Category Archives: Corporate Commercial

What Rights to Land Does a Foreign Invested Company Enjoy in Mongolia?



Posted by , , ,

Articles 27-44 of the Law of Mongolia on Land regulates granting land for possession or use. In this blog we will discuss difference between the right to possess and use land in Mongolia as well as the right of foreign investment company in this field.

The right to use and possess land are different by the subjects, purpose of its use, size and duration under the Law of Mongolia on Land. For instance, in regards with the subject, the land possession shall be given only to Mongolian citizens, companies and organizations.

Under Mongolian legislations, foreign investment company is considered as Mongolian legal entity. However, according to Article 44 of the Law of Mongolia on Land, there is only right to use the land not to possess for foreign investment company. Also, the article 6.5 of the Constitution of Mongolia specifically state that “the State may allow foreign nationals, legal persons, and stateless persons to use land for a specified period of time under conditions and procedures as provided by law”.

This is related to the concept “Land relations are the basis of national heritage and independence” of the Constitution of Mongolia. Therefore, granting land possessing rights to foreign invested company is contrary to the concept of the Constitution of Mongolia.

Foreign invested economic entities can use land for specific purposes, terms and conditions set forth in the Law of Mongolia on Land and the Government shall set the relevant term and duration to use land.

Renewal of a Mining License



Posted by ,

In the past weeks the firm’s Mongolian lawyers have been approached with an inquiry regarding how the recently revised Law on Permits may affect renewal of Mining Licenses.

Mining license are typically granted for a term of thirty (30) years, and are available for renewal in the two years before expiration.

The holder of a Mining License is required to submit an application for renewal of the license not less than two years prior to the expiration of the Mining License.  The applicant is required to submit the original Mining License along with a copy of the license as part of the application. The applicant is also required to submit documentation demonstrating regarding implementation of the mandatory Environmental Protection Plan for mining operations for the project.

Upon the receipt of an application for renewal of the Mining License along with supporting documents mentioned above, the relevant government agency shall reach a decision within 15 days. Where the administering agency finds no violations or other issues which result in ineligibility, the Mining License should be extended for a new term of 20 years.

Exercising the Right to Enforce Sale of Collateral without a Court Order



Posted by , , ,

Our Mongolian lawyers have recently assisted a client in connection with the planned sale of collateral by auction without obtaining a court decision.  

Mongolian law provides for this type of out of court enforcement procedure where stipulated in a mutual agreement. In order to start this process, the Pledgee is required to notify the Pledgor in writing as to the demand for performance of the contractual obligation. The notice period required in 30 days. If there is no reply within 30 days, the enforcement may be registered directly with the national pledge registry which will initiate a sale of the pledged collateral.

The law provides that the auction price shall be agreed upon by the parties to the contract, and if no agreement is reached, it shall be set at 70 percent of the market value determined as determined by an appraisal.

If there is no competition during the auction, or if the winner does not deposit the price offered by him/her in the designated account within the time specified in the contract, the auction will be deemed not to have taken place and a new auction will be held.

A Pledgee is entitled to negotiate an agreement with the Pledgor within 10 days after an announcement that no auction has taken place to have the collateral transferred to its ownership at the first price of the auction.

If the collateral is sold, or the Pledgee takes possession of the collateral as satisfaction of its demand, or the Pledgee does not finally to exercise its right to purchase the collateral the security interest on the collateral shall be terminated.

Important Changes to Permitting Extensions and Renewals



Posted by , ,

In our previous post, we looked at the new Law on Permitting and the goals of the government to reduce and standardize permitting requirements overall. This week, we will look at how the new Law on Permitting will simplify the process for application to extent a permit.

Under the revised law, a permit holder shall apply to the competent authority 30 days in advance to renew the permit.

An interesting aspect to the revised law provides that where a permit holder is able to show they meet certain qualifying conditions, for example, having fully paid taxes due, and having a good record of reliable employment, the initial period of the permit will be automatically doubled. In other words, if the permit is issued for 3 years, it can be extended for 6 years.

Also under the revised law, the reviewing authority is required to issue a decision (acceptance or denial) on the application for extension within 10 working days from the receipt of the application and the materials submitted. If no decision has been issued within the 10 day period, the permit will be automatically extended. This system is designed to avoid a common problem encountered in the past in which business found their permits revoked solely to due to delay in timely processing, even where the application for extension had been submitted on time. This had resulted in substantial difficulty and wasted resources for business forced into administrative and litigation battles to regain operating permits.

Another new regulation in the draft law is to establish electronic database of permits. The electronic database for permit shall be maintained by the Secretariat of the Council under the Prime Minister. Permission granted, extended, suspended, revoked, terminated, pledged or transferred shall be registered in the electronic database of permit.

Revised Law on Permitting Aims to Reduce Regulatory Burden



Posted by , ,

The newly submitted Law on Permits is being discussed before the Parliament and approval is expected. One of the key goals with this new update to the Law on Permits will be a reduction in the number of permits required to be issued by the state authorities with the aim of allowing citizens and legal entities more flexibility to conduct business.

The current Law on Licensing specifies the types of licensed activities. The law authorizes the relevant state administrative authority to issue licenses for specific business activities. However, various government agencies continue to create new licenses and expand licensing requirements within the scope of their authority. Over time, the situation has developed to the point where there are 1,600 separate a company may be required simply to conduct it’s target business . Originally, the Law on Licensing provided for the issuance of about 200 unique licenses. Currently, at least 8 different permits are required to operate a simple supermarket business; whereas the revised law aims to reduce that number to only two, a license for the sale of alcohol, and a separate license for sale of tobacco products. The revised Law on Permits will provide for 365 different types of permits, a reduction of 77%.

The new Law on Permits regulates only those activities that require a permit in order to allow citizens and legal entities to conduct businesses freely. Under the revised Law, permits will be classified as a “License” or a “Permit”, depending on the purpose, conditions and level of operational risk.

Under the new law, Licenses will be issued for a period of at least 5 years while ordinary Permits will be valid for a period of at least 3 years. The permit shall be extended for at least the period for which it was originally issued. Permits may be granted indefinitely in cases provided by law.

In general, the updated law calls for a decision on whether to grant a license to be made within 30 days of receipt of the application, this is an extension of the 21 days provided for under the current law.

This blog provides general reasons for the adoption of the Law on Permits. The next blog will cover other new features and a discussion of implications.

Introduction to Mongolia’s Law on Digital Signatures



Posted by , ,

A newly revised Law on Electronic Signatures was adopted in December 2021 and will come into force on May 1st, 2022.

The Revised Law distinguishes between electronic signatures and digital signatures. The Law provides that an electronic signature shall be used for electronic information that has been converted from paper form to electronic form by means of an information system, or created, sent, received, stored or accessed in an electronic environment (except for those classified as state secrets).

Generally digital signature is characterized by a unique feature that is in digital form like fingerprint that is embedded in a document. The Law provides that digital signature is a form of an electronic signature, and is an information that is encrypted and converted into digital signature by using private key and can be verified and validated by using a public key. With regards to legal entities, pursuant to the Law legal entities shall use digital seals, which must meet the requirements for digital signatures. The authorized representative of legal entity shall be the holder of the digital seal. The signer shall be required to have a certificate so that he/she can be linked to the document (information). Digital signature shall be as valid as the written signature on paper document.

Along with the certificate the signer shall be required to have a digital signature tool used to create the digital signature and retain private key. The Law specifically provides that for Mongolian citizens their ID cards shall be one of types of digital signature tools, that is information on citizen’s digital signature, certificate and private key shall be placed in the memory chip of ID card. The Law does not set a legal limit on the types of digital signature tools, but a list of eligible tools shall be issued by the Ministry of Electronic Development and Communications.

In accordance with the Law now not only Mongolian citizens and legal entities, but also foreign citizens and stateless persons shall be able to use digital signatures. Also, now a digital signature certificate issued by foreign authority may be used in the same way as Mongolian certificate provided that conditions set forth in the Law are met and in accordance with procedures set forth in the Law. Meaning that digital signatures authorized by foreign certification authorities may be used, whereas the current law does not allow it.

Furthermore, the Law sets forth more detailed requirements for digital signature certificates, certification authorities, their rights and obligations, rights and obligations of government authorities.

Mongolia’s New Law on Virtual Assets Providers



Posted by , , , , ,

In recent years number of companies and organizations have come out and sold various “coins” and tokens. Although virtual asset services have the advantage of using technological advances to increase access to finance at low cost, the process of trading coins and tokens is carried out in very short term and at high prices. As a result, special legal regulations became necessary due to high risk of possible increase of cybercrimes, and as consequence individuals and investors to become victims of cybercrimes, or even unknowingly get involved in money laundering and terrorist financing crimes said lawmakers. Thus, the first draft of Law on Virtual asset service providers was submitted by the Government on May 12, 2021 and the parliament adopted it on December 17, 2021. The law came into force on February 25, 2022.

Pursuant to law public offerings and trading of virtual assets now can be done only through companies registered as virtual asset service providers. Companies that want to provide virtual asset services and that meet requirements set in law and ancillary regulations on combating money laundry, terrorist financing and risk mitigation can be registered with Financial Regulatory Commission (FRC) as virtual asset service providers. Once registered virtual asset service providers shall be obliged to identify its customers, determine the legality of their assets, and inform customers in advance about risks of becoming victims of technical and fraudulent crimes in the process of possessing and trading of virtual assets.

Pursuant to law eight ancillary regulations must be adopted, which are currently being developed by FRC. FRC is currently conducting survey on some of the draft regulations. You can read the draft regulations (only Mongolian versions are provided) (the link http://www.frc.mn/a/3910) and send your proposal by March 27, 2022.

FRC shall not register any company as virtual asset service provider within four months from the date the law came into force. This period is given for FRC to develop and adopt aforementioned ancillary regulations. Companies that provided virtual asset services before the law was adopted shall satisfy all requirements set in law and ancillary regulations within three months after expiration of the four-month period and may be registered with FRC as virtual asset service provider.

The law expressly provides that registration of a company as virtual asset service provider is not considered as guarantee for the virtual asset. The government shall not be responsible for any damages resulting from activities related to virtual asset service, and public offerings and trading of virtual assets through a company not registered as virtual asset service provider is prohibited.

An individual or legal entity that violates the law shall be subject to liability specified in Criminal Code or Law on Infringements. Administrative penalty for violation of law for individuals is fine in the amount equal to from 1 million MNT up to 3 million MNT, for legal entities is fine in the amount equal to from 10 million MNT up to 200 million MNT.

So, it looks like in October virtual asset market will start to be more regulated and well-ordered.

Revised Law on Personal Information Protection for Digital Age



Posted by , , ,

The parliament adopted a revised Law on Protection of personal information on December 17, 2021, and this law will come into force on May 1, 2022. This law is a revised version of current Law on Individual secrecy, which will be repealed on the date when revised law comes into force.

Current Law on Individual secrecy was adopted in 1995. It has passed over 20 years since then and social relations have changed and evolved a lot. The revised law covers a wider range of personal information than the current law, and regulates protection of personal information rather than “personal secrets”. Law on Protection of personal information covers personal information (such as name, date and place of birth, citizenship, educational background, membership, information on property, etc.) and sensitive information (such as nationality, religion, gender, key to digital signature, criminal and medical records, sexual orientation, correspondence, etc.), which also include genetic and biometric information.

The revised law introduces several novelties. One of them is that any personal and sensitive information must be collected, processed and used with a written consent from owner of the information (either written on paper or electronically), with exception of cases specified in laws. Pursuant to current Law on Individual secrecy only owner of personal information has responsibility to protect his/her own “personal secrets”. When the revised Law on Protection of personal information comes into force the responsibility to protect one’s personal information shall be imposed also on government bodies, individuals, legal entities and organizations without the rights of a legal entity that legally collected, processed and used personal information. Also, lawmakers differentiated criminal liabilities for disclosure of personal information via telecommunications and the Internet, and toughened criminal penalties.

The revised law also regulates matters and restrictions related to installation of cameras, voice recording devices and making of recordings in public places, offices and/or at home, processing and use of such recordings.

Amendments to Law on Trademarks and Geographical Indications



Posted by , ,

As promised, we will continue to discuss about intellectual property law reform in Mongolia. On May 6, 2021 lawmakers passed amendments to Law on Trademarks and Geographical indications. The revised version of this Law was adopted in 2010, and was previously amended only once in 2015. Since this Law was adopted some trademark-related relations have evolved and several new regulations were implemented. For example, IP office started to take trademark applications online. Due to these circumstances, it became necessary to make relevant amendments to the Law.

Let’s look at key points of new regulations implemented in new amendments to Law:

  1. Terms and definitions are redefined in accordance with international treaties, to which Mongolia is a party (such as TRIPS, the Paris convention, Singapore Treaty on the Law of Trademarks),
  2. New ground for refusal to register a trademark is added: if a mark (trademark) matches the name of a legal entity that is registered in state registration.
  3. In connection with above mentioned regulation, IP office (IP inspectors) is now authorized to access the state registration database for purposes of performing trademark examinations. This authority was not granted under previous regulation. Because of this there were occasions where a name of a legal entity is registered as different entity/person’s trademark.
  4. New stages of trademark examination are implemented. Now after formal examination of an application IP office determines the filing date and publishes bibliographic data of a mark in the official journal. This regulation was not provided previously. After such publication an interested party may submit an opposition to IP office. Meaning that now an interested party may submit an opposition before a trademark is registered (while IP office is performing a trademark examinations) and after a trademark is registered. Whereas under previous regulation, an interested party could submit an opposition only after a trademark is registered.
  5. New ground for cancellation of a trademark is added: if a trademark was not used for 5 years without any good reason.
  6. New regulations are introduced with regards to entity/person who was using in good faith a mark that is similar or identical to a registered trademark for the same goods or services prior to the latter’s priority date.
  7. Now trademark owners and holders of geographical indications are obliged to notify the IP office every time of their name change, address change and transfer of ownership, and apply to make relevant amendments to registration.

Overall same as new Law on Patents, the amendments to Law on Trademarks and Geographical indications have implemented more detailed and new regulations of trademark application filing, formal and substantive examinations, registration and publication of trademarks and geographical indications, and eliminated any existing inconsistencies and overlapped regulations.

Intellectual Property Law Reform in Mongolia



Posted by , ,

Over the past decade or so due to rapid development of technologies more new types of works and creations are starting to be protected by intellectual property rights. Hence the relations and transactions related to intellectual property rights are becoming more complex and multifaceted. Naturally, reform of intellectual property legislation becomes necessary. So, new Law on Intellectual property was adopted on January 23, 2020 and came into force on December 1, 2020. Law on Intellectual property establishes general regulations related to intellectual property rights, legal status of intellectual property authorities and institutions. In one of our previous blogs, we have covered highlights of this law. And matters related to specific types of intellectual property are regulated by separate relevant laws.

As part of said reform several key laws were renewed and amended on May 6, 2021, particularly, Law on Patents, Law on Copyrights, and Law on Trademarks and Geographical indications.

Revised version of Law on Patents was adopted and it implements several new significant regulations. Here are highlights of these new regulations:

  • new law provides to grant patents for utility models, whereas previously certificates were granted for utility models;
  • patentability criteria of inventions, utility models and industrial designs are redefined, in the sense that they are more clarified;
  • patent application filing procedures have become more detailed, particularly, formal examination of application is split into two stages: composition check of application documents and examination of application documents;
  • due to the fact that terms in the Patent Cooperation Treaty (PCT), to which Mongolia is a party, are long and the need to bring the law into line with PCT, patent application filing terms and prior art search and substantive examination terms have been extended. Also, other relevant regulations have been brought into line with international treaties, to which Mongolia is a party;
  • regulation of electronic filing of patent applications have been updated, while previous regulations were very vague;
  • more clarified regulation is added concerning third-party observations (third-party objections);
  • regulation on international patent application filing procedures, and licensing agreement regulations have become more detailed.

Overall, the new law has implemented more detailed regulations and precise terms of patent application filing, application examination and patent granting procedures, and has eliminated any previously existing inconsistencies and overlaps of regulations.

In our following blogs we shall discuss about new regulations established in Law on Trademarks and Geographical indications and Law on Copyrights.