DELGER IP MONGOLIA

Author: Uyanga Delger

  • Oyu Tolgoi’s Responsible Mining Index

    by Dr Uyanga Delger, attorney-at-law

    I

    When it comes to society’s expectations for a large mining operation, the traditional Mongolian view is based on its experience during the Soviet era, in particular with the Erdenet mine. A 2013 UN Working Group report states: “In mining communities, the expert was informed of expectations that hospitals and schools would be built in the soums by business enterprises, without any mention of the government’s responsibility to do so, nor with clear contractual or legal obligations for business enterprises in this regard.”[1]

    Given the public‘s expectations, it is not surprising that the Oyu Tolgoi mine, which is predominantly owned by Rio Tinto, is financing, for example, the construction of a school and kindergarten complex in South Gobi Aimag. These local investments are, of course, good for those people who are directly benefiting from the investment (e.g. students), as well as for the company’s own reputation.

    However, it seems that “modern-day” Mongolia needs an updated common understanding of and social agreement on what society can reasonably expect of a large-scale mining project such as Oyu Tolgoi. This understanding and agreement should be focused on the long-term national interests of a better quality of life and an economically secure future. Thus, Mongolia’s leaders should make more of an effort to reshape public perceptions beyond visible, short-term gains. 

    II

    International responsible mining initiatives may be helpful for developing national consensus which are, at the same time, internationally acceptable and fair to all stakeholders. A new assessment on the framework for such international initiatives—the 2018 Responsible Mining Index (RMI)—includes Oyu Tolgoi along with 126 other mine sites worldwide. The 2018 RMI assesses companies and mine sites based on publicly available information, and looks at how mining companies are reflecting the issues of workers, local people, local environments, and local economies in their policies and practices.

    It is evident from the RMI assessment that the Mongolian public may reasonably expect mining companies to consider national development priorities through contributions to cultivate skills and knowledge applicable to other sectors of the economy or the systematic prevention, mitigation and management of impacts on the environment (air quality, water quality and quantity, and biodiversity). Moreover, there should be financial security in the event of mine closure; disaster management and recovery; and company commitments to ensure the just transition for workers in the event of major downsizing.

    III

    The RMI assessment focuses primarily on company-wide policies and practices, which means the world-wide operating company that is Rio Tinto, not merely Oyu Tolgoi. The mine site assessments should enable a snapshot at the individual mining level. The assessment shows the extent to which a mine site tracks its performance on local procurement, local employment, local community and mining workers grievance mechanisms, and water quality/quantity and biodiversity management.

    The assessment notes that none of the 30 mining companies covered show consistent reporting and tracking of local impacts on people and the environment. Nevertheless, Oyu Tolgoi’s performance was, together with an Argentinean mine, significantly better than other mines. Interestingly, the comparably better performance by Oyu Tolgoi stemmed from the reporting requirements set by the International Finance Corporation (IFC).

    According to the RMI, Mongolia’s policy-makers possess, by international comparison, better access to information provided by a mining company, i.e. Oyu Tolgoi. The RMI assessors point out that measuring the actual level of performance was difficult to assess in a fair manner due to specific circumstances in the given location. Therefore, the RMI measures only the extent to which the mine site tracks its performances on socio-economic and environmental impacts.

    IV

    The RMI gives reason to ask whether the quality of the information provided by Oyu Tolgoi is independently monitored and assessed by the Government of Mongolia by taking into account the local circumstances and long-term economic, health and environmental impacts.

    A 2017 report by the Intergovernmental Forum (IGF), another international responsible mining initiative, summarized that in Mongolia there was no apparent system of regular government documentation and reporting on the socio-economic impacts of the mining industry. Moreover, the IGF raised concerns over the capacity of the Mongolian government to monitor and oversee potential environmental impacts (including water quality or quantity, biodiversity impacts or mine closure).

    July 2018

    First published in The Defacto Gazette No. 55, 27 Jul 2018

    [1]  Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises on its visit to Mongolia (8-18 October 2012), A/HRC/23/32/Add.1, https://www.ohchr.org

  • Out with the Old, in with the New: Reforming Mongolia’s Law Associations

    Out with the Old, in with the New: Reforming Mongolia’s Law Associations

    It may surprise some readers to learn that there are still institutions in Mongolia that have not yet transitioned to democracy. These associations which once were controlled by communist party members, are today governed by a small groups of individuals. But the first generation of Mongolians born since the democratic transition has come of age. And this generation, the oldest of whom are now in their late-30s, has only ever known the ideals of democracy, human rights and the rule of law. And as this generation begins to take part in the direction of our country, Mongolia’s associations must begin to reflect the values they’ve come to expect. In this column, we will explore this idea through the lens of Mongolia’s law associations and their lack of internal democratic structure.

    Bar Associations in Europe 

    The bar associations in Austria and Estonia serve as good starting points for comparison. Their organization and membership are typical for Europe and may place elsewhere.

    As of 2017, there were 6,238 attorneys-at-law in Austria, and as a precondition to practising law these lawyers have a statutory obligation to maintain membership with one of the nine regional bar associations in the country (the largest of which, the Vienna Bar Association, has more than 2900 members). Each of the nine bars has the status of a public law body. Each bar is responsible for licensing lawyers in its territory and maintaining professional ethics through a Disciplinary Council. There is an association at the national level, the Austrian Bar, but its powers are limited. Very generally it serves as a national moderator among the nine bars. Estonia, on the other hand, is a much smaller country in size and population, relative to Austria. Its 1,020 lawyers are united under one main entity, the Estonian Bar Association.

    The powers of the bars in both Austria and Estonia are held by general meetings that take place at least once a year. The procedural rules make sure that each of the bar members are informed about the general meeting well in advance. The Estonian Bar Association Act stipulates that the general meeting has a quorum only “if more than one-half of the attorneys with the right to vote participate”. In Austria, the quorum is regulated but the rules are a little more complex. But the takeaway here is that, in both countries, in principle, each bar member has the opportunity and the right to participate in the general meetings of the bar associations.

    Lawyers’ Associations in Mongolia

    Things are a little different in Mongolia. The Mongolian Lawyers Association (MBA) is not an association of independent legal professionals (as was argued in a previous column). Judges and state prosecution officers hold statutory membership in the MBA. As of September 2017, there were 5,303 lawyers registered with the MBA (517 judges, 506 prosecutors, 2,077 advocates, 2,203 other lawyers). The MBA holds licensing authority for new advocates (attorneys-at-law).

    The general meeting of the MBA normally takes place once every two years. The general meeting is held by representatives of the association’s members, although every member of the MBA has the right to nominate himself/herself as a representative (the election for which is via online balloting). The number of representatives may vary. In October of last year, 534 representatives were elected to the general meeting, at which they cast votes for President and members of the Board.

    Another lawyer’s association, the Association of Mongolian Advocates (AMA), has roughly 1,200 members, but it no longer holds licensing authority. The highest governing body of this association is the general meeting of the representatives that is organised normally once every three years.

    The organisational structures of the MBA and the AMA are hierarchical; their decision making and controlling functions are centralised at the national level and are in the hands of their Presidents and Boards (the governing board of the MBA is comprised of around 30 members while the AMA’s has nine). Importantly, unlike their counterparts in Europe, the majority of members of both organisations do not have the opportunity to participate directly in the decision-making of either association.

    Outlook

    Earlier this year, the Defacto Institute published a report on the internal democratic structures of Mongolia’s political parties. Their findings suggested the parties have a ways to go before they are properly participatory. Likewise with Mongolia’s law associations. This begs the question: How can the democracy of our country grow and strengthen if such foundational institutions are not themselves democratic?

    No matter how hard the Presidents and the Boards of public associations such as the MBA and the AMA work, they will not be able to gain the support of Mongolia’s “democracy” generation unless the associations allow greater participation by their members. Gaining and maintaining the public’s support is essential to the survival of these institutions. The 2013 law that stripped the AMA of it’s authority to license advocates is an example of what is at stake. In light of the organizational structures of Europe’s bar associations and democratic participation of their members, Mongolia’s law associations have no good reason not to work toward this as a goal.

    September 2018

    First published in The Defacto Gazette No. 64, 30 Sept 2018

  • Be first, but be faithful: Trademark Law Reforms

    Be first, but be faithful: Trademark Law Reforms

    The Trademark Law of Mongolia is based on first-to-register principle, a simple rule that may often be fair enough. It could, however, serve as incentives to dishonest business practices. This is why the same or comparable special rules have been developed in many countries around the world that prioritise the legitimate interests of the public, consumers and honest business owners against malicious trademark applications. In this regard, the term trademark application in “bad faith” used commonly.

    The Draft Law on Trademark, introduced by the Ministry Justice of Mongolia to public debates, purposes many positive changes for better balanced and fair trademark registration rules. The non-use-cancellation rule and the procedure on oppositions against Mongolian trademark applications are examples thereof as they will improve the quality of trademark examination and allow businesses better access to product and service names.

    The Draft Law on Trademark, however, does not address the issue of trademark applications in bad faith.

    Examples of registrations in bad faith

    An owner of a trademark registered in Mongolia finds out that exactly the same product name was registered later in Mongolia for thousands of different products ranging from food, medication and male contraceptive to baby milk. One may ask here whether the trademark was registered with the sole interest of excluding others from the use of a very attractive product name, in order to sell or licence the product name later.

    A Mongolian company imports washing powders from abroad together with packaging materials. The company received a cease and desist warning from another Mongolian company, the owner of a big number of trademarks. The trademark owner has never been active in selling washing powders in Mongolia. Generally, the company has never produced or sold any goods. All trademark registrations of the company are related to popular retail product names.

    Another company operates in Mongolia by supplying goods under the product name X. Their product name has not being registered as a trademark. The company finds out that a person who had business relationships with them applied for the trademark X for the same goods.

    Extension of the list of Art. 5.2 of the Trademark Law

    The trademark registrations as shown in the examples above are nowadays very common in Mongolia. As the belief that trademark registration is a money-making opportunity seems to prevail (The Defacto Gazette No. 58), the public register is starting to fill up. Moreover, the current Trademark Law of Mongolia does not provide for prevention of registrations in bad faith.

    A simple solution for tackling the issue is adding a new provision to the list of Art. 5.2 of the Trademark Law that “trademarks that have been applied for in bad faith shall not be registered”.

    Reasonings

    The purpose of the Trademark Law is giving businesses opportunity to participate in the economy through competition on the merits but not through imitation or abuse.

    If the Draft Trademark Law, introduced by the Ministry of Justice, passes the Parliament of Mongolia, individuals and companies will be more encouraged to submit oppositions against Mongolian trademark applications. This means, businesses will have more chances to stop the emergence of an unjustified trademark – an exclusive ownership position – already at the stage of trademark application.

    Thanks to digitalisation with the support of the World Intellectual Property Office (WIPO), the trademark examination and publication have been improving in Mongolia in recent years significantly. Mongolian Trademark applications are published in the databases of the Intellectual Property Office of Mongolia and the Global Brand Database of WIPO. 

    Together with an additional provision in Art. 5.2 on applications in bad faith, the trademark application opposition procedure will substantially contribute to prevention of unnecessary intimidation potentials by dishonest business practices. There is, accordingly, a strong argument for adapting the current Draft Trademark Law by adding a provision on registrations in bad faith. A document published by the WIPO states, moreover, that the prohibition on registration in bad faith is internationally common (WIPO). Excluding trademark applications in bad faith from registration is, therefore, not only nationally desirable but internationally acceptable and, most importantly, beneficial to encouraging a fair competition that is essential to true economic progress and development of our country.

    May 2019

    First published in The Defacto Gazette No. 7 (96), 10 Jun 2019

  • The Power of Judicial Review: Distancing the Courts from Politics and Ensuring Law and Order

    In 2002, the Mongolian Parliament adopted two new laws to create a new type of court specialising in administrative law. The new administrative courts became operational in June 2004. In Spring the following year, the Tsets, the body responsible for constitutional control in Mongolia (үндсэн хуулийн цэц; undsen khuuliin tsets; or “Tsets”) issued an opinion (No. 2; 2005) that the administrative courts did not have the power of judicial review—that is, the power to rule on the legality of administrative acts by the Cabinet. As a result, Parliament removed those provisions from the law and the administrative courts were no longer able to address citizens’ complaints against Cabinet decisions. The decision of the Tsets was criticized heavily by lawyers, especially by Professor B. Chimid.          

    Later, in 2015 and 2016, Parliament adopted the General Administrative Law and the new Law on Administrative Court Procedure. These laws have been in force since July 2016. The administrative courts and the Supreme Court of Mongolia represents the view that these laws reinstated the powers of judicial review by the administrative courts. The administrative courts have accepted, hence, lawsuits against the Cabinet since July 2016. Over the last two years, the administrative courts have reviewed around twenty decisions of the Cabinet, according to one report. The administrative courts have taken up a number of highly politicized issues, such as the 49% of shares of “Erdenet” mining or the Winter/Spring horse races.

    Tensions between the Tsets and the Supreme Court

    Yet despite the new laws, the Tsets continues to assert its 2005 No. 2 Opinion. In a letter dated 02 April 2018, Mr. D. Odbayar, Chairman of the Tsets, demanded that the Supreme Court correct the “wrong practice of judicial review of Government’s decisions by administrative courts”. In May, the Supreme Court responded, stating that it “refuses to satisfy the demand” put forth by Chairman Odbayar (Defacto Gazette No. 47).

    Mr. Odbayar’s letter was criticized by lawyers such as Dr. O. Munkhsaikhan who argued that the Tsets may only act if a petition was lodged. Therefore, the Chairman of the Tsets violated both the Constitution and the Constitutional Procedural Law when he issued an opinion without due procedure.

    In an October 2018 interview, Supreme Court Justice Dr. G. Banzragch stated that the Tsets’ 2005 No. 2 Opinion was not applicable to the new 2015/2016 laws anyway because the original 2002 Law on Administrative Court Procedure had been repealed by Parliament.

    In fact, despite the Tsets’ 2005 No. 2 Opinion, Cabinet decisions were being reviewed—but by the civil courts. Between 2005 and 2016, the civil courts were restoring personal and property rights of individuals if they were violated by Cabinet’s decisions.

    The role of the administrative courts 

    In theory, the administrative courts are in a better position to protect the rights of individuals with regard to state authorities due to the inquisitorial system that originates from German administrative court rules. The administrative courts may actively be involved in investigating the facts of the case, whereas the civil courts are limited primarily to the role of an impartial referee between the disputing parties. Potentially, the rights of citizens could be protected from arbitrary state actions more effectively if the administrative courts were able to clearly carve out their place in the Mongolian judicial system.

    Experience shows, however, that the administrative courts’ rules make access to justice more difficult when it comes to areas such as intellectual property protection (Defacto Gazette No. 69). Another issue is whether the administrative courts are capable of distancing themselves enough from politics. For example, the current Law on Administrative Court Procedure permits “organisations representing the public’s interest” as claimants. With the Winter/Spring horse racing case, the administrative courts accepted several children’s’ rights NGOs as claimants. For administrative courts, the risk of becoming of an extended arm of politicians is thus very high.

    One other issue involves the courts’ power to interpret ordinary law in consideration of the Constitution of Mongolia. If a regular court considers a law—the validity of which is material to its decision—to be unconstitutional, it should suspend the proceedings and refer the matter to the Supreme Court. The Supreme Court should then ask the Tsets for an opinion if it decides that the referral by the regular court on a law’s constitutionality was sufficiently reasoned.

    In the case of the 2015 and 2016 laws, the regular courts did not question the constitutionality despite the existence of the Tsets’ 2005 No. 2 Opinion. The constitutionality of the administrative courts’ actions is therefore questionable as the Tsets is entrusted with safeguarding the constitutionality of the ordinary laws, according to the Constitution of 1992. As discussed in a previous column, this issue reflects the need for reforms of the constitutional procedural law in order to ensure a clear positioning of the Tsets within the Mongolian judicial system.

    The way forward

    Curbing the administrative courts’ powers of judicial review does not solve the current tensions between the highest constitutional institutions of Mongolia. Instead, procedural rules need to be reformed in order to ensure sufficient distancing of the administrative courts and the Tsets from day-to-day politics. This goal can be achieved only by clearly positioning the Tsets within the judicial system and by limiting the rules regarding the admittance of claims before the administrative courts. Mongolia’s democracy depends on a judiciary that is free from political influence, clearly structured, and thus able to execute its primary role of maintaining law and order in society.

    November 2018

    First Publication in The Defacto Gazette No. 73, 06 Dec 2018

  • What’s in a Name?

    Dr Uyanga Delger, attorney-at-law

    Since liberalisation in the 1990s, unfair business practices have become a complicated, and at times confusing, issue for both entrepreneurs and consumers in Mongolia. Specifically, for this article, we will look at how businesses have been able to mislead the public thanks to inconsistently enforced competition laws.

    Notorious cases

    One well-known example of a deceptive commercial practice is the newspaper Zasgiin Gazriin Medee (“Government News”). The name suggests a state-run media outlet. But a joint report by the Press institute of Mongolia and Reporters Without Borders points out that Zasgiin Gazriin Medeewas started in 2014 and owned by the decidedly private Trade and Development Bank (TDB) ever since.

    Another example involves Mongoliin Undesnii Ikh Surguuli, a large private university, and Mongol Ulsiin Ikh Surguuli, the country’s oldest public university, established in 1942. If these names look similar, that’s no accident. Even the Mongolian acronyms of both universities are nearly identical (МҮИС and МУИС). It’s also confusing in English, with the private school translating itself as “Mongolian National University” and the public school as the “National University of Mongolia”. It has been claimed that the private Mongolian National University has leveraged its similar-sounding name in the countryside in an effort to dupe less-informed secondary school applicants of its pedigree.

    There are laws but…

    The Mongolian Trademark Law provides for registration-based protection. The Law on Competition may, however, be applied in the case of the newspaper. Article 12.1.10 of the Law on Competition could serve here as basis for a legal action.

    In the case of the two universities, the Competition Authority of Mongolia prohibited in 2013 the use of the name “The National University of Mongolia” in English by the private university. The Competition Authority stated that the name of the private university in Mongolian language was registered by State Registration Authority in breach of the relevant provisions of the Law on State Registration.

    Despite the actions of the Competition Authority in October 2013, the private university still maintains it’s name in Mongolian language to this day. Moreover, the Intellectual Property Authority registered a logo of the private university as a trademark (TM Reg. No. 40-0012492) in December 2013, only two months after the Competition Authority’s cease and desist order.

    Today, the Government of Mongolia and the National University of Mongolia could both still initiate legal action and public awareness campaigns against the newspaper and private university respectively based on the Law on Competition. Additionally, some provisions of the Civil Code may be helpful, as was the case in France and Germany in the early 19th century, during which unfair and misleading commercial practices were uncharted territory for both lawyers and entrepreneurs. 

    Ownership

    The awkward question here is why the Government of Mongolia is not taking actions against the Zasgiin Gazriin Medee. TDB is not the government, and it shouldn’t seem to speak on its behalf. Yet the Reporters without Borders report contends that TDB “is owned by highly influental people with a lot of political affiliations”. Over 65% of TDB’s shares are owned by Globull Investment and Development SCA, a company registered in Luxembourg. In Mongolia, TDB owns Bloomberg TV and Forbes Mongolia Magazine, and the company was involved in the “mysterious” sale of Erdenet mine.

    Similarly, questions arise in the case of the university names: Who owns the private university? And how is their misleading name allowed to persist?

    Procedure

    The Mongolian law enforcement system is complicated and costly. The law enforcement powers are shared between many government agencies. The university name dispute shows that at least three authorities were involved, and each authority issued different, even contradictory decisions. In these cases, the courts’ powers are limited, and complicated administrative complaint proceedings hinder the access to justice. For example, a trademark infringement case needs to be dealt with by administrative and civil courts separately, provided they reached the stage of a court dispute at all. At the end of the court proceeding, there is an additional complication with the enforcement of the court decisions by the General Executive Agency for Court Decisions, a government agency.

    Light at the end of the tunnel?

    Both cases are typical examples of the challenges of law enforcement in Mongolia. Mysterious ownership structures allow a private bank to operate a newspaper under the name of the Mongolian Government. But in cases of trademark and unfair competition infringements, a less complicated law enforcement is possible if, for example, civil courts dealt with these cases based on Civil Code and Civil Procedural Code without any interfereance from government agencies.

    Unfortunately, the new intellectual property law reform proposals suggest that our “hidden owners” do not want a less-complicated and efficient system. And until they do, unsuspecting Mongolians will continue to get their “Government News” from the “National University of Mongolia”.

    October 2018

    First published in The Defacto Gazette No. 69, 06 Nov 2018