When negotiating the terms of an investment project, Foreign banks and other investors typically opt to go with foreign arbitration rather than litigation in Mongolia. At least five international arbitration proceedings have been well publicized in Mongolia since 2000. However it remains an open question as to whether the arbitration award is worth the high costs.
In 1994, Mongolia ratified the New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. Therefore Mongolia is obliged to recognize and enforce foreign arbitration awards produced under the jurisdiction of another state party to the Convention. Mongolia’s declarations in signing the Convention, indicating that Mongolia will apply the Convention only on the basis of reciprocity and only as to commercial disputes defined by Mongolian national laws, in most cases do not create a substantial barrier to enforcement.
The Law on Arbitration of Mongolia, 2003 has been drafted in compliance with the United Nations Commission on International Trade Law Model Law. The process of enforcing the award is fairly straightforward. The creditor must first formally request enforcement of a foreign arbitration award in the territory of Mongolia. In order to do that the creditor must submit the original copy of the final award with official translation to Mongolian and a judicial order warranting the feasibility of its enforcement. When the Court Decision Enforcement Agency receives the request, an Enforcement officer who will be in charge of this procedure will be assigned to collect on the reward. From then, the enforcement of the arbitration award is treated the same as enforcement of a Mongolian court decision, the enforcement officer will take all measures necessary to collect, as allowed by the law.