Key Considerations When Entering Into NDAs With Employees and Business Partners
Confidentiality obligations in Mongolia are governed by the Constitution of Mongolia[1], the Civil Code[2], the Law on Organizational Secrets[3], and the Labor Law.
The Law on Organizational Secrets provides: “Unless the law provides otherwise, an organization may classify as an organizational secret any confidential information, technological solution, project, research document, or necessary technical equipment that the organization has itself chosen to keep secret and protect, either because of the nature of its official operations or to safeguard its market position and competitive advantage, and whose disclosure could harm its lawful interests.”[4] Specifically, an organization may define through its internal rules which information is confidential, and may determine in advance who is permitted to handle it.[5]
Entering into agreements with those who handle or use such information helps ensure the stable operation of the organization and protects its intellectual property rights. It is therefore advisable to include the following in a confidentiality agreement:
Confidential information and authorized persons: the information that qualifies as confidential, and the persons entitled to access it.
Rights and obligations of the parties.
Term: To protect production and business secrets, the parties may agree to include an additional term in the employment contract, or to enter into a separate ancillary agreement. Under such a term, the employee undertakes, for a specified period after the employment relationship ends, not to work for any business, organization, or individual that competes directly with the employer, and not to engage in activity that competes directly with the employer.[6]
Liability: the circumstances in which information is considered lost, used without authorization, or disclosed, together with liability and compensation for the resulting damage. This also covers the duty to retain and produce the records and information needed to establish whether information has been lost, and the duty to cooperate.
Jurisdiction for dispute resolution: where the parties may file complaints, and where disputes arising from performance of the agreement will be resolved.
It is difficult to say that valuable business information is fully protected merely because a confidentiality agreement has been signed. Nevertheless, defining the scope of confidential information clearly, and setting out in detail the conditions of use and the rights, obligations, and liability of the parties, is an important step in reducing the risks a business may face.
Sources:
[1] Constitution of Mongolia, Article 16.17
[2] Civil Code (2002)
[3] Law on Organizational Secrets (1995)
[4] Law on Organizational Secrets (1995), Article 3.2
[5] Labor Law, Article 72.2
[6] Labor Law, Article 72.1г
Disclaimer: This article is intended for general informational purposes only and have been prepared in accordance with the laws in effect at the time of writing. For legal advice, please consult a professional attorney.
