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 February 2013 regarding impacts of the Undai River diversion by Oyu Tolgoi’s project Umnugobi Aimag (Art. 2.1). In their complaint, the herders contended that the river diversion would jeopardize their traditional nomadic lifestyle and livelihood and lead to several water systems drying up, deteriorated pastureland yields, diminished water supply to forests, and cultural impacts to a sacred river, and they requested that Oyu Tolgoi stop its work (Art. 2.2). The Khanbogd Soum government, Herders Representatives, and Oyu Tolgoi participated in the dispute resolution process from March 15, 2013 to May 9, 2017 (Art. 3.1). On June 8, 2015, the parties 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 parties also hired an independent expert panel (IEP) to assess the project’s impacts on three important water resources (the Undai River, the Bor Ovoo Spring, and the Haliv-Dugat River), how those impacts would affect the herders’ pasture, access to water, and water quality, and whether there were any alternatives, modifications, or additional mitigation measures to avoid or reduce those impacts (Art. 3.3). In January 2017, the IEP submitted its final report and recommendations to the 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). The parties 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 will ensure that herders and other stakeholders are consulted and engaged in the implementation of the agreed actions (Art. 5.6). The tri-partite council (TPC) shall ensure open communication with the parties as specified in its charter, including participation by herders in TPC meetings (Art. 6.1). The Compliance Advisor Ombudsman (CAO) of the IFC 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 issues relating to herders, pasture, and 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 actions in the agreement for which Oyu Tolgoi is solely or jointly responsible (Art. 4.2).

• Community development obligations: Local content

  Oyu Tolgoi and Khanbogd Soum government will jointly explore and discuss opportunities for engaging people in on-the-job vocational skills training at Oyu Tolgoi (Annex 1, Art. 13.3). 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. 13.5.4, 13.5.9). Oyu Tolgoi, Khanbogd Soum government, and Herders Representatives will adopt a policy to replace in phases outsourced monitoring (e.g., of pasture, water, soil, vegetation, dust, wildlife, Undai River and Khaliv-Dugat River flow, tailings storage facility seepage and downstream impacts) with local monitoring, build the professional monitoring capacity of local specialized organizations and herders, and provide for salaries or other incentives to herders (Annex 1, Art. 13.6).

• Community development obligations: Infrastructure and social services

  Oyu Tolgoi and tri-partite council (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 herders’ preferences (Annex 1, Arts. 7, 14). Oyu Tolgoi will create an artificial pond at Ust Bag Mod Quarry for use as an additional water source, jointly develop and implement a vegetation plan with herders, and evaluate the results (Annex 1, Arts. 11.1-11.2). Oyu Tolgoi and the TPC will jointly design and implement, and Oyu Tolgoi will fund, 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. 13.5.2, 13.5.3, 13.5.6, 13.5.7, 13.5.8, 13.5.10; 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. 13.4). Oyu Tolgoi will prepare a college and university scholarship program for the children of herders (Annex 1, Arts. 13.4.1-13.4.3). Oyu Tolgoi and the TPC will jointly design and implement, and Oyu Tolgoi will fund, a life skills training program in cooperation with the Soum Lifelong Learning Center, and a project to expand the healthy herders project currently implemented with the Inter-Soum Hospital (Annex 1, Arts. 13.5.1, 13.5.5). Oyu Tolgoi will collaborate with the elders’ council to implement and fund a project to advise youth on traditional livestock breeding practices and provide an honorarium to participating elders living along the Undai River (Annex 1, Art.13.2). Obligations of Oyu Tolgoi to compensate herders set forth in Annex 1, Art. 13 apply to herders with winter and/or spring camps along the Undai River basin and registered as a herder household in the Soum registry from January 1, 2007 to December 29, 2012 (Annex 1, Art. 13). 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.

• Environmental and social protection

  Oyu Tolgoi will redesign and revise its waste rock dump design to avoid touching a local sacred hill (Bor Ovoo) in the mine lease area (Annex 1, Art. 2). Oyu Tolgoi will consult with herders on a new location for the Bor Ovoo Spring, jointly develop and implement a vegetation plan with the herders and evaluate the results, place an information board about the original Bor Ovoo Spring at its new location, and present a photo of the original Bor Ovoo Spring to herders for exhibition at the Soum Museum (Annex 1, Arts. 3.1-3.3, 4). Oyu Tolgoi will finance an MNT 88 million, 3-year Gobi Grove tree planting project and engage herders living along the Undai River; tri-partite council (TPC) and Gobi Soil will implement the project and prepare and publicly share reports (Annex 1, Arts. 5.1-5.3). Oyu Tolgoi will take all feasible measures to reestablish the free flow of the Undai River in 3 currently obstructed areas inside the mine lease area (Annex 1, Art. 6). Oyu Tolgoi will improve the integrity of the Haliv-Dugat diversion channel to reduce erosion and convey floodwaters more efficiently; TPC will jointly identify areas of excessive erosion, sites to implement measures, and which measures to implement (Annex 1, Art. 8). Oyu Tolgoi will provide adequate drainage mechanisms (e.g., culverts, arches, or armored flood crossings) to reduce ponding and evaporation in the watershed; TPC will jointly decide which mechanisms to implement (Annex 1, Art. 9). An independent technical review board will review the potential for seepage and downstream impacts from a tailings storage facility and propose modifications to avoid or mitigate such impacts, which Oyu Tolgoi agrees to implement (Annex 1, Art. 10). The pastureland participatory monitoring assessment team will include additional monitoring points suggested by herders in the assessment (Annex 1, Art. 12).

• Transparency or confidentiality

  The parties agree to openly and transparently disclose the agreement publicly (Art. 6.2).

• Other noteworthy clauses

  Oyu Tolgoi presents an official apology letter to herders regarding the Undai River diversion and publicly publishes it (Annex 1, Art. 1; Annex A). Oyu Tolgoi presents an official apology letter to herders regarding the Undai River diversion and publicly publishes it (Annex 1, Art. 1; Annex A). There is no provision in the agreement to implement Annex B. However, Annex B appears to be identical to Annex B of Khanbogd Herders’ - Oyu Tolgoi LLC - Khanbogd Soum Government - 2017 - Complaint Resolution Agreement #1, which agreement does contain a provision requiring Oyu Tolgoi and the government to implement Annex B (Agreement #1 - Annex 1, Art. 4.10.1).