1. Arbitration Agreement
An arbitration agreement forms the basis of arbitral proceedings. Parties may include an arbitration clause in their contract or enter into a separate agreement to refer an existing dispute to arbitration.
Under Section 3 of the Act, disputes covered by an arbitration agreement must be resolved through arbitration in accordance with the agreed procedure or, where no procedure is specified, the Act. The dispute must also be capable of settlement through arbitration under Nepalese law.
A carefully drafted clause should identify the scope of disputes, appointment procedure, applicable rules, place of arbitration and language of proceedings.
2. Appointment of Arbitrators
The parties may agree on the number of arbitrators and their appointment procedure. Where the agreement is silent, the Act generally provides for three arbitrators.
Unless otherwise agreed, the appointment process must begin within three months after the dispute arises. If the parties cannot constitute the tribunal through the applicable procedure, a party may seek appointment through the High Court under the Act.
Parties should therefore review the arbitration clause and any incorporated institutional rules before issuing an appointment notice.
3. Independence and Challenge of Arbitrators
Arbitrators must act impartially and satisfy the qualifications required by law and the parties’ agreement. Circumstances that reasonably raise doubts about independence or impartiality must be disclosed.
Section 11 of the Act recognises the agreed grounds and procedure for removing an arbitrator. Where no procedure has been agreed, a party may apply to the arbitrator within 15 days of appointment or becoming aware of the relevant conduct.
Statutory grounds include clear bias, improper conduct or fraud, repeated procedural irregularities, unjustified delay, breach of natural justice and lack of the required qualifications. A decision under the statutory procedure must be made within 30 days of the application where the arbitrator does not withdraw or the other party does not agree to the grounds. The decision may be challenged before the High Court.
4. Submission of Claims and Defence
The claimant must submit a written claim identifying the dispute, the relief sought and the supporting evidence within the applicable contractual or statutory period.
Unless otherwise agreed, the respondent must submit its defence within 30 days of receiving the claim. A counterclaim should be submitted with the defence, and the claimant is ordinarily allowed 15 days to respond to it.
Relevant documents and witness details should accompany the pleadings. Documents submitted to the tribunal must also be provided to the other party. Failure to submit a defence does not, by itself, amount to acceptance of the claim.
5. Jurisdiction and Conduct of Proceedings
The tribunal may determine objections concerning its jurisdiction and the validity or effectiveness of the underlying contract. An arbitration clause is treated separately from the remaining contract; invalidity of the contract does not automatically invalidate the arbitration clause.
The parties must receive an adequate and equal opportunity to present their case. Proceedings follow the agreed procedure, supplemented by the Act where necessary. Parties should raise jurisdictional objections within the prescribed time and comply with procedural directions throughout the proceedings.
6. Arbitral Award and Time for Decision
Unless otherwise agreed, and subject to the Act, the tribunal should ordinarily deliver its award within 120 days after submission of the documents required under Section 14 of the Act. This period should not be understood as an unconditional deadline running from the first notice of dispute.
The Act also permits limited correction, clarification and supplementary decisions. These procedures are subject to specific deadlines and do not provide a general opportunity to reopen the merits of the dispute.
7. Challenging an Award
Under Section 30 of the Act, a party seeking to set aside an award must apply to the High Court within 35 days of hearing the award or receiving notice of it.
The statutory grounds include:
- Incapacity of a party or invalidity of the arbitration agreement;
- Failure to provide proper notice of appointment or proceedings;
- An award exceeding the matters referred to arbitration;
- Improper constitution of the tribunal or a procedure inconsistent with the applicable agreement or law;
- A dispute that cannot legally be resolved through arbitration; or
- An award contrary to public policy.
A setting-aside application is a limited statutory remedy. The court must not conduct the hearing by re-examining the evidence relied upon by the tribunal.
8. Enforcement of Domestic Awards
Section 31 of the Act requires parties to implement an award within 45 days of receiving its copy. If the award remains unimplemented, the concerned party may apply to the District Court within 30 days after that period expires.
The District Court enforces the award as its own judgment. Filing a setting-aside application does not automatically suspend enforcement. A separate application and a court order are required for a stay under the statutory conditions.
9. Enforcement of Foreign Awards
Section 34 of the Act provides for recognition and enforcement of foreign arbitral awards through the High Court, subject to the applicable treaty framework and statutory requirements.
The application must include the award and arbitration agreement, in original or certified form, together with an official Nepali translation of the award where required. The Act specifies a 90-day application period from the date of the award. Parties should assess the applicable treaty conditions and filing requirements promptly.
Enforcement may be refused where the dispute is not arbitrable under Nepalese law or enforcement would conflict with public policy.
Frequently Asked Questions
Is an arbitration clause necessary?
Arbitration requires an agreement between the parties. This may be an existing contractual clause or a separate agreement made after the dispute arises.
Can parties choose a sole arbitrator?
Yes. Parties may agree on a sole arbitrator. The statutory default generally provides for three arbitrators where the agreement is silent.
Can arbitration continue if the respondent does not participate?
Yes, subject to proper procedure. The tribunal may proceed on the available evidence, but non-participation does not automatically establish the claimant’s entitlement.
Can parties agree to expedited arbitration?
Yes. Section 13A allows parties to resolve their dispute through expedited arbitration in accordance with their agreement or consent.
Can an award be challenged merely because a party disagrees with it?
Disagreement alone is insufficient. The applicant must establish an applicable statutory ground for setting aside the award.
Does challenging an award stop its enforcement?
No. A setting-aside application does not itself prevent enforcement. A separate stay order must be obtained under the Act.
How Alpha Law Associates Can Assist
Alpha Law Associates assists clients with drafting arbitration agreements, reviewing contractual dispute procedures, appointing and challenging arbitrators, preparing claims and defences, conducting arbitration proceedings, and pursuing challenges or enforcement of domestic and foreign awards.