arbitration of mongolia full - Засвартай …1 arbitration of mongolia a. introduction (a)...

1

ARBITRATION OF MONGOLIA

A. Introduction

(a) Overview

1. Mongolia is a parliamentary republic that is currently governed by the Mongolian People’s Party, which won the last parliamentary elections in June 2008. Mongolia’s economy is centered on agriculture and mining with a large proportion of Mongolian industry focusing on exploitation of mineral resources such as copper, coal, tin, iron, tungsten and gold. The GDP of Mongolia in 2010 was estimated to be USD6.8 billion 218 and the population of Mongolia is around 2.8 million.

(b) Legal system

2. The legal system of Mongolia is a civil law system. Statutes are the main source of law in Mongolia and as of 2010, more than 350 laws exist. The right to adopt laws remains with the legislative branch of the State. Only members of the State Great Hural, the Government, and the President of Mongolia may initiate drafting of a law. The Supreme Court of Mongolia provides official interpretations for correct application of all laws except the Mongolian Constitution.

3. In 1990, the Mongolian people abolished the previous totalitarian regime, rejected the planned economy, and began a transition toward a new political system. This new choice was to develop a country respecting human rights, democratic values, the market economy, and the rule of law. This led to the complete reform of the legislative system and structure.

4. As precedent is not considered to be a source of law, the courts in the modern Mongolian legal system play no formal role as a source of law. In Mongolia, judges are supposed to only apply law, not create it. The court system in Mongolia is based on the continental legal system as practiced in Russia and Germany. It is not a common law system and therefore decisions issued by the various courts do not have precedential value and stare decisis does not apply. Judicial decisions of the Supreme Court of Mongolia, by contrast, are limited to individual cases. Although they are binding upon all courts and other persons for the particular purpose of that case, they have no further effect, and therefore, they do not become “law” in a general sense.

5. Mongolia has three levels of ordinary courts:

� Soum, intersoum and district courts have jurisdiction only at first instance and deal with misdemeanors and less serious crimes and civil disputes where the amount in dispute is less than Tug 10 million ($22,000). � Aimag courts, found in the aimag capitals, and the Capital City Court in Ulaanbaatar have first instance jurisdiction in cases of more serious crime and in civil matters where the amount in dispute is over Tug 10 million. They also deal with appeals from the lower level courts. The judges of these courts sit in both first instance and appeal cases.

2

� At the highest level is the Supreme Court in Ulaanbaatar which deals with any matters at first instance that are not specifically within the jurisdiction of the other courts and appeals from decisions of the aimag courts and the Capital City Court.

(c) History of arbitration

6. The Mongolian National Arbitration Court (MNAC) was founded on 2 July 1960 and forms part of the Mongolian National Chamber of Commerce and Industry (MNCCI). The first arbitration dispute was settled in Mongolia under the MNAC in 1967. In 1995, the Law on Foreign Trade Arbitration Court was adopted by Parliament of Mongolia. According to this law, the Foreign Trade Arbitration Court at the MNCCI was tasked to resolve disputes between Mongolian citizens, business entities and foreign citizens and foreign entities arising from of foreign trade agreements; disputes between foreign investors and local partners, and disputes between foreign business entities and recognized institutional arbitration in Mongolia. On May 09, 2003 a new Law on Arbitration which was based on the UNCITRAL Model law, was adopted by Parliament, replacing the previous law.

(d) Present trends in arbitration

(i) General attitude

7. Mongolian courts have a tradition of supporting arbitration and arbitration has a long history in Mongolia. There is therefore a strong arbitration culture amongst lawyers and judges, although arbitration carried out is still almost exclusively domestic arbitration (i.e. arbitration between two Mongolian parties). There is no separate regime for arbitration which involves a foreign party.

(ii) Arbitration compared to litigation

8. In Mongolia potential users of arbitration still appear to prefer the Mongolian courts as the favored arena to resolve disputes. Labor disputes are one category of dispute that is commonly arbitrated, but litigation is still the preferred method of dispute resolution.

(iii) Ad hoc arbitration compared to institutional arbitration

9. In Mongolia, there has not been any ad hoc arbitration in the last seven years, since the current arbitration law was passed, although ad hoc arbitration was carried out in Mongolia previously and ad hoc arbitration is provided for under the Arbitration Law 2003. All arbitrations carried out in Mongolia are institutional arbitrations run by the Mongolian National Arbitration Center. In the last three years, the Mongolian National Arbitration Center has administered 75 cases.

(iv) Popular places of arbitration

10. Most arbitration involving Mongolian parties will be carried out in Mongolia and it is unusual for Mongolian parties to agree to foreign arbitration, unless the foreign investor imposes a requirement for foreign arbitration. As between Mongolian parties, arbitrations in most cases

3

will be held in Mongolia itself. If parties agree to choose a foreign seat of arbitration, it is possible for Mongolian parties to arbitrate outside Mongolia, but this is very uncommon.

(v) Future developments

11. Mongolia has introduced a new draft arbitration law which has not yet been enacted but is expected to be passed by the Mongolian Parliament before July 2011. The reason for the change in the arbitration law is to create a more favorable legal environment and improve the interaction between the arbitration law and the Civil Procedure Code in Mongolia. In particular, the new arbitration law seeks to make it easier to obtain support from the Mongolian courts for arbitration, such as interim injunctions.

12. The proposed changes are aimed at encouraging parties to resort to arbitration rather than litigation. The new arbitration law also seeks to clarify and provide more guidance in relation to the current arbitration procedure in Mongolia, for example, in relation to the appointment of mediators. In addition, more provisions have been included in relation to ad hoc arbitration in the hope of encouraging more parties in Mongolia to attempt ad hoc arbitration.

B. Applicable Laws

(a) Law governing the arbitration (the lex arbitri)

(i) The lex arbitri

13. The main source of the lex arbitri is the Arbitration Law 2003 which applies only to arbitration which has its seat in Mongolia.

(ii) Secondary sources

14. Secondary sources of the lex arbitri include:

� The Civil Procedure Code 2002 which sets out procedures for the purpose of seeking interim injunction in support of arbitration, determining appeals on the jurisdiction of the tribunal, and enforcing both domestic and foreign arbitral awards; � The Law on Court Enforcement 2002 which governs enforcement of awards and expands on the Civil Procedure Code 2002 by providing more detail on the process of enforcement of arbitral awards by the Mongolian courts; � The Supreme Court Interpretation of the Arbitration Law which provides guidance and greater detail to the Arbitration Law, although it does not have binding effect; � The Civil Code which governs jurisdiction of the courts and the arbitral tribunal in conjunction with the Civil Procedure Code 2002; and � The 1958 New York Convention on Recognition and Enforcement which is considered part of Mongolian national law; (iii) Relationship between the lex arbitri and the arbitration rules

4

15. In Mongolia, the arbitration rules adopted by the parties cannot contradict the Arbitration Law 2003, which provides that the arbitration rules adopted by the parties must be adopted in accordance with Arbitration Law 2003. The Arbitration Rules of the MNAC, appendix to Decree No. 2 of the Council on the Mongolian National Chamber of Commerce on 16 June 2003, are the rules typically adopted between Mongolian parties.

(b) Key features of the lex arbitri

(i) Overview

16. The current Arbitration Law is based on the UNCITRAL Model Law 1985. The Arbitration Law is structured into 8 chapters:

a. Chapter 1 covers general provisions such as the definition of legal terms and the scope and purpose of the law; b. Chapter 2 covers the requirements for arbitration agreements and the rules governing the seeking of interim injunctions; c. Chapters 3 and 4 covers the constitution of the tribunal and the rules governing challenging the appointment of the tribunal, as well as the authority of the tribunal; d. Chapter 5 covers the conduct of arbitral proceedings; e. Chapter 6 covers the making of an award and termination of proceedings; f. Chapter 7 covers appeals and recourse against the award; and g. Chapter 8 covers the recognition and enforcement of arbitral awards. (ii) International arbitration compared to domestic arbitration

17. The arbitration regime in Mongolia does not distinguish between domestic and international arbitration.

(iii) Competence‐competence

18. The arbitral tribunal may rule on its own competence (per article 20 of the Arbitration Law 2003). A plea that the arbitral tribunal does not have jurisdiction cannot be raised any later than the time for submission of the statement of defence while a plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during arbitral proceedings. The matters referred to above may be determined by the arbitral tribunal either as a preliminary question or in an award on the merits.

(iv) Separability

19. Article 11.5 of the Arbitration Law 2003 provides that the arbitration agreement shall remain valid independent of the validity of the underlying contract between the parties.

(v) Other key features

5

20. Although the Arbitration Law 2003 is based on the UNCITRAL Model Law, it also contains additional provisions which clarify or supplement the Model Law provisions.

21. The most important of these are as follows:

� it prohibits certain classes of persons, such as members of the constitutional court, judges, prosecutors, court officers and others from acting as arbitrators; � there is express provision for the separability of the arbitration agreement; � there is express provision dealing with appointment of arbitrators where the parties fail to agree; � the default language for arbitration is Mongolian; � the requirements for the contents of an arbitration claim are the same as those set out in article 62 of the Mongolian Civil Procedure Code (which sets out that, amongst other things, the claim must state the full name and address of the claimant and the defendant, the basis of the claim, the value of the claim and supporting evidence for the claim); � there is express provision for confidentiality of the arbitral proceedings requires that the tribunal and the parties to arbitration are obliged to maintain the confidentiality of state secrets and confidential information of organizations and individuals that were revealed during the arbitration proceedings. (c) Conflicts of law

(i) Substantive law

22. The parties are free to choose the substantive law of the agreement. In the absence of express choice by the parties, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable. The Arbitration Law 2003 provides, at article 34, expressly for the conflict of laws rules which will apply.

(ii) Proof of foreign law

23. In Mongolia, foreign law is proven as a question of law by way of written submissions and authorities and not by way of expert witness.

(iii) Procedural law

24. Procedural law is generally governed by the Arbitration Law 2003 and the MNAC Arbitration Rules, but parties can agree to adopt other rules to suit their particular situation and this is quite often the case. It is not common for parties to adopt the rules of a foreign arbitral institution.

(iv) Law governing the arbitration agreement

25. The parties are free to choose the law governing the arbitration agreement. In most cases (and in the absence of express provision to the contrary), the governing law of the rest of the contract will also govern the arbitration agreement.

6

(v) Choice of transnational law

26. It is permitted under Mongolian law to adopt principles of the lex mercatoria to resolve a dispute, although in practice, it is rare for parties to choose a transnational law.

(d) Key international treaties and conventions

27. The key treaties Mongolia is a signatory to are:

� The New York Convention 1958; � The ICSID Convention 1965; � The 1972 Moscow Convention on the Settlement by Arbitration of Civil Law Disputes Resulting from the Relations of Economic and Scientific‐Technical Cooperation.

C. Arbitral Institutions

(a) Leading institutions

(i) Leading arbitral institutions

28. The Mongolian National Arbitration Court (MNAC) was founded on 2 July 1960 at the Mongolian National Chamber of Commerce and Industry. MNAC has its branches in the regions. Now there are 21 branch arbitration centers in Mongolia empowered to settle domestic disputes. MNAC is composed of the Chairman, Secretary General, arbitrators and staff.

29. The Mongolian Labor Union and Employer’s Union have jointly established a “Center for resolving a petition or claim from mining sector prior to court proceedings” and this institution carries out arbitral proceedings on mining disputes.

(ii) Popular foreign arbitral institutions

30. Mongolian parties prefer Asian dispute resolution centres such as the HKIAC or SIAC due to geographical proximity and convenience.

(b) Caseload

31. Statistics on the number of cases administered by the MNAC are as follows:

Year Number of cases 1995 3 /to date/ 1996 6 1997 11 1998 9 1999 5 2000 3 2001 8

7

2002 10 2003 30 2004 27 2005 29 2006 28 2007 31 2008 36 2009 38 2010 42 2011 46

32. The parties were largely Mongolian parties and the majority of disputes were in relation to commercial matters.

(c) Arbitration rules of the MNAC

(i) Overview of available arbitration rules

33. The Arbitration Rules of the MNAC was passed on 16 June 2003, as Appendix to Decree No. 2 of the Council of the Mongolian National Chamber of Commerce and Industry. The Rules are typically adopted in MNAC arbitrations and contain detailed provisions relating to, amongst other things, the timing for submission of pleadings, the form of pleadings, appointment and challenge of arbitrators, rules of evidence, confidentiality, the form and contents of the arbitral award, interim measures and the costs of arbitration.

(ii) Special features

34. Like the Arbitration Law 2003, the Arbitration Rules of the MNAC are loosely based on the UNCITRAL Model Law 1985 and therefore the relevant rules governing, for example, the definition of an arbitration agreement, the constitution of the arbitral tribunal or the competence of the tribunal to rule on its own jurisdiction are very similar to the UNCITRAL Model Law 1985.

35. Some special features include the definition of arbitral disputes (which is defined as ‘any dispute that the parties agreed to resolve by arbitration in accordance with Article 13.2 of the Mongolian Civil Procedure Code, the default language of the arbitration (Mongolian) and also a very detailed provision on the conduct of hearings and written proceedings.

D. The arbitration agreement

(a) Requirements for a valid arbitration agreement

36. The requirements for a valid arbitration agreement are similar to those in the UNCITRAL Model Law 1985. An arbitration agreement must be in writing and may be made before or after a dispute arises. The agreement may be contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the

8

agreement, or in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by another. Furthermore, a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and if the contract states that the reference is such as to make that clause part of the contract.

(b) Legal capacity

37. Article 13.2 of the Mongolian Civil Procedure Code provides that disputes between citizens and legal entities (which include government departments and ministries, as well as companies and partnerships) shall be resolved by arbitration if it is provided by law, international treaty to which Mongolia is a party or the litigants have agreed so through an arbitration agreement. There are otherwise no particular stipulations or restrictions as to who can be a party to an arbitration agreement.

(c) Arbitrability

(i) General position

38. There is no express restriction on arbitrability, provided the parties agree to arbitrate. However, in practice criminal matters and family disputes are not arbitrated in Mongolia.

(d) Split clauses

39. There is nothing under Mongolian law which suggests that split clauses are invalid.

E. Interim Measures and Court assistance

(a) Interim measures from the arbitral tribunal

(i) Available interim measures and related orders

40. It is not common in practice for tribunal ordered interim measures to be granted in Mongolia, although Article 21 of the Arbitration Law 2003 does contemplate that the tribunal will have the power to order interim measures should it wish to do so.

41. The power of the tribunal to order interim measures is very widely drafted, to: “order any party to take such interim measures of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute”.

(b) Court assistance

(i) Available court assistance

42. Article 8 of the Arbitration Law sets out in detail the areas in which court assistance is available in support of arbitration.

9

43. A key area of court assistance is the granting of interim measures, as provided for in Article 69 of the Civil Procedure Code and Article 13 of the Arbitration Law 2003.

44. Article 69 of the Civil Procedure Code provides that the court may take the following measures in order to secure implementation of a court decision to enforce an arbitral award:

a. seizing of money or property belonging to the party against which the measure is sought for the sum equal to amount of a claim; b. prohibiting the party against which the measure is sought from doing certain acts related to its property (for the sum equal to amount of a claim); c. freezing transactions on account of the party against which the measure is sought (for the sum equal to amount of a claim); and d. requiring an advance payment of money into Court. 45. The party against which the measure is sought may substitute one kind of security specified in Article 69 of the Civil Procedure Code with another, i.e. the party may make a payment into court in lieu of a freezing order on the party’s bank account.

46. Court assistance is also available in the following instances:

a. The appointment of an arbitrator where parties are unable to agree; b. Challenging the appointment of an arbitrator; c. Termination of an arbitrator’s appointment; d. Ruling on the jurisdiction of an arbitral tribunal on an appeal against the tribunal’s ruling; e. Taking of evidence; f. Application to set aside an award; and g. Recognition and enforcement of the award. (ii) Procedure and applicable tests

47. Typically an application for an interim injunction in support of arbitration can be obtained within a week and the application can be made ex parte to the court.

48. When making an order for interim measure, the court must take into consideration, inter alia, potential disruption of the day‐to‐day production of and services provided by a company, or the potential denial of an income source of the party against whom the measure is sought.

49. The main court assistance which is regularly applied for is interim injunction in support of arbitration.

(c) Whether to apply to the arbitral tribunal or to the courts

(i) Relative advantages and disadvantages

10

50. It is not common in practice for tribunal ordered interim measures to be granted in Mongolia. Rather almost all interim measures are obtained through the court and so there is no real basis for comparison.

(d) Court assistance in aid of foreign arbitrations

51. The courts in Mongolia are also able to assist in granting of an interim measure in support of a foreign arbitration, although this has not been tested yet.

F. Before the arbitration Commences

(a) Enforceability of multi‐tiered dispute resolution clauses

52. Multi‐tiered dispute resolution clauses are permitted, although they are not common. Mediation is a recognised form of dispute resolution in Mongolia but is not commonly used.

(b) Attitude towards alternative dispute resolution

53. Mongolian parties are not familiar with the concepts of mediation and negotiation – there is no general awareness of alternative dispute resolution. The Mongolian Ministry of Justice has implemented projects on alternative dispute resolution such as meditation by developing government agencies for setting up such a system and raising awareness amongst users of dispute resolution in Mongolia.

(c) Stay of court proceedings

54. A stay of court proceedings is available under Article 80 of the Civil Procedure Code. However, Article 80 sets out very narrow grounds for a stay of proceedings, and this does not include a stay of proceedings brought in breach of an agreement to arbitrate. Nonetheless, Mongolia is a signatory to the New York Convention and a Mongolian court would be obliged under Article II of the Convention, upon application by one of the parties, to refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

(d) Anti‐suit and anti‐arbitration injunctions

55. Mongolian courts do not recognize the concept of anti‐suit injunctions.

(e) Limitation periods

56. The limitation period for actions brought under Mongolian law are governed by Article 75 of the Civil Code. Unless otherwise stipulated by law, the general limitation period is ten years. However, there are certain exceptions to the general limitation period, namely:

� claims related to the performance contractual obligations shall have a three year limitation period;

11

� claims related to contractual obligations regarding immovable property shall have a six year limitation period; � claims related to obligations which must be to performed during a fixed time period shall have a three year limitation period; � claims related to damaging of another person’s property shall have a five year limitation period. 57. The limitation period starts running on the date which the claim arises. For example, if the defendant in an action was supposed to carry out a certain action but failed to do so, time starts to run from the time when the claimant was supposed to take action.

G. The arbitration Process

(a) Introduction

58. The MNAC Arbitration Rules typically apply to international or foreign‐related arbitrations in Mongolia, although as stated above, it is relatively rare for a foreign party to agree to arbitrate in Mongolia. The arbitral law that would apply would be the Arbitration Law 2003.

(b) Main stages of the arbitration

59. The major stages of an arbitration under the Arbitration Procedure (being the MNAC Arbitration Rules 2003 and the Arbitration Law 2003) are as follows:

a. Constitution of the arbitral tribunal. The default number of arbitrators is one or three arbitrators and the tribunal is typically constituted as a first step before the commencement of arbitral proceedings, pursuant to an arbitration agreement between the parties. Any challenge to the arbitral tribunal should be made at this stage in proceedings, and should be made within 15 days of the constitution of the arbitral tribunal. b. Submission of request for arbitration/statement of claim. The date on which the statement of claim (which also serves as a request for arbitration) is received by the arbitral tribunal shall, for all purposes, be deemed to be the date of the commencement of the arbitral proceedings. c. Filing of defence. Within 21 days of receiving the statement of claim, the respondent should file its defence; this time period can be extended for a month on the reasonable request of the respondent. d. Counterclaim. The respondent also has a right to submit a counterclaim at any time before the termination of proceedings, although if the respondent delays the proceedings by failing to submit its counterclaim without reasonable explanation, it shall bear any additional costs which arise as a result of the delay. e. Making of the award. Unless the parties agree otherwise, the award shall be rendered within 60 days after the tribunal receives the statement of claim, although this time limit may be extended by the agreement of the parties or if the tribunal has a reasonable reason for extension of this period.

12

(c) General principles

(i) Party autonomy

60. Parties have extensive autonomy under the MNAC Arbitration Rules and the Arbitration Law 2003. Parties are free to free to agree, inter alia, time periods, constitution of the tribunal, rules governing submission of evidence, the use of expert witnesses and settlement. Article 22 of the MNAC Arbitration Rules expressly states that “the parties are free to make the rules of proceedings” and party autonomy even extends to the right to agree whether oral hearings should be held or whether the parties wish the tribunal to decide the case on documentary evidence alone.

61. In practice, this is very much the case, with parties given autonomy to decide on all aspects of the arbitral process – this is respected by arbitrators in Mongolia and is a core tenet of Mongolian arbitration.

(ii) Equality of treatment

62. Equal treatment of parties is enshrined both in the Arbitration Law 2003 (at Article 22) and also in the MNAC Arbitration Rules (at Article 21). This is a fundamental principle under both the Arbitration Law 2003 and the MNAC Arbitration Rules and extends to, inter alia, giving each party a full opportunity to present its case, access to documents, to question other participants with permission of the arbitrator, to appoint experts or to challenge arbitrators, experts and interpreters.

(iii) Right to be heard

63. The right to be heard is a fundamental principle of both in the Arbitration Law 2003 (at Article 22) and also in the MNAC Arbitration Rules.

(iv) Place of arbitration

64. The parties are free to agree on the place of arbitration and there is no default seat under the MNAC Arbitration Rules. If the parties are unable to agree on the seat of arbitration then the arbitral tribunal shall determine the seat, having regard to the circumstances of the case, including the convenience of the parties. The arbitral tribunal may meet at any other place it considers appropriate for consultation amongst the arbitrators, hearing of witnesses, experts, or the parties or for inspection of goods, other property or documents.

(v) Language

65. The default language under both the MNAC Arbitration Rules and the Arbitration Law 2003 is Mongolian. However, the parties may agree another language for use in the arbitral proceedings. The arbitral tribunal may further order that any documentary evidence shall be accompanied by a translation into the language or languages agreed upon by the parties.

(vi) Default by a party

13

66. Default by a party is dealt with both in the MNAC Arbitration Rules and the Arbitration Law 2003. Unless otherwise agreed by the parties, the consequence of failure to serve a statement of claim is for the arbitration to be terminated. There is no “summary procedure” unless the parties agree otherwise – in the event the respondent fails to serve its defence the arbitral tribunal shall continue proceedings without treating such failure in itself as an admission of the claimant’s allegations. Finally, if either party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal will continue the proceeding and make an award on the evidence before it.

(vii) Representation

67. There is no express provision on whether foreign lawyers have the right of representation in arbitration matters conducted in Mongolia; if the parties are agreeable then it is permissible for a foreign lawyer to appear in Mongolian arbitration proceedings, although it would be common for the foreign lawyer to appear together with local counsel. There is no division between barristers and solicitors in Mongolia but there are very few local counsel with experience in handling foreign‐related arbitrations.

(d) Commencement of proceedings: Notice of arbitration and Request for Arbitration

68. The date on which the statement of claim is received by the arbitration court shall, for all purposes, be deemed to be the date of the commencement of the arbitral proceedings.

69. Under the MNAC Administered Arbitration Rules, the statement of claim shall include following matters:

• name and contact details of the parties; • demand of the dispute, rationale, legal instrument(s) out of or in relation to which the dispute arises; • description of the claim and indication of the amount involved; • arbitration agreement; • a proposal as to the number of arbitrators, if not previously agreed; • jurisdiction of the arbitration, language and governing law. 70. In practice, these requirements are often easily met and in many Mongolian arbitrations, a short statement of claim of about 3‐5 pages, excluding exhibits, is usually submitted. Exhibits would usually be limited, although the relevant contract(s), arbitration agreement(s) as well as corporate and other relevant Certificates are usually included.

(e) The tribunal

(i) Constituting the tribunal

(1) Number of arbitrators

14

71. The default number of arbitrators under the Arbitration Law 2003 is three whereas the default number of arbitrators under the MNAC Arbitration Rules is one or three.

(2) Appointment of arbitrators

72. As a starting point, the parties should attempt to agree on the number of arbitrators. If the parties are unable to agree the number of arbitrators, the number of arbitrators shall be three. There are no nationality restrictions on arbitrators appointed under either the MNAC Arbitration Rules and the Arbitration Law 2003.

73. The parties will then decide on the identity of the arbitrators – either by agreement if there is one arbitrator, or, in the case where the tribunal consists of three arbitrators, by appointment of one arbitrator each and the two arbitrators appointing a third arbitrator. If it is not possible to decide on the appointment of the third arbitrator, or the single arbitrator by the parties, then this may be referred to the Mongolian Court of Appeal and the Court of Appeal will appoint the arbitrator, having due regard to the arbitrator’s ability to act as arbitrator, independence and impartiality and any qualifications required by the parties.

(3) Multi‐party appointment of arbitrators

74. If a party fails to appoint the arbitrator within 21 days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within 21 days of their appointment, the appointment shall be made, upon request of a party, by the chairman of arbitration court.

(4) Choice of arbitrators

75. The MNAC maintains a panel of arbitrators and there are currently about 150 arbitrators on the panel, including international arbitrators from Russia, Singapore, Korea, Japan and China. MNAC arbitrators are appointed by the Commission of the Mongolian Trade and Industry Chamber for a term of three years. The arbitrators on MNAC possess a wide range of skill sets, including language capability, cultural familiarities, and familiarity with the mindsets of foreign parties coming to arbitrate in Mongolia.

(ii) Impartiality and independence of tribunal

76. The tribunal must be independent, impartial and fair. The arbitrator is obliged to disclose any circumstances likely to give rise to justifiable doubts as to the his impartiality or independence. If there are circumstances that give rise to justifiable doubts as to an arbitrator’s impartiality or independence, he/she may be challenged. However, parties may challenge the arbitrators designated by either party only for reasons it became aware or ought reasonably to have become aware of after the designation was made

(iii) Challenge and replacement of arbitrators

15

77. Both the MNAC Arbitration Rules and the Arbitration Law 2003 provide that the parties are free to agree on a procedure for challenging the appointment of an arbitrator, subject to the right to appeal to the Court of Appeal within 30 days should the challenge be unsuccessful. The decision of the Court of Appeal cannot be appealed against.

(iv) Liability of arbitrators and arbitral institutions

78. In practice, arbitrators and the MNAC are not immune from liability. Under Mongolian arbitration law there are no specific provisions in this regard.

(f) Preliminary steps and objections

(i) Preliminary meeting

79. Under the MNAC Arbitration Rules, as soon as the arbitral tribunal receives the file from the MNAC, the arbitral tribunal will draw up, on the basis of the documents or in the presence of the parties and in the light of their most recent submissions, a document defining its Terms of Reference. This document shall include the following particulars:

a. the full names of descriptions and addresses of the parties; b. nature of the dispute; c. arbitration fee; d. list of issues to be determined; e. the full names, descriptions and addresses of the arbitrators; f. place of the arbitration; g. language of arbitration; and h. applicable law. (ii) Objections to jurisdiction

(1) Procedure and practice

80. A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defense. The arbitral tribunal may rule on a jurisdictional challenge either as a preliminary question or in an award on the merits.

(2) Court involvement

81. Under the Arbitration Law 2003, if the tribunal rules as a preliminary question that it has jurisdiction, any party may appeal within 30 days after having received notice of that ruling to the Court of Appeal for a final ruling on the jurisdiction of the tribunal.

(g) Written submissions

(i) Overview

82. The written submissions include the following:

16

a. Submission of statement of claim. The statement of claim should contain, inter alia, the names and addresses of the parties, a description of the nature and circumstances giving rise to the claims, specification of the relief sought, the number of arbitrators, the place of the arbitration and the language and applicable law of the arbitration. b. Filing of defence. Within 21 days of receiving the statement of claim, the respondent should file its defence; this time period can be extended for a month on the reasonable request of the respondent. c. Counterclaim. The respondent also has a right to submit a counterclaim at any time before the termination of proceedings, although if the respondent delays the proceedings by failing to submit its counterclaim without reasonable explanation, it shall bear any additional costs which arise as a result of the delay. (ii) Format

83. There is no fixed format for the Statement of Claim, Statement of Defence and further submissions. Parties file submissions which differ significantly in form, and even the terminology used in these documents is not, in practice, consistently used.

84. Usually these pleadings are around 3‐6 pages in length, excluding exhibits, and filings often include particulars on both fact and law. Parties often include at least some supporting exhibits to the written submissions, and the volume of exhibits varies from case to case. There is no fixed practice on whether all documents exhibited with the submissions will be translated.

(h) Documents

85. Documentary evidence in Mongolian arbitration is limited to the exhibits to the pleadings. There is no additional stage of discovery or disclosure of documents.

(i) Factual witnesses

(i) Overview

86. Under Mongolian law, there are no strict rules on which persons may give evidence as a witness. Evidence in chief is typically given orally although a witness statement may also be prepared.

(ii) Format

87. Witness statements, if prepared, are typically quite short (a few pages) and the exhibits included (if any) are not extensive.

(j) Expert witnesses

(i) Overview

88. Expert witnesses are permitted in MNAC arbitrations. Unless otherwise agreed by the parties, the arbitral tribunal may appoint one or several experts on its own motion or upon the request of a

17

party. The expert witness will typically produce a written report to the tribunal and if any of the experts has different opinion than the others, he may issue separate report.

89. The arbitral tribunal may ask the parties to provide the expert with all necessary information, documents, goods and other objects, which are deemed relevant to the case.

(ii) Party‐appointed experts

90. It is permitted for the parties to request for the appointment of an expert but the expert witnesses will be appointed by the tribunal and will owe their duty to the tribunal. If the parties consider that there is a doubt as to the report submitted by the expert they may challenge the expert. This challenge shall be decided by the arbitral tribunal.

(iii) Tribunal‐appointed experts

91. All experts are appointed by the tribunal, although some experts will be appointed on the request of the parties.

(iv) Frequency and subject area

92. It is common for the tribunal to appoint technical experts such as engineers and architects. It is not common for the tribunal to appoint legal experts, rather the tribunal will rely on legal submissions by the parties legal counsel.

(k) Evidence

(i) Overview

93. Under the MNAC Arbitration Rules, which expressly govern the evidence which is submitted during the arbitration, any facts and documents which support of the statement of claim and statement of defense of the parties and which are significant for the settlement of the case by arbitration shall serve as evidence.

94. Evidence in MNAC arbitrations is expressly stated to consist of the explanations of the parties, of the third parties, of the representatives thereof, testimony of witnesses, written materials (contracts, agreements, protocols, specifications, invoices, remittance documents, customs declarations for clearance of goods through the border, certificates of quality etc.), materials in electronic form, physical objects, reports of experts and inspection reports.

95. The production and admission of evidence is therefore largely left to the tribunal’s discretion.

(ii) Applicable principles

96. Under MNAC arbitration Rules, the parties or their representatives shall have the burden of proving the facts relied on to support a claim or defense.

18

97. The parties, their representatives and the third party shall not be allowed to submit faulty evidence, or to collect evidence in any illegal way. Evidence collected in such manner shall be given little weight by the tribunal.

98. Evidence must be submitted prior to 7 days before the arbitral hearing and if the parties request to file new evidence during the course of the arbitral proceedings, the hearing may be suspended and the parties asked to submit the evidence for the tribunal’s consideration.

(l) Settlement

99. There are no express rules on the settlement of disputes after the commencement of arbitration – in practice this depends on agreement between the parties. The settlement will be set out in the form of a settlement agreement between the parties.

(m) The hearing

(i) Opening statements

100. The hearing is lead by the tribunal and not the parties – therefore there is no opening statement by the parties, rather the hearing shall start with the presentation of the report on the content of the case by the tribunal.

101. The presiding arbitrator will then ask whether the claimant supports its statement of claim, whether the defendant agrees with the claim and whether the parties are willing to attempt to settle the claim.

(ii) Procedure and practice

102. The hearing is led by the tribunal and once the opening statement by the tribunal is made (as detailed above), the arbitral tribunal shall hear the witnesses and experts and it is obliged to carefully study the evidence, written to otherwise.

103. At this point, the parties may ask questions of the witnesses and experts with the permission of presiding arbitrator. Upon examination of the evidence, the presiding arbitrator shall ask the participants whether there are any clarifications that need to be made.

104. Subsequently, the claimant and his representatives shall submit and prove the statement of claim. If the defendant does not agree with the claim, they shall submit a statement of defense with evidencing documents and the parties may exchange questions and answers.

105. During such exchange of questions and answers by the parties, the arbitral tribunal may put forward any questions at any time. After examining all evidences in the case carefully and hearing the statements and explanations of the participants, the arbitral tribunal shall conduct deliberations, make the award, announce the content of the decision and declare the hearing closed.

(iii) Practicalities

19

106. Transcripts of the arbitration will be taken and are available to the parties on request.

(n) Confidentiality

107. Article 32 of the Arbitration Law and Article 36 of the MNAC Arbitration Rules provide that the arbitral tribunal and parties shall maintain confidentiality of the government, organization and all persons disclosed during arbitral proceedings. The MNAC Arbitration Rules further provide that the MNAC shall keep the confidentiality of arbitration and shall conduct arbitration independently, fairly and promptly.

H. The award

(a) Types of awards

108. Mongolia law does not recognize any distinction between interim and final awards.

(b) Tribunal’s decision making process

(i) Exercise of discretion

109. The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute, and in all cases, the tribunal shall decide in accordance with the terms of the underlying contract (if any) and shall take into account the common practices of the trade applicable to the dispute.

(ii) Amiable compositeur and ex aequo et bono

110. Mongolian law does not contemplate that the arbitrator can act as amiable compositeur or decide the dispute ex aequo et bono.

(c) Form and content

111. The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated. The award shall state names of the arbitral tribunal or sole arbitrator, place of arbitration and its date, legal reasons of the arbitral award unless otherwise agreed by parties or the dispute is settled by the parties and the costs of the arbitration.

(d) Remedies

(i) Available remedies

112. Damages are available through the Mongolian courts and are the most commonly granted remedy. Specific performance is relatively uncommon.

(ii) Damages – applicable principles

20

113. The Civil Code governs the recovery of damages in Mongolia. The principles for computing and proving damages are not expressly set out, but generally the party which is claiming damages must be able to produce documentary or other evidence of its loss.

(e) Interest

114. There is no express law which governs the rate of interest charged but interest is normally awarded in practice. Interest is typically based on market rate of interest; there is no “court‐rate” of interest.

(f) Costs

(i) Categories of costs incurred

115. The main costs incurred in the arbitration include legal fees, arbitration fees, fees of the MNAC (if relevant), expert fees, hearing fees and disbursements of the tribunal.

(ii) Arbitrators’ fees and arbitral institution’s fees

116. Administrative fees for international and domestic commercial arbitration are set out below:

International trade arbitration /USD/ Domestic trade arbitration /MNT/ Amount of dispute Arbitration fee 100 50 0‐10000 1500 101 ‐ 1000 60 plus 4.0 percent

excess over 100 10001‐50000 3000 plus 3 percent

excess over 10000 1001 ‐ 5000 300 plus 3.0 percent


excess over 50000 5001‐10000 350 plus 3.0 percent

excess over 5000 100001‐ 200000 20000 plus 4 percent








excess over 200000 500001‐800 000 80000 plus 3.5 percent


excess over 500000 800001‐1 000 000 100000 plus 3.5 percent


excess over 1000000 1000001‐5000000 150 000 plus 2.5

percent excess over 1000000

2000001‐5000000 32000 plus 0.5 percent excess over 2000000

5000001‐10000000 250 000 plus 2.5 percent excess over 5000000

5000001‐10000000 48000 plus 0.25 percent 10000001‐50000000 400 000 plus 2 percent

21

excess over 5000000 excess over 10000000 excess over 10000001 61000 plus 0.1 percent

excess over 10000000 50000001‐100000000 1 200 000 plus 1.7

percent excess over 50000000

Excess over 100000001 2050000 plus 1.5 percent excess over 100000001

(iii) Allocation of costs

(1) Applicable principles

117. The basic position in relation to allocation of costs, unless the parties agree otherwise, is that the costs of the arbitration will be borne by the losing party.

118. If the claim is partially satisfied, payment is allocated proportionally to each party.

(2) Procedure and taxation

119. The arbitral tribunal determines the actual cost of the arbitration by means of an arbitral award. The arbitration cost includes the arbitrators’ fees, expenses, witness costs, and the MNAC’s costs for institutional arbitration. The costs are determined by the tribunal and not the parties, so there is no taxation process.

(g) Correction, interpretation and supplementing of awards

120. Article 47 of the Arbitration Law 2003 provides as follows:

� Within thirty days of receipt of the award, unless another period of time has been agreed upon by the parties a party, with notice to the other party, may request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature. The arbitral tribunal may correct any such error on its own initiative within twenty days of the date of the award.

� Within thirty days of receipt of the award, unless another period of time has been agreed upon by the parties, if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award.

� Unless otherwise agreed by the parties, a party, with notice to the other party, may request, within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal considers the request to be justified, it shall make the additional award within sixty days.

121. A party shall submit his request in writing referring to paragraph 1, 2 and 3 of Article 47 (which are set out above) to the arbitration court. The chairman of the arbitration court shall state the time limit and shall oblige the arbitral tribunal to take the relevant measures or to give reply. If

22

the arbitral tribunal considers the request to be unjustified it shall inform the parties in writing within the time limit. If the arbitral tribunal considers the request to be justified, it shall make the correction or give the interpretation within the time limit. The interpretation shall form part of the award.

I. Challenge of awards

(a) Overview

122. Awards in Mongolian arbitrations may only be set‐aside, but may not be challenged on the merits.

(b) Setting aside

(i) Procedure

123. An application for the setting aside of an award must be made to the Mongolian Court of Appeal within three months from the date on which the party making the application had received the award.

124. The Court of Appeal, may, when asked to set aside an award, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the tribunal’s opinion will eliminate the grounds for setting aside.

(ii) Scope

125. There are limited grounds for the challenging of an award made in Mongolia, which are set out in Article 40 of the Arbitration Law 2003, and include:

� a party to the arbitration agreement was under some incapacity; � a party was not given proper notice of the arbitration or otherwise unable to present its case; � the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of the Arbitration Law 2003 from which the parties cannot derogate, or failing such agreement, was not in accordance with the Arbitration Law 2003; or � the award is in conflict with the public policy of Mongolia. 126. The court hears the challenge de novo and has discretion to refuse to set aside an award even though the grounds for a successful challenge are proven.

(iii) Case law

127. In the case of Shilegdorj, an arbitration was filed by one party against his business partners for failure to fulfill their contractual obligations. A third party (who was not party to the agreement to arbitrate) was brought in during arbitral proceedings and the tribunal’s eventual award was set aside on the grounds that there had been no grounds to involve the third party in the arbitration under Mongolian law. It is considered that this case was correctly decided – the third party was not a

23

party to the arbitration agreement and therefore although the tribunal allowed the third party to be brought into the arbitration, the court was correct to strike out the award.

(c) Substantive challenges

128. As noted above, awards in Mongolian arbitrations may be set‐aside, but may not be challenged on the merits.

J. Recognition and Enforcement of awards

(a) Overview

129. Mongolian law recognizes and enforces both awards made in Mongolia and awards made in a New York Convention state.

(b) awards made in Mongolia

(i) Procedure and timeline

130. The parties are legally bound to execute the arbitral award but if a party fails to do so, the other party may submit a request to the Court of Appeal to enforce the award. Such enforcement request must be submitted within three years of the making of the award, for both foreign and domestic awards. The party seeking to have the award enforced must supply the duly authenticated original award or duly certified copy thereof, and the original arbitration agreement or a duly certified copy of the same.

(ii) Grounds for refusing recognition and enforcement

131. The grounds for refusal to recognize and enforce and award are set out in Article 43 of the Arbitration Law 2003 and are the same grounds for the setting aside of an award by the Court of Appeal (as described in detail above). In addition, enforcement and recognition may be refused if the arbitral award is not valid or challenged or withdrawn by the tribunal, or the court of the place of arbitration.

(c) Foreign awards

(i) Overview

132. Mongolia is a New York Convention state and applies the Convention as follows:

� Mongolia will apply the Convention, on the basis of reciprocity, to the recognition and enforcement of arbitral awards made only in the territory of another Contracting State. � Mongolia will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of Mongolia. (ii) Grounds for refusing recognition and enforcement

24

133. The grounds for refusing recognition and enforcement of foreign awards are the same as the grounds for refusal of enforcement of a Mongolian award (as detailed above), which are substantively similar to those in the New York Convention.

(iii) Recognition and enforcement – in practice

134. It is generally quite easy to enforce a New York Convention award in Mongolia and there is a large body of court decisions (widely regarded as having been correctly decided) which support the enforcement of an arbitral award. On a review of the case law on enforcement it is clear that most foreign arbitral awards are enforced by the Mongolian courts.