Summary of contract

• Negotiation, representation, and other relevant context

  The parties to this agreement are the Herders Representatives of the Khanbogd Soum Bagh herders, Oyu Tolgoi LLC, and Khanbogd Soum government. The purpose of the agreement is to implement the actions to resolve a complaint that the Khanbogd Soum Bagh herders filed to the Compliance Advisor Ombudsman (CAO) of the IFC in October 2012 regarding the impacts of the Oyu Tolgoi’s project’s use of land and water (Art. 2.1). In their complaint, the herders contended that they have not been compensated or relocated, and they questioned the project’s due diligence, particularly around the sustainable use of water in an arid area and the impacts on the herders’ nomadic practices (Art. 2.2). On June 8, 2015, the Herders Representatives, Oyu Tolgoi, and Khanbogd Soum government entered into a memorandum of understanding to establish a tri-partite council (TPC) to address issues relating to herders, pasture, and water and other relevant matters regarding the complaint (Art. 3.2). The Herders Representatives, Oyu Tolgoi, and Khanbogd Soum government also hired a multi-disciplinary team (MDT) to assess three components to generate information on Oyu Tolgoi’s impacts on livelihoods of the herders and adequacy of the compensation process: (1) changes in access to and quality of pasture and herd water; (2) impacts on general livelihood of households; and (3) based on evaluated information, adequacy of 2004 resettlement and 2011 compensation process (Art. 3.3). In January 2017, the MDT submitted its final report and recommendations to Herders Representatives, Oyu Tolgoi, and Khanbogd Soum government, who accepted the recommendations and agree to jointly develop a detailed implementation plan (Art. 3.3).

• Governance, implementation, dispute resolution

  The Herders Representatives, Oyu Tolgoi, and Khanbogd Soum government will prepare a joint statement about implementation of the agreement, ensure timely delivery of accurate information about implementation of the agreement, and prevent miscommunication and misunderstanding among herders and citizens of Khanbogd Soum (Arts. 6.3-6.4). Oyu Tolgoi and Khanbogd Soum government will produce an annual report on the past year’s performance and plans for the coming year covering local economic impacts including employment, local taxes and fees paid, local procurement, environmental impacts, environmental monitoring and management programs, and social performance including compensation programs for vulnerable people; this should be published in the Mongolian language in a form that is accessible to herders and the local community (Annex 1, Art 3.3). The tri-partite council (TPC) will work as a “Compensation Claims Committee” supported by an independent secretary to decide if herders are eligible for compensation; the TPC will formulate guidelines for the Committee (Annex 1, Arts. 4.2, 4.3). The Herders Representatives, Oyu Tolgoi, and Khanbogd Soum government may change or amend the agreement in writing upon mutual consensus (Art. 5.2). The agreement shall remain in effect until all agreed actions are fully implemented (Art 5.5). The Herders Representatives, Oyu Tolgoi, and Khanbogd Soum government will ensure that herders and other stakeholders are consulted and engaged in the implementation of the agreed actions (Art. 5.6). The TPC shall ensure open communication with the parties, including participation by herders in TPC meetings (Art. 6.1). The Compliance Advisor Ombudsman (CAO) will monitor and verify implementation of the agreement for 12 months from the signing date (Art. 7.1). At the end of the monitoring period, the CAO will conclude whether the agreement is being implemented effectively based on the TPC’s conclusion; if the CAO concludes that the agreement is being implemented successfully, the complaint will be closed, and if the CAO concludes otherwise, the monitoring period will be extended to ensure implementation of the agreement (Art. 7.2). If a dispute arises among the parties during the monitoring period, the parties may contact the CAO dispute resolution team, who will convene a meeting(s) with the parties to facilitate resolution (Art. 7.3). Upon closure of the complaint, the TPC shall address, resolve, and exchange information on issues relating to herders, pasture, water and other relevant matters (Art. 7.4). If a dispute or misunderstanding relating to implementation of the agreement arises, the parties shall attempt to amicably resolve the dispute; if the parties cannot resolve the dispute amicably, they may seek court or non-court dispute resolution procedures to settle the complaint (Art. 8.4). The agreement is signed in English and Mongolian, but in case of any conflict or inconsistencies between those versions, the Mongolian version shall prevail (Art. 8.2).

• Fiscal obligations: content

  Oyu Tolgoi will incur the funding and financing required for implementation of the actions in the agreement for which Oyu Tolgoi is solely or jointly responsible (Art. 4.2).

• Community development obligations: Local content

  Khanbogd Soum government will re-establish a grazing system for the lost pasture areas in the south territory, encourage traditional herder mobility, open access to water and land, reduce actions by herders to restrict access to wells and land, and analyze increasing livestock numbers and absentee livestock ownership in Khanbogd Soum (Annex 1, Arts 1.1, 1.2, 1.7). Oyu Tolgoi will continue to implement the grazing protocol by arranging for livestock grazing in certain areas within the fenced production site of Oyu Tolgoi (Annex 1, Art 1.10). Oyu Tolgoi, Khanbogd Soum government, and Herders Representatives will adopt a policy to improve monitoring with genuine involvement of herders, with salary incentives, and such programs should be sensitive to herders’ practice to enable participation and design and implemented to use a joint fact-finding methodology to ensure credibility (Annex 1, Art 3.1). Oyu Tolgoi and tri-partite council (TPC) will jointly design and implement, and Oyu Tolgoi will fund, a project to establish a herders’ market in Tsogt-Tsetsii and other soums and promote the creation of a supply chain for livestock raw material producers, and a training and information program for young herders under 35 years old (Annex 1, Arts. 4.10.4, 4.10.4.9). Oyu Tolgoi will expand community relations work with a team comprised of trained people whose role includes ensuring effective two-way communication between Oyu Tolgoi and herders; the community relations team will maintain strong links within Oyu Tolgoi to be able to provide herders and local residents with up-to-date information about Oyu Tolgoi activities (Annex 1, Art 3.4).

• Community development obligations: Infrastructure and social services

  Oyu Tolgoi and Khanbogd Soum government will work with Soum’s Citizen Representative Khural to decide if speed bumps on both sides of animal crossings are needed to slow down traffic on the Oyu Tolgoi road (Annex 1, Art 1.8). Oyu Tolgoi and the tri-partite council (TPC) will collaborate with the Khanbogd Soum government to create and maintain a system to build and repair the condition of new and old wells (Annex 1, Art 2.3). Oyu Tolgoi and Khanbogd Soum government will close all leaking boreholes in the area of Gunni Kholloi and equip two fountaining boreholes so herders can use them for household water needs (Annex 1, Art 2.5). Oyu Tolgoi and TPC will form a program to construct new shallow hand wells to encourage migration and use of alternate pastures and give herders the means to retain customary practices; the location of new wells should be based on a hydrogeological study funded by Oyu Tolgoi and the Khanbogd Soum government and integrate herder preferences (Annex 1, Art. 2.2, 2.7). Oyu Tolgoi and TPC will design and implement projects to establish a well maintenance team, establish a team of herders to carry out livestock shelter construction and maintenance, plant livestock fodder Soum-wide, create and restore water collection points based on herders’ input, connect herders’ deep wells with renewable energy, and build a permanent slaughter line operation (Annex 1, Arts. 4.10.4.2, 4.10.4.3, 4.10.4.6, 4.10.4.7, 4.10.4.8, 4.10.4.10; Annex B, Art. 18). Oyu Tolgoi will provide tuition through graduation for the children of herders who are currently attending an accredited college or university, maintain a threshold GPA, and major in areas that will contribute to Soum development (Annex 1, Art. 4.10.2). Oyu Tolgoi will prepare a college and university scholarship program for the children of herders (Annex 1, Arts. 4.10.2.1-4.10.2.3). Oyu Tolgoi and TPC will design and implement a life skills training program in cooperation with the Soum Lifelong Learning Center, and a project to expand the healthy herder’s project currently implemented with the Inter-Soum Hospital (Annex 1, 4.10.4.1, 4.10.4.5). Oyu Tolgoi will rehabilitate and restore: (1) old airport; (2) part of the road to the southwest from Oyu Tolgoi – Khar Tolgoi River’s upstream and downstream area; (3) quarry located in the north of Khanbogd Soum road; (4) areas of camps located outside the mining lease area (MLA); (5) quarry used for the road from Tsagaan Khad to Gashuun Sukhait border point; (6) old road from the front gate of Oyu Tolgoi’s MLA to Javkhlant Bagh center and quarries alongside road; (7) dirt road previously used by Oyu Tolgoi from west gate of Oyu Tolgoi’s MLA to the coal road; and (8) dirt roads located in parallel with improved gravel road from Oyu Tolgoi to Manlai (Annex 1, Art 1.9; Annex A). Annex B sets forth activities, timelines, and budgets for long-term projects funded by Oyu Tolgoi’s Gobi Oyu Fund to implement the Khanbogd Soum’s Animal Husbandry Sector’s Development Program. Activities within the program include: (1) activities aimed at conducting a study on pasture land and water reserve and the roots for traditional livestock husbandry, and developing and implementing a Soum Pasture Management Plan based on the study’s findings; (2) activities to establish an animal health center, train qualified specialists and personnel, and provide required equipment, software, and other supplies; (3) activities to enhance herders’ knowledge and skill, prepare succession of herders, resume traditional way of livestock herding, introduce modern advanced technology ,and prepare qualified professionals; (4) activities to improve animal health and breeding and enhance livestock productivity; and (5) initiatives to develop small- and medium-sized enterprises to process livestock raw materials at the local level and produce value-added products (Annex B).

• Community development obligations: Other

  Oyu Tolgoi will improve its grievance mechanism (Annex 1, Art 3.5).

• Environmental and social protection

  Khanbogd Soum government will open new and additional pasture through the well building program to understand the water reserve under the pasture (Annex 1, Art. 1.3). Khanbogd Soum government will work with the Agency for Land Affairs to implement its process for identifying resource use, resource rights, and land planning in order to document and secure customary herder use rights. (Annex 1, Art 1.6). Oyu Tolgoi and Khanbogd Soum government will determine the local monitoring purpose, scope and type: pasture, water, soil, vegetation, dust, wildlife, Undai River, Khaliv-Dugat river flow, tailings storage facility seepage, possible downstream impacts (Annex 1, Art 3.1.1). Oyu Tolgoi and the Khanbogd Herders will produce regular reports on the results of environmental monitoring and any resulting proposed actions (Annex 1, Art 3.1.5).

• Transparency or confidentiality

  Herders Representatives, Oyu Tolgoi, and Khanbogd Soum government agree to openly and transparently disclose the agreement publicly and cancel confidentiality clauses in the 2004 and 2011 compensation agreements so that those who have been compensated are able to disclose information if they choose to do so (Art. 6.2; Annex 1, Art. 4.9.4).