Tag Archives: Compliance

Important Changes to Permitting Extensions and Renewals



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In our previous post, we looked at the new Law on Permitting and the goals of the government to reduce and standardize permitting requirements overall. This week, we will look at how the new Law on Permitting will simplify the process for application to extent a permit.

Under the revised law, a permit holder shall apply to the competent authority 30 days in advance to renew the permit.

An interesting aspect to the revised law provides that where a permit holder is able to show they meet certain qualifying conditions, for example, having fully paid taxes due, and having a good record of reliable employment, the initial period of the permit will be automatically doubled. In other words, if the permit is issued for 3 years, it can be extended for 6 years.

Also under the revised law, the reviewing authority is required to issue a decision (acceptance or denial) on the application for extension within 10 working days from the receipt of the application and the materials submitted. If no decision has been issued within the 10 day period, the permit will be automatically extended. This system is designed to avoid a common problem encountered in the past in which business found their permits revoked solely to due to delay in timely processing, even where the application for extension had been submitted on time. This had resulted in substantial difficulty and wasted resources for business forced into administrative and litigation battles to regain operating permits.

Another new regulation in the draft law is to establish electronic database of permits. The electronic database for permit shall be maintained by the Secretariat of the Council under the Prime Minister. Permission granted, extended, suspended, revoked, terminated, pledged or transferred shall be registered in the electronic database of permit.

Revised Law on Permitting Aims to Reduce Regulatory Burden



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The newly submitted Law on Permits is being discussed before the Parliament and approval is expected. One of the key goals with this new update to the Law on Permits will be a reduction in the number of permits required to be issued by the state authorities with the aim of allowing citizens and legal entities more flexibility to conduct business.

The current Law on Licensing specifies the types of licensed activities. The law authorizes the relevant state administrative authority to issue licenses for specific business activities. However, various government agencies continue to create new licenses and expand licensing requirements within the scope of their authority. Over time, the situation has developed to the point where there are 1,600 separate a company may be required simply to conduct it’s target business . Originally, the Law on Licensing provided for the issuance of about 200 unique licenses. Currently, at least 8 different permits are required to operate a simple supermarket business; whereas the revised law aims to reduce that number to only two, a license for the sale of alcohol, and a separate license for sale of tobacco products. The revised Law on Permits will provide for 365 different types of permits, a reduction of 77%.

The new Law on Permits regulates only those activities that require a permit in order to allow citizens and legal entities to conduct businesses freely. Under the revised Law, permits will be classified as a “License” or a “Permit”, depending on the purpose, conditions and level of operational risk.

Under the new law, Licenses will be issued for a period of at least 5 years while ordinary Permits will be valid for a period of at least 3 years. The permit shall be extended for at least the period for which it was originally issued. Permits may be granted indefinitely in cases provided by law.

In general, the updated law calls for a decision on whether to grant a license to be made within 30 days of receipt of the application, this is an extension of the 21 days provided for under the current law.

This blog provides general reasons for the adoption of the Law on Permits. The next blog will cover other new features and a discussion of implications.

What to Consider When Entering into an Employment Agreement (Part 2)



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This week we continue the topic of issues the employer and employee should consider when concluding an employment agreement. The first post reviewing these issues can be found here.

Part-time employment agreement

Pursuant to Labor Law (Law) part-time employee means an employee who works less hours than a full-time employee. Law specifies that reducing work hours of a full-time employee in accordance with the law is not considered as working part-time. Employer may hire an employee to work part-time work and pay him/her a salary commensurate with the work performed and hours worked.

Employment agreement for employees working from home

Upon agreement employee may choose to work from home or any other place or location of his/her choice that is other than employer’s, using employer’s or own equipment and materials, under the supervision of employer. In this case employer is responsible for inspecting the safety of equipment and other tools used by employee working from home and providing safety instructions.

Chapter 6 of Law does not apply to employees working from home. Meaning that general provisions and regulations regarding work hours, rest hours, leaves and holidays does not apply to employees working from home.

Remote employee employment agreement

Upon agreement employer may allow employee to perform his/her duties remotely online, either permanently or partially.

In addition to specifying main conditions of the agreement provided by Law, remote employee employment agreement must specify place or location where employee shall perform his/her duties, term/deadlines and form of handing over the work performed, and amount of compensation payable by employer in the event of use of employee’s own assets and equipment to perform duties.

Unless otherwise provided by Law, part-time employee, employee working from home or remote employee has the same rights and obligations as a full-time, permanent employee of the employer or other employees performing similar duties, and is subject to provisions and regulations of labor laws, collective agreements, collective bargaining agreements and internal labor regulations.

When concluding any type of mentioned employment agreements main conditions provided by Law must be specified in employment agreement, which are name of the job or position, duties to be performed specified in the job description, place or location of the job, amount of salary and work conditions.

Introduction to Mongolia’s Law on Digital Signatures



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A newly revised Law on Electronic Signatures was adopted in December 2021 and will come into force on May 1st, 2022.

The Revised Law distinguishes between electronic signatures and digital signatures. The Law provides that an electronic signature shall be used for electronic information that has been converted from paper form to electronic form by means of an information system, or created, sent, received, stored or accessed in an electronic environment (except for those classified as state secrets).

Generally digital signature is characterized by a unique feature that is in digital form like fingerprint that is embedded in a document. The Law provides that digital signature is a form of an electronic signature, and is an information that is encrypted and converted into digital signature by using private key and can be verified and validated by using a public key. With regards to legal entities, pursuant to the Law legal entities shall use digital seals, which must meet the requirements for digital signatures. The authorized representative of legal entity shall be the holder of the digital seal. The signer shall be required to have a certificate so that he/she can be linked to the document (information). Digital signature shall be as valid as the written signature on paper document.

Along with the certificate the signer shall be required to have a digital signature tool used to create the digital signature and retain private key. The Law specifically provides that for Mongolian citizens their ID cards shall be one of types of digital signature tools, that is information on citizen’s digital signature, certificate and private key shall be placed in the memory chip of ID card. The Law does not set a legal limit on the types of digital signature tools, but a list of eligible tools shall be issued by the Ministry of Electronic Development and Communications.

In accordance with the Law now not only Mongolian citizens and legal entities, but also foreign citizens and stateless persons shall be able to use digital signatures. Also, now a digital signature certificate issued by foreign authority may be used in the same way as Mongolian certificate provided that conditions set forth in the Law are met and in accordance with procedures set forth in the Law. Meaning that digital signatures authorized by foreign certification authorities may be used, whereas the current law does not allow it.

Furthermore, the Law sets forth more detailed requirements for digital signature certificates, certification authorities, their rights and obligations, rights and obligations of government authorities.

Constitutional Change Improves Environmental Impact Transparency



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The Parliament of Mongolia amended the Constitution of Mongolia on November 14, 2019, according to the second part of Article 6.2 of the Constitution of Mongolia “… By using subsoil resources within the right of citizens to live in a healthy and safe environment have the right to know about the impact on the environment”.

In order to exercise this constitutional right, the Law on Environmental Protection and the Law on Environmental Impact Assessment provide for measures to be taken by citizens to monitor the status of subsoil use, environmental impact, rehabilitation and monitoring by the authorities. The legal regulation of the right to know and the legal regulation of the exercise of constitutional rights are in the process of being approved.

This is very important regulation. There are frequent tripartite disputes between citizens and company using subsoils or project implementer and local authorities such as Governor and Citizens’ Representative Meeting.

Citizens complain that companies using subsoil in local area and project implementers are destroying the environment and failing to rehabilitate it, and demand that action be taken to stop the activity.

The reason for this is that citizens are not given the right to know and the information they want has not been provided. In other words, failure to provide information or access to information on the current status of subsoil use, its impact on the environment, and the process and results of rehabilitation, the lack of access to information has led to a number of negative consequences, such as misinformation and misunderstandings.

On the other hand, due to the failure of the local government to provide the above information to the citizens, the citizens have lost trust in the local governors and the Citizens ‘Representatives’ Meeting and therefore there have been many cases that citizens criticized local government that not protecting their rights and interests instead protecting and serving the interests of the company using subsoil and project implementers.

As a company using subsoil and project implementer, they have spent a certain amount of money and have conducted certain activities, such as employing local people, providing financial support for local development, and conducting regular rehabilitation work. Lack of information or access to information has led to many misunderstandings and conflict among citizens due to a lack of information about their work and investments.

Therefore, it is important to ensure that citizens have access to information and right to know, and that local governments and project implementers are required to report their work and the results of their activities in connection with proving information to citizens.

According to the two laws mentioned above, on the one hand, the law allows a citizen may request information from the aimag, capital city, soum and district governors, project implementer on the condition of natural resource use within the territory, its impact on the environment, rehabilitation process and control measures taken by the state authorities and project implementers.

On the other hand, aimag, capital city, soum and district Citizens ‘Representatives’ Khurals and Governors shall openly inform citizens about the conditions of land use, environmental impact, rehabilitation and control measures within the territory, and provide relevant information upon request, and therefore obliged to report it to the Citizens’ Representatives Meeting.

As a project implementer, they are obliged to provide or provide information on the status of subsoil use, environmental impact, rehabilitation process and results related to its activities at the request of the citizen.

Mongolia’s New Law on Virtual Assets Providers



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In recent years number of companies and organizations have come out and sold various “coins” and tokens. Although virtual asset services have the advantage of using technological advances to increase access to finance at low cost, the process of trading coins and tokens is carried out in very short term and at high prices. As a result, special legal regulations became necessary due to high risk of possible increase of cybercrimes, and as consequence individuals and investors to become victims of cybercrimes, or even unknowingly get involved in money laundering and terrorist financing crimes said lawmakers. Thus, the first draft of Law on Virtual asset service providers was submitted by the Government on May 12, 2021 and the parliament adopted it on December 17, 2021. The law came into force on February 25, 2022.

Pursuant to law public offerings and trading of virtual assets now can be done only through companies registered as virtual asset service providers. Companies that want to provide virtual asset services and that meet requirements set in law and ancillary regulations on combating money laundry, terrorist financing and risk mitigation can be registered with Financial Regulatory Commission (FRC) as virtual asset service providers. Once registered virtual asset service providers shall be obliged to identify its customers, determine the legality of their assets, and inform customers in advance about risks of becoming victims of technical and fraudulent crimes in the process of possessing and trading of virtual assets.

Pursuant to law eight ancillary regulations must be adopted, which are currently being developed by FRC. FRC is currently conducting survey on some of the draft regulations. You can read the draft regulations (only Mongolian versions are provided) (the link http://www.frc.mn/a/3910) and send your proposal by March 27, 2022.

FRC shall not register any company as virtual asset service provider within four months from the date the law came into force. This period is given for FRC to develop and adopt aforementioned ancillary regulations. Companies that provided virtual asset services before the law was adopted shall satisfy all requirements set in law and ancillary regulations within three months after expiration of the four-month period and may be registered with FRC as virtual asset service provider.

The law expressly provides that registration of a company as virtual asset service provider is not considered as guarantee for the virtual asset. The government shall not be responsible for any damages resulting from activities related to virtual asset service, and public offerings and trading of virtual assets through a company not registered as virtual asset service provider is prohibited.

An individual or legal entity that violates the law shall be subject to liability specified in Criminal Code or Law on Infringements. Administrative penalty for violation of law for individuals is fine in the amount equal to from 1 million MNT up to 3 million MNT, for legal entities is fine in the amount equal to from 10 million MNT up to 200 million MNT.

So, it looks like in October virtual asset market will start to be more regulated and well-ordered.

Revised Law on Personal Information Protection for Digital Age



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The parliament adopted a revised Law on Protection of personal information on December 17, 2021, and this law will come into force on May 1, 2022. This law is a revised version of current Law on Individual secrecy, which will be repealed on the date when revised law comes into force.

Current Law on Individual secrecy was adopted in 1995. It has passed over 20 years since then and social relations have changed and evolved a lot. The revised law covers a wider range of personal information than the current law, and regulates protection of personal information rather than “personal secrets”. Law on Protection of personal information covers personal information (such as name, date and place of birth, citizenship, educational background, membership, information on property, etc.) and sensitive information (such as nationality, religion, gender, key to digital signature, criminal and medical records, sexual orientation, correspondence, etc.), which also include genetic and biometric information.

The revised law introduces several novelties. One of them is that any personal and sensitive information must be collected, processed and used with a written consent from owner of the information (either written on paper or electronically), with exception of cases specified in laws. Pursuant to current Law on Individual secrecy only owner of personal information has responsibility to protect his/her own “personal secrets”. When the revised Law on Protection of personal information comes into force the responsibility to protect one’s personal information shall be imposed also on government bodies, individuals, legal entities and organizations without the rights of a legal entity that legally collected, processed and used personal information. Also, lawmakers differentiated criminal liabilities for disclosure of personal information via telecommunications and the Internet, and toughened criminal penalties.

The revised law also regulates matters and restrictions related to installation of cameras, voice recording devices and making of recordings in public places, offices and/or at home, processing and use of such recordings.

Updates to Mongolia Money Laundering Law Under Review



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The Law on Fighting Money Laundering and Financing of Terrorism was first ratified by the Parliament of Mongolia on July 8, 2006. The Asia-Pacific Organization of the Financial Action Task Force on Money Laundering (FATF) has conducted a mutual evaluation of Mongolia’s anti-money laundering and financing of terrorism system in 2007 and 2017.

Mongolia was included in the FATF’s grey list of Strategically Deficient Countries in Combating Money Laundering and Terrorism Financing in October 2019. Therefore, Mongolia needs to be implemented the work plan in comply with the FATF’s recommendations.

The Working Group was set up with representatives of multilateral state organizations which is responsible to coordinate the implementation of relevant measures to exclude Mongolia from the FATF’s grey list by order No.172 of the Prime Minister of Mongolia dated December 11, 2019. The Working Group is responsible to provide the certain actions for amending the relevant legislation.

Within the framework of the FATF’s recommended mandatory work plan for Mongolia, it is necessary to ensure the coherence of laws which are an integral part of Mongolia’s responsibility system for combating money laundering and financing of terrorism, and to create conditions for a unified, non-duplicated sectoral system by taking remedial action.

Therefore, the amendments in concerning with the legislations, namely, Law on Combating Money Laundering and Financing of Terrorism, the Law on Accounting, the Criminal Code, the Law on Legal Status of the Financial Regulatory Commission and relevant bills have been developed for purpose of the eliminating duplication  and violations of the relevant legislations, as well as the abovementioned  legal and practical needs within the framework of combating money laundering and financing of terrorism.

The drafting of the amendment was based on a common international requirement, which was to strengthen Mongolia’s system for combating money laundering, financing of the terrorism and the spreading of weapons of mass destruction.

In particularly, the draft of amendments of the relevant legislation states that to determine clearly the some legal terminologies stipulated in the Law on Money Laundering and financing of terrorism, to ensure/provide the authorized person who are entitled to perform the monitoring, to create a legal environment for monitoring in purpose of the implementation of the legislation, to report electronically by the obliged person to the Financial Information Agent, to include the tighten of sanctions for crimes and offenses related to the money laundering, to intensify the investigation and to eliminate the duplication and violation between the relevant legislations.

These amendments to the above-mentioned legislation are expected to be discussed by the State Khural of Mongolia (the Parliament of Mongolia) for the adaptation.

Mining License Renewal



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Do the originals of the Mining Licences need to be taken physically to MRPAM for the annual registration?

The license-holder is obliged to pay license fees annually in order to keep the license valid.   When you pay the annual license fee the original mining license certificate is required to be taken physically to MRPAM  (Mineral Resources and Petroleum Authority of Mongolia) and make the appropriate record on the annex of the license certificate.

According to the internal rule of MRPAM, when MPRAM receives original documents such as mining license, request letter, license fee and MRPAM will provide the receipt confirmation. The receipt confirmation shall contain the documents received by the MRPAM and the date on which the license certificate was recorded the annual payment will be returned to the license holder or authorized person.  Practically speaking, the registration will take 3-7 days depending on the workload of MRPAM. Please note that if license holder is unable to do the annual payment and registration, an annual registration could be done with MRPAM if agent has a proper POA to act on behalf of the license holder. 

What’s the process for in case of the Mining Licences were lost or damaged and can the Mining Licences be reissued?

MRPAM will re-issue the mining license and following documents are required when apply for new license certificate:

–          Official request letter to reissue the license;

–          A receipt of the stamp duty fee of 250 000 MNT for mining license and 200 000 MNT for exploration license paid to MRPAM;

–          Announcement of invalidation of the lost license in the newspaper (piece of announced newspaper including the name, date, number of the newspaper);

–          A copy of Company certificate issues by the LERO;

–          Completed application form (reissuance of license) (available at MRPAM’s website to download)

Issues with Mongolian Competition Law



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Our Mongolian lawyers have encountered an unusual number of inquiries regarding Mongolian competition and anti-monopoly issues in the past few months. The scenario below takes a looks a common situation found in Mongolian trade.

Let’s assume that multinational company A currently sells to several Mongolian counterparties (Supplier Customers) who have a product import permit. Under the terms of sale, title passes to the Mongolian counterparty before the product is imported on either the Russian or Chinese border.

Mongolian wholesale client (Company B) proposes a profit-sharing agreement whereby Company B will Purchase products from Company A for purposes of:

  • storing product in Company B’s facilities and reselling to the other Supplier Customers within Mongolia; and
  • selling to wholesale clients provided that they are not already existing customers of the Supplier Customers.

In this scenario Mongolian Competition Law does not apply to the company A.  The Mongolian Competition Law does not apply to business entities which are not registered in Mongolia and are operating outside of its borders. Since the proposed transaction contemplated by the agreement would have company A deliver the products to the purchaser outside of Mongolian territory, the provisions of the Competition Law would not be applicable.

In our view, Company A and B would not be forming a monopoly because the transaction is cross-border, and A is not a “business entity” within the meaning of the Competition Law.

Company B only occupies approximately 1% of the domestic market for sale and supply of certain products. Accordingly, since it does not occupy a “dominant position” in Mongolia’s market (defined as a party which sells or produces 1/3 or more of a certain type of goods), the prohibitions in Mongolia’s Competition Law with regard to monopolistic activities would not be relevant to its operations.

With regard entering into agreements and monopolies, the following activities are prohibited under the Mongolian Competition Law:

  • mutually agreeing to fix prices of products;
  • dividing markets by location, production, services, sales, name or type of products or consumers;
  • restricting the production, supply, sale, shipping, transportation and market accessibility of products, investment, technical and technological renovation;
  • participating in competitive tender or bid auction or activities procuring goods, works or services by state and local funds having in advance agreed on the price, other conditions and criteria of products;

In addition, the following agreements or entered between business entities shall be prohibited where they contradict the public interests or create circumstances restricting competition:

  •  refusing to establish economic relations without economic or technical justifications;
  • restricting sales to or purchase by third parties of products;
  • collectively refusing to enter into agreements or negotiations which have significance for competition;
  • preventing competitors from joining organizations with the purpose of running their businesses profitably;

Mongolian business entities are prohibited to enter into agreements with effects as described above.