Goldman Sachs Group Inc., a global investment banking and securities firm which engages in investment banking, securities services, investment management and other financial services primarily with institutional clients, is believed to have filed a lawsuit against Mongolia in an international arbitration court in matters relating to Mongol Gazar and the Olon Ovoot mines.

Nevertheless, B. Lhagvasuren, Mongolbank’s Inspection Department director, has said he has no information about Goldman Sachs filing any lawsuit.

Ts. Myanganbayar, president of Mongol Gazar LLC and “Gold Magnate,” pawned the Olon Ovoo license to five banks and Goldman Sachs to borrow a total of MNT 210 billion. Of this, Zoos Bank, now known as Government Bank, gave him MNT 60 billion, Anod MNT 30 billion, and Goldman Sachs MNT 15 billion. As a result, Myanganbayar’s failure to pay his debts to Anod and Zoos banks was a major reason for their dismal failure.

Part of the problem lays in the fact that global investment banking and securities firm Goldman Sachs is not registered in Mongolia, nor does it have any representative here. A man with only a visiting card has been representing Goldman Sachs to meet Mongolian officials and nobody knows anything more about him, nor what position -- if any --  he holds at the company. Therefore the Mineral Department agreed to the mortgage of the mining license to Goldman Sachs in violation of the basic regulation that when the company has no legal standing in Mongolia, mining licenses can be mortgaged only to banks or non-banking financial organizations.

One way out of this imbroglio could be to take Olon-Ovoot under state ownership. D. Enkhtuya, director of the Olon Ovoot Gold Company which now holds the license has, however, pledged to pay back all debts by operating the mine. Olon Ovoot is run under 18 licenses. Some, however, put the number at five. Mongolbank says it is difficult to find the truth because Myanganbayar pawned the licenses under the names of different companies.

If there was such a thing as Goldman Sachs filing case against the Mongolian government, the news would come in the wake of unconfirmed but strong reports that the Mongolian Government has lost the case against the Russian-owned gold mining company Altan Dornod MNT 1billion claim which had come up for hearing at an arbitration court in Frankfurt on Thursday last April 2009.

Altan Dornod and its partner Vostokneftgaz of Russia are claiming that the windfall profits tax levied in 2007 was discriminatory, and put illegal pressure on investors, leading to huge business losses for them. They also say this action by the Mongolian Government violated bilateral international agreements.

Asserting its sovereign right to levy taxes, the Mongolian Government charges Altan Dornod Mongol with non-payment of tax worth MNT 50 million. After a lower arbitration court had ruled against the company, the Metropolitan Administrative Court confiscated the assets of the two companies in Mongolia, freezing their bank accounts.

Altan Dornog and Vostokneftgaz last year mined 2.5 tons of gold, worth USD65 million, but did not pay any windfall profits tax. They also refuse to honour a court order to pay USD two million every month to the Government.

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