In a recent post we have previously discussed the practical aspects of mediation in Mongolia. Mediation is one of the better alternative dispute resolution methods for those who are seeking short-term and inexpensive way to settle a dispute. In this article we’ll explore the closing of the mediation process and aftermath.
The mediation process is generally considered more prompt, inexpensive, and procedurally simple than formal litigation. It allows the parties to focus on the underlying circumstances that contributed to the dispute, rather than on narrow legal issues. The mediation process does not focus on truth or fault. Questions of which party is right or wrong are generally less important than the issue of how the problem can be resolved. Disputing parties who are seeking vindication of their rights or a determination of fault will not likely be satisfied with the mediation process.
Nonetheless, if in the mediation process a resolution is reached between parties, a written settlement agreement must be executed. Such settlement agreement is binding for all parties of dispute and considered enforceable contract. As mentioned in our previous post mediation centers operate at courts of first instance (court-based mediation centers), and may operate at government authorities, NGOs and professional associations (other mediation centers). Settlement agreements executed by mediators of a court-based mediation center become a sort of court judgement, as judge of corresponding court issues a court decision confirming such settlement agreement. And if parties fail to voluntarily perform their obligation under settlement agreement, it shall be enforced same as court decision. On the other hand, while settlement agreements executed by mediators of other mediation center are also binding for parties of dispute, these are not enforced same as settlement agreements executed by mediator of court-based mediation center. If parties fail to voluntarily perform their obligations under such settlement agreement, parties have the right to pursue their claims in other forms (such as litigation or arbitration).
However, if in the mediation process parties could not reach any resolution, or parties did not actively seek any resolution, or for other reasons the mediation process could not further proceed, the mediation process shall be terminated. At this point parties of dispute may decide to resolve their dispute through litigation or arbitration.
Mediation a method of alternative dispute resolution parties to any agreement should consider, aside from arbitration. Mediation is essentially a negotiation facilitated by a neutral third party. Unlike arbitration, which takes a form more similar to trial, mediation doesn’t involve decision making by the neutral third party, but seeks to find a mutually acceptable resolution or compromise between the parties. Mediation procedures can be initiated by the parties or may be compelled by legislation, the courts, or contractual terms. When parties are unwilling or unable to resolve a dispute, one good option is to turn to mediation. Mediation is generally a short-term, structured, task-oriented, and “hands-on” process.
In Mongolia the institution of mediation was established by adoption of the Law on Mediation in 2012. Pursuant to Law, mediation may be used in civil legal disputes, individual labor disputes and disputes arising from family relationships, and in some other disputes only if specified by law.
In mediation, the disputing parties work with a neutral third party, the mediator, to resolve their disputes. The mediator facilitates the resolution of the parties’ disputes by supervising the exchange of information and the bargaining process. The mediator helps the parties find common ground and deal with unrealistic expectations. The mediator may also offer creative solutions and assist in drafting a final settlement. The role of the mediator is to interpret concerns, relay information between the parties, frame issues, and define the problems. Unlike the litigation process or arbitration, where a neutral third party (judge or arbitrator) imposes a decision over the matter, the parties and their mediator ordinarily control the mediation process – deciding when and where the mediation takes place, who will be present, how the mediation will be paid for, and how the mediator will interact with the parties.
A mediator is a specialized person, who is certified and registered in the list of mediators. Anyone with higher education may attend training courses for mediators and become a certified and registered mediator. However, currently most certified and registered mediators are usually lawyers or persons with certain legal or economic background. Law on Mediation provides presence of mediation centers at courts of first instance. Law also permits government authorities, NGOs and professional associations to have medication centers in accordance with their direction of professional activity, provided that certified and registered mediators are employed.
As we work with many foreign clients engaged in a range of international businesses, one of the most comment questions asked by our clients is whether a foreign arbitral award or court decision will be enforceable in Mongolia.
Generally speaking, Mongolian courts will generally not recognize or enforce judgments rendered in a foreign state unless Mongolia has concluded a treaty with that state concerning the mutual recognition of judgments. In this case, we would have to look at the relationship between the particular state from which the court decision originated to determine if there is a treaty, however, Mongolia has ratified very few such treaties and changes are slim such court judgment will be enforceable.
So what to do? The Mongolian Enforcement Agency will generally enforce a foreign arbitration award, so long as enforcement would not violate any public policy.
Mongolia has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, in 1994 and the courts of Mongolia will enforce an arbitral award in Mongolia provided that such award:
- is given by an arbiter of competent jurisdiction;
- imposes on the judgement debtor a liability to pay a liquidated sum for which the judgement has been given;
- is final;
- is in relation to a dispute which is commercial in nature;
- is confirmed by a judicial order in Mongolia;
- is not in respect of taxes, a fine or a penalty; and
- was not obtained in a manner and is not of a kind the enforcement of which is contrary to the public policy of Mongolia;
There are a few specific circumstances under Mongolia’s Arbitration Law in which a foreign arbitration will not be enforced:
- one of the parties to the arbitration agreement is incapacity or arbitration agreement is invalid;
- proper notice of the appointment of an arbitrator or of the arbitral proceedings was not given to the respondent party and unable to participate to the arbitral procedure and provide the response;
- arbitral award is not contemplated by or not falling within the terms of the submission claim, or arbitral award is beyond the scope of the claim;
- the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties and law of the country;
- award is not binding or valid or suspended;
- the subject-matter of the dispute is not capable of settlement by arbitration under the law of Mongolia;
- the recognition or enforcement of the award would be contrary to the public policy of Mongolia.
The Previous Mongolia Arbitration Law consisted of 43 clauses while the newly revised Arbitration law consists of 52 clauses. The new Mongolia Arbitration Law is drafted to be mostly based on the previous Arbitration Law with a few key changes.
Under the new Mongolia Arbitration Law the following “Temporary Actions” may be taken to secure the implementation of an Arbitration decision:
- Force the continuance or restoration of the status quo until dispute is resolved;
- Parties may be compelled to not take actions which may affect arbitration proceedings and may take preventive actions to prevent further damages;
- Take actions to protect property aa may be necessary for ensuring the enforcement of of a final arbitration award;
- Take action to preserve evidence which is significant for the resolution of the dispute or otherwise related to the dispute.
The following conditions must be met in order to take such protective measures
- The request for the temporary action should be clear and enforceable;
- if no actions are taken, it will be impossible to compensate, in full, the damage enforceable under the principle award;
- The amount of the potential damage should be greater than amount of potential damage which may incur as a results of the temporary actions if taken;
- there is a reasonable possibility that the dispute may be resolved positively for the Party requesting the temporary action.
If the arbitration panel considers that informing one party of the request for Temporary Action submitted by the other party, the panel may do so. The party so notified will have the opportunity to provide arguments relating to the request for Temporary Action.
The arbitration panel may request the Party requested the temporary actions, to provide appropriate financial guarantee in relation to the said actions.
This is a positive change to the Arbitration Law which will give Arbitration more “teeth” and better ways to be effective at both resolving disputes and securing an appropriate compensation for a grieved party seeking redress. Our experienced Mongolia lawyers are excited at the new options provided by this change the Arbitration Law and we are looking forward to see these Temporary Actions take effect in our own cases.
The Parliament of Mongolia approved the newly revised Mongolian Arbitration law.
Firstly, Mongolian Arbitration law approved in 2003 by parliament closely following the example arbitration law of the UN, however the Mongolian Arbitration law has not been accepted as meeting international standards. Cases are resolved by Arbitration in Mongolia are relatively low with 41 cases in 2014, 70 cases in 2015, and only 58 cases in 2016.
Following UN guidance, the Government of Mongolia set out to revise the Arbitration Law in an effort to increase ability for citizens and companies to resolve disputes outside of the courtroom. Parties will be free to choose arbitration, which is expected to be more efficient in terms of time and costs. It is hoped that cases resolved by respected professional arbitrators will have result in outcomes respected by both parties.
A major improvement in the new arbitration law is setting out the detailed procedures for securing implementation and enforcement of the award.
Interestingly, the law also outlines those individuals who will NOT be allowed to operate an arbitration organization. Under the new law, an arbitration organization may be established by the Mongolian National Chamber of Commerce and Industry, Customer and Trade Unions, but not any state organization or government entity. This regulation will provide a positive effect to transparency of the arbitration organization.
Check the following blog post for more detailed information about the new Mongolian Arbitration Law.
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.