Tag Archives: Parliament

Mongolia Presidential Election Maintains Divide Between Presidency and Parliament

The people of Mongolia have just completed the election of the President of Mongolia. Battulga Khaltmaa, of the Democratic Party, is the victor. Mr. Khaltmaa follows Ts. Elbegdorj, also of the Democratic Party in serving as President. This will continue the previous dynamic of a Democratic Party President serving concurrently with a parliament dominated by the Mongolian People’s Party (MPP).

Mr. Khaltmaa achieved his win with 50.6% of votes cast, with a voter turn-out estimated at 60%. The MPP candidate received 41.2% of the vote, while 8.2% of ballots were returned in protest with no selection, a practice expressly allowed by the Election Law of 2015.

The MPP continues to hold a supermajority in parliament. Therefore, they will retain the capability to override any potential veto by Mr. Khaltmaa of proposed legislation. Still, his presence at the top is expected to force some concessions on the part of the parliament. Mr. Khaltmaa will be primarily responsible for foreign policy, and negotiations of treaties with foreign governments.

During the campaign, Mr. Khaltmaa advocated for state involvement in the economy, and management of natural resources. He has framed his pending presidency as a necessary balance against the MPP dominated parliament. It is expected that a period of adjustment will follow the election in which the parliament and Mr. Khaltmaa learn to work together and set boundaries.

Mr. Khaltmaa is called a Nationalist by Bloomberg. His campaign has promised to increase public access to wealth from Mongolia’s large resource mining projects. He has also promised to reduce trade imbalances Mongolia has with Russia China, a task which may be easier said than done. Even so, the rhetoric has not been overly hostile to foreign investment and the election is not expected to derail Mongolia’s recent efforts to revitalize its mining boom, or efforts to diversify its economy in the agricultural sector.

New Liabilities for those who Advise Mongolia CEOs

Parliament has recently passed a bill to amend the Mongolia Criminal Code. The Amendments will create new liabilities for adviser’s of corporate CEOs, whose actions result in offenses such as money laundering, terrorism, bribery, environmental abuse, actions that threaten the nation’s economic security, or the abuse of state property.

Under previous law, only the CEO his or herself could be held liable in such cases. The amendments will hold those around the CEO, who advised or pressured a certain course of action to also take responsibility.

These changes will apply not only to private corporations, but also to state owned enterprises. It is interesting to note that while the Criminal Code previously contained over 80 items imposing certain legal liabilities on legal entities such as companies, the amended Code now has less than 30.

This is in general expected to make it easier to establish and operate a new company in Mongolia. The intention of the law appears to be to make it easier for companies to do business by providing more free dome of operation, while at the same time increasing liability for offenses at the top levels.

Mongolian Public Officers May Soon be Subject to Dismissal

We have already provided an overview of the new Law on Imposing Liability on Selected and Appointed High Ranking Government Officials, we would like to follow that with a closer look a few specific provisions in the new draft.

The law will set forth the legal basis and official procedures imposing disciplinary actions, political and moral accountability on officials including the President of Mongolia, the Parliament Speaker, the Deputy Speaker of Parliament, members of Parliament, the Prime Minister, Cabinet members, and officials appointed by the Parliament, or appointed by  provincial governors or Chairmen of local representative councils.

Officials in violation of legislation, oath or code of conduct or who fail to perform his/her duties will be subject to disciplinary actions depending on the nature of the violation committed. The said actions will be in form of warning the said official individually or warning among public. Furthermore, other disciplinary actions will be taken pursuant to other applicable legislations.

For the political accountability, officials in violation of the Constitution, legislation and code of conduct, will be dismissed or recalled, or his/her right to hold government high ranking position will be subject to 2 or 4 year restriction.

Furthermore, the law categorized ethics accountability as type of accountabilities in order to develop political culture in Mongolia, and aims to make officials feel greater regret for poor performance or taking advantage of their position and voluntarily assume accountability. However, if an official was subject to ethics accountability, he/she will be exempted from political accountability.

Chapter two of the law clearly states grounds for dismissal of President of Mongolia subject to overwhelming majority voting of members attended in Parliament session.

Chapter three states grounds and procedure for dismissal of the Parliament Speaker and the Deputy Speaker of Parliament and dismissal subject to overwhelming majority voting of members attended in Parliament session. Moreover, Parliament members elected from constituency will be dismissed according to majority voting of total members attended in Parliament session based on request by voters.

Chapter four includes wider grounds for dismissal of Prime Minister, Cabinet members and officials appointed by the Parliament, dismissal subject to discussion and majority voting of members attended in Parliament session and regulates other relevant issues. Furthermore, the chapter states basis for dismissal of aimag or city Governor.

Chapter five states basis for dismissal of chairman of the Citizen’s Representative Khural of aimags or city and issue on dismissal will be decided according to majority voting of total representatives attended in meeting.

Chapter six regulates matters regarding public statement, informing officials about dismissal, conducting investigation, discussing about dismissal, imposing liability on officials, reporting and informing public about compensation of damage incurred to state due to breach of law by officials.

This new law which clearly outlines procedures for dismissal of public officials will be a significant improvement over the current situation in which misdeeds by public officials are not adequately addressed. We expect this new law will go a long way to reduce or eliminate any feeling by public officials that the does not apply to them due to their position of authority.

Draft Law Seeks to Define Liabilities for Mongolian Government Officials

A new draft law has been submitted to the Mongolian parliament. Named the Law on Imposing Liability on Selected and Appointed High Ranking Government Officials, the proposed law seeks to define liability for certain high ranking government officials. The draft will first be reviewed and discussed by Parliament before a vote. We are very excited at the current draft and our Mongolian lawyers consider the proposed law, if adopted, to be hugely important to Mongolian public policy and society. The need for the law stems from a feeling among many in the Mongolian public that politicians in the country often to act “Above the Law.” The effects of this official lawlessness are seen and felt by the public through displays of misbehavior and misconduct. In the past, there has not been adequate legislation to clearly identify inappropriate actions by public officials, and impose liability. The new draft is an important attempt to remedy this through new legislation.

To give readers a better idea of the problems facing Mongolia and the provisions in the law which will address these issues, the following are several weak points, or grey areas which the draft law will address.

The disciplinary sanctions set forth in the current Law on Public Service address only the executive branch government hierarchy, while not mentioning Members of Parliament, or those officers directly appointed by and responsible to the Parliament (the Legislative Branch and auxiliaries). Legal grounds for imposing liability on politicians within (the Legislative Branch and auxiliaries) have been absent or unclear at best. However, even grounds for imposing liabilities to the politicians within the government hierarchy carries uncertainty.

While each of the Law on Public Service, the Law on Anti-Corruption, and the Law on Regulation of Public and Private Interests and Prevention of Conflict of Interest in Public Service outline legal grounds to impose liability on officials, these each function as separate stand alone laws without a unified or common approach.  For example, liability under the Law on Public Service only targets administrative, executive, and public service professionals, and specified public officials. Political officers are not included.

Because of these limitations there is no clear body of law to assist in establishing or imposing liability on high ranking “selected” and “appointed” (as opposed to Elected) government officials. Currently, wrongdoing by such officials may only be determined on a case by case basis through a decision of a court, which does not allow for regular and effective enforcement.

In practice there is no regulation providing for the recall of elected officials such as Members of Parliament. The President, the Parliament Speaker, and Members of Parliament may be dismissed or recalled, only where the Constitutional Court of Mongolian issues a ruling that that they have violated the Constitution of Mongolia and must be removed. This is exceptionally difficult as there is no clear standard for establishing such violations in the legal system.

Under current legislation, political liability and means to impose it has not been addressed. Such liability will increase overall levels of responsibility for public officials who may be forced to resign, face recall, or be restricted from nominations for future public office in the event clear guidelines of liability are established. By establishing real legal consequences, the draft law is expected to help promote a culture of greater responsibility for public officials, bringing greater prestige and international respect to Mongolia’s political institutions and public officers.

Political liability is intended to increase the level of responsibility for individual officers by setting clear provisions and requires for resignations, dismissals, recalls and restrictions on rights to be nominated as candidate for specific period for the elected and appointed high ranking officials. In this way the new draft law seeks to establish a culture of self-responsibility and accountability for politicians as an integral part of public service regulation in the well-developed democracy in other countries. To this end the draft law will help to established procedures and a foundation for imposing liability on politicians within (the Legislative Branch and auxiliaries).

By doing so it is hoped that government influence and interference in public society and operations of private companies will be greatly reduced or eliminated.  Come back for our next post which will have an overview of some important provisions in the new draft law.

Mongolian Government Introduces Positive Amendments to 2017 Budget

Mongolia Minister of Finance B. Choijilsuren presented to the Speaker of Parliament M. Enkhbold a set of planned amendments to the 2017 state budget. These amendments have been designed to better ensure the government’s ability to meet its obligations under the International Monetary Fund’s extended fund facility program from which the government will receive substantial loans.

The amendments are intended to stabilize the national budget and the fiscal outlook financial environment, by reductions in budget deficits, and imposing discipline.

The primary changes in the new budget include:

  1. Increasing taxes on alcoholic beverages and imposing tariffs on imported cigarettes;
  2. Increasing taxes on gasoline and diesel fuel;
  3. Increasing taxes on imported vehicles, in accordance with engine capacity;
  4. Dividing personal income taxes into three brackets and increasing personal income tax for people with higher incomes;
  5. Charging a ten percent tax on interest earned from savings accounts;
  6. Raising social insurance fees;

Of these, the biggest and the one that caught the attention of our China lawyers is the changes proposed for the personal income tax. The exact income levels which will be cut off points between the three tax tiers is not yet known, however it is likely that many expatriate employees in Mongolia may be affected by higher taxes on their income.

In addition to the above, the amended budget will impose several new measures intended to reduce the government’s overall operational sending levels and bring expenditures in line with government revenues.

  1. Increase the efficiency of tenders being carried out in the medical sector;
  2. Raise the retirement age every two years;
  3. Promote the Meat and Milk Campaign to develop Mongolian meat and dairy industry;
  4. Provide the state’s monthly welfare allowance of 20,000 MNT for children and other state assistance only to targeted groups;
  5. Repeal existing laws that put pressure on the state budget.

The government will aim to limit deficit spending to 10.6% of overall GDP, with revenue expected to be 23.1 percent of GDP, and overall spending to be 33.7% of GDP.

Of the above measures, LehmanLaw Mongolia is pleased to see efforts to promote the Mongolia meat and dairy industry included. Mongolia’s large expanse of green pasture land, clean water and fresh air should provide excellent opportunities for entrepreneurs and foreign investors seeking to establish meat and dairy production operations in the country. Exports of such products to China should find a willing market, as Chinese meat and dairy consumption is expected to continue rising trends.

The other good news is the general commitment to eliminate old laws that cause unnecessary financial strain on the government. This review process is necessary and is expected to help the government identify new areas where spending can be reduced by smart changes to the law. This is the kind of reform needed to stabilize the Mongolian economy and prepare for long term growth.

Mongolia Anti-Corruption Law: Overview of Prohibited Activity

Mongolian law prohibits certain activities by public officials, while other activities are restricted. These prohibitions and restrictions are intended to prevent conflicts of interest in public service and to eliminate opportunities for bribery and other forms of corruption. However, even in the face of legal prohibitions and restrictions, sometimes officials will in communications with our clients suggest “options” or “solutions” that amount to barely disguised violations of these laws. Foreign invested enterprises in Mongolia should “keep an eye out” for these kinds of activities so they are not caught up in an illegal scheme.

Mongolian public officials are prohibited from disclosing in a manner not related to their official duties, information that has been acquired via official capacity. Unfortunately, violations of this prohibition are widespread as politicians and unelected officers will often seek to share or trade in private information gained through their position of privilege. Officials will seek to use this information to further their own interests, or to spread damaging propaganda about opponents.

Public officials are also prohibited from utilizing their official position to issue a decision, or to control, supervise, inquire or impose liability on another for the private purposes of themselves or their friends and family. They are also prohibited from using their official position to put pressure or influence on others. While this is not as common as the information sharing described above, one would not be surprised when encountering an official who seeks to wield their power in this way.

An official is prohibited from using the power of public office in any kind of advertising, except in connection with their official duties, and where participation is in favor of activities in benefit of the society.

Public officials are further prohibited from utilizing public service to represent their own private interests, or those of other individuals, organizations, or companies they are directly or indirectly associated with. Even so, many members of parliament are successful in business and continue ot be involved with a private business. For many a primary reason to become a member of parliament is to enhance or extend to their business opportunities and income. Parliamentarians have been known to introduce new laws and regulations which are beneficial to their private business or their personal interests.

Officials are prohibited from accepting any payment or supplementary payment, or gifts in connection with the performance of their official duties, however, this is another common violation which is often performed discretely.

With regard to an official’s accepting a gift, there is a legal obligation for an official to file a written report within 30 days in the event the value of a one-time gift or service received exceeds the equivalent of that official’s salary for one month, or where the value of gifts received from a single source in the course of one year exceeds the equivalent of that official’s salary over three months. If the value of a gift or service received by an official is in excess of that official’s salary over 6 months, the gifted items shall become the property of the State. The official can accept or redeem these gifts only by way of paying the government the value in excess of the official’s six month total salary.

This is a strange arrangement per western standards as a gift of 6 months total salary may still be a substantial amount. Keep in mind that while a gift of this nature may be legal in Mongolia, foreign companies and individuals may still be subject to anti-corruption laws in their home country, such as FCPA in USA.

Public officials are further prohibited from participating in the business of a company or serving in a management role of a company. Additionally, officials are subject to a two year prohibition on being a shareholder, stockholder or a partner in a legal entity for which the official had been involved decision making on awarding such company government procurement contracts, allocation of central government, provincial or municipal funding, or where the public official had exercised official supervision or control over such company in connection with the official’s public duties.

This is only an introduction to official prohibitions on actions of public office holders. Future blogs will continue our review.

Proposed New Mongolia Laws Promise Reform in 4 Key Areas

Parliament has just issued a list of draft laws to be considered during the fall session in 2017. This list includes drafts in relation to State Budget 2017 and number of completely new proposed laws. There are also several proposed amendments to existing laws that look to be very interesting going forward.

The following are the newly initiated draft laws:

  • Amendments to Constitutional law
  • Law on National System of Payment
  • Law on Development of the Ger District
  • Law on Investigating and Resolving Infringements
  • Casino law
  • Law on Mongolian Foreign Relations
  • Law on Safety of Information
  • Law on Encouraging Development of Youth
  • Law on Food Supplements for Infants and Toddlers
  • Law on Health of Livestock and Animals
  • Law on Resource of Livestock Genetics
  • Law on Enriched Food
  • Law on Responsibility of Elected or Appointed State High Officials
  • Law on Protecting Critic’s Rights

The Mongolian Lawyers at LehmanLaw Mongolia are particularly interested in the proposed Law on National System of Payment.  There is huge potential for reform and modernization in this area and we are excited and looking forward to significant changes under a new law.

We expect the proposed Law on Investigating and Resolving Infringements to be very interesting to foreign businesses seeking greater protection for Intellectual Property rights in Mongolia, including Copyright, Trademarks and Patents. We hope the new law will provide a clear system for enforcement of protected intellectual property rights in Mongolia.

Two proposed laws appear to target Mongolia’s growing agricultural sector.  Mongolia is ripe for increased foreign investment in the agricultural sector and an improved legal framework in this area will be sure to increase interest. We will monitor related developments

It also looks like there will be a proposed law regarding establishing norms of official behavior, which appears to be an effort to increase anti-corruption measures among government officials; a very positive development which we will explore more fully as details are available.

Mongolian Parliament Votes for Nationalization of Mining Company

In 2016, a private Mongolian company, Mongolian Copper Corporation (MCC), bought 49% of shares in Erdenet Mining Corporation (EMC). The shares were purchased from previous owners, the government of Russia, and Russian state-owned Rostec Corporation. Described by Rostec as, “valued at a market premium,” The purchase initially attracted public criticism as to how it was conducted.

A task force, lead by Sh. Radnaased Head of the Mongolian Parliament’s Standing Committee on Law (SCL) investigated the transaction and found that MCC had paid over USD 400 million for the stake utilizing a pattern of illegal corporate structure ss and illegal financing arrangements. The transaction violated several provisions of the Mongolian Constitution and statutory laws. The SCL made a proposal this year to transfer the 49% stake in EMC to the Mongolian Government. The Mongolian Parliament has passed a resolution endorsing this course of action.

The sale to MCC was approved by the former government, the day before new parliamentary elections were held. Some now say the allegations of illegal conduct are political fabrications designed to make nationalization of the shares easier by discrediting the original sale.

Though in this case the nationalized shares are currently owned by a private Mongolian company, foreign investors will no doubt take note. Though the current government has allowed foreign mining company Rio Tinto to continue with the Oyu Tolgoi mining expansion, and claims that Mongolia is open to foreign investment, it is clear that among parliament at least, there are substantial sentiments regarding government ownership of mining projects.

Fresh Amendment to Mongolia Company Law Incoming

A new draft law to amend to the company law was submitted to the Mongolia Parliament recently. The purpose of the proposed amendments is to improve the regulation of liability limited companies with majority state ownership. There have been problems which have occurred with corporate governance of such majority state owned companies, in areas such as shareholder and board meetings and selecting members of the Board and executive management.

The amendment aims to improve legislation concerning proposals to call regular and irregular meetings of shareholders of these companies and improve the effectiveness of the regular Board of Directors meeting so as to aid is role as decision maker and to ensure normal operations of these companies.

The draft amendment includes the regulations clarifying procedures for to the call of regular and irregular meetings of shareholders of and the effectiveness of Board of Directors meetings.

Once the draft law enacted, rights, obligations and liabilities associated with the liability limited companies dominated by state ownership shall be clear and no additional funding from state budget shall be required for enforcement of this law.  We see this as a positive step to encourage independent decision making among leadership of key state owned enterprises, which are the primary vehicles by which Mongolia facilities and draws profits from several of its major mining operations.

Mongolia Looks to Improve Agricultural Sector

During Parliament’s recent session, issues confronting agriculture in Mongolia were discussed. Importantly, economic growth in the agricultural sector was 2.8% higher this year than in the January through October period of 2015. This is contrast to many export sectors which saw a decline.

The government of Mongolia is implementing policies to support production of agricultural products in Mongolia. In each of 2012, 2014, and 2015, Mongolia produced the highest recorded crops yields in 25 years.

The government is seeking ways to promote Mongolian livestock and agricultural products to increase competitiveness globally and to meet international standards

Policies implemented by the government include discussions with China to promote meat export to China, and the government is pursuing a policy to provide herders and farmers with soft loans.

With all this in mind, it’s looking like a very good time to make a new investment in Mongolia in the farming and animal products sectors.