Arbitration practice in Nepal
Arbitration is becoming more popular as a method of conflict resolution in Nepal. Arbitration in Nepal is governed under the Arbitration Act, 2055 (1999). The Public Procurement Monitoring Office also recommends arbitration as a default dispute resolution procedure for government procurement contracts.
Model Law of the UNCITRAL
Is the arbitration legislation based on the UNCITRAL Model Law?
Although the UNCITRAL Model Law has an influence on Nepalese Arbitration Law, it is not directly based on it.
Arbitration Agreements
What formal requirements must a legally enforceable arbitration agreement meet?
Arbitration agreements must be in writing to be enforceable, and the parties must have a legal relationship, contractual or otherwise. The requirement for a written agreement will be met by:
a separate arbitration contract; an arbitration provision in the underlying contract; or• a letter, telex, or email conversation in which the parties agree to arbitrate.
The parties are deemed to have engaged into an arbitration agreement if a party submits to an arbitration case as a respondent without disputing the beginning of arbitration.
Arbitrator Appointment
How many arbitrators will be chosen and appointed if the arbitration agreement and any applicable regulations are silent on the subject? Is the right to object to the appointment of an arbitrator limited?
If the arbitration agreement and accompanying rules are silent, three arbitrators must be appointed. Within three months of the occurrence of the cause of the dispute, the parties must begin the process of appointing an arbitrator. Each side must select one arbitrator, and the two arbitrators will select a chair.
have no legal capacity to enter into a contract; have been convicted of a moral turpitude-related crime; are bankrupt or insolvent; have a personal stake in the outcome of the conflict; or You do not meet the contract’s criteria.
If the parties are unable to reach an agreement on the appointment of arbitrators in line with the arbitration agreement, each party may petition the appropriate high court for appointment. The court will appoint arbitrators from its expert group.
The Nepal Council of Arbitration (NEPCA), a non-profit organization, is the exclusive provider of institutional arbitration services. According to the NEPCA Rules, the parties must appoint their arbitrators within 30 days of the initiation of proceedings. If the parties are unable to agree on a sole arbitrator or propose an arbitrator (in the case of multiple arbitrators), either party may request that the NEPCA select the arbitrator.
However, the bulk of the NEPCA arbitrators lack legal training, which is an unusual practice. Similarly, Nepal has a scarcity of competent or experienced legal practitioners, resulting in a scarcity of candidates to meet the needs of sophisticated arbitration.
The arbitration procedure
Is there any substantive necessity in domestic law for the procedure to be followed?
The arbitration procedure specified in the arbitration agreement must be followed. If no method is agreed upon, the parties must adhere to the Arbitration Act of 1999. If the agreement or the statute do not address procedural issues, the parties may decide how to proceed.
If the parties cannot agree, the arbitrators will resolve the procedural concerns. In arbitrations governed by the Arbitration Act, however, the following procedures must be followed:
The arbitration must commence immediately once a claim, response, counterclaim, and rejoinder are filed.
What grounds are there for contesting an award in court?
A party to an arbitration may file an application with the competent high court to vacate an award within 35 days of its issuance if the following conditions are met:
The arbitration agreement is void under the applicable law; the arbitration agreement is void under Nepalese law since it is unclear whether legislation applies to the parties;
The applicant did not obtain or did not receive a timely notice to choose its arbitrator.
The arbitrator issues an order that is not within the scope of the arbitration agreement; the arbitration violates the terms of the arbitration agreement; or the nomination of the arbitrator or the arbitration proceedings are not completed in accordance with the agreement or, in the absence of an agreement, the Arbitration Act.
The high courts might either annul the award or order the panel to deliberate. The courts will vacate the award if the verdict is unarbitrable under Nepalese law or is harmful to public good or policy. There are no other options for contesting an arbitration ruling. However, in cases where the reward
If the award violates a party’s constitutional rights, the party may file a writ petition with the Supreme Court appealing the decision.
Enforcement
What procedures exist to enforce international and domestic awards?
Domestic arbitration parties have 35 days from the date of the order’s issuance to voluntarily comply with the order. If the parties do not voluntarily comply, the aggrieved party may file an application with the appropriate district court within 30 days of the 35-day deadline. The award will be enforced as a decision of the district court.
A party may ask the competent high court to overturn the award. If the issue is not arbitrable under Nepalese law, or if the decision is adverse to public good or policy, the award will be overturned by the high court.
If a foreign award fits the following criteria, it will be enforced under the Arbitration Act:
The arbitrators must have been appointed in conformity with the arbitration agreement’s laws or processes.
The proceedings must have been appropriately notified to the parties
Arbitration must be limited to the terms of the arbitration agreement or the issues submitted to arbitration.The arbitration award must be final and binding in the seat country, and Nepalese awards must be reciprocally recognized by the applicant’s or seat country.
A request for recognition of a foreign award must be submitted within 90 days after the award’s issuance.
The higher courts will determine if the aforementioned conditions have been met. If they have, the court will enforce the award unless the dispute is not arbitrable under Nepalese law or the award is against public policy.
Costs
Can a successful party recover its costs?
Nepali law is silent on the topic of expense recovery. The arbitrator and the contract must decide.
If you have any questions pertaining to arbitration matters, please contact us at +977-9745374671 or via email at alpanabhandari@gmail.com
