NEPAL Trends and Developments Contributed by: Purna Man Shakya, Prakrit Shrestha and Dechen Gurung, Reliance Law Firm
enforce a foreign award only where the award was made in the territory of another contracting state and, in practice, where the applicant can demonstrate that the country of the seat itself treats Nepal as a recipro - cating jurisdiction under its own domestic implement - ing legislation. This requirement is not merely theoretical. In In Sanghi Brothers ( Indore ) Pvt Ltd v High Court , Patan (NKP 2022, DN 10904), the Supreme Court declined to enforce an Indian arbitral award because the peti - tioner failed to demonstrate that Nepal had been notified in India’s official gazette as a reciprocating territory, a formal step required under Indian enforce - ment legislation quite apart from anything Nepali law itself demands. The case is a useful cautionary tale for parties structuring cross-border contracts with a Nepali counterparty: the choice of seat should not be made on the assumption that New York Convention membership alone guarantees smooth enforcement in Nepal, and counsel advising on enforcement strategy should verify, at the contract-drafting stage, whether the intended seat’s own domestic law recognises Nepal as reciprocating, and vice versa. Beyond the reciprocity point, the substantive standard the Nepali courts apply to enforcement is genuinely favourable to award creditors. The Hanil case con - fined the public-policy exception, for both foreign and domestic awards, to cases involving a denial of a fair opportunity to be heard or serious procedural irregu - larity, rather than any dissatisfaction with the tribunal’s substantive findings. This approach is echoed in Ama- deus IT Group SA v Himalayan Airlines Pvt Ltd (Case No 081-FJ-0032, High Court Patan, March 2025), where the High Court recognised an ICC award seat - ed in Singapore on straightforward proof of the New York Convention conditions, and in NEA v Swanta Electrical (High Court, Case No 071-DP-1341), which confirmed that a bare invocation of the public-policy ground, without an objective evidentiary basis, will fail. The 2025 amendment’s removal of the broader “public interest” ground for domestic awards reinforces the same pro-enforcement posture across the board. Institutional Development and the Road Ahead NEPCA, established in 2048 (1991), remains, more than three decades on, the only dedicated arbi -
tral institution in Nepal, and no new institution has emerged to challenge or supplement that role in the past year. Institutional development has instead taken the form of incremental modernisation of NEPCA’s own rules, alongside broader professional discussion about whether NEPCA’s procedures, panel composi - tion and case-management practices need to evolve to match the ambitions of the 2025 legislative reform. For foreign investors, financiers and counsel consider - ing Nepal as a seat, the direction of travel is encourag - ing. The 2025 amendment has: • narrowed the grounds for challenging awards; • restricted the courts to a genuinely correctional role; • curtailed automatic stays of enforcement; and • introduced a fast-track option for straightforward disputes. What remains is a shorter, but still meaningful, reform agenda: codifying interim and emergency relief along Model Law lines, formally embracing international norms on arbitrator conduct and continuing to build NEPCA’s institutional capacity so that Nepal’s statu - tory improvements are matched by practice on the ground. Parties transacting in Nepal today are operating under a materially more enforcement-friendly regime than existed even two years ago, and the trajectory of reform gives good reason to expect that trend to continue. Arbitrator Independence Under Strain: When the Tribunal Becomes a Litigant In most Model Law jurisdictions, a set-aside or vaca - tur application is understood as a contest between the parties to the arbitration, not a claim against the tribunal itself. Under the UNCITRAL Model Law, Arti - cle 34 gives the court a narrow remedy: to set aside the award on limited grounds or, at a party’s request, to suspend the proceedings so the tribunal can resume and cure a defect. The tribunal is not cast as a respondent required to defend its own reason - ing; the mainstream position is that a challenge runs against the opposing party, with the arbitrator drawn
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