Preface

Dear Readers,

Anderson & Anderson LLP is an international law firm, based in the USA, founded in California in 1885.  We have been active in China for more than 30 years, and in Mongolia for over 15.  Our practice both inside and outside of Mongolia has included a diverse range of fields such as IP law, including trademark, patent, and copyright registration and protection, mining law, related taxation law, general domestic and international tax law, litigation and arbitration both in Mongolia and internationally, direct foreign investment, banking law and structured cross-boarder loans, mergers and acquisitions, derivative contracts, securities law, real-estate and property law, due diligence and contract work related to all of the above fields, initial and secondary public offerings and offerings of bonds on stock exchanges domestic and foreign, other securities-related transactions, as well as establishment of Mongolian subsidiaries and the franchising thereof.

Furthermore, our clients come from a wide variety of backgrounds, including influential international organizations (both governmental and non-governmental), private banks and insurance companies, major media companies, foreign and domestic mining corporations, including wholly-owned subsidiaries, telecom and media firms, as well as manufacturers of construction equipment and the world’s largest soft-drink manufacturer.

We send you this newsletter, Mongolia Lex, as an accommodation and to keep you abreast of the latest topical changes in Mongolian law.  If there are other areas of law you wish to be kept informed about, please do let us know.

Yours faithfully,
Anderson & Anderson LLP, Ulaanbaatar Office

The Legal Environment for  Litigation in Mongolia

Mongolia is only 19 years into the process of building a democracy and free market economy, but Mongolia’s democracy has for some time been considered well developed for a young democratic country. Upon Mongolia’s rejection of the prior political socialist system, it developed a system respecting human rights, democratic values, the market economy and the rule of law.

Since that time Mongolia has followed the example of other civil law based countries, and this has led to the complete reformation of the legislative system and structure.  This reform did not take place all at once but rather has been an ongoing and gradual process. Mongolia had made good progress in developing the necessary business laws, regulations, and institutions, but important areas of reform are not complete or even fully understood yet.

In 1990, the Constitution was adopted; this new Constitution of Mongolia reflected the principle that the courts should be independent and subject to the law.

The legal system of Mongolia is divided into branches of laws similar to that of other countries that are part of the Romano-Germanic legal system, such as constitutional, administrative, criminal, civil, and international courts.

To understand today’s situation concerning lawsuits in Mongolia requires some introduction to the previous legislative system.

The court system was tightly controlled by the state before 1990. In practice, judges were responsible to the Mongolian’s People’s Revolutionary Party (MPRP[ There was only one  party in Mongolia between the 1920’s and 1990.]) which often influenced judicial decisions. In 1990 Mongolia chose to become a civil law based country. In reality, the court system remained controlled by the state.

Since 2002, Mongolian courts system is trying to be more independent and removed from political influence. Today, judges are subject only to the Constitution. Judicial power is vested exclusively in the courts while extra-judicial interference is strictly prohibited.
Mongolia is also making progress from their legislative institutions since the end of the 1990’s as well; there are now independent councils and committees whose job it is to evaluate the qualifications of judges, to administer the judicial organizations, and to provide continuing legal education for judges.

The Mongolian Judges Association was established on 21st February, 1998, and later became a member of the International Association of Judges. Currently, the MJA has over four hundred members from courts of all levels. The MJA aims at contributing to and strengthening the judicial independence and impartiality of judges, protecting the interests of judges, improving their knowledge and skills, and enhancing cooperation with the International Association of Judges and with foreign legal and judicial institutions.  [

http://www.supremecourt.mn/english/index.php?what=mja]

Mongolia has approximately 430 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.
 
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 years legal experience. Judges of the Supreme Court must be at least 35 years old with at least ten years experience. Mongolian judges are generally young, especially when compared with judges in common law countries. Approximately 26.4% of all judges are aged between 25 and 35, 33.1% of all judges are aged between 36 and 45, and 40.5% of the all judges are aged between 46 and 60.
 
The workload of judges has increased substantially over the last few years and the types of cases they handle have changed. Under the former 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 regards to civil law.  Although most of the judges have attempted to familiarize themselves with new legislation, there are still some who base decisions on outdated 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. More training is necessary, particularly in the commercial law area.  The General Council of Courts organizes refresher trainings for judges and the judges are encouraged to participate to the training. These are also foreign NGO-funded judicial reform programs and re-training projects of legal professionals funded by the World Bank and Japanese International Cooperation Agency (JAICA).

For this reason, the Supreme Court and the General Council of the Courts have sent judges and court officials to international conferences on judiciary issues, have shortened and long term training courses, and have organized visits to other countries for the purpose of studying and sharing experiences.

The Advocates

There has been an advocacy profession in Mongolia since the early socialist period. The work of advocates was largely confined to criminal matters. 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 state authorities.
 
The new Law on Advocacy came into effect in 2002 and outlines the structure of the advocacy profession. Under the new law, advocates can give legal advice, prepare legal documents, participate in investigations, and represent their clients in courts, before administrative organs, and international courts. However, they have no monopoly on these activities and a defendant may be represented in court by any person of their choosing.
 
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. Foreigners may also conduct advocacy activities in Mongolia; they must know Mongolian and they must meet the same requirements as the local attorneys.
 
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 most advocates seem to be lacking in knowledge and experience of both commercial law and market economics, the demand for advice on commercial matters is developing quickly and at present seems to be being met by the few advocates practicing in this area.

One area in which training might be useful is in the adversarial process, which is still unfamiliar to most advocates and judges. A second is in developing skills in arbitration and international 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 the court system, which is relatively inexpensive and quick. Both of these factors will undoubtedly change over time, and there are already requests for training in arbitration.

Already in Mongolia there are problems, well-qualified advocates often are not successful, and instead attorneys who have many friends and acquaintances at the courts tend to succeed.  Advocates still do not have much influence with the judges at court hearings, since debate between advocates does not seem influence to the judge’s decision. This is because there are situations where the judges have already made their decision before the court hearings.
 
Prosecutors

The General Prosecutor's Office was set up in 1930. It was a very powerful organization in the judicial system and prosecutors have retained substantial control over the trial process.
 
It now has two main functions. One is supervisory; prosecutors supervise inquiries by the police in criminal 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. 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 may also take part in civil cases in which the state is not a party and may appeal decisions in cases in which it has not appeared if it believes that the decision is contrary to law.

Court System of Mongolia and Jurisdiction

The court system in Mongolia is based on the continental legal system as practiced in Russia and Germany. Under the Law on Courts which was revised in 2002, Mongolia has three levels of ordinary courts:

Soum[ Soum is a sub- administrative unit of aimag.], intersoum and district courts are courts of first instance in Mongolia;

Appeal courts, found in the Capital City Court in Ulaanbaatar and in the various aimags[ Aimag is a fist level administrative subdivision of Mongolia like province.]; and
The Supreme Court in Ulaanbaatar is the highest court of the land.

Soum, intersoum and district courts have jurisdiction only at first instance and deal with all crimes and all civil disputes.

Appeal courts have first instance jurisdiction in cases of more serious crimes. They also deal with appeals from the lower level courts. The judges of these courts sit in both first instance and appeal cases. Due to the relative number of cases, criminal appeals are the primary focus of their work. The establishment of separate chambers for criminal, civil and administrative cases at the Capital City Court is considered to be an important step towards improving case management and efficiency and since 2002 seems to be working, as the total number of cases saw a dramatic increase and yet the number of judges handling the case load did not.

At the highest level is the Supreme Court in Ulaanbaatar, which deals with certain matters at first instance that are not specifically within the jurisdiction of the other courts, such as the recognition and enforcement of arbitral awards as well as reviewing decisions of the aimag courts and the Capital City Court.  The Supreme Court, in addition to reviewing decisions of lower courts, has the power to provide official interpretation for uniform understanding and application of laws (except for the Constitution), to develop policies on the administration of justice, and to provide professional guidance to judges.

Administrative Case Court

For the purpose of keeping equilibrium between judiciary and executive organizations, Administrative Case Court was established on 1st June 2004. The main power of the Administrative Case Court is to exercise court control of activities of the executive organizations within legally-defined frames and power.

Constitutional court

The 1992 Constitution established a judicial supervision system of the implementation of the Constitution by founding a special Constitutional Court.

This court examines and settles constitutional disputes at the request of the Parliament, the President, the Prime Minister, the Supreme Court, the General Prosecutor, on its own initiative, or on the basis of petitions received from citizens.

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 handled by the Supreme Court, as the Supreme Court interprets Mongolian law currently.  There is also concern that this court’s make up is one third members of the Supreme Court, the rest being political appointees engendering fears of improper, politically slanted decisions and potential conflicts with the Supreme Court over the validity of specific laws.

Special Jurisdiction of the Mongolian Courts

In accordance with the Mongolian laws, the following international disputes are referred to the special jurisdiction of Mongolian courts:

disputes related to ownership, possession, and use of immovable properties which are located at the territory of Mongolia;

disputes related to reorganization and bankruptcy of legal persons which are incorporated in Mongolia, and the decision raised by the legal persons, their branches, and their representative offices;

disputes about whether registration by Mongolian courts and other authorized organizations is valid or invalid;

disputes related to the registration and applications for registration of patent, trademark, and other intellectual properties by Mongolian Intellectual Organization;

court decisions enforced in Mongolia and personal requests for enforcing court decisions in Mongolia.

Mongolian National Arbitration Court

The Mongolian National Arbitration Court was established with one arbitrator in 1960. Later in 1991, the jurisdiction of the Arbitration Court was expanded to consider all commercial disputes, regardless of the nationality of the disputants. In 2003, a new Arbitration Law was adopted, expanding the Mongolian National Arbitrations Court’s sphere of activities to include resolution of domestic and foreign business disputes through arbitration and mediation and also to promote training and research in arbitration.

Parties who conclude arbitration agreements impliedly choose to have their disputes resolved solely by arbitration. In order to respect the parties’ arbitration agreement, the court will not participate in arbitration proceedings arising from matters covered in the parties’ contract. Also, the courts are completely barred from being involved in certain types of disputes, which are under the exclusive domain of arbitration under Mongolian law.

However, if either party finds arbitration proceedings to have been conducted unfairly, they may demand court assistance from a Court of Appeals.

International litigation

In accordance with Mongolian law, there are no legal restrictions in choosing a foreign jurisdiction to resolve transaction/contract disputes; contracting parties are free to choose any jurisdiction to resolve their contract disputes, except for the matters referred especially to Mongolian jurisdiction as noted above[ Please look at Special Jurisdiction of the Mongolian Courts on Page 9.]. It is common business practice for Mongolian parties to voluntarily submit to foreign jurisdictions in relation to commercial contracts.

In deciding civil litigation and disputes, Mongolian Courts may apply foreign law that does not contradict the Constitution and other laws of Mongolia or international treaties to which Mongolia is a party. Therefore, Mongolian courts can apply foreign countries’ laws in resolving disputes arising out of an agreement or a transaction, provided that the applicable foreign law and applicable provisions or parts of foreign law are not in conflict with the Constitution and other laws of Mongolia, nor with international treaties to which Mongolia is a party.

If the contents of the foreign laws are too difficult to understand, both the courts and arbitration panels of Mongolia may ask for assistance from the Ministry of Justice or Mongolian Embassies in foreign countries; they have also been known to invite specialists to explain foreign laws. Either defendant or claimant can provide the court with documents that explain and opine the foreign laws.  If it is still too difficult for the court to use and understand the foreign laws, the court may use Mongolian laws instead.

We advise our clients to provide an arbitration clause for dispute resolution in any agreement since Mongolia is a party to the New York Convention on Enforcement of Arbitral Awards. Arbitration can take place in a country that is also a signatory to the Convention. It is hoped that the arbitration is procedurally more flexible and that a higher quality of justice is achieved.

Arbitration awards are enforceable in Mongolia if the contracting parties choose to arbitrate in a country that is a party to the New York Convention on Enforcement of Arbitral Awards.

Ad Hoc arbitration is also permitted in Mongolia by law, which means there is no need to use institutional arbitration which is generally of very poor quality due to the newness of the process, the lack of training on the part of the National Arbitration Center, and the lack of experience in arbitration of the arbitrators. Such arbitration is another reasonable method of dispute resolution with a Mongolian person, though it may entail bringing potential panelists from abroad to act as arbitrators. This may be more desirable than arbitration or litigation in Mongolia.  Unfortunately because of issues with the bureaucracy and both perceived and actual corruption with the legal system it is often difficult for people to believe that the courts will deliver an actual just result.  But through arbitration there is a chance for both sides to choose arbitrators that they think will provide an unbiased decision.

The Supreme Court of Mongolia has been actively developing international cooperation, and as a result it has established close cooperation with the Supreme Courts of the United States of America, the Russian Federation, The People’s Republic of China, and the Republic of Korea. 

Furthermore, several comprehensive projects aimed at reforming the judicial system of Mongolia are being successfully implemented. These are the USAID funded “Judicial Reform Program”,  GTZ “Training and Re-training of LEGAL Professional” project, the World Bank “Judicial and Legal Reform” project, as well as activities of the Hanns-Seidel Foundation of Germany, the JAICA, and  the Korean International Cooperation Agency (KOIKA). [

Lawsuit Procedure and Court Decision Enforcement

General Lawsuit Procedure

Statutes are the main source of law in Mongolia. The courts follow the relevant laws, not legal precedence to resolve matters. Precedent is not considered to be a source of law; the courts in the modern Mongolian legal system play no formal role as a source of law. In Mongolia, judges are supposed to only apply law, not create it. Mongolia does not use a common law system and therefore decisions issued by the various courts do not have precedential value (no stare decisis). Although they are binding upon all courts and other persons for the particular purpose of that specific case, they have no further effect on legislation or legal interpretation. Therefore, they do not become "law" in a more general sense.

Legal customs are considered to be a limited, but not a principal, source of law. While studying existing legislation in Mongolia, one can find some evidence of the importance of legal tradition. For Mongolia with a nomadic civilization certain objects used in daily life are vastly different than those of other nations, it is necessary to follow customary norms bequeathed from ancient times when solving cases and disputes. However, the courts of modern Mongolia do not follow any legal customs to resolve any litigation.

Legal doctrines are also not considered as a source of law. Therefore, Mongolian and foreign academic opinions are not taken into account when a court makes a decision.

 It is not the practice of Mongolian courts to cite the published works of jurists when issuing a judgment. In many ways, jurisprudence is still in its infancy.  Currently judges do not expound any reasons as to why one side is successful over another nor do judges exercise any legal analysis in their decisions.  Judges simply announce and publish their position.  This means that there is little interpretation as to the direction of the law or to the merits of a case or to what judges find convincing evidence. It is also likely that this helps lead to a higher propensity of judicial corruption as judges are not required to give clear and convincing reasons as to why and how they made their decision. Unfortunately, there is no current law concerning judge’s decisions in Mongolia today that might force them to explain their thought process.

Litigants enjoy the right to appeal a court decisions to the next court level, but must do so within 14 days of the first instance court’s decision. Litigants may appeal the court’s decision to the appeals court or within 30 days litigants may claim to the Supreme Court directly, to review the lower court’s decision.

The litigant has the right to choose where to appeal the first instance court’s decision. If the litigant takes their claim to the Supreme Court for review of the first instance court’s decision, it shall loose the right to appeal the court decision to the Appeals court.

If the litigant also does not accept the Supreme Court’s decision because it finds that the Supreme Court has breached the laws, it may make a claim to the Chief Judge of the Supreme Court. If the Chief Judge finds that the claim is reasonable, he/she may recall the court hearing by the entire panel of the Supreme Court to review the lower court’s decision again and the decision made by the entirety of the Supreme Court shall be final.

The status of international law in the Mongolian legal system was dramatically transformed by the 1992 Constitution of Mongolia. The 1992 Constitution of Mongolia provides that "the international treaties to which Mongolia is a party, shall become effective as domestic legislation upon the entry into force of the laws or on their ratification or accession. Mongolia shall not abide by any international treaty or other instruments incompatible with its Constitution”. [ Constitution of Mongolia, Article 10]
 
The term international treaties refer to all interstate, intergovernmental, or interdepartmental documents irrespective of their form and appellation.

In the case of civil and criminal procedure the same courts hear both types of proceedings. However, at higher levels of the judicial system, special separate divisions are created for civil and criminal cases.

Litigants have the following rights in proceedings: 1) to be informed of claims and arguments, and to challenge the evidence of another party; 2) to be acquainted with the record of case, to make notes after an order is made by a court; 3) to take part in judicial proceedings; 4) to request to testify as a witness, 5) to appoint an experts to perform actions specified in clause 48, 6) if it is considered that evidence is false or tendered illegally to object to or apply to reject evidence; 7)to request adjournment of case on grounds provided by law; 8) to challenge the composition of the court, judge, prosecutor, citizen’s representative, secretary of court, expert, translator or interpreter; (9) to put questions to other participants; 10) to appeal court decisions; 11) and other rights provided by law.[ Civil Procedure Code, Articles 23,24, and 25]
  
Litigants in proceedings have following duties; 1) to prove their claim, make submissions, objections, and gather their evidence; 2) to appear in court when called; 3) to implement court orders; 4) to comply with court rules and 5) to implement final decisions of the court.[ Civil Procedure Code, Article 25]

If the law does not specify a specific date, cases are supposed to be decided within 60 days from date of instigation of proceedings, and in cases of appeals be decided within 30 days from the date of receipt of an appeal. Before the hearing of case, a defendant enjoys the right to make counter-claims, together with basic claims.
  
Judge shall accept and instigate proceedings within 7 days after receiving a claim by the claimant, as long as there are no reasons to dismiss the action.  

A judge may dismiss actions in the following cases; (1) cases where personal jurisdiction was not established; (2) cases where other proper court jurisdiction was not established; (3) cases where a plaintiff defied procedures specified in law on non-judicial provisional adjudication; (4) cases where there is an inability to show a cause of action by the plaintiff; (5) cases where an action was brought by a person without the right of representation by the plaintiff; (6) cases where there is a court decision that has come into force about facts alleged in the legal action and regarding fault of parties or decrees of a court that has come into force, or a judge’s decree about dismissal of an action as well as dismissal of case; (7) cases where a court is considering another case about the matter in dispute; (8) cases where the subject of this matter is under criminal investigation; (9) cases where defendant’s address is unknown; and (10) cases where the claim at issue or liability at issue was transferred to a successor in case, when the person representing one party has died or the legal entity was dissolved.[ Civil Procedure Code, Article 65]

After instigation of proceedings, if a judge deems it necessary, a judge may decree the following measures for affirmation on basis of plaintiff’s request; (1) seizure of defendant’s assets in the amount of the claim; (2) prohibition of any concrete operations of defendant in the amount of the claim; (3) seizure of current accounts of defendant in the amount of the claim; or (4) transfer of money in the amount of the claim to court. [ Civil Procedure Code, Article 69. ]  

Setting Aside of Arbitral Award

If requested by a party, a Court of Appeal may suspend setting aside proceedings to give an arbitral tribunal opportunity to take action that would eliminate grounds for setting aside if arbitral committee fails to eliminate grounds for setting aside. [ Law on Arbitration, Article 40]

If a Court of Appeals fails to issue a writ of execution for illegal or unclear reasons it will not be sufficient reason to not enforce measure. In such case, the court enforcement organization executes arbitral award on its own initiative. A Court of Appeals has the right to refuse to recognize and enforce arbitral award if an arbitral award is not valid, or challenged, or withdrawn by the court of the place of arbitration[ Law on Arbitration, Article.43.
].

Court Decision Enforcement

Legal confirmation of independent jurisdiction as exercised by first instance, appellate and supervisory courts and the various courts’ decisions are effective as soon their decisions are made.  No other court equal to or lower can make decisions that will affect a court’s rulings because of the guarantee of an independent and impartial court.

A former regulation on writing a protest by justices of the Supreme Court and Chief Judges of Aimag and City Courts against decision of lower courts that influenced the impartiality of court’s decision was terminated.

Court decision enforcement institutions of Mongolia consist of Court Decision Enforcement Agency, prisons, and court decisions enforcement offices of the Capital City and Aimags.
 
The Court decision Enforcement Agency contacts foreign and domestic persons on behalf of the other court decision enforcement institutions.

The Court Decision Enforcement Agency of the capital city or aimag conducts the following duties:

to provide professional instruction and control the enforcing procedure of the court decisions on civil cases, court penalties on criminal cases to fine, to confiscate, and to arrest;

to provide professional instruction and control to enforce court decision of foreign courts and international arbitration if it is specified in the international treaty;

to organize compulsory auction of real estate; and

to file a record for citizens and legal person in its jurisdiction who has a debt;

If either of the parties fails to implement arbitration award, the other may appeal to a Court of Appeals pursuant to the procedures on enforcement of court decisions to have an arbitration award recognized and enforced[ Arbitration Law, Article 42.1].

Mongolian courts rarely, if ever, enforce foreign court judgements. Enforcement of a foreign court judgement is regulated by the laws and regulations of Mongolia, by a treaty entered with the foreign country and by international treaties to which Mongolia is party.

Court Decision Enforcement Law provides a statue of limitation of three years for enforcing foreign court judgement and arbitration awards.

In international civil procedure matters, Mongolia is a signatory to the 1954 Hague Convention on Civil Procedure and Mongolia has concluded Bilateral Treaty to Mutually Provide Legal Aid in Civil and Family Cases with several countries, including Russia, Poland, Bulgarian, Ukraine, Hungary, France, Peoples Republic of China, India, Yugoslav and both  North and South Korea.

Unfortunately, Mongolia has not signed a treaty with some countries, including the United States of America, United Kingdom, Japan, Australia, Austria, Swiss, New Zealand, Israel, German, Danish and Canada., etc with respect to recognizing that countries court judgements. Therefore, some countries’ court judgements are not be recognized by courts in Mongolia.

In order to be enforced in Mongolia, the foreign court decision must be confirmed and accepted by the court that made the decision, to compel enforcement, in Mongolia.  Further, the foreign court decision must be officially translated into Mongolian and delivered in accordance with the proper regulation under the Bilateral treaty between the countries or international treaty.

If any of the following situations occur during the enforcement the foreign court judgment here in Mongolia, a foreign court decision will not be enforced in Mongolia:

if  damage to the independence and national security of Mongolia may occur;
if it contradicts commonly accepted norms;
if there is a valid court decision made by Mongolian courts on the case in question;
if the court decision is related to litigation that belongs to the special jurisdiction of Mongolian courts;
if the court decision is not yet validated; or
statute of limitation for enforcing a foreign court judgment has lapsed.

If the court decision has enforced, the recipient of the whole amount in dispute must pay to the court decision enforcement organization the expenses incurred with regard to the actions taken by the organization for the court decision enforcement. Furthermore, the recipient also must give bribes equivalent to 0.5% and 10% of the amount satisfied to the staff that enforced the court decision based on the contract after the court decision fully enforced.

However, citizens complain that the court decision enforcement agency and its staffs discriminate and are not efficient in executing court decisions. This organization also has been repeatedly accused and charged with corruption as well.

Problems with Mongolian Legal Tribunals

The 1992 Constitution of Mongolia lays down procedural principles and guarantees that are applicable to all court proceedings: the right to use the national language, the independence of judges and their subordination only to the law, the equality of citizen before the law, and the open examination of cases in all courts.
 
While substantive law is made up of those rules which relate to the rights and duties amongst citizen, procedural law regulates the stages in the progress of a civil action or criminal prosecution.

The process is intensifying for changing judicial control into a system that controls whether activities and decisions of the legislature and executive are in accordance with human rights. However, judicial powers are not yet fully politically or economically independent. The composition of judges, are not fully developed, technical provisions are not sufficient, their specialization and knowledge is still very low, and the judicial branch, some would say, is losing its independence due to corruption, political influence and office buying.  The concepts of independence and impartiality have not yet settled into the court systems during this transition period.

It is very difficult to believe to the impartiality of the courts. This is because the budget for courts does not reach 1% of the total state annual budget. The remuneration of the judges is also on average the same as the average laborer’s salary in Mongolia. Because Mongolian judges are not properly compensated they have shown a propensity to acquire wealth using their power and position; therefore they do not command the respect that other nation’s judges do.

The authority and strong traditions of prior times continue to haunt the Mongolian courts system. Despite improvements, citizens continue to distrust the courts and for good reasons.

Judges are often influenced by personal economic factors. A judge’s perceptions of potential benefits or consequences for self, family, or friends may determine a ruling.  Many people think that low salaries are often used as an excuse for judges to accept bribes, gifts, or other in-kind gratifications.  It is an openly known secret amongst lawyers and even large business that the outcome of lawsuits can be purchased.  In talking with lawyers almost everyone knows of someone who has been asked for a bribe, offered a bribe, or paid a bribe for a successful legal outcome

The level of political influence and corruption in the system increases with the relevance of the Court. Political pressure is lower in the primary courts, moderate in the Appeal Courts, and practically inevitable at the Supreme Court level. The president appoints all judges; former judges allege that corruption starts in the selection process. Secrecy of court decisions facilitates corruption in the courts since judges need not worry about the disclosure of lack of evidence in reaching a decision.

In civil cases for example, if one of the litigants were to give some (about 10%) of the award to the judges, the dispute may be decided for that party’s benefit.  While this is difficult to quantify as it is illegal; many lawyers all know “a friend” who have been approached by a representative of the judge in their case.  This has soured the general public’s belief concerning the fairness of the courts and the legal system at large.

According to the survey on Mongolian corruption by “Sant Maral” foundation as of September, 2008 about which organizations are mostly influenced by corruption, courts are the fourth highest, after land, custom, and mining sectors of Mongolia.

Implementing and enforcing the law is a difficult task in Mongolia. In the process of transforming the legal system, some laws were drafted and passed rapidly without serious consideration to contradictions among laws, implementation shortcoming, or loopholes.

Additionally, the repeated presence of land, licensing, customs, and courts in lists of problematic institutions with low public respect concerning corruption warrants a closer examination of these institutions and processes.

Courts are widely seen as corrupt and generally do not constitute an effective recourse for victims of corrupt use of public authority.

According to the corruption index report in 2007, some negative perceptions of the courts have declined, while others have not. For example, the percentage of individuals surveyed who thought corruption to be a problem in the courts declined from 38.9% in 2001 to 17.7% in 2005. At the same time, around 70% of respondents (both the general public and those with direct experience with the courts) believe that judges and decisions are affected by political considerations and the personal interest of judges and/ or other government officials. Around 90% of respondents (both the general public and those with experience in the courts) believed politically influential people received better treatment in the courts and they also felt that rich people, influential officials, and friends/relatives of court official would get somewhat or far better treatment in the courts. [http://www.usaid.gov/mn/documents/MongoliaCorruptionAssessmentFinalReport.pdf
]

Litigants choose arbitral tribunals for quick, cheap and fair proceedings. Unfortunately, because of the poor quality of its arbitrators, their lack of decent remuneration, and the tendency of the arbitrators to support the Mongolian party, there has been a substantial decrease in parties’ willingness to submit cases to the Mongolian National Arbitration Court. Ad hoc arbitration and arbitration out of Mongolia has become common for Mongolian litigants.

Confidentiality is an important issue in international arbitration proceedings and keeping the confidence of the parties may be an advantage of arbitration. However, there are no rules with regard to confidentiality for parties and arbitrators involved in the arbitration proceeding in the current Law on Arbitration of Mongolia.

Litigants are also becoming less enamored with Mongolian Arbitration, because arbitral activities are also connected with the Mongolian courts. For example, courts have the right to confirm or invalidate arbitral awards according to the request by either party, additionally a party may submit a request to the court to have an arbitration award recognized and enforce.

Statistics of lawsuits