GILS Dispute Resolution: Mongolia

MONGOLIA

CASE №1:

On December 23, 2022, “A” LLC (or the Client of GRATA International Mongolia law firm) initiated legal proceedings in the court of first instance seeking compensation of MNT 426 068 124,50 for breach of contract obligations related to services provided to “B” LLC, along with an additional MNT 17 696 737,43 as fines, totaling MNT 443 764 861,93. 

On the other hand, “B” LLC filed a counterclaim seeking to invalidate a portion of the service agreement and the service payment amount listed in the appendix, which is denominated in USD. Additionally, they aim to compensate MNT 176 349 041 for damages resulting from the invalid agreement. The case was resolved in favor of "A" LLC by both the Civil Court of First Instance and the Court of Appeal. 

Case Summary: “A” LLC fulfilled its contractual obligations by providing timely work and services as per the service agreement with “B” LLC. Despite submitting work reports and invoices accordingly in a timely manner, “B” LLC failed to make the payment within the agreed period or fulfill its contractual obligations. 

On the contrary, “B” LLC filed a response with the court of first instance, contesting the portion of the aforementioned amount, or MNT 99 298 822,23 for transportation fee, along with the associated penalty. Furthermore, “B” LLC argued that the payment execution clause outlined in the service agreement between the parties violated the "Law on Execution of Payments in National Currency” or that the parties have agreed to the service fee in USD and agreed to pay in MNT (local currency). Consequently, “B” LLC deemed the agreement invalid and filed a counterclaim to the court of first instance for damages because of the depreciation of USD or currency of services agreement during the term of the Agreement. In this regard, “A” LLC filed a response to the court of the first instance, considering that the counterclaim demand made by “B” LLC is groundless, requested to dismiss the entire counterclaim. 

Court judgment: After a thorough examination of the claims presented by both parties, the Court of First Instance of Civil Affairs rendered its decision as follows: 

The portion of “A” LLC's claim for MNT 422 922 714,54 was satisfied, while the remaining claim of MNT 20 842 147,39 due to lack of written evidence and the counterclaim brought by “B” LLC against “A” LLC were dismissed respectively. 

Subsequently, “B” LLC initiated an appeal with the court of appeals contesting the decision of the court of first instance. Nevertheless, upon a comprehensive review of the case, the court of appeals dismissed the appeal initiated by the “B” LLC and affirmed the decision of the first instance court.

Bolormaa Volodya.