A Trusted Recovery Solution in Mongolia
Collecting a debt in Mongolia can seem impossible. Language and cultural barriers, foreign laws and customs, and sheer distance all impose serious challenges.
Debt recovery is simpler when you use a collection agency fluent in the laws and customs of the country where the debtor resides. Cedar Financial offers on-the-ground representatives in Mongolia who understand the debt collection practices that work to support full recovery of your funds.
Since 1991, Cedar Financial has served as a trustworthy, nationally licensed debt collection agency, helping businesses collect unpaid accounts internationally. With knowledge of collecting debts in a wide range of different industries, our experienced team collects your debts quickly and effectively so you can receive the payments you’re owed.
With offices in over 150 countries, including Mongolia, working with Cedar Financial provides you access to a global network of nationally licensed debt collectors. Our in-depth understanding of local laws, customs and cultures guarantees the best possible debt mediation results.
Comprehensive, People-First Help
At Cedar Financial, we put people first, doing everything we can to get your money back while still preserving a good relationship with your customer. Our strategic customer relations efforts are fair, but firm – ensuring that your reputation is our top priority.
We combine a people-oriented approach with the latest tech-driven solutions to drive results and provide better contact management. This comprehensive method gets the results you need while preserving customer relationships.
Our valuable network of collectors, attorneys, suppliers, and vendors allow us to get the job done. We cherish our relationships, no matter how small or large.
Contact us today and learn what we can do for your business.
Navigating Debt Collection in Mongolia
Collecting a debt in Mongolia can seem like a daunting task. The below information may help you navigate the unique challenges faced in collections in Mongolia.
Economic and Cultural Overview
Despite being thinly populated, Mongolia is one of the world’s fastest growing economies, driven mainly by its mining sector. In 2011, it had the fastest growing GDP in the world, at 17.3%.
Foreign investments (especially those skewed towards mining) have increased in recent years. Most of its exports are to China, rather than Russia, as a result of an altered political landscape. Meanwhile, it is dependent on imports from Russia for over 90% of its petroleum. Other imports are well balanced between the two bordering countries, with other imports from Japan, South Korea, the USA and Germany.
Half of Mongolia’s population, and most of Mongolia’s business, is based out of its capital city, Ulaanbaatar, resulting in a close-knit small business community, making relationships very important.
With the increase in foreign company interest and offices established, international business practices have taken hold, with many meetings conducted in English. However, some translation may still be required. Expect to dress professionally, share business cards, get to know each other over a meal and toast with vodka at the conclusion of a business deal.
Top Reasons for Non-Payment of Debt in Mongolia
- Economic Crisis. Since Mongolia is so dependent on the mining industry, a price drop in these products can have a significant impact on individuals, companies and the economy overall. This may render individuals and companies affected by the crisis unable to pay their debt.
- Weak Control/Demand From Creditors. Mongolian debtors fail to pay due to overly trusting creditors who neglect to make a claim against the debtor when they do not keep their financial obligations.
- Fluctuating Foreign Currency. As the rate of USD and other currencies go up, debtors have trouble making timely payments due to the increased price.
Challenges Faced in Amicable Collections
- Information Is Difficult to Obtain. Litigation, bankruptcy and criminal record databases are not open to general public, and foreign companies will have trouble obtaining information about the track record, reputation, and liabilities of potential business partners.
- Power of Attorney. Mongolian debtors almost always ask for POA proving that the lawyer or agent is entitled to represent the creditor before they will make contact or negotiate, due to article 62.3 of the Civil Code.
- Address and Contact Info Difficult to Obtain. Lack of thorough systemization can make legal addresses wrong or difficult to locate.
Challenges Faced in Legal Collections
- No Assets, or Assets Have Been Moved. Before the claim is even submitted to the Mongolian courts, assets may be moved from the debtor’s name, or they may have no assets remaining. Seek to freeze assets at the beginning of the litigation process.
- No Commercial or Trade Courts. Debt collection is done through civil court in three steps: Trial, Appeal and Supreme Court. Going through all three could take 7-8 months.
- Exact Address Needed for Submitting Claim to Court. If the exact address is not available to serve court notices, a request must be submitted to trace the address with reluctant police assistance, which can take several months.
Challenges Enforcing Judgements/Collecting Debt
- Insufficient Assets. After successful litigation, there may be no or insufficient assets to pay the debt owed the creditor.
- Weak Court Decision Enforcement Law/Agency. The enforcement agency has a heavy workload and may be slow to operate, not enforcing the decision quickly enough or putting the debtor under necessary pressure to collect the amount owed. The creditor or collections agency needs to constantly demand and liaise with officers in order to enforce decisions in a timely manner.
Legal Framework for Debt Collection in Mongolia
Because Mongolia is undergoing a major transition to democratic governance and a market-based economy, problems can arise when laws are written in too broad of language, leaving them open to interpretation. In addition, some regulations are not always consistent with other laws.
Without an agreement to use foreign country laws for the trade agreement, Mongolian laws apply to debt collection litigation. These issues are under exclusive jurisdiction of Mongolian courts:
- Disputes regarding immovable property located in Mongolia; liquidation or bankruptcy of Mongolian legal entities; registration of legal entities or properties; or patents or intellectual property registered by Mongolian authorities.
- Court decision enforcement procedures.
Foreign Judgement and Arbitration
Parties can agree to resolve civil disputes through arbitration, in accordance with the Arbitration Law of Mongolia, and the decision made by an arbitrator is binding and generally cannot be subjected to judicial review or appeal. Though the legal framework for arbitration exists, the system is not widely used.
Mongolia recognizes and enforces foreign arbitration decisions, just as arbitration in Mongolia should be recognized and enforced abroad.
Statute of Limitation
The general statute of limitation is 10 years, unless otherwise stated by law.
Claims for performing contractual obligations have a 3-year period, and a 6-year period for those involving immovable property.
Claims resulting from damage caused to others’ property have a 5-year period.
Upon request, the Court may change the period and its procedure, if there is adequate reason to pass the statute of limitation.
Bankruptcy Law in Mongolia
Mongolian bankruptcy law is concerned only with commercial entities, as a side effect of it being created as part of its transition to a free market economy. As a result, individuals cannot be debtors under this law. While the Mongolian Constitution does recognize individual economic rights, bankruptcy law doesn’t provide the same protections to individual entrepreneurs as it does to commercial entities.
In the Mongolian system, the debtor only includes commercial debtors: partnerships, cooperatives, companies or non-governmental organizations. A debtor is considered to be insolvent when it is unable to timely pay its debts with more than 10% of its capital.
Bankruptcy proceedings may be voluntary or involuntary, instituted by either the debtor or the creditor, or may be instituted to rehabilitate or liquidate the debtor’s assets.
- Rehabilitation proceedings: plans may be proposed by any party and are voted on by the creditors. If accepted, it is approved or disapproved by the court. If approved, a plan will be implemented under the supervision of the trustee, and, if completed, the proceeding is dismissed, and the debtor is released from further obligations. If disapproved, the debtor is declared bankrupt and assets liquidated.
- Liquidation proceedings, the court declares the debtor bankrupt under one of four conditions: a request for rehabilitation was not filed with the court, a plan was not submitted to the court, a plan was not approved by the court, or the implementation of the plan has failed. Once the assets of the debtor have been sold to satisfy the claims, the debtor will cease to exist and be stricken from the State Register.
Local Experts in Collections
Collections in Mongolia can be complicated for small to medium-sized businesses. When in doubt, remember that debt recovery is much simpler when you use a collection agency fluent in the laws and customs of the country where the debtor resides.
Cedar Financial offers on-the-ground representatives in Mongolia who understand the processes and debt collection practices that work to support the full recovery of your funds. For more information on how we can help, contact us today.
* The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.