“The principles of the free market ought to have made state ownership smaller, but Mongolia’s state ownership has been growing bigger. The so-called state-owned companies have actually become political-party owned companies.” D. Jargalsaikhan’s remarks given at Harvard University on 8 March 2018, The Defacto Gazette No. 41.
The most fundamental issue in Mongolia is, undoubtfully, the question on how to limit unfair competition practices of state owned or political party-linked companies and distortion of competition by state (international) aid and party-linked companies’ investments. In other words, Mongolia has reached the development stage that the state’s economic participation should be discussed from the perspectives of equal opportunity, free and fair competition and incentives for innovation.
Constitution of 1992
The rule of law principle did not emerge in 1990’s Mongolia from private enterprise capital and investment protection claims. Mongolia was previously a socialist country, where the state was considered as the sole legitimated proprietor. Mongolian understanding of private property and free competition was, therefore, limited to the notion that these are the prerequisites of a market economy. The documentation of the parliamentary debates on the Constitution of 1992 shows evidences that the legislator was not fully aware of the importance of the constitutional protection of private property and entrepreneurial freedoms.[1] During the parliamentary debates, Mr. Chimid, who acted as a member of the advisory committee, was representing the opinion that the property issues should be regulated by civil law. Consequently, the current Constitution of Mongolia provides for frameworks that are formulated from the historical perspectives rather than the private enterprise interests on private capital and investment.[2] The Constitution of 1992 distinguishes state property from private property. Article 5 determines that the state shall regulate the economy “with a view to ensure the development of all forms of property.” In practice, Article 5 could serve to some extent as limits to state regulations and practices eroding competition and the market economy itself. Unfortunately, Article 5 did not have any practical relevance in the past.
Competition law The first law on competition regulation was enacted in 1993. A competition authority was established end 2005. The current Unfair Competition and Consumer Protection Agency (CA) does not conduct general market enquiries by assessing access to a market sector and competition in the relevant sector or in Mongolia overall. CA is an enforcement authority that investigates against companies and state administration bodies primarily on the basis of private complaints. The number of private complaints increased substantially over the last decade. CA is, however, not an independent, quasi-judicial body.
Intellectual property laws Patent, trademark and copyright laws are enforced by the Intellectual Property and State Registration Agency (IPO), General Customs Office (GCO) and courts. A registration with the IPO is necessary for patent and trademark enforcement. A copyright registration is currently recommendable.
For the patent and trademark protection, IPO examines novelty and other requirements. The examination quality is very low so that the registration itself may create market restriction to honest businesses. Additionally, the Mongolian trademark law does not provide for adequate protection of businesses from unfair use of registered trademarks.Overall, the intellectual property enforcement is a huge issue to businesses. IPO has the authority to stop an infringement. In case of enforcement on the border, the right owner should request before IPO and GCO actions to hinder the entry to the domestic market. The IPO and GCO procedures are not regulated sufficiently so that the right owner may rely on efficient and impartial enforcement. The right owner should lodge a complaint before administrative court if IPO and/or GCO did not act or if the owner did not agree with IPO and/or GCO decisions. The damages should be claimed before civil court. In other words, the system is complicated, costly and unfair especially in relation to independent private businesses.
In future, civil courts should be entrusted with intellectual property enforcement. IPO’s authority should be limited to it’s capacity as a registrar. In case of GCO, it’s authority should be limited to execution of civil court orders.
[1] Hans-Seidel-Stiftung, Documents on the Constitution of Mongolia of 1992, Vol. 90, p. 10, 264 (in Mongolian)
[2] Uyanga Delger, Das Patentrecht in der Mongolei, Carl Heymanns Verlag 2011, p. 82 (in German).
2018.04.30