“Mongolian Law and Legal Environment” with James Liotta of Lehman Lee & Xu

By , 21 December, 2009, 3 Comments

James Liotta Lehman Lee XuOverview: Mongolia has a developing judicial system, sometimes even described as “rotten to the core”.  People need to do due diligence before coming to Mongolia to do business.  Following the law to your best ability from the beginning will help prevent issues later.

For business news, the state budget containing 76 Billion tugrugs or 1 billion tugrug per each MP, has been passed, even after a veto by the President of Mongolia.  Millennium Challenge Account is investing more than hundred million USD for clean air and road infrastructure projects.  Boroo Gold mining company has agreed to donate 1 million USD for new national park being developed in Ulaanbaatar.

For “Mongolia Business” podcast update, we received some recommendations from one of our listeners.  We also received a five star review on iTunes.

Podcast can be downloaded from iTunes or from our website.  For directions, visit: Mongolia Business podcast

This week’s podcast talk show was recorded on December 18, 2009 and published on December 20, 2009.  Below are highlights, not a verbatim transcript, of the recording.

Mongolia Business Blog PODCAST update

  • We received a suggestion for improvement from one of our listeners.  Bachi Nyangar mentioned that we should have a starting and ending music and maybe a female co-host.  He also suggested that we start covering mining stock prices and getting sponsorships for the show.
  • We also received our first five-star review on iTunes.  Mendorshikh, young Mongolian studying computers in the US, is a big fan of our show and mentioned that our podcast is THE FIRST EVER Mongolian podcast in the world.

Some business & mining news from last week:

  • There was a big news event over the past week with the 76 billion tugrugs in the state budget.  This 76 billion was to be 1 billion per each parliamentary member to spend on their own districts.  This portion of the state budget received quite a lot criticism as being a “pork barrel” spending.  Media outlets pointed out that the spending of 1 billion by each MP is going to lack transparency and that the funding would have been much better spent on larger national issues such as healthcare, education, and infrastructure.  Mongolian President Elbegdorj used his veto powers to veto this bill.  Some MP’s joined in on the call and refused to support the bill.  However, in the end, it was approved with 40+ MP’s voting for their rights to receive 1 billion each.
  • Boroo Gold mining company agreed to invest $1,000,000 for the new National Park Project for Ulaanbaatar.  The public and media have been questioning the 76 billion tugrugs that was approved as part of state budget and why we Mongolians cannot ourselves spend the money on important matters such as healthcare and education.
  • Millennium Challenge Account is going to invest in two new projects: Clean Air Project ($127 million) and Road Project (road between Choir & Sainshand City and road to Nalaikh due in about three years).   MCC is chaired by US Secretary Hillary Clinton.
  • Ivanhoe Mines announced it will spend $786 million this year on ramp-up for mining the Oyu Tolgoi mine site
  • H1N1 curfew ended few weeks ago.  Minister of Health announced it doesn’t know what to do with all of the Swine Flu vaccines.  They arrived late, but now that they are here… nobody wants them now.  Just a few weeks ago, people could not walk into buildings without a mask
  • Because of the H1N1, there will be no state funded New Year’s party.  Maybe we can get the MP’s to pitch in from the
  • Lots of foreign aid to Mongolia, but what is Mongolia itself doing?  Maybe we need to be more responsible and take matters into our own hands?

“Mongolian Law and Legal Environment”

Interview with guest speaker James Liotta, Managing Director of Lehman, Lee, & Xu.  Below is an abridged highlight of what was discussed.  It is not verbatim.

MONGOLIA BUSINESS BLOG: Can you briefly describe Lehman Lee & Xu and what it does?

  • JAMES LIOTTA: Lehman Lee & Xu is a Mongolian firm with networks throughout Asia and has been in Mongolia for about seven years.  Company focuses mainly on mining and private sector, but it also works with NGO’s and governmental organizations as well.  Over the past seven years, there has been a growing need for development of rule of law.

MONGOLIA BUSINESS BLOG: Can you describe the legal environment of Mongolia for people looking to do business & invest in Mongolia?

  • JAMES LIOTTA: #1 thing I recommend to anyone is to do “due diligence”.  There are a lot of cowboys that come here and think they can do anything they want.  There is a lot of law out there, and when implanted, it can cause some headaches if you are ill prepared.  It is a civil law system.  There is more help to develop the Mongolian legal system.  There is regression in rule of law in Mongolia.  There was a recently published review which called the Mongolian judicial system as “Rotten to the Core”.

MONGOLIA BUSINESS BLOG: What are the major challenges for your clients?

  • JAMES LIOTTA: We have a diverse group of clients.  The biggest problem is that they can’t count on the judiciary here.   The courts do not appear to be separated from politics entirely.  The courts do not seem to be using or importing sophisticated concepts of law.  For instance, if there is a complex commercial matter, the judge who has opened the case is not going to be equipped to properly handle the case.  The problem is not that always it is the case of corruption, but clients need to understand that they are entering into a developing judicial system.  And, their best defense is to comply with the law as best as possible…

MONGOLIA BUSINESS BLOG: So what happens that when clients do end up in courts?

  • JAMES LIOTTA: I think it is pretty obvious that courts do have preference to Mongolian companies and individuals… I think I should divide it up here.  There are those who are “cowboys” who have not made any efforts to comply with the law.  They often do get slapped with fines, and they probably should be fined.  The clients I feel sorry for are ones that do everything they should and still get fined.  There is sometimes a notion that “foreign entities have the money; why not fine them?”  What we recommend to our clients is to try and take the arbitration outside of Mongolia…

To get the full interview, you will need to either listen or download the podcast.  Please visit our podcast page: Mongolia Business podcast

Other topics covered with James Liotta:

  • Rates of law firms… Some are very expensive… Lehman’s rates are often lower than other Mongolian firms and quality is one of best.
  • Jay first came to Mongolia in 2000 as a Peace Corps volunteer.  Has been in Mongolia for 6 years during past 9 years.
  • Working on a manuscript “Rule of Law and Legal Culture of Mongolia” due to be published in the next few months… Incorporates things such as “How Chinggis Khaan (Gengis Khan) used rule of law to rule Mongolia…
  • Access to Mongolian law has improved
  • #1 advise: Do your due diligence
  • Likes seeing students grow develop… Practicing law in Mongolia is extremely frustrating, but also extremely exciting… The book on rule of law in Mongolia with Professor Lundendorj…
  • I love Mongolia and Mongolians, but have zero sympathy… Buck up Mongolia!  Instead of making excuses or going in the wrong direction, work together as a team and make it happen.  I’ve seen firsthand that when Mongolians work together, there are some pretty amazing results that can happen.

To listen, to download, or to subscribe to the podcast, please visit: Mongolia Business podcast

To contact us with questions, comments, & suggestions, please email us at MongoliaBusinessBlog (at) gmail (dot) com.  You can also follow us on twitter: @MongoliaBiz.

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