29 September, 2012


Legal News & Analysis – Asia Pacific – Mongolia


On 19 January 2012, the Parliament of Mongolia, the State Great Khural, adopted the Law on Regulating Public and Private Interests in Public Service and Preventing Conflicts of Interest (the "CIL"). The CIL came into effect on 1 May 2012.


The CIL aims to prevent conflicts of interest arising between the official duties and private interests of those in public service roles, and to regulate and monitor conflicts of interest in order to ensure that public service activities accord with the public interest and that transparency and faith in public services is maintained.


Those in "public service roles" are listed in the CIL, and we set out the full list further below. In this note we will use the term "public official".


A "conflict of interest" is defined in the CIL as circumstances where either (i) there is a conflict between the private interests of a public official and public interests which may arise when carrying out his/her official duties; or (ii) it is unlikely that a public official's official duties can be discharged in a fair and equitable manner.


"Private interest" is defined as the proprietary and other interests of a public official or his/her related persons which could affect the discharge of official duties by a public official.


The key features of the CIL are that it:


  • provides a definition of "public official" and his/her related and affiliated persons
  • requires public officials to make declarations in respect of "no conflict of interest", and public officials and nominees to public office or public official roles to make declarations in respect of their "private interests"
  • introduces a number restrictions applicable to public officials during their term of office/service and following their release from public office/service
  • deems agreements, contracts or licences that were entered into or obtained in breach of the law to be void.




The CIL applies to managerial and administrative-level officers of state political and administrative departments and agencies, and of the special services (police, bailiffs, court staff and the diplomatic service). It also applies to managerial-level officers of state support services (education, health and welfare), state and local government-owned legal entities, legal entities with state and local government participation and non-governmental organizations which receive funds from the state and local budgets.


The CIL also applies to the related and affiliated persons of a public official. A "related person" is defined as one's father, mother, brother, sister, cohabitants; the father, mother, brother or sister of a spouse and other affiliated persons; and "affiliated person" is defined as individuals or legal entities who are connected with a public official through profit-generating activities.




The CIL imposes a number of obligations and prohibitions on public officials, principally:


  • an obligation to immediately report any form of duress, coercion or inappropriate influence in carrying out official duties
  • an obligation to report the receipt of any gifts, service fees and payments of a value of more than one month's salary, or when receipt occurs more than once, a value of more than three months' salary when aggregated over the course of one year, from entities other than family members and other relatives. Further, an obligation to transfer any gifts of a value of more than six months' salary to the state and in the event of receipt of such gifts/payments, not to undertake any official duties in connection with the donor entity for a period of two years thereafter
  • a prohibition on, in the course of their duties, carrying out any act, making any decision or exerting influence in relation to the same that would affect their own and/or their related persons' private interests
  • a prohibition on receipt of any payment of gifts, directly or indirectly, in return for fulfilling their official duties
  • a prohibition on engaging in other work except for businesses registered with the tax office as sole traders and which provide an income of no more than 8 times the minimum wage (approximately 11,232,000 Mongolian tugrugs or US$8,295) or income derived from economic and educational, not-for-profit activities.


Furthermore, within two years of stepping down from public office/service, a public official is prohibited from:


  • becoming a shareholder, owner or a partner of a business entity with which he/she was involved (by way of his/her decision-making powers) during his/her term in office
  • becoming employed/hired by business entity or organization which is in some way related to his/her prior official duties
  • with limited exceptions, entering into a contract or agreement or applying for a licence from the department/agency for which he/she worked
  • representing any person or entity before a department/agency at which he/she was employed.




In addition to the above obligations, a public official must file a private interest declaration within 30 days of appointment or election into office and annually (by 15 February) during his/her term of office/service. The CIL provides that such declaration shall be accessible to the public.


A public official must also declare that he/she is not conflicted prior to issuing administrative acts, undertaking administrative actions or entering into contracts or taking part in negotiations, and in the event of a conflict of interest or possible conflict of interest arising, refrain from undertaking such activity.


In this regard, on 25 April 2012 the Parliament of Mongolia adopted the Resolution on Registering, Reviewing and Safekeeping of Private Interest Declarations and Asset and Income Declarations of Officials (the "Resolution"), which provides that a no-conflict of interest declaration is required in the event of a conflict of interest or potential conflict of interest arising as part of the process of preparing decisions to be adopted by the President, Parliament, a member of the Government, a Government ministry or agency, regional governors, state-owned legal entities and/or legal entities with state participation, or in relation to the procurement or selection of goods and services for the state/local government.


The thresholds for determining whether a no-conflict of interest declaration needs to be made in terms of a public official's interest in a third party is if he/she holds 5 percent or more of the total shares of a listed company, or where the value of the shares held in a limited liability company exceeds his/her annual salary. Neither the CIL nor the Resolution expressly states whether indirect holdings would be included when calculating the threshold amount.




The CIL prescribes a range of administrative sanctions and disciplinary actions depending on the type of violation. Administrative sanctions include fines ranging from MNT 280,800 (approximately US$207) to MNT 702,000 (approximately US$518), repayment of the gift (or its equivalent value) or service fees, removal from office, and voiding of agreements, contracts and licences.

Disciplinary actions include warnings, reductions of pay by up to 30 per cent for three months, demotion and dismissal from public office.

In the event of a contract or agreement is entered or where a licence has been granted in violation of the provisions the CIL, a court may terminate such contracts or agreements and revoke the licence.




The enactment of the CIL is a further step in Mongolia's fight against corruption. Nevertheless, the success of the CIL will depend on its practical application. The Mongolian Anti-Corruption Agency has recently become more pro-active, and according to its records, as of 18 September 2012 approximately 46,000 public officials had submitted their Private Interest and Asset and Income Declarations. However, it remains to be seen if the Agency effectively uses the provisions of the CIL to pursue its mandate in Mongolia.



For further information, please contact:


Michael Aldrich, Partner, Hogan Lovells

[email protected] 


Chris Melville, Partner, Hogan Lovells


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