Tag Archives: Anti-Corruption

Anti-Corruption Law in Mongolia



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Each year, Transparency International association develops an index of corruption perceptions which reveals corruption levels at a worldwide standstill. From 2020-2022, Mongolia scored 35 points and ranked 111 out of 180 countries on the corruption index, while this year it was ranked 116th with 33 points.

Corruption is a high risk for foreign investors and companies operating business in Mongolia, arising from political corruption and judicial corruption. Since 1996, Mongolia has been fighting against corruption through activities such as a national anti-corruption program and anti-corruption legislations include the Criminal Code and the Anti-Corruption Law, which prohibit active and passive bribery. However, the fact that Mongolian corruption index has not decreased over the last 3 years, and the most recent update has even seen an increase in the corruption index which has led to questions about the effectiveness of anti-corruption law.

Mongolian Public Officers May Soon be Subject to Dismissal



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We have already provided an overview of the new Law on Imposing Liability on Selected and Appointed High Ranking Government Officials, we would like to follow that with a closer look a few specific provisions in the new draft.

The law will set forth the legal basis and official procedures imposing disciplinary actions, political and moral accountability on officials including the President of Mongolia, the Parliament Speaker, the Deputy Speaker of Parliament, members of Parliament, the Prime Minister, Cabinet members, and officials appointed by the Parliament, or appointed by  provincial governors or Chairmen of local representative councils.

Officials in violation of legislation, oath or code of conduct or who fail to perform his/her duties will be subject to disciplinary actions depending on the nature of the violation committed. The said actions will be in form of warning the said official individually or warning among public. Furthermore, other disciplinary actions will be taken pursuant to other applicable legislations.

For the political accountability, officials in violation of the Constitution, legislation and code of conduct, will be dismissed or recalled, or his/her right to hold government high ranking position will be subject to 2 or 4 year restriction.

Furthermore, the law categorized ethics accountability as type of accountabilities in order to develop political culture in Mongolia, and aims to make officials feel greater regret for poor performance or taking advantage of their position and voluntarily assume accountability. However, if an official was subject to ethics accountability, he/she will be exempted from political accountability.

Chapter two of the law clearly states grounds for dismissal of President of Mongolia subject to overwhelming majority voting of members attended in Parliament session.

Chapter three states grounds and procedure for dismissal of the Parliament Speaker and the Deputy Speaker of Parliament and dismissal subject to overwhelming majority voting of members attended in Parliament session. Moreover, Parliament members elected from constituency will be dismissed according to majority voting of total members attended in Parliament session based on request by voters.

Chapter four includes wider grounds for dismissal of Prime Minister, Cabinet members and officials appointed by the Parliament, dismissal subject to discussion and majority voting of members attended in Parliament session and regulates other relevant issues. Furthermore, the chapter states basis for dismissal of aimag or city Governor.

Chapter five states basis for dismissal of chairman of the Citizen’s Representative Khural of aimags or city and issue on dismissal will be decided according to majority voting of total representatives attended in meeting.

Chapter six regulates matters regarding public statement, informing officials about dismissal, conducting investigation, discussing about dismissal, imposing liability on officials, reporting and informing public about compensation of damage incurred to state due to breach of law by officials.

This new law which clearly outlines procedures for dismissal of public officials will be a significant improvement over the current situation in which misdeeds by public officials are not adequately addressed. We expect this new law will go a long way to reduce or eliminate any feeling by public officials that the does not apply to them due to their position of authority.

Mongolia Anti-Corruption Law: Overview of Restricted Activity (Part II)



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We have previously written about certain activities prohibited by Mongolian public officials according by Mongolia’s anti-corruption law. In this post we will summarize the activities which Mongolian officials may engage in, but which are subject to specific legal restrictions.

Mongolian public officials are generally prohibited from accepting or requesting from individuals or legal entity’s donations or other financial aid to address public needs, which may include funding assistance for their specific governmental department. However, officials and government organizations may accept donations and other financial aid for purposes such as improvement of staff training, organizational operations and structure, or in providing technical support, which will provide public benefits by increasing the capacity of that government organization to perform its responsibilities. When this is done, care must be taken to ensure it will not present a conflict of interest for officials. Officials must obtain permission from their management or the relevant government authority before accepting even an allowed donation or financial aid. In the event a donor provides such aid as described above for an official purpose, the government officials involved are legally prohibited from making any decision which concerns the donor for a period of two years following the receipt of the donation. This means a private donor may make a donation to a public agency, but the individuals at that agency which benefit from such donation will not be allowed to make regulatory decisions or approvals as regards the donor for at least two years.

 Public officials are restricted from concurrently holding any private employment or public office other than as specifically allowed by the law. The following are expressly allowed:

A member of the Parliament or Government of Mongolia may concurrently have or hold the following occupations or offices:

  • offices allowed by law and/or international treaties;
  • offices directed at public benefit activities;
  • occupations of a teacher, researcher or creative work;
  • if allowed by law, other offices in the Parliament or the Government;
  • if allowed by law, offices in international organizations.

Members of the Constitutional Court, judges of all levels, prosecutors, investigative officers are prohibited from holding concurrent offices or occupations except for a professor or a researcher.

An officer of the armed forces may perform work or exercise authority under a labour or work-performance contract concluded on the basis of a written permission by that officer’s superior officer.

Officials are restricted from certain actions which are considered fraught with conflict of interest, for at least two years after they leave public office:

  • take up employment with an legal entity or organization which close relationship to their former official duties;
  • conclude agreement or contract with former government employer or seeking/requesting a license issued by the former government employer;
  • lobby for any individual or a legal entity before the former government employer.

This restriction will not apply to an agreement, contract that had been concluded or extended prior to the official’s election or appointment to public office, or will it apply to an agreement or contract that has been awarded through public tender or that has a value with an annual income less than the amount equal to 12 million MNT (~$5,000).

Mongolia Anti-Corruption Law: Overview of Prohibited Activity



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Mongolian law prohibits certain activities by public officials, while other activities are restricted. These prohibitions and restrictions are intended to prevent conflicts of interest in public service and to eliminate opportunities for bribery and other forms of corruption. However, even in the face of legal prohibitions and restrictions, sometimes officials will in communications with our clients suggest “options” or “solutions” that amount to barely disguised violations of these laws. Foreign invested enterprises in Mongolia should “keep an eye out” for these kinds of activities so they are not caught up in an illegal scheme.

Mongolian public officials are prohibited from disclosing in a manner not related to their official duties, information that has been acquired via official capacity. Unfortunately, violations of this prohibition are widespread as politicians and unelected officers will often seek to share or trade in private information gained through their position of privilege. Officials will seek to use this information to further their own interests, or to spread damaging propaganda about opponents.

Public officials are also prohibited from utilizing their official position to issue a decision, or to control, supervise, inquire or impose liability on another for the private purposes of themselves or their friends and family. They are also prohibited from using their official position to put pressure or influence on others. While this is not as common as the information sharing described above, one would not be surprised when encountering an official who seeks to wield their power in this way.

An official is prohibited from using the power of public office in any kind of advertising, except in connection with their official duties, and where participation is in favor of activities in benefit of the society.

Public officials are further prohibited from utilizing public service to represent their own private interests, or those of other individuals, organizations, or companies they are directly or indirectly associated with. Even so, many members of parliament are successful in business and continue ot be involved with a private business. For many a primary reason to become a member of parliament is to enhance or extend to their business opportunities and income. Parliamentarians have been known to introduce new laws and regulations which are beneficial to their private business or their personal interests.

Officials are prohibited from accepting any payment or supplementary payment, or gifts in connection with the performance of their official duties, however, this is another common violation which is often performed discretely.

With regard to an official’s accepting a gift, there is a legal obligation for an official to file a written report within 30 days in the event the value of a one-time gift or service received exceeds the equivalent of that official’s salary for one month, or where the value of gifts received from a single source in the course of one year exceeds the equivalent of that official’s salary over three months. If the value of a gift or service received by an official is in excess of that official’s salary over 6 months, the gifted items shall become the property of the State. The official can accept or redeem these gifts only by way of paying the government the value in excess of the official’s six month total salary.

This is a strange arrangement per western standards as a gift of 6 months total salary may still be a substantial amount. Keep in mind that while a gift of this nature may be legal in Mongolia, foreign companies and individuals may still be subject to anti-corruption laws in their home country, such as FCPA in USA.

Public officials are further prohibited from participating in the business of a company or serving in a management role of a company. Additionally, officials are subject to a two year prohibition on being a shareholder, stockholder or a partner in a legal entity for which the official had been involved decision making on awarding such company government procurement contracts, allocation of central government, provincial or municipal funding, or where the public official had exercised official supervision or control over such company in connection with the official’s public duties.

This is only an introduction to official prohibitions on actions of public office holders. Future blogs will continue our review.

Human Rights Development in Mongolia



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Mongolia Foreign Affairs Minister Ts.Munkh-Orgil recently spoke at the United Nations Human Rights Council where he presented the current human rights policies and measures undertaken by the Government of Mongolia.

Human rights are essential values enshrined in the Constitution of Mongolia, which was one of the original countries to implement the Millennium Development Goal Number 9 as a national plan to improve human rights and promote democratic government.

The Mongolian government’s 2016-2020 action plan places a great priority on continued legal reforms based on the preservation of human rights. Mongolia is working toward elimination of the death penalty, and amending the criminal law and other laws to protect the rights of children and the elderly, as well to protect against domestic violence; combat human trafficking; enhance the transparency, accountability, and independence of the judiciary; and fight corruption in the public sector.

Mongolia’s commitment to democracy and fairness is a major positive point for many foreign businesses and NGOs operating in Mongolia. As the first international law firm established in the country, LehmanLaw Mongolia is excited to see continued progress and development in this area among many others in Mongolian law and society.

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.

8 “Must Do’s” to Keep your Mongolia Company Safe



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Every Mongolia company, foreign or domestic, is required to have a Company Seal, which takes the form of a simple stamp. These seals serve as the legal “signature” of the company for various documents and are officially registered with the government. When a seal is affixed to a contract the company will be legally bound to the terms of the contract.

While these seals can be a convenient way for a company to indicate acceptance of a contract, the nature of the system can allow misuse by unapproved parties, or misappropriation of the seal if not kept securely. Even a misused seal will legally bind the company.

Problems encountered due to misuse of seals include employees redrafting employment contracts and granting themselves increased salary or benefits, Employees using company seals to bind the company to expensive contracts with the employee’s friends or relatives, or employees using seals to deposit company funds directly into the employee’s foreign bank account.

Seals personally kept and under the control of individuals may also be subject to theft or simply refusal to cooperating in executing certain company policies. This can include, holding seals “hostage” and demanding a payout from the company, refusal to approve important business deals, leaving the company unable to take action. Employees holding seals may refuse to cooperate in providing the necessary seal for the employee’s own termination from employment; or if terminated, an employee may continue to hold a company’s seals and continue to carry out business in the company’s name. In an extreme case, a terminated employee holding the companies seals may initiate lawsuits against the company itself, or against its trusted business partners sabotaging the relationship.

It is imperative for each company to establish clear systems for management of the company’s seals, particularly where they are kept on premises. The following are recommended best practices.

  1. Company management should appoint persons authorized to approve use of each particular seal (such as a department manager, whether in Mongolia, or abroad), and clearly communicate these authorizations to all employees.
  1. Company management should appoint persons authorized to hold and use each particular seal, and clearly communicate these authorizations to all employees.
  1. An employee seeking to utilize a seal is required to first report the required use, and gain approval from the authorized personnel, and then report to the individual authorized to hold and use the seal to finally affix the seal on the document.
  1. Each individual authorized to hold a seal is to be required to maintain the seal safely and securely, and has the responsibility to prevent unauthorized use of the seal in their possession, or delivery to unauthorized personnel.
  1. When applying for use of a seal, the applicant shall file an application form or send an application email stating clearly the purpose of the required use of the seal and the nature of the documentation to be stamped.
  1. Each time the seal is used, the individual seeking use of the seal is required to sign their name, and mark the date to record the seal use.
  1. Each time a seal is used, the authorized holder is required to maintain the application and approval documentation in their possession, clearly filed along with scanned copies of each stamped document.
  1. Seals are not to be affixed to any blank or incomplete document.

Mongolian Parliament to Consider New Anti-Corruption Program



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As we posted previously, the Anti-Corruption law of Mongolia was enacted firstly in 1996 and it was renewed by the Parliament in 2006. Furthermore, Mongolia became a Party to the United Nations Convention Against Corruption (UNCAC) in 2006.

According to the legislation, the Independent Authority Against Corruption was established in 2007 in charged with functions to raise anti-corruption public awareness and education, and corruption prevention activities, and to carry out under-cover operations, inquiries and investigations in detecting corruption crimes, and to review and inspect the assets and income declarations.

The National Program on Combating Corruption was approved by the Parliament of Mongolia in 2002. This program was implemented between 2002-2010. In recent years, a new National Program for Combating Corruption and Strengthening Integrity was drafted and submitted to the previous parliament. Unfortunately, Parliament at the time rejected the new program without discussion.

The current Parliament recently created a taskforce to prepare a draft program for discussion in the Parliament. The taskforce is led by the Chair of the Legal Standing Committee Sh. Radnaased. During the Parliament Legal Standing Committee meeting, a draft resolution on the National Program on Combating Corruption and Strengthening Integrity will be discussed. We expect the program to be presented and discussed at the Parliament plenary session in the near future.