Mongolia rejects mining company’s tax claims in international dispute, seeks damages

The government of Mongolia has filed its defense and counterclaim in a USD 155 million international arbitration tax dispute with the operator of the Oyu Tolgai mine, Oyu Tolgai LLC, according to a press release from majority-owner of the mine, Turquoise Hill.

The news of Mongolia’s action in the international tax arbitration follows a recent announcement from the OECD regarding Mongolia’s first transfer pricing assessment – in the amount of USD 228 million – against an undisclosed taxpayer, presumably Oyu Tolgai.  

Oyu Tolgai is 66 percent owned by Turquoise Hill and 34 percent owned by a Mongolian state-owned entity. It received a tax assessment from the Mongolian tax authority in 2018 for USD 155 million. It disputed all but approximately USD 5 million of that amount. Unable to reach resolution with the Mongolian government on the remainder, Oyu Tolgai filed for international arbitration in February 2020.

Mongolia’s defense and counterclaim in the arbitration rejects Oyu Tolgai’s tax claims, requests the arbitral tribunal to add Turquoise Hill and a member of its parent company as parties to the arbitration, and seeks unquantified damages. In the alternative, Mongolia asks the tribunal to declare void a 2009 investment agreement between Mongolia and Oyu Tolgai.