Cryptocurrency Exchange and Trading in Mongolia



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As we work with many foreign clients engaged in range of international businesses, one of the comment questions asked by our clients lately is whether cryptocurrency is legal in Mongolia and how it is regulated.

In Mongolia, cryptocurrency trading and exchanges are legal, and the country implemented the Law of Mongolia on Virtual Property Service Providers (VPSP law) which came into force on December 17, 2021.

Along with the rapidly evolving technological processing in the world, the market of crypto is expanding in Mongolia. At the same time, there was a need to create a legal framework for the sector of crypto trading and exchanging in order to prevent from public risks as well as to have required records, suspicious or terrorist-related transactions reports.

Considering these issues, Mongolia has taken an adoptive approach to cryptocurrency regulation by applying legislation mentioned above. The main objective of the VPSP law is to register cryptocurrency exchanging and trading providers, monitor their activities, and determine their legal rights and obligations.

The VPSP law brought cryptocurrency under the regulatory authority of the Financial Regulatory Commission from December 2021, and imposed a requirement from cryptocurrency service provider companies to register and obtain a special license. Moreover, cryptocurrency exchange and trading service provider’s income is taxable and exempt from value added tax.

Can You Obtain a Damages Award for Emotional Distress in Mongolia?



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In order to guarantee the fundamental rights of the citizens, regardless of the material damage, the rights to claim emotional distress damage should be open. In Mongolia, the right to claim emotional distress damages is limited by the Civil Code of Mongolia. In judicial practice, only emotional damages related to defamation of other people’s distinction, reputation and business reputation are awarded. Other than that, emotional damage that may occur is interpreted as not specifically regulated on compensation for emotional damage based on the Article 230.2 of the Civil Code of Mongolia.

Jurisprudence shows that certain conditions must be met in order to award emotional damage compensation. It includes:

  • Emotional damage should be related to the victim of the case
  • The damage cannot be repaired or restored
  • Intentional or reckless guilt
  • The act must have been manifested in an action that is discussing, repulsive and noticeable to anyone
  • Victims may have experienced emotional damage
  • The right to demand compensation for emotional damage must be specified in the civil law and other laws.

Studying the decisions of the courts of Mongolia, emotional damage award will be depending on the severity of the case. Although the court considered that emotional damage has not been proven, in cases of obviously serious, repulsive and despicable acts, there are cases where claims are satisfied including the amount and evaluation of emotional damage in the physical damage of the victim. However, the scope of the right to claim emotional damages is still limited by Article 230.2 and 511 of the Civil Code.

The Law on Criminal Procedure and the Law on Family provide for the possibility of demanding compensation for emotional damage, but the court refuses to issue compensation for emotional damage on the grounds that “it is not specifically provided for in the Civil Code”.

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



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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.

A Mongolian perspective on Public-Private Partnerships Development



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Since the Law of Mongolia on Concessions was adopted in 2010, it has established a legal framework for public-private partnership by granting concessions to private investors to use existing infrastructure facilities owned by the state, and to construct new infrastructure facilities for the purpose of providing services.

However, the current Concessions law is inadequate to meet the needs of fundamental principles of public-private partnership such as planning, granting and effective risk and debt management.

The implementation of the Concessions law raised the following issues:

  • Illegal selection of participants for granting a concession
  • Concluding an invalid direct agreement
  • Ineffective concession which creates significant burden of the state budget
  • Absence of specific regulations and policies of concession procedure guidelines.
  • Lack of related administrative authorities’ involvement on selecting, contracting, implementing, or overseeing concession
  • Risk management and risk allocation methodologies

Therefore, the government submitted the first draft of Law on Public-Private Partnership on April 6, 2022, and requested to repeal the Law of Mongolia on Concession. The purpose of the law is to support private sector’s participation and investment in the implementation of public-private partnership in the field of public infrastructure and public services projects, and to create favorable legal environment for long-term efficient cooperation.

Judicial Recusal



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Articles 91-93 of the Civil Procedure Law of Mongolia regulate grounds for recusal of a judge, submission of a request for recusal, resolution thereof, and consequences of recusal by a judge. In this blog, we will mention some practical difficulties and issued encountered in judicial recusal.

Firstly, in general a judge is obligated to reach a decision in a matter before it.

When the parties to the case make a motion for recusal of the judge, they usually base the request on issues or concerns which raise doubt as to whether the case can be resolved fairly. In this ground, one of the participants in the case must have provided information with certain facts about the judge being influenced by the other party.

However, according to the court practice, the requests made on this basis are related to the violation of the rights of the participants in the case, the restriction of their rights, and the violation of the case procedure.

In the course of the proceedings, the judge himself/herself manages the proceedings, granting or refusing to grant requests made by the parties to the case on the basis of the law.

There are also cases where withdrawing from a judge on the grounds that refusing to accept the request is considered to be interfering to the process of case review by judge.

On the other hand, in the course of the proceedings, there are cases where the judge gives too much priority to one of the parties involved in the case and makes a decision that is beneficial to that party.

It is very difficult to prove the above-mentioned grounds for recusal of a judge, and in practice, in most cases, even if a request for recusal of a judge is made, the request will be always denied or not accepted. 

Another reason for refusing a judge is that lawyers use the tactics of delaying the court hearing and delaying the court processing.

Delays in proceedings and delays in court hearings depend on many factors, but one of them is the delay related to the process of resolving a request to recuse a judge, a panel of judges, or all judges of a given court. 445 cases or 7.8% of cases were delayed due to requests for recusal by judges in civil courts of first instance.

Freezing Assets in Mongolian Litigation



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A frequent issue in litigation is the risk that the defendant may liquidate or transfer assets during the court proceeding, so that when the court award is finally granted the defendant has no assets on paper.

In order to prevent this situation, Mongolian courts allow for a process of freezing a defendant’s assets or bank account at the start of the court proceeding. Such an asset freeze will prohibit the defendant from transferring assets and cash to other parties in an attempt to avoid the negative consequences of a judgment against them. To initiate such an asset freeze, Mongolian courts require payment of a deposit, or bond by the Plaintiff into an account controlled by the court, in an amount equal to the claim.

An asset freeze of this kind requires a formal petition to the court. In most cases the court will grant a plaintiffs request for an asset freeze. There is no legal timeline for the freeze, but in most cases it will be implemented quickly to avoid any transfers by the defendant to evade the freeze. However, there are certain situations in which actual implementation of the freeze is delayed due to administrative issues, or delay by the Court Enforcement Bureau.

There is also the issue of appeal of the court’s decision regarding the freeze of assets.

The defendant has the right to appeal the decision of the court within 10 days, and the court must decides on the appeal within 14 days. The law does not regulate whether or not the Judge’s order on freeze of assets will be suspended until the complaint is resolved, or will be effective during the appeal process. This situation sometimes creates confusion and differences in actual implementation. Of course, if the actual impact of the asset freeze is not enforced until 24 days after the order, the defendant will have a lot f time to potentially transfer or hide the targeted assets.

Although, there is no specific regulation on the liability for failure to comply with the Judge’s order on measures to secure implementation of court decision, the law does allow for penalty in the form of a fine, and in some cases potential imprisonment.

How to Extend a Minerals Exploration License



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Our team of Mongolian lawyers recently received an inquiry from a long-time client regarding the process for renewal of a minerals exploration license. Exploration licenses are issued by the Mineral Resources and Petroleum Authority for a 3 year period with holders permitted up to 3 extensions of the term of an exploration license for 3 years each. A license holder should apply for extension to the Mineral Resources and Petroleum Authority 1 month before the expiration of the exploration license.

Within 10 working days after receiving the application for the extension of an exploration license, relevant government agency shall verify whether the applicant qualifies for a renewal. If so, the period of the exploration license shall be extended for a period of 3 years, and this shall be recorded in the license registration book.

As soon as Mineral Resources and Petroleum Authority renews the exploration license it will notify the state inspection agency and details of the renewal will be published in the daily newspaper.

In the event, the license holder does not meet the above- mentioned requirements and conditions, the Mineral Resources and Petroleum Authority will refuse to extend the term/period of the exploration license and shall notify the applicant in writing of this and record it in the license registry book.

Renewal of a Mining License



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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



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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.

The Supreme Court Made the Right Decision



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In our previous post, we looked at the recent decision of the Mongolian Supreme Court finding a car accident resulting primarily in property damage will not be considered a criminal matter. Today, we will look a little deeper at the legal basis for the decision.

In the recent case, the Prosecutor charged the defendant under Article 27.10, Section 2, Clause 2.4 of the Criminal Code. However, the law at issue provides that, “Where a driver of a motor vehicle causes serious damage to human health due to a violation of the law on traffic safety”, it will be considered a crime (emphasis added).

Under the legal standard set by the law, a car accident resulting in “minor” injury or even significant property damage, would not meet the requirements to be treated criminally.

Therefore, the case in question should not be treated as a crime, but should property be dealt with a violation of traffic safety pursuant to the Law on Violations. Additionally, those suffering property damage may rely on civil law solutions in accordance with the Civil Code for appropriate compensation in accordance with the law.