According to a number of media outlets, the Polish government has bought the world-famous Czartoryski art collection, which includes a rare Leonardo da Vinci painting, for a fraction of its market value. As well as being an interesting arts and culture story, it also raises issues regarding foundation governance, 'ethical' and purposes-led decisions, the intentions of those creating collections, trustee decision-making processes and investment considerations.
It has been reported in the BBC that the Czartoryski Collection was sold for £100 million ($105 million; £85 million) despite its value being estimated at about £2 billion. It was owned by the Czartoryski Foundation and the BBC reported that the head of the Czartoryski family said it was in part a "donation". The media reports note that non-family members of the board of the foundation resigned in protest at the sales process and price.
Intentions and lasting integrity and purposes of a collection
Often the existence of a group of items and objects in a collection is to create a collective, something that is to be considered together and not just as individual pieces which happen to be housed together. It can be important for the collector to set out in writing their aims and ambitions for the collection and also their intentions and purposes. This is the case irrespective of how ownership is held - private, individual, joint among family members, in a private trust or other vehicle, in a charitable entity or held by and for the public.
The reason a clearly documented intention or purposes is so important is that (many years) later there may be proposals put forward that require consideration of the basis upon which the collection is in fact held. A recent Scottish example is the Burrell Collection, which we have discussed before. In the Czartoryski case, the New York Times reported that "after an announcement earlier this month that the ministry was in talks to buy the collection, the board of the Czartoryski Foundation said that the move might be illegal, because, according to the foundation's statute, the collection is "nontransferable and indivisible". Therefore, for the Czartoryski Foundation board of trustees there was an issue as to whether or not the 'foundation's statute' would permit any action that resulted in transfer or the division of the collection. It appears that there was a difference of opinion among trustees about this.
Therefore, it is important that the purposes for which a collection is held are as clear as possible, including whether certain actions are to be prohibited. As we have written about before, it can be useful to consider mechanisms to review and amend conditions and prohibitions to take account of changes over time while retaining the spirit of the original intentions and purposes. Indeed, it has been reported that the 'foundation's statute' was amended prior to the sale to the Polish government, which is perhaps an example of sufficient flexibility being built into the constitution to allow for developments over time.
Purposes-led decisions and investments
This is related to the issue of clearly documented intention(s) and purpose(s). It may be that actions are in fact permitted (and indeed positively encouraged) on the basis that they implement and further those intentions and purposes.
Jan Lubomirski-Lanckoronski, a family member and now a trustee of the Czartoryski Foundation, said that "this is such an incredible thing, not just for our family, but for our country as well. All these artworks are an inseparable part of Poland's history and I know that Aunt Izabela would be happy that they now belong to the Polish people". It seems in this statement that the decision to transfer the collection to the Polish Government is considered to be in keeping with the underlying objectives of the foundation and collection; a purposes-led decision. It could be argued that the act of transfer of the collection, while 'out' of the foundation, is in its own right an act which seeks to secure and promote the intentions and purposes of the foundation.
The issue of the sale taking place at an apparent significant undervalue can therefore potentially be justified on the basis of purposes-led investment and decision making. On the one hand the collection was an investment, which should be managed to produce the maximum financial return for the foundation. On the other hand, where the purposes of the foundation are furthered by the act of transfer to the Polish Government (and people), then it could be argued by the trustees that the financial return is not the be-all and end-all. It is a 'mixed motive' decision balancing financial or 'pure' investment with the underlying intentions and purposes to be achieved. In such circumstances it may be considered appropriate and indeed beneficial for the foundation to accept a lower financial return because the decision to sell and transfer furthered its aims. This is one way of analysing Adam Karol Czartoryski's statement that the sale also included an element of "donation".
Creating that lasting legacy and the key message
The sale of the Czartoryski Collection underlines the importance of documenting and making clear from the outset the reason for the creation of a collection (or even individual items, music or literature) and the basis upon which it is to be housed legally. That will provide the best protection and chance of securing a lasting legacy, whether financial, artistic or wider.
To protect and secure that value and control its use, the legal structure is an important tool to make sure a stamp on creativity or longer legacy can be made and its value secured. The legal structure sets out who controls the work, who benefits from its value and the basis upon whichitis controlled and enjoyed.
Brodies is the only Scottish law firm featured in independent legal directory Legal 500 for its work on art collections and ranked in Legal 500 as Tier 1 for charities and not for profit.