Arbitration Law in Nepal – Everything you need to know (2080))

In this article, you will get valuable information related to arbitration law in Nepal.

Settlement of dispute avoiding the formal litigation procedure of the court is called Alternative Dispute Resolution(ADR). As the court procedure is lengthy and expensive, people do not want to file a case on many occasions.

Therefore, there will be many victims in society who are far away from fair justice. That is why the concept of ADR was brought. There are different types of ADR. Among them, arbitration is one.

Arbitration is a method of ADR where there is one or more neutral third parties appointed by the other two disputing parties for the solution of the dispute. Such neutral parties are called arbitrators whose decision is binding and the decision of the arbitrators is called an award.

The procedure of arbitration in Nepal is governed by the Arbitration act 2055.

Settlement of Disputes through Arbitration

Disputes to be Settled through Arbitration

According to the section 3 chapter 2 of the arbitration law in Nepal that is arbitration act 2055,

(1) In case any agreement provides for the settlement of disputes through arbitration, the disputes connected with that agreement or with issues coming under that agreement should be settled through arbitration according to the procedure prescribed in that agreement.
(2) In case of concerned parties to a civil suit of a commercial nature that has been
filed in a court and which may be settled through arbitration according to prevailing laws, file an application for its settlement through arbitration, such dispute should also be settled through arbitration.

Appointment of Arbitrators and Their Office

Section 5- Number of Arbitrators

(1) The number of arbitrators is as specified in the agreement. In case the agreement does not specify the number of arbitrators, there shall ordinarily be three arbitrators according to the arbitration law in Nepal.
(2) In case the number of arbitrators appointed under the agreement is an even one, it shall be turned into an odd one by designating the additional arbitrator chosen by them.

Section 6- Appointment of Arbitrators

(1) If there is no agreement regarding the time for the appointment, the process of appointing arbitrators must be started within 30 days from the date when the reason for the settlement of a dispute through arbitration arises.
(2) In case the agreement mentions the names of arbitrators, they themselves shall be recognized as having been appointed as arbitrators.
(3) In case the agreement has made any separate provision for the appointment of arbitrators, arbitrators shall be appointed accordingly.
(4) If there is no agreement, each party shall appoint one arbitrator and the arbitrators shall appoint the third arbitrator who shall work as the chief arbitrator.

Section 7- Appointment of Arbitrators by Court

(1) Any party may submit an application to the Appellate Court for the appointment of arbitrators in the following circumstances:
(a) In case no arbitrator can be appointed upon following the procedure contained in the agreement.
(b) In case the agreement does not mention anything about the appointment of arbitrators.

Qualification of Arbitrators

The following persons shall be disqualified for appointment as arbitrators according to the arbitration law in Nepal:
(a) Disqualified for entering into contracts as per prevailing laws.
(b) Punished by a court on criminal charges involving moral turpitude.
(c) Become insolvent or declared bankrupt.
(d) Any personal interest in the dispute which has to be settled through arbitration.
(e) Not having any specific qualification specified in the agreement for becoming eligible for appointment as an arbitrator.

Removal of Arbitrators

In the following conditions, arbitrators may be removed according to the arbitration law in Nepal:

(a) In case any arbitrator is clearly seen to have shown a bias toward or discriminated against any party instead of working in an impartial manner;
(b) In case any arbitrator engages in improper conduct or commits fraud in the course of arbitration;
(c) In case any arbitrator frequently commits mistakes or irregularities in the course of arbitration;
(d) In case any arbitrator does not attend arbitration meetings or refuses to take part in arbitration proceedings more than three times without furnishing satisfactory reasons with the objective of prolonging or delaying the arbitration proceedings in
an improper manner;
(e) In case any arbitrator takes any action which is opposed to the principles or rules of natural justice; or
(f) In case any arbitrator is found to be lacking the necessary qualifications or to have ceased to be qualified.

Process of Arbitration

The process of arbitration is mentioned in section 14 of arbitration act 2055:

Submission of Claims, Counter-Claims, objections or
Rejoinders

1. The claimant shall submit its claim to the arbitrator in writing mentioning the details of the subject matter of the dispute and the remedy sought, along with evidence, and also supply a copy thereof to the other party within the time limit mentioned in the agreement if any. Within three months from the date when a dispute requires arbitration has arisen in case only the name of the arbitration has been mentioned in the agreement without mentioning any time limit, and from the date of appointment of the arbitrator in case the arbitrator has been appointed after the dispute has arisen.
2. After a claim is filed, the other party shall submit its objection to it within 30 days from the date of receipt of the claim unless otherwise provided for in the agreement.
3. The other party shall submit its objection, as well as its counterclaim, if any, in that connection within the time limit. In case it submits a counter-claim also, the arbitrator shall provide a time limit of 15 days to claimant submit its rejoinder over such counter-claim. In case a rejoinder has so submitted a copy thereof shall be supplied to the party making the counter claim.
4. In case a party fails to submit its objection or rejoinders, it can submit an application for the time extension providing satisfactory reasons within 15 days from the date of expiry of the time limit.
5. While submitting claims, counter-claims, objections, or rejoinders under this section, all documents, as well as evidence substantiating them, if any shall also be submitted.
6. Each party submitting documents to the arbitrator in connection with arbitration proceedings under this Act shall supply copies thereof to the other party according to the arbitration law in Nepal.

Also read: Company Registration in Nepal

Power of Arbitrators

The powers of the arbitrator shall be as follows, except when otherwise provided for in the agreement according to the arbitration law in Nepal:
(a) To direct the concerned parties to appear before him/her to submit documents, and record their statements as required.
(b) To record statements of the witness.
(c) To appoint experts and seek their opinion or cause examination on any specific issue.
(d) In case the party is a foreign national the decision pronounced by the arbitrator is not likely to be implemented for that reason, to obtain a bank guarantee or any other appropriate guarantee as determined by the arbitrator.
(e) To inspect the concerned place, object, product, structure, production process, or any other related matter and in case there is any material or object which is likely to be destroyed or damaged, to sell them in consultation with the parties and keep the sale proceeds as a deposit.
(f) To exercise any specific power conferred by the parties.
(g) To issue preliminary orders, or interim or inter locating orders with respect to any matter connected with the dispute at the request of any party, or make a conditional decision.
(h) To issue a certified copy of the document.
(i) To exercise the other power conferred by this Act.

For Answers and Questions

Conclusions

The concept of arbitration is becoming significant day by day as the cases in the court are increasing rapidly. As court procedure is lengthy and expensive, many people do not like to go to court due to which victims are prohibited from fair justice.

In this condition, arbitration is the landmark concept to give justice to the people easily. Also, to relieve the court from a load of many cases, arbitration plays a vital role.