Mongolia Project

NGO Law Forum in Ulaan Bataar / Mongolia Report (January 2006)

The NGO Law Forum in Ulaan Bataar was held on December 15th. It was attended by about 60 NGO representatives. Unlike previous similar meetings to discuss the draft law, this event was cordial and many constructive suggestions were made. The discussion covered all aspects of the draft law. Dr. Irish was the principal presenter. Earlier in the week, on December 12th, Dr. Irish made a presentation to interested parliamentarians on tax rules for NGOs, and he had several one-on-one meetings with leading MPs.

The process to redraft the NGO Law began more than two years ago. (Mongolia is the only country in the world that has to date called the legal form for a nonprofit organization an "NGO") The new Civil Code adopted in 2002 states that the nonprofit organizations in Mongolia are foundations, associations, and cooperatives. Foundations and associations are the traditional, classic legal forms for nonprofit organizations in civil law systems, and the Civil Code necessitated transforming each NGO into either an association or a foundation, and spelling out the rules for each. (It was a mistake for the Civil Code to say that cooperatives are nonprofit organizations, for they typically permit the distribution of profits. Working with the drafting committee Dr. Irish suggested that this problem be solved, not by amending the Civil Code, but by adding a provision to the new NGO Law defining an NGO as an organization that is prohibited from distributing profits and specifically stating that this law does not apply to cooperatives.)

The draft law is lengthy and complex. Dr. Irish worked with the Drafting Committee, composed of Ministry of Justice officials and NGO leaders, for a week. He made many suggestions, most of which were adopted. These were explained at the Forum. On his last day there Dr. Irish drafted a 25 page report with 48 additional suggestions for changes and additions. This have been translated into Mongolian and the Drafting Committee is going through the memorandum deciding which to accept. The draft law will then go to Cabinet. If Cabinet approves it, it will then go to parliament -- the Great Hural. A parliamentary committee will be appointed to study the draft. The law would be adopted in the Spring at the earliest.

Enactment of the new NGO law is rendered uncertain because of the current political crisis. The Government has been forced to step down and negotiations are occurring to form a new Government, probably one headed by the MPRP -- the Mongolian Peoples Revolutionary Party, which is the former communist party. The MPRP, with 38 seats in the 76-seat parliament, is one seat short of a majority. The Democratic Party, with 25 seats, has vowed not to support an MPRP Government, though smaller parties have said that they would. Negotiations are now focused on cabinet seats. There have been a series of angry public demonstrations.

If and when the new Government is formed, the NGOs may oppose putting the draft law forward, for the MPRP is much less favorable to NGOs than the former coalition between the MPRP and the DP was thought to be.

Dr. Irish advised the Drafting Committee that it must choose to retain the name "NGO" or switch to "Foundation" and Association." Further, the Committee will have to decide whether to retain "public benefit organization" or "PBO, which is well established in Mongolia and risk confusion with the requirement that all foundations, some of which will not qualify as PBOs, have beneficial public purposes. This requirement, embedded in the Civil Code, means that there cannot be a non-membership mutual interest NGO in Mongolia, a problem that is difficult to solve, though Dr. Irish made some suggestions.

One of the principal features of the draft law is to distinguish between PBOs and non-PBOs, with the thought that tax and other benefits were be limited to PBOs. The draft law would define what public benefit activities are. A PBO would be an NGO that engages exclusively in PBAs. The list of PBAs is still being discussed. The draft law would establish a PBO Commission that would issue regulations and forms, determine which NGOs qualified as PBOs, supervise PBOs and discipline or de-certify them if necessary. PBOs would file annual reports that would be available to the public. The Commission under Dr. Irish's proposal would consist of three members appointed respectively by the Ministries of Justice and Finance and the Prime Minister, and 6 non-governmental members knowledgeable about the NGO sector and appointed from open nominations by the Human Rights Commission, which is composed of non-governmental individuals.

The draft law would establish clear but flexible rules to assure good internal governance of NGOs, with separate rules for associations, which are membership organizations, and foundations, which are non-membership organizations. Dr. Irish suggested that the draft law include strong conflict of interest and self-dealing rules to prevent abuse. The draft law would establish public registers. Only basic information would be posted with respect to non-PBO NGOs, whereas detailed information and all annual reports of PBOs would be publicly available. Finally, since each of the roughly 5,000 NGOs in Mongolia will need to re-register once the new law is adopted, Dr. Irish recommended that special care be taken in drafting effective date and transition rules.

Much work remains to be done on the Mongolian NGO Law, and the political crisis makes its fate uncertain. Even as it stands, however, it is far better than comparable laws in other formerly communist countries.