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The Mongolian mining industry is a big part of the firm’s client base. Of course, mining in Mongolia is a very carefully regulated sector. Mongolian mining companies require a special mining license to legally manage a mine or conduct geological exploration activities. In some cases, a valid mining license may be revoked by the government. It is important to be mindful of these circumstances so that steps may be taken to avoid such a risk.

The State administrative agency will revoke a mining and exploration license on the following grounds:

One of the general requirements to hold exploration and mining license are that the legal entity holding the mining license, should be incorporated under the laws of Mongolia and must be Mongolian taxpayer for the entire duration of a valid license. Without meeting this requirement will be one of the grounds to be revoked the licenses. If a company is not paying correct taxes, it is at risk.

Another important requirement is to pay license fees on time as specified in the law. The amount of the license fee will be calculated on the basis of the measurements of the real estate covered by the license. Timely payment of the required license fees will be determined by the date of the transaction as recorded at the bank. The license holder must pay the license fees each year in advance, on or before the anniversary date of the issuance of the license. If the fee is not paid in advance, the company will be levied fines of 0.3 percent of the annual payment amount for each day overdue. If payment is overdue for 30 days or more the license is at risk of being revoked.

Where a designated area for exploration or mining has been reclassified as a “special purpose territory” by a decision of the Government, or it has been prohibited by the law to explore or mine in such area, the government may compensate the mining and exploration license holder, and duly revoke the license ;

If a company holding an exploration license is not conducting expected exploration activities, as indicated by annual exploration expenditures being lower than the expected minimum cost of exploration, the license for such exploration may be revoked.

A license may be revoked if environmental authorities determine the license holder has not adequately carried out its environmental conservation duties.

Where a designated area for exploration or mining has been identified as a cultural heritage area, the license will be revoked.

If it is determined that the license holder has breached obligations under Mongolian Law as it relates to fresh water conservation, the license will be revoked.

Regional Deputy Vice President for Europe, Asia, Pacific and Latin American of Millennium Challenge Corporation’s (MMC) Department of Compact Organizations, Ms. Fatema Z. Sumar has informed the Mongolia Minister of Foreign Affairs Mr. Ts. Munkh- Orgil  that MCC’s Board of Directors have decided to include Mongolia in a list of countries eligible to sign the Second Compact Agreement.

Mongolia’s first MCC compact, a five-year, $285 million infusion of targeted development assistance from the United States was concluded on September 17, 2013.

The MMC’s second compact agreement will be focused on creating comprehensive ways to create sustainable and suitable solutions for Mongolia’s long-term development.

The MCC will cooperate with Mongolia to improve sanitation and water supply facilities serving the ger districts of Ulaanbaatar. The Board of directors of MCC believes that maintaining efforts to combat corruption in Mongolia will yield improvements for the economy. The preparations for the signing of the Second compact are underway and it expects to sign in 2017.

This is seen as an important development for Mongolia, as securing clean water and sanitation is a key element to attract Foreign Direct Investment. It is expected that new water and sanitation facilities will help to bring in new investments and help to diversify the Mongolian economy.

The Cabinet’s ministers voted to pursue negotiations to use a one billion USD loan from India to build a petroleum processing factory in Sainshand soum in Dornogovi Province. Total preliminary estimated cost for opening refinery will be 1 billion USD, 264 million USD will be spent on refinery and 264 million USD will be spent on a petroleum pipeline.

Early studies indicate the refinery could generate annual revenue of 1.2 billion USD, and net profit would be 43 million USD. The plan for the refinery capacity to process is up to 1.5 million tons of petroleum annually, 560,000 tons of gasoline, 670,000 tons of diesel fuel, and 107,000 tons of liquefied gas meeting Euro 4 and Euro 5 emission standards.

Studies shows that the proposed factory could contribute to increase the country’s GDP by 10 percent and a twofold increase in the revenue generated by the natural resources processing sector.

Economists predict that the investment could contribute to increasing the flow of foreign currency and help to stabilize Mongolia’s macro economic and monetary policy. The Cabinet believes that the refinery could create around 600 new jobs and pay more than 150 million USD a year in state and local taxes which will contribute to the state budget. The Finance Ministry suggests that a total of 30 factories, including tire, rubber, plastic, cosmetics, and pharmaceutical factories, could be established with direct access to a domestic refinery.

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.

2. Company management should appoint persons authorized to hold and use each particular seal, and clearly communicate these authorizations to all employees.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. Seals are not to be affixed to any blank or incomplete document.

Britain and Mongolia this week signed a new memorandum of understanding targeting the mining sector. The two countries pledged an exchange of technology and expertise, and deepening ties in the mining sector.

The agreement, recognizes “the spirit of cooperation that exists between the respective countries” and demonstrates a desire on both sides to “to promote closer cooperation in the extractive sector”. The MOU was signed by the two parties at a Mining conference held in UK.

Future cooperation is expected to cover technology transfer, education, and financing. This is good news for the mining sector in Mongolia, which relies on foreign technology, expertise and financing to develop its vast mining resources.

Oyu Tolgoi, the largest mining project in Mongolia, is managed by UK based Rio Tinto.

As with most countries, Mongolia provides special benefits for expecting and new mothers. The law provides for a period of “Maternity Leave” as well as a period of “Baby Care Leave.” Understanding the differences of each of these leave periods is critical for foreign companies operating in Mongolia.

Maternity Leave is designated under Mongolian law as a required period of 120 days. This Maternity Leave period is intended to cover 60 days prior to birth and 60 days after delivery. During this legal Maternity Leave period, the Mongolian Social Insurance system is responsible for payments to the new mother. Maternity Leave is not available for male employees.

The Baby Care Leave is granted to all mothers (and single fathers) with children under 3 years, and is optional at the employee’s discretion. During the leave period, the Employer is obligated to pay required monthly Social Insurance payments to the Social Insurance Fund on behalf of the employee. The employer is obligated by law to accept the employee in the same employment position or in a new position when the employee returns to work at the end of the leave.

Mongolia may be a relatively small market, but global brands are increasingly seeking to protect and enforce intellectual property rights in the country. Our firm works directly with global brands as to trademark and patent registration in Mongolia, cancellations of prior registrations, and IP enforcement matters.

Enforcement is difficult. Due to the relatively small population in Mongolia (about 3 million people in the whole country with about half in one City, Ulaanbaatar), many local lawyers and law firms are often unwilling to pursue intellectual property enforcement actions or litigation in Mongolia. The small interconnected population means many lawyers are unwilling to proactively advocate on behalf of clients, for fear of making enemies. Most trademark and patents providers will simply file registrations. When they do file an enforcement action it is more  “proforma” and less proactive advocacy.

One thing missing in Mongolia is a strong sense of the value of branding, and a clear understanding that brands deserve protection via copyright. The firm is acting on behalf of a group of brand owners who seek to create a new organization with the goal of raising awareness of the importance of intellectual property in Mongolia. The key to better protection is awareness.

During Parliament’s recent session, issues confronting agriculture in Mongolia were discussed. Importantly, economic growth in the agricultural sector was 2.8% higher this year than in the January through October period of 2015. This is contrast to many export sectors which saw a decline.

The government of Mongolia is implementing policies to support production of agricultural products in Mongolia. In each of 2012, 2014, and 2015, Mongolia produced the highest recorded crops yields in 25 years.

The government is seeking ways to promote Mongolian livestock and agricultural products to increase competitiveness globally and to meet international standards

Policies implemented by the government include discussions with China to promote meat export to China, and the government is pursuing a policy to provide herders and farmers with soft loans.

With all this in mind, it’s looking like a very good time to make a new investment in Mongolia in the farming and animal products sectors.

A draft of the 2017 budget for Mongolia is approved including a budget framework and an overview of policy through 2019.  The budget projects a 9.1% deficit for 2017.

The budget expects economic growth of 3% in 2017. In the interests of maintaining a stable tax environment for companies, taxes are not expected to increase. The government aims to improve infrastructure in the mining sector, move forward in large mining projects and generate budget revenue by increasing construction and investment.

The government’s operating expenses are set to be cut by 1% over 2017.  At the same time, money has been set aside for loans and scholarships for top students, as well as funding for private and public colleges.

There are also steps included to minimize the deficit, for example, operating expenses for state organizations will be cut. Each organization will receive a cut of 10% to 100%, depending on the organizations function. Expenditures for a number of state funded programs and events will be reduced by 410 billion MNT.

Mongolian parliament has approved the reduction of the number of domestic bonds issued and will promote economic growth by taking steps to ensure proper spending of funds received from foreign loans.

These measures, to limit the deficit, to promote large mining and infrastructure projects, and investing in Mongolia’s schools and students, are all positive steps for the country at a time when the overall economy has slowed due to global economic forces. If the increase in mining and infrastructure projects proceeds as expected, Mongolia could return to double digit growth in the coming years.

Mongolian law recognizes “Specified Term” and “Permanent” employment. A Specified Term agreement states a definite starting date, and ending for the employment, or a condition that ends the employment when and if it occurs.

Mongolian law stipulates that a Specified Term agreement will be automatically extended for the duration of the initially stated term if termination of the agreement is not proposed by the parties, and the employee continues to work in the position.

For a valid Specified Term agreement, the employment automatically ends at the end of the specified term, or upon the occurrence of an event, such as return to work of an original employee. In this case, a termination notice from the employer should be utilized so as to avoid the situation described above in which the Specified Term agreement automatically renews under Mongolian law.

To qualify as a “Permanent” position under Mongolian law, the employment agreement must be concluded for an indefinite term. This means no stated ending date, and no stated event or condition upon the occurrence of which the employment ends.

If a Specified Term agreement is terminated before the term expires, or a Permanent position is terminated, the termination provisions of the Agreement and of Mongolian Law will apply.

Per Mongolian law, for a Specified Term agreement, the requirements and reasons requiring Specified Term employment, and any conditions in connection with the same must be clearly stated in the Employment Agreement.  Such requirements, reasons or conditions will typically be the need for temporary or seasonal employment for the replacement of an employee that is taking some kind of hiatus from work, but whom the employer expects to return.