Edited by ITOFO.J


Director of the Policy Implementation Regulation Department at the Interior Ministry T. Altangerel has denied claims that a verdict in favour of Russian Altan Dornod Mongol mining company has been rendered following the hearing held in Frankfurt in May, 2009, stating that the arbiter has yet to give his decision which, according to him, should soon be made public.

About the selling of ADM S.V. Paushok’s gold by Mongolbank without his permission, Altangerel said it was legitimate as the director of ADM had made a contract with Mongolbank about keeping, selling and buying gold.


In Altengerel’s view, a step taken by the company to avoid paying the windfall profits tax. When the tax organization found out that the gold in Mongolbank had been sold, it demanded 68% tax.  

This is when S. V. Paushok and Mongolbank took their dispute to a London court; then Paushok filed a case against the Government in 2007. Altan Dornod and its partner Vostokneftgaz of Russia claim that the windfall profits tax levied in 2007 was discriminatory, and put illegal pressure on investors, leading to huge business losses, adding this action by the Mongolian Government violated bilateral international agreements.

Mongolian authorities took the decision to freeze the company’s bank accounts and sealed down its properties in Zaamar with further threat to confiscate its mining licenses.

“Paushok mined 25 tons of gold in Mongolia in more than 10 years and ADM holds 40 licenses,” said Altangerel, continuing that “ Paushok used the instability of the 1990s to his favour.”

“The Government may have to revise agreements made with others in those days,” T. Alangerel stated, referring to cooperation contracts made by Mongolia with several countries like Russia, China, and Great Britain in order to attract foreign investments. For example, it was agreed that Russian investors will work under the same terms as domestic companies.

The state official pointed out that similar dispute had erupted with Darkhan Metallurgy in relation to contract made with China, while Goldman Sachs talks about the contract made with Great Britain.

The Mongolian Taxation Authority claims that Altan Dornod Mongol owes MNT56bn; and in May 2009, the Mongolian government was forced to defend itself in the Frankfurt Court of International Arbitration, after it was sued for USUSD1bn by the mining company. Altan Dornod Mongol accuses the Mongolian authorities of taking excessive taxation from Russian investments, claiming that the 68% windfall tax is against international law as Mongolia and Russia have signed a bilateral agreement to avoid double taxation for companies operating between the territories. Meanwhile the Mongolian Taxation Authority claims that Altan Dornod Mongol owes MNT56bn and has subsequently shut down the company’s bank accounts and is threatening to confiscate its mining licenses.

If Mongolia wins the case, the tax amount the company will pay will be 10 times over the MNT5 billion spent so far on legal costs.