“In 1892, the French-born impressionist painter, Gustave Caillebotte, produced “Iris bleus, jardin du Petit Gennevilliers” … an oil on canvas, 21¾” x 18¼”. Little did he know that some 127 years later, Iris Bleus would be at the heart of the present appeal.”
So begins the recent decision by the Federal Court of Appeal in Canada (Attorney General) v. Heffel Gallery Limited, a case which has caused a stir in cultural property and art law in Canada over the past year.
The case involved a work by French impressionist painter Gustave Caillebotte, which was sold in 2016 by Toronto-based Heffel Fine Art Auction House for $678,500 to a gallery in London. Following the sale, as required by the Cultural Property Export and Import Act, Heffel applied for an export permit in order to send the painting to the purchaser in the UK. However, the application was rejected by the Canadian Cultural Property Export Review Board (the “Board”), on the basis that the work was of “outstanding significance” and of “national importance”, and should therefore remain in Canada.
Heffel challenged the Board’s decision by way judicial review before the Federal Court, and in June 2018, the court held that the Board’s determination that a French-born painter’s work could be of “national importance” was unreasonable, and quashed the decision, thereby clearing a path for the sale to proceed. The Federal Court’s decision effectively restricted the designation of “national importance” to works with specifically Canadian significance.
But that was not the end of the story. The Attorney General quickly appealed and, earlier this month, the Federal Court of Appeal upheld the Board’s initial decision. The Board’s determination that the Caillebotte was of “national importance” was upheld, and the work is therefore destined to stay in Canada.
Why the Federal Court’s Decision Mattered
The Federal Court’s narrow interpretation of “national importance” from its June 2018 decision caused great concern among Canadian museums and galleries for several reasons.
Export of Art and Cultural Property
Firstly, a permit application for the export of an artwork or other cultural property will generally only be refused if the property is both of “outstanding significance” and of “national importance”. That is, a work may be freely exported from Canada if it is not deemed to be of national importance. By effectively limiting the classification of “national importance” to works created in Canada by Canadians, the Federal Court’s decision would allow works of outstanding significance currently held in Canada to leave the country more freely, thereby potentially depriving Canadians access to significant works of art and cultural property.
Donation of Art and Cultural Property
Secondly, the government of Canada provides tax incentives (including a charitable donation tax credit for individuals, or a deduction for corporations) to encourage donations of artwork and cultural property to designated institutions in Canada, in order to ensure that such property remains in Canada for the benefit of Canadians. However, to qualify for the incentives, the work must be of “outstanding significance” and of “national importance”.
The concern was that the Federal Court’s restrictive interpretation of “national importance” would make the criteria for the tax incentives more difficult to satisfy, thereby resulting in a decrease in donations to cultural institutions in Canada. In fact, shortly after the Federal Court’s decision, leaders from several major Canadian museums published an open letter warning that “donations that were in progress – even from recognized Canadian collections – have been frozen, preventing [the] institutions from acquiring major works”. Ten Canadian museums, including the Vancouver Art Gallery, would also go on to act as interveners in the appeal. The Federal Court’s decision was so consequential that the 2019 Federal Budget proposed amending the Income Tax Act and the Cultural Property Export and Import Act to remove the requirement that a work be of “national importance” in order to qualify for the tax incentives, which would bypass the problematic interpretation adopted in the Federal Court’s decision.
The above concerns, however, have largely been quelled since the Federal Court of Appeal’s decision two weeks ago, which disapproved of the lower court’s restrictive interpretation of “national importance”. The Appeals decision affirms that significant works by foreign artists may be protected from export – and their donation eligible for tax incentives – despite a tenuous, or absent any, connection to Canada.
Although this decision may have been welcomed by museum representatives, it was not considered a victory for auctioneers like Heffel and other commercial dealers, who struggle with the export restrictions when attempting to attract international buyers.
It is this competing interest between museums and galleries, who generally benefit from a broad interpretation of “national importance”, and auctioneers and dealers, who are limited in their ability to export by such a broad interpretation, that has led to calls for reform of the cultural property and art law regime in Canada – specifically, a separation of the export and donation schemes. It appears the government has been listening, as the proposed amendments to the Cultural Property Export and Import Act in the 2019 Federal Budget specifically apply only to donations of cultural property, and do not affect the export analysis. Consequently, there are signs that such changes may be on the horizon.