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JunHe Enabled Client’s Success in First Online Aircraft Auction in China

February 2018 - Transport. Legal Developments by JunHe LLP.

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On February 6, 2013, Jade Cargo International Airlines, the first Sino-foreign cargo airline company, filed for bankruptcy with Shenzhen Intermediate People's Court. Since October 26, 2015, the bankruptcy administrator of Jade Airlines has auctioned three self-owned Boeing 747 cargo airplanes offline on six different occasions, but all had failed. On September 19, 2017, the three airplanes were placed on online judicial auction platform operated by Alibaba with the court's approval. This is the first time that a bankruptcy estate has been auctioned online in accordance with rules promulgated by the Supreme People's Court of China with respect to online judicial auction.


Aircraft is typically an asset with international mobility. However, the online auction process of has not fully taken into consideration the needs of foreign participants in the auction of aforesaid aircrafts, whether in relation to their opening of Taobao and Alipay accounts, their payment of auction deposit, or in relation to their registration as bidders. In addition, the State Administration of Foreign Exchange (“SAFE”) generally prohibits domestic entities from receiving foreign currencies aboard as bid deposit. These deficiencies of the online auction platform, together with the restrictions imposed by SAFE, make it nearly impossible for foreign buyers to register for the online judicial auction and pay the auction deposit.


In the said online auction, the JunHe team led by partner Mr. Zhenfeng Yan represented a foreign client. After numerous communications and effective coordination and explanations by our team with all concerned parties and government authorities, our client was eventually permitted to pay the auction deposit offline with US Dollars, and to open Taobao, Alipay, bank and cellphone accounts, which allowed the foreign client to complete the bidder registration process two days before the deadline.




In addition, aircraft inspection, typically including document review, technical inspection, and test flight, is very critical for the purchaser in used aircraft transactions. The original auction announcement only allowed the bidder to walk around the auction object for visual inspection. To make the technical inspection possible for our client, Mr. Zhenfeng Yan submitted a written application to Shenzhen Intermediate People's Court, and flew from Shanghai to Shenzhen together with the foreign client to elaborate the importance and necessity of aircraft inspection. The court and the bankruptcy administrator, after having been convinced, finally approved our application for aircraft inspection, and this actually benefitted all bidders in the auction process.


JunHe has been greatly appreciated by the client, as with our expertise and professional service, it was enabled to participate into the first ever online auction in Chinese bankruptcy proceedings, to inspect the aircraft before the auction, and ultimately has acquired one Boeing 747 aircraft.


JunHe will continue to serve manufacturers, airlines, suppliers, leasing companies, banks, MROs and other players in aviation industry with its proven expertise.


The leading partner of this project was Mr. Zhenfeng Yan.