NEPAL Trends and Developments Contributed by: Purna Man Shakya, Prakrit Shrestha and Dechen Gurung, Reliance Law Firm
Reliance Law Firm House No 46, Ward No 20 Natole, Jawalakhel Lalitpur Nepal Tel: +977 980 101 8424 Email: prakrit@reliancecs.co Web: www.reliancecs.co
Nepal’s international arbitration practice has entered a period of unusually rapid legislative change. For a quarter of a century, the Arbitration Act, 2055 (1999) provided a stable, if increasingly dated, framework built around principles borrowed from the UNCI - TRAL Model Law on International Commercial Arbi - tration (1985) without formally adopting it. In the last 18 months, however, the government of Nepal has amended the Act for the first time in a generation; hydropower and infrastructure financing have contin - ued to push cross-border disputes towards arbitration rather than the courts, and practitioners have begun openly debating whether Nepal’s arbitrator-conduct and interim-relief rules meet the expectations of the foreign investors the country is trying to attract. This chapter surveys the most significant of these devel - opments and considers what they mean for parties contracting with Nepali counterparties or investing in Nepal-seated projects. A Reform Two Decades in the Making: The 2081 (2025) Amendment The centrepiece of the recent changes is the Act to Amend Some Nepal Acts Relating to Improving Economic and Business Environment and Enhanc - ing Investment, 2081 (2025), which came into force on 18 Chaitra 2081 (31 March 2025), together with a further amending act in force from 14 Shrawan 2082 (30 July 2025). Although the amendment touches on several commercial statutes, its treatment of the Arbi - tration Act, 2055 (1999) is the most consequential for the arbitration community. Three changes stand out. • First, a new Section 13A introduces fast-track arbi - tration for the first time, requiring the District Court
to enforce a fast-track award within 15 days of an enforcement application. • Second, the grounds on which the High Court may set aside an award under Section 30 have been narrowed: “public interest” has been removed as an independent ground, leaving “public policy” as the sole residual ground alongside the enumerated procedural grounds. • Third, and most significant for practitioners used to protracted set-aside litigation, the new Sec - tion 30 (4) expressly prohibits the High Court from re-evaluating the evidence or reviewing the merits of the tribunal’s decision when hearing a set-aside application, and enforcement is no longer auto - matically suspended merely because a set-aside petition has been filed. A stay is now available only where the High Court is satisfied that there is prima facie evidence of corruption or fraud in the making of the award or agreement. That legislative intent echoes, and to some extent formalises, a position that the Supreme Court had already been moving towards. In Krishna Chan- dra Jha v Dinesh Bhakta Shrestha (NKP 2009, DN 8128), the Court had already described the review - ing court’s jurisdiction over an arbitral award as cor - rectional rather than original. In the Hanil case (NKP 2017, DN 10138), the Court had already confined the public-policy exception to serious procedural unfair - ness rather than substantive disagreement with the tribunal’s reasoning. More recently, the Kanchanjunga Tamang JV case (NKP 2024, DN 11322) held that a reviewing court may not examine an award as though hearing an appeal on the merits and may intervene only where a serious error of law is apparent on the
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