rights of the TVA during the duration of the (unlimited) holding of their works. These sizeable financial advantages tend to transform the warehouses into long-term holding zones, keeping objects for many years. Tax only applies when the work leaves the warehouse. If it is sold within the walls of the free-port, the owner will not have to pay any tax on the transaction.
Uncertainty has also arisen out of the willful financial fraud of rich owners, but also from the bypassing of the laws concerning cultural goods, due to the decried method of the trust, where a bank can appear as the owner of an item, avoiding having to reveal the identity of the real owner and thus confusing the origin of the item for good and favoring illegal trade. The climate of criminality has been reinforced even more by the scandals of the past twenty years.
Scandals and reputation
The first scandal affecting free-ports dates back to 1995. That year, Swiss police, at the demand of the Italian police, discovered, in the warehouses of Geneva, around 3000 objects pillaged from tombs in Italy. They were found in the box of Italian antique dealer, Giacomo Medici, who tried to launder the thieved items obtained from the looters of the tombs before reselling them to private collectors or museums.
Eight years later, in 2003, Cairo police told their Genovese counterparts to search la Praille. There they discovered 200 objects of Egyptian archeology, including two mummies more than two thousand years old, exhibited on shelves. In March 2010, customs suspected the origin of the trouble to have been a Roman marble sarcophagus dating from the 2nd century AD which came from a looting in Pergé, Turkey.
You can’t deny that such events tarnish the reputation of these secretly guarded warehouses. Even if they still remain just as watertight, regularization is starting to break up. The police still need proof of theft or smuggling before inspecting the warehouses, but the Swiss law, anxious about the image of their country, reaffirmed in May 2009 its requirements concerning free-ports. All transferred goods have to appear on an inventory. The objects stocked are treated according to the same rules as the standard imported goods and have to be accompanied by specific information – the name of the owner, the origin, value, destination.
The aim? Greater transparency, of course. The rapport by the federal control of finances in April 2014 pursued the issue by insisting on the urgent need to “clarify things with to provide greater traceability and transparency”, the words of the Genovese minister in guardianship of the free-ports and state advisor, Pierre Maudet, when speaking to the Swiss newspaper Matin Dimanche. The daily 24H even pointed out on 31 May 2015 that the Genovese state advisor had highlighted that the Swiss customs control lacked the numbers to be able to inspect everything that came into the free-ports. Forty-three customs officers remain, but a minimum of only two are permanently at the arrival quays of the merchandise. The federal council must present a new global strategy by the end of 2015.
Growth and Astronomical Profit
These last ten years, the considerable development of the art market and the dynamic exchanges between the different international art scenes have made for a favourable environment for the blooming of these new zones. The free-ports of Geneva make up more than 50% of global revenue for the art market generated by public sales, the after-sale sales, the verbal agreements and the commissions, according to a summary note by Artprice. According to the journalist Tristan Dessert, who investigated for VoxPop magazine, the goods stocked in the free-port in Geneva totaled a value of €82 billion and this free-port generates an annual turnover of €20 million. Yves Bouvier is the main player. It was also Bouvier who convinced the exchequer for Luxembourg to create their own free-port, despite the changes needed to be made to the financial laws. He and his society Natural Le Coultre are also behind the creation of the free-ports in Singapore and Peking.
And in September 2014, it was the turn of Luxembourg to adopt its own free-port, “Brink’s” (more than 22,000m²). The space is rented to the State and finds itself in the perfect location, connected to one of the largest cargo airports in Europe. For its part, the principality of Monaco opened a new free-port in June 2013, a tool sure to increase the country’s appeal, as the free-port would bring the arrival of large-scale works and thus prestigious exhibitions to Monaco.
Saga of a Russian billionaire and a Genevan dealer carrier
Yves Bouvier is head of Natural Le Coultre, the company bought by his father in 1997 who created at the time an industry specialised in the transport of precious objects. This company is today the global leader of storing works of art.
Since the month of February 2015, the businessman finds himself in a legal whirlwind which opposes the Russian billionaire, owner of football club AS Monaco, Dmitry Rybolovlev. This last, attacks him for fraud and laundering” as part of a transaction of master paintings which Yves Bouvier would have sold to him at excessive prices in the aim of giving himself the most value of some hundred million euros – according to the plaintiff. Charged on 27 February, he is free on bail of 10M€.
Dmitry Rybolovlev claims that Yves Bouvier should act in agent by finding the paintings and collecting, as a broker, a commission; what challenges the dealer who should according to him buy the works on his account before reselling them to his Russian client, the head of a collection worthy of the greatest museums, composed with the help of the same name whom he accuses now to truancy. Bouvier had already unearthed a gold mine of paintings for the Russian greedy of Master paintings: Picasso, Modigliani, Van Gogh, Gauguin, Monet, le Greco, Matisse, Léonard de Vinci, but also Giacometti and Rodin. 37 pieces acquired between 2003 and 2014
The billionaire asked him sometimes for very precise works lost in the circulation for tens of years and requiring years of research. A large number of these pieces are found now in Cyprus in the trusts of Rybolovlev, particularly to prevent their seizure during his divorce in 2008.
Today, the Russian estimates the financial damage of these years of “collaboration” to 957M€ – which represents half of the purchase value of his collection. The Genevan dealer denies these accusations and says to assume these business processes which made him incur all risks if the Russian changes his point of view at the last moment on the purchase of works. Although the subjectivity of the Monacan law, who immediately reacted very sharply to the complaint of one of the richest habitants in Rocher, is called into question, Rybolovbev recruited private investigators to try to extract likely affairs to knock down his older dealer, particularly the theft of Picasso’s drawings that the Swiss would have snatched from the daughter of Jacqueline Hutin-Blay, last spouse of the painter, in order to sells them without his authorisation – what Yves Bouvier, again, denies totally. Other elements tended to prove that the Russian plotted a ploy to prove the culpability of the dealer, through forging bank documents. Stay tuned.
Yves Bouvier or the pluralism of free ports
The Genevan dealer carrier of art operated a considerable diversification of free port, which covers at present all the facet of the art market: study, expertise, authentication, conservation, presentation, transaction… at the height of his ambition to create “artistic hubs”.
Yves Bouvier is at the origin of these free-port projects of Singapour, Beijing, Shanghai and Luxemburg. The last proposes a certain number of onsite services to avoid the words leaving the warehouse, particularly an exhibition service with showrooms, presentation spaces, etc. It is equally possible to make framings, restorations, expertise and authentications of onsite works, with prices up to 20,000 francs. These benefits are equally carried out except TVA, the same as purchases and sales of works carried out on site. It is as well La Belle Princesse, the last work dedicated to Léonard de Vinci, was discovered.
Yves Bouvier therefore totally rethought of the storing of art. He incidentally opened in 2014 a free-port based on the same concept as Singapore, entirely dedicated to art, wine and precious substances. The latest opened this year in Luxemburg, its 22,000m² was conceived from the outset to the art storage, and it presents technological innovations and weight logistics that could classify it in pole position: strong digital and monumental rooms, archives, seismic detector or even gas fire extinguisher, decontamination rooms, and this up until the organisation of private events.
David Arendt, administrator of the free port in Luxemburg, highlights his gains of logistics and transport that would do that clients. And his appeal attracts now museums or galleries, who do not always have the space to stock their collections in the reserves and who could relocate in these very secure bunkers and of optimum storage conditions (which the museum itself doesn’t have sometimes). The Mudam (Museum of contemporary art of Luxemburg) and the Pompidou-Metz Centre are already clients.
The free-port of Geneva can stock up to 1 million works. The price rises according to the level of security and the storage conditions (humidity level to 50%, between 18 and 20°C). It earns around 10 million Swiss francs each year to the state of Geneva, its major shareholder.
The Bouvier case raises the tricky question of the dilution of responsibilities, can we really be guaranteed storage of works and independent dealer? Yves Bouvier is at the same time shareholder, tenant, and art dealer. This accumulation of hats has today reproached him by professionals, highlighting the danger of such a situation.