Category Archives: Uncategorized

55 Years of Cooperation with the United Nations



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Mongolia became the 101st member of the United Nations on October 27, 1961. Thursday, October 27 marks the 55th anniversary. A ceremony was held October 1st at the Mongolia Ministry of Foreign Affairs in celebration of Mongolia’s long participation in the global body.

The Mongolian Vice Minister of Foreign Affairs, and the UN Resident Representative both spoke at the event, discussing the contributions Mongolia has made to the United Nations, and the benefits Mongolia has received in return. Both look forward to a strong future for Mongolia and increased participation of the country in the international community.

The Ceremony comes a month after The President of Mongolia, Tsakhiagiin Elbegdorj presented a speech on principles of sustainable development to the 71st Session of the UN General Assembly. Mr. Elbegdorj’s speech discussed the rapid economic changes in Mongolia, and emphasized the principles of accountability, democracy, human rights, and international cooperation as vital to ensure the path of global sustainable development.

Basics of Mongolia Customs Restrictions



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Mongolia recognizes 4 categories of commodities for purposes of cross-border trade. Items are classified as either:

  1. Forbidden;
  2. Licensed;
  3. Taxed;
  4. General.

An item classified as Forbidden is not allowed to pass through Customs whether by import or export. Narcotic s and related equipment for production or use are Forbidden.

Items which are not Forbidden, but which are subject to certain legal restrictions are Licensed. There must be an appropriate license for import or export. Some licenses are restricted to only export, or only import. Medical drugs and alcoholic beverages are examples of items which must be licensed. Imported or exported metals must also be accompanied by a license, however there is an exception for used aluminum drink cans. Other items which must have a license for export or import are toxic chemicals, blood and organs for donation, raw or processed uranium, firearms, historic or cultural items, and Mongolian pedigree cattle.

Some items which do not require a license are nevertheless subject to special taxation on import or export. As of September 09, 2016 changes to the law, such taxes on goat cashmere and camel wool are removed. Only processes and unprocessed timber remain subject to special taxation.

By any other Name, Would Champagne Taste as Sweet?



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So what does it mean to be made in Mongolia? Or anywhere else for that matter? In Mongolia the protection of Geographical indications is governed by the Law on Trademark and Geographical Indication which has taken effective on July 25th, 2010. Under the law, “geographical indication” refers to any geographical indication of a product’s manufacturing country, area and territory where quality, reputation and other characteristics are defined by factors relating to the nature of the territory, climate condition or local practice.

Forms of geographical indication are expressed in single geographical names of territory that determine the origin of the goods and products, or a combination of the name of the goods and products with a territory. However, general names for goods and products of a territory within Mongolia are not considered as geographical indicators. Moreover, geographical indications are tools for protection of local industry by creating the suggestion that similar goods produced in other geographic regions will not have the same characteristics or quality. Champagne is only champagne, if it is from Champagne, France, otherwise it is sparkling wine.

Under Mongolian law, a community, association or organization of unified manufacturers of goods and products of a local region apply for geographical indication protection in writing as specified in regulation set by the Intellectual Property Office. The Intellectual Property Office examines the application within six months of filing the application. This term may be extended up to six months if required. If the Intellectual property office decides to register a geographical indication, that geographical indication shall be entered in the State register and a Certificate of Geographical Indication shall be issued. The protection of geographical indication is not limited for definite periods and is valid from the filing date of the application.

Mongolia has several traditional products that originate from its nomadic culture and its extremely continental climate. There are over 20 products which have been protected by geographical indications in Mongolia, for example dairy products, meat products, pure water and sea buckthorn. A few years ago, Champagne, the famous French drink received protected in Mongolia as a geographical indication. Accordingly, Champagne is protected against misrepresentation or infringement. This demonstrates that foreign geographical indications can be duly protected in Mongolia.

Closing Down A Mongolia Company



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In Mongolia company liquidation proceedings may be started by either a decision of the shareholders, or order of a court.

If the company is liquidated by decision of the shareholder’s, the Board of Directors (or in its absence, the executive body), will submit a draft Shareholders Resolution of Liquidation of the company. The shareholders resolution must include appointment of a liquidation commission and authorization of its commission, a liquidation timeline and if necessary, a procedure for the distribution of the company’s remaining property among shareholders after creditors` claims are satisfied. The shareholder resolution must be approved by an overwhelming majority of votes of shareholders.

The company/legal entity is obliged to notify the relevant state registration authority in writing within 3 working days and attach the original decision on liquidation.

Upon appointment of the liquidation commission, the company’s executive authority will be terminated and such authority is transferred to the liquidation commission. From then on, the liquidation commission has final authority over the company.

The liquidation commission is required to publicize the pending liquidation of the company via the media. If the company has any licenses, the commission will request that they are canceled and returned to the relevant authority.

The following actions must also be completed over the course of the liquidation. The State Registration Certificate of the company must be officially handed in. The company’s bank accounts closed, the company’s official seal must be handed over to the police. Finally a form must be obtained from the Customs Office to confirm no related taxation issues remain on behalf of the company.

The Tax authority will examine and investigate the company’s tax records, and an auditor will be required to handle the closing financial statements. Then an accountant will issue the closing balance of the company.

Once the Liquidation commission has submitted the required documents such as the Shareholders Resolution, completion report of the liquidation, report or reference by the tax inspector and reference by court decision enforcement agency on debt obligations to the State Registration Office (SRO), the SRO will remove the legal entity from the state register. The registration body will announce publicly the deletion of the company from the State Register. It will likely take 6 months to 1 year to complete the company liquidation process.

China’s Smart Oil Investment In Dornogovi



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The Mineral Resources Authority of Mongolia (MRAM) and Smart Oil Investment of China signed a production sharing agreement for an oil exploration site on Oct 14, 2016.

Smart Oil Investment of China was selected for the tender for oil exploration at Ergel 12. The company obtained an 8 year exploration license. During that time, Smart Oil Investment plans to conduct gravity and magnetic exploration, 2D and 3D seismic surveys, and drill eight exploration and evaluation holes for the sum of 35.5 million USD. The company will spend one million USD for land reclamation.

Signing an agreement with a company that has resolved investment issues and ready exploration plans in a time when the nation’s foreign investment and exploration have slowed down is vital in intensifying oil exploration in Mongolia. The production sharing agreement for oil exploration is a big step towards attracting more foreign investors to the nation’s oil sector.

In accordance with the production sharing agreement, Smart Oil Investment will give 40 percent of oil explored to the government of Mongolia. The MRAM noted that Mongolia’s stake may increase to 70 percent if the company’s oil exploration is higher than 15,000 barrels per day.

Basics of Corruption Prohibitions for Mongolian Officials



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Following on our previous discussion of Mongolia’s Anti-Corruption Law, today we will take a closer look at restrictions in the law on Mongolian officials. The law applies to:

  • Political, and administrative officials;
  • State or locally-owned legal entity’s management;The Chairperson of the National Council;
  • The General Director of public radio and television;
  • Management of NGOs performing work on behalf of the government;  and
  • Electoral candidates.

 These officials are prohibited from engaging in the following activities:

  • Exerting pressure on, intervening in or influencing civil servants in the course of duty;
  • Giving or offering to give rewards to others or to intermediaries;
  • Illegally granting or promising to grant preferences to any individual or to a legal entity;
  • Illegally limiting the lawful rights of others in the course of duty;
  • Misusing official budget or donated funds;
  • Requiring others to provide rewards in connection to the officials performance of duty;
  • Misusing or exceeding such official’s power or position;
  • Using official position to acquire property, or enjoying preferential or privileged  rights; and
  • Unjust enrichment.

Top government officials are required to to prepare and file an accurate and true declaration of income. The declarers must submit their declaration within 30 days of their election or appointment to office. An annual declaration is due on February 15 of each year during the period of public service.

Where an official is unable to “explain” assets or income in excess of 6 month’s salary, such earnings may be declared illegal unjust enrichment.

Establish A Mongolian Credit Union! Why Not? (You have to be Mongolian)



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As with many developing countries, liquidity is an issue in Mongolia, especially for individuals without significant financial assets to start with. Banks often won’t make loans to those with limited income. Is there an alternative?

Dating from 2011, the Mongolian Law on Credit Unions allows a Credit Union to be established with at least 20 individuals Mongolian citizens as participants. The Credit Union, formed voluntarily by its members is to be governed in a democratic manner with each member having voting rights. The Credit Union is owned collectively by its members. A Mongolian company or other entity may be a part of a Credit Union.

There are some requirements for Credit Union members, each must be resident in the same locality, and there must be some unifying or communal relationship between the members, either in terms of business, industry, or a religious, social or educational commonality.

The Credit Union will be established with a charter approved by a meeting of its members. A management board and Audit Board must be elected to manage and oversee the Credit Unions affairs. Of course when dealing with people’s finances, a license is required. After acquiring the license to operate the Credit Union is able to offer credit and savings services, but these are limited to the Credit Union’s members.

There is no minimum amount of capital the Credit Union must have to be established. The assets of the Credit Union shall consist of the contributions of the members. The Credit Union may charge fees upon membership. Profits may be distributed in accordance with the Credit Union’s Charter. A single member may not contribute more than 10 percent of the Credit Union’s total assets.

Introduction to Mongolia Anti-Corruption Law



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For Multinational Companies Anti-Corruption policies and legal compliance is a major priority.  The Anti-Corruption law of Mongolia was enacted by the Parliament on 6 July 2006 and has since been amended several times.

The Law regulates the activities of political and governmental officials, officers and managers of state or local government owned entities, electoral candidates, and officials of some other organizations with an operational relationship with the government.

Certain specific officials are prohibited from corrupt activities listed in the law, and are additionally required to officially declare assets and income.

In addition to receiving bribes, the law penalizes giving bribes, or acting as an intermediary.

The law also outlines and regulates the structure, role and operational principles of the Mongolia Anti-Corruption Agency.

We will follow up over the next several days with a series of blog posts with more detail on this important topic.

Enforcing a Foreign Arbitration Award in Mongolia



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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.

The World Bank Warns Mongolia on Debt



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The World Bank projects that the Mongolian budget deficit will reach over 18 percent of national GDP by the end of this year. If current trends continue government debt financial obligations will reach 90 percent of GDP.

 The report welcomed the swift measures announced by the new government to address the growing fiscal risks, and called for strong fiscal and monetary policy adjustment to address increasing fiscal and balance of payments risks.

 The World Bank noted that the central bank has provided significant liquidity to the government, and warns that continued financing of the government could worsen macroeconomic vulnerability.

 The World Bank also cautioned that falling mineral exports would add challenges the balance of payments in 2017, but indicated that with proper fiscal and macroeconomic management such problems could be overcome.