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.
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.