Perspective | A Brief Discussion on Judicial Auctions
Published:
2025-03-28
In the field of court enforcement, judicial auction has always been the "last mile" in realizing the rights of winning the lawsuit. From real estate worth tens of millions to industrial equipment that has been out of production for many years, these objects, which bear complex interests and disputes, are tested on how to maximize their value in an open and transparent process, which tests the wisdom of enforcement and concerns judicial credibility. With the widespread popularity of online auctions, traditional offline auctions have gradually withdrawn from the stage of history, and a new model of online judicial auctions has quietly arrived. This article mainly elaborates on the court's judicial auction process and some thoughts on lawyers' participation in the judicial auction procedure.
Introduction
In the field of court enforcement, judicial auction has always been the "last mile" in realizing winning rights. From real estate worth tens of millions to industrial equipment that has been out of production for many years, these assets, which carry complex entanglements of interests, are tested in terms of maximizing value in an open and transparent process, testing enforcement wisdom and concerning judicial credibility. With the full popularization of online auctions, traditional offline auctions have gradually withdrawn from the historical stage, and a new online judicial auction model has quietly arrived. This article mainly elaborates on the court's judicial auction process and some thoughts on lawyers' participation in the judicial auction procedure.
I. Judicial Auction Process
Step 1: Auction Property Review
According to the provisions of Article 10, Paragraph 2 of the Supreme People's Court's "Several Provisions on Online Judicial Auctions by People's Courts" (Interpretation No. 18 [2016]), the people's court shall perform the following duties: ascertain the current status of the auction property, rights burdens, etc., and provide an explanation.
The people's court should ascertain matters such as the ownership, rights burdens, possession and use, unpaid taxes and fees, and quality defects of the property. If audit or appraisal is required, the people's court may conduct an audit or appraisal in advance. (During this period, the court will conduct an on-site inspection of the property and post legal documents.)
Step 2: Determine the Reference Price
According to the provisions of Article 10, Paragraphs 3 and 4 of the Supreme People's Court's "Several Provisions on Online Judicial Auctions by People's Courts" (Interpretation No. 18 [2016]), the people's court shall perform the following duties: determine the reserve Price, the amount of the deposit, the tax burden, etc.; determine the payment methods for the deposit and auction proceeds. The determination methods include: organizing the parties to negotiate the Price, targeted inquiries, online inquiries, and court-commissioned appraisals. In theory, there is no order of precedence among the above methods, but in practice, they are generally carried out in the above order. If online inquiries are adopted, the online inquiry platform shall issue an online inquiry report within three days, and the average value of all timely issued report Prices shall be used as the reference Price for the starting Price. If court-commissioned appraisal is adopted, the appraisal institution shall issue an appraisal report within 30 days.
Step 3: Objections from Parties
Within three days of receiving the targeted inquiry, online inquiry, commissioned appraisal, and explanatory corrections reports, the people's court shall send them to the parties and interested parties. The parties and interested parties may submit written objections within five days of receiving the online inquiry report or appraisal report.
If the parties and interested parties do not raise objections to the appraisal report, the objections raised are rejected, or the appraisal institution has made corrections, the people's court shall use the appraisal results or corrected results as the reference Price; if the objections raised by the parties and interested parties to the appraisal report are valid, the people's court shall use the corrected results or newly made appraisal results made by the appraisal institution as the reference Price. If the professional technical review does not make a negative conclusion on the appraisal report, the people's court shall use the appraisal results as the reference Price.
Step 4: Initiate Auction Procedures
According to Article 10 of the Supreme People's Court's "Several Provisions on Online Judicial Auctions by People's Courts" (Interpretation No. 18 [2016]), online judicial auctions shall determine a reserve Price, which is the starting Price. The starting Price is determined by the people's court with reference to the appraised Price; if no appraisal is conducted, the market Price is used as a reference, and the opinions of the parties are solicited. The starting Price shall not be lower than 70% of the appraised Price or market Price.
Within ten days of determining the reference Price, the people's court shall initiate the auction procedure and determine the starting Price based on the reference Price. The starting Price shall not be lower than 70% of the appraised Price or market Price.
Step 5: Unsold and Debt Offset
According to Article 26 of the Supreme People's Court's "Several Provisions on Online Judicial Auctions by People's Courts" (Interpretation No. 18 [2016]), if no bids are made during the bidding period of the online judicial auction, the auction will be unsuccessful. After the auction fails, it shall be auctioned again on the same online judicial auction platform within 30 days. For the auction of movable property, an announcement shall be made seven days before the auction; for the auction of immovable property or other property rights, an announcement shall be made 15 days before the auction. The reduction in the starting Price for the second auction shall not exceed 20% of the previous starting Price. If the second auction fails, it can be sold legally on the same online judicial auction platform.
If no bids are made during the bidding period of the online judicial auction, the auction will be unsuccessful. If no one bids at the auction or the highest bid of the bidder is lower than the reserve Price, and the applicant for enforcement or other execution creditor present applies for or agrees to accept the auctioned property at the reserve Price determined at that auction, the property shall be delivered to him/her for debt offset.
If more than one execution creditor applies for debt offset with the auctioned property, the creditor with priority in legal repayment shall be given priority; if the repayment order is the same, the recipient shall be determined by lottery. If the amount of the creditor's claim to be repaid is lower than the value of the debt offset property, the people's court shall order him/her to make up the difference within a specified period. If the applicant for enforcement or other execution creditor refuses to accept or is legally unable to deliver the debt offset after the first auction fails, the property shall be auctioned again on the same online judicial auction platform within 30 days, and an announcement shall be made 15 days before the auction. The reduction in the starting Price for the second auction shall not exceed 20% of the previous starting Price. For immovable property or other property rights that still fail to be auctioned after the second auction, the people's court may deliver it to the applicant for enforcement or other execution creditor at a Price for debt offset. If the applicant for enforcement or other execution creditor refuses to accept or is legally unable to deliver the debt offset, no further auction will be conducted, and it can be sold on the same online auction platform.
II. Online Judicial Auction
According to the "Several Provisions on Online Judicial Auctions by People's Courts" of the Supreme People's Court, if the people's court disposes of property by auction, it shall adopt the method of online judicial auction. Judicial auction platforms are gradually shifting from offline to online. The openness of online auctions will not only increase the transaction Price of auctioned items but also prevent backdoor operations in judicial auctions, enhance the credibility of the judiciary, and the entire auction process is publicly available online, with traceable records at any node. Online judicial auctions have a wide dissemination range, are open and transparent, online operations are simple and convenient, and can also avoid malicious collusion among bidders to suppress Prices, greatly improving the auction success rate and the premium rate of auctioned items. Online judicial auctions, through technological empowerment and institutional innovation, have built a new enforcement model integrating "efficiency, fairness, and inclusiveness." Its advantages are not only reflected in the improvement of economic value but also in promoting judicial openness from form to substance, becoming an important practical example of the modernization of the rule of law. In the future, it is necessary to further improve the rules for the disposal of special assets (such as equity and complex property rights), balance technological innovation and legal regulation, and continuously release institutional dividends.
In accordance with the "Supreme People's Court's Provisions on Several Issues Concerning Online Judicial Auctions" (Interpretation No. 18 [2016] of the Supreme People's Court), the online service provider is selected by the applicant from the list of online judicial auction service providers published by the Supreme People's Court; if no selection is made or the selections of multiple applicants are inconsistent, the people's court shall designate one. Currently, the Supreme People's Court has published a list of seven online judicial auction service providers, namely Taobao, JD.com, the People's Court Litigation Asset Network, Gongpai.com, the China Auction Industry Association Network, ICBC Rong'e Gou, and the Beijing Equity Exchange. Among them, Taobao and JD.com have the highest listing and transaction rates in recent years. These two platforms have been relatively successful in terms of audience reach and asset promotion efforts.
Of course, online judicial auctions also have certain limitations. For example, if a bidder suffers losses due to defects in the subject matter (such as undisclosed lease relationships in auctioned properties or missing game account items), the path to redress is unclear. Courts typically declare that they "do not bear the responsibility for defects," making it difficult for bidders to seek compensation through legal channels. Malicious bidding or collusion is difficult to supervise, platforms lack the technical means to monitor abnormal transactions in real time, and the mechanisms for determining and pursuing legal responsibility are not sound. This requires the state to further improve judicial auctions and support them with relevant laws and regulations in the future.
III. Several Considerations on Lawyers' Participation in Judicial Auctions
1. Batch Asset Disposal
For multiple assets under the name of corporate debtors, lawyers can suggest that the court adopt a "package auction" or "split bidding" model to attract professional institutions and improve the transaction rate.
2. Disposal of Special Assets
For new types of assets such as corporate equity, trademarks, mineral exploration rights, sea area rights, carbon emission allowances, and digital currency, lawyers need to study relevant regulatory policies, design compliant transaction structures, and avoid legal risks.
3. Reverse Accountability and Punishment
The core of breaking the deadlock in judicial auctions for lawyers lies in procedural compliance (promptly reminding and cooperating with the court to advance the process based on an understanding of the auction procedures) + technological empowerment (conducting due diligence on the auctioned property and negotiating with both parties) + strategic innovation (creating new models and using the crime of resisting enforcement). It is necessary to accurately control legal points (such as objections to execution and the division of co-ownership) while leveraging technological means to reduce information asymmetry and explore innovative paths such as batch disposal and the monetization of new types of assets. Through full-process risk control and flexible strategy combinations, judicial auctions can be transformed from a "deadlock in execution" into a "breakthrough in rights realization".
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