Arbitration law in Nepal: All you need to know about it


Arbitration is steadily gaining popularity as a way of resolving disputes between parties. The Arbitration Act of 1999 passed in Nepal with the aim of updating the laws relating to arbitration, as stated in the act’s preamble. Arbitration is a form of alternative dispute resolution, which is a legal technique for resolving disputes outside of in which the disputing parties refer the matter to an arbitrator, who is an impartial or neutral third party.

All you need to know about arbitration in Nepal is right here.

Appointment of arbitrators

The number of arbitrators is decided by an arrangement, according to Section 5 of the Arbitration Act. It should normally be three in number if it is not included in the agreement. If an arrangement specifies an even number of arbitrators, one additional member would be included.

Furthermore, according to Section 6 of the Arbitration Act, the procedure of appointing arbitrators shall begin within three months of the occurrence of the cause for the resolution of disputes. The arbitrator is selected in compliance with the agreement’s provisions. If no appointment provisions are included in the contract, each party will nominate one arbitrator, and the arbitrators will appoint a third arbitrator to serve as the chief arbitrator.

Disqualifications of arbitrators

The list of conditions for disqualification from being named as arbitrators is set out in Section 10 of the Arbitration Act.

  1. Those who have no capacity to enter into a contract
  2. Those who have been punished by a for criminal charges involving a moral turpitude
  3. Those who have become insolvent or who have been declared bankrupt
  4. Those who have any personal interest in the dispute that is to be settled through arbitration
  5. Those who do not possess the specific qualifications as mentioned in the arbitration agreement
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Removal of arbitrators

The parties may dismiss the arbitrators if the terms of the agreement are not followed, according to Section 11 of the Arbitration Act 2055. If the conditions are not specified in the agreement, the arbitrators may be relieved of their duties if the following conditions are met:

  1. In case any arbitrator is clearly seen as biased or discriminating against any party instead of working in an impartial manner
  2. Where the arbitrator engages in improper actions or commits fraud in the course of the arbitration
  3. Frequently commits mistakes or irregularities in the course of the arbitration
  4. If the arbitrator does not attend meetings for more than three months, without furnishing satisfactory reasons, in order to delay the proceedings in an improper manner.
  5. Takes any action which is opposed to the principles or rules of natural justice
  6. The arbitrator is found to be lacking the necessary qualifications or to have ceased to be qualified

Places for arbitration

Arbitration must place where an agreement specifies it, according to Section 12. If the location is not specified in the agreement, it will be done at:

  1. A place determined by the disputing parties
  2. If the parties fail to agree, the place shall be specified by the arbitrators in the light of all the cirplusstances. However, the arbitrator may record the statements of witnesses, obtain opinions of experts and inspect any doplusent, object or place at any other place.

Procedure of arbitration

The measures involved in resolving a conflict by arbitration are as follows:

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Step 1: Submission of claims

The plaintiff should submit its claim before the arbitrator in writing along with all evidence.

Step 2: Counterclaims

If the agreement specifies a time limit, the opposing party must apply its objection within the time frame specified in the agreement. Counterclaims must be filed within 30 days of the date of receipt of the claim if no time limit has been specified.

Step 3: Rejoinders

The rejoinders should be submitted within 15 days from the date of submission of the counterclaim. A copy of the rejoinder should also be provided to the opponent party.

Step 4: Extension of submission time

If a party fails to send its counterclaim or rejoinder within the time limit due to cirplusstances beyond its control, the party can apply to the arbitrator for a time extension within 15 days of the time limit expiring. If the justification for the extension appears to be valid, the arbitrator can grant the requested extension.

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