OPERATION OF BUSINESS  ENTITIES
WITH FOREIGN  INVESTMENT

Article 21.  Use of Land by Business Entities with Foreign Investment.

1. Land shall be  used by the business entity with foreign investment on the basis  of a leasehold and subject to conditions and procedures set forth in land laws of  Mongolia.
  
2. A lease shall contain the terms and duration of use, the measures to ensure the protection and restoration of the natural environment to the original state, amount of annual ground rent, and the liabilities of the lessor and lessee.

3. A lease shall be made under the procedures set forth below:

(i) a lease for the use of state-owned land by a wholly  foreign-owned business entity shall be made between the Mongolian land-owner and the foreign investor and be subject to authorization thereto by the respective local Hural of Representatives and its Presidium;

  (ii) a lease for the use of state-owned land by a business entity with  foreign investment to which a Mongolian investor is a participant, shall be made between  the Mongolian land-owner and the head of the business entity concerned and be subject to authorization thereto by the respective local Hural of Representatives and its Presidium;

(iii)A lease for the use of private freehold land by a business entity with foreign investment to which a Mongolian investor is a participant, shall be made between the Mongolian land-owner and the head of the business entity with foreign investment and be subject to authorization thereto by the competent state authorities.

4. Liabilities arising from a lease, referred to in paragraph 3 (ii), (iii) of this Article, which is entered into by the head of the business entity with foreign investment shall be borne by the Mongolian and the foreign investor in proportion to their contributions to the share capital of the business entity.
 
5. The duration of any lease shall be determined by the duration of the operations of the business entity with foreign investment. The initial term of a lease shall not exceed 60 years. The lease may be extended once for a period of up to 40 years under the initial conditions of the lease.
 
6. If a business entity with foreign investment is dissolved before the expiration of the lease, then the lease shall be terminated at the same time.
 
7. Leasehold land may be substituted or taken back for a specific state purpose. Decisions concerning this matter shall exclusively rest with the Government of Mongolia.  Compensation for losses suffered by a foreign investor due to such action shall be effected without delay. The amount of compensation shall be determined on the basis of the         value at the time of such substitution or transfer.
 
8. If  leasehold land is used to the detriment of public health, the natural environment or the interests of national security, then the lease shall be canceled.