Arbitration Act of Nepal

Arbitration can be initiated in Nepal when the contract contains an arbitration clause, when both parties mutually agree to arbitrate after a dispute arises, when a pending court case is referred to arbitration with both parties’ consent, or when specific laws mandate arbitration (such as the Public Procurement Act, FITTA, or the Public-Private Partnership Act). If a valid arbitration agreement exists, the court must dismiss any lawsuit on the same dispute.

The Arbitration Act sets specific timelines: arbitrators must be appointed within 3 months, claims submitted within 3 months, counterclaims within 30 days (with a possible 15-day extension), and the arbitral award must be issued within 120 days of receiving the final documents. After the award, parties have 45 days to comply voluntarily. The total process is significantly faster than litigation, which can take 1–3 years or more.

Parties choose their own arbitrators. If no agreement is reached, the High Court appoints one. Typically, each party appoints one arbitrator, and the two selected arbitrators choose a third who serves as chairperson. If the agreement is silent on the number of arbitrators, three are appointed. Arbitrators must be legally capable, have no criminal record, and be free of conflicts of interest with either party.

Yes. An arbitral award in Nepal has the same force as a court judgment. If a party does not comply within 45 days, the aggrieved party can apply to the District Court for enforcement. The court treats the award as its own judgment and uses standard execution procedures including attachment and sale of property. Foreign arbitral awards are enforced through the High Court under the New York Convention.

Yes. Nepal’s accession to the New York Convention 1958 means foreign arbitral awards from any Convention country can be enforced in Nepal. An application must be filed at the High Court with the original award (or certified copy), the original arbitration agreement, and Nepali translations of all documents. The court may refuse enforcement only on limited grounds including invalid agreement, denial of due process, improper tribunal, or violation of public policy.

Yes, but on narrow grounds. A dissatisfied party can challenge an award in the High Court if the arbitration agreement was invalid, a party was denied proper notice, the award exceeds the scope of the agreement, the tribunal was improperly constituted, or the award violates public policy. Courts generally defer to the arbitrator’s judgment. In exceptional cases, a writ petition to the Supreme Court is possible if no alternative remedy exists.

Arbitrators have broad powers under the Arbitration Act: they can compel parties to present documents, record witness statements, hire independent experts, conduct on-site inspections, secure guarantees from foreign nationals, grant interim relief to protect assets at risk, and make provisional rulings on jurisdiction and procedural matters. Their powers are comparable to those of a court judge within the scope of the arbitration.

Yes. Section 19 of the Arbitration Act mandates that arbitration proceedings be conducted in-camera (privately). This means hearings are closed to the public, and parties and arbitrators have a duty to maintain confidentiality. This is a significant advantage over litigation, where court proceedings are generally open to the public.

The New York Convention (1958) is an international treaty that provides for the recognition and enforcement of foreign arbitral awards across member countries. Nepal acceded to the Convention in 1998, meaning arbitral awards made in Nepal can be enforced in over 170 Convention countries, and foreign awards from those countries can be enforced in Nepal through the High Court. This makes Nepal a viable venue for international commercial arbitration.

NEPCA is the primary institution administering domestic arbitration proceedings in Nepal. It maintains a registry of qualified arbitrators, oversees the appointment of arbitrators when parties cannot agree, provides administrative support for arbitration proceedings, and ensures awards are issued and enforced in accordance with the Arbitration Act. NEPCA operates alongside the Nepal International Arbitration Center (NIAC), which focuses on international arbitration.

Yes. If a valid arbitration agreement exists between the parties, the court must dismiss any lawsuit filed on the same dispute and refer the parties to arbitration. This is unless the arbitration agreement is found to be void, inoperable, or incapable of being performed. This principle was reinforced in the landmark case National Construction Company v. Appellate Court Patan (NKP 2065), which confirmed that one party cannot unilaterally revoke an arbitration agreement.

If an arbitrator is biased, acts unlawfully, or neglects their duties, a party can file for removal. The application must be made within 15 days of discovering the misconduct. The removal process ensures transparency and protects the integrity of the arbitration. If the parties’ agreement specifies a removal procedure, that procedure is followed; otherwise, the court decides.

Interim relief is a provisional order issued by the arbitral tribunal to protect a party’s interests before the final award is reached. In Nepal, arbitrators can grant interim measures to prevent damage to or dissipation of assets, preserve evidence, or maintain the status quo. If a party disagrees with the tribunal’s interim order, they can appeal to the High Court, whose decision is final.

In arbitration, an arbitrator hears both sides and issues a binding decision (arbitral award) enforceable as a court judgment. In mediation, a neutral mediator facilitates dialogue to help parties reach a voluntary agreement — the mediator does not decide the dispute. Arbitration is governed by the Arbitration Act 2055 and preferred for commercial disputes. Mediation is governed by the Mediation Act 2068 and commonly used for family and property disputes.