Whether we’ve encountered this issue in practice or heard of someone purchasing an asset at an auction, understanding the legal framework for auctions in Romania is crucial. We may have even imagined ourselves raising a bidding paddle and hearing the words “Sold!” – in such cases, it’s worth knowing the legal framework of auctions.
To start, we need to clearly distinguish between the regime of public procurement and the regime of private auctions.
Regarding public procurement, we refer to Law 98/2016. This law outlines its scope, which includes public procurement contracts, framework agreements, and design contests. It also provides definitions of the parties involved, mandatory procedures, stages of the public procurement process, general participation rules, and award procedure guidelines.
The Court of Accounts defines public procurement as the sum of all processes related to planning, setting priorities, organizing, publicizing, and conducting procedures. This aims to facilitate purchases by organizations funded, either wholly or partially by the state budget. Contracting authorities strive to ensure effective, efficient, ethical, impartial, and transparent utilization of public funds through this process.
The core principle of the Public Procurement Law is straightforward: contracts of a specific type and value must undergo a competitive procedure. This procedure adheres to principles such as non-discrimination, transparency, fairness, and responsibility. It ensures equal opportunities and treatment for all candidates and bidders.
In other scenarios, we commonly encounter the auctioning of assets from a bankrupt company’s estate. These auctions are conducted by the judicial liquidator under the court-appointed judge’s supervision. To maximize the value of the debtor’s assets, the judicial liquidator must take all necessary steps to market and sell them effectively. This may involve public auctions, direct negotiations, or a combination of both. The rules for such sales are approved by the assembly of creditors, based on the judicial liquidator’s proposal. In the case of a public auction, the information is also made available on the website of the National Union of Insolvency Practitioners in Romania.
Article 156 of Law 85/2014 empowers the judicial liquidator to request a public auction if the assembly of creditors doesn’t approve a sale regulation or if assets are not liquidated within a reasonable period, despite an approved sale regulation. This follows the Civil Procedure Code.
This provision leads us to another practical application of auction procedures – the enforcement of a debtor’s assets through forced execution. To satisfy their claims, creditors can seize movable assets belonging to the debtor, whether in the debtor’s possession or held by others. If the debtor fails to pay the owed amount within one day of receiving the notice and the enforcement order, the enforcement officer will proceed to seize the seizable movable assets for subsequent sale. If, within 15 days of the seizure, the owed amount, along with all accessories and execution costs, remains unpaid, the judicial enforcement officer will sell the seized assets through a public auction, direct sale, or other methods permitted by law.
These are instances where auction procedures are mandated by the law and strictly regulated.
But what if we’re not in any of these situations? Can we still use this method to sell a private asset? The answer is yes. In such cases, we rely on the provisions of the Civil Code, even though it doesn’t explicitly define or reference auctions.
We can undoubtedly refer to auction sales as a method of selling a property, right, or service by publicly inviting buyers to make offers. Ultimately, the highest bidder offering the most favorable conditions secures the purchase.
We can identify these elements in Articles 1188-1190, referred to as “offer to contract,” “proposal addressed to unspecified persons,” and “request for offers.”
In any of these variants, the general rules regarding the sale-purchase contract apply. The legal characteristics of the auction sale contract mirror those of the classic sale contract – it’s consensual, bilateral, onerous, commutative, and involves the transfer of ownership.
For inspiration, those looking to sell a property at auction can explore Western models, which encompass various methods: all-pay auctions, penny auctions, buyout auctions, English auctions (open ascending-bid auctions), blind auctions, and more.
From any perspective, selling at auction is a method that garners attention and interest.
Author: Atty. Lavinia Rusu