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Developing Mongolia's Legal Framework: A Needs Analysis
Foreword
The origins of this report lie in a letter sent by Mongolia's Prime Minister, Mr. Puntsagyn Jasrai, to the Asian Development Bank ("the ADB") in July 1993. In his letter, Mr. Jasrai referred to the essential role that a country's legal and regulatory framework plays in facilitating the effective operation of a market economy. The Prime Minister asked the ADB for technical assistance to support his Government's efforts in developing Mongolia's legal framework. He suggested that such assistance could include a study to identify gaps in the existing legal framework. "I consider," wrote Mr. Jasrai, "that the findings of such a study should prove to be of value not only to the Government but also to the donor community whose efforts in this area in the future could thereby be more carefully coordinated."
A special feature of the "law and development" project that began in early 1994 in response to the Prime Minister's request has been the cooperation it has engendered between the ADB and United Nations Volunteers. Altogether, six legal advisors have been fielded under the project. Two were engaged directly by the ADB, one as project coordinator and the other as a commercial and comparative law expert. The other four were recruited on behalf of the ADB by United Nations Volunteers. The four volunteers - from the Netherlands, Canada, New Zealand and the United States - each agreed to give their services for a period of at least one year to various branches of the Mongolian government and judiciary.
This report, although chiefly the handiwork of Ms. Stephanie McPhail, one of the United Nations volunteers, nevertheless incorporates the combined wisdom and experience of all those involved in this ADB project. It is our shared hope that the report will stimulate thought within both the Mongolian legal community and the foreign donor community on how best to achieve an effective and coordinated approach to the further development of Mongolia's legal framework.
During visits to Ulaanbaatar over the past two years, first to formulate the project and later to carry out periodic reviews, I have been assisted by the Ministry of Justice, the executing agency for the project. I particularly wish to thank Mr. N. Luvsanjav, the Minister of Justice, and his deputy, Mr. D. Sougar. Mr. A. Enkhjav, Ms. D. Haliuna and Mr. V. Bathkuu, all of the Ministry of Justice, provided encouragement and help at various stages. The support given to this project by Ms. H. Oyuntsetseg of the Ministry of Trade and Industry and Mr. D. Dembereltseren, Chief Justice of the Supreme Court, has also been appreciated.
Ross Clendon
Office of the General Counsel
Manila, October 1995
Introduction
This report has been written as part of a project to develop Mongolia's legal framework financed by the Asian Development Bank. It serves two purposes. One is to provide an outline of the process and the current state of Mongolia's legal reform as the country makes the transition to a market economy. The second is to reinforce the institutions involved in this reform. The emphasis has been placed on the commercial laws and the institutions responsible for the economic development of the country.
There is virtually nothing written specifically on the current legal system or laws of Mongolia, at least in languages other than Mongolian, and almost all of the research for this report was carried out by way of interviews and by studying translations of laws and other documents. Most of the interviews took place in Ulaanbaatar although members of the project team also organised visits to Bayan-Olgie and Dundgobi to meet with representatives of the legal profession working in those two aimags.
As the main author of this report, I would like to express my gratitude to the rest of the project team, in particular to Hélène Barra for her research and contributions on legal education and the Ministry of Justice, to Heimerick Jansem for his work on the judiciary and the General Prosecutor's Office, and to Gregory Richardson and Paul Robinson for their assistance with the appendices. Special thanks are due to my Mongolian counterpart, Urana, for her invaluable help and patience in translating, interpreting and providing general information; to Gabriele Crespi Reghi i, Professor of Comparative Law at the University of Pavia, for his input into the first chapter; to Gilles Blanchi, Deputy Director fo the International Development Law Institute, for his comments on an earlier draft; and to Ross Clendon, Senior Counsel at the Asian Development Bank, for his guidance and support.
Finally, I must record my gratitude to the wide cross-section of the Mongolian legal community who have assisted us. Without their availability, patience and openness, this report would never have been possible.
General Background
Mongolia is a large landlocked country situated on the northern plateau of Central Asia. Roughly three times the size of France, it covers an area of 600,000 square miles and has a populaton of only 2,200,000. Half of the inhabitants are under the age of 20 and approximately 650,000 people live in the capital city of Ulaanbaatar. The extreme continental climate means a short temperate summer followed by a lengthy winter with temperatures well below freezing. While there has been some industrial development, livestock breeding and crop farming remain the mainstays of the Mongolian economy.
The physical infrastructure is not well developed. Many small settlements have no power supply or heating. Telecommunications are limited but improving. Few roads outside the cities are paved, and with the vast distances vehicular transport is slow. The only major train line connects Mongolia with Russia and China. There are also regular flights to Russia, China and Kazakhstan, with further links anticipated. The recent link up with the Internet means that Mongolia is now connected in another way to the rest of the world.
The end of Soviet domination in 1990 and the collapse of the Council for Mutual Economic Assistance (CMEA), whose member states were Mongolia's main trading partners, forced Mongolia to begin what has been a rapid transition to a market economy. While Mongolia was theoretically independent, it had been very much subject to Russian influence for 70 years and its economic, social, political and legal institutions were closely modelled on those of the Soviet Union. During that period Mongolia adopted the civil law tradition of many European countries.
Mongolia's earlier legal traditions are less clear. From the twelfh century onwards, particularly under such famous rulers as Genghis Khan and Kublai Khan, Mongolia had been subject to customary law, much of it apparently unwritten. By the fifteenth century, the area that is modern-day Mongolia had broken into a number of separate, and often warring, khanates. Tibetan Buddhism gained ascendary in the sixteenth century, and thereafter Mongolia came increasingly under the influence of the new Manchu dynasty in China. Throughout the eighteenth and nineteenth centuries an alliance of Buddhist theocracy and secular Mongol aristocracy ruled Mongolia under Manchu suzerainty. The vast majority of Mongolians lived simply as either nomadic herders or monks. After the Chinese revolution of 1911, Mongolia declared its independence, subsequently becoming in 1924 the world's second communist state. This marked the beginning of the lengthy period of Soviet domination. Under communism, reminders of Mongolia's Buddhist past were ruthlessly suppressed.
In comparison with most other CMEA states, Mongolia is therefore making the transition to a western-style economy after a longer experimentation with a command economy, with less historical experience in the operation of a free market and without well-remembered and suitable indigenous legal traditions or structures to fall back on.
Mongolia does, however, have some advantages in making this transition. It has a well-educated population, substantial natural resources and proximity to the large Asian market. Recent times have been hard for Mongolians with rising unemployment, high inflation and many products in short supply, but this has been balanced by the young private sector keen to take advantage of the economic opportunities now offered. The period has been, and will continue to be, one of rapid change.
The Legislative Framework
Since 1990, Mongolia has moved rapidly to establish the legislative framework necessary for a market economy. The basic elements - laws on property, the creation and winding-up of business entities, contract and a fair marketplace - are now in place, as well as laws governing more complex areas such as banking, securities, tax and accounting. Not all of these laws are likely to prove adequate in the long term, however. The laws on property and contract are reasonably comprehensive, although the regulation of land use will need to be further addressed. The law on the creation and operation of business entities has recently been significantly amended but the law on bankcruptcy still awaits similar treatment. The laws aimed at establishing a fair marketplace have no proper enforcement or monitoring agency. Certain laws, particularly those covering financial matters, tend to be very general, and there are a number now on the books that need to be reinforced by detailed regulations.
After the pro-democracy demonstrations of 1990, followed by the breakdown of the CMEA trade and assistance arrangements the following year, Mongolia instituted a programme of economic and political reform designed to effect the transition to a market economy. It has since made rapid strides from the centralised ownership and decision making of a command economy to a freer and less regulated regime.
At least until recently, much effort and foreign technical assistance was concentrated on economic advice, and on the whole there was less emphasis on legal and structural reform. Yet the economic, social and political changes brought about by the passing of new laws must be supported by a proper legal and administrative infrastructure. To what extent the current laws serve the policy objectives of a market economy and how they are served in turn by the relevant institutions are two of the themes of this report.
There are a number of basic requirements for the legal framework of a market
economy to enable it to function properly. Some of
these will be the subject
of substantive law; others will be institutional. Obviously they can be grouped
differently, but
essentially they are:
Legal
Property rights. It is axiomatic that there must be rights of ownership in a market economy, as well as rules for the transfer of those rights. These rights and rules need to be defined by law, and in a civil law jurisdiction such as Mongolia this will generally mean regulation by the civil code.
Business entities. The law should provide for the formation, regulation and dissolution of business entities, and ideally should also define the rights of foreign-owned entities and foreign citizens to conduct business within a country's territory.
Contract. This is probably the principal means of transfer of ownership in a market economy, as well as the means through which labour is provided. In a civil law jurisdiction, the basic law of contract is found in the civil code, which will contain the requirements for entering into a contract, and remedies for breach. There will also be laws governing specific and more complex types of transaction.
Fair marketplace. In order to promote competition and to encourage new entities to enter the marketplace, the law needs to establish some control over monopolistic activities and unfair trading practices. Finding the correct balance for this is still problematic in most developed economies. Any regulation may also aim to minimise or eliminate the activities of state-owned enterprises which often are the legacy of a dirigist past and frequently still hold a monopoly on their market.
In addition, but perhaps not so basic, there should be laws on: Labour. The law will normally regulate the formation and powers of trade unions, employment contracts and collective bargaining, the right to strike and dismissal and redundancy.
Financial matters. The law will normally seek to regulate such areas as banking, securities and capital markets, currency exchange, taxation, insurance and general accounting practices.
Institutional
Administration. The laws and any ancillary regulations should be implemented and supervised by an impartial administration. To encourage entrepreneurship and market activity, it is important that decisions of administrative and quasi-judicial bodies be made according to clear and publicised rules and guidelines, and that all parties be treated fairly and impartially. In particular, there should be no special favours for state-owned enterprises, or discrimination against non-governmental or foreign entities in the way licences are granted or requirements are imposed.
Judiciary. If disputes arise, particularly between enterprises and the government, there needs to be a system for the interpretation and enforcement of the law that is independent of the executive and legislative branches of government. There may also be alternative methods of dispute resolution such as arbitration or mediation.
Publication. The entire body of laws, including all subsidiary legislative or administrative regulations, should meet certain tests of transparency. In particular, they should be widely publicised at the time of promulgation and thereafter be freely accessible to lawyers and general public alike.
Hand in hand with all these requirements, both legal and institutional, is the expectation that business entities will be able to operate in the market economy as freely as possible þ in other words, that they will have the right to contract with whomever they wish and however they wish, that they will be able to carry out whatever sort of trade or economic activity they wish, and that they will be able to move wherever they wish, subject only to such reasonable restrictions as may be laid down by law in order to ensure a just and democratic society and the free and fair operation of the market economy.
Unlike other former socialist countries, Mongolia did not have a suitable body of pre-Soviet legislation to revive after the passing of the command economy. As a consequence, Mongolia's national parliament, the Ikh Khural, has embarked on an extensive legislative programme and almost all of Mongoliaþs current laws date from the period between 1991 and the present.1 The legislative process itself is considered in the next chapter. How well the laws fit the requirements of a market economy and some of the practical issues regarding their implementation will be considered in the rest of this chapter.
Property Rights
The Constitution of 1992 is Mongolia's supreme legislative document and can only be amended by a three-quarters majority of the Ikh Khural. In addition to laying down Mongolia's constitutional framework, the Constitution enshrines a number of basic rights and freedoms. Among these are freedom of association, freedom of thought and religion, and the freedom to choose oneþs own employment. The rights include rights to education and medical care and to a healthy and safe environment. In addition, there is now a constitutional right to own property.
Prior to the adoption of the 1992 Constitution, changes had been made to the then existing civil code to permit ownership of private property. Article 16(3) of the Constitution now confers the right to the fair acquisition, possession and inheritance of movable and immovable property. State and public bodies may not appropriate private property except for public need and on payment of compensation.
The new Civil Code, which was enacted in 1994 and took effect on 1 January 1995, contains provisions governing the transfer of ownership and draws a distinction between ownership and possession. It appears, however, that this is not always understood. Many people talk of þowningþ their apartment, although privatisation of state-owned housing has not yet begun. Confusion hasalso arisen in determining whether property is that of an entity or of the individual who is looking after it. It is not always understood that it is possible for an employee to manage property on behalf of a company without owning it.
The Civil Code anticipates ownership singly, jointly by family members, or participatorily with many owners not related to each other. The right to revenues and profits belongs to the owner unless the law or a contract specifies otherwise. In the case of a chattel, transfer occurs on the physical handing over of the chattel to its acquirer, or on delivery, or on the handing over of a document such as a bill of lading. Owners and possessors have the right to prevent others from violating their rights, and are entitled to the revenues and profits gained by anyone illegally in possession.
In addition to the Constitution and the Civil Code, the main source of property rights is now the Land Law of 1994 which entered into effect on 1 April 1995. It regulates the possession, use and protection of the land and was one of three laws dealing with land that were passed by the Ikh Khural at the end of 1994.2
Although the Constitution provides for the private ownership of non-pastoral land, until now all land, both urban and rural, has continued to be owned by the state. Under the new Land Law, Mongolian citizens, business entities and organisations may be granted the right to lease state-owned land for up to 60 years with the possibility of an extension for a further 40 years. Not all types of land are covered by this, however. For instance, it is provided elsewhere in the Land Law that the initial term for a lease of farming land (i.e. arable as opposed to pastoral land) may not exceed 25 years. Irrespective of the term of lease, the new Land Law does not appear to permit the sale, pledge or transfer of a leasehold interest other than by inheritance. At least one local legal commentator has expressed a contrary view, claiming that it will be possible to effect transfers in certain limited circumstances. This is not immediately obvious from a reading of the only English translation of the law that is currently available. Whatever the true position, it needs to be appreciated that this is a new and untested law which had a difficult and unusually protracted passage through the Ikh Khural and it may take some time before its full legal implications become clear.
In addition to the uncertainties relating to possessory rights, the new Land Law also leaves uncertain the extent to which those who are eventually granted a lease of agricultural land will be restricted in the uses to which they can put their land. If the land use restrictions prove too onerous or unreasonable, this would obviously prove a deterrent to the establishment of private farms. Much will depend on the final form of a proposed law on land use payments. A draft law was introduced earlier this year but no agreement was reached during the spring parliamentary session.
At the time of writing, consideration was also being given to the drafting of a law to allow for the mortgage of land use rights. It is difficult at this stage to envisage the final shape of such a law, given the cautious approach taken under the Land Law and the continuing uncertainties surrounding the privatisation of both urban and rural land.
In order to implement the Land Law, at least as it applies to rural land, regulations have recently been promulgated by the government.3 The application of these regulations is likely to be a challenging task and amendments may become necessary as time goes by. The detailed procedures for land registration, for example, are still to be settled. These will need to assign administrative responsibility and establish the legal framework for adjudication, demarcation, survey and registration rights. Implementation will for the most part be at local government level where institutional capacity is at present limited. Although such a regulatory and institutional framework is essential to create an environment for private sector led development in both the rural and urban property markets, the task of establishing such a framework is likely to be costly and take several years.
The government has requested advisory technical assistance from the Asian Development Bank for implementation of the Land Law as it applies to the agriculture sector. The primary objective of the technical assistance will be to assist with the establishment of a legal and institutional infrastructure for land records management that is consistent with private rights in land and market-based land transactions. This request for assistance is being processed in conjunction with a proposed policy-based loan to the government in support of reforms in the agriculture sector. The loan is due to be considered by the ADB's board in late 1995.
Under the Land Law, there is nothing to preclude foreigners from owning or having an interest in business entities that obtain use or possessory rights to land. Individual foreigners may obtain a land use contract for five years with one possible extension for a further five years, but they are expressly forbidden from using land for pastoral animal husbandry and farming. These provisions may be contrasted with those in the Foreign Investment Law of 1993 which permit a foreign investor to lease land for up to 60 years with the possibility of renewal for a further 40 years.
Under the Constitution, ownership of all mineral wealth, forests, water resources and game rests with the state.
Business Entities
Under the central planning system, the state owned all enterprises of any significance and there was accordingly little need for the variety of forms of business entity common to societies with a market economy. After 1990, transfer of government ownership to the private sector became a centrepiece of the Mongolian economic reform programme. To date, the privatisation of about 45 percent of state-owned assets has been completed through a voucher-based system. The privatisation programme began in October 1991 with the free distribution of share vouchers to 1,989,889 Mongolians. Each citizen was given three red vouchers (with a nominal face value of Tug 1,000) and one blue voucher (with a nominal face value of Tug 7,000). Red vouchers could be freely traded or accumulated to buy small enterprises such as shops. Blue vouchers could only be exchanged through the newly created stock exchange for shares in larger enterprises.
With the completion of this so-called "voucher" privatisation, Mongolia is now moving into the second stage of the privatisation process, often referred to as "cash" privatisation to reflect the idea that remaining government shareholdings will be sold rather than distributed. These developments have served to focus attention on the forms of business entity able to operate under the new market conditions.
All forms of business entity permitted in Mongolia prior to July 1995 were governed by the Business Entities Law of 1991. This law is being replaced over a three-year transition period by th Law on Companies and Partnerships of 1995. The establishment of a business by a foreign investor is also regulated by the Foreign Investment Law of 1993.
The Business Entities Law was drafted hurriedly and was based on a conservative Hungarian law passed in 1988 during the early stages of that country's transition process. The new Law on Companies and Partnerships was drafted in late 1994, based on a variety of European and North American models, and came into force on 14 July 1995. A law on cooperatives was passed at around the same time and came into effect on 15 July 1995. Cooperatives are a form of entity similar to, but not to be confused with, partnerships and it is anticipated that they will be used largely in the agricultural sector for purposes such as marketing. No translation of the law on cooperatives is yet available.
The Business Entities Law governed - and at least in part will continue to govern - three types of enterprise: sole proprietorships, partnerships and companies.
Sole Proprietorships
Under the Business Entities Law, a sole proprietor is someone who carries on business for profit in a form other than that of a company or partnership and who is liable to the full extent of his or her personal assets. The sole proprietor is prohibited from being a member of any other business entity apart from holding shares in a joint-stock company, presumably in order not to reduce the security his or her property offers to creditors.
Like all other business entities, the sole proprietor is required under this law to register before commencing business. The new Law on Companies and Partnerships does not regulate sole proprietors. Its transitional provisions indicate an intention eventually to pass a new and separate law on sole proprietorships. It has also been suggested that sole proprietorships could be covered simply by the provisions of the Civil Code.4
Partnerships
The law on partnerships has changed little from the Business Entities Law to the Law on Companies and Partnerships. Two types of partnership were and are permitted þ limited and unlimited. In an unlimited partnership, all partners are liable, first, in relation to the amount of their contribution, and ultimately to the full extent of their assets. In a limited partnership, at least one partner is wholly liable, and the others to the amount of their respective contributions. Like the sole proprietor, unlimited partners are not permitted to be members of any other business apart from being a shareholder in a joint-stock company.
Under both the old and new provisions, partners in an unlimited partnership are entitled to a share of the profits and are liable for losses in proportion to their contribution. It seems that in dividing profit, account may now be taken of greter contributions by way of work and services. All partners have equal voting rights regardless of the size of their contribution. The partnership may not enter into transactions without the consent of all partners, although the management can be vested in particular partners by deed.
In a limited partnership, the unlimited partners must participate personally in partnership activities, while limited partners are unable to participate in management. Apart from this, there are no special rights or duties for those partners who have assumed unlimited liability. Limited partners may transfer their interest to someone else. There are grounds provided for expulsion of partners and the winding-up of the partnership.
Companies
Under both the Business Entities Law and the Law on Companies and Partnerships, two types of company were and are permitted - limited liability and joint-stock. The former resembles the German GmbH, the French SARL or the British private company. The joint-stock company is the approximate equivalent of the German AG, the French SA or the British public company. The new law introduces significant changes, simplifications and improvements to the former regime. Companies that were in existence before the new law came into effect have until May 1996 to bring their articles and memoranda into conformity with the new provisions, and until January 1998 to comply with the new minimum capital requirements.
The Law on Companies and Partnerships deals first with joint-stock companies and then limited liability companies. There are only a few provisions on the latter and they largely follow the provisions regulating joint-stock companies in such areas as administration, financial control and auditing, and reorganisation.
Joint-stock companies are formed by prospectus. Under the new law they must have more than 50 shareholders and an authorised capital of more than Tug 30 million ($65,000). Under both the old and new regimes, contributions could and can be made in cash or in kind but the latter are now subject to the verification of value by an independent auditor. Shares and debentures and their issue are now regulated.
The new law replaces the previous three-tier administration structure, which consisted of the general meeting, a board of directors and a supervisory board, with a simpler two-tier model, with the general meeting and a representative governing board of at least three members. This is probably more appropriate for the transitional phase. No reference is made to the general manager, who played an important role under previous Soviet law. There can be both ordinary and extraordinary meeting of shareholders, but the competence of the latter is not defined.
A detailed system for keeping the financial books of companies has been introduced, and, although it is not altogether clear based solely on a reading of the new law, it seems that a company must now appoint an auditor to supervise and inspect the management, verify the accounts, value the assets and examine individual transactions (see also section 6.4 below on auditing requirements). The implementation of these provisions may face problems with the acute shortage of qualified accountants in Mongolia. A company must also prepareannual accounts and an annual report and there is an indication of possible civil liability for directors and auditors who do not perform their duties.
Mergers are now dealt with in the new law which also includes some brief provisions on companies owned by the state.
A limited liability company need have only one member and may not have more
than 50. The authorised capital must be at least Tug
10 million ($22,000) and
at least 30 percent must be paid at the outset. The high capital requirement
is apparently to discourage
small entrepreneurs from engaging in foreign trade
through the medium of a company. Shares are all of equal value. They can be
transferred between members but if they are sold outside the company, the consent
of all members is required. The wisdom of
this is debatable, as is the decision
to subject limited liability companies to the same control procedures and financial
requirements
as joint-stock companies, as these may well turn out to be too
burdensome for the smaller limited liability company.
Registration and Reporting Requirements for Companies
Both the old and new laws contain some general provisions that apply to all business entities, such as those on registration. Under the Business Entities Law, the registering body was the State Tax Office or the local tax administration. The duty to register concerned primarily only the initial status or phase of an entityþs life. Under the new law, the registration agency appears to be different from the tax offices but it is not clearly stated. In fact, the intended establishment of a separate network has so far proved too difficult, expensive and time-consuming and so registration continues to be done through the tax offices. A different office may be set up in the future, possibly as part of the court system. Under the new law, more information must now be provided by companies on a continuing basis.
Financial reporting requirements under the Business Entities Law were vague. All business entities were subject to inspection by undefined state financial institutions, but the requirement to provide accounts was found not in the Business Entities Law itself but in the Accounting Law, which requires business entities to produce quarterly balance sheets and to keep accounts in single or double entry form. There are no new accounting requirements for partnerships under the new law but extensive provisions, as already mentioned, for companies.
Companies with Foreign Investment
The establishment of a business in Mongolia by a foreign concern is covered by the Foreign Investment Law of 1993. Its stated purpose is the encouragement of foreign investment, the protection of the property of foreign investors and the regulation of their operations. The law guarantees foreign investors no less fair treatment than that accorded to Mongolians.
A foregn investor is someone who invests for the purpose of establishing a business entity. Foreign businesses that simply wish to set up a branch office in Mongolia are covered by the Foreign Offices Liaison regulations, administered by the Ministry of Trade and Industry, which permit that to be done but prohibit the office from doing anything for the purpose of making a profit. A foreign business could set up a branch office and enter into a joint-venture at the same time under the Foreign Investment Law.
To establish a business where more than 20 percent of the registered capital is provided by a foreign investor, application must be made to the Ministry of Trade and Industry. In theory the Ministry is obliged to rule on the application within 60 days, although in practice it seems that this deadline is rarely met. Furthermore, time only starts to run after all relevant ministries have first given their respective approvals.
There are various criteria which the Ministry of Trade and Industry must apply when deciding on an application and these are set out in the law. Approximately 80 percent of applications are approved but only about half of these come to fruition. Despite its seeming simplicity, the procedure is bureaucratic and cumbersome.
Once an application has been approved, it is registered at and published by the State Tax Office. All of the registered capital, whether in cash or in kind, must be paid in Mongolia before the company starts business, which can discourage the registering of companies with a large capital.
A foreign investor is subject to Mongolia's laws and is liable to pay tax in Mongolia, but there are various favourable concessions given on both income tax and customs duty. Businesses involved in energy production, transportation or telecommunications receive a three-year tax holiday and tax relief of 50 percent for the following five years. Some mining businesses and those involved in oil, coal, chemical production, machinery and electronics may claim a five-year tax holiday. They will also be eligible for tax relief of 50 percent for the following five years. There is also an exemption from customs duty on the import of any technological equipment and machinery that forms the registered capital of the business, and on raw materials, spare parts and production materials.
There is a requirement to employ Mongolian labour unless special skills are needed that are not available within the country. This is dealt with by the Ministry of Population Policy and Labour.
Insolvency
The insolvency of all types of business entity referred to in the Business Entities Law is covered by the Bankruptcy Law of 1991. This law, incidentally, does not provide for personal bankruptcy in Mongolia except to the extent that an individual may be a sole proprietor. It is unclear how the Bankruptcy Law will be affected by the passage of the Law on Companies and Partnerships. The exclusion of individual entrepreneurs from the bankruptcy regime is probably wise, at least while Mongolia is still in the transition phase to a market economy.
Insolvency occurs when a business entity fails to meet the liabilities owed to its creditors on time. At that point the business entity is obliged to give notice to the court or, if it does not, a creditor can bring a claim. There is a penalty of Tug 1,500-3,000 ($3.26-$6.52) for owners and administrators of a business entity that fails to declare its insolvent status. All bankruptcy cases go before a court, whether begun by a creditor or the business entity.
The court's decision can be adjourned if the business entity guarantees to pay its creditors within the next three months. There does not seem to be an option for the creditor to refuse to accept such a guarantee.
Once a court declares a business entity bankrupt, trading activities must cease and various transactions made between the notice of hearing and the decision are deemed null and void. A meeting of creditors is organised by the court and, if there are more than seven creditors, a creditorsþ council must be formed which in turn may recommend someone to fill the role of trustee. If there are less than seven creditors, they also have the right to a creditors' council but the law does not specify whether a trustee is appointed in such a case.
The trustee is usually a court bailiff as Mongolia does not have a pool of insolvency practitioners. Neither do the bailiffs have any in-depth training in law or accountancy to enable them to handle the complex issues that may arise during an insolvency, particularly during a company winding up. The law gives very general rights to the trustee and does not specify any powers to deal with the personal property of members of bankrupt entities who are fully personally liable.
Under the Bankruptcy Law, if there are insufficient funds to pay all debts, the first call is for wages. Then all creditors are paid equally. The major weakness of the existing law is that there is no priority accorded to secured creditors. The law has no provision for payment of the trustee's fees, court costs or other costs of the insolvency, although a Supreme Court interpretation states that if the property realised is not sufficient to pay all creditors, then the legal costs (undefined) shall be paid after wages. Similarly, there is no priority for the payment of any unpaid taxes. However, the Civil Code also purports to deal with bankruptcy in its general provisions on winding-up of legal persons and gives a different sequence for paying out - payments due on claims for compensation for damage to life or health, wages, taxes, social insurance premiums and, finally, payments to creditors.
There is no provision whereby a company can restructure with the consent of creditors to avoid bankruptcy and no concept of receivership.
The Bankruptcy Law appears to be applied with increasing frequency to small business entities. However, a large number of remaining state-owned enterprises including banks are said to be technically insolvent but continue to trade, in some cases with a view to being privatised. It seems that their creditors, often other state-owned enterprises, are reluctant to pursue their remedies as the unlikelihood of recovering anything means that their own book assets will prove to be worthless. It is also unclear whether one state-owned enterprise can institute bankruptcy proceedings against another.
A business entity may also decide to wind-up voluntarily under the provisions of the Civil Code, in which case a liquidation commission is appointed. Claimants have between two and six months to make their claims and, as noted, the sequence for paying out is different from that under the Bankruptcy Law.
Contract
The general law on contract is found in the 1994 Civil Code. Apart from certain restrictions on the rights of minors and persons lacking capacity, all physical and legal persons5 have the right to enter into contracts. Although oral contracts may be valid, a large number of transactions will fall within the exceptions to this. For example, any contract between legal persons must be in writing and so must any contract to be performed in the future.
There are extensive provisions for declaring contracts void, including those made through fraud, duress or misrepresentation. In cases where the transaction was contrary to the good of the public or the state, any profits, and sometimes the consideration involved, are liable to be forfeited by the state.
The remedies for breach of contract are generally specific performance and damages, but the ability to recover compensatory damages is probably limited. There are many statements throughout the Civil Code to the effect that a party in breach is obliged to compensate for resulting loss, but this is probably restricted by Article 180 which defines the types and amount of compensation that may be paid. Parties are able to stipulate in advance the amount of compensation payable in the event of a breach, either in the form of compensatory damages or a penalty. However, in either case the amount paid by the defaulting party under Article 180 may not exceed 50 percent of the loss. It is not clear whether this rule also applies where no remedies are specified in the contract. There was a similar provision in the former Civil Code which was interpreted by the courts to mean that unpaid creditors could never be awarded more than 150 percent of an outstanding loan, no matter how long the debt had been due and no matter what the interest rate.
There are a large number of specific types of contract with their own provisions contracts for sale and purchase, pledge, employment and provision of services, hire, lease of land and buildings, auction, bailment and loan. Despite this, there are proposed laws that would deal with specific types of contract already covered, such as insurance, and that may repeat or even risk contradicting provisions of the Civil Code. There is even a proposal to have a separate law on contracts. This could render much of the Civil Code of questionable relevance or at least problematic as it has no higher legislative status than any other law, although the Civil Code does state that a court should not apply laws that contradict its general principles. There are no rules to resolve issues as to which provisions take precedence in questions relating to the conflict of laws.
As with some other laws, the provisions of the Civil Code need to be supported by appropriate administrative mechanisms. For example, an unpaid lender under a contract for pledge can recover the amount owing through a sale of the pledged goods and can claim priority over other creditors. However, there is no registry of pledges and no obligation on a borrower to tell a lender of any previous securities that may have been given over the same property. This has meant that borrowers can and do pledge one piece of property many times over.
The general limitation period for bringing a contract claim is three years, although this is subject to a number of exceptions and extensions.
Consideration is being given to whether there is a need to supplement the Civil Code with a commercial code. In a period of transition, and in a country where there are no separate commercial courts, the wisdom of this must be doubted.
Fair Marketplace
The concept of a fair marketplace is presently covered in Mongolia by two laws - the Consumer Protection Law of 1991 and the Unfair Competition Law of 1993.
Consumer Protection Law
This law gives the consumer the right to use quality products and services that comply with established standards. Producers must label goods or packaging with the quality, price, date of manufacture and warranty period. There are no exceptions, even for goods that are sold without any label or packaging as is the case with bread or vegetables. Products that may be harmful to health or the environment need a certificate of quality and warning labels, and need to comply with storage, transportation and consumption requirements.
If a seller is in breach of the law, the purchaser may be compensated by monetary damages for loss, or have the price reduced or the goods replaced. There is no provision under the Consumer Protection Law for compensation to be paid to a person who suffers damage but who was not the purchaser (although a claim could presumably still be brought under the provisions on tort found in the Civil Code which, in general terms, require a person who causes damage to the life or health of another to pay compensation). There are, however, provisions under which a purchaser could be awarded what appear to be punitive damages, and the defendant could be required to pay certain penalties to the state.
Unfair Competition Law
This law is designed to restrict state control over the competition of business entities in the marketplace and to regulate other activities impeding fair competition.
Business entities that, alone or acting together with other entities, account for over 50 percent of a particular market may not use this dominant position to create artificial shortages, use contract conditions to give themselves an unequal position, sell below cost or fix retail prices, make sales conditional on the purchase of other items or on not buying from competitors, refuse to deal with other entities in order to drive them out of the market, or demand that a competitor dissolve or shift itself. Neither can they enter into agreements with other dominant entities to hinder competition, buy up the shares of competitors, or jointly create a new entity to carry out monopolistic activities, unless the benefits of this to the leading spheres of the national economy, or to the population at large, or from making certain goods more competitive on foreign markets, exceed the damage caused to competition. Who is to make this decision is not specified.
Under the Unfair Competition Law, government and local administrations are in theory not allowed to prohibit or restrict economic activity or give preferential treatment to or discriminate against any business entity. Neither can they attempt to affect prices, divide the market, restrict any business entity from entering the market or force any entity out of the market.
There is no special supervisory body set up to administer this law. Complaints about its breach must be made to the Ikh Khural or to the government depending on which part of the law is in question. The courts are given the right to determine that a business entity is a monopoly or in a dominant position and can order the entity to halt activities in violation of the law.
Labour
The Labour Law of 1991 deals with most aspects of employment law. It provides for employment contracts to be by way of collective or individual contract. However, if there is a collective agreement in force, it seems to apply to all those who work for the particular enterprise, regardless of whether they want to be covered or not and regardless of their position in the hierarchy.
The law sets out public holidays, annual leave provisions, weekly hours of work and restrictions on the amount of overtime. It also governs the amount of wages that can be paid, although it is not clear to whom this applies, and there is a minimum wage fixed by the government.
There are provisions requiring the employer to take proper steps to protect health and safety in the workplace. If there is an industrial accident, the employer must investigate it, prepare a report and take any measures required under procedures set by the government. Other provisions govern dismissal and redundancy and outline the compensation that must be paid (up to three months' wages). There appears to be a presumption in favour of reinstatement.
Labour disputes are decided by the Labour Disputes Settlement Commission with the possibility of appeal to the courts.
Financial Laws
Banking
Banking activities are regulated by the Banking Law of 1991 (as amended) and the Currency Law of 1994. The Bank of Mongolia (sometimes referred to as the Mongol Bank) is the countryþs central bank, and as such is responsible for implementing the governmentþs monetary policy and supervising the activities of the commercial banks. Under the Banking Law, it is required to have a formal set of rules for administering the commercial banks, but as yet these do not exist. As a result, the Bank of Mongolia can, for example, put pressure on a commercial bank to make a particular loan. There is now a generally recognized need for a proper legal framework to govern the relationship between the central bank and the commercial banks, and in particular to require the Bank of Mongolia to treat all commercial banks equally. In support of the reform process, the Asian Development Bank and the World Bank are working together to give technical assistance for the support of policy, legal and regulatory banking system reform measures and to hasten the introduction of international bank accounting standards.
Critics of the current Banking Law point out that, among other things, it provides no legal basis for the liquidation or merger of commercial banks and that it lacks teeth with regard to regulating and enforcing the duties of commercial bank directors, in particular in the area of shareholder lending.
Commercial banks, of which there are currently 14,6 must have a minimum capital of Tug 400 million ($870,000). They may lend, hold deposits and carry out other normal banking functions. At present, no banks operate cheque accounts and there is no clearing house system. One bank has very recently installed a limited number of automatic teller machines, another has issued a debit card and a third can settle major credit card payments. Most business entities settle accounts among themselves using payment orders. A commercial bank is obliged to keep the affairs of its customers confidential.
Capital Markets
The Mongolian Stock Exchange was set up in Ulaanbaatar in 1991. Trading started on 7 February 1992 and has since been taking place on a twice-weekly basis. During the stock exchange's first 18 months of operation, the shares of 259 companies were traded. Over 400 companies are to be privatised during the "cash" privatisation programme now underway so trading activity can be expected to increase. Secondary trading began on 28 August 1995.
A Securities Law was approved in late 1994 and came into effect on 1 January 1995. The new law governs the activities of the stock exchange, regulates who may issue securities, outlines how public offerings may be made, and sets down the duties and powers of such capital market players as clearing houses, depository organisations and underwriters. Under the Securities Law, a Securities Commission has been established to administer the Securities Law and generally to oversee the activities of the stock exchange.
There are also some provisions governing securities in the Civil Code. It has already been suggested in some quarters that the Securities Law be reviewed.
Taxes and Duties
Taxes and duties are presently covered by at least ten separate laws, including a General Taxation Law, a Personal Income Tax Law, a Business Entity and Organisation Income Tax Law, a Customs Law and an Excise Tax Law. Some business entities claim that the combined effect of all these taxes is that they pay up to 70 percent of their gross income in taxes. Tax collection is not efficient, however, and tax inspectors do not have broad powers of search and seizure.
Accounting and Auditing Systems
The Accounting Law of 1993 requires business entities to adopt international accounting standards and to submit audited quarterly financial statements and reports to the Ministry of Finance. The ministry has prescribed a format promulgated by the International Accounting Standards Committee of the International Federation of Accountants for these reports, and implementation of this requirement is to become effective in 1995. By 1996, all financial statements of Mongolian business entities submitted to the ministry should conform to this revised reporting format. However, there is as yet no audit law in Mongolia.
Mongolia has three accounting associations: the Accounting Council (with 26 members), the National Association of Certified Public Accountants (with a membership of 200 associate unlicensed accountants), and the Union of Finance Specialists Association (comprising accountant members employed by he Ministry of Finance). Under the provisions of the Accounting Law, the Accounting Council is responsible for developing accounting forms and methodology and for training, and the Ministry of Finance is responsible for implementing all reforms to the accounting and auditing systems.
Despite these legislative advances, there is not yet a competent professional body of accountants in Mongolia with knowledge of international accounting and auditing standards. Full compliance with the Accounting Law is accordingly likely to be some time away.
Recommendations
To create a sound business environment, in particular one that facilitates the giving and obtaining of credit:
To encourage foreign investment, the approval process should be made less bureaucratic and cumbersome.
To promote the operation of a fair marketplace, Mongolia should consider the merits of following the example of those countries that have set up an independent monitoring agency.
To ensure consistency in legislation and to avoid confusion, the place of the Civil Code in the hierarchy of legislation should be clarified, and efforts should be made to ensure that proposed laws dealing with discrete areas of contractual requirements or tortious liability do not cover matters already dealt with in the Civil Code, except by way of amendment, if necessary, to the Civil Code.
The Legislative Process
Mongolia's laws pass relatively rapidly through the stages of drafting, standing committee consideration, parliamentary debate and enactment. This is partly due to the absence of public discussion and the short and general nature of the laws themselves. The legislative process would be enhanced by greater debate on policy issues, by the inclusion of a process for public input, and the creation of a separate drafting office with training for the drafters. This would assist in creating laws that are better defined, with proper enforcement measures and institutions, and that are conceptually consistent with other laws. The role of resolutions and decrees needs to be clarified and there is an urgent need for official translations of laws into English.
Mongolia's supreme legislative document is the Constitution and all laws and legal - instruments that are incompatible with it are void. After that the hierarchy of laws becomes less clear. The next layer should be the laws themselves followed by resolutions7 and decrees. However, as will be considered later in this chapter, there is sometimes a conflict, particularly between laws and resolutions, and it is not clear which are to prevail. In addition, ministers issue orders on procedural matters, although it is not clear where the power to do so comes from, and local khurals and governors have powers to pass - resolutions and issue ordinances on certain defined topics which are effective within their territories. These lower level forms of regulation are not covered in this report.
Outline of the Legislative Process
Mongolia has a unicameral parliamentary system and the Ikh Khural8 is its supreme legislative body.
It is difficult to describe the legislative process with complete accuracy. The process of law-making is relatively formalised, but not all laws seem to progress in the same way or at the same speed and different actors in the process seem to have different ideas of their respective roles.
The Ikh Khural has 76 members9 elected on the basis of universal suffrage for all citizens over the age of 18. Under the Constitution, elections are held every four years. The country is divided into single-member constituencies, with the member being the person who obtains the most votes at the election. However, after the communist Mongolian People's Revolutionary Party won 71 seats in the 1992 election, a change to a proportional representation system has been considered.
As well as passing laws, the Ikh Khural is also responsible for defining domestic, foreign and financial policy, laying down guidelines for the country's economic and social development and supervising the implementation of its laws and decisions.10 It sits in two sessions annually, spring and autumn, four days a week for a total of about 40 weeks. Beginning in 1990, the Ikh Khural embarked on a legislative programme which had seen more than 100 new pieces of legislation enacted by June 1995. The autumn 1995 session has approximately 20 draft laws scheduled for debate and so it does not appear that the pace of reform is slowing.
The Prime Minister is elected by the Ikh Khural which also appoints the ministers of the Cabinet, who do not need to be members of the Ikh Khural. Together, the Prime Minister, the two Deputy Prime Ministers and the Cabinet form what is known as the Government, which is responsible for the parliamentary legislative programme, although draft laws can also be put forward by the President or any member of the Ikh Khural.
The first stage in preparing a new law is usually the formation by the Government of a working group, normally up to five ministerial staff or others with relevant experience to consider suggestions for a bill and then to draft it. The working groups appear to have comlete flexibility as to how they go about their task. As discussed below, there is no formal procedure for public participation in the law making process, and it seems that this is the only stage at which members of the public and interest groups can put their views and suggestions forward.
A draft law, once completed by the working group, must be approved by various key ministries, such as Justice and Finance, before being presented by the relevant minister to the Government. At this stage, other ministries have the opportunity to put forward their comments through their own minister. The Government then presents the draft to the Ikh Khural.
Once there, the draft is considered by one of six parliamentary standing committees.11 Each committee must advise the others of the time and place of its discussions and members of the Ikh Khural may present their views in person or in writing. A draft law is discussed on a clause-by-clause basis, and the discussions cover both the policy and procedural aspects of the proposed law. The standing committee may approve the draft, send it back for redrafting, or reject it outright. The potentially powerful role given to the standing committees in the legislative process has been seen as creating difficulties for foreign advisors preparing a draft law, as the effect of the draft may be diluted by the changes made at the standing committee stage. Once a draft has been accepted, the standing committee passes it to the chairman of the Ikh Khural with a report on its discussions, one week before the law is due for debate. Other standing committees may also make a report, as may individual members who made opposing submissions.
The first reading consists of extensive debate leading to possible further redrafting. This is done by the same standing committee. There are only two readings, although it seems that there can be further amendment, at least for "editorial" purposes, after the second. Some laws become effective on a date set by government resolution. Otherwise, it is ten days after publication in the daily government newspaper Ardyn Erkh.
The proceedings of the Ikh Khural are videotaped and there is a short daily broadcast of the highlights on the television news.12 Despite provision in the law for the debates to be open to the public,13 this is subject to regulation by the Ikh Khural. In practice, it is difficult to get access, and visits are only permitted for a short time. The debates are also recorded and transcripts are held in the Ikh Khural library.
The President has the right to participate in parliamentary debate, as do the government ministers who are not duly elected members.
All members have assistance in their work from the secretariat of the Ikh Khural, which provides research and secretarial help and includes a number of legal advisors.
The chairman of the Ikh Khural sets the agenda for each session. There is a feeling within some ministries that priority is given to the bills of those ministries with more power, particularly those concerned with financial matters, rather than according to the importance and urgency of the legislation.
In practice, a draft law can proceed through the drafting and legislative processes to become law in a very short time. The working groups or ministries that prepare the drafts are usually given relatively little time to do so. Once on the Ikh Khural agenda, there is virtual certainty that a law will pass at that session, even if in an amended form. For example, the Business Entities Law of 1991 was drafted in one month and was passed shortly thereafter. This means little time for the consideration of policy issues or the means of implementation. Some contradictions in the commercial laws have been referred to in the first chapter. Te organisation of the necessary administrative measures is often left for consideration until after the law comes into effect. These problems could be alleviated to some extent by allowing greater time for the initial consideration of policy and drafting issues.
Role of the President
The President is the Head of State but has a restricted role in government. Election for the office is held separately from that for the members of the Ikh Khural, but the nominations are made by them. The present incumbent is from an opposition party. The President has various powers, most largely ceremonial, such as the ratification of treaties and the appointment and recall of diplomats. Presidential powers in the legislative arena are two -- the power of veto and the power to issue decrees.
The President may veto all laws passed and decisions made by the Ikh Khural, provided this is done within 72 hours. In practice, at present this power is of limited effect, as the veto can be overturned by a two-thirds majority of the Ikh Khural. It is not clear whether there is such a thing as a partial veto and if so what its consequences would be.
Decrees may be issued within the areas of the President's powers and need the consent of the Prime Minister.
Public Input
There is no recognised formal means for the public to have input into the legislative process. The government does not issue discussion papers on legislative proposals or distribute drafts of proposed laws. Neither is there any opportunity for public appearance at the standing committee stage. Some working groups have sought public comment and members of the public who take an interest in law reform do provide unsolicited comments.
As the laws begin to deal with more and more complex matters, and as the state becomes less involved in economic activity, informed parliamentary debate would be enhanced by having greater public input. Politicians and law drafters cannot be expected to see all the possible ramifications of a proposed law that potentially affected members of the public might be able to detect. This input would be particularly valuable at the standing committee stage, and should be accompanied by a system of public access to the drafts under discussion.
Legislative Drafting
Legislative drafting is theoretically the preserve of the Ministry of Justice and its team of law drafters, currently eight. In practice, however, most ministries use their own legal advisors to do their drafting, or it is done by the members of working groups.
Some comment must be made on the drafting style and problems with the process. Although having had access only to translations, which thus makes it difficult to comment authoritatively, it appears that the modern Mongolian drafting style is derivative of its socialist predecessor. While they can usually be commended for their brevity, Mongolian laws tend to be general, descriptive and vague. Normally few, if any, definitions are given. The laws often create rights but not duties, leave the implementing agencies undefined, and fail to set out procedures. To give some examples from the laws that have been mentioned in the first chapter:
Vagueness: Laws in Mongolia tend to create rights and not duties. This means that the laws do not specify who has the obligation to provide for the right that by law ought now to be fulfilled. For example, the Consumer Protection Law gives the consumer the right to receive true and complete information about products. It does not say whether the provider of this information is to be the manufacturer, the distributor, the wholesaler, the retailer, or some other party.
Definitions: Most Mongolian laws contain few, if any, definitions. For example, the Bankruptcy Law does not define the entities to which it applies. English translations generally show it as applicable only to companies. However, it has been said to apply also to sole proprietorships and partnerships because it became effective at the same time as the Business Entities Law and therefore can be assumed to cover the same range of entities. This is a dangerous method of interpretation. It would have been much clearer if terms were defined properly, even if this was accomplished by reference to another law. As it is, the Business Entities Law and the Bankruptcy Law seem to have been written with little conceptual regard for one another. Occasionally, definitions are given, but they are sometimes spoiled by vagueness. For example, the Business Entity and Organisation Income Tax Law defines the types of income subject to tax at some length and then concludes with "other income." It would have been clearer to have said that the law applies to all income with some defined exceptions.
Institutions: No ministry is ever designated in a law as being responsible for that law's implementation. Many laws refer to institutions without setting them up. For example, the Consumer Protection Law refers to consumer protection agencies as being, among other things, "the relevant state control organisations," without specifying which organisations these are or what is "relevant". Lack of procedure or supporting regulation: Many of the laws talk of doing things such as registering, but few set out the procedure, even in general terms. For example, the Business Entities Law required the publication of registration, but did not say who was to organise the publication, where the information was to be published, or how often. These types of uncertainty could be addressed by supporting resolutions dealing with procedural issues including forms and fees. This may also assist in helping create transparency in administrative decision making.
No Mongolian law ever states that it is repealing an earlier one. Some resolutions expressly repeal redundant legislation. However, as the Ikh Khural is the supreme legislative body, it is arguable from a constitutional point of view that these resolutions are invalid. It would be preferable, for reasons of both law and clarity, if the new laws themselves repealed old legislation, whether in whole or in part.
It should also be noted that there is no law on statutory interpretation to provide rules on matters such as whether the singular includes the plural, whether a later statute repeals an earlier one, or if the specific derogates from the general in the case of conflicting provisions.14
If these problems are not addressed, the possibility will remain for considerable administrative interpretation or uneven application of the laws which will create general uncertainty, and may in time undermine public and business confidence in the legal system.
Obviously Mongolia's law drafters have been working under some constraints. Many were practising earlier in their careers as prosecutors or advocates defending criminal cases. There was only a very small pool of legislative drafters before 1990. Using the Ministry of Justice as an example, none of the law drafters there has had any experience as a commercial lawyer, and, as most of the drafting effort is now directed towards civil and commercial laws, previous experience in criminal law is not an asset. There are no useful texts in Mongolian on drafting. If a foreign law has been chosen as a model, the choice has often been dictated by the familiarity of the drafter with the particular legislation, the influence of a foreign advisor, or simply its availability in a language with which the drafter is familiar.
There appears to be little or no contact between the different ministries' legal advisors on drafting, even though many are grappling with similar problems. Nor does there appear to be any system for checking the consistency of legislation.
Mongolia may wish to consider the practice of many countries and establish a separate legislative drafting office. All drafts and redrafts could be done by this office, including those required after the deliberations of the standing committees and the first and second readings in the Ikh Khural. This would require the ministries to set out the policy and administrative objectives of the law and allow the drafters to turn these into legislation. Tis office could also be responsible for checking the consistency of legislation.
Whether or not such an office is set up, drafting training is essential. It should ideally be in Mongolian, although the language problem may not be fundamental as long as the basic principles, particularly of analysis, are taught.
Government Resolutions
The power for the Government to issue resolutions (or what, in many countries, are known as regulations) is found in the Constitution. It is simply a blanket power to issue them in conformity with the "law."15
There is no guidance as to what the resolutions might cover. Their ambit seems very broad and in practice many of the resolutions that have been made do more than merely deal with the procedural fine points of administering a law. Some could be considered to be effectively legislating in their own right.
Supreme Court Interpretations
The Supreme Court has the right to issue interpretations of any law except the Constitution, on its own initiative or at the request of the Government, a ministry, the General Prosecutor or a lower court.
There are currently 62 interpretations, which can be obtained from the Supreme Court. The interpretations tend to be short, sometimes simply restating what is in the law or dealing with procedural matters rather than interpretation. For example, the interpretation of the Business Entities Law states that documents for registering a business entity must be filed in duplicate and the presenter should keep one copy. In many jurisdictions, these would be considered administrative matters better left to the registering authority itself. The same interpretation requires certain documents to be notarised. This might be considered law-making and would be more appropriately left to the Ikh Khural for decision. The interpretations might more usefully provide analyses of previous court decisions on specific issues.
Translations
Pursuant to Government Resolution No. 156, the provision of official translations of laws, decrees and resolutions is the sole responsibility of the Ministry of Justice. To date, 15 have been given "official translation" status: the Law on Aids Prevention, the Law on Companies and Partnerships, the Foreign Investment Law, the Law on Government Service, the Health Insurance Law, the Labour Law, the Police Law, the Law on the Protection of Items of Historical and Cultural Value, the Law on Statistics, the Law on Tobacco Hazards, and a package of recently passed environmental laws.
Legal translation is difficult, particularly as the Mongolian language is not specific in its terminology and does not have the range of legal vocabulary of some other languages. In addition, the staff of ministries involved in translation work have not received any training in translation techniques.
At present, there are many foreign advisors in Mongolia working on technical assistance projects who require a working knowledge of particular local laws. In the absence of official translations, and in many cases the absence of any translation at all, there has been a considerable call on the services of local translators. The resulting translations are of widely varying quality. Certain senior government officers have given their view that there are no more than ten people in Mongolia who have sufficient language and legal training to translate adequately complex legal material into English. Some consider even this number optimistic. It is probable that the number of qualified translators living abroad is equally small. Recently quoted fees for legal translations in Ulaanbaatar have ranged from $5 to $25 per double-spaced page. The latter figure is equivalent to a fortnight's salary for a high ranking civil servant. It should be noted, however, that inquiries made within Ulaanbaatar's international community also revealed that the fees actually being paid for translation services at the present time tend to be at the bottom end of this scale or even less.
There remains an urgent need for a pool of legal translators capable of translating from Mongolian into English.
Publications
The Department of Information Affairs of the Ministry of Justice is responsible for the dissemination of new legislation. This it does by publishing new legislation in the daily government newspaper Ardyn Erkh and in the government gazette Turiin Medeelel. The latter is issued four times a year and contains all laws and resolutions as they are passed. Ardyn Erkh also recently reprinted some of the main commercial laws.
In addition, commentary on new laws, although not the text, and items of general interest concerning law and recent court cases are published in the legal newspaper Tamga which is published every five days and is widely available on the streets. This paper is supported by five institutions concerned with law: the Ministry of Justice, the General Prosecutor's Office, the Police, the Supreme Court and the Association of Mongolian Advocates.
The Ministry of Justice keeps copies of all laws, amendments and resolutions, which may be purchased from the ministry. It hopes to have all laws on a computer network by the year 2000. In 1994 the ministry published a looseleaf volume containing 49 laws, chosen for their importance or because they were recent. This was distributed to other ministries and legal institutions such as the judiciary. Two companion volumes have now been prepared.
The Ministry of Justice is also responsible for the dissemination of information on new laws to the public. This is done by means of public lectures and press and radio interviews. In the aimags, this work is continued by the local administration. It seems to be well received, at least in the aimag of Bayan-Olgie where it is sufficiently popular for members of the public to make requests for particular topics.
Recommendations
Government and the Administration
Mongolia is administered chiefly by thirteen ministries together with a number of other government-related agencies. In many cases their responsibilities are overlapping, but there is little cooperation between them. Legal advice is not given a high priority, and some administrative organisations have no legal advisors at all. The primary task of the legal advisors in most ministries is to draft the necessary laws to create a regulatory framework for various aspects of the economy, in some cases prior to privatisation. These advisors, however, generally have no experience in the operation of a market economy, and few translated texts or models from which to work. Training in how to regulate areas of the economy, in drafting, and in languages or translation would therefore be beneficial.
Mongolia has a complex administrative structure that operates at many levels. This is a result of both the nomadic culture and the fact that the population is spread over a vast area. At the highest levels are the ministries and state departments. Below them are the aimag governments and further down are those of the soums, bags and horoos, each with its own body of officials. As the emphasis of this report is on central government, this local administration will not be considered.
The central Mongolian administration consists of ministries and departments charged with administering the legislation under their aegis,16 supervising its implementation, advising the government on proposed laws and decisions, providing information to the public on new legislation, and educating their staff.
Ministries
At the beginning of 1995, the government appointed a commission to consider a possible restructuring of the ministries. Preliminary reports and recommendations have been prepared by the Management Development Programme, 17 involving advisors from the top levels of government. It is anticipated that a plan for reform will be put before cabinet for approval in late 1995. Substantial changes are possible, but what follows is a brief survey of the work and legal resources of the present ministries and organisations most closely involved with the implementation and administration of the market economy. Accordingly, the Ministries of Culture, Defence, Health, Population Policy and Labour, and Science and Education have not been included.
Ministry of Energy, Geology and Mining
The Ministry of Energy, Geology and Mining is responsible for implementing energy policy, managing the mining industry 18 and conducting geological research. The ministry has a staff of about 60 people at its head office and 38,000 in the mines and power plants, with one legal advisor who has been involved in drafting a number of significant laws, such as those on energy and mineral resources. There will be substantial changes to the ministry's responsibilities with the proposed privatisation of parts of the energy sector and advice is needed on how to regulate energy distribution.
Ministry of External Relations
Mongolia has been steadily opening up to the rest of the world over the past three decades, a process which has been accelerated by the withdrawal of Soviet troops and other personnel. By 1990, Mongolia had diplomatic relations with over 100 states, although it maintains embassies in only a small number of them. The Ministry of External Relations is responsible for foreign policy and for negotiating bilateral trading agreements. It also takes an interest in the policy aspects of the Foreign Investment Law.
The ministry has a staff of around 100 in its Ulaanbaatar office. Its legal department has five diplomats trained in international law, but with little experience in commercial law. There is a particular need for expertise in legal translation, as all trading agreements must be translated into Mongolian.
Ministry of Finance
The Ministry of Finance is responsible for formulating the government's monetary policy, preparing the budget, overseeing foreign borrowing, and improving auditing and accounting standards. It also has an important role to play in the legislative process as it must approve all laws that go before the Ikh Khural. The ministry has a staff of around 70, with one legal advisor.
Ministry of Food and Agriculture
The Ministry of Food and Agriculture has overall responsibility for the agricultural sector and also for ensuring the countryþs food supply.
There are about 50 people employed at the ministryþs head office, including one legal advisor. The transition to a market economy has brought substantial changes to the ministry's work. Privatisation of herds and agricultural operations has largely taken place. Controls on wheat and meat prices are in the process of being lifted. With the disappearance of the old-style collective, the operation in the rural sector of various types of business entity, including the cooperative, will continue to be of particular interest to this ministry.
Ministry of Infrastructure Development
The Ministry of Infrastructure Development is responsible for the development of transportation, construction, housing, public services and communications.
Its staff of approximately 100 includes one legal advisor. Some areas presently under the ministry's control, such as telecommunications, are under consideration for privatisation. A suitable regulatory framework for telecommunications is in the process of being created.
Ministry of Justice
As well as legislative drafting, the Ministry of Justice is responsible for the operation of the penal system and the regulation of prosecutors and advocates. It has no administrative or supervisory role in the judiciary, but does assist in providing judges with further education. The ministry also registers organisations, such as trade unions and non-governmental organisations, and deals with matters of nationality.
It has a staff of around 50 at its head office, including eight law drafters and a number of others with legal training.
Ministry of Nature and the Environment
The Ministry of Nature and the Environment has ultimate responsibility for Mongolia's land use policies. Ministry staff have been responsible for introducing the new Land Law and for drafting the regulations that will facilitate its implementation. There is one legal advisor among the ministry's staff of around 50.
In addition to being responsible for the Land Law, the ministry was also responsible for the package of seven environmental laws considered during the spring 1995 session of the Ikh Khural, including the Environmental Protection Law which sets up the legal framework for the operation of laws dealing with specific parts of the environment.
Ministry of Trade and Industry
The Ministry of Trade and Industry is in charge of all industrial development, administers the Foreign Investment Law, grants approvals for joint ventures, deals with export promotion, and concludes trade and economic cooperation agreements with other countries on behalf of the government. It also supervises international conventions and multilateral agreements on foreign trade, and is responsible for Mongolia's application to join the World Trade Organisation (WTO).
In connection with the WTO accession process, which Mongolia hopes will be completed by the end of 1995, the Ministry of Trade and Industry has been given responsibility for revising the Customs Law of 1992, drafting a separate tariff law and revised Tariff Schedule, drafting an anti-dumping law, drafting amendments to the Excise Tax Law of 1993 and in general bringing all provisions relating to Mongolia's export/import controls into line with WTO requirements.
The Ministry's staff includes six legal officers in its treaty and law division, several of whom speak English and a number of other languages fluently and have studied in countries with a market economy.
Other Institutions
The Bank of Mongolia
As the countryþs central bank, the Bank of Mongolia is responsible for implementing the government's monetary policy and regulating the commercial banks. The Governor of the Bank of Mongolia is responsible directly to the Ikh Khural. Mongolia's banking system, which evolved from a monobanking system, currently comprises 14 commercial banks, mostly owned and controlled by state-owned and recently privatised enterprises.
The Bank has a staff of around 120. At the time of writing, this included one legal advisor and another was on a one-year banking law course in Germany. Both the Bank of Mongolia and the commercial banks have found it difficult to recruit legal staff with a high degree of banking expertise.
National Development Board
The National Development Board was set up in 1992 to replace the former Central Planning Bureau. It is responsible for strategic management of the economy and its principal tasks are to provide economic planning advice to the government, to determine guidelines and strategies for public investment and to coordinate foreign aid.
Its staff of around 60 does not include a legal advisor.
State Privatisation Commission
The State Privatisation Commission was set up in 1991 under the Privatisation Law to oversee the privatisation process. Although not directly responsible to the government, its chairman is one of the Deputy Prime Ministers. As the initial stages of privatisation are now completed, the commission is working on the cash privatisation of large industries, and on providing management training.
The commission's staff of 15 includes one lawyer.
There is obviously some overlap of responsibilities among the various ministries and associated institutions. For example, both the Ministry of Trade and Industry and the National Development Board have an interest in enterprise development. The Ministry of Finance, the Bank of Mongolia and the National Development Board all have interests in the coordination of foreign aid. The Ministry of Trade and Industry and the Ministry of External Relations share an interest in foreign trade agreements.
On the whole, most ministries appear understaffed in terms of legal advisors. Those legal advisors who exist are often obliged to carry out a wide variety of work, including drafting, for which they have had little or no training. In general, they are not expected to become specialised legal advisors, and legal advice has not traditionally been given a high priority.
Inter-ministerial cooperation, at least in the legal sphere, seems to be largely non-existent and there is little or no contact between legal advisors, even though they are often confronting similar legal problems. Some ministries have run seminars on new laws without inviting lawyers from other ministries. Although several ministries share the same difficulties with obtaining translations and model laws, overall there seems to be little sharing of the relevant documents or the information that is available, either on a formal or informal basis.
Resources
On the whole, most ministries appear to be well equipped with copies of the Mongolian laws and resolutions relevant to their work.
Apart from copies of laws, however, research facilities are few. There are no useful texts in Mongolian on the operation of the market economy. Many legal advisors spoke of the need for information and training on how a market economy works, how businesses and financial markets operate, and how the private sector is regulated. As well as general texts, legal staff also require better access to the legislation of other countries which they can evaluate and use as models.
Given tha most useful material, whether texts or model laws, is in a language other than Mongolian or Russian (which most professional staff speak and read fluently), there is an urgent need for translations. This need will never be met without a suitable pool of qualified translators. The language skills of translators should not be confined to English, particularly in light of the fact that most civil law jurisdictions use other languages.
Most ministries do not appear to pool information in a library. Assessing resources is difficult, as staff keep materials in locked cabinets, which are part of standard office equipment to prevent theft. It is therefore difficult to establish exactly what information each ministry has.
There are plans to establish a library at the Supreme Court, which would be open to all government staff. However, it is not known yet to what extent this will satisfy the need for commercial information. Possibly an additional library concentrating on business matters, practical texts and model documents could usefully be established or included as part of some other facility.
There is a reasonably comprehensive library at the Ikh Khural, with a lot of texts in English and other European languages on commercial and economic matters. However, although it is open to all government employees, it does not appear to be used much by them, even those with the necessary language skills.
There is a noticeable shortage of computer equipment in some ministries, while others seem reasonably well provided for. Some legal advisors have to write most of their work by hand because of lack of typing or computer facilities. Although computers are not necessary yet for legal research as there are no databases of Mongolian material, they could assist in the production and use of standard form documents and to store information.
Training
All ministerial legal advisors stressed the need for training of professional staff in how a market economy should operate and be regulated. While a few ministries have provided training, on the whole this seems to have been general in nature and not focused on the needs of legal staff. Of necessity, certain types of specialised training must be given, at least initially, by foreign experts. At present, legal staff are expected to draft legislation and resolutions governing the operation of an economic system which they do not yet fully understand. In order to determine the best method of regulating a free-market economy, there needs to be fuller knowledge of how such an economy operates, how different types of business work, how the financial and capital markets function, and so on. While most Mongolians would prefer overseas to in-country training, financial constraints will necessitate most training being carried out in-country, at least in the foreseeable future.
Working Conditions
Salaries of civil servants are often said to be low, and a number of ministerial legal advisors report that legal positions in the private sector would carry double the remuneration. However, there are certain compensations for those remaining in the government's employ. Under the Law on Government Service, civil servants are entitled to a number of fringe benefits, such as a large subsidy for health and social insurance, generous provisions on sick leave, and the payment of university fees for one child. Some legal staff are also able to supplement their income, for example, by carrying out translation work or sitting as an arbitrator.
Recommendations
The Judicial System
The Mongolian judiciary is now independent of the other branches of government. Over recent years there has been a considerable increase in the proportion of civil cases involving issues such as contract disputes and bankcruptcy. The 357 judges, however, have all been trained under the socialist system and it can be expected that many will find the new situations they will be called upon to deal with confusing. These has been little training. Court houses are also poorly equipped, sometimes even lacking court rooms. The judiciary would therefore benefit from further training in commercial matters and the provision of research and technical facilities.
The Constitution of 1992 formalised the separation of powers between the judicial and other branches of government, enshrining the judiciary's independent status. Under the previous system, while it was nominally independent, the judiciary was effectively controlled by the ruling communist party. Judges were appointed by committees of the party, and party membership was an unwritten requirement. The party could put pressure on a judge to decide a case in a particular way, and it was also common for citizens to use their personal contacts with high ranking officials to try to influence judicial decisions. Although the party had no power to override a judicial decision, it could summon the judge to appear before a party committee to explain the result, and this in turn could lead to the judge being discredited or simply not reappointed. Now judges are subject only to law, and judicial power is vested exclusively in the courts. The government must respect the independence and impartiality of the judiciary, and in turn judges must abstain from political activity.
The Constitution also introduced judicial standards that are embodied in the United Nations Basic Principles on the Independence of the Judiciary, such as the right to a fair trial, the right to counsel, and the presumption of innocence.
The court structure has been transformed by significantly reducing the number of courts, abolishing the military and railway courts and those for hearing disputes between state-owned enterprises, and introducing a constitutional court. A proposed draft law would see the creation of an administrative court system.
The Court System
Ordinary Courts
Mongolia has three levels of ordinary court:
The procedure for these courts is discussed later in this chapter.
Constitutional Court (Tsets)
Mongolia has followed the example of some other civil law countries and has established a constitutional court known as the Tsets. 20 This court examines and settles constitutional disputes at the request of the Ikh Khural, the President, the Prime Minister, the Supreme Court, the General Prosecutor, on its own initiative, or on the basis of petitions received from citizens. Most of its work involves the latter and it receives around 150 petitions and requests a year. However, a substantial number of these do not fall within its jurisdicti on and are transferred to the ordinary courts or other institutions. Most of the petitions that are considered concern human rights violations by state officials. For example, a recent case concerned the issue of whether the General Prosecutor breached the Constitution in the procedure adopted to investigate a complaint against a police officer.
The nine judges of the Tsets panel are appointed by the Ikh Khural for a term of six years. Members must be at least forty years old and experienced in politics and law. At present, eight are lawyers and one is a geologist. Four are full-time and five are part-time members.
Hearings are conducted before a panel of five. Decisions on the conformity of laws, decrees or international treaties with the Constitution must be submitted to the Ikh Khural for approval. If the approval is refused, the Tsets will reconsider with a full panel. The decision is then final and binding.
Judgments of the Constitutional Court are published in the government gazette and the government newspaper.
Some members of the legal community doubt the usefulness of having a separate court for constitutional matters and consider that its work would be better dealt with by the Supreme Court.
The General Council of Courts
In order o help ensure the independence of the judiciary, the General Council of Courts was created.21 It has twelve members: the Chief Justice, the General Prosecutor, the Minister of Justice, a secretary appointed by the President,22 two members appointed by the Supreme Court, two by the Ikh Khural, two representi ng the aimag and Capital City courts, and two representing the courts of first instance.
The role of the Council includes submitting proposals to the Ikh Khural about the judiciaryþs budget, personnel and court buildings, recommending candidates for appointment to the judiciary, organising training courses for judges, and making rank23 and other additional payments to judges and court officials.
In November 1994, the Council issued an outline of its proposed programme to ensure the independence of the judiciary for the years 1995 - 2000. The programme focuses primarily on perceived material needs, but also addresses training. It has been submitted to the Ikh Khural for approval.
In 1995, the Council established a judicial professional committee of nine experienced jurists to examine the qualifications of present and future judges. At the time of writing, it is in the process of finalising a code of ethics for judges. It also proposes setting up judicial disciplinary committees to review judges' conduct and impose sanctions, although as yet judicial discipline has not been a problem.
Court Procedure
Formerly trials were inquisitorial, with the emphasis on pre-trial investigation, and there was close cooperation between the judge, prosecutor and advocates to establish the objective truth. The trials themselves were effectively run by the prosecutors who put pressure on judges to decide cases in conformity with the party line, and who generally supervised and controlled judicial activities.
Mongolia has now adopted the adversarial system for all trials, although they do not yet operate in a manner resembling trials in those countries with the same system. In particular, the advocates are not obviously assertive on behalf of their clients and hearings are generally dominated by the judges. Both advocates and judges may be assisted by some training in this area.
When a case is submitted to the court, the allocated judge invites the defendant to a meeting to determine whether there is a defence or if the matter will be contested. This is the first of what may be several meetings between the judge and one of the parties without the other. If settlement is not possible, a date is allocated for the hearing, usually no more than two months after filing. Prior to the hearing the parties may submit written statements, documents and other evidence to the court. However, there are no interlocutory procedures available such as discovery or interrogatories.
Trials are held in public. All evidence mst be presented at the hearing and a transcript is made by the court secretary. Judges must base their decision on the evidence presented and may not rely on their own knowledge. Decisions are made after hearing the opinion of the citizensþ representatives.24 If there is more than one judge on the bench, the decision is made by majority vote. A hand-written judgment is generally given at the end of the hearing and a typed version is provided later. If there is a dissenting judgment, the case will automatically be reviewed by a higher court. The average civil judgment is three pages long with an outline of the facts found and an analysis of the relevant law.
The Civil Procedure Code does not provide methods by which a trial may be shortened, such as the provision of agreed statements of fact. This does not yet seem to be an issue, at least with litigants, cost-saving not being a priority as most parties represent themselves. However, it is something that, along with the introduction of interlocutory procedures, could be considered in the future.
First instance cases are considered by up to three judges and three citizensþ representatives. This makes for a cumbersome and expensive justice system and many judges are of the opinion that more first instance cases should be heard and decided by just one judge.
All appeals are considered by three judges who receive the complete file from the lower court and base their decision on it. Normally there is no hearing, although there may be if the judges think that there are still issues to clarify. In the Supreme Court, a dissenting judge may look for the support of two other Supreme Court judges, and if this is forthcoming the matter will be reconsidered at a plenary session, of which there are an average of twelve each year. The final decision is by majority vote.
The court filing fee to be paid by a plaintiff to the first instance courts in civil cases varies from two percent of the amount in dispute for claims under Tug 10,000 ($22) to four percent for claims above Tug 50,000 ($109). A successful plaintiff may claim these costs from the defendant and any successful party can seek a contribution to the costs of legal representation from the loser. There are no court costs for criminal cases, appeals, or for cases before the Tsets.
Judgments that are not voluntarily executed are implemented for the winning party by the court bailiffs. Parties are not permitted to execute judgments themselves and there is no procedure by which they can secure their position as judgment creditors, for example, by taking a charge over the judgment debtor's property. Although bailiffs claim a success rate of 65 percent, there is also some feeling that they are not particularly effective in enforcing large judgments and that it is too easy for judgment debtors to hide their assets. This problem might be partly overcome by stronger enforcement mechanisms and the introduction of more comprehensive property and security registers.25 There is also growing public pressure to bring in a system of imprisonment for non-payment of judgment debts.
The Judges
Mongolia has 357 positions for judges who are appointed for life by the President upon the recommendation of the General Council of Courts. This is in contrast to the previous system in which appointments were for a fixed term. The Supreme Court selects one of its members to be Chief Justice. Appointment for the six year term is made by the President. On the recommendation of the Chief Justice, the President also appoints the two Senior Judges who preside over the Supreme Courtþs civil and criminal chambers.
Until recently, the functioning of the judiciary was constrained by the fact that a substantial number of judicial positions were vacant. In early 1994, these amounted to as many as one quarter of the total. One year later, the situation had improved, with most positions being filled. There are no present plans to increase the number of positions for judges.
The number of judges sitting at different courts varies between three and five for soum and intersoum courts, and between five and nine for aimag courts. The Capital City Court is the largest in the country and has 83 judges. There are 17 on the Supreme Court bench.
All judges must have a law degree, although not necessarily from Mongolia. In the lower courts, judges must be at least 25 years old and have three yearsþ legal experience. Judges of the Supreme Court must be at least 35 years old with ten yearsþ experience. These constitutional requirements came into force in 1992. Approximately one-fifth of the judges at that time did not meet the necessary requirements but were permitted to stay in office as there were no replacements available. Failure to meet the education requirement is being overcome by courses provided by the Ministry of Justice in cooperation with the Institute of Law of the State University of Mongolia.
Approximately three-quarters of present graduate judges studied at the former Law Faculty of the State University of Mongolia, the others at Irkutsk and other universities in the former Soviet Union.
Mongolian judges are generally young, especially when compared with judges in common law countries. Most are aged between 30 and 35. The average age was even lower before the introduction of the age requirement and it was not unusual to become a judge after graduation from the legal high school at the age of 21.26 Sixty percent of Mongolia's judges are women.
The workload of judges has increased substantially over the last few years and the types of case they deal with have changed. Under the socialist system, most of their work was criminal. Now two-thirds of the cases are civil, primarily involving contractual disputes, although criminal matters still make up the bulk of appeals.
Under the previous system, judges worked with a limited number of laws and legal publications, but they have now had to adjust to a rapidly changing legislative environment, particularly in the civil area. Although most of the judges have attempted to familiarise themselves with the new legislation, there are still some who base decisons on their old knowledge as they find it difficult to keep up with the changes. Their experience in the application of commercial laws is limited, and many find the unfamiliar situations of a market economy that they are faced with confusing.
This has been alleviated with some training in commercial, contract and company law and exposure to market economy concepts, although most of these courses had a general, elementary character and were not specifically designed for the judicial practice. More training is necessary, particularly in the commercial law area. Not all judges, however, need to develop expertise in commercial matters, and it is recommended that, at least initially, training could be given to one judge in each aimag and a greater number from Ulaanbaatarþs courts. The presence of more junior judges, presumably more inclined to embark on a tedious and difficult learning programme in language and new substantive domains could facilitate the emergence of such specialist judges, dealing primarily with business-related cases.
All judges meet at least once a year in Ulaanbaatar for a conference or training course. The Chief Judges of the aimag courts, and the Capital City and Supreme Court judges meet more often. Occasionally, judges of neighbouring aimags have regional meetings and judges of the Supreme Court regularly make observation visits to the courts in the aimags.
Many judges are fluent in Russian, but few have any knowledge of other languages. Only three Supreme Court judges have any knowledge of English, one of them speaking it reasonably well. Training in English and other European languages, such as German or French, would enable judges to integrate more easily into the international judicial community, and would assist them in broadening their knowledge by reading foreign texts.
The Bailiffs
There are about 150 bailiffs to enforce all judicial decisions not voluntarily executed by the parties. With the large increase in civil claims over the last few years, their workload has substantially increased. They may seize goods from judgment debtors, often livestock or other bulky items such as electronic equipment or carpets, and can also take funds from bank accounts. However, seizure of goods has become difficult because of lack of transport and storage facilities. The role of the bailiffs also brings them a lot of abuse from the public which sometimes takes the form of physical violence, and they would like to see this alleviated by the provision of uniforms and defensive weapons. Another way of avoiding this problem might be to use the services of the police, which could also enhance the status of the bailiffs as part of the judicial process.
Working Conditions of the Judiciary
Research and Support Facilities
Mongolia's judiciary is assisted in its work by approximately 740 staff, including administrative officials, researchers and cleaners. Of these, 53 are employed at the Supreme Court.
The Supreme Court has four researchers to assist in the preparation of decisions and opinions, but its library facilities are limited to a small collection of outdated Russian books and treatises and a few recent publications in English. The latter are unhelpful as most judges do not read English. The library consists of one small room primarily devoted to the storage of archive material and old files, with no reading area or tables and no librarian.
An assessment of the Supreme Court's library needs was conducted in November 1994 by the United Nations Centre for Human Rights as the prelude to a donation of $60,000. The report includes proposals for the short-term establishment of an adequate library for the Supreme Court, the training of a librarian and associate-librarian and the acquisition of a printing machine to enable the Supreme Court to provide all courts with models for writing decisions27 and the texts of laws and judgments. In addition, it calls for the setting up of a computer network which would link the library with its users, and the provision of Mongolian, Russian and German books and periodicals and the official publications of the European Union.
Lower courts have limited research facilities and have relied on the government newspaper for obtaining copies of legislation, although most judges received the Ministry of Justice's compilation of 49 laws. They also receive an informal monthly bulletin of recent decisions and interpretations of laws from the Supreme Court, and the legal newspaper Tamga. Judges in the aimags frequently telephone the Supreme Court for guidance and information.
Equipment
The Supreme Court is relatively well-equipped, having nine computers, printers, a photocopier and a fax machine, and researchers and secretaries have attended computer courses. Lower courts, particularly in the aimags, are poorly equipped, sometimes not even having typewriters or long-distance telephone calling facilities. Much of the writing in courts is done by hand. Lower courts need typing facilities and photocopiers, and the acquisition of fax machines would facilitate their contact and correspondence with other courts.
Court Buildings
Only the premises of the Capital City Court have been allocated for the exclusive use of the judiciary. Other court buildings are leased from the aimag administrations or the General Prosecutors Office. The judiciary hopes ultimately to acquire ownership of all court houses.
The Supreme Court has only one courtroom at its disposal. Other courts do not have a court room at all and judges conduct hearings in their offices. On the whole, court rooms are poorly but adequately furnished. The General Council of Courts would like to provide all court houses with a national flag and emblem in 1995.
There are plans for a new Supreme Court building which would reflect the judiciaryþs new status. The Tsets is now in the same building as the Ikh Khural, which makes it difficult for petitioners to gain entry, and the question of whether it could be relocated in the new Supreme Court building or elsewhere should be considered.
Many of the lower courts buildings are in bad condition, even in desperate need of repair.28 The costs of major repairs are often shared between the landlord and the tenant while small repairs are usually paid for by the tenant. In general, neither the judiciary nor its landlords have had the funds to effect the necessary repairs. Outside Ulaanbaatar, the distances some parties have to travel to come to court are forbidding and often they have no means of transport other than horse or camel. As a result, the practice developed of the judge, along with a court secretary and bailiff, travelling to the parties and conducting hearings at their homes. This has become more problematic over recent years because of an increasing lack of available cars and jeeps.
Judges' Robes
Judges do not wear robes or other distinctive clothing in the court room, and
nor do the prosecutors, advocates or citizens' representatives,
making it difficult
for the parties and the public to distinguish between them. The use of some
distinctive clothing such as
a robe may not only eliminate confusion but also
enhance the status of the judges. The judiciary hopes to have all judges provided
with a robe by April 1996 in time for the 70th anniversary of the establishment
of courts in Mongolia.
Judicial Salaries
Judicial salaries are comparable to those of civil servants, but low compared with lawyers in private practice, ranging from Tug 15,200 ($33) to Tug 23,500 ($51) per month. Bailiffs receive a monthly slary of approximately Tug 13,000 ($28). Salaries for judges will improve when supplements linked to a recently introduced ranking system are paid. Under this system, which came into force in September 1995, judges will be ranked according to seniority and experience, and will receive a supplement ranging from 10 percent of their salary for the lowest ranking judges to 30 percent for the Chief Justice.
Relatively low salaries and mediocre working conditions are an impediment to attracting highly qualified candidates to the profession. In addition, the living conditions of judges are often difficult. In the countryside, one out of three judges does not have an apartment. Consequently, some judges live in their office, which is clearly not desirable and does not enhance the status of the judiciary. The General Council of Courts advocates the allocation of apartments to newly appointed judges, as well as an increase in their salaries.
Judicial Budget
The budget for the judiciary has increased substantially over the last few years. In 1993 it was Tug 114 million ($248,000), in 1994 Tug 236 million ($513,000) and in 1995 the judiciary will receive Tug 456 million ($991,300). The Supreme Court is responsible for allocating the funds, which are spent on salaries, the operational costs of court houses and the purchase of cars and equipment. Some local courts also receive financial support from the aimag budget. The amount varies from aimag to aimag depending on financial - resources and the needs of the local judiciary. Their income is sometimes supplemented by commercial activities such as cattle breeding and farming. Some courts in the aimags have nevertheless had difficulti es paying their heating, electricity and petrol bills and these courts will receive additional support from the judiciary's budget.
The Tsets has a separate budget, most of which is spent on salaries, and in 1995 will receive Tug 9 million ($20,000).
Arbitration
Mongolia has one arbitration forum, the so-called Arbitration Court of the Mongolian Chamber of Commerce and Industry in Ulaanbaatar. It was established in the early 1960's and deals with disputes between Mongolian and foreign entities. Prior to 1991, disputes involving only Mongolian entities were dealt with by specialised arbitration courts attached to the ordinary courts. Those arbitration courts have been abolished, however, leaving the Arbitration Court as the sole remaining arbitration centre sanctionedby the government. While parties can choose to arbitrate informally through their own means, only awards of the Arbitration Court are enforceable through the Mongolian court system. As Mongolia recently acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (adopted in 1958 and more commonly known as the New York Convention), arbitration awards made within Mongolia are also now enforceable in the 125 or so other states and territories that have ratified the convention.
The Arbitration Court hears approximately 15 cases a year. There is a panel of approximately 15 arbitrators appointed by the Chamber of Commerce and Industry, all of whom are lawyers. Cases take on average approximately two months from start to finish. Decisions are final with no right of judicial review by, or appeal to, the courts.
At present, arbitration is governed by regulations of the Arbitration Court but a draft Foreign Trade Arbitration Law based on the model law on international commercial arbitration adopted in 1985 by the United Nations Commission for International Trade Law (UNCITRAL) has been submitted to the Ikh Khural and is scheduled for debate in the autumn 1995 parliamentary session. The draft law would establish the Chamber of Commerce and Industry as the centre for foreign trade arbitration in Mongolia and regulate the appointment and powers of arbitrators, the rights of the parties submitting to arbitration, the procedural rules for the arbitration hearings and the enforcement of awards.
Mongolian arbitrators have increasing experience in dealing with the type of complex legal issues that are likely to arise in a commercial arbitration but would nevertheless still benefit from training, especially in market economy operations and private international law. The Arbitration Court hopes to expand its contacts with the Hong Kong International Arbitration Centre29 and the International Chamber of Commerce in Paris, as these institutions run training courses for arbitrators. Training in languages would also be valuable, particularly English as the language in which many international contracts and other documents are written, although at present the non-Mongolian party at most arbitrations is either Chinese or Russian.
Recommendations
The Legal Profession
There are three branches of the legal profession - prosecutors, advocates and notaries. The prosecutors need training in the mechanisms of a market economy and in how to deal with economic crime. They also need research facilities. To some extent these various needs may be met by their own plans. As yet, there is a limited market for advocates working in commercial law and so training in this field is probably not a pressing need. However, they would benefit from some training in the adversarial process, arbitration and alternative dispute resolution. The notaries will probably have their role enlarged when laws on the privatisation of housing are implemented.
Both in the socialist period and today there have been three groups of lawyers making up what could be called the legal profession in Mongolia: those who represent the state - the prosecutors; those who provide legal advice to the public and represent people in court - the advocates; and those who witness or authenticate documents - the notaries. As these groups have separate structures and rules and different admission requirements, each group will be considered separately. Despite the differences between these groups, however, here seems to be great fluidity in the legal profession, and its members do not expect to stay in one branch of it for their entire career. Rather, they move easily between roles as prosecutors, judges, advocates and government advisors, as well as to less strictly legal roles such as the police or tax inspection.
The Prosecutors
The General Prosecutor's Office was set up in 1930. As noted previously, it was a very powerful organisation in the judicial system and prosecutors retained substantial control over the trial process.
It now has two main functions. One is supervisory. Prosecutors supervise inquiries by the police in both criminal and civil cases, and by customs and administrative organs. They do not do any actual investigatory work themselves and their role is to ensure that investigations are carried out according to law. All investigations must be registered with the General Prosecutor's Office at the outset and prosecutors are then involved at every stage. The investigator must obtain the permission of the General Prosecutor's Office before any search or inquiry can be made that infringes on the liberty of the subject. Investigations must be completed within two weeks. Prosecutors also supervise the execution of criminal penalties.
The other role of the General Prosecutor's Office is to represent the state in both civil and criminal proceedings. It can also take part in civil cases in which the state is not a party and can appeal decisions in cases in which it has not appeared if it believes that the decision is contrary to law. The General Prosecutor sits in all plenary sessions of the Supreme Court.
The nature of the prosecutors' work has changed considerably over the last few years. One reason is that the role of supervising investigations is new. The second is that the types of crime are changing. In the socialist period, matters such as the improper storage of goods were prevalent. Now there is a growth in crimes against property, particularly theft, possibly as a result of growing unemployment, and economic crime such as fraud and tax evasion.
On the other hand, the prosecutors' role in civil proceedings has been greatly reduced. Previously they wre involved in all civil cases. Now this work is largely limited to family matters such as divorce, to labour disputes such as redundancy, and to bankruptcy. The prosecutors do not take the side of any one party in these matters but play an advisory role for the court as to the legal merits of the action and whether there is sufficient evidence for it.
The General Prosecutor's Office is still a powerful institution, but is now independent of the government although it is financed from the state budget. It is headed by the office of the General Prosecutor in Ulaanbaatar. There are local offices in the capital city and the aimags, and at soum, intersoum and district level. Altogether there are about 375 prosecutors, including approximately 40 in the General Prosecutor 's Office and 100 in Ulaanbaatar, the remainder working in the other aimags.
The General Prosecutor and his two deputies are appointed for a term of six years by the President in consultation with the Ikh Khural. All other prosecutors are appointed by the General Prosecutor. They must have a higher education in law. At present, 60 percent of them graduated in the former Soviet Union and the rest from the State University of Mongolia. The General Prosecutor must be at least 35 years old with ten years' legal experience. Chief prosecutors at the aimag and capital city level must have five years of professional experience. Approximately half the prosecutors are women.
Salaries range from Tug 17,000 ($37) per month to Tug 29,000 ($63) for the General Prosecutor and are thus comparable to judicial salaries. Like the judges, they are ranked according to seniority and experience and, based on their respective rankings, they will each receive a supplement to their income.
Only higher-ranking prosecutors can supervise police investigations, which can lead to an uneven distribution of work in one office as there are often too few senior prosecutors.
On the whole, the problems facing the prosecutors are the same as those facing other members of the legal profession. They have as yet had little exposure to the operation of a market economy or the nature of economic crime and they have had no relevant training. A few have attended training courses abroad and all prosecutors attended a course on the Law of the Prosecutor's Office. There have been various courses on human rights and justice which some prosecutors attended, but the actual usefulness of some of the knowledge obtained for their day-to-day work is probably doubtful.
The General Prosecutor's Office has developed a plan for training its staff over the next five years, including intensive training for five months to be given by the prosecutors themselves and the staff of the Institute of Law. They also hope to have some participation from prosecutors from other countries with a similar system. There is no doubt that further training in the relevant aspects of the market economy is needed. Not all prosecutors, however, will be dealing with complex commercial cases. Education could be given, at least initially, to one prosecutor from each aimag, and a greater number from Ulaanbaatar. A national association of prosecutors was set up in late 1994. One of its goals is to press for more training.
The General Prosecutor's Office has a library, but most of the texts are outdated and therefore of little or no use. It also has a research and information centre which is staffed by three former prosecutors. There are no research facilities in the aimags.
There are plans to improve the equipment in the prosecutors' offices and funding has been given from the government for the first stage. The office of the General Prosecutor now has copiers and there will be a computer system installed in Ulaanbaatar and in two aimags over the next year. Assistance is still being sought for the continuaton of this programme.
The Advocates
While the economy and society were heavily regulated by the state, citizens had little need for legal advice unless they were party to a criminal case. As a result, there seems to be no tradition of seeking professional advice and little regard for its potential usefulness. Advice is rarely sought before entering into a contract. In addition, there is an expectation that advice will be free, and certainly it appears that general legal advice is sought from places such as the General Prosecutor's Office, local governments and ministries.
There has been an advocacy profession in Mongolia since the early socialist period. In 1928 a body of advocates was set up and its members were authorised to act as defence counsel and to prepare legal documents. The right of a defendant to retain counsel was later enshrined in the Constitution. However, there was no monopoly on those activities and any adult could represent someone in court. The work of advocates was largely confined to criminal matters, although they were sometimes called on to advise state enterprises and organisations such as agricultural cooperatives.
The Law on Advocacy came into effect at the beginning of 1995 and outlines the structure of the advocacy profession. It does not regulate government legal advisors who are specifically prohibited from joining the Association of Mongolian Advocates. Under the new law, advocates can give legal advice, prepare legal documents, represent their clients in court and before administrative organs and participate in investigations. However, they still have no monopoly on these activities and a defendant may choose to be represented in court by a lay person.
The precise number of advocates in Mongolia - and of lawyers generally - has not been easy to establish. In late 1994, there were said to be around 200 practising advocates. Most were working in the courts on criminal matters. By mid-1995, the Association of Mongolian Advocates had nearly 400 members. In 1994, the aimag of Bayan-Olgie had only three advocates, of whom two were of pensionable age and none had any recent training in commercial law. Only two or three firms in Ulaanbaatar can provide commercial advice, but there does not seem to be a demand for more. There is also one foreign law firm with an office in Mongolia.
In fact, there are few law firms as such and most advocates practise independently, often from home There is nothing to prevent a group of advocates from setting up as either a partnership or a company and thus limiting their liability, although the high tax rates for business entities may be a disincentive. The Law on Advocacy does provide that if a clientþs property is damaged as a result of an advocate's malpractice, that loss must be compensated, but it does not say by whom or what happens in the case of limited liability if it is not covered by insurance. By law, four percent of an advocate's fees must go towards insurance which is organised by the Association of Mongolian Advocates.
All advocates must belong to the Association of Mongolian Advocates, which is independent of the government and is funded by a levy of six percent of its members' fees. In keeping with the size of the profession, the Associationþs office in Ulaanbaatar is small, with a full time staff of around four. There are branch offices in all the aimags. The Association has plans to increase the services offered to its members by providing a regular newsletter and seminars. It has also recently drawn up a code of ethics to which all advocates must adhere, and a set of standard fees for various advocacy activities although these are not binding. According to this scale, advice costs around Tug 200 ($0.43) per hour.
To qualify as an advocate, it is necessary to have a law degree, no criminal record, and to pass an examination administered by the Association of Mongolian Advocates and the Ministry of Justice. It is possible for judges and prosecutors to become advocates after a gap of one year from their previous position. Foreigners may also conduct advocacy activities in Mongolia, although the law is not clear on what requirements there are before this can be done.
It is difficult to make any specific recommendations as to the needs of advocates, partly because advocates do not form an especially cohesive body. In addition, although they seem on the whole to have little commercial or market economy experience, the demand for advice on commercial matters is only developing slowly and at present seems to be met by the few advocates practising in that area and by bodies such as the Mongolian Chamber of Commerce and Industry which provides legal advice to its members. What advocates may need to foster at this particular stage is a greater public awareness of what assistance they can give and in what sort of situations they can help, but recommendations as to this sort of marketing are beyond the scope of this report. Advocates may also be assisted by greater interaction among themselves, and between themselves and other members of the legal profession.
One area in which training might be useful is in the use of the adversarial process, which is still unfamiliar to advocates and judges alike. A second is in developing skills in arbitration and alternative dispute resolution. As noted previously, however, arbitration is limited in its availability and there is not much incentive at present for litigants to use alternatives to a court system which is relatively inexpensive and quick. Both of these factors will undoubtedly change, and there is already some request for training in arbitration.
The Notaries
Notaries have been used in Mongolia for some time. Unlike the laws that apply to prosecutors and advocates, the Law on Notaries has not been substantively changed since the transition to a market economy began although a draft law is in preparation. There is a feeling among notaries that a new law would help to clarify their role.
Notaries generally form part of the local aimag administrations with one notary per aimag, and their offices are financed and their salaries paid out of the aimag budget. There are also at least five independent notaries in Ulaanbaatar.
Notaries are used to authenticate documents. They are not involved in drafting or in advising the parties of a documentþs contents, but simply in checking that documents are in order and signing or stamping them. The types of transaction for which notarisation is required are bank loans and agreements for the sale and purchase of items such as livestock. With the emergence of a leasehold market and the anticipated privatisation of housing, it is expected that notaries' responsibilities will increase.
The work of the notaries has changed considerably in the last few years and it is not always clear to them how they are expected to do their work under the new system. Neither are there any modern texts to be used as a reference. The volume of work has also increased dramatically, although there does not seem to be an immediate need for more than the approximately 25 notaries now working in Mongolia.
Legal Education
Legal education is provided primarily by the Institute of Law of the State University of Mongolia in Ulaanbaatar. The Institute has a current enrollment of around 400 students. It has been difficult for the professors there to adapt their courses and teaching methods to the new system, due to a lack of experience and an absence of research material in a language they and their students can understand. Course at present tend to be theoritical and not particularly relevant to the situations that the students are likely to face to face in a developed market economy. The professors would benefit from assistance in adapting both their courses and teaching methods and from the provision of equipment to enable them to produce new materials for their students.
With the change to a market economy, Mongolia has altered the basis of social and economic relationships, and thus the essence and justification of its legal system. The impact of the new order on legal theory needs to be reassessed and a new theory of law developed. Similarly, legal education has to be restructured in terms of jurisprudence and, more practically, in the choice of courses, their content and their presentation.
Legal instructors must adapt their knowledge to the realities and cultures of established market economies in order to prepare their students for the different range of work now open to them. The work of different legal professionals such as prosecutors, judges or criminal advocates, which have traditionally been the future roles of law graduates, has changed considerably in response to the new legal environment, and there should soon be a greater demand for commercial legal expertise.
Legal Education of Jurists30
Pre 1990
Although the State University of Mongolia was founded in 1942, it was not until 1960 that a law department was opened there. A further impetus to the development of the juridical sciences within Mongolia was given with the foundation of the Institute of Philosophy, Sociology and Law at the Mongolian Academy of Sciences in 1972.
In 1990 the State University had a Chair of Legal Studies within its Faculty of Social Sciences31 and a Chair of Law within its Faculty of Economics. The previous year a separate Institute of Law had been founded within the Academy of Sciences.
Legal training throughout the communist era had also been available abroad. Beginning in the 1920's, promising young Mongolians were sent to the USSR, and later elsewhere in the Soviet bloc as well, for higher education. As of 1990, a significant number of Mongolian law graduates had acquired their legal training in the USSR, particularly in Irkutsk.
Post 1990
Now most Mongolian law students are remaining in Mongolia for their studies, although at the beginning of 1995 there were at least 20 students studying law abroad, amounting to almost five percent of the total number of Mongolians currently embarked on undergraduate law degrees.32 The training of students who want to make law their career is now concentrated at the Institute of Law of the State University of Mongolia, and at two private schools, the Shikhikhitung School of Law and the Otgon-Tenger School of Languages. All three are in Ulaanbaatar. The legal education offered by these three schools is the primary focus of this chapter. Law is also part of the curriculum of other institutions, and these will be considered briefly, along with continuing legal education.
Education for a jurist is generally completed at the undergraduate level. The curriculum is of a general nature, covering a broad spectrum of legal topics with no attempt at specialisation, and is completed in four years. All three institutions follow the same curriculum. Most students enter the first year at the age of 18 and graduate at 22. They are admitted on the results of three tests covering social knowledge, Russian and mathematics. Revision to the admission requirements is currently under consideration.
There are also programmes at the Institute of Law for graduates from other disciplines who want to become jurists. These courses are two or three years long. Students do not have to study the non-legal subjects that are part of the course of the undergraduate students, but otherwise the studies are comparable. There are no postgraduate law degree courses either at the Institute of Law or elsewhere in Mongolia.
Legal Curriculum
The curriculum for Mongolia's three law training institutions is drawn up by an Academic Council composed of 15 people, including professors of the Institute of Law, members of the Ikh Khural and jurists. There is no student participation. Both the Ministry of Justice and the Ministry of Science and Education are also involved in its development and must approve it.
In the first two years much time is devoted to the study of Russian and English. Third year students must also acquire a basic knowledge of one other modern language, with a current choice of German, French, Japanese or Chinese. Some students comment that they do not learn enough of any of these languages during the time available to enable them to read or comprehend legal texts. Others, intending to practice law in the employ of local government administrations outside Ulaanbaatar, believe that the study of a foreign language is of little use to them, and that the classroom instruction is enough to enable them to succeed at the exams without having to read foreign texts.
The fact remains, however, that jurists in tomorrow's Mongolia will be confronted with foreign counterparts who will not speak Mongolian. The problem of language in Mongolia is possibly more acute tha in any other country in a similar state of transition. Mongolian is not spoken elsewhere and it is similar to few other languages. Languages such as Russian are probably of limited use in assisting students in their studies in this period of change although a few texts on the market economy in Russian have recently become available. Russian and Chinese may be of some use to students in their future work, as there is considerable trade between Mongolia and both Russia and China, but whether these languages are appropriately part of a course in law is another issue.
The curriculum has traditionally included general subjects such as philosophy and the theory of state, and more recently economics and sociology have been included. A computer science course has also been introduced which aims to teach not only the basic elements of how to use a computer but also how to write programmes.
Courses on the theory of law are compulsory. However, there needs to be some evolution of these to deal with the market economy and related legislation. The legal theory taught should be updated and made less abstract.
Civil law courses also need to be adapted to parallel developments in that sphere. Education in commercial law is still in a trial period and is basically confined to teaching the relevant chapters of the Civil Code. This is not sufficient to provide students with an understanding of the legal framework of the commercial world and will not equip them for occupations requiring knowledge of it. However, any development of new courses will require an increase in the knowledge and experience of the professors themselves.
From the comments made elsewhere in this report, it is evident that the principles of legal analysis are not or have not been well taught, although these are fundamental to the ability to be a good advocate, judge or, perhaps most importantly at this stage, law drafter. Courses on the analysis of legal principles and their applicability to factual situations should be included in the curriculum or be a fundamental part of courses on substantive law subjects. Training in skills such as legal drafting, client interviewing and advising, and negotiating would undoubtedly also be of benefit.
Once proficient in the relevant language, law professors would benefit from seminars or courses given in Mongolia or abroad about the practice of civil law in market economy countries and its relationship to the teaching of law. Study visits abroad would also enable professors with the necessary language skills to increase their overseas contacts and to reevaluate their own teaching methods and courses.
Training Methodology
None of the three institutions providing legal education has yet received muh foreign assistance to help them adjust their training methods to Mongoliaþs new economic and legal regime. The Hanns-Seidel Foundation has begun a support programme, to be based at the Institute of Law and the Institute for Administration and Management Development, in the areas of constitutional law, administrative law and local government. Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) is also planning a legal education programme. And in late 1994 and early 1995, the Asian Development Bank sponsored two workshops on training for legal trainers, both conducted under the auspices of the International Development Law Institute.
Legal Education for Other Professionals
Economists and Accountants
Economists and accountants are trained at the undergraduate level at Ulaanbaatar's Economic College. While the main thrust of their studies is economics, law is an important adjunct. It is taught from a practical point of view, with the law of business entities and the law of contract as core parts of the curriculum.
Administrators
The Institute for Administration and Management Development trains public administrators. These students already have work experience and come to Ulaanbaatar for courses ranging in duration from two weeks to one year. The Institute's department of legal education has six sections teaching constitutional, civil, labour and commercial law. The Institute plans to expand its activities in the near future by the addition of training for hospital and school administrators, which will include the teaching of related legislation.
Foreign Affairs Specialists
The School of Foreign Service of the State University of Mongolia trains foreign affairs specialists for both the public and private sectors. Law is taught in two parts: public international law and private international law with an emphasis on commercial law.
Continuing Legal Education
Most practising jurists were trained before the recent extensive legislative changes and thus need retraining. To address this problem, the Ministry of Justice, using the Institute of Law as a base, has introduced various continuing education courses. One programme is aimed at fulfilling the constitutional requirement that all judges have higher education in law. It is a three year programme given in Ulaanbaatar or by correspondence.
Another programme has been devised for short-term retraining of lawyers and notaries. The courses, given in Ulaanbaatar for periods of two to six weeks, deal with the new commercial laws.
Continuing legal education should eventually become part of the services provided by the professional associations of judges, advocates, notaries and prosecutors. While the number of jurists is still relatively low, it could be organised by establishing a legal education cenre in each aimag, run by one of the local jurists who would coordinate seminars and training programmes. The centres could also act as contact points for outside agencies wanting to provide local training.
Opportunities for jurists to study and work abroad should be fostered. Since 1990, a small but growing number of Mongolian lawyers, judges and students have travelled to countries with established market economies to attend workshops, participate in study tours or avail themselves of scholarships and fellowships to pursue academic legal studies (see Appendix II for details). These opportunities have been offered by a wide range of donors ranging from multilateral organisations to individual governments and NGOs. For the most part, the assistance that has been given in this area has been provided on a piecemeal and uncoordinated basis. It is probable that the full and lasting benefits of much of this overseas travel will only become apparent after a number of years.
Teaching Institutions
The Institute of Law
The Institute of Law, which is part of the State University of Mongolia, was created in 1994 when the State University's law faculty merged with the legal education and research branches of the Academy of Sciences and a separate legal study centre.
The Institute is managed by a director and a deputy director, and governed by a scientific or academic council and a directorþs council. It has five departments: constitutional and juridical law, civil law, criminal law, administrative law and international law. In addition, there is a research centre with ten researchers, and another centre that organises the training courses for graduates.
Approximately 400 students attend the Institute, with some 80 graduating in 1994, and about 60 in 1995. Entry is restricted and depends primarily on the results of the entry tests, although it is expected that more students will be admitted in the future. Most candidates are approved by the Ministry of Science and Education, though a small number might be directly admitted by the Institute.
The tuition fees for the 1995/96 year are Tug 78,000 ($170), exclusive of text books. This represents about one-third of the current annual salary of a junior government jurist. About one-quarter of the students have a scholarship awarded by the state, and a small number are sponsored by future employers. There is also a government student loan programme.
The Institute has 20 full-time and 20 part-time professors with an average age of 36. They earn an average of Tug 16,000 ($35) per month, an amount comparable to the average salary of a government jurist or a lower level judge.
All Institute staff were educated in the former Soviet Union and as yet have received little exposure to non-socialist legal systems, although some have recently had trips abroad. Increased exposure to foreign colleagues would be beneficial but, for the reasons outlined below, difficult to implement in practice. There are no visiting professors from other countries on the staff, and no current expectation that any will be coming.
Because of the language barrier, legal academics from abroad are unlikely to find Mongolia an attractive destination in which to spend sabbatical leave. The limited research facilities and the absence of the possibility of postgraduate study are further disincentives for such foreign academics. It will be difficult to persuade overseas experts to come to Mongolia to teach on anything but a short-term basis. However, there is no doubt that such assistance would be invaluable, not only to broaden the knowledge of the professors and students, but also to expose them to alternative teaching methods, to assist them in the preparation of texts, lecture notes and databases and to increase their foreign contacts.
Lack of language skills inhibits the work of the professors in other ways too. Few speak enough English or other European languages (apart from Russian) to enable them to read or translate texts, and the teaching institutions do not have enough money to pay for this to be done. It is therefore also difficult for teaching staff to obtain information from, or to establish and maintain contacts with, counterparts abroad.
Accordingly, the teaching staff of the Institute of Law and the other institutions teaching law would benefit from intensive language training. This certainly need not be restricted to English. Mongolia's long-established contacts with Germany, another civil law country, should, for instance, provide a continuing incentive for a number of Mongolians to learn German. Mongolia's gradually reviving contacts with China should likewise encourage more Mongolians to learn Chinese.
Operational facilities at the Institute of Law are somewhat strained as there is only one photocopier, few books or legal periodicals, and paper is difficult to obtain and relatively expensive. The Institute would benefit from the provision of computer equipment (with any necessary training), overhead projectors, copiers and binding equipment. Facilities such as fax lines and e-mail might be considered in a second stage.
Professors at the Institute of Law have a teaching load of around 18 hours per week. Some of them occasionally face an eight-hour teaching day which does not give much time for course preparation, the development of materials or research. Indeed, research is not regarded as part of professorial duties. Although there is nothing equivalent to sabbatical leave, the administration did indicate that should a professor want free time in order to write a text book, it might be possible to have a year away from teaching on full salary. Even if sabbatical leave were available, for reasons of language and finance most professors would be unable to use it to take up a position abroad.
The professors themselves are very much aware of the need for updating teaching materials. Six are working on a book about the administrative system of Mongolia which is the result of two years of research financed by the Ministry of Science and Education. Another group of ten is working on a book on the general provisions of the Civil Code. Both books are to be ready for printing in 1995.
Private Law Schools
The Shikhikhitung School of Law and the Otgon-Tenger School of Languages are the two private schools in Ulaanbaatar that are licensed by the Ministry of Justice to teach law. They were established in the early 1990's and must follow the same curriculum as the Institute of Law. They were not founded to provide an alternative approach to the teaching of law, but rather as a business opportunity resulting from the limited number of students admitted by the Institute of Law compared with an anticipated demand for jurists. These two schools charge the same fees as the Institute of Law and their combined total enrollment is about 150 students.
Research Facilities
There are two libraries at the Institute of Law, as well as a law library at the Ikh Khural, and law books at the central public library. The Institute for Administration and Management Development has a library including legal texts and a librarian to assist students to locate material. The School of Foreign Service has a small but good selection of law books that students and professors can make use of if they have the necessary language skills. However, there is no room designated as a library and no shelving.
Students report that there is information available when the need arises to supplement course notes through library research. Resource material in the commercial and civil areas is not extensive, however, and seldom updated and there is undoubtedly a shortage of material adapted to today's needs. Graduate students and professors with the necessary language skills wishing to do research of an international calibre would find the selection sparse. Nor are there any facilities for translation of foreign texts into Mongolian.
The Institute of Law has two full-time librarians. Neither has had relevant training, and some technical assistance in this area would be useful. Better-trained librarians should be able to help the Institute select and obtain material, assist the students and professors to carry out research, familiarise library users with the use of databases, and possibly create a database of Mongolian legal material. This should be coordinated with the establishment of libraries at the Supreme Court and elsewhere.
As a rule, academic researchers in Mongolia are not pursuing degrees, and the results of their research are generally not published. This makes the task of fostering their credibility in the eyes of their counterparts abroad a difficult one.
Recommendations
Appendices
Laws on Mongolia
Laws of Mongolia as of September 1995
| Name | Date Law Passed or Made Effective | Date Law Amended |
|---|---|---|
| Accounting | 1 April 1993 | |
| Administrative and Territorial Units and Their Management | 25 August 1992 | |
| Administrative Responsibilities | 15 December 1992 | |
| Advocacy | 1 January 1995 | |
| AIDS Prevention | 13 January 1994 | |
| Air | 5 June 1995 | |
| Airspace | 20 April 1992 | 5 December 1994 |
| Alcoholism | 1 February 1994 | |
| Allowances | 1 July 1991 | 5 July 1994 |
| Banking | 1 May 1991 | 22 October 1992 |
| 18 November 1993 | ||
| 12 December 1994 | ||
| 17 April 1995 | ||
| Bankruptcy | 18 June 1991 | |
| Border | 21 October 1993 | |
| Budget | 1 January 1993 | |
| Business Entities | 1 July 1991 | |
| Capital City | 5 July 1994 | 16 July 1994 |
| Citizenship | 27 February 1987 | 4 January 1991 |
| City and Village | 1 April 1994 | |
| Civil Code | 1 January 1995 | |
| Civil Defence | 1 July 1994 | 17 April 1995 |
| Civil Procedure | 1 October 1967 | |
| Companies and Partnerships | 14 July 1995 | |
| Constitution of Mongolia and Annex Law of the Constitution | 12 February 1992 | |
| Corrective Labour Code | 1 July 1982 | 11 January 1988 |
| 6 December 1993 | ||
| Constitutional Court (Tsets) | 1 June 1992 | |
| Consumer Protection | 1 September 1991 | |
| Cooperatives | 15 July 1995 | |
| Copyright | 1 September 1993 | |
| Courts | 1 April 1993 | 4 November 1994 |
| Criminal Code | 1 July 1987 | 7 July 1993 |
| Criminal Procedure | 1 June 1964 | 1968, 1979, 1980, |
| 1983, 1987, 1991, | ||
| 1995 | ||
| Currency | 1 June 1994 | |
| Customs | 11 February 1992 | |
| Defence | 14 November 1993 | |
| Delegation of Authority of the Government | 3 January 1991 | |
| Deputies of the Mongolian Peoples' Republic | 26 December 1978 | |
| Education | 1August 1991 | |
| Election of the President | 1 March 1993 | |
| Election of the Ikh Khural | 8 April 1994 | 27 October 1993 |
| Environmental Protection | 5 June 1995 | |
| Family | 1 October 1973 | 5 November 1982 |
| 26 December 1988 | ||
| 15 July 1993 | ||
| 9 May 1994 | ||
| 13 January 1995 | ||
| Foreign Citizens | 1 February 1994 | |
| Food | 1 April 1995 | |
| Foreign Investment | 1 July 1993 | |
| Forests | 5 June 1995 | |
| Forest Use Fees | 1 July 1995 | |
| Government | 6 May 1993 | 16 December 1989 |
| 14 January 1994 | ||
| 15 November 1994 | ||
| Government Service | 1 June 1995 | |
| Health Care | 1 January 1978 | 23 December 1989 |
| 8 July 1993 | ||
| Health Insurance | 1 August 1993 | 8 December 1994 |
| Hunting | 5 June 1995 | |
| Hunting Fees | 1 July 1995 | |
| Ikh Khural | 20 July 1992 | 17 January 1995 |
| International Treaties | 14 January 1994 | |
| Labour | 14 February 1991 | 16 January 1995 |
| Labour Disputes Settlement | 16 November 1993 | |
| Land | 1 April 1995 | |
| Livestock Genetics | 1 May 1993 | 17 April 1995 |
| Membership of IMF, IBRD, IFC and IDA | 21 January 1991 | |
| Metrical Measuring | 1 April 1994 | |
| Military Service | 1 June 1992 | 14 June 1993 |
| 21 October 1993 | ||
| 13 June 1994 | ||
| 17 April 1995 | ||
| Mineral Deposits | 1 January 1995 | |
| Natural Plant | 5 June 1995 | |
| Natural Resources Use Fees | 1 July 1995 | |
| Notaries | 1 July 1985 | 15 July 1993 |
| 9 May 1994 | ||
| Patent | 1 September 1993 | |
| Pensions | 10 December 1990 | 13 January 1994 |
| Pensions and Benefits from Social Insurance Fund | 1 January 1995 | |
| Pensions and Benefits for Injury or Occupational Disease from Social Insurance Fund | 1 July 1994 | |
| Pensions and Benefits for Servicemen | 1 July 1994 | |
| Peoples' Deputies to the Khurals of Aimags and Cities | 1 July 1985 | |
| Peoples' Deputies to the Khurals of Soum, District and Local Government | 1 January 1979 | |
| Petroleum | 13 February 1991 | |
| Posts requiring non-Party Membership | 3 September 1991 | 6 April 1992 |
| 10 April 1994 | ||
| Police | 1 January 1994 | |
| Political Parties | 10 May 1990 | 26 January 1991 |
| President | 10 June 1993 | |
| Prison | 1 January 1994 | |
| Private Secrets | April 1995 | |
| Privatisation | 31 May 1991 | |
| Procedures for Demonstrations and Gatherings | 30 July 1994 | |
| Prosecutorūs Office | 23 April 1993 | |
| Protection from Toxic Chemicals | 5 June 1995 | |
| Protection of Items of Historical and Cultural Value | 1 September 1994 | |
| Relations between Church and State | 30 November 1993 | 14 January 1994 |
| 17 April 1995 | ||
| Rewards of Medals and Increases of Pension to Mothers of Many Children | 2 April 1957 | |
| Securities | 1 January 1995 | |
| Social Insurance | 1 July 1994 | |
| Social Protection | 5 June 1995 | |
| Stamp Duties | 1 September 1993 | 17 April 1995 |
| Standardisation | 1 April 1994 | 17 April 1995 |
| State Control | April 1995 | |
| State Protected Areas | 1 January 1995 | |
| State Secrets | 1 July 1995 | |
| State Security | 1 June 1992 | 13 June 1994 |
| State Symbol | 1 July 1994 | |
| Statistics | 17 March 1994 | |
| Subsoil | 1 April 1995 | 1 June 1995 |
| Income Tax | 1 January 1993 | 28 November 1993 |
| Excise Tax | 21 January 1993 | 8 December 1994 |
| Gasoline and Diesel Fuel Tax | 6 June 1995 | |
| General Taxation | 1 January 1993 | 2 June 1995 |
| Gun Tax | 11 May 1993 | |
| Personal Income Tax | 1 January 1993 | |
| Personal Income Tax on Undefined Income in Informal Sector | 1 January 1994 | 1 December 1994 |
| Sales Tax | 1 January 1993 | |
| Transport Facilities and Vehicles Tax | 1 January 1993 | |
| Tobacco Hazards | 1 March 1994 | 17 April 1995 |
| Towns and Villages | 1 January 1994 | 16 January 1995 |
| Trade Union Rights | 1 July 1991 | 9 November 1993 |
| Travel Abroad and Emigration of Mongolian Citizens | 1 February 1994 | |
| Treasures | 1 January 1995 | |
| Unemployment Benefits from Social Insurance Fund | 1 July 1994 | |
| Unfair Competition | 5 July 1993 | |
| Unlawful Activities by Government Agencies, Organisations and Officers | 1 July 1990 | |
| Unlawful Activities of the Courts and Investigative Organisations | 1 May 1990 | |
| Water | 5 June 1995 | |
| Water and Mineral Water Use Fees | 1 July 1995 |
Government's Legislative Workplan for Autumn 1995 Parliamentary Session
(Pursuant to Resolution No. 68 of 4 July 1995)
'Law and Development' Activity in Mongolia since 1991
List of People Contacted
Bibliography
2 The others were the Law on State Protected Areas and the Law on Mineral Deposits, both of which entered into effect on 1 January 1995.
3 Under Resolution No. 143 which was signed by the Prime Minister on 19 August 1995.
4 The Civil Code of 1994 states that, subject to other laws, citizens can engage in business without creating a legal entity
5 This term includes not just business entities but also state, religious and voluntary organisations.
6 No foreign banks are currently registered in Mongolia although one of the local commercial banks does collaborate with a Portugese entity under an arrangement that falls short of being a full joint venture.
7 Resolutions are what in many countries would be referred to as regulations.
8 Also known as the State Great Hural.
9 Currently just two are women.
10 Constitutions, Article 25.
11 These are the Public Policy, State, Monetary and Fiscal Policy, Justice, Agricultural Policy and Environment and Economic Policy Committees.
12 Mongolia has only one television channel.
13 Law on the Ikh Khural, Article 28.
14 The Mongolian language is free of gender problems.
15 Constitution, Article 45.
16 The Mongolian language is free of gender problems.
17 This is a United Nations Development Programme project.
18 Most of Mongolia's electrity is generated by coal.
19 Administratively, Mongolia is divided into 18 aimags or provinces and 3 autonomous municipalities (Ulaanbaatar, Darhan, and Erdenet). The aimags are in turn divided into soums and bags. The autonomous municipalities are divided into districts and horoos. Larger soums have thier own court of first instance, otherwise two or more soums share an intersoum court.
20 Constitution, Article 64. Tsets means wisdom in Mongolia.
21 Constitution, Article 49(3).
22 The present secretary is the chairman of the Administrative Office of the Courts.
23 An explanation of these is given later in this chapter.
24 These are members of the public without legal training who are elected to the position for a four-year term by the soum or district administration. Every citizen with a good record of behaviour is eligible. They may express their opinion about the facts of the case or the guilt or innocence of the accused. They receive an allowance for their participation. Mongolia's first Constitution of 1926 introduced citizens' representatives, who were then known as people's representatives, and whose task it was to represent the people in court hearings.
25 There are no credit-checking agencies in Mongolia.
26 The legal high school has now been abolished.
27 At present there are twelve standard forms available.
28 The Sukhbaatar District Court building was in such a state of imminent collapse that in 1994 the judges went on strike until they were temporarily rehoused in the Supreme Court building.
29 Established by the Hong Kong government in 1985; its governing legislation since 1990 has been based on the UNCITRAL Model Law.
30 The term "jurist" is used throughout this chapter to refer to someone with a law degree working in the field of law. This includes judges, prosecutors, advocates, government legal advisors and academics.
31 In addition to the Chair of Legal Studies, this faculty had a Chair of Communist Theory, a Chair of Marxist-Leninist Philosophy and a Chair of the History of the People's Republic of Mongolia and the Mongolian People's Revolutionary Party.
32 Two in China, five in Hungary, two in India, two in Japan, five in Russia and four in Turkey.
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