Time Running Out for Mongolians to Claim Free Land Entitlement



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According to Mongolian law, each Mongolian citizen is legally entitled to own a plot of land. Plot size allotted will be depending on the location, which a smaller plot available in Ulaanbaatar, and a larger plot (up to .05 hectares) available in more rural areas This ownership entitlement is a one-time opportunity granted by “The Law on Allocation of Land to Mongolian Citizens for Ownership”. But the opportunity is not forever and the period to apply for a free grant of land in accordance with the law expires on May 1st this year.

As the deadline is fast approaching, our Mongolian lawyers would like to offer some tips on the application process to Mongolian citizens who have not yet taken advantage of the land grant.

Firstly, citizens applying for the land grant must submit applications materials to the local governor or land development office. The Application requirements as set out by law require applicants to submit the following documentation and materials.

Citizens need to submit their application to the relevant local Governor or land department to acquire land for ownership for the purpose of family needs.

  • notarized copies of birth certificates of family members who have not reached 16 years of age
  • letter of confirmation by a Governor of khoroo or bag on the status of the family and number of its members;
  • if land is possessed according to Law on Land, then copies of the land certificate to possess land or notarized copy of the land possession contract;
  • an outlining map showing location and size of the land requested (if the land is to be owned on a shared basis among a group then an outlining map of every parcel belonging to each owner showing its size, location and boundary).

The local governor will review the application documentation and resolve the application within a period of 3 months from receiving the application. Usually the land is granted unless there are irregularities in the documentation. The land grant issued by the governor will indicate the plot’s location, boundaries, purpose, full name of the new owner, the owner’s identification number and birth certificate number for those who have not yet reached 16 years of age.

Based on the decision of Governor, the local Immovable Property Registration Office will register the land ownership status and will issue a registration certificate for immovable property reflecting ownership.

Expat Visa and Work Permits in Mongolia: Part III



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We continue our guide to Mongolia visa and work permits. In this article we shall cover work permit visas (HG visa). (Don’t forget to also check out Part I and Part II)

Work permit visas (HG visa) are issued to foreign citizens, who work in Mongolia under labor contract. HG visas are valid for up to 1 year, depending on employer’s request. Holders of these visas are required to obtain residence card from Immigration Agency and work permit from Labor and Welfare General Agency.

There are several key considerations that employer should be aware of. A key influence is that a foreign employee quota is set by the Government of Mongolia every year for local and foreign companies in Mongolia. This usually ranges from 5% to 80% depending on the sector in question. Generally, however, the default quota for companies is 5%. Another key condition is that employer must pay a workplace fee. Employer must pay on monthly basis a workplace fee, equal to twice the minimum wage set by the Government, for every foreign employee they hired.

So, if you, an employer, have decided to hire a foreign employee then as usual you must first provide a visa invitation letter for your foreign employee. Firstly, employer must obtain a work permit letter from Labor and Welfare General Agency at least one month prior to employee’s arrival to Mongolia. Thereafter a request must be submitted along with required packet of documents (including a work permit letter) to the Immigration Agency. Once Immigration Agency permits to issue a visa, then a visa invitation letter must be forwarded to the embassy or consulate in foreign employee’s country of residence, where he/she applies for HG visa. HG visas are valid for 183 days upon their issuance until the entry into Mongolia.

Upon arrival of foreign employee to Mongolia, employer must register him/her with the Immigration Agency within 7 days, obtain a residence card within 21 days and obtain work permit within 10 business days.

If necessary employer may apply for a single exit-entry, two-time exit-entry or multiple exit-entry visas (valid for either six months or one year) depending on employee’s or employer’s needs. HG visas may be renewed.

Also, there are other visa options for those who seek to engage in other types of activities, such as employment in NGOs, religious organizations and other. Therefore, companies inviting foreigners should carefully choose what visa suit their purpose before applying for visa.

Expat Visa and Work Permits in Mongolia: Part II



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Continuing our guide to Mongolia visa and work permits, in this article we shall cover foreign investor visas (T visa).

Foreign investor visas (T visa) are issued to individuals, who are foreign investors or chief executive officers of a foreign invested company, or its branch or representative offices. These are valid for either 6 months or 1 year. Unlike multiple-entry B visas, holders of T visas are required to obtain residence permit (residence card) and therefore may stay the full period of their visa.

Like B visas, company inviting a foreign investor (or chief executive officer) must first provide a visa invitation letter. A request must be submitted along with required packet of documents (including a foreign investor card previously obtained from General authority for intellectual property and state registration) to the Immigration Agency. Once Immigration Agency permits to issue a visa, then a visa invitation letter must be forwarded to the embassy or consulate in foreign investor’s country of residence, where he/she applies for T visa. T visas are valid for 183 days upon their issuance until the entry into Mongolia.

Inviting company must register the investor with the Immigration Agency within 7 days and obtain a residence card for the investor within 21 days upon their entry into Mongolia.

In case of need, inviting company may apply for a single exit-entry, two-time exit-entry and multiple exit-entry visas (valid for either 6 months or 1 year) during investor’s stay in Mongolia. T visas may be renewed.

Expat Visa and Work Permits in Mongolia



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The Mongolian Government is known for generally enforcing a fairly flexible investment policy, with foreign investment well received in all sectors of the economy. So Many entrepreneurs seek partnership with foreign investors. Also, as there remains a notable shortage of skilled labor in Mongolia, foreign workers are therefore encouraged to fill these gaps. For entrepreneurs and companies considering inviting foreign investors/partners or employees to Mongolia, we will provide you a brief guide to Mongolia visa and work permits in several parts.

In this case there are three visa options available: business visa (B visa), foreign investor visa (T visa) and work permit visa (HG visa).

There are single-entry and multiple-entry B visas. Single-entry B visas are valid for a period of up to 90 days, and multiple-entry B visas are valid for either 6 months or 1 year. However, inviting company should take note that with multiple-entry B visas one time stay of a visitor should not exceed 30 days upon entry into Mongolia. In other words, visitor may enter Mongolia multiple times within the period of issued visa, but every stay may not exceed 30 days. Whereas visitors with single-entry B visa may enter Mongolia one time only and stay for a period of up to 90 days (depending on issued visa). B visa holders cannot legally work while in Mongolia – they may attend business meetings, conferences, exhibitions and other similar events. B visas may be sponsored only by a company duly registered in Mongolia. Therefore, B visas are generally intended for potential or current business partners and investors visiting Mongolia.

Company inviting a foreign partner or investor must first provide a visa invitation letter to such partner or investor. A request must be submitted along with required packet of documents to the Immigration Agency. Once Immigration Agency permits to issue a visa, then a visa invitation letter must be forwarded to the embassy or consulate in foreign partner’s or investor’s country of residence, where he/she applies for B visa. Single-entry B visas are valid for 90 days upon its issuance until the entry into Mongolia, and multiple-entry B visas are valid for 183 days.

Inviting company is responsible for registering the visitor with the Immigration Agency within 7 days upon their entry into Mongolia.

Mongolia Set to revise Labor Law



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A recent meeting of the Cabinet reviewed and discussed a proposed draft of amendments to the Labor Law. It was decided by the Cabinet that the proposed amendments will be submitted to Parliament to be formalized in law, along with the addition of some proposals from Cabinet members.

The Labor Law was ratified in 1999 and has been amended several times since. The law governs employment relationships within Mongolia. The Law and sets standards as to health and safety requirements, minimum wage levels, maximum hours of work, collective employment agreements and bargaining and resolution of employment disputes. The law prohibits employment discrimination on the grounds of social or property status, race, color or nationality, sex, religion or political views as well as unwritten contracts of employment.

The latest changes introduced via the Amendment Law on 21 April, 2017 provide detailed regulations regarding previously unclear provisions of the Labour Law, such as probationary periods, internship/apprenticeship periods, and part-time employment. The amendment also increased the level of fines for violations of the Labour Law by employers, in order to ensure the protection of employees’ basic rights.

The working group which drafted the current proposed amendments believe that a number of the law’s articles are outdated and don’t meet the needs of the modern labor environment. The newly proposed amendments seek to cover relations between employers and employees, clarifying rights and obligations. The amendments also include articles that would place restrictions on the employment of minors, workplace discrimination, establishing employment agreements without time constraints for permanent employment, part-time employment regulations, remote working regulations, basing salaries on skills and abilities, annual vacation requirements, and new regulations for vacation days for mining sector employees who work far from home for extended periods.

Lehmanlaw Mongolia LLP will be update further progress of the amendments to the Law on Labour in timely.

Mongolia Introduces Investment Protection Council



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We would like to introduce the Investment Protection Council (IPC), one of the effective way to protect rights and interest of the investors and to resolve the disputes involving the foreign investors in Mongolia.

The Investor Protection Council needs to be established in concern with the facilitation of investment related dispute settlement and of favorable environment for the sustainable operation of investors. The Investor Protection Council is established based on an ordinance of the Prime Minister of Mongolia in Dec 2016. That council is composed of Chairman, 16 members, and Secretary. The main formation of the Council’s operation structure should be Council’s session. The decision will be made by majority of the Council members during the session.

The IPC’s Main Roles:

  • Preview and make preliminary prognosis on foreign investment related issues that will be discussed by Cabinet Session
  • Improve investment legal framework, remove duplications and breaches of laws, introduce investment related proposal that made by relevant organizations to Cabinet.
  • Make proposals on implementation of laws and resolutions related to investment, and introduce it to Cabinet. The council should be supernumerary and the Council’s operation should be permanent.

In addition above, one of the main roles of IPC is to protect investors’ right, and solve their grievance (except the cases examined under court or arbitrage). So far 83 compliant and claims submitted by investors to this Council’s Secretariat. As we have been classifying these complaint and claims, there are 40% of them was related to mining, 20% for road, transportation, construction, manufacturing, 10% for information, communication, space technology, 10% for bank, finance, tax, 5% for land, land proprietorship, utilization, 5% for national development, planning, and remaining percentage was claims related to fair competition, as well as supervision, pressure and burden, registration, and authorization activities of the law enforcement agencies.

For example, in relation to the dispute related to the termination of the license of Mobicom Corporation with 100% – a business entity 100% owned by Japan, by the Communications Regulatory Authority, it was further discussed at the Investor Protection Council Meeting and it supported to resolve the investor’s claim. In doing so, KDDI, the Japanese investor, will make additional investments to expand Mobicom’s operations, which indeed has not been resolved over the past 10 years.

LehmanLaw Mongolia LLP suggests our clients this amicable mechanism to resolve the disputes involving them in Mongolia.

Using Customs Seizure to Stop Import of Infringing Products to Mongolia



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Our firm’s Mongolian intellectual property lawyers have seen a lot of inquires in recent months from clients seeking assistance regarding counterfeit products which were being sold in Mongolia.

There are several mechanisms our Mongolian lawyers recommend to deal with counterfeit products in Mongolia.  One of the most important of these is utilizing Customs to restrict entry of counterfeit products or goods infringing registered trademarks from entering Mongolia.

This works by seizing infringing goods at Customs upon attempted entry into Mongolia. Before this may be done, the authentic goods bearing a validly registered Mongolian Trademark must be registered with Customs.

This registration process is relatively easy, requiring documentation of the registered trademarks, basic information regarding the trademark owner, a description of the products, and a list of items requested to be reviewed and protected by Customs. Our Mongolian lawyers will walk you through the process. The review procedure will talk approximately 30 days from the date of submission of the application, after which, the registered information will be forwarded to Customs entry points around Mongolia.

A written request for seizure of infringing goods, must be submitted along with a small cash deposit or bank guarantee. The customs office prefers having the deposit to avoid incurring any damages to importer before starting examination of infringing goods based on the original goods with customs registration.

Our Mongolian lawyers and clients have found such Customs seizures to be effective at blocking incoming shipments of infringing products. However it is important to note the applicant seeking to block the shipments must have a valid, registered Mongolian trademark in order to support such action by Customs.

Franchising Proves Effective for Many Foreign Brands in Mongolia



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There are numerous tools a business may use to grow and expand, not just locally but also globally. Franchising is one of the many ways through which brand owners can rapidly grow their businesses and expand profits while delegating much of the cost and risk to a third party.

Franchising is commonly used in a wide variety of service oriented businesses, such as restaurants, hotels, health care, real estate and others, and is also used production and distribution of products. In Mongolia for example, over the last few years many global brands entered Mongolia via a franchise arraignment. Major brands to do so include Coca-Cola, Pepsi, Ramada Hotels, Shangri-La Hotels, Cosmopolitan, Re/max real estate, KFC, Burger King, Coffee Bean and Tea Leaf, Pizza Hut, Emart to name only a few. This strategy is chosen very deliberately due to the low risk of bankruptcy, and a higher chance of success for business to enter a franchising agreement. Research shows that an average consumer in the world spends one of every three dollars on product or service provided via a franchise model, demonstrating the economic significance of franchising.

In a franchise arrangement, the franchising party or Franchisor gives the Franchisee permission to not only use the Franchisor’s intellectual properties (trademarks, brand name, know how, goodwill, copyright, etc.) but also the Franchisor’s business operations system. In addition, Franchisees often benefit from the Franchisor’s distribution systems and marketing campaigns to sell the Franchisee’s products or services. In return, the Franchisee pays the Franchisor consistent fees and royalties, providing a steady stream of income for the Franchisor.

The franchise model provides several benefits for both the Franchisor and the Franchisee. Along with other benefits franchise agreements allow Franchisor companies to expand much more quickly than they could otherwise. A lack of funds and workers can cause a company to grow slowly. Through Franchising, a company invests very little capital or labor because the Franchisee supplies both. The Franchisor company experiences rapid growth with little financial risk.

The Franchisee also has numerous advantages that come from entering a franchising agreement. There is a low risk for the Franchisee due to the tried and tested formula. Franchisee gets the benefit of owning a proven business formula that has been tested and shown to work well in other locations. In addition, the Franchisee gets training and head office support from the Franchisor; this may be essential if the Franchisee is new to running a business and has no experience or business knowledge. And in a broader sense, global franchising is beneficial for the local government and economy as well, because jobs are created, and ownership remains local.

There are three major types of franchises – business format, product, and manufacturing – and each operates in a different way.

In business format franchises (which are the most common type), a company expands by supplying independent business owners with an established business, including use of its name and trademark. The Franchisor company generally assists the independent owners considerably in launching and running their businesses. In return, the business owners pay fees and royalties. In most cases, the Franchisee also buys supplies from the Franchisor. Fast food restaurants are good examples of this type of franchise. Prominent examples include KFC, Burger King, and Pizza Hut.

With product franchises, manufactures control how retail stores distribute their products. Through this kind of agreement, manufacturers allow retailers to distribute their products and to use the manufacturer’s name and trademarks. To obtain these rights, store owners must pay fees or buy a minimum amount of product for sale. In Mongolia there are several clothing retail stores that utilize this type of franchise, for example, United colors of Benetton stores, and Mango stores.

Through manufacturing franchises, a Franchisor grants a manufacturer the right to produce and sell products using its name and trademark. This type of franchise is common among food and beverage companies. For example, soft drink bottlers often obtain Franchise rights from soft drink companies to produce, bottle, and distribute soft drinks. For example, MCS Coca-Cola LLC obtained Franchise rights to produce, bottle and distribute soft drinks of the Coca-Cola company in Mongolia.

There are four basic types of franchise agreements: single-unit, multi-unit, area development and master franchising agreements.

A single-unit franchise agreement is the most common and is simply where a Franchisor grants a Franchisee rights to open and operate one single Franchise unit. In Mongolia, explicit examples are Caffé Bene, a coffeehouse chain, or Re/max, a real estate agency. All single units of these chains use the same trademark and same utilize the business operations system of the Franchisor. However, every single unit in Mongolia is owned by a different local company.

A multi-unit franchise agreement is where a Franchisor grants a Franchisee rights to open more than one franchise unit. For example, Tavan Bogd Foods LLC has multi-unit franchise rights to operate KFC restaurants in Mongolia, and Max Center LLC has multi-unit franchise rights to operate Burger King restaurants.

An area development agreement allows a Franchisee the right to open multiple units over an agreed amount of time within a specified geographic location and/or to own rights to their specific territory and earn money on each franchise sold in their territory through sharing of the franchise fee and ongoing royalties.

A master franchise agreement, also referred to as sub-franchising, gives a Franchisee the same rights as an area development agreement but also gives that Franchisee rights to establish franchises arrangements with other individuals or entities within the specified territory. A Master Franchisee assumes many of the tasks and obligations of the Franchisor such as training and support and receives a portion of the franchise fee and royalties. While technically there are significant differences there are times that master franchising and area development are used interchangeably.

The regulation of franchising varies country to country. While some countries have adopted separate franchising laws, many countries do not have a separate law that regulates franchising in its entirety. In most countries franchising is regulated in their commercial laws, commercial codes or civil codes, and in some countries it falls under regulation of several laws. In Mongolia franchise arrangements are regulated via Articles 333 – 338 of the Civil Code. The Civil Code provides the definition of a Franchise Agreement, and outlines the legal obligations and liabilities of the parties, terms of agreement, and non-competition terms. Intellectual property related aspects of a franchise agreement shall be regulated by relevant intellectual property laws.

It seems clear that franchising model in Mongolia is poised to continue to grow, as several global brands have announced their opening in Mongolia in the near future. Of course, prior to any franchise arrangement in Mongolia, a foreign business should seek out qualified advice from their Mongolian lawyer.

Can Foreign Companies Acquire Land in Mongolia?



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In this article we shall discuss what land rights are there for foreign citizens, foreign companies /foreign invested companies/ in Mongolia and is it prudent to invest.

Pursuant to laws there are three types of land rights in Mongolia: land ownership, land possession and land use right. All land, other than land granted for ownership to citizens of Mongolia, is owned and managed by the state. Thus, obviously aside from the state only citizens of Mongolia are entitled to land ownership. Therefore, restrictions on private foreign land ownership in Mongolia are absolute, meaning foreign citizens and companies are prohibited from outright land ownership. Domestic companies and Mongolian citizens may “possess” and “use” the land, where foreign companies and citizens may only “use” the land and only for purposes established by legislation.

Foreign citizens, who permanently reside (for more than 183 days) in Mongolia, may acquire land use right through open auctions for residential needs only. Foreign citizens may be given land for use up to 0.05 hectares for a residential lot, and up to 0.1 hectares – for gardening activities (such as cultivating vegetables, fruits and berries). Land may be given for use for up to 5 years through a contract and be extended by up to 5 years at a time.

For foreign companies or Mongolian companies with foreign shareholding the acquiring of land use rights is much more complicated process. Foreign companies may acquire land use rights through an open auction process similar to foreign individuals. However only the Parliament of Mongolia is entitled to make a decision on giving land for use to foreign companies (including or Mongolian companies with foreign shareholding); whereas, a decision on giving land for use to foreign citizens is made by governors of corresponding level. Land may be given for use to foreign companies under lease or concession contracts for up to 60 years and extended once for up to 40 years upon its initial term. The Government determines land borderlines and land use regulations.

Aside from restrictions on acquiring land use rights, there are a couple additional restrictions for foreign citizen and companies’ land rights. Foreign citizens and companies are prohibited to freely transfer, or pledge acquired land use rights. Such transfers and pledges may be undertaken only between Mongolian citizens, companies and organizations. Mongolian citizens and companies, who gave the land for utilization to foreign citizens and companies without proper prior approval from authorized state body, are liable to compensation of damages and termination of their land use rights. In other words, in order to acquire land use right from Mongolian citizens and companies, once again one must obtain approval from abovementioned authorized state bodies. Thus, it makes acquisition of land use right from domestic companies and citizens also complicated.

In conclusion, while the process for a foreign invested company is difficult, it is doable. For those foreign companies for which acquiring such land use rights is important, it will be important to obtain the advice and assistance of an independent Mongolian lawyer.

Changes to Mongolian Central Bank Guarantee Independent Operation



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Finishing our series (part one here, part two here) reporting on changes to the operations of the Mongolian Central Bank we present here the new provisions which will work to solidify and encode in the law the bank’s operations as an independent entity, not directly under the control of the executive branch of the government.

Independence of the Central bank from Government.

The amendments explicitly provide for the independence of the Central bank from the government. It is clear that the government should not provide any direction to the Central Bank regarding the agreements and transactions the bank enters into or in any other matter unless explicitly provided for in the law. The Central Bank of Mongolia should not directly or indirectly grant credit to the Government of Mongolia and may only purchase long and short-term securities of the Government from primary or secondary market except where explicitly provided for in the law.

Granting Credit to the Government

Under the new law, the Central bank of Mongolia may grant temporary credit or buy a short- term Government Bond in order to meet seasonal liquidity needs of the government, subject to repayment before the end of the financial year. If the Central Bank of Mongolia bought bond/securities issued by the Government, it will be added to the credit balance of the Government. In the frame of open market operation, the long -term securities of Government purchased by the Central Bank of Mongolia contingent upon repayment in short terms will not be included in the total amount of the balance of temporary credits.

Supervision of Bank Activities

The Central Bank of Mongolia will have authority to establish procedures, regulations and instructions, and make decisions, and carry out supervision and enforcement activities relating to the licensing to establish banks and operating activities of banks. This includes matters relating to the maintenance of adequate paid in capital and liquidity of bank assets, improving the security of the banking system, and regulation of banking activities for the purpose of protecting the interests of depositors and customers.

New amendment also updated the range of Central Bank’s activities.

In order to implement its objectives, the Central Bank of Mongolia will conduct the following activities:

  • issuing and regulating currencies into transaction;
  • formulation and implementation of monetary policy;
  • acting as the Government’s fiscal intermediary;
  • supervision of banking and entities specified in the law activities;
  • organizing, reconciling and supervising of local/national payments and settlements system;
  • holding and management of the State’s reserves of foreign currencies;
  • protecting right and interest of customer, depositor;
  • implement balanced/proper macro policy.