18.08.2021

Enforcement proceedings in Mongolia

1. Introduction

A citizen of Mongolia is entitled under the Constitution of Mongolia to the right to:

  • appeal to the court for protection if the one considers his/her rights or freedoms granted by the laws of Mongolia or an international treaty to have been violated;
  • to be compensated for the damage illegally caused by others;
  • to receive legal assistance; to have evidence examined;
  • to a fair trial;
  • to be tried in one’s presence;
  • and to appeal against a court decision.

If any disputing Parties cannot reach an agreement by negotiations, they may file a claim to a domestic or foreign court or arbitration. Unless it is set forth in the agreement concluded by the Parties that any dispute or controversy shall be settled by arbitration, the claim shall be settled by the court according to the Civil procedure code of Mongolia.

As determined in the Law of Mongolia on the Court, the judicial system of Mongolia shall be independent in terms of its organization and shall consist of the Supreme Court, aimag[1] and capital city courts /the Appellate Courts/ and soum[2]or inter-soum and district courts /the Courts of first instance/. Soum, intersoum and district courts are the lower courts that hear all civil cases and settle them at first instance. The upper court or aimag and capital city courts decide appeals against decisions of the Court of First Instance. The Supreme Court is the highest level of Court in Mongolia and reviews decisions of the Aimag and the Capital City Courts. Some cases may be settled at first instance or appellate level by aimag and capital city courts or the Supreme Court provided that the case is subject to their special jurisdiction under the Law on the Court. The Supreme Court shall have specialized chambers on criminal, civil and administrative cases. The first instance and appellate court may have specialized chambers.  

Mongolian International Arbitration Center at the Mongolian National Chamber of Commerce and Industry (hereinafter the MIAC) is an internationally recognized permanent court of arbitration in Mongolia that has commenced its operation in 1960. The MIAC has its branches in 21 aimags. Currently, 51 local arbitrators qualified in law, economics, finance, and mining and 11 foreign arbitrators (from the Russian Federation, the People’s Republic of China, Federal Republic of Germany, Japan, Hong Kong, and Poland) are working at the MIAC.

2. Court decision

A citizen or legal entity is obliged to comply with any valid court decisions. In case of non-compliance with the court decision voluntarily, it shall be enforced in accordance with the grounds and procedures specified in the Civil procedure code of Mongolia. Enforcement of domestic and foreign court decisions or arbitral awards is regulated in the Law of Mongolia on Enforcement of the Court Decision and International treaties of Mongolia.

Foreign court decision: Mongolia has acceded to the 1954 Convention on Civil Procedure in 1999. The enforcement proceeding shall be conducted in the territory of Mongolia on the basis of the decision of foreign courts and international courts and arbitral awards if provided in an international treaty to which Mongolia is a party. The State, on the territory of which the execution of a judicial document is to be affected, may refuse to enforce it if the State considers that its sovereignty or its security would be prejudiced thereby according to the Convention on Civil Procedure. The procedure to implement the foreign court decisions is enforced in the same way as the arbitral award.

Domestic court decision. The ground to enforce the court decision shall be a writ of execution certified by the court decision according to the Civil procedure code of Mongolia. Civil enforcement proceedings shall not be initiated if the following period has passed:

  • 4 years from the date of entry into force of a court decision on civil claims that are settled together with civil case and criminal case;
  • 4 years from the date of entry into force of a judge’s order on a case settled in a simplified procedure;
  • 3 years from the date of entry into force of the decision of a foreign court and international court, or arbitral award;
  • 2 years from the entry into force of a judge’s order on taking measures to ensure the execution of a court decision, etc.

The judge shall issue an order to enforce a court decision upon the following grounds:

  • the payee has applied for enforcement of the court decision;
  • the judge ruled that it is urgent to execute the court decision immediately.

The bailiff may implement from the following types of enforcement actions in order to enforce the court decision:

  • to obtain in accordance with the laws information on whether there is any property in the ownership of the payer, to withdraw from the payer’s savings and current accounts, conduct body search and property search and inspection, and to seal, confiscate, and sell the property;
  • to testify the payer about the property and register the payer in the registration of debtors;
  • to deduct from the payer’s salary and other similar income;
  • to levy payment in accordance with laws from the payer’s property in the disposal of others;
  • other actions provided by law.

Monetary assets confiscated during civil enforcement proceedings shall be transferred to the payee within 3 working days.

1. Arbitral award

When Mongolia joined the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter the Convention) in 1997, it has declared that:

 

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.

 

Therefore, in accordance with the Convention each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. However, recognition and enforcement of an arbitral award may also be refused under the Convention if the competent authority in the country where recognition and enforcement is sought finds that:

  • the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
  • the recognition or enforcement of the award would be contrary to the public policy of that country.

Also, there are several specific circumstances under the Law of Mongolia on Arbitration in which a foreign arbitration will not be enforced:

  • one of the parties to the arbitration agreement has no legal capacity or the arbitration agreement is invalid;
  • a party responsible for the arbitral award had not received proper notice of the appointment of an arbitrator or of the arbitral proceedings and had been unable to participate in the arbitral proceeding and provide the response;
  • arbitral award is not contemplated by or not falling within the terms of the claim, or arbitral award is beyond the scope of the claim;
  • the composition of the arbitral tribunal and the arbitral proceeding are not in accordance with the agreement of the parties, or, in the absence of such an agreement, not in accordance with law of the country of jurisdiction;
  • the arbitral award is not valid, or enforcement of the award is suspended;
  • the subject-matter of the dispute is not capable of settlement by arbitration under the law of Mongolia;
  • the recognition or enforcement of the award would be contrary to the public policy of Mongolia.

The courts of Mongolia will enforce an arbitral award in Mongolia provided that such award:

  • is final;
  • is in relation to a dispute which is commercial in nature;
  • is confirmed by a judicial order in Mongolia;
  • is not in respect of taxes, a fine or a penalty; and
  • was not obtained in a manner and is not of a kind the enforcement of which is contrary to the public policy of Mongolia;

Under Article 48.1 of the Arbitration Law of Mongolia, the arbitral award shall be final and binding regardless of where it has been issued. A Party interested in the enforcement of the arbitral award shall submit a request for a writ of execution of the arbitral award to the court of the jurisdiction of the payer’s residence according to Article 184.2 and 184.3 of the Civil Procedure Code of Mongolia. Enforcement of the arbitral award shall be confirmed by a judge's order within 7 days from submission of the request. The judge shall immediately issue the writ of execution and deliver it to the payee, payer, and General Executive Agency of Court Decision within 7 days after issuance of the order.

For instance, Khan Resources LLC disputed to be compensated for the loss and damage caused to it due to the Government’s illegal action revoking the company’s license of uranium without any justifications in 2012. Causing damage and loss in an amount equal to USD 80 million and violating the Energy agreement and the Law of Mongolia on Investment, the Government of Mongolia has executed and satisfied the arbitral award in accordance with UNCITRAL Arbitration Rule wholly.

[1] Province – the administrative unit in Mongolia outside Ulaanbaatar, the capital city.

[2] Subdivision of aimag or province.

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