Arbitration

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

To be enforceable, arbitration agreements must be made in writing and the parties must have a defined legal relationship, whether contractual or not. The obligation for an agreement to be in writing will be met by way of:

  • a separate contract to arbitrate;
  • an arbitration clause in the underlying contract; or
  • an exchange of letters, telex or email in which the parties agree to arbitrate.

If a party surrenders to an arbitration proceeding as a respondent without challenging the commencement of arbitration, the parties are deemed to have an arbitration agreement.

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

The arbitration procedure set out in the arbitration agreement must be followed. If no procedure has been agreed, the parties must follow the procedure set out in the Arbitration Act 1999. If there are procedural aspects not defined in the agreement or the act, the parties may decide on how to proceed. If the parties are unable to agree, the arbitrators will decide on those procedural aspects. However, the following procedures must be followed in arbitrations governed by the Arbitration Act:

  • Once a claim, response, counterclaim and rejoinder have been filed, the arbitration must proceed without delay.
  • The arbitrator must make a timeline for the proceedings and inform the parties of this timeline in advance of the proceedings.
  • If either party is not present in the proceeding as per the timeline, the arbitration can proceed and an order can be rendered.
  • Once hearings end, the arbitrator must make an end of hearing order, after which no hearings can take place nor any additional evidence be taken.
  • Ex aequo et bono and amiable compositeur can be applied only if expressly agreed by parties.
  • Each party must be afforded equal and sufficient right to present their case.
  • Each party must be allowed to be represented by their legal representatives and counsels.
Award

When and in what form must the award be delivered?

Generally, the tribunal must issue an award within 120 days of the date on which the last of the claim, response, counterclaim and rejoinder is received by the tribunal. The award must be in writing and include the details prescribed in the arbitration agreement. If the agreement is silent, the award must:

  • contain a brief description of the dispute referred for arbitration;
  • establish jurisdiction over the arbitration;
  • contain the arbitrators’ decision and reasons and grounds for reaching the decision;
  • contain claims which must be realised and the amount that must be compensated;
  • set out any interest payable for delayed payment of realised amounts; and
  • contain the place and date of the decision.
Appeal

On what grounds can an award be appealed to the court?

A party to an arbitration can apply before the relevant high court to quash an award within 35 days of its issuance if:

  • either party lacks the capacity to conclude the arbitration agreement;
  • the arbitration agreement is invalid under the governing law;
  • the arbitration agreement is invalid under Nepalese law, where it is unclear which law governs the parties;
  • the applicant has not received a notice to appoint its arbitrator or notice is not provided in a timely manner;
  • the arbitration decides on issues not submitted to it;
  • the arbitration gives an order outside the scope of the arbitration agreement;
  • the arbitration violates the conditions of the arbitration agreement; or
  • the arbitrator’s appointment or the arbitration proceedings are not completed pursuant to the agreement or the Arbitration Act, where there is no agreement.

The high courts can either quash the award or order the tribunal to deliberate. The courts will quash the award if the decision is non-arbitrable under Nepalese law or is against public good or policy. There is no other appeal available against an arbitration award. However, in cases where the award violates the constitutional rights of a party, the party can file a writ petition to the Supreme Court against the high court decision.

Enforcement

What procedures exist for enforcement of foreign and domestic awards?

Parties to a domestic arbitration are given 35 days from the date of issuance of the order to voluntary comply with said order. If the parties do not comply voluntarily, the aggrieved party can file an application with the relevant district court within 30 days of the date on which the 35-day time limit elapses. The district court will enforce the award as its own judgment.

A party can file an application with the relevant high court to quash the award. The high court will quash the award if the dispute is not arbitrable pursuant to Nepalese law or if the award is against public good or policy.

A foreign award will be enforced pursuant to the Arbitration Act  if the award fulfils the following:

  • The arbitrators must have been appointed pursuant to laws or procedures prescribed in the arbitration agreement.
  • The parties must have been notified of the proceedings on time.
  • The arbitration must be limited to the conditions set out in the arbitration agreement or limited to the issues submitted to the arbitration.
  • The arbitration award must be final and binding in the seat country, and the applicant’s country or seat country must give reciprocal recognition to Nepalese awards.
  • The recognition of the foreign award application must be filed within 90 days of the issuance of the award.

The high courts will determine whether the above conditions have been met. If they have, the court will enforce the award, unless the dispute is not arbitrable pursuant to Nepalese law or the award is against public policy.