Auction Explanation (Aanwijzing) as a Process in Ensuring Certainty of Auction Information

1. Introduction

An auction is essentially a method of selling goods conducted openly to the public, through a competitive price-bidding mechanism preceded by an Auction Announcement. In practice, an auction is not merely regarded as an ordinary sale and purchase process, but also as a legal mechanism that must be carried out in an orderly, transparent, and accountable manner. Therefore, Minister of Finance Regulation Number 122 of 2023 (PMK 122/2023) was issued to provide guidelines so that the implementation of auctions runs efficiently, effectively, simply, and in a modern manner, while still providing legal certainty for the parties involved.

One important stage in the series of auction implementation is the Auction Explanation, or Aanwijzing. This stage is carried out by the Seller to provide an overview and explanation to prospective auction participants regarding the Auction Object and other matters related to that object. Through the Auction Explanation, prospective participants not only become aware that an object will be auctioned, but also obtain more complete information regarding the condition of the object, supporting documents, the auction implementation procedure, obligations that must be fulfilled, and possible risks that need to be considered. For this reason, the Auction Explanation becomes an important part in ensuring that the auction process takes place in an open, careful manner, and provides room for participants to make decisions based on sufficient information.

2. Concept and Purpose of the Implementation of the Auction Explanation (Aanwijzing)

The Auction Explanation, or Aanwijzing, is essentially a stage provided to ensure that prospective auction participants do not take part in the auction process while lacking information. Under Article 1 point 12 of PMK 122/2023, the Auction Explanation is understood as an activity carried out by the Seller to provide an explanation regarding the Auction Object and other matters related to the Auction Object prior to the implementation of the auction. This means that, from the outset, this provision positions the Seller as the party actively providing information to prospective auction participants.

In its implementation, PMK 122/2023 does not require an Auction Explanation for every type of auction object, but only for certain objects as regulated under Article 15 paragraph (1), namely:

a. intangible goods;

b. securities; or

c. movable goods with a total Reserve Price of at least IDR 5,000,000,000.00 (five billion rupiah).

From a technical standpoint, the Auction Explanation also does not always have to be conducted face-to-face within a single room. Article 15 paragraph (2) of PMK 122/2023 allows the Auction Explanation to be conducted either through physical presence or virtually through electronic media, provided that such media enables the Seller and prospective Auction Participants to directly hear and see one another.

The main substance of the Auction Explanation is the information provided by the Seller, which includes a description of the Auction Object, additional information related to the Auction Object, and further explanation of information previously stated in the Auction Announcement, as regulated under Article 15 paragraph (3) of PMK 122/2023.

Furthermore, Article 15 paragraph (4) of PMK 122/2023 also stipulates that the implementation of the Auction Explanation must be set out in an official report and submitted to the Auction Official prior to the implementation of the auction. With such an official report, there exists a written record of the information that has been explained by the Seller to prospective auction participants.

This obligation of disclosure also remains applicable where the auction is conducted through the Auction Application. In this regard, Article 15 paragraph (7) of PMK 122/2023 requires the Seller to state the time of implementation of the Auction Explanation on the Auction Application and to upload the official report of the Auction Explanation prior to the implementation of the auction.

Furthermore, the purposes of implementing the Auction Explanation (Aanwijzing) are as follows:

a. Providing Certainty of Information Regarding the Auction Object

The Seller explains the condition of the object, the completeness of documents, and the auction requirements in detail so that participants obtain a comprehensive overview.

b. Enhancing Transparency

The explanation is conducted openly and without discrimination, providing assurance to the public that the auction is carried out in accordance with the principle of good governance.

c. Avoiding Disputes

With clear information provided from the outset, the potential for problems or objections after the auction can be minimized.

d. Strengthening Participants' Decisions

Participants are able to determine their bids more rationally based on the information received during the Auction Explanation (Aanwijzing).

3. Legal Consequences of Not Implementing the Auction Explanation (Aanwijzing) for Auction Objects as Referred to in Article 15 Paragraph (1) of PMK 122/2023

The Auction Explanation (Aanwijzing) constitutes a complementary stage in the implementation of an auction; however, for certain auction objects as referred to in Article 15 paragraph (1) of PMK 122/2023, the Auction Explanation instead becomes an important part that must be carried out before the auction begins. Through this stage, prospective auction participants should obtain sufficient explanation regarding the condition of the Auction Object, documents related to that object, and other matters that need to be known before participants decide to take part in the auction.

If the required Auction Explanation is not carried out, there exists a deficiency in the auction process that relates directly to the fulfillment of the formal requirements of the auction. In this regard, Article 47 letter e of PMK 122/2023 essentially provides the basis that an auction may be cancelled if it fails to satisfy the Formal Legality of the Subject and Object of the Auction.

In the context of the Auction Explanation, the Formal Legality of the Subject and Object of the Auction is not to be construed merely as the availability of ownership documents or other supporting documents. Beyond that, formal legality also encompasses the fulfillment of procedures that ensure prospective participants obtain clear, open, and accountable information regarding the Auction Object.

Accordingly, with respect to Auction Objects for which an Auction Explanation is required under Article 15 paragraph (1) of PMK 122/2023, the failure to carry out that stage may become a ground for the Auction Official to cancel the auction pursuant to Article 47 letter e of PMK 122/2023, on the basis that the auction fails to satisfy the Formal Legality of the Subject and Object of the Auction.

4. Conclusion

Based on the foregoing discussion, the Auction Explanation, or Aanwijzing, may be understood as an important stage in the implementation of an auction, particularly for certain objects that are indeed required under PMK 122/2023. This stage is not merely a formality, but rather serves as a means for prospective auction participants to obtain sufficient information regarding the Auction Object before deciding to take part in the auction process.

Through the Auction Explanation, participants can understand the condition of the object, the completeness of documents, the implementation procedure, and the risks that may be inherent in the object to be auctioned. With clearer information from the outset, the auction process becomes more open, and participants are able to make more considered decisions.

Accordingly, if the Auction Explanation required under Article 15 paragraph (1) of PMK 122/2023 is not carried out, this may be regarded as a failure to fulfill one of the important procedures in an auction. This condition may ultimately serve as a basis for the Auction Official to cancel the auction pursuant to Article 47 letter e of PMK 122/2023, because the auction fails to satisfy the Formal Legality of the Subject and Object of the Auction.