Lessons about Third-Party Guarantees from a Christie’s Dispute
Photograph of Pablo Picasso, 1904, by Ricard Canals i Llambí, in the public domain available at Wikimedia Commons
In an unfolding dispute between a prominent collector and Christie’s, a familiar tension in the auction world is once again in view: what happens when a third-party guarantee (sometimes called an irrevocable bid) comes due — and the guarantor no longer wants to perform? While the legal outcome remains to be seen, the case reinforces a broader point familiar to those active in the market: third-party guarantees, while structured as financial instruments, are ultimately transactional commitments — subject to the same commercial, legal, and reputational consequences as an outright acquisition.
At issue is Picasso’s Femme Dans Un Rocking-Chair, offered at Christie’s in February 2023 with a £14.5-million ($19.7-million) third-party guarantee from Brewer Management Corporation (BMC), whose authorized representative is London venture capitalist Sasan Ghandehari. A third-party guarantee agreement typically provides the guarantor with a share of the upside if a work sells above the guarantee level, which serves as incentive and compensation for the guarantor’s assumption of the risk of a failed sale which otherwise would land on the auction house. However, the third-party guarantor is also obligated under the agreement to purchase the work if there are no bidders above the guaranteed level, meaning the third party can go from expecting to receive a check to having to shell out the purchase price. The painting at issue here failed to sell at auction, activating the guarantee. BMC made a partial payment of £4.8 million ($6.5 million) but subsequently initiated legal proceedings, seeking to rescind the agreement.
According to the complaint, Christie’s failed to disclose that a prior owner of the work — José Mestre Sr. — had been convicted in 2014 in connection with a major narcotics trafficking operation. While the auction house identified Mestre’s son as the consignor, the guarantor’s representative, Ghandehari, alleges that he was told the elder Mestre was deceased and that there were no concerns relating to title or ownership history. That information, he says, turned out to be inaccurate — discovered not through any formal disclosure, but via an online search conducted after the sale.
Christie’s characterizes the dispute as a standard debt enforcement matter, stating it complied fully with its legal and regulatory obligations. It also notes that Ghandehari is a seasoned market participant with a history of third-party guarantees and professional representation.
To be clear, we do not speculate as to the specific motivations or merits involved in this case. However, within the market, it is well understood that disputes over guarantees are not uncommon — and that attempts to disavow such commitments may, at times, be driven by strategic or commercial reconsiderations rather than newly discovered facts. That broader pattern is what makes this case instructive.
It’s a reminder that the risks associated with third-party guarantees are not limited to price volatility. When the guarantee comes due, the guarantor becomes the buyer — and with that comes reputational exposure, market scrutiny, and potential illiquidity. This is not a new insight, but one worth reinforcing. The time to protect one’s position is at the outset, when targeted investigative due diligence into recent ownership — focusing on reputational concerns, regulatory implications, or exposure to financial crime — can quietly surface facts that become far more consequential once the transaction is live.
This type of diligence is neither complex nor costly when scoped appropriately. A well-directed review can often be completed quickly and at a fraction of the cost of even preliminary litigation. In high-value transactions where reputational sensitivity matters, this should be standard — not exceptional.
Considerations for Guarantors and Their Advisors
Treat the guarantee as a conditional acquisition. If triggered, you own the work — and the associated reputational profile.
Independently verify key facts. Auction house disclosures have limits. Where there is risk, seek your own clarity.
Ask precisely framed questions. General representations or informal assurances are rarely durable when tested.
Incorporate diligence into standard practice. Targeted investigative review of ownership history should be routine at this value level.
Anticipate reputational drag. Works associated with legal or criminal controversy can face headwinds in future transactions.
Third-party guarantees remain a valuable mechanism for sophisticated buyers to gain exposure to high-value works. But they are not risk-neutral. Building in lean, purposeful diligence — not to second-guess the transaction, but to prepare for its completion — is increasingly essential in protecting both financial and reputational capital.
About Jordan Arnold
Partner and co-founder JORDAN ARNOLD has over twenty years of combined law enforcement and private consulting experience investigating theft, fraud, and related financial crime involving art and collectibles, and providing market participants with risk management and security advice. As a prosecutor with the Manhattan District Attorney’s Office, Jordan’s art crime cases included the recovery of a 1949 Salvador Dali watercolor and the dismantling of a criminal enterprise distributing counterfeit Damien Hirst artwork. Jordan is also the former executive vice president of a global consulting firm and head of its private client practice, and the founding principal of Jetty Partners. Read more about Jordan’s career here.