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Nepal Arbitration Law and Procedure

Arbitration is being used to resolve conflicts in Nepal. The Arbitration Act, 2055 (1999) controls arbitration in Nepal. The Public Procurement Monitoring Office recommends arbitration as the default dispute resolution for government procurement agreements.

Model Law of UNCITRAL

Is the arbitration legislation based on the UNCITRAL Model Legislation?

The Nepalese Arbitration Law is influenced by the UNCITRAL Model Law, but is not entirely based on it.

Agreement on Arbitration

What are the formal criteria for a legally binding arbitration agreement?

  • Arbitration agreements must be in writing and between parties with an established legal connection, whether contractual or not. To meet the requirement for a written agreement,
  • a separate agreement for arbitration;
  • Arbitration can be agreed upon through a contract provision or a letter, telex, or email.
  • When a party responds to an arbitration case without disputing its start, it is assumed that they have agreed into an arbitration agreement.

Arbitrator Selection

  • If the arbitration agreement and regulations do not specify the number of arbitrators, how will they be appointed? Is the right to oppose an arbitrator’s nomination restricted?
  • If the arbitration agreement and regulations do not specify otherwise, three arbitrators must be chosen. The parties must appoint an arbitrator within three months of the dispute arising.
  • Each party selects one arbiter, and the two select a chair.
  • have no legal capacity to enter into a contract.
  • was convicted of a moral turpitude-related crime;
  • Are bankrupt or insolvent; have a personal stake in the outcome of the disagreement; or
  • You do not meet the qualifications mentioned in the contract.
  • If the parties cannot agree on the appointment of arbitrators in accordance with the arbitration agreement, either party may file a petition with the relevant high court for appointment. The court will choose arbitrators from its team of specialists.

The Nepal Council of Arbitration (NEPCA), a non-profit organisation, is the exclusive provider of institutional arbitration services. The NEPCA Rules require the parties to appoint their arbitrators within 30 days of the initiation of proceedings.

Nepal has an inadequate number of skilled legal practitioners, making it difficult to find suitable candidates for advanced arbitration.

The Arbitration Process

Do domestic law procedures have any substantive requirements?

    • The arbitration procedure specified in the agreement must be followed. If no procedure has been agreed upon, the parties must follow the Arbitration Act of 1999. If procedural issues are not addressed in the agreement or statute, the parties can decide how to proceed.
    • If the parties cannot reach an agreement, the arbitrators will resolve the procedural concerns. The Arbitration Act requires the following actions to be taken during arbitrations:
    • Arbitration must commence immediately after filing a claim, answer, counterclaim, or rejoinder.
      The arbitrator must develop a timeframe for the proceedings and communicate it to the parties ahead of time.
    • If either side fails to present at the hearing by the date, the arbitration may proceed and an order made.
    • Once the hearings are completed, the arbitrator must issue an end of hearing order, which prohibits further hearings or evidence.
    • Ex aequo et bono and amiable compositeur are only applicable if both parties expressly agree.
    • Each party must have an equal and sufficient opportunity to present their case.
    • Each party must be allowed to have legal advice and representation.

    What grounds can the court use to intervene in an arbitration?

    • According to the Arbitration Act of 1999, the high courts are authorised to:
    • Appoint an arbitrator if the arbitration agreement is silent on the matter and the parties are unable to reach an agreement.
    • Make a definitive decision to remove an arbitrator if parties disagree.
    • Make a definitive ruling about an arbitrator’s jurisdiction and rights.
    • The parties may override these procedures by agreeing to a controlling law other than Nepalese law or by defining the arbitral procedures (or rules) in the arbitration agreement. District courts can help arbitrators in acquiring evidence if the arbitrator or a party to the proceedings requests it.
    • Temporary relief.

    Do arbitrators have the ability to grant interim relief?

      Arbitrators have the authority to grant interim remedies. To challenge the interim relief, the affected party can file an appeal with the relevant high court within 15 days after its issuance. The Supreme Court’s verdict will be binding and final.


      When and how should the award be presented?

        • Generally, the tribunal must issue an award within 120 days of receiving the final claim, response, counterclaim, and reply. The award must be in writing and contain all facts stated in the arbitration agreement. If there is no unanimity, the award will be:
        • Include a brief summary of the disagreement that has been referred to arbitration.
        • establish the arbitration’s jurisdiction;
        • include the arbitrators’ ruling as well as the reasons and grounds for the decision;
        • include the claims that must be realized as well as the amount that must be


        On what grounds can an award be challenged in court?

        • A party to an arbitration may file an application with the appropriate high court to
          vacate an award within 35 days of its issuing if:
        • any party lacks the legal ability to enter into the arbitration agreement;
        • the arbitration agreement is void under the applicable law;
        • the arbitration agreement is void under Nepalese law since it is unclear whose
          legislation applies to the parties;
        • The petitioner has not received or has not received in a timely manner notice to appoint an arbitrator.
        • Arbitration rules apply to unreported issues.
        • The arbitrator renders an order that does not fall within the scope of the arbitration agreement;
        • Arbitration violates the provisions of the agreement, or the arbitrator is not nominated or the proceedings are not completed in accordance with the agreement or the Arbitration Act (if no agreement exists).
        • The high courts have the authority to either overturn the award or require the panel to deliberate.
        • If the award violates a party’s constitutional rights, the party may file a writ petition with the Supreme Court to challenge the high court’s decision.
        • Enforcement

        What procedures are in place to enforce international and domestic awards?

        • Domestic arbitration parties have 35 days from the date the order was issued to comply voluntarily. If the parties do not voluntarily comply, the aggrieved party may file an application with the competent district court within 30 days of the 35-day period expiring. The award is to be enforced as the district court’s own decision.
          A party may apply the relevant high court to have the award vacated.


        Can a successful party reimburse its expenses?

        Nepal’s legislation is silent on the question of expense recovery. It’s up to the arbitrator and the contract.

        Should you have any questions about it then you might want to connect with us.

          Written by

          Alpana Bhandari

          Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.

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