This document summarizes a presentation on challenges to Mongolia's legal system regarding foreign investment. The presentation covered: 1) An overview of Mongolia's past foreign investment laws and agreements since 1993. 2) Challenges including a lack of consistent policy guiding investment laws, which causes sudden changes that increase investment risk. The 2012 Law on Regulation of Foreign Investment in Strategic Entities was given as an example. 3) Recent trends toward improving laws by requiring public input before changes, drafting procedural rules with statutes, and combining laws with implementing decrees to reduce ambiguity. The goal is to lower investment risk through stable and clear legal frameworks.

1. Challenges to the legal system of
Mongolia: a case of foreign
investment
Dr. Batbold Amarsanaa
Joint conference by Business Council of Mongolia and UBRM Consulting
‘Foreing investment in Mongolia: Challenges, Risks and Solutions’
Kempinski hotel
20130419

2. Presentation plan
• General overview and past trend of foreign
investment law in Mongolia
• Challenges to legal framework
• Recent trend and likely solutions

3. General overview and past trend of
foreign investment law
• Law on Foreign Investment of Mongolia (1993)
• Law on Regulation of Foreign Investment in Strategic Entity (2012)
• WTO agreements
• Convention on the Settlement of Investment Disputes between
States and Nationals of Other States
• Convention on the Recognition and Enforcement of Foreign Arbitral
Awards
• The Convention Establishing the Multilateral Investment Guarantee
Agency
• Mongolia-EU Partnership and Cooperation Agreement (2010)
• Bilateral investment treaties with 43 countries (as of March 1, 2013)

4. Focus of the presentation
• There are not a few individual legal issues
pertaining foreign investment laws in
Mongolia
– Registration, regulation etc.
• Focus of presentation is to see bigger picture
– Identify risks and most likely solutions

5. Previous policy on foreign investment
• Law on Foreign Investment of Mongolia is one
of the few laws that hasn’t been revised or
invalidated since 1993.
• Comparable example: Company laws have been newly
adopted 3 times and revised once between 1991-2011.
• Past trend/policy regarding foreign investment
– Encourage foreign investment inflow without
substantial restriction

6. Challenges to legal framework:
Policy v. Laws
• Law without policy? (easily changeable policy
and law=no policy)– high risk for foreign
investment
• To determine Policy first and design the laws
in accordance with the policy
– Laws will not be easily changed
• Low risks from legal point of view

7. Why relevance of policy and laws is
important?
• Trend of regulating businesses parliamentary
documents/statutes rather than procedural rules
of the ministries etc.

8. Biggest risks from the legal point of
view
• Problem: SUDDEN CHANGE OF LEGAL
ENVIRONMENT which increases RISKS for
foreign investment
• Example: Law on Regulation of Foreign
Investment in Strategic Entity (2012)
– Change of policy:
– (Encourage) – (encourage+regulate)
– In very short time span (few weeks)

9. Law on Regulation of Foreign
Investment in Strategic Entity (2012)
• Shortages mostly criticized:
– Poorly drafted – ambiguity
– Might need to ask permission from Govt. when
foreign investor exits from Mongolia
– Problem with the sale of shares through stock
exchanges /confidentiality of a deal/ etc.

10. Recent trend and likely solutions
• Tackling ambiguity of laws
– In the past: statutes with substantive rule only –
power of administrative organs, obligation of
companies etc.
– Recent trend: To draft statutes inclusive the
procedural rules – Government organ in charge to
issue decision to grant or not to grant approval
within 10 days etc.

11. Recent trend and likely solutions
• Tackling sudden change of policy/statutes
– At present: promulgating statutes without substantial
public/stakeholder input in some important occasions.
• basically drafts sponsored by the Cabinet and the President
On-going discussion and
• On-going discussion and likely trend: Binding provision
to throw draft statutes for public/stakeholder discussion –
• OUTCOME: will take time thus enable investors to evaluate
possible risks and chance of lobbying

12. Recent trend and likely solutions
• Law+ministerial decree = a package
– Law and ministerial decrees to implement the law
is drafted separately. It can be drafted together in
order to avoid ambiguity
• To train legal community, judges, prosecutors
etc. – to understand complex business and
commercial matters.

13. Thank you.
Any questions?