At the recent Art Law Conference at Christie’s, the question was asked, “are NFTs an art-form?”.
The over whelming opinion of the expert panellists was that NFTs were not a form of art but a means of delivering art that had been created digitally or has been fractionalised or actual art forms that have been digitalised. But NFTs themselves are not art.
The recent case of Amir Soleymani -v- Nifty Gateway LLC [2022] EWHC 773 (Comm) illustrates some of the issues that can arise when using online auction platforms to sell digitalised art.
Nifty is a US company which operates an NFT trading platform. Mr Soleymani is said to be an experienced art collector and had bid previously for many NFTs on Nifty’s platform. Between April and May 2021 he placed bids for a piece of work called Abundance by Beeple. Work by Beeple had previously fetched $69.3m at the first NFT auction run by Christie’s. Mr Soleymani successfully bid $650,000 for Abundance through Nifty’s platform. Unfortunately, Mr Soleymani was not the only successful bidder, there were 99 other successful bids. What Mr Soleymani received was edition 3 of 100. He was the third highest bidder, but he was not aware that there could be more than one successful bid. Mr Soleymani had believed there would be only one successful bid.
A dispute arose, with Mr Soleymani claiming it had not been made clear that there would be more than one successful bid. Nifty maintained that auction rules were clearly displayed and Mr Soleymani would have seen the auction rules had he clicked a button that said, “How does this work”. He also challenged Nifty’s general terms and conditions of business for the use of the platform, which among other things required that disputes should be resolved by arbitration in New York. Users of the platform are required to confirm they have read the terms and conditions before proceeding and there was a hyperlink to Nifty’s terms and conditions.
To try to prevent an arbitration in New York, Mr Soleymani issued proceedings in England to challenge the arbitration agreement contained in Nifty’s terms and conditions.
The challenge failed. English courts have for many years taken a supportive approach to arbitration and in this instance recognised that arbitral tribunals can, and frequently do, determine issues as to their own jurisdiction. It was appropriate for this issue to be determined by the arbitral tribunal itself.
The case illustrates, not only the supportive approach of the English courts to arbitration but also some of the problems that may arise from the use of NFTs in relation to art. Terms and conditions need to be well prepared and should include a suitable dispute resolution provision. Anyone using such platforms are well advised to ensure they read the auction rules and terms and conditions very carefully and take legal advice, if necessary, before proceeding.
