Best Project Finance Lawyers in Mongolia

About Project Finance Law in Mongolia

Project finance in Mongolia refers to the legal and financial structuring of large-scale projects-most commonly in mining, infrastructure, energy, and industrial sectors-where repayments are secured primarily by the future cash flow generated by the project rather than the general assets or credit of the project sponsors. Due to its vast mineral resources and growing demand for infrastructural development, Mongolia has become an attractive destination for both domestic and international project financing. Legal frameworks have evolved to accommodate foreign investment, private-public partnerships, and the unique complexities these large ventures bring.

Why You May Need a Lawyer

Entering into a project finance agreement in Mongolia often involves numerous legal challenges and complexities. You may need a lawyer for several reasons, including:

• Structuring complex financial arrangements involving multiple stakeholders and international entities
• Negotiating and drafting project agreements such as concession, construction, operation, and supply contracts
• Navigating Mongolian regulations, licensing, and permitting procedures
• Assessing and managing risks related to currency, political changes, and market factors unique to Mongolia
• Advising on tax obligations, profit repatriation rules, and customs laws
• Resolving disputes or renegotiating terms should the project's circumstances change
• Ensuring compliance with environmental, labor, and local content requirements

Local Laws Overview

Several key aspects of Mongolian law are particularly relevant to project finance:

• Foreign Investment Law - Mongolia encourages foreign direct investment but requires careful structuring to comply with ownership, repatriation, and reporting requirements.
• Concession and PPP Laws - These laws regulate how public infrastructure projects can be developed with private sector participation, including bidding processes and government guarantees.
• Secured Transactions - Under Mongolian Civil Code and associated laws, lenders must register security interests in order to protect their claims on project assets and future receivables.
• Licensing and Permits - Almost all resource extraction, energy, and large infrastructure projects require multiple permits from state and local authorities.
• Environmental Regulations - There are strict requirements for Environmental Impact Assessments and ongoing monitoring to protect Mongolia's natural resources.
• Dispute Resolution - Contracts must specify mechanisms for resolving disputes, often including options for international arbitration.
• Currency Controls - Laws regulate the use of foreign currency and transfers, which can impact debt repayments and foreign investor returns.

Frequently Asked Questions

What is project finance and how does it differ from corporate finance?

Project finance is a method of funding projects where repayment depends primarily on the project's cash flow, rather than the general credit or assets of the project sponsors. In contrast, corporate finance relies upon the whole company’s balance sheet and creditworthiness.

Can foreign investors participate in project finance deals in Mongolia?

Yes, Mongolia permits foreign investors to participate in project finance. However, there may be restrictions in certain sectors, especially when it comes to strategically important industries like mining or telecommunications.

What permits and approvals are required for a project finance transaction?

The permits required depend on the sector and scale of the project. Typically, companies need a business registration, sector-specific licenses, land use permissions, environmental approvals, and, in some cases, foreign investment approval.

Is it possible to secure financing with project assets in Mongolia?

Yes, Mongolian law allows for the creation and registration of security interests over project assets, including real estate, equipment, and project receivables. Secured transactions must be registered to protect lender rights.

How are public-private partnerships (PPPs) regulated in Mongolia?

PPPs are governed by the Law on Concessions, the Law on Investment, and sector-specific regulations. The government can offer concessions for infrastructure projects and sets out requirements for bidding, negotiation, and contract enforcement.

What are the main risks to consider in project finance in Mongolia?

The primary risks include political and legal changes, currency fluctuations, regulatory uncertainties, delays in obtaining permits, and unforeseen environmental or social impacts.

How are disputes in project finance typically resolved?

Project agreements generally contain provisions for dispute resolution, most often through negotiation, Mongolian courts, or international arbitration, especially for cross-border projects.

Are there restrictions on repatriating profits or loan repayments abroad?

Mongolia's Investment Law allows the repatriation of profits, but certain conditions and reporting requirements must be met. Exchange controls and tax regulations may also apply.

What taxes are relevant for project finance ventures in Mongolia?

Relevant taxes include corporate income tax, value-added tax (VAT), royalties for resource projects, customs duties, and, potentially, withholding taxes on certain payments abroad.

How can legal counsel help in the due diligence process?

A legal advisor can conduct comprehensive due diligence covering title to assets, compliance with laws, validity of licenses, environmental obligations, contract enforceability, and potential liabilities, all of which are critical to a successful project finance transaction.

Additional Resources

For professionals and investors seeking more information or assistance, consider contacting the following:

• Ministry of Finance of Mongolia - Oversees policies relating to public finance and project finance matters
• Ministry of Justice and Home Affairs - Regulates legal procedures, registration, and dispute resolution
• National Development Agency - Coordinates major national projects and foreign investment promotion
• Mongolian Bar Association - Directory of licensed lawyers experienced in project finance
• Business associations such as the Mongolian National Chamber of Commerce and Industry (MNCCI)
• International financial institutions operating in Mongolia, such as the Asian Development Bank or World Bank Group, for guidelines on PPPs and major project financing

Next Steps

If you require legal assistance in project finance in Mongolia, consider taking the following steps:

• Clarify your project’s scope, objectives, and stakeholders
• Gather all documentation relating to project assets, permits, and agreements
• Identify potential legal and regulatory issues unique to your industry or investment structure
• Consult with an experienced Mongolian lawyer or law firm familiar with project finance to review your plans
• Arrange a preliminary meeting to discuss your needs, potential risks, and compliance steps
• Monitor changes in local laws and industry practices that could impact your project

By being proactive and seeking specialist advice early, you can help ensure your project finance transaction in Mongolia is legally sound and set up for success.