This article focuses on the legal provisions of Nepal’s Arbitration Act, 1999 (2055).
Background
The Arbitration Act and Rules, 2059 (the “Arbitration Rules“) are the basic legislation that govern arbitration in Nepal. The Arbitration Act repealed the Arbitration Act of 1981 (2038).
Nepal’s Arbitration Act outlines a comprehensive approach to dispute resolution through arbitration.
Arbitration for conflict resolution.
If the agreement specifies arbitration for dispute resolution, all disagreements should be settled accordingly. If the agreement does not provide a dispute resolution procedure, the Arbitration Act should be used.
Number of arbitrators
The number is determined by the Arbitration Parties. In Nepal, arbitration must be completed by three arbitrators unless otherwise stated in the parties’ agreement.
Section 5 of Nepal’s Arbitration Act, 1999 (2055) specifies the number of arbitrators in an agreement.
If appointed, three arbitrators will be retained, but if not appointed, three will remain.
The number is determined by the Arbitration Parties. In Nepal, arbitration must be completed by three arbitrators unless otherwise stated in the parties’ agreement.
If the number of arbitrators allocated under the agreement is even, select an additional arbitrator from among the current arbitrators to make it odd.
Appointment of Arbitrators
Arbitrators must be appointed within three months of the dispute arising.
The agreement requires each party to select one arbitrator, who will then appoint a third arbitrator to act as the chief arbitrator.
If the agreement specifies arbitrators, they should be appointed.
The appointment of arbitrators by the court:
If the parties do not choose an arbitrator or the agreement does not include an arbitration provision, they can submit an application with the high court and provide a copy of the arbitration agreement.
If the parties do not appoint an arbitrator or the agreement does not include an arbitration provision, they can file an application with the high court. The application should include a copy of the agreement and the names of at least three arbitrators.
If the parties cannot agree on the arbitrator’s name, the high court will appoint a qualified arbitrator within 60 days after the application. The court’s finding is conclusive.
Arbitrator’s Qualification
The following person is not competent to act as an arbitrator:
disqualified from entering into contracts under present legislation. Punished by a court for criminal charges, including moral turpitude.
Any personal stake in the dispute must be resolved through arbitration.
The agreement does not specify any qualifications required for appointment as an arbitrator. Having become insolvent or declared bankrupt.
Arbitrator’s removal
Parties can remove the arbitrator according to the agreement’s conditions.
If the agreement does not specify how to remove an arbitrator, the parties can do so under the following conditions:
If an arbitrator is viewed as biassed or prejudiced against a side, rather than acting impartially,
Any arbiter who engages in criminal activity or commits fraud during arbitration,
Frequently makes errors or conducts irregularities during arbitration.
Intentionally prolonging or delaying arbitration proceedings by failing to attend sessions or refusing to participate more than three times without reason.
If an arbitrator violates natural justice standards, they are considered unqualified or have lost their qualifications.
Arbitration Venue
Arbitration should take place in the venue specified in the agreement. If the contract does not specify a venue for arbitration, the parties involved should select where it will take place.
If the parties cannot agree on a site within 15 days of the arbitrator’s appointment or are unable to achieve an agreement, the arbitrator will determine the location.
Arbitration language
Use the language specified in the agreement. If an agreement does not specify the language, the parties should agree on one.
If the parties are unable to agree, the arbitration hearing should follow the agreement’s text.
Arbitration proceedings in Nepal.
The arbitration dispute resolution system includes the following steps:
Claims Submission
Plaintiffs should submit their claim in writing to the arbitrator, along with evidence. The Claim must be made within the following time frames:
If a time restriction is specified in the Agreement, the Submission must be completed within that timeframe.
If an Arbitrator is appointed after a disagreement, submissions must be made within three months of the appointment.
If an arbitrator is selected in the agreement, the submission must be made within three months of the dispute occurring for arbitration.
Counter-Claims
If time is mentioned in the agreement, the opposing party must submit their objection within that time limit. If a provision is not included, counterclaims must be made within 30 days of receiving the claim.
Rejoinders
Rejoinders must be submitted within 15 days following the counter-claim submission date. The opposing party should also obtain a copy of the rejoinder.
Time extension for submission.
If a party is unable to submit its counterclaim or rejoinder by the deadline owing to circumstances beyond their control, they can request a time extension from the arbitrator within 15 days.
Time extension for submission.
If a party is unable to file a counterclaim or rejoinder within the time limit owing to circumstances beyond their control, they can request an extension from the arbitrator within 15 days after the deadline.
If the reason for the prolongation is justified, the arbitrator may grant the requested extension.
Actual Procedures
The arbiter initiates the arbitration process after receiving any claims, objections, counter-claims, or rejoinders from the parties involved. The arbitrator shall notify the parties of the arbitration date and time, as well as the nature of the proceedings. When three or more arbitrators are involved in a dispute, the processes progress collectively, except for the final decision-making phase. The arbitration process continues even when one party is absent.
Hearing
After hearing allegations and counterclaims, the arbitrator can make a final decision based on provided facts and evidence. The arbitrator issues an order signalling the end of the proceedings.
Within 30 days, a written decision will be made.
Decision in Writing
The arbitrator must give a written decision within 30 days of receiving the final order and completing the processes.
Arbitrator’s Authority
During the decision-making process, the arbitrator holds the following authority:- Parties must appear before an arbitrator to submit papers and record their views.
- To document the witness’ statements,
- To consult with an expert or conduct research on a given topic,
- For foreign nationals, get a bank guarantee or other appropriate assurance.
- To investigate the location, object, product, building, manufacturing process, or other dispute-related matters.
- Sell items that are likely to be destroyed or damaged after consulting with parties involved.
- To exercise any specific right provided by the parties,
- To provide preliminary orders, interim orders, or interlocutory directions regarding
- After consultation with the parties, sell the material or object that is likely to be destroyed or damaged. Exercise any specific power conferred by the parties. Issue preliminary, interim, or inter-locating orders on any matter related to the dispute. Make a conditional decision and issue a certified copy of the document.
Arbitration ruling
Arbitrators must issue rulings within 120 days of receiving claim documents, unless otherwise provided in the agreement. If there are three or more arbitrators, the majority’s decision takes precedence.
Grounds for Contesting the Arbitral Decision
- If a party is dissatisfied with an arbitrator’s ruling, they can file a petition with the high court within 35 days of the hearing or notification.
- The High Court has the authority to overturn or reverse a decision based on the following grounds:
- If a party was incompetent to sign the agreement, or if the agreement is invalid under the law of the country with jurisdiction over the parties, or if the law is unclear and the agreement is not valid under Nepalese laws, a notice to appoint
- If the opponent is not given notice to appoint an arbitrator, a decision is made on a disputed matter that was not referred to the arbitrator, the arbitrator’s conditions are violated, or the arbitrator acts beyond their jurisdiction.
- If the arbitrator’s decision-making procedure conflicts with the agreement’s procedure.
- The Appellate Court can overrule the arbitrator’s verdict on the following grounds:
- If the arbitrator’s ruling cannot be resolved using Nepalese law.
If the arbitrator’s decision is upheld,
Implementation of the Arbitration Decision
The agreement’s parties must execute the award within 45 days of obtaining a copy. If an award is not executed, the affected party has 30 days to file an application with the district court.
Implementation of Foreign Award.
- To implement a foreign award in Nepal, parties must submit an application with the High Court and provide all essential papers.
- Original or certified copy of the arbitrator’s decision.
- The agreement’s original or certified copy.
- If the arbitrator’s award is not in Nepali, we shall provide an official translation.
- To enforce a foreign arbitral award in Nepal, the following conditions must be accomplished.
- The arbitrator’s selection and award should have followed the protocols agreed upon by the parties.
- The parties to the dispute should have been appropriately informed of the arbitration proceedings.
- The award should be based only on the subject matter allocated to the arbitrator and in accordance with the provisions of the agreement.
- The ruling should have been final and binding on the parties, as per the statutes of the jurisdiction where it was delivered.
- Arbitration awards issued in Nepal should be recognised and executed regardless of the laws of the applicant’s country or the nation where they were delivered.
- An application for the execution of an arbitral award must be presented to the Nepalese court within 90 days of its date.
Foreign awards cannot be enforced in Nepal under the following conditions:
- If the settled matter cannot be handled by arbitration under Nepalese laws.
- If the award’s implementation is detrimental to public policy.
- If the high court orders the award to be executed in Nepal, it will be sent to the district court for execution.
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