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Arbitration is a method of resolving disputes outside of traditional court litigation through the involvement of a neutral third party known as an arbitrator or a panel of arbitrators. It is a form of alternative dispute resolution (ADR) that offers parties a private and often more efficient way to resolve their disagreements. Arbitration in Nepal is governed by the Arbitration Act, 2055 (1999) and Arbitration Rules 2059.
Delta Law arbitrates a conflict between two parties on the course of their business. The mediator maintains their relationship by assisting them in reaching a mutually agreeable compromise and helping them communicate successfully.
In an arbitration involving a contract dispute, we represent parties. Regarding matters like project delays and payment disputes, an arbitrator hears arguments from both sides and renders a legally binding ruling.
We also assist a client in a personal injury case by negotiating a settlement agreement. Our other services include: give clients advice on the best ADR process for their specific dispute as well as experience with ADR processes, represent clients in alternative dispute resolution (ADR) processes, standing up for their rights and defending their interests, help parties conduct fruitful conversations and negotiations.
Arbitration is a method of resolving disputes outside of traditional court litigation through the involvement of a neutral third party known as an arbitrator or a panel of arbitrators. It is a form of alternative dispute resolution (ADR) that offers parties a private and often more efficient way to resolve their disagreements. Arbitration is typically chosen when parties want to avoid the formalities, delays, and costs associated with court litigation. Arbitration is a binding procedure. It is often "administered" by a private organization that maintains lists of available arbitrators and provides rules under which the arbitration will be conducted. Arbitration is sometimes referred to as "non-binding" if the parties agree to make it so, but that is really a misnomer.
Arbitration differs from traditional court litigation, Here are some key differences between arbitration and traditional court litigation in Nepal:
Arbitration in Nepal is governed by the Arbitration Act, 2055 (1999) and Arbitration Rules 2059. The Public Procurement Monitoring Office also prescribes arbitration as a default dispute resolution method for government procurement agreement. An arbitration agreement is a contract between parties that outlines their intention to resolve any disputes that may arise between them through arbitration rather than litigation. The procedure of arbitration is provisioned in section 14 of arbitration act 2055:
The Nepal Council of Arbitration (NEPCA) is a statutory body in Nepal established to promote and regulate arbitration proceedings within the country. Its primary role is to oversee and facilitate arbitration proceedings, ensuring that they are conducted in a fair, impartial, and efficient manner. The NEPCA plays a vital role in promoting arbitration as an alternative dispute resolution mechanism in Nepal. It works to create awareness among businesses, individuals, and legal professionals about the benefits of arbitration and its effectiveness in resolving disputes. The key roles and functions of the Nepal Council of Arbitration in overseeing arbitration proceedings are listed as below:
Foreign entities or individuals can participate in arbitration proceedings in Nepal. The Arbitration Act of Nepal governs arbitration in the country. If there is an arbitration agreement, recourse to arbitration becomes mandatory, and no suit in such a dispute may be filed in any court of Nepal. The arbitrator has to follow substantive law, except otherwise provided for in the agreement. Arbitrators are allowed to settle the dispute according to the conditions stipulated in the relevant contract, and for this purpose, the arbitrator has to pay attention to the commercial usages applicable to the transaction concerned. Foreign arbitral awards are still enforced in Nepal, and Nepal is a signatory to the New York Convention, which is the most effective diplomatic tool for enforcing overseas arbitral awards. An international arbitral award is enforceable in Nepal if it complies with the conditions set out in Article 34 of the Arbitration Act, founded on the New York Convention.
The key advantages of choosing arbitration over litigation in Nepal can be listed as:
In Nepal, the selection and appointment of arbitrators for arbitration cases can be done through the following methods:
iii. Qualification of Arbitrators: As provisioned in section 10 of Arbitration Act 2055, The following persons are disqualified for appointment as arbitrators according to the arbitration law in Nepal:
In Nepal's legal system, parties generally cannot appeal an arbitration award. However, there are certain circumstances where a party can challenge or seek to set aside an arbitration award. As provisioned in Section 30 of the Arbitration Act 2055, any party dissatisfied with the decision taken by the arbitrator may, if one wishes to invalidate the decision file a petition to the Appellate Court along with the related documents and a copy of the decision within 35 days from the date the decision heard or notice received thereof under this Arbitration Act 2055.
The high courts in Nepal have the authority to quash an arbitration award if it falls under the grounds mentioned below:
In such cases, the court can either quash the award or order the tribunal to reconsider the matter.
It is important to note that the courts in Nepal have the power to quash an arbitration award if it is non-arbitrable under Nepalese law, against public good or policy, or violates constitutional rights. However, there is generally no appeal available against an arbitration award, except in cases where the award violates constitutional rights, in which a party can file a writ petition to the Supreme Court. The enforcement of arbitration awards in Nepal involves following the procedures set out in the Arbitration Act and seeking court enforcement when necessary.
(a) The original or certified copy of the arbitrators award.
(b) The original or certified copy of the agreement.
(c) In case the arbitrators award is not in the Nepali Language, an official translation thereof in Nepali language.
In case Nepal is a party to any treaty which provides for recognition and implementation of decisions taken by arbitrators in foreign countries, any decision taken by an arbitrator after the commencement of this act within the area of the foreign country which is a party to that treaty shall be recognised and implemented in Nepal in the following circumstances subject to the provisions of that treaty and the conditions mentioned at the time of entering into the treaty.
(a) In case the arbitrator has been appointed and awarded according to the laws and procedure mentioned in the agreement.
(b) In case the parties had been notified about the arbitration proceedings in time.
(c) In case the decision has been taken according to the conditions mentioned in the agreement or upon confining only to the subject matters referred to the arbitrator.
(d) In case the decision has become final and binding on the parties according to the laws of the country where the decision has been taken.
(e) In case the laws of the country of the petitioner or the laws of the country where arbitration proceedings have been conducted, do not contain provisions under which 23 arbitration awards taken in Nepal cannot be implemented.
(f) In case the application has been filed for the implementation of the award within 90 days from the date of award.
The enforcement of arbitration awards in Nepal is typically done through the courts. Once the award is obtained, the party seeking enforcement can apply to the court for the execution of the award.
The merit of the arbitration award cannot be changed but in certain circumstances the decision can be invalidated which is provisioned so in Section 30 of the Arbitration Act 2055. There are certain limitations and they are listed as such:
- A party can challenge an arbitration award if it can be shown that either party lacked the capacity to conclude the arbitration agreement.
- If the arbitration agreement is invalid under the governing law or under Nepalese law, the award can be challenged.
- If a party has not received a notice to appoint its arbitrator or if the notice is not provided in a timely manner, the award can be challenged.
- If the arbitration decides on issues that were not submitted to it, the award can be challenged.
- If the arbitration gives an order that is outside the scope of the arbitration agreement, the award can be challenged
- The high court can quash the award if the dispute is not arbitrable under Nepalese law or if the award is against public good or policy.
The general procedure for initiating arbitration proceedings in Nepal, regardless of the number of parties involved, includes the following steps and are provisioned under chapter 3 and 4 of The Arbitration Act, 2055:
Nepal's legal system doesn't have any specific legal provisions related to interim measures and emergency arbitration that are widely known or recognized in international arbitration practice. Typically, interim measures in arbitration refer to temporary measures that a party can request from the arbitral tribunal to maintain the status quo or prevent irreparable harm before the final award is rendered. Emergency arbitration is a similar concept where parties can seek urgent relief from an emergency arbitrator before a full arbitration tribunal is constituted.
However, there is no mention of emergency arbitration or interim measures in the Public Procurement Monitoring Office's prescribed arbitration as a default dispute resolution method for government procurement agreements. Emergency arbitration is a relatively new concept for example, India only recently recognized it as a legal mechanism. Therefore, it is possible that Nepal may consider incorporating provisions for emergency arbitration and interim measures in the future.
There are no specific provisions on confidentiality of arbitration proceedings in the Arbitration Act, 2055 (1999) that governs arbitration in Nepal. However, the treaty, contract or law containing the parties consent to arbitration may include specific provisions on confidentiality and transparency applicable to the arbitration proceeding. Although the Arbitration Act does not contain any provisions on confidentiality, the duty of confidentiality is recognized in international commercial arbitration. Although confidentiality is generally implied in commercial arbitration cases, parties may agree to waive confidentiality obligations otherwise implied by law or incorporated into arbitration rules.
Therefore, it can be inferred that the procedure for initiating arbitration proceedings in Nepal and the key steps involved are the same for both single-party and multi-party arbitrations. The parties must have a valid arbitration agreement in place, appoint arbitrators, provide a notice of arbitration, conduct the arbitration proceedings, and ultimately receive an arbitration award. The Arbitration Act, 2055 (1999) does not specifically address multi-party arbitrations, the parties involved in a multi-party arbitration can still follow the general procedure outlined in the Act and agree upon any additional procedural aspects to accommodate the specific circumstances of their case.
Public policy refers to the principles, values, and standards that a society considers fundamental and essential for the well-being of its citizens. In the context of arbitration, the concept of public policy comes into play as a ground for challenging or setting aside an arbitration award. An arbitration award can be challenged if it goes against public interest or policy, and the court has the authority to quash the award if it is non-arbitrable under Nepalese law or against public good or policy. While there is generally no direct appeal available against an arbitration award, a party may file a writ petition to the Supreme Court against the high court decision if the award violates their constitutional rights. If an arbitration award is believed to violate the public policy of a country, a court might intervene and refuse to enforce or uphold the award. The Arbitration Act 2055 establishes a procedure for prompt dispute resolution based on arbitrators' decisions chosen by the disputing parties. An international arbitral award is enforceable in Nepal if it complies with the conditions set out in Article 34 of the Arbitration Act, founded on the New York Convention. However, if an international arbitral award is incompatible with public policy, it is not upheld in Nepal, according to Section 34(4) of the Act.
Yes, there are provisions for cost allocation in arbitration cases in Nepal. According to the Arbitration Act 2055, each party must bear the expenses required for the arbitration proceedings in the proportion prescribed by the arbitrator, taking into account the relevant circumstances.
It is provisioned in Section 35 of Arbitration Act 2055 that, (1) ) Except when otherwise provided for in the agreement, the parties seeking arbitration must pay to the arbitrator the amount fixed their in consultation with parties for conducting the arbitration proceedings.
(2) Except the otherwise provided in the agreement, each party shall bear the expenses required for the arbitration proceedings in the proportion prescribed by the arbitrator taking into account the relevant circumstances.
This means that the arbitrator has the power to allocate costs between the parties in an arbitration proceeding. The allocation of costs can be made with regard to a particular part of the proceeding, with regard to particular claims or defenses, or as a whole. When making a cost allocation decision, the arbitrator considers various factors, such as the conduct of the parties, the complexity of the case, and the outcome of the arbitration.
It is to be noted that in domestic arbitrations, the Nepal Council of Arbitration’s (NECPA’s) guidelines are mostly followed, while in arbitration involving international contracts, the ICC Rules and UNCITRAL Rules are also taken as guidelines to determine the remuneration.
In Nepal, parties to arbitration proceedings can seek assistance from the courts for evidence collection. The district courts can assist arbitrators in collecting evidence upon the request of the arbitrator or a party to the proceedings. This means that if the arbitrator or a party needs assistance in obtaining oral or documentary evidence, they can approach the district court for support. As provisioned in section 10 of Arbitration Rules 2059, the parties seeking courts assistance shall follow certain procedures as provisioned in the respective clause:
(1)In case of requirement of assistance of court for the purpose of examination of evidence, arbitrator shall request the concerned district court in written form.
(2) Following aspects shall be mentioned in the request:
(a) Name, surname and address of claimant and respondent,
(b) Nature of dispute and subject matter of intended remedy before arbitrator,
(c) Type of assistance required form district court on what type of evidence to be examined relating to the dispute under consideration before arbitrator,
(3) While requesting to district court for the purpose of causing a document to be executed elaborating any matter from any person clear questions shall be prepared about the matter to be asked. Upon the receipt of request mentioning questions to be asked, the district court should summon such person, draw the answer as per the question and send it following procedure pursuant to prevailing laws.
(4) Upon the receipt of application district court may order the concerned person to be present self before the arbitrator and deliver the statement or to submit documentary evidence to be submitted if it is remaining on his/her hold and that substantially affect the decision of arbitrator or to do other required work and task or to deliver statement by presenting before arbitrator or to submit any documentary evidence.
(5) District court may initiate proceedings and punish against contempt of its own to a person not complying with the order.
However, it is important to note that the assistance from the courts for evidence collection may be subject to certain conditions. For example, assistance in obtaining evidence from another jurisdiction may be provided if there is a mutual legal assistance treaty between that country and Nepal, or if the country's diplomatic office in Nepal assures the Nepalese government of providing similar assistance in the future, pursuant to Section 3 and Section 5 of Mutual Legal Assistance Act 2074 (2014).
Arbitration is a legally and commercially accepted dispute resolution mechanism in Nepal and its acceptance can be judged by the increased use of arbitration in recent years. The Arbitration Act 2055, outlines the legal framework for arbitration in the country. The Act provides for mandatory arbitration in certain cases, and specifies that the arbitrator must follow substantive law unless otherwise provided for in the agreement. Nepal is party to the New York Convention, the major international instrument for enforcement of foreign arbitral awards. An arbitral award rendered in a foreign jurisdiction is enforceable in Nepal provided that it meets the requirements specified in Section 34 of the Arbitration Act, which is based on the New York Convention.
- After twenty years of enforcement of the Arbitration Act, the Supreme Court has rendered its judgment on the enforceability of a foreign arbitral award for the first time in the case of Hanil Engineering & Construction Co., Ltd. (“Hanil”), a South Korean company, entered into an agreement with Melamchi Water Supply Development Board (“Melamchi Board”) to construct access roads for the Melamchi Water Supply Project. The judgment affirms that a foreign arbitral award, which is intended to be recognized and enforced in Nepal, must ensure that the arbitration proceedings fulfill the requirements specified in section 34 of the Arbitration Act and the New York Convention. The Supreme Court of Nepal issued a ruling affirming that a foreign arbitral award, which is intended to be recognized and enforced in Nepal, must ensure that the arbitration agreement is valid under Nepalese law.
- The Public Procurement Monitoring Office prescribes arbitration as a default dispute resolution method for government procurement agreements.
- In 2019, Axiata Investments (UK) Limited and Ncell Private Limited initiated an investment dispute against the Federal Democratic Republic of Nepal over the government's imposition of a capital gains tax on Axiata's acquisition of Reynolds Holding Limited from TeliaSonera in 2016. Nepal defeated a US$422 million claim commenced by Axiata Investments UK Limited (“Axiata UK”), a wholly-owned subsidiary of Axiata, and Ncell Axiata Limited (“Ncell”) against the Federal Democratic Republic of Nepal (“Nepal”) brought under the UK-Nepal Bilateral Investment Treaty (“BIT”). The arbitration, Axiata Investments (UK) Limited and Ncell Private Limited v. Nepal (ICSID Case No. ARB/19/15), was Nepal’s very first investment arbitration case.
- In Bikram Pandey v Ministry of Physical Planning and Construction (NKP, 2067 Decision No. 8437, page 1346, Division Bench), the Supreme Court came up with a new interpretation to simplify the arbitration procedure. It ruled that internationally recognised rules like the UNCITRAL Arbitration Rules may govern arbitration, but when such rules come into conflict with domestic laws the provisions of domestic law will apply. The Supreme Court further ruled that, even if the parties agree to conduct arbitration under the UNCITRAL Arbitration Rules, their failure to name an appointing authority in the arbitration agreement will not give automatic authority under the UNCITRAL Rules to designate an appointing authority and that the Appellate Court will have jurisdiction to act as appointing authority.
Nepal has taken steps to align its legal framework with international arbitration best practices by enacting the Arbitration Act 2055 and becoming a party to international arbitration-related conventions.
a.Nepal's Arbitration Act is largely based on the UNCITRAL Model Law on International Commercial Arbitration, which is a widely accepted international standard for modern arbitration laws. The Arbitration Act 2055, provides a comprehensive framework for both domestic and international arbitration, addressing key aspects such as the recognition and enforcement of arbitral awards, arbitrator qualifications, and procedural matters.
b.Nepal is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This convention facilitates the recognition and enforcement of foreign arbitral awards in Nepal, promoting a more arbitration-friendly environment and aligning with international practices.
Cybercrime has a significant impact on businesses in Nepal. Many businesses are not adequately prepared to deal with cyber threats, and a successful cyber-attack can cause significant financial losses, damage to reputation, and loss of sensitive data. To protect against cyber threats, businesses in Nepal implement strong cyber-security measures, such as using firewalls and antivirus software, regularly backing up data, and conducting regular security audits. Businesses should also educate their employees on safe computing practices, such as how to recognize phishing scams and how to create strong passwords. It is also significant for businesses to have an incident response plan in place in case of a cyber-attack. This plan should include steps for isolating affected systems, notifying stakeholders, and contacting law enforcement agencies. By taking proactive steps to prevent cyber-attacks and having a plan in place to respond to incidents, businesses can better protect themselves against the harmful effects of cybercrime.
Individuals in Nepal are also vulnerable to cybercrime. Cybercriminals often use social engineering tactics to trick people into providing personal information, such as passwords or credit card numbers. This can lead to financial losses and identity theft. To protect against cyber threats, individuals should take steps such as using strong and unique passwords, avoiding public Wi-Fi networks, and being cautious when sharing personal information online. It is also important to regularly monitor bank and credit card statements for suspicious activity and to report any suspected incidents of identity theft or fraud to the appropriate authorities. In addition, individuals can protect themselves by staying informed about the latest cyber threats and by using security software, such as antivirus programs and firewalls, on their devices. By taking these steps, individuals can reduce their risk of falling victim to cybercrime in Nepal.
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