On China’s doorstep: Elixir Energy drilling for Mongolian gas www.news.mn

Drilling is underway at Elixir Energy Limited’s (ASX:EXR) 100% owned Nomgon IX coalbed methane (CBM) production sharing contract (PSC).

Government to provide support for building meat and food storage facilities www.montsame.mn

Ulaanbaatar /MONTSAME/. An irregular meeting of the Cabinet today discussed draft decree on ‘Instructing the government’ initiated by President of Mongolia with a view to ensure safety of meat and food products and decided to convey some proposals to the draft.

Impact of the FATF grey listing on FDI into Mongolia www.melvilledalai.com

In October 2019, the Financial Action Task Force (“FATF”) included Mongolia into its watchlist (the so called “Grey List”). From the outset, this could increase the concerns of investors around economic stability, smooth
international transactions, and free flows of currency. If the Grey List status lasts for a significant length of time, this could develop into more serious problems, but we believe this status should be corrected within a
short-term period and do not expect that it will have a material medium or long-term impact on FDI.

POTENTIAL SHORT-TERM RISKS
Some short-term risks associated with the Grey Listing could include the following:
• Correspondent banks processing US dollar transactions with Mongolian commercial banks already face a significant regulatory burden and comparatively low transaction volumes. Enhanced oversight required as a consequence of the Grey Listing, could stretch existing relationships and impact on US
dollar transactions
• Mongolian commercial banks may limit transactions in US dollars as the MNT/USD exchange rate is put under increased pressure
• If Mongolia is not able to reverse the Grey Listing in the short-term, there is a risk of increased reliance on its neighbors, China and Russia, due to a greater perceived risk for US, European, Australian, and Asian investors may be enhanced

Regardless of the current Grey Listing, since the foreign investment boom into Mongolia between 2010-2012
(when ironically Mongolia was also on the Grey List), there have been numerous other issues and obstacles to attracting FDI. This is dependent upon various external and internal factors, but we believe Mongolia still has good potential to attract FDI. Some of the main points underpinning this are set out below.

1. STRATEGIC LOCATION AND DEMOCRACY IN THE REGION

Mongolia is regarded as the only democratic country located in North and Central Asia, sandwiched between China and Russia, two important players in the world economy and geopolitics. With an area of more than 1.5 million square kilometers and a population of about 3.2 million, Mongolia has recently topped lists as one of the world’s fastest growing economies, holding a massive wealth of mineral resources.

2. COMPARATIVELY LIBERAL LEGAL SYSTEM
Mongolia is considered as a Civil Law, and not a common law country. The Mongolian legal system, established by the 1992 Constitution, is a civil law system primarily based on the continental or Romano-Germanic tradition, where judicial decisions do not incorporate any binding rules into the body of law in the same way as judicial precedents in common law. The Civil Code of Mongolia itself is ostensibly modelled on the major continental European codifications, in particular the German Civil Code.
However, in practice, the sources of the Mongolian legal system are far more complex and diversified than is often described by academics. The reason for this is that several multilateral and development agencies, technical assistance programs and foreign advisors and academics from various countries have been involved in the drafting of new legislation. As a result, many business-related laws are somewhat similar to common business legislation used in western countries.
Furthermore, the Civil Code also sets out an important characteristic of the Mongolian legal system - the principle that commercial acts are lawful so long as they do not conflict with existing laws. In other words, Mongolia has adopted a principle similar to the common law notion of "that which is not prohibited is permitted."

3. INVESTMENT PROTECTION
Replacing the 1993 Law on Foreign Investment, and the controversial 2012 Law on the Regulation of Foreign Investment in Business Entities Operating in Sectors of Strategic Importance, the Parliament passed a new Investment Law in 2013. The Investment Law eased the regulatory approval requirements and streamlined the registration process for foreign direct investment. Further, it sets out certain legal guarantees and incentives so as to promote investment activity in Mongolia.
Some of the key features of the Investment Law are:
(a) It applies to both foreign and domestic direct investment;
(b) No approval requirements are imposed on foreign private investment;
(c) It provides legal guarantees to protect investment in Mongolia and sets out tax and non-tax incentives so as to promote investment in Mongolia;
(d) It offers tax stabilisation incentives in the form of tax stabilisation certificates and investment agreements; and
(e) Foreign invested business entities incorporated in Mongolia are eligilible to acquire most types of licenses.
More importantly, any illegal expropriation is prohibited and protection against expropriation is ensured in compliance with international standards and criteria of lawful expropriation. It is prohibited to expropriate investors’ property unlawfully. Further, subject to any Bilateral Investment Treaties,
investors’ property may be only expropriated if:
(a) the purpose of expropriation is solely for the public interest; and
(b) full compensation at market price is provided.
In addition, Mongolia is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention") and it is possible to enforce foreign commercial arbitral awards in Mongolia. Domestically, the Law on Arbitration ("Arbitration Law"), enacted on 26
January 2017, the Law on Civil Procedure, enacted on 10 January 2002 and the Law on Enforcement of Court Decisions, enacted on 10 January 2002 govern the procedure for the recognition and enforcement of foreign arbitral awards in Mongolia. Further, foreign investment is broadly protected by numerous instruments, such as international treaties, under which the Mongolian government has been brought to international arbitration by foreign entities, and arbitral awards have been enforced in Mongolia.

4. LOW CORPORATE INCOME TAX
Mongolia recently revised the Law on Business Entities Income Tax in March 2019. The revised law will be effective from 1 January 2020 and provides better incentives to business entities due to a decrease in income tax rates. For example, the 10% income tax rate threshold for business entities up to 3 billion MNT will be doubled to 6 billion MNT, and the 25% income tax rate will now apply to business entities with income above 6 billion MNT. Tax on business entities with income up to 300 million MNT will now be 1%. Further, the Revised Law promotes foreign investment by means of various provisions to secure stabilized tax.

5. SHAREHOLDER RIGHTS AND LIBERAL COMPANY LAW
The enactment of the revised Law on Company ("Company Law") in 2011 was an important step towards the government's aim of bringing Mongolian corporate governance standards closer to those found in more developed jurisdictions. The Law on Company secures fundamental shareholder rights and privileges. This includes typical pre-emptive rights, voting rights and the right to bring a derivative
suit against the governing persons of a company in the event of loss. Furthermore, a company’s charter or shareholder agreement can increase the standard thresholds for various approval requirements, and add other typical shareholder rights such as tag-along and drag-along rights.

6. OTHER POINTS
These fundamental points are all important factors to attract long term investment. Just to add several other advantages, the following can also be pointed out:
(a) there are no legal currency controls for international transactions;
(b) no residence and no-citizenship requirement for board directors and/or key managers of a Mongolian-invested company;
(c) all “Big 5” audit companies have a presence in Mongolia, and financial and tax reporting has been simplified in recent years; and
(d) foreign-invested companies can apply for all business licenses to legally the same extent as national companies.

7. CONCLUSION
To conclude, although Mongolia appears to have lost attraction for foreign investors in recent years, we consider that the basic fundamentals and system are in place to attract long term FDI into Mongolia.
In order to encourage FDI investment into the country, policy makers need to focus on some of the practical legal issues which impact all businesses. For example, in practice, there is still inconsistent enforcement of Mongolian regulations and laws. Some laws create disparities in understanding and
result in patchy and inconsistent enforcement. This sometimes gives government officials discretion to impose requirements that are not stipulated in the law, which can encourage corruption and malpractice at an administrative level. Likewise, the court system remains erratic and unpredictable,
which, in turn, damages the legal and business environment for FDI.

Air quality of Mongolia's capital improves in Oct. www.xinhuanet.com

Nov. 19 (Xinhua) -- The air quality in the Mongolian capital of Ulan Bator has improved, the country's National Statistics Office said Tuesday.

Speaker requests President to endorse the Constitutional amendment www.montsame.mn

Ulaanbaatar/MONTSAME/. On November 18, President Kh.Battulga was yesterday introduced the Constitutional amendments approved by the parliament last week and requested to endorse this original copy.

Forum on Responsible Artisanal and Small-scale Mining takes place www.montsame.mn

Ulaanbaatar /MONTSAME/ The Forum on Responsible Artisanal and Small-scale Mining was held today in connection with the completion of the Sustainable Artisanal Mining project. At the forum, over 250 representatives of corresponding ministries, international organizations, local authorities, and miners discussed the results of the 14-year project and policies and decisions being adopted in the field.

Mongolia warns against traveling to cholera-affected countries www.xinhuanet.com

Mongolian Health Ministry on Monday warned its citizens not to travel to countries affected by cholera outbreaks.

Investors don't seem to know what to make of the US-China trade war www.cnn.com

Hong Kong (CNN Business)A muddled view of US-China trade talks once again seems to be weighing on investors.

ACM annuls former PM decree on Dubai agreement www.zgm.mn

Administrative Court of Mongolia (ACM) annulled Former Prime Minister Saikhanbileg Chimed’s order No.27, 99 and 123 on the 2015 Dubai Agreement. The document covers the costly and several times delayed underground expansion of Oyu Tolgoi (OT). Darkhan Mongol Nogoon Negdel NGO had requested ACM to invalidate Saikhanbileg’s order, considering it violated the law. The court decision confirms that the deal was signed illegally and the Dubai agreement has become invalid. However, the Government of Mongolia has the right to appeal to the ACM decision. Erdenes Oyu Tolgoi LLC, the 34 percent shareholder of OT declined to give specific information on the matter. Amongst Mongolians, the Dubai deal refers to an agreement on the pathway forward for starting development of the underground mine, which was signed by representatives of the government of Mongolia, Rio Tinto and Turquoise Hill Resources at a meeting held in Dubai in May 2015. Oyu Tolgoi was launched in 2009 after an investment agreement granted Mongolia its share and the rest to Canada’s Ivanhoe Mines, now the Rio Tinto-controlled Turquoise Hill Resources. Oyu Tolgoi, a copper-gold mine in the South Gobi region of Mongolia, approximately 550 km south of the capital Ulaanbaatar, holds one of the largest undeveloped high-grade copper deposits in the world. Between 2010 and the third quarter of 2019, OT spent over USD three billion on national procurement, of which USD 523 million was spent on procurement from Umnugovi province. The company signed MNT 2.7 billion contract to purchase 5,000 locally made standard leather safety boots from Khos Az LLC for the next three years. Following the opening of the two new factories in Manlai soum, 64 new jobs were created.

Sexual harassment above the clouds! Mongolian Chief Justice to resign www.news.mn

Chairman of the Constitutional Court of Mongolia D.Odbayar has presented a letter of resignation. The request is expected to be discussed at a meeting of the Constitutional Court on 22 November at 11.00 a.m. D.Odbayar is due to return from a foreign trip on 21 November.