Arbitration in Nepal: Resolving Disputes Outside Court

Arbitration is a private alternative to court litigation: the parties appoint a neutral arbitrator whose decision, the award, is binding and enforceable. In Nepal it is governed by the Arbitration Act 2055, and it is the default route for most commercial and construction contracts.

It starts with the contract

Arbitration is consensual, which means it usually starts long before any dispute, in the arbitration clause of the contract. A well-drafted clause names the rules, the seat, the number of arbitrators, and the language. A vague clause produces fights about how to fight, before anyone reaches the actual disagreement.

How proceedings run

Once a dispute arises, the claimant gives notice and the tribunal is constituted. Proceedings are more flexible and private than court, with the parties exchanging statements and evidence before a hearing. The arbitrator then issues a written award, which carries the force of a court judgment.

Enforcement

A domestic award is enforced through the court if a party does not comply voluntarily. Nepal is also party to the New York Convention, so foreign awards can be recognised and enforced here, an important comfort for international contracts.