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About this book

This book analyses the adequacy of Mongolia’s legal system for foreign investment protection by conducting a multi-level assessment of international investment treaties, domestic legislation of the host State, and investor-State contracts from an international comparative perspective. The investigation distinguishes between three legal dimensions, each of which offers both substantive legal guarantees for the protection of investments in the host State and provisions for the settlement of investment disputes by arbitration. In the first dimension of Public International Law (PIL), Mongolia is bound by international investment treaties, which offer investors an international law setting. In the second dimension, a special domestic investment law defines the domestic framework for the establishment, promotion and protection of investments, but also for the conclusion of investor-State contracts. These contracts in turn open a third legal dimension, which represents a cross-section through the PIL and domestic-law dimensions of investment protection. Following the development of a multi-level system with legal dimensions that are not isolated but rather interrelated and mutually reinforcing, the book examines whether Mongolia’s international investment treaties and domestic investment law reflect globally shared international and domestic standards of treatment and protection of foreign investments. Lastly, the author inquires whether the domestic laws applicable to investor-State contracts in Mongolia allow investors and the Mongolian Government to agree on protective terms according to the (not uncontroversial) standards of international contract practice.

Table of Contents


Chapter 1. Introduction

Interest in investing in this final frontier is on the rise and is really just beginning. The geographic location and the fact that it is a parliamentary democracy make it a very attractive destination”—indeed, as described by a Nasdaq article entitled “Emerging Markets: Mongolia, Truly the Final Frontier” from July 2015, the economic and socio-economic conditions for investing in Mongolia are promising. Mongolia is extremely rich in mineral resources, whereas sales benefit from the country’s proximity to the resource-hungry Chinese economy and two highly industrialised nations, Japan and South Korea. The German Federal Ministry for Economic Affairs and Energy believes that Mongolia, which is almost four times the size of California and the world’s second biggest landlocked State, belongs to the 10 resource-richest countries in the world. Particularly important are pit coal and lignite, gold, copper, silver and iron, oil, uranium, wolfram, molybdenum, other rare earths, and phosphates. Geological studies on large untapped reserves of rare earths, as a commodity for which China currently has a de facto national exploitation and distribution monopoly, have attracted international interest. The level of education of the country’s relatively young population is very high. Mongolia maintains excellent relations with Western States and belongs to the freest societies in Southeast and East Asia. The country follows a strategy of political neutrality and seeks to fulfil an intermediary role with regard to remaining political challenges in the region.
Bajar Scharaw

Chapter 2. International Investment Treaties

The nations of the world have built a distinct international legal system to protect foreign investments. During the second half of the last century, countries began to conclude special international investment treaties by which the contracting States assume binding inter-State obligations with respect to the treatment and protection of investors from the other contracting State(s) and the settlement of investor-State disputes by international arbitration. Today, there are more than 2500 international investment treaties worldwide.
Bajar Scharaw

Chapter 3. Domestic Investment Law

Besides international investment treaties, ‘domestic investment laws’ play an important role for the protection of foreign investments. In fact, every foreign investment is primarily governed by the domestic laws of the host country concerned, subject to their compatibility with relevant international (treaty) obligations. This not only applies in the domestic context of application of national laws if the host State’s domestic legal order acknowledges the supremacy of international (treaty) law over conflicting national rules. Arbitral tribunals constituted under international investment treaties also consider rules of domestic law. As pointed out in the investment treaty-based investor-State arbitration of Paushok v. Mongolia, the law governing the investor-State dispute “is public international law and the law of Mongolia as far as it is relevant.”
Bajar Scharaw

Chapter 4. Investor-State Contracts

Large-scale investments are typically governed by complex contractual agreements directly entered into between foreign investors and host governments. Besides international investment treaties and special domestic investment laws, these so-called ‘investor-State contracts’ or ‘investment contracts’ play an important role for the protection of foreign investments too.
Bajar Scharaw

Chapter 5. Results and Concluding Remarks

Mongolia pursues a multi-level approach of foreign investment protection through international investment treaties, a special domestic investment law and investor-State contracts.
Bajar Scharaw


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