NEPAL Law and Practice Contributed by: Purna Man Shakya, Prakrit Shrestha and Dechen Gurung, Reliance Law Firm
• traditional civil and criminal disputes (held by the Supreme Court in the Oriental Insurance case); • questions of personal status, guardianship and capacity; and • matters engaging the state’s sovereign or regula - tory functions. Labour disputes are partly restricted. Collective dis - putes may be arbitrated under Sections 119–122 of the Labour Act, 2074 (2017), but individual statutory employment rights treated as matters of public policy are generally reserved to the labour courts and cannot be contracted out of by an arbitration clause. Nepali courts generally treat commercial, contractual and investment disputes including construction, sup - ply, joint-venture, loan and licensing disputes as freely arbitrable. Disputes inseparable from a non-arbitrable public-interest issue, however, fall under the exception in Section 4 (2)(a) of the Act, under which a court will decline to cancel the record of its own proceedings. 3.3 National Courts’ Approach Nepali courts apply Nepali conflict-of-laws principles to determine the law governing the arbitration agree - ment. Section 30 (2)(a) directs the High Court, on a set-aside application, to examine capacity and validity first under the law the parties expressly or impliedly chose to govern the arbitration agreement, and only under Nepali law where that choice is unclear. In Hanil Engeeneering (see 3.1 Enforceability ), the Supreme Court confirmed that the governing law of the arbitration agreement must be determined inde - pendently, rather than assumed to follow the law cho - sen for the main contract. Where no distinct choice has been made for the arbi - tration clause itself, Section 18 (1) fills the gap, so Nepali law typically governs the arbitration agreement as the residual outcome of this analysis rather than by default assumption. On the enforcement of arbitration agreements, the courts’ approach is robust. Section 39 ousts the ordi - nary courts’ jurisdiction over any matter regulated by the Act, and Section 4 permits, and in most cir - cumstances requires, a court before which a dispute
covered by an arbitration agreement has been filed to cancel the record of the suit at the parties’ joint request. A court will refuse to do so only where: • the claim is inseparable from a non-arbitrable issue; or • there is another appropriate reason (Section 4 (2)). This reflects a longstanding judicial policy. Even before the current Arbitration Act existed, the Supreme Court, in Anang Man Sherchan (NKP 1963, DN 220), directed parties who had agreed to arbitrate to pursue that remedy rather than litigate. 3.4 Validity Nepal fully recognises the doctrine of separability. Section 16 (3) of the Arbitration Act expressly provides that where an arbitration clause forms an integral part of a wider contract, it is to be treated as a separate agreement, so that even a tribunal decision that the underlying contract is null and void does not, by itself, invalidate the arbitration clause. This allows a tribunal whose jurisdiction is challenged on the ground that the main contract is void to nonetheless proceed to determine that very question. Section 16 (1), the com - petence-competence principle, vests the tribunal with power to rule on its own jurisdiction and on the validity of the contract from which the dispute arises before addressing the merits. Judicial precedent reinforces this statutory position. In Hanil Engeeneering , the Supreme Court affirmed that a dispute resolution clause is a distinct agreement, independent of the main contract, with two practical consequences: • status independence – the legal status or validity of the main contract does not affect the arbitration agreement’s own validity; and • autonomous governing law – the law governing the arbitration agreement, and its procedure, may differ from the law governing the main contract.
631 CHAMBERS.COM
Powered by FlippingBook