Debt collection in Mongolia

The debt collection procedure in Mongolia begins with an assessment of the financial capabilities of the debtor, his field of activity, the history of the enterprise, the availability of documentary evidence of the debt, current court cases and initiated enforcement procedures, as well as the possibility of challenging this debt. This analysis serves as the basis for developing a strategy to be used on behalf of the client to recover the debt.

In the absence of current litigations against the debtor or outstanding court decisions regarding debt collection, and provided that the debtor is active, amicable debt collection becomes the preferred approach. 

This stage is based on active negotiations with the debtor to reach an agreement regarding payment of the creditor’s claims or other settlement options, such as return of goods, transfer of debt to a third party, exchange of services or goods.

Interaction with the debtor begins with sending a notification via mail, email, telephone or instant messengers. This process involves intensive communication with the debtor in order to put pressure on him. The main task is to establish a dialogue with key decision makers in order to speed up debt repayment.

The average term for out-of-court collection is up to 60 days. If this stage does not lead to the expected results, or if after an initial analysis it becomes clear that it is not applicable, then you should proceed to recovery through the court.

The general statute of limitations period in Mongolia is 10 years, but for claims related to failure to fulfill contractual obligations it is 3 years. The civil law provides for the right of the court to change the limitation period and the procedure for calculating it if there is a corresponding request from the parties to do so. If the statute of limitations expires, the court may reinstate it in order to protect the violated rights. The statute of limitations  is interrupted if the debtor makes partial payment of the debt, interest, provides a guarantee, or accepts any other requirement confirming the recognition of the debt. After such an interruption, the statute of limitations begins to be calculated anew.

Before going to court, it is important to pay attention to the procedure for preliminary dispute settlement, which were agreed in the contract. If the parties have agreed that disputes will be resolved through claim settlement or negotiations, then the specified conditions must be met before filing a claim in court, otherwise the claim will be rejected.

The legislation of Mongolia provides three options for debt collection through the court: general procedure, simplified and special proceedings.

The general judicial procedure is carried out by filing a statement of claim in court. According to the law, the period for consideration of a case in the court of first instance is 60 days from the date of initiation of the court case. The court may extend this period for another 30 days. The case is considered in a court session with the parties summoned and their positions heard. As a result of consideration of the case, the court makes a decision, which comes into force in 14 days from the moment it is given to the parties.

Each party to the case who does not agree with the court decision has the right to appeal it on appeal by filing a complaint with the capital or provincial court. The appeal is considered within 30 days from the date of its receipt by the court. As a result of consideration of the appeal, the appellate court makes a decision, which is final.

An interested party to the case has the right to file a complaint to review the final decision in a supervisory manner if she believes that there are serious violations of the judicial practice  (for example, the court applied the law differently than provided for by the decisions and conclusions of the Supreme Court). The complaint is considered within a month from the date of the decision to consider the complaint in court. Based on the results of consideration of the complaint, a decision is made within 30 days from the date of completion of the court hearing, but on the recommendation of the judges, this period can be extended by another 30 days. The decision comes into force after it is signed by the court.

Simplified proceeding is initiated similarly to the general procedure. But in the period from the date of initiation of the case to the court hearing, if the defendant recognizes the claim, the parties are reconciled, or the defendant fulfills the claims, the case is resolved in a simplified manner. As a result of consideration of the case, the court makes a decision in the form of an order, which is not subject to appeal.

Special proceeding is applicable for cases of collection of funds in an amount not exceeding twenty times the minimum monthly payment. The case is considered in one court session on the basis of written and electronic documents. The period for consideration of the case is 45 days from the date of initiation of the case. As a result of consideration of the case, the court makes a decision that comes into force within 7 days after its adoption, provided that it is not appealed.

After the court decision enters into legal force, provided that the debtor refuses to comply with it voluntarily, a writ of execution should be obtained from the court and presented to the bailiff for forced execution. The creditor has the right to present the writ of execution to the bailiff within four years from the date of entry into force of the court decision.

Satisfaction of the creditor’s claims in the process of forced execution is carried out through the seizure of funds and their write-off, seizure of property with their subsequent forced sale, transfer of the debtor’s real estate for management to the creditor.

An additional way to collect debt is to initiate bankruptcy proceedings for the debtor. According to the Mongolian Bankruptcy Law, if a debtor fails to fulfill obligations that amount to at least 10 percent of his property within the period stipulated by the contract or law, then by default such debtor will be considered insolvent. Accordingly, the creditor has the right to go to court with this subject of the claim. As part of the bankruptcy procedure, it is possible to cancel the debtor’s transactions that were aimed at withdrawing his assets in order to avoid satisfying the creditor’s claims at the expense of such property.

You should also pay attention to the provisions of the Law “On the Company”, which provide for the liability of the owners of the company, for example, if the property and property rights contributed by the owner to the company are not clearly distinguished from personal property and property rights, then such owner bears double liability for the company’s debts all their property and property rights.

If you have any questions or need support regarding international debt collection in the Republic of Mongolia, our company is ready to provide our expert assistance to effectively resolve your debt issue. Please contact us to receive additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY MONGOLIA

06.02.2022

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