Arbitration is increasingly recognized as an effective dispute resolution mechanism in Nepal. Governed by the Arbitration Act, 1999 (2055), arbitration is the preferred method for resolving disputes, including those related to government procurement, as prescribed by the Public Procurement Monitoring Office.
UNCITRAL Model Law
Nepalese arbitration law aligns with the UNCITRAL Model Law but is not expressly based on it.
Arbitration Agreements
For an arbitration agreement to be enforceable, it must be in writing and define the legal relationship between the parties. Acceptable formats include:
- A separate arbitration contract
- An arbitration clause in the main contract
- Written communication (letters, emails, or other exchanges) confirming agreement to arbitrate
If a party does not challenge arbitration and participates in the proceedings, they are deemed to have accepted the arbitration agreement.
Appointment of Arbitrators
- If the arbitration agreement is silent, three arbitrators must be appointed.
- Parties must select arbitrators within three months of the dispute’s occurrence.
- If parties fail to appoint arbitrators, the High Court can appoint them based on provided names and qualifications.
- Arbitrators must meet the requirements set by the Arbitration Act, 1999 and cannot have conflicts of interest.
Court Intervention
Courts may intervene in arbitration to:
- Appoint arbitrators when parties fail to do so.
- Rule on arbitrator removal disputes.
- Determine the jurisdiction of arbitrators.
- Assist in collecting evidence if requested by an arbitrator or party.
Interim Relief
Arbitrators have the authority to grant interim relief. If a party disputes the relief, they may appeal to the High Court within 15 days. The court’s decision is final.
Cost Recovery
Nepalese arbitration law does not explicitly address cost recovery. The decision on costs is left to the arbitrator and the arbitration agreement.