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Mongolia – Regulatory Framework For Investment: General Legal Guarantees And Obligations.

5 November, 2013

 

Legal News & Analysis – Asia Pacific – Mongolia


To ensure a stable regulatory framework, the Investment Law provides that any proposed amendment to or repeal of the Investment Law will only be effective upon the affirmative vote of at least two-thirds of members of Parliament. This could help to prevent arbitrary or sudden changes in the investment environment. Nonetheless, this provision may raise constitutional issues as it seeks to bind future parliaments.


Further, the State may issue a guarantee for stable tax treatment upon request by an investor in accordance with the Investment Law. If approved, an investor would be entitled to enjoy stable tax treatment for a specific period of time in the form of tax stabilisation certificates or investment agreements.


The Investment Law provides general legal guarantees of investments such as protection from nationalisation (by setting out conditions under which nationalisation is permitted), protection of intellectual property rights, the right to repatriate profits (following the payment of relevant taxes), and freedom to choose a dispute resolution forum.


Further, the Investment Law sets out general rights and obligations of investors in relation to their operations. Both foreign and domestic investors are obliged:


(a) to comply with Mongolian laws and regulations;
(b) to provide work and services that are in compliance with national and international standards;
(c) to maintain accounting records and registers in accordance with international standards;
(d) to provide necessary information to relevant state authorities, including tax authorities, on a timely manner;
(e) to implement investment activities that are in the interests of customers, environment-friendly, and supportive of human development;
(f) to pay social insurance and health insurance contributions in relation to their employees in accordance with applicable legislation;
(g) to provide training and improve the professional skills of employees and to introduce good corporate governance principles;
(h) to respect the traditions and customs of the Mongolian people; and
(i) for those who hold stabilisation certificates, to make investment in accordance with the Investment Law.


The relevant state authority may impose administrative sanctions on those who failed to comply with the statutory obligations specified in items (b) to (f) and (i). Imposition of sanctions for non-compliance with comparatively open-ended obligations could be problematic.

 

Index:

 

1. Overview

2. Scope Of The Law, State Regulation Of Investment

3. General Framework For Investment

5. Promotion of Investment

6. Sanctions, Conclusion

 

Hogan Lovells

 

For further information, please contact:

 

Michael Aldrich, Partner, Hogan Lovells
[email protected]

 

Chris Melville, Partner, Hogan Lovells
[email protected]

 

Anthony Woolley, Hogan Lovells
[email protected]

 

Nominchimeg Odsuren, Hogan Lovells
[email protected]

 

Solongoo Bayarsaikhan, Hogan Lovells
[email protected]

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