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For decades, Canadian curators have benefited from a complex tapestry of tax credits and grants to buy beyond their usual means. But if buyers come knocking from overseas, not everyone is able to sell. Here’s how we got here, and how a court case might soon change everything

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One fall evening in 2016, Heffel Fine Art enjoyed a particularly brisk Toronto sale: Collectors snapped up $42-million worth of art, a Canadian auction record for a single night. Several of the lucky buyers were not located in Canada and would need government permits to export their valuable purchases. Normally, that’s a routine process, but this time some items got blocked: In particular, an expert judged that an 1892 painting of blue irises by the French artist Gustave Caillebotte, sold by Heffel to a British art dealer for $678,500, was too important for Canada to lose.

Alarmed at this interference in its international business, Heffel launched a court case, the first of its kind in Canadian history. Last June, a judge sided with the auction house, saying he failed to understand how a French painting from a private collection could be considered so significant a piece of Canadian cultural heritage that it shouldn’t be allowed to leave the country.

That proved to be a dramatic decision: In the months since the judge’s ruling, the tug on that one thread has unravelled the complex bureaucracy that stitches up Canada’s visual-art tapestry. The problem is that the rules for exporting art are tangled up with the criteria for attractive grants and special tax credits that allow public museums to obtain masterpieces far beyond their means. If a foreign painting destined for export wasn’t deemed to be important Canadian heritage, would foreign artworks that collectors intended to donate now fail to qualify for the lucrative tax credits? By August, the biggest art galleries in the land were crying foul, saying the ruling had sideswiped their donation process: The Montreal Museum of Fine Arts was already worried it was going to lose a Rembrandt print in the kerfuffle.

The museums feel the ruling dismisses their cultural mandate, narrowly questioning the importance of international art and world cultures to Canadian institutions as though they should only value Canadian material. The federal government is equally concerned: Backed by the galleries and museums, it is now fighting the ruling in an attempt to stitch the system back together. In an unprecedented Federal Court of Appeal hearing in Ottawa next week, the court will decide whether the art-world rules that have allowed Canadian museums to build up impressive international collections – and give wealthy patrons special tax credits if they donate art – should be abandoned.

The case pits government against dealer, curator against curator. And it turns on a deceptively simple question: What art is of national importance to Canada?

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This 17th-century astrolabe, thought to belong to explorer Samuel de Champlain, was sold to an American collector in 1901, and repatriated to Canada 88 years later. Federal legislation seeks to prevent cultural treasures like this from being sold into foreign hands.Pierre Girard/Canadian Museum of History


In the nationalist atmosphere of the early 1970s, the Pierre Trudeau Liberal government created an emergency fund to buy precious items in danger of leaving the country, or to repatriate Canadian works that had been sold abroad. Nobody wanted another piece of Canadian history to suffer the fate of Samuel de Champlain’s astrolabe: The 17th-century navigation instrument, found in the Ottawa Valley in 1867 and popularly identified as belonging to the French explorer who had travelled that way, was sold to an American collector in 1901. (It was donated to the New York Historical Society in 1942 before finally being repatriated in 1989 to what is now the Canadian Museum of History.)

But the fund would only work if the owners of such items wanted to sell, so the government set up an act controlling the export of privately held art. The goal was to move art and artifacts from private collections into public ones. “It is very important … to understand that the policy was originally devised to help enrich the collections of Canadian museums,” senator Serge Joyal, who helped shape the law as a rookie Liberal MP, told The Globe and Mail in a recent interview.

To achieve this goal, the Cultural Property Import and Export Act included a few carrots and a stick. The stick was a system of export delays based on a list of criteria, including age and value, that would be used to determine whether cultural objects were free to leave the country. Objects deemed to be of “outstanding significance” and “national importance” wouldn’t get permits. The act covers everything from musical instruments to geological samples, but government statistics show that the vast majority of items processed are fine art.

Museum curators or other experts are asked to judge whether an item can leave Canada; they rarely deny permits, but when they do, they often give no reason other than citing the “outstanding significance and national importance.” The owner can appeal a denial to a whole panel of experts, the Canadian Cultural Property Export Review Board. If the permit is still denied, the board establishes a waiting period of up to six months, during which the item is advertised for sale at market value to public institutions. The institutions can get federal grants to buy the blocked items; if owners refuse to sell, they then face a two-year export ban after which they can apply again. Only if no gallery or museum wants to buy an item can an owner finally take the item abroad, albeit months later than originally planned.

That process does cut into the property rights of Canadians trying to sell art abroad, so the act provided a few carrots, too. It created the grants that would help museums buy these blocked works from their owners. More importantly, the act created a special tax break administered by CCPERB, the same body that judged export permit appeals, and assessed on the same criteria. If collectors donate art judged to be of “outstanding significance and national importance” they get relief from being taxed on the capital gains that could be assessed on an object that had become more valuable over time. And, more lucrative than regular charitable tax credits, the credit allows donors to wipe out their income taxes for up to six years. “We have a very generous system,” said Malcolm Burrows, the head of philanthropic advisory services at Scotia Wealth, “but it is hopelessly complicated and opaque.”

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The Massacre of the Innocents, a 17th-century painting by Peter Paul Rubens, was cited by the Art Gallery of Ontario in a court case about the laws that allow Canadian galleries to acquire valuable works of art.The Thomson Collection, Art Gallery of Ontario


Since the 1970s, museums have come to rely heavily on this system as the main way they add valuable works of art to their collections. Public art galleries typically have small acquisition budgets and use the lure of tax breaks to attract donations. In documents filed in court, Stephen Borys, the director of the Winnipeg Art Gallery, said his institution has just $30,000 to spend each year on buying art. Nevertheless, because of the tax deductions, in 2009 the Winnipeg gallery obtained an artwork well beyond that budget: Afternoon Tea (The Gossips), a 19th-century painting by English artist John Everett Millais, is worth almost $3-million and was donated by Winnipeg senator Douglas Everett (no relation to the artist.)

In its submission to the court, the Art Gallery of Ontario described how its most precious donation – the $117-million Peter Paul Rubens painting The Massacre of the Innocents, given to the gallery by newspaper baron Ken Thomson in 2008 – serves as an international calling card, helping the gallery participate in a forthcoming exhibition devoted to Rubens’ early work that it is co-curating with the Fine Arts Museums of San Francisco.

But the system that awarded the special tax credits for the Millais and the Rubens has started to fall apart in the months since Heffel’s legal challenge, in a way that none of the participants of that hearing intended.

When Federal Court Justice Michael Manson sided with Heffel last June, he said the explanation that CCPERB provided for blocking the Caillebotte was “unreasonable.” In particular, the judge took issue with the board’s interpretation of what it means for a piece of art to be important to national heritage.

“At a minimum, the object must have a significant impact on Canadian culture,” Justice Manson wrote. He ordered a different group of experts at CCPERB to rehear the case and, if they thought losing the Caillebotte would have a detrimental effect on Canadian culture, to make that connection more clearly.

Why did that decision, about a single French painting, cause panic at galleries and museums across the country? Because the cultural property rules cover both exports and donation, using the same set of terms to evaluate the importance of the two different areas.

Assessing whether an object should be given an export permit, an expert has to decide whether the item is both of outstanding significance – for instance, because of its aesthetic qualities – and of national importance – such that its loss would diminish the country’s heritage.

And those exact same criteria are used when the experts at CCPERB decide whether an item being donated to a museum should qualify for the special tax break.

Last summer, after Justice Manson criticized how CCPERB was judging what was “of national importance,” the review board took it to heart. They issued new guidelines saying works needed a demonstrable link to Canadian history, especially if they originated overseas. And CCPERB used the new definition for everything. Suddenly, international works of art were less likely to be judged so important they couldn’t be exported – but then they were also less likely to be judged so important they deserved a tax break.

The Attorney-General of Canada, on behalf of CCPERB, appealed. And museums, which suddenly found that their donations were drying up – including some already in process, such as the proposed donation of a Rembrandt print to the Montreal Museum of Fine Arts – joined the case as interveners, arguing for a return to the old system. (As well as Montreal, Winnipeg and the AGO, interveners include the Beaverbrook Art Gallery in Fredericton, Montreal’s Musée d’art contemporain, the Royal Ontario Museum, the Thomas Fisher Rare Book Library at the University of Toronto, the Remai Modern in Saskatoon and the Vancouver Art Gallery.)

Heffel’s lawyers point out that the issue of donations did not come up in the original hearing and, in any event, it has no direct impact on whether the Caillebotte painting should be allowed to leave the country.

“The sole purpose of the interveners’ new evidence is to support their arguments that the Federal Court decision has undesirable policy implications for them,” Heffel’s lawyers, Thomas Conway and Julie Mouris, wrote in a court filing. “… Parliament, and not this court, should remedy the perceived mischief that the interveners have articulated.”

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A visitor snaps a picture of Queen Elizabeth I's Armada Portrait at London’s National Maritime Museum. Canada's rules for the export of nationally significant art are based on British guidelines from the 1950s.Michael Bowles/GETTY IMAGES FOR THE ART FUND


Of course, Canada’s Parliament never really articulated what national importance meant in the first place.

The Canadian system of export controls is based largely on a British system established in the 1950s, when postwar currency shortages were prompting wealthy Britons to sell off their art.

The British criteria are broader than those used in Canada, but they are also more clearly defined. Known as the Waverley criteria, after the viscount who chaired the committee that established them, the reasons for blocking an export are: connection to British history and national life; outstanding aesthetic importance; or outstanding scholarly importance.

There is no hierarchy to the criteria, and an object need only satisfy one of them, so an artwork made outside of Britain could be deemed as important as one of British origin. In recent years, the British government has blocked the export of Saint John the Evangelist by the Baroque artist Domenichino and a rare 14th-century altarpiece painting by the Italian artist Pietro Lorenzetti.

In contrast, the United States is one of very few developed countries that does not have export controls, perhaps because its wealth and its large art market mean that buyers for prized pieces can often be found within the country. Indeed, both British and Canadian policy-makers who crafted export controls feared losing cultural patrimony to the United States in particular.

“We don’t have the wealth that our [U.S.] neighbour had to support vast museums and fabulous collections, so the government is kind of in bed with the art museums,” said Robert Paterson, a law professor at the University of British Columbia who has written on the system.

Despite the fear that Canada might be losing great art, only a handful of pieces actually get blocked each year – out of hundreds of export applications filed. And for those that are blocked, it’s not always clear why.

Government guidelines state expert examiners are to provide written explanations of how they arrived at their decisions. But records obtained by The Globe and Mail under Access-to-Information law show that the examiners don’t always do so. In some cases, curators attached documents of a few hundred words explaining their research and reasoning. But in about half the cases examined by The Globe, an expert just scrawled a quick sentence at the bottom of the page. “The specimen is of outstanding significance and has national importance,” one expert wrote in 2015 as the only justification for denying a permit.

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Mount Robson from Berg Lake, a painting by Lawren Harris, was blocked from export to Canada to give Canadian public galleries a chance to buy it. None did.Heffel Fine Art Auction House


After the November, 2016, auction, Heffel filed a total of 19 export permits for works sold at the sale. All of them were forwarded by the Canada Border Services Agency to Michelle Jacques, the chief curator at the Art Gallery of Greater Victoria, for approval.

Jacques approved all but two. One of the ones she rejected was the Caillebotte, which, she wrote in her expert examination, has “value to the study of the arts [that] is remarkable given that it is such a rare example of the artist’s work [within] Canadian borders.”

The other she blocked was a landscape, Mount Robson from Berg Lake by the Group of Seven artist Lawren Harris, which had sold for $1.9-million to Space Age Trust in Seattle, a company connected to Paul Allen, a co-founder of Microsoft.

Again Heffel appealed to CCPERB. The review board’s experts, who had delayed the Caillebotte’s export for six months, again agreed with Jacques, although the Harris was given only a three-month delay, during which it was offered to Canadian public galleries.

But unlike the Caillebotte, which the AGO is negotiating to buy but the British dealer has so far refused to sell, no one wanted the Harris. “There are many examples of Mount Robson sketches available,” Andrew Hunter, then an AGO curator, wrote in a submission to CCPERB.

Two paintings, one Canadian and one international, were both judged by the same experts to be of “national importance” to Canada. Both were kept from leaving the country and both offered to Canadian public collections at fair market prices. But when faced with the choice, the galleries chose the international painting. They already had enough of the Canadian.

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Some of the foreign treasures that have been barred from export from Canada over the years: A 19th-century teapot designed by Britain's Christopher Dresser; An 18th-century piano built by British piano maker Frederick Beck, with woodwork attributed to Christopher Fuhrlohg; an oak table and chairs by American architect Frank Lloyd Wright.Photos: Royal Ontario Museum, Montreal Museum of Fine Arts

Blocked from export


The Cultural Property Export and Import Act was designed to move precious art and important artifacts from private collections to public ones. In that, it has succeeded admirably. The system encourages private collectors to give up the goods in two ways: It offers generous tax credits to collectors who donate important cultural property. Meanwhile, the act also blocks them from selling these treasures abroad, giving public institutions partial grants to buy the art and keep it in Canada.

Defending this process in a case that goes before a federal court next week, Canadian museums, galleries and archives cite some of their most precious treasures as items they have acquired thanks to the tax credits. The Montreal Museum of Fine Arts points to a cheeky Picasso painting that reprises a 17th-century portrait of Cardinal Richelieu and a collection of Napoleonic material. The Thomas Fisher Rare Book Library at the University of Toronto lists a 16th-century medical text as well as archival material about the British novelist Thomas Hardy, and the Royal Ontario Museum in Toronto includes such priceless treasures as a 500-year-old Aztec Tlaltecuhtli stone, a sculpted disc that is one of only 40 in the world.

The list of objects that have stayed in Canada because their export was halted is shorter and often features less expensive items. Donations for tax credit are common, but export delays, followed by the award of a federal “Movable Cultural Property grant” to help an institution buy an object, are rare. Only seven objects got blocked in 2015-16 and only four the year before. Sometimes the blocked items are important examples of Canadian art, but often they are unusual international pieces by artists whose work is underrepresented in Canadian museums – if it’s there at all. In that regard, the Gustave Caillebotte painting that triggered the court case is typical of what gets blocked.

Here are a few foreign treasures that stayed in Canada because the government wouldn’t let a vendor export them.

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Interior with Four Etchings (1904), by Vilhelm Hammershoi.Photography by Craig Boyko

  • At the Art Gallery of Ontario, the 1904 painting Interior with Four Etchings by the Danish artist Vilhelm Hammershoi is the first example of the artist’s work – or any work by a Scandinavian modernist – in a public collection in Canada. Its purchase encouraged the AGO to bring a whole Hammershoi exhibition to Toronto in 2016. The National Gallery of Canada acquired a second Hammershoi the following year.
  • An oak table and pair of chairs by the American architect Frank Lloyd Wright are a key fixture in the ROM’s Gallery of Modern Design. The furniture, dating to 1915-22, once stood in the Imperial Hotel in Tokyo, the famed Wright building – for which the architect also designed all the interior decor – that was demolished in the 1960s.
  • The ROM’s European Galleries also include a rare 18th-century rectangular piano built by the London piano maker Frederick Beck, set in a pine case with inlaid wood attributed to furniture maker Christopher Fuhrlohg. The piano still works.
  • The decorative-arts collection in the Montreal Museum of Fine Arts includes an unusual rectangular silver-plate teapot created in 1879 by the influential British designer Christopher Dresser, a key figure in the Aesthetic Movement.
  • Montreal also boasts a pencil sketch of a young girl by the Austrian artist Gustav Klimt. From 1912, it is a preparatory drawing for the Portrait of Mada Primavesi that hangs in the Metropolitan Museum in New York.
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Gustav Klimt's finished Portrait of Mada Primavesi at New York's Metropolitan Museum of Art.Gustav Klimt

Editor’s note: (Feb. 7, 2019) An earlier version of this story said the AGO had the only example of Vilhelm Hammershoi's work in a public collection in Canada. In fact, the National Gallery of Canada acquired a painting by the artist in 2017. This version has been updated.

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