NEPAL Trends and Developments Contributed by: Purna Man Shakya, Prakrit Shrestha and Dechen Gurung, Reliance Law Firm
Arbitrator Conduct: The Case for the International Bar Association (IBA) Traffic Light System A related but distinct debate concerns the standard applied to arbitrator independence and impartiality. Section 9 (2) of the Arbitration Act requires an arbitra - tor to disclose, before taking office, any matter rea - sonably giving rise to doubt about their impartiality or independence, but the operative threshold for removal under Section 11 (2)(a) is that the arbitrator must be “clearly seen” to have shown bias or discriminated against a party. In Constructora Sanjose SA v NEPCA and Others (Case No 076-FJ-0037, 2020), the High Court, Patan read this ground narrowly, holding that a collective, institutional decision of the tribunal does not itself amount to bias, and that a removal claim must instead be directed at a specific arbitrator with clear, individualised grounds reinforcing just how tar - geted a removal claim must be to succeed under the statutory standard. Nepali commentators have pointed out that the “clearly seen” threshold sits well below the “justifi - able doubts” standard that has become the inter - national norm, and considerably below the granular, colour-coded framework of the IBA Guidelines on Conflicts of Interest in International Arbitration, most recently updated in 2024.The practical consequence is a degree of unpredictability for foreign parties and counsel unfamiliar with the “clearly seen” standard, particularly where an arbitrator’s prior relationships with a party, its counsel or a co-arbitrator would read - ily fall on the IBA’s Orange or Red List but might not, without more, meet Nepal’s statutory bar for removal. There is a growing and, in the firm’s view, well-found - ed call for NEPCA and the courts to adopt the IBA Guidelines, including the traffic-light system, as a sup - plementary interpretive aid, even without formal legis - lative amendment. Doing so would cost the legislature nothing and would materially improve the confidence of foreign parties selecting Nepal as a seat. Cross-Border Enforcement: The Reciprocity Reservation in Practice Nepal acceded to the 1958 New York Convention in 1998, subject to the reciprocity and commercial res - ervations permitted under Article I(3) of the Conven - tion. The reciprocity reservation means that Nepal will
engaged, now operates under the same accelerated and pro-enforcement framework introduced by the 2025 amendment. Persisting Gaps: Interim Relief, Emergency Arbitrators and the Model Law Question Notwithstanding the 2025 reforms, several structural gaps between the Arbitration Act and contemporary international practice remain unaddressed. Section 21 (1)(g) empowers a tribunal to issue interim or interlocutory orders, and Section 21 (1)(d) allows it to require security, including a bank guarantee, from a foreign party. However, the Act does not expressly address court-ordered interim relief in support of a Nepal-seated arbitration independent of the tribunal’s own powers, the District Court’s role under Section 23 is confined to assisting the tribunal with the taking of evidence, not granting free-standing protective relief, and the Act is silent altogether on interim relief in aid of arbitrations seated outside Nepal. The concept of the emergency arbitrator, now a standard feature of most major institutional rules and reflected in the 2006 amendments to the UNCITRAL Model Law, has no equivalent under Nepali statute. These gaps matter in practice: a party seeking urgent protective measures, an injunction to preserve assets, a freezing order or interim relief pending the consti - tution of a tribunal cannot currently look to a Nepali court for a made-to-measure interim remedy in the way that parties in Model Law jurisdictions routinely can. Practitioners have accordingly begun to call for a further round of amendment that would ensure a more thoroughgoing alignment with the Model Law, including an express domestic/international distinc - tion (which the current Act, applying uniformly to both categories of dispute, does not draw), codified tribu - nal- and court-ordered interim measures, and a statu - tory basis for emergency arbitrator procedures that the Nepal Council of Arbitration (NEPCA), as Nepal’s only institutional provider, could then adopt into its own rules.
647 CHAMBERS.COM
Powered by FlippingBook