Litigation

Court system

What is the structure of the civil court system?

The Nepalese courts are divided into three tiers:

  • the Supreme Court;
  • the high courts; and
  • the district courts.

There are also specialised courts and tribunals (eg, the Labour Court, the Revenue Tribunal, the Debt Recovery Tribunal and Special Court) which are considered to be in the same tier as the high courts.

The Supreme Court is the highest court and is responsible for:

  • hearing appeals of lower-court judgments;
  • revising its own judgments; and
  • issuing writs to enforce fundamental rights and provide judicial remedy when alternative remedies are exhausted or insufficient.

Supreme Court judgments are binding judicial precedents. The constitutional bench of the Supreme Court comprises the chief justice and four judges appointed by the chief justice. It hears:

  • cases concerning the constitutionality of laws;
  • disputes involving constitutional questions; and
  • disputes between provinces, and federation and provinces.

The Supreme Court will sit as a single-judge bench, a joint bench of two judges, a full division bench of three judges or an extended full bench comprising five or more judges. Judgments made by benches comprising a greater number of judges will be binding on benches comprising fewer judges.

The high courts hear appeals of district court judgments and issue writs. The high courts also have a designated commercial bench which has first-instance jurisdiction over certain commercial cases under the Companies Act 2006, the Secured Transaction Act 2006, the Insolvency Act 2006, the Competition Promotion and Market Protection Act 2007 and the Banking Offence Act 2008. The high courts sit in benches of one or two judges, depending on the nature of the dispute.

The district courts are the courts of first instance for most civil and contractual claims. They also enforce judgments issued by other courts. A sole judge sits in each district court.

Judges and juries

What is the role of the judge and the jury in civil proceedings?

There is no jury system in Nepal. All cases are decided by judges or members of a tribunal. An adversarial system is observed, so a judge adjudicating a dispute on both fact and law has a passive role.

Judges are nominated by the constitutionally established Judicial Council and are appointed by the chief justice. The Judicial Council comprises:

  • the chief justice (the senior most judge of the Supreme Court);
  • a member of the Nepal Bar Association; and
  • a jurist nominated by the president and the federal minister of law, justice and parliamentary affairs.

Supreme Court judges are nominated by the Judicial Council and appointed by the president after their nomination has been approved by the Federal Parliament.

Limitation issues

What are the time limits for bringing civil claims?

No single statute of limitations governs the time limits for bringing civil claims. The time limit will depend on which statute the claim is brought under. For example, the time limits for bringing the following types of claim are as follows:

  • three months for marriage and divorce disputes (among others);
  • six months for labour, property, tort and defective product disputes;
  • one year for disputes regarding adoption, mortgages over immoveable property and the registration of deeds;
  • two years for disputes relating to the Company Act and contract law; and
  • three years for disputes relating to succession.

Time limits will apply from the occurrence or knowledge of a cause of action, depending on the nature of the case.

Some actions have a shorter time limit for example a challenge to a trademark, design or patent at the Department of Industries must be made within 35 days of the publication of the public bulletin of registered trademark, designs and patents.

Parties cannot suspend time limits through agreement. However, in certain instances, an agreement may serve to delay a cause of action.

The courts can allow a claim to be submitted after the expiry of the specified time limit in exceptional cases relating to the plaintiff (eg, the death of a family member, accidents, serious illnesses, natural calamities and illegal detention).

Pre-action behaviour

Are there any pre-action considerations the parties should take into account?

Typically, no pre-action requirements are necessary, except in relation to contractual claims, litigation against a government office and public interest litigation.

In such cases, the parties must fulfil any pre-dispute procedures set out in the agreement before bringing a contractual dispute. They must also notify the relevant government office before initiating a suit against said office.

Applicants filing public interest litigation must show that they have undertaken prior lobbying with the relevant authorities before filing a petition.

Starting proceedings

How are civil proceedings commenced? How and when are the parties to the proceedings notified of their commencement? Do the courts have the capacity to handle their caseload?

Civil proceedings commence with the plaintiff filing a complaint in the competent first-instance court. Complaints must be filed in the district court where:

  • the immovable property is situated, if the dispute relates to immovable property; or
  • the defendant resides in case of other disputes.

The defendants must be notified of the suit. Notice may be served by court officers, the plaintiff or the plaintiff’s attorney and must include a copy of the plaintiff’s complaint and evidence. 

The Nepalese courts have excessive caseloads – particularly at the Supreme Court. A recent report indicates that 20,298 out of 32,717 cases before the Supreme Court, 15,387 out of 53,236 cases before the high courts and 57,785 out of 188,077 cases before the district courts are pending. As such, cases are taking longer than the statutorily set timelines. Some cases before the Supreme Court have taken between eight and 10 years to conclude.

Timetable

What is the typical procedure and timetable for a civil claim?

There are two procedures followed in civil claims: general and summary procedures.

Summary procedures are expedited procedures applicable in cases relating to:

  •  trademark, copyright, design, patent, agent and agency disputes;
  • excise duty disputes;
  • labour disputes; and
  • corporate disputes (including those involving shareholders or directors).

Prior to accepting a complaint, court officers will inspect the legality of the complaint and whether the plaintiff has complied with the necessary specifications (eg, the prescribed format of documents and the submission of evidence) and paid court fees. The court will then accept the complaint and prepare notices to be served to the defendant; this takes a maximum of three days under both general and summary procedures.

Notice to the defendant comprises the time limit to file a defence and all of the documents and evidence submitted by the plaintiff. Notice is typically served within seven days under a general procedure and two days under a summary procedure.

The time limit to file a defence is 21 days from being notified under a general procedure and seven days under a summary procedure. These time limits can be extended by 15 days.

After a defence has been filed, a preliminary hearing will be conducted, during which the defendant can submit arguments regarding locus standi or the limitation or jurisdiction of the court.

Depending on the court’s caseload, preliminary hearings typically take one month from the submission of a defence. After the preliminary hearing, the court will examine the evidence – a procedure which can be held over multiple days, depending on the nature of the evidence and the witnesses being examined. Once the evidence has been examined, the final hearing will take place. It typically takes one year for cases before the district and high courts to reach the final hearing stage. In the Supreme Court, this timeline is approximately two years. Notably, the timeline to reach the final hearing stage may vary drastically depending on the severity of the case.

A judgment must be issued within:

  • one month of completion of the examination of evidence under a general procedure; and
  • three days of submission of any necessary documents or 90 days of filing a defence application, whichever is earlier, in a summary procedure.

However, in practice, these timelines are much longer.

The aggrieved party can appeal within 30 days of receipt of the judgment under both procedures. The court of appeal must issue a judgment within 90 days of the date on which the appeal was filed or all necessary documents were submitted.

Case management

Can the parties control the procedure and the timetable?

The parties cannot control the procedure or timetable. The procedure is set by the relevant statute and the court determines the timetable. The court sets its own reporting and hearing dates. Generally, reporting and hearing dates are set one month apart in the lower courts and approximately three to four months apart in the Supreme Court. However, recently filed cases may receive a longer timetable, whereas long pending cases may receive a shorter timetable.

Parties can request an extension of the court reporting date (22-day extension) or timetable (15-day extension) if circumstances beyond the parties’ control make this necessary. Each party can seek to adjourn the hearings twice. Adjournment requests must be made by filing an application before the bench.

Evidence – documents

Is there a duty to preserve documents and other evidence pending trial? Must parties share relevant documents (including those unhelpful to their case)?

There is no duty to preserve documents or other evidence pending trial. However, if a party does not or cannot submit a document pursuant to a court order, the court will assume that the document contained details which were unhelpful to the party.

Parties need not share relevant documents with other parties. All evidence is submitted when the complaint and defence are filed. The other party can request a copy of the evidence from the court.

The court can order offices, individuals and entities to submit documents and evidence which the court finds important or where either party has requested this. If a party does not comply with the order, the court will presume that the evidence is against the non-compliant party. 

Evidence – privilege

Are any documents privileged? Would advice from an in-house lawyer (whether local or foreign) also be privileged?

Legal advice given by an attorney to their client is privileged and inadmissible as evidence. Parties cannot be required to disclose privileged information in court. Further, any details disclosed by a party to an attorney after their appointment or while appointing said attorney is privileged. However, attorneys can disclosure any crime committed by a client after they have been appointed.

A party can waive their right to privilege at any time by providing written notice to their attorney. They can also disclose privileged information in court at any time. Attorneys cannot disclose privileged information, even after their tenure has ended.

Evidence – pretrial

Do parties exchange written evidence from witnesses and experts prior to trial?

Parties do not exchange written evidence from witnesses and experts prior to trial. Evidence – including a written record of witness depositions and expert opinions – are collected during trial. Parties can obtain a copy of witness depositions and expert opinions and other evidence submitted by another party from the record of the court by paying prescribed fees to the court.

Evidence – trial

How is evidence presented at trial? Do witnesses and experts give oral evidence?

Evidence is presented during trial, along with claims and defences. Witnesses and experts will give oral evidence in court and the court will record these statements in writing. Chief examinations and cross-examinations are allowed. Expert reports can also be presented as evidence. The expert who prepared the report must be present in court and confirm the facts in the report for the report to be valid.

Interim remedies

What interim remedies are available?

Interim remedies are available in two broad categories: interlocutory and interim orders. A party can request a remedy to bar another party from taking any action that might make the first party’s claim futile.

In relation to interim orders, the party requesting the order may be asked to provide security with the application. This party may also be asked to compensate the other party if it is later found that interim relief was unnecessary.

Interim remedies include:

  • freezing injunctions;
  • orders to prevent a property from being wasted or removed;
  • orders to prevent a party from taking any action or act in a way that harms the other or has other adverse effects; and
  • orders to prevent a party from continuing to act pursuant to a contract.

The party requesting the interim relief must establish that their claim will be futile if the order to cease any actions or prevent actions from occurring is not granted or if the current state of affairs is altered.

In addition, interim remedies will be issued on the establishment of a prima facie case and balance of convenience and that the party seeking such remedy will face irreparable loss if the relief is not granted.

The party against which interim relief is sought can appeal before the issuing court and a higher court (where necessary). Interim remedies become ineffective after a final judgment has been delivered.

Interim freezing orders are available to support foreign proceedings if the country where the proceeding is sub judice has a mutual legal assistance treaty with Nepal. If no treaty exists, said country’s diplomatic office in Nepal must assure the Nepalese government that it will provide similar assistance to Nepal in future. To obtain a freezing order, the foreign country’s diplomatic office in Nepal must apply to the Nepalese government through the central authority.

Remedies

What substantive remedies are available?

The substantive remedies available are as follows:

  • Enforcement of claim – on the successful establishment of a claim, the court will:
    • enforce the plaintiff’s claim;
    • execute the judgment;
    • order recovery of fines and court fees from the unsuccessful party; and
    • ensure that the defendant pays the claimed amount.
  • Specific performance – specific performance will be ordered if the breach of contract is such that damages cannot cure the harm caused by the breach.
  • Injunctive relief – a party can seek injunctive relief where another party has committed an act which will result in a breach of contract. The court can also order the defendant to pay damages for any harm caused to the plaintiff due to the defendant failing to comply or delaying compliance with an injunctive order.
  • Damages – liquidated and actual damages suffered by an applicant are provided in the event of a breach of contract. Consequential damages and other types of damage (eg, punitive damages) are unavailable.

Interest may be payable on a money judgment, provided that the claim mentions the recovery of the principal amount, along with interest.

Enforcement

What means of enforcement are available?

Judgments issued by all courts are enforced through the judgment execution department of the relevant district court.

Money judgmentsMoney judgments are typically enforced by voluntary payments by the parties.

If a party does not comply, the party enforcing the judgment can apply with the department to execute the judgment by auctioning the non-complying party’s assets or bank accounts. That said, the assets and bank accounts must be listed by the party seeking execution; the court will not order the non-compliant party to provide a list of its assets or bank accounts.

If the party still does not comply, the other party can request that the non-compliant party be arrested. In such cases, the court will offset 3% of the money judgment to enforce the prison sentence. Money judgments are converted at a rate of NRs400 per day of prison.

Other judgmentsFor all other judgments, a court official is assigned to give effect to the judgment. The court official has authority to take necessary actions to enforce the judgment and the parties must comply.

Public access

Are court hearings held in public? Are court documents available to the public?

Court hearings will be held in public, unless the bench decides to hold an in camera hearing following a request from the parties. Notably, parties can request an in camera hearing in cases relating to family matters (eg, the establishment of relations, marriage or divorce).

Court documents from cases before the high courts or district courts are available to the parties to the proceedings for inspection and copying. Further, the public can inspect court documents on approval from the court and payment of prescribed fees. Members of the public are prohibited from copying court documents and court officials will monitor the process.

Court documents from Supreme Court cases are available only to the parties to the proceedings for inspection and copying.

Costs

Does the court have power to order costs?

The courts can order a defendant to pay a plaintiff’s court fees when filing the compliant if the plaintiff’s claim can be established. District courts cannot order any other costs.

The high courts and Supreme Court cannot order costs in most cases. Exceptions to this rule apply in cases involving insolvency and contracts of indemnity and subrogation under the Muluki Civil Code 2017, among others.

The courts will assess any costs based on receipts, expert fees and the actual cost borne by the relevant party. However, costs are rarely ordered in practice.

Funding arrangements

Are ‘no win, no fee’ agreements, or other types of contingency or conditional fee arrangements between lawyers and their clients, available to parties? May parties bring proceedings using third-party funding? If so, may the third party take a share of any proceeds of the claim? May a party to litigation share its risk with a third party?

‘No win, no fee’ agreements and other types of contingency or conditional fee are unavailable. The code of conduct for legal practitioners restricts counsel from:

  • making fees dependant on the outcome of a case;
  • determining fees on a percentage or contractual basis; or
  • determining fees by way of a bidding system.

Parties can bring proceedings using third-party funding. Such arrangements are regulated by the law of contract. If a party chooses to share its risk with a third party, a conditional contract can be made between the two parties to give effect to such sharing.

Insurance

Is insurance available to cover all or part of a party’s legal costs?

No, insurance is not available to cover all or part of a party’s legal costs.

Class action

May litigants with similar claims bring a form of collective redress? In what circumstances is this permitted?

Collective redress against the same defendants concerning the same subject matter is allowed. Multiple parties can consolidate a claim relating to a single issue against a single defendant. The court will hear the dispute as a single case.

Appeal

On what grounds and in what circumstances can the parties appeal? Is there a right of further appeal?

A dissatisfied party can appeal a court judgment before a court of appeal. No specific grounds limit appeals.

Appeals are typically based on claims of equity, legislation or precedents. However, a party cannot appeal the outcome of a court-assisted settlement or mediation.

The high courts hear appeals of district court cases. Appeals must be made within 30 days of the date on which the party acquired a copy of the judgment. A party cannot appeal if this time limit expires, although an extension may be allowed where the delay is caused by forces outside the party’s control (eg, illness, accidents or natural calamities). Court fees must be paid to the court of appeal to initiate a suit.

Further appeal to the Supreme Court is allowed:

  • if the dispute is for NRs2.5 million or more and the district court's judgment is partially or completely overturned by the high court. In this case, the Supreme Court’s judgment can be further appealed in the Supreme Court if:
    • the party discovers evidence that could substantially affect the case only after the judgment has been issued; or
    • the decision was made contrary to the Supreme Court’s precedent or legal principle; or
  • if the district court judgment is upheld by the high court and:
    • the high court judgment has a serious legal or constitutional error or misinterpretation or fails to comply with Supreme Court precedent;
    • women, children, mentally unstable individuals or senior citizens aged 75 years or older were not properly represented during trial; or
    • the dispute relates to a loss of government property.

Further appeal of a Supreme Court's judgment is prohibited where:

  • the judgment has already been revised once;
  • the judgment has been issued by the extended full bench of the Supreme Court; or
  • the judgment has been issued by the constitutional bench.
Foreign judgments

What procedures exist for recognition and enforcement of foreign judgments?

Foreign judgments are recognisable and enforceable in Nepal. They will be recognised in the high courts and enforced in the district courts.

The high courts will recognise a foreign judgment if:

  • it has been issued by a competent court with jurisdiction to decide the matter;
  • it is enforceable in the issuing state; and
  • it is final in the issuing state.

Once a judgment has been recognised, the district courts will enforce the judgment unless:

  • it appears procedurally deceitful or fraudulent;
  • an earlier dispute concerning the same parties, facts and purposes was filed with the Nepalese courts and this case is either sub judice or in the process of being recognised or decided on by a Nepalese court;
  • sufficient opportunity for independent representation was not provided while rendering the judgment;
  • it was rendered without following the necessary procedures; or
  • the enforcement therein would be detrimental to Nepalese public order.
Foreign proceedings

Are there any procedures for obtaining oral or documentary evidence for use in civil proceedings in other jurisdictions?

Assistance in obtaining oral or documentary evidence will be provided where:

  • the country in which the dispute is sub judice has a mutual legal assistance treaty with Nepal; or
  • said country’s diplomatic office in Nepal assures the Nepalese government that it will provide similar assistance to Nepal in future, pursuant to the Mutual Legal Assistance Act 2014.

Any requests for assistance must be made to the Nepalese government through the Foreign Ministry. A request can be made to:

  • make evidence available;
  • search any place or goods;
  • seize goods; or
  • allow any person living or staying in Nepal to be called as a witness.

Once the central authority determines that all necessary details and evidence are present in the request, it will be enforced by the district courts. The district courts will send original documents and goods, as requested. Regarding a request to send a person as a witness, the relevant district court will coordinate with the requesting state to send and bring back the person. Regarding a request for search and seizure, the issue at the centre of the case must be criminalised in both Nepal and the requesting state.

Legal assistance can be denied if:

  • the dispute is for less than NRs100,000;
  • the provision of such assistance is detrimental to public order;
  • the offense for which the request has been made is of a political nature;
  • requested additional documents are not submitted;
  • the issue relates to the Military Act;
  • it appears that the foreign state is trying to conduct an investigation, judicial proceedings or punishment against a person on the grounds of caste, religion, sex, ethnic origin, nationality or political opinions;
  • the issue for which the assistance is requested cannot be investigated;
  • the information for such investigation can be obtained from any other source; or
  • the requesting state does not make an assurance that the evidence will not be used for any other proceedings.

Arbitration

UNCITRAL Model Law

Is the arbitration law based on the UNCITRAL Model Law?

The Nepalese Arbitration Law is reflective of the UNCITRAL Model Law, but it is not expressly based on it.

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.

Choice of arbitrator

If the arbitration agreement and any relevant rules are silent on the matter, how many arbitrators will be appointed and how will they be appointed? Are there restrictions on the right to challenge the appointment of an arbitrator?

If the arbitration agreement and relevant rules are silent, three arbitrators must be appointed. The parties must commence the arbitrator selection process within three months of the occurrence of the cause of the dispute. Each party must appoint one arbitrator and the two arbitrators will appoint a chair.

A party can challenge the appointment of an arbitrator before the high courts; the relevant high court’s decision is final.

If the parties fail to appoint the arbitrators, either party can request the relevant high court to appoint the arbitrators with the full names, nationalities, occupations and areas of expertise of the three potential arbitrators, along with a copy of the agreement. The courts will seek the unanimous agreement of the parties to the dispute. If the parties cannot agree, the court will appoint a single arbitrator. The appointment cannot be challenged.

Arbitrator options

What are the options when choosing an arbitrator or arbitrators?

Parties are free to choose arbitrators who meet the requirements prescribed by the Arbitration Act 1999 when choosing arbitrators for an ad hoc arbitration. An arbitrator will be disqualified from appointment if they:

  • have no capacity to enter into a contract;
  • have been punished for a crime involving moral turpitude;
  • are insolvent or bankrupt;
  • have any personal interest in the dispute; or
  • do not meet the qualifications specified in the agreement.

If the parties cannot agree on the appointment of arbitrators pursuant to the arbitration agreement, either party can apply to the relevant high court to make the appointment. The court will appoint arbitrators from its list of arbitrators.

The Nepal Council of Arbitration (NEPCA), a non-profit organisation, is the only institution that provides institutional arbitration services. Under the NEPCA Rules, the parties must appoint their arbitrators within 30 days of the commencement of proceedings. If the parties fail to agree on an arbitrator (in the case of a sole arbitrator) or to appoint their arbitrator (in the case of multiple arbitrators), either party can request the NEPCA to appoint the arbitrator. However, the majority of arbitrators listed in the NEPCA have no legal background, which is an odd practice. Similarly, there are few legal professionals in Nepal qualified or experienced in arbitration, leading to insufficient candidates to meet the needs of complex arbitration.

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.
Court intervention

On what grounds can the court intervene during an arbitration?

Pursuant to the Arbitration Act 1999, the high courts can intervene to:

  • appoint an arbitrator if the arbitration agreement is silent regarding appointment or the parties are unable to reach an agreement in this regard;
  • issue a final ruling on whether to remove an arbitrator if the parties disagree on said removal; or
  • issue a final ruling on an arbitrator’s jurisdiction and rights.

These procedures can be overridden by the parties by agreeing to a governing law other than Nepalese law or by expressly mentioning the procedures (or rules) of arbitration in the arbitration agreement. The district courts can assist arbitrators in collecting evidence, on the request of the arbitrator or a party to the proceedings.

Interim relief

Do arbitrators have powers to grant interim relief?

Yes, arbitrators have powers to grant interim relief. The aggrieved party can file an appeal before the relevant high court within 15 days of issuance of such relief to quash the interim relief. The high court’s decision will be final.

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.

Costs

Can a successful party recover its costs?

Nepalese law is silent regarding the recovery of costs. It is left to the arbitrator and the agreement.

Alternative dispute resolution

Types of ADR

What types of ADR process are commonly used? Is a particular ADR process popular?

Mediation is widely used in civil disputes. Parties can resort to mediation if the agreement between them allows disputes to be resolved this way. Disputes sub judice in the court can also be settled through mediation with court approval. If the parties agree to pursue mediation, the Mediation Act 2011 must be followed.

Registrars in the district courts will encourage parties to undertake mediation on their first court reporting date. If the parties agree, they will be allotted a 30-day period to mediate and sent to a mediator listed in the court’s record. The district court’s registrar can also order a dispute to be settled by mediation if one party so requests and the other party agrees.

Registrars in the high courts can also allot parties a 30-day period to settle their dispute through meditation on their first court reporting date. If the parties fail to settle, they will be given a hearing date. Even after the parties are given a hearing date, the high court or district court judge may order the parties to settle their dispute through mediation if both parties agree to mediate and the judge finds that mediation is appropriate. If the parties fail to settle through mediation, the court will either order mediation again (if the parties agree and court finds it appropriate) or will resume hearing the dispute through a regular court procedure.  

The Supreme Court registrar can order parties to settle their dispute through mediation if both parties agree to mediate in their application. A Supreme Court judge can order parties to settle their dispute through mediation at any time if the judge finds it appropriate, even if the parties do not agree to mediation. If the parties fail to mediate, a hearing date will be set for the case and the court will resume hearing the case through a regular court procedure.

Requirements for ADR

Is there a requirement for the parties to litigation or arbitration to consider ADR before or during proceedings? Can the court or tribunal compel the parties to participate in an ADR process?

Parties are compelled to consider ADR where there is a statutory requirement to consider ADR.

The statutory requirement to consider ADR is set out in the Banking and Financial Institutions Act 2017 and the Foreign Investment and Technology Transfer Act 2019. Under the Banking and Financial Institutions Act, any disputes between banks and financial institutions must be settled through mutual understanding among the parties. If the parties cannot settle their dispute through mutual understanding, Nepal Rastra Bank (the central bank of Nepal and the regulator of banks and financial institutions) will mediate the dispute by means of ADR.

Similarly, under the Foreign Investment and Technology Transfer Act, any dispute between a foreign investor and its Nepalese partner must be attempted to be settled amicably under the facilitation of the Department of Industries before the dispute settlement mechanism under agreement can be exercised. The dispute settlement mechanism set out in the agreement between the parties can be carried out only if the parties fail to settle their dispute by facilitation. If the agreement between the parties is silent as to the mechanism of dispute settlement, the dispute must be settled by arbitration.

Miscellaneous

Interesting features

Are there any particularly interesting features of the dispute resolution system not addressed in any of the previous questions?

Local administration (eg, the mayor’s office) can hear a number of cases, such as irrigation canal disputes and defamation and trespassing disputes. Further, local administration can order mediation in cases relating to defamation and trespassing. The parties can appeal the decisions from local administration before the district courts.

Update and trends

Recent developments

Are there any proposals for dispute resolution reform? When will any reforms take effect? (Please also mention any ground-breaking recent cases, etc.)

In 2017 Nepal promulgated the Civil Code, the Civil Procedures Code, the Criminal Code and the Criminal Procedures Code. The codes fundamentally reformed Nepal’s legislative framework, which previously had no separate procedural, civil and criminal codes. The reform also introduced torts law and requirements regarding providing security to request interim relief and similar legal relief.