Category Archives: Uncategorized

Mongolia Movable Property Pledges: Online Registration is Perfection



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As we posted previously, the Mongolian Law on Pledge of Movable and Intangible Property was adopted on July 2, 2015. This new legislation was supposed to come into force on September 1, 2016. However, effective date of the law had been postponed until March 1, 2017 due to lack of preparation of the required online database for registration of pledges.

In order to fully implement this new law, the Ministry of Justice and Internal Affairs, the International Finance Corporation, the Intellectual Property Rights and State Registration Office, the Bank of Mongolia, and other organizations have cooperated to establish an online database for the registry of pledges on movable property and information regarding collateral.

According to the law, collateral may be all kinds of stocks, securities, rights to demand, industrial designs, trademarks, all creative works of sciences, arts and other movable properties or intangible assets and present or future movable properties of individuals that are usable and transferable to other’s ownership of individuals that is valid and transferable to other’s ownership. Under the law, a Pledge will be perfected upon registration of a notice of the pledge with online registry, whether collateral is not transferred to the pledgee’s possession or a pledge is created by operation of law.

As for movable and intangible assets which have been pledged prior to the new law coming into effect, these collateral need to be registered with the new online database within six months after the entry into force of the law.

The new online database shows how Mongolia is utilizing new technologies to make its legal and financial systems more efficient, and will benefit Mongolian citizens and foreign investors alike. The implementation of this law provides a new lifeline for the economy and will create new opportunities in the business sector. Furthermore, information in the database will be available to the public, and registered information will become official records of assets and collateral.

Mongolia’s New Arbitration Law Offers More Effective Enforcement



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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

  1. The request for the temporary action should be clear and enforceable;
  2. if no actions are taken, it will be impossible to compensate, in full, the damage enforceable under the principle award;
  3. 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;
  4. 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.

Mongolia Economy to Benefit from Key Stabilization Measure



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The good news is that the Government of Mongolia has agreed with the International Monetary Fund on the terms of financing of USD 440,000. The total current external financing for Mongolia is USD 5.5 billion. Negotiations on the current financing agreement have been ongoing since August of last year.

The agreement is preliminary, and has to be approved by the IMF’s Executive Board; however, in most cases the Executive Board will not overturn a preliminary agreement. The agreement will also depend on the Government of Mongolia meeting a series of agreed actions, which include the ceasing of certain off the record activities of Mongol Bank, and performing a diagnostic on the Mongolia banking system.

According to experts at the IMF, Mongolia’s loose budgeting in past years is a major cause of the country’s current economic troubles and relatively high debt. As a result, the IMF is requiring the national budget to be tightened. The agreement allows for the continuance of certain social spending for low income populations.

The government will be required to implement several fiscal reform actions. A Council will be established to provide independent budget forecasts and review expenditures. The Ministry of Finance will have to approve the budgets for any proposals.

The agreement with the IMF if implemented is expected to strengthen Mongolia’s prospects for sustainable growth going forward. Finance Minister B. Choijilsuren compared the reform package to a medicine that is “Bitter,” but helps to “heal.” LehmanLaw Mongolia is excited to see the agreement as it demonstrates both the belief the IMF has in the Mongolian economy as well as the determination of the government of Mongolia to accept difficult reforms in favor of a more sustainable path toward economic growth. With this agreement reached, there has never been a better time to come to Mongolia and see what unique business opportunities may be had in this unique developing country.

Proposed New Mongolia Laws Promise Reform in 4 Key Areas



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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



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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.

Will Mongolia Continue Economic Growth?



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Mongolia may be poised for a new phase of economic growth according to Nikkei Asian Review. After an initial mining boom in 2011 and 2012, with growth reaching up to 17% of GDP in 2011, The Mongolian economy slowed. Low commodities prices led to reduced economic growth.

That may be set to change. According to the article, commodities prices increased toward the end of 2016, setting Mongolia up for a new phase of growth; if the right policies can be found to cultivate growing industries.

In addition to the Mining industry, the article gives examples of two Mongolian entrepreneurs who are producing and marketing new diabetes testing devices. The article also points to initiatives to increase renewable energy production capacity in Mongolia.

In the past, Mongolia’s windfall from mining resulted in poor planning and waste. Recent reforms by the new government have encouraged the International Monetary Fund to step in with new funding to ease Mongolia’s foreign debt burden.

If the trend of smart government continues, and at LehmanLaw Mongolia we think it will, the country is well placed for continued future growth. The key will be to diversify the economy away from reliance on the mining sector and to promote entrepreneurship and small business. The recent tax break on small business is a step in the right direction.

What’s Happening In Mongolia’s Meat and Dairy Industry?



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The Mongolia Ministry of Food, Agriculture and Light Industry hosted a training and discussion event on January 09 2017 with presenters offering insights into a new powdered milk processing plant. The new plant comes right on time as Mongolia’s Meat and Milk Campaign started January 01, 2017 in hopes of increasing access to high quality meat and dairy products for all Mongolians.

Prime Minister J. Erdenebat met with diary entrepreneurs, local farmers, and researchers to discuss the meat and dairy industry in Mongolia.

The new facility will have the capacity to produce 600 liters worth of powdered milk in a single 8 hour day. The Prime Minister suggested that such plants should increase, hoping to stabilize prices for dairy products by establishing state of the art facilities around Mongolia. This would help to provide job security for the nation’s diary farmers who will be sure to have easy access to serve local demand.

With the needs of Mongolia’s population met, an increase in dairy farming and factories would power important exports of key dairy products. Such exports may be especially lucrative with China just south of the border with an increasingly wealthy population craving high quality natural and organic meat and diary products.

LehmanLaw Mongolia is knowledgeable about the Mongolia diary industry, and the legal issues encountered when starting up a new agricultural operation in Mongolia. Give us a call for an initial consultation to see how we can help guide you through Mongolian laws to take advantage of the unique opportunities of the Mongolian dairy boom.

Mongolia Enacts New Law on Hygiene Affecting Employers



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The Parliament of Mongolia nullified the Law on Sanitation adopted on May 07, 1998 and passed the Law on Hygiene on Feb 04, 2016. The laws warrant the Constitutional right of a citizen to live in healthy and safe environment.

According to the new law, organizations and employers shall have the following duties:

  • to demand employees and customers to comply with hygiene legislations;
  • to impose a penalty on employee who is in breach of hygiene legislations;
  • to comply with the order issued by a competent official or an authority with respect to standards and legislation on hygiene and to take all necessary actions to eliminate the offences and to respond;
  • to comply with the norms and requirements of labor safety and hygiene during all stages of activities;
  • to keep the public road and square free of garbage, puddle, snow or ice, to broaden green area and to keep stairs, walls and fences intact;
  • to prevent infectious and non-infectious diseases, occupational disease, industrial accident and injuries;
  • to include the employees to medical exam and screening;
  • to employ a personnel who is in charge of labor safety and hygiene in accordance with rules adapted by State Central administrative authority in charge of Health and Labor related matters if the organization and legal entity in production and service business employs 50 people or more. If the organization in manufacturing and service business employs 50 people or less, it may employ the personnel on the basis of  a contract;
  • to approve annual expenses to spend on hygiene safety;

Also the organization and the employer is required to cooperate with the relevant professional NGOs in organizing hygiene trainings and shall support by providing accommodation and other expenses related to the training.

According to the law, following activities shall be prohibited:

  • to take any actions and activities that has adverse impacts to human health and environment;
  • to sell open food and operate production and service on public streets, squares, points or places where such activities were prohibited by the competent authorities;

If the organizations or persons do not comply with the law authorities shall impose the following administrative sanctions i.e. fine if the violation does not constitute a criminal offence.

Prime Minister Discusses Future of Mongolian Cooperation With Eurasian Economic Commission



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On February 2-3, Mongolian Prime Minister J. Erdenebat met with a representative of the Eurasian Economic Commission (EEC) for talks promoting economic cooperation between the EEC and Mongolia.

In the meeting, Mongolia indicated that it hoped to establish a Free Trade Agreement with the EEC. The EEC representative supported the PM’s proposal, suggesting a formal decision would be seen from the EEC relatively soon. As trade between Mongolia and the EEC has been stable but stagnant for several years, the EEC hopes to organize a business forum for entrepreneurs from EEC member states, and Mongolian organizations.

The Prime Minister was quick to agree and assured EEC companies there are great business opportunities in Mongolia, and made clear that the Mongolian Government is currently making efforts to improve its agricultural sector, including exports to EEC states.

The sides agreed to work to strengthen collaboration in establishing regulations and raising standards in veterinary, sanitation, and quarantine regulations and practices. There was also mutual agreement to promote joint training, and business seminars in Mongolia.

The meeting ended with an agreement on protocol for a second meeting to be held this year In November, and developing an action plan for joint working groups, which will include provisions to facilitate cooperation in transportation and infrastructure.

LehmanLaw Mongolia is pleased to learn of the government’s continued focus on developing the Mongolian economy through increasing trade and promoting the agricultural sector, as well as development of Mongolian infrastructure.

NOW is the Time to Start-Up in Mongolia!



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As we posted previously, the general corporate income tax rate for an economic entity incorporated in Mongolia is ten percent (10%) for the first 0-3.0 billion; and a 300 million MNT base tax, plus twenty-five percent (25%) tax on all income exceeding 3.0 billion MNT.

However, Parliament recently approved amendments to the Law on Corporate Income Tax. The amendment aimed at supporting “small and medium-sized enterprises” (SMEs) in particular sections by offering a 90% tax reduction for a period of several years.

The 90% tax reduction will be available to SMEs with less than 1.5 billion MNT in sales operating in the following four sectors:

  • the food production industry;
  • the clothing and textiles industry;
  • the production of construction materials; and
  • the agricultural and livestock industries and its supplementary operations.

The SMEs will be eligible to pay a 1% tax on business conducted from January 1, 2017 to January 1, 2021 (That’s 4 years at a 1% corporate income tax rate!). The government believes that this will reduce the tax burden for SMEs, create a favorable environment for increasing employment, result in increased investment, encourage entrepreneurship, and increase the number of SMEs.

Now is the time to start your new operation in Mongolia!