INVESTMENT PROTECTION COUNCIL GOVERNMENT OF MONGOLIA

Introduction

 

This legal document is about the council’s structure, duties and functions, job implementation and future proceedings of the Investors’ protection of rights.  

1.The Legal basis, requirements

           One of the leading priorities of the government is to protect the needs and rights of the investors, to provide foreign investors with stable legal policies and cooperation as well as a comfortable environment, to aid in its implementation process of international contracts, domestic laws and regulations, hereafter need to make sure to further work hand in hand with the investors and maintain a steady relationship with them.

           Therefore, the Government Resolution and the order of the Prime Minister of Mongolia have granted an issuance to establish the Investment Protection Council and it has been actively functioning to this day.  

            The Investment Protection Council was established on the basis of Law on Government of Mongolia, the Article 24 paragraph 2, the Article 17 paragraph 5, the Article 33 paragraphs 3, of the Article 9 of the Investment Law, paragraph 1 of the Government Action Plan from 2016 to 2020 ratified by the Resolution 45 of 2016 of the State Great Khural (parliament) provision 1.3.6 of the "Financial recovery program" ratified by the Resolution 71 of 2016 of the State Great Khural (parliament) and 2nd appendix , provisos 1.22.2 of the Government Action Plan affirmed by the Government Resolution 121 of 2016 and proviso 1.3.6 of the "Detailed Action plan of the Economic recovery program" ratified by the Government Resolution 208 of 2016.

           In light of the previously mentioned regulations, the Investment Protection Council was set up by the Government provision no.10 dated August 3, 2016, and Prime Minister's Order 136 dated December 22, 2016.

           The Chief of Cabinet Secretariat of Government of Mongolia has issued an ordinance no.353 dated December 28, 2016, for the Investment Protection Council’s regulations on how to work, also on receiving and resolving applications and complaints from the investors.

2.Structure of the Council

The council under the supervision of government of Mongolia is made out of Chief, 15 Members, and a Secretary. Council members are composed of the secretaries of state from perspective ministries as well as NGOs and representing personnel from the professional association. The committee falls under the administration of the Cabinet Secretariat of Government of Mongolia and it has been in constant functioning.

Effective immediately after the appointment of the Secretariat and Chief on 15th of March, 2017 the following council had started to function officially.

Note: (The three delegates from the non-government association and professional association to serve the committee will be appointed by the Chief of Cabinet Secretariat of Government of Mongolia for a duration of one year.)

3.Duties and functions of the council

           Law on Government of Mongolia, resolution of the Government of Mongolia, and the ordinance of the Prime Minister of Mongolia have ratified the members and structure of the Investment Protection Council.

The duties of the council include the following:

A.Preview and make a preparatory prognosis on foreign investment related issues that will be discussed during the Cabinet Session

B.Protect foreign investors’rights, analyze and solve their complaints (aside from the cases inspected under court or arbitrage)

C.Improve investment legal system, expel duplications and ruptures of laws, present investment related suggestion that made by important associations from the Cabinet.

D.Make proposition on an execution of laws and resolutions identified with investment, and acquaint it to the Cabinet; the Council's task ought to be perpetual.

            The main compartment of the Council’s operation will be in a form of a session meeting. The choice will be made by dominant/majority part of the Council individuals amid the session. Appropriately, the resolution will be affirmed when Chief of Council, a council member who has referenced the issue into Council's session, and also Secretary of the Council who affirms the resolution.

 4. Council's work regulations, complaint, solutions, and requests

             As of now the 125 requests, complaints, statements received from international, domestic organizations and investors have been solved respectably. Alone from the investors' side, there has been 48 requests, complaints and applications that have been resolved.

 At the moment the Council has received 4 applications and requests from the investors and they are in the process of being analyzed and soon would be in the stage of further solution proceedings. (Attachment 1)

            These complaints, applications, and requests are being reviewed by the Law on Civil Service, Law on resolving complaints and issues submitted by ordinary citizens, accordance with these mentioned laws, ordinance no.353 dated to 2016 from the Cabinet Secretariat of Government of Mongolia has been ratified to be followed by the Investment Protection Council in order to review and resolve any related issues.

             There has been some hindrance along the way in resolving complaints and requests related to investment matters because to this day there are no existing Government Regulations that have been approved for the council on the limits and on the power execution of rights, also there is no appointed government agency to resolve matters right away accordingly.

             As we have been arranging these requests and cases, 40% of them was identified from mining, 20% from infrastructure development, 10% from data information, communications, space innovation relations, 10% from bank, tax, finance, 5% from land ownership and its usage, 5% from national advancement and planning, from fair competition, from prohibition of border control, from law enforcing agents.

Case

4.1   For instance, the Communications Regulatory Authority, in connection to the identified dispute with the end of the permit of Mobicom Corporation a business entity 100% owned by the Japanese government, was additionally talked about at the Investment Protection Council Meeting on 4th of April and it bolstered to determine solution for the investor's claim. In doing as such, KDDI, the Japanese investor, will make sure to extend Mobicom's activities and finance in the needed $10 million dollars which had been speculated to be invested over the past 10 years. The decision has been made by the KDDI board chairman Hiroyuki Soshi and the Mobicom corporation CEO Tatsuya Hamada then it was informed to the Chief of the Cabinet Secretariat of Government of Mongolia on 16th May 2017.

4.2    Another case is that, an appointed work committee conducted researches regards to the issue, where the related parties were advised by the Investment Protection Council to resolve the dispute involving a 500,000,000 tugriks caused between the Ministry of Energy and the National Renewable Energy Center in connection with the renewable energy activities of "Mon-Naran" project, which is being implemented by "Everyday Farm" LLC., As a result on 19th of June, 2016 the parties have successfully resolved the issue and settled their new contract numbered E/H 24 “To issue a technical control over the facilities of the Renewable Energy Center.” “Mon-Naran” project powered with 10 MBT solar energy station had continued its process and opened an Electricity Station.

4.3 Investment Protection Council has resolved the request for the following case, the Ulaanbaatar airport project loan proposal funded by the Japanese companies with $560 million, to solve the risen matter on a continuation of the concession agreement under the condition to invest-be in usage, and to further aid in its management proposal. The concluding result has been introduced by the Investment Protection Council session through Parliament on 2nd of Sep, 2017 by the appointed work committee made up of Chief of the Cabinet Secretariat of Government of Mongolia, Chairman of Ministry of Finance, Chairman of Ministry of Road and Transport Development and the chairmen of Mongolian Customs, General Authority for Border Protection, General Authority for Specialised Inspection and the General Intelligence Agency of Mongolia. Given that the appointed work committee has proposed to proceed with the initial agreement and the proper usage of the airport. The additional $36 million required for the project has been approved to be financed and it has been included in the national budget expense.

 4.4   We have received the complaint from a German DV Oil LLC., worked on fulfilling the compliance from Ministry of Road and Transport Development of Mongolia on three-tier court decision to pay 2.3 billion tugriks to Yalguusan LLC., as well as conducted a research on the possibilities to not cause any loss to the above companies, negotiated with the Ministry of Road and Transport Development of Mongolia and Ministry of Finance of Mongolia and the administrations of the involved companies, and to include the court ordered payment in the national budget expense. In the result of this, the issue will be decided through the State Great Khural (parliament) and the payment amount was included in both the national budget expense of 2018 and in the budget expense of the Ministry of Road and Transport Development of Mongolia. On 30th of October, 2017 a five-sided meeting was held between the Cabinet Secretariat of Government of Mongolia, Ministry of Finance’s Budget Agency, Chairman of Road Transport Division of Ministry of Road and Transport Development of Mongolia, DV Oil LLC., and Yalguusan LLC. In the result of this, German DV Oil LLC., company’s loss and repayment of 2.3 billion tugriks have been on the verge of successful settlement.

4.5   We have worked on and came to a mutual agreement on the case involving Erdenes Tavan Tolgoi LLC., and Chinese Chalco company, where the two parties have had issues over previous debt and on enforcement of some parts of the contract. The Mongolian Government has paid off the debt amount one year earlier than the required time as well as proposed future cooperation methods.

4.6   We have made what was considered to be an appropriate decision in terms of the relationship and implementation of the contract between the Mongolian Government and Oyu-Tolgoi LLC., We had established a permanent mechanism for coordinating the issues related to the implementation of the Oyu-Tolgoi mine/deposit project and had come to a successful conclusion towards getting in more of the benefits from the Oyu-Tolgoi LLC., to Mongolian side.

             Moreover, we are working on resolving different cases submitted by foreign countries.

The below is about the inspection and revision of legal entities and government administration personnel who have purposefully violated the law and caused inconvenience for the investor's, and also issues on bans for the border control

            According with the ordinance no.48 a working committee is set up in view under the Prime Minister's order and has been administrated by the Secretariat of the Ministry of Justice and Home Affairs to examine and investigate the issues identified with infringement of rights of investors and illicit accusations from the government administration personnel and from legal entities against the investors.

            According to the appointed active duty committee during the last 3 years, there have been many cases of harassments, wrongful accusations against the investors and as well as a violation of ethical standards.

            For instance, 454 of the above cases are identified with ethical and moral violations. Out of them,188 are considered as an infringement, and 24 officers were punished for disciplinary action.

            Based on the appointed active duty committee, 298 Mongolian nationals, 21 foreigners, overall 319 citizens' border bans have been lifted, violations related to constraining investors’ rights and permits ended, and had put an end to unlawful badgering and relevant government authorities have been charged.

             The active duty committee is directed under the supervision of the Ministry of Justice and Home Affairs and it has been working on both introducing and getting a clear instruction seasonally from the Investment Protection Council.

5.Protection policies, professional advice and support on implementation

            The Investment Protection Council’s 2017 work plan has been through discussion session and has been ratified by the Chief of the Council accordingly. At the moment we have distributed the proposed performance outlines to the council members and currently open to suggestions for the year of 2018. (Attachment, 3)

             For instance, we have conducted research on the improvement of investment legal framework, appointed a working committee in accordance with the decision made during the Investment Protection Council session on 6th of April, and the joint-ordinances A/33, A/49 dated to 12th April, 2017 made by the Chairman of Secretariat of Ministry of Justice and Home Affairs and the Chairman of National Development Agency.

             Keeping in mind the end goal, in order to increase foreign investors' satisfaction, counteract and prevent future investment-related issues, and enhance work productivity between the state organizations and their internal administration at the dispute resolving level, "The Regulation is to prevent disputes and other issues at foreign arbitrary courts, resolve them through negotiations and tenets to follow if there should be an occurrence of dispute" ratified in accordance with the no.160 regulation by the Mongolian Government on 7th July 2017.

            We are working currently on simplifying the process to obtain licenses and permits, as well as decreasing the number of licenses.

           Within this framework, we are also working on making suggestions and decisions whether we should invalidate all types of permits, registrations, reviews and legal acts which the ministries, agencies, local administrations give out.

On the preliminary stage of the research, it has been stated that it is possible we could decrease the number of existing 1400 permits by 2-3 times.

6.Multilateral cooperation

             In order to improve and create a desirable environment for the investors, to create a national system for investment protection, to stabilize the policy measurements, we have cooperated along with the World Bank, other countries, foreign embassies and international organizations.

             Mongolian Government and Frontier company had held the "Invest Mongolia 2017" investment forum between 2017. 09. 04-05 at the Shangri-La Hotel. During the forum, there were 1115 investor-participants, and we had introduced to foreign investors our government policies and its ongoing activities.

             Additionally, the government of Mongolia and Frontier Company has been planning on organizing the "Tokyo-Invest Mongolia 2017" investment forum between 2017.11.20.-22 in Japan. In this forum, there would be about estimated of 100 investors interested in participating.

             In order to have a more intact relationship with the investors, to hear feedback from foreign investors, we are working hand in hand with the foreign embassies in Mongolia and have been actively conducting information sessions and meetings. For instance, on September 29 we held a meeting together with the representative of World Bank to Mongolia and had invited foreign ambassadors to discuss on investment protection issues, investment atmosphere and exchanged ideas respectfully.

             Moreover, we have had a unique gathering with particular investors and entrepreneurs, by teaming up with the Embassies of the People's Republic of China, the USA, and Japan, American Chamber of Commerce and People's Republic of China's Chamber of Commerce.

             In the structure of these gatherings, a joint talk was led with local associations, Mongolian National Chamber of Commerce and Industry, Ulaanbaatar Chamber of Commerce, American Chamber of Commerce in Mongolia, and Mongolia-British Chamber of Commerce to discuss further proceedings.

 7.Other Issues

             The Mongolian Government has been selected to be the World Investment Atmosphere Renewal Association founding member.

             The World Bank Group had given recognition for Mongolia on its excellent work establishing Investment Protection Council, and its continuous work in supporting the investment mechanisms, therefore, The World Bank Group has asked Mongolia to cooperate on becoming the founder country for the "World Investment Policy Renewal Forum."

             In this framework with the order from the Chief of Cabinet Secretariat of Government of Mongolia in June 20 2017, ordinance no.147 there has been an appointed committee made up of the 10 Secretariat of the Ministries and have planned and prepared accordingly to become the founding country for the “World Investment Forum” organized by the World Bank.

             The Prime Minister of Mongolia and his fellow representatives have successfully participated in the Investment Competitiveness Forum held at the city of Vienna, Austria dated between 2017.10.24-27.

 8. Additional information on future tasks

In cooperation with the International Finance Corporation there will be a generalized registration system known as SIRM, which can accumulate all the investors’ requests, complaints and later it will be introduced for public use, therefore we will conduct advertisement and study sessions in organizations as well as get ratification on its usage from the Government of Mongolia.

  1. We will be working with the US Embassy and the Japanese Embassy to establish a “One Stop Center” for all foreign investors. Also, have been working in direct contact with the US Embassy and the American Chamber of Commerce to work on projected proposals.
  2. We have invited professional experts on investment, trade and international legal treaty to prepare lawyers on such matters with the cooperation of Germany and US Embassy.
  3. The Prime Minister’s ordinance no.48 has been carried out to appoint a committee specialized to resolve issues dealing with hindrances the investors and business personnel face, also inconveniences caused by legal entities which provokes the investors’ rights.
  4. The National Development Place needs to propose a renewal policy and strategy projects for the Mongolian Investment atmosphere, and it needs to be introduced to the Investment Protetion Council.

 9. Public and the private sector’s consultative body

 “Public and the private sector’s consultative body” has been running by the supervision of Investment Protection Council and it was established by the Chief of Cabinet Secretariat of Government of Mongolia.

            The “Public and the private sector’s consultative body’s" leading priorities are too, first of all, provide related information to the Investment Protection Council, before drafting any legal document about any investment-related laws and regulations, always need to make sure that no mutual interest is being violated and to advise on each legal issue for the Investment Protection Council.

            This would be essential to keep in mind that its vital role should be that any legal decision will not be made without the inclusion of the private sector and specifically the investors.

            As of today we are working on the Investment Protection Council’s plan for the 2018 and outlining its priorities, which will be ratified by the Chief.

            Hereafter, we are planning to establish “ Agency that is responsible for regulation and inspection of violations, bans and illegal acts of accusations against the private sector and for the investors”

            Moreover, we are working on ratifying the protocol, strategy, and planning for the Investment Protection Council. We profoundly ask you to cooperate and support us. We dearly hope that our cooperation would unite us towards one goal and our work would be followed by many achievements.

 

 

 

 

  

           

            

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