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Amendment to Mongolia's Strategic Foreign Investment Law

22 April 2013

Further to our recent alert dated 15 April, the Parliament of Mongolia approved an amendment ("the Amendment") to the Law of Mongolia on the Regulation of Foreign Investment in Business Entities Operating in Sectors of Strategic Importance (the "SFI Law") on 19 April 2013.



The approved text of the Amendment is as originally described in our 15 April alert. The Amendment is stated to be effective from 19 April 2013.

The Amendment recasts Article 4.7 of the SFI Law by stipulating Parliament as the approval authority only in those transactions where a non-Mongolian state-owned enterprise acquires more than 49% of the issued shares of a Mongolian company. The Amendment removes investments by foreign private investors from the scope of Parliamentary approval and deletes the MNT 100 billion threshold in its entirety.

The changes do not mean that foreign private investors are free from a formal approval process since acquisitions falling within the scope of the SFI Law will nevertheless have to be approved by the Cabinet, or the Ministry of Economic Development under the SFI Law's draft implementing regulations. Some comfort is provided insofar as the approval process for foreign private investment is removed from the purview of a government organization that is not always in session and has to consider other matters of national importance.

On a separate but related note, various officials including the Deputy Minister of Economic Development and the Governor of the Bank of Mongolia, have recently indicated that the Mongolian government intends to submit a new investment law (a draft of which has been prepared) for Parliamentary approval this summer. The new law would aim to provide greater stability for foreign investments in Mongolia. In addition, government officials also have suggested that sections of the amended SFI Law might be "merged into" the new investment law. We will of course monitor developments and update our clients as any events unfold.

Please click here to read the full alert

The team

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