(2022.08.02-ны өдрийн орчуулга) Unofficial translation

LAW OF MONGOLIA

November 2, 1995                             Ulaanbaatar city

ON BILL OF EXCHANGE

CHAPTER ONE

BASIC PROVISIONS

Article 1. Purpose of this law

This law regulates the relations with respect to bills of exchange to be used in payment settlements made between a citizen, a legal entity or between them.

Article 2. Legislation on bills of exchange

1. The legislation on bills of exchange shall consist of the Civil Code, the Banking Law, this Law and other legislative acts enacted in compliance with them.
2. If international treaties, to which Mongolia is a party, stipulate otherwise, the provisions of the international treaty shall prevail.

Article 3. Terms and definitions

Specific words and expressions used in this Law shall have the following meaning:

1. "Bill of exchange" is an unconditional negotiable payment order binding a debtor to pay a sum certain in money at a fixed or determinable time to a bearer of bill of exchange in an undisputable manner. Bill of exchange is securities of payment settlements.
2. "Maker of promissory note" is a citizen or a legal entity who makes or executes a promissory note.
3. "Maker of simple promissory note" is a debtor/drawee who issues a promissory note to a supplier or service provider to pay a definite sum of money at a specified or within the specific timeframe for the supply of goods or provision of works and services.
4. "Maker of transferable promissory note" is an entity who claims a debtor/drawee to pay a payment specified in the bill of exchange to a bearer of bill of exchange.
5. "Bearer of bill of exchange" is a citizen or a legal entity holding the right certified by the bill of exchange, and a claimant who claims a payment for the supply of goods or provision of works and services.
6. "Transferor of promissory note" is a holder of a promissory note who makes a transfer note and who transfers the certified right to another person.

Article 4. Type and form of promissory notes

1. A promissory note shall be simple and transferable promissory notes.
2. A simple promissory note is a note in which a maker of promissory note promises to pay a sum certain in money within a specific timeframe specified in the promissory note to a bearer of bill of exchange.
3. A transferable promissory note is a note which a maker of promissory note assigns a debtor/drawee to pay a sum certain in money at a fixed time to third party or bearer of bill of exchange.
4. An authorization promissory note is a note which determines a name and address of an original holder of the promissory note.
5. A promissory note of statement is a note which states "This promissory note shall be delivered to the bearer" or the expression with the same meaning without the name of address of the bearer.

Article 5. Composition of promissory note

1. A promissory note contains the followings:

1/ the text "Promissory note";

2/ Unconditional order to pay a sum certain in money, or an authorization of debtor/drawee who has approved to pay that amount of money;

3/ name, address and corresponding bank account of a debtor/bearer /the name of a debtor/bearer and maker of a promissory note shall be the same in a simple promissory note/;

4/ place of payment and name and address of a bank where a drawee/debtor's current account is maintained;

5/ name of an original bearer for an authorization promissory note;

6/ name of currency for payment;

7/ maturity date;

8/ date of issuance;

9/ issuer's name, address and signature;

10/ payment authorization for a transferable promissory note;

11/ "Payment specified in the promissory note shall be made in an undisputed manner". The text cited /from the law on bill of exchange/;

2. The maturity date for a promissory note with the conditions specified in paragraphs 1 and 2 of article 12 of this Law shall be indicated as "Date of delivery of promissory note" or "after …… (in figures and in words) days upon delivery of a promissory note".
3. The Bank of Mongolia shall determine a design and application procedure of a promissory note.
4. The parties shall agree that a payment specified in a promissory note is made within one year from the date of issuance of the promissory note.
5. A name and address of only one bank shall be written for payment of the bill.
6. An amount to be paid shall be written in figures and words without correction. It is prohibited to write the amount of money in several parts.
7. The mature date shall be agreed by the parties.

Article 6. Grounds to deem a promissory note invalid

A promissory note shall be deemed invalid in the following cases:

1/ an entry of a composition specified in clause 1 of article 5 and clause 1 of article 17 of this law is incomplete;

2/ absence of signature of a maker of promissory note or a citizen authorizing a payment, or absence of signature, seal or stamp of a legal entity;

3/ a promissory note is not written on an approved form;

4/ other provisions specified in the law are violated;

CHAPTER 2

PAYMENT AUTHORIZATION, GROUNDS FOR REFUSAL OF PAYMENT, PAYMENT CLAIM

Article 7. Payment authorization

1. A payment authorization is a process through which the amount to be paid by a drawee/debtor is written in a transferable note, and is signed, sealed and verified.
2. It is prohibited for a drawee/debtor to give an authorization to pay in installments specified in the promissory note.
3. A maker of promissory note is responsible for issuing a payment authorization for the transferable promissory note.

Article 8. Payment authorization term

1. The payment authorization term shall begin from the date of issuance of a simple promissory note.
2. Payment authorization for a transferable promissory note shall be issued prior to the due date specified in the bill.

Article 9. Payment of promissory note

1. Upon delivery of a promissory note by a holder of the promissory note, the debtor shall pay a payment on the maturity date. The debtor may make the payment earlier prior to the due date.
2. A debtor shall make a payment specified in the promissory note on time and within 2 subsequent working days thereafter and record such payment on the promissory note.
3. A bearer of a bill of exchange shall not demand a debtor/drawee to pay earlier, unless the debtor's bankruptcy case is processed at court or his/her property has been pledged as collateral.
4. A bearer of a bill of exchange may claim a payment through a bank within the period specified in the promissory note. The bank may charge a fee for a payment transfer (for provision of service). The procedure for payment settlement by a bill of exchange shall be determined by the Ministry of Finance and the Bank of Mongolia.

Article 10. Refusal to pay

1. A debtor may refuse to pay the amount specified in the bill of exchange in the following cases:

1) a bill of exchange is deemed invalid on the grounds specified in article 6 of this law;

2) a bearer of bill of exchange has notified and demanded for payment after one year the bill of exchange is made.

2. If a debtor refuses to pay on the grounds specified in paragraph 1 of this article, the related document shall be made and notarized prior to expiry of the term specified in the bill of exchange.
3. Disputes related to the refusal to issue a payment authorization shall be resolved in accordance with the Civil Code.

Article 11. Currency of payment

1. A payment specified in a bill of exchange shall be made by national currency – togrog within the territory of Mongolia.
2. In case of claiming the payment specified in the bill of exchange in a foreign currency, the payment shall be made in a convertible foreign currency to be agreed with the entity.

Article 12. Payment term

1. The maturity date of a bill of exchange is determined as follows:

1 / within the term of delivery of a bill of exchange on demand;

2 / within a certain period of time upon delivery of a bill of exchange;

3 / the date specified in the bill of exchange;

4) within a certain period of time after issuing a bill of exchange;

Article 13. Interest on bill of exchange

Payments specified in a bill of exchange may have a monthly or annual interest rate. The amount of an interest shall be agreed by the parties. It will be stated in the bill.

Article 14. Payment invoicing

1. If the payment specified in a bill of exchange is not paid within 2 working days after the maturity date, a bearer of a bill of exchange shall have the right to recover the payment from the debtor/drawee and his/her guarantor in an undisputed manner. In this case, the bank where the debtor's current account is maintained shall be obliged to make a payment from the debtor's account on the basis of a valid bill of exchange.
2. If the payment specified in a bill of exchange is not recovered in accordance with paragraph 1 of this article, a bearer of a bill of exchange shall have the right to file a claim to court for payment.

In this case, a bearer of a bill of exchange shall claim the followings:

1) payments as specified in a bill of exchange, and if agreed of an interest payment, the amount of interest accrued on it;

2) a penalty amount as determined in article 232.6 of the Civil Code for each day of overdue payment specified in the bill of exchange;

/ This clause/sub-paragraph was amended according to the law dated July 04, 2002 /

            3) an income that would have been received by the bearer of a bill of exchange if the payment had been paid on time;

            4) submission of a claim for reimbursement of expenses related to filing a claim.

 3. Claims referred to in clause 2 of this article may be filed to a maker of simple and transferable promissory notes, an issuer of a payment authorization, or to a transferor of promissory note and their guarantors jointly or individually.

4. If the debtor deems that there are legal grounds to refuse to pay, a claim shall be filed to court within the following period:

1/ in case of refusal to issue a payment authorization, within the payment term;

2/ in case of refusal to pay, within 10 days after delivery of a bill of exchange demanding a payment;

CHAPTER THREE

AVAL OF PROMISSORY NOTE AND TRANSFER OF OWNERSHIP RIGHTS OF PROMISSORY NOTE

Article 15. Guarantor

1. A guarantor (hereinafter referred to as "Guarantor") is a third party who guarantees the payment specified in a promissory note by the debtor and is obliged to make a payment on behalf of the debtor if he/she fails to fulfill a payment obligation. The guarantor or an avalist is a bank or business entity.
2. The guarantor shall exercise the rights and obligations specified in the Civil Code.
3. In case of issuing a bank guarantee, the followings may be agreed with the debtor:

1) to open a special payment account in the name of the debtor and to accumulate funds from his / her income equal to the amount specified in the promissory note;

2) to make payments from the debtor's current account in an undisputed manner within the determined time;

3) if the debtor's current account does not have the required amount of money on the day of payment, the bank shall give a loan to the debtor to pay a payment;

Article 16. Transfer of bill

1. A holder of bill may transfer a note to others within the payment period by mutual agreement in the following cases:

2)  if the holder of bill has a debt to his/her creditor or supplier.

2. In the case specified in paragraph 1 of this article, a bill may be sold to others or to a bank through the money market.
3. When purchasing a bill at a discount within the limits of its own capital, a commercial bank shall agree the interest rate specified in the bill/note with a person selling a bill. When a commercial bank needs temporary cash, the bill can be sold to the central bank at a discount. The Bank of Mongolia shall set the discount rate again.
4. It is prohibited to transfer the right to hold a bill partially.

Article 17. Transfer record

1. When transferring the rights certified by a promissory note to others, an entry shall be made on the back of the promissory note form or on an additional sheet that is an integral part of it. The transfer record shall consist of the following:

1/ name and address of a transferor of promissory note;

2/the name and account number of the bank where the promissory note holder's current account is maintained;

3/ signature and stamp of a transferor of promissory note;

4) the transfer date of promissory note;

5) name and address of a new holder of the promissory note, name and account number of the bank where his/her current account is maintained.

2. No transfer entry shall be made in a promissory note of statement.
3. Upon making a transfer entry, the rights of the holder of promissory note shall be transferred to the new holder of the promissory note.

CHAPTER FOUR

MISCELLANEOUS

Article 18. Dispute settlement

1. Disputes arising in connection with the default of the debtor within the period specified in the promissory note shall be settled or resolved by the court or arbitration in accordance with the relevant legislation.

/ This paragraph was amended according to the law as of January 26, 2017 /

2. Any disputes arising in connection with payment for the supply of goods or provision of works and services shall be settled by arbitration in accordance with the Civil Code, if there is a court or arbitration agreement.

/ This paragraph was amended according to the law as of January 26, 2017 /

Article 19. Liability for violation

1. A person or legal entity that violates this Law shall be subject to liability specified in the Criminal Code or the Infringement Law.

/This article was revised according to the law as of December 4, 2015 /

Article 20. Copy of promissory note

If necessary, a promissory note may be copied. This copy of the promissory note shall not be a valid proof of payment and shall only certify that the promissory note has been written.

BAGHABANDI.N, SPAEKER OF THE STATE GREAT KHURAL/PARLIAMENT OF MONGOLIA