Preliminary Court Rules on Erdenet As the Government Says It Intends to Compensate

"Much anticipated litigation over Erdenet Mining Corp's 49 percent stake ownership has already commenced at a number of Mongolian courts, and multiple rulings have been issued in Mongolian Copper Corporation's favor," CEO of the company Purevtuvshin Tsooj says. The Civil Court of Sukhbaatar District issued a preliminary court injunction on April 10, 2017, to prevent the Government Agency for Policy Coordination on State Property (the alleged 100 percent shareholder of EMC on the government's behalf) to hold another shareholders meeting and take other corporate action concerning EMC, Purevtuvshin said.

The injunction also prohibited the new board, fully appointed by the government, to have new board meetings and to carry out any structural changes at EMC. Purevtuvshin says the civil court injunction is vital for his company to protect its interests during the judicial process, and to prevent the Government Agency for Policy Coordination on State Property to carry out anticipated structural changes at the company.

It is a well-known practice in Mongolia for new management to change the organizational structure of a company to install it nominated people.In addition to the civil case, during a March 20th preliminary hearing carried out by the Administrative Court, which had its session postponed at the request of the government's representative, the court ruled to suspend all directives of the government and Cabinet Secretariat given to the Government Agency for Policy Coordination on State Property.

The Administrative Court also ruled to suspend the 49 percent share registry at the registration office, which means the 49 percent share registry should have been returned to MCC until the case was resolved, Purevtuvshin said. He said their claim is to ask the court to reinstate MCC as 49 percent shareholder of EMC.

The main defendants in the case, the GoM and Government Agency for Policy Coordination on State Property, declined to comment.The court's decision is timely, as Mongolia's government says it intends to compensate Mongolian Copper Corporation for the expropriation of its 49 percent stake in Erdenet Mining Corp.

But with the economic downturn, finding financial resources is a challenge, sources familiar with the matter say.The compensation is expected to amount to as much as 500 million USD.

The legal action arose following the government's March 29, 2017, directive to the Government Agency for Policy Coordination on State Property, the...