Arbitration Act

• Black’s law dictionary defines arbitration as: “A

process of dispute resolution in which a neutral
third party (arbitrator) renders a decision after
hearing at which both parties have an
opportunity to be heard. Where arbitration is
voluntary, the disputing parties select the
arbitrator who has the power to render a binding
decision”
• Harold Crowter defines arbitration as a private
procedure. Arbitration is a process where, by
agreement, parties to a contract submit their
differences or dispute to the consideration and
decision of one or more independent persons
 Characteristics
• Flexibility and cost effective: Arbitration is a very
flexible process by which the commercial disputes are
settled. Due to this it has become cheaper and quicker
than going to the formal justice system through the
litigation.
• Party Autonomy: One of the fundamental principles
that form the basis and run through most aspect of
modern arbitration is party autonomy. Parties are free
to decide on the place of arbitration, the language of
the proceeding, the procedure to be followed and the
applicable law
 Confidentiality/ Non disclosure of
privacy:
• The other advantage of arbitration is confidentiality or
non disclosure of privacy. Various business or
commercial secrecies are to be maintained and it is
possible through the arbitration. In arbitration parties
can obtain large measure of privacy and confidentiality.
Confidentiality in arbitration proceedings includes the
obligation not to disclose documents, statements,
pleadings and other matters arising in connection with
proceeding generally. Often being a private proceeding,
arbitration allows businesses to resolve without
creating a public record. It is more attractive as in this
process the parties are not forced to reveal their trade
secrets where as this happens in the litigation.
 Parties’ choice of the place of
arbitration:

• In the arbitration, parties are free to choose

the place of arbitration. If the parties are
failed to choose, the place of the arbitration
shall be fixed by the court unless agreed upon
by the parties
 Binding nature of arbitral award:
• Arbitration is the creation of agreement between
the disputant parties. Once a party has entered
into an agreement he cannot unilaterally opt out
of that agreement and it may be enforced against
him. ICC Rules of Arbitration states, ‘Every award
shall be binding on the parties. By submitting the
dispute to arbitration under these rules, the
parties undertake to carry out any award without
delay and shall be deemed to have waived their
right to any form or recourse in so far as waiver
can validly be made.
 Less time consuming:
• The parties may agree to shorten the various
time limits. Principal objective of arbitration is
to resolve dispute without unnecessary delay.
 Advantages
• Prompt settlement.
• Simple procedure
• Less expensive
• Privacy and close hearing
• Simplicity
• Binding force of the award
• Service of experts available
 Essentials
• Arbitration agreement
• Lawful agreement
• Present and future dispute
• Not necessary to mention the name of
arbitrator.
• Binding
 Arbitration Act 2055
• A reference by agreement of the parties must
originate in an arbitration agreement. Such an
agreement may be made verbally or in
writing.
• Section 2(a), ‘ Arbitration agreement is
defined as a written agreement to submit
present or future differences relating to any
lawful issues with or without agreement to
arbitration.
 Procedures [Section 3]
• If agreement provides about settlement by
arbitration, arbitration shall be adopted.
• If procedure mentioned, shall be adopted
same procedure.
• If not mentioned as per arbitration law of
Nepal
Appointment of Arbitrator [Section 5]
• By the parties.
• If number mentioned in the agreement, the
number mentioned to be appointed.
• Both parties shall appoint one arbitrator and
appointed arbitrator shall appoint the third one.
• In absence, normally 3 arbitrator.
• In odd number
• To be appointed within three months.
Appointment by the Court [Section 7]
• Any party may apply to the Appellate Court
for the appointment of arbitrators.
• After application, the Appellate court appoints
arbitrator proposed by the parties to the
dispute and getting approval for them.
• If not appointed, then the Court itself shall
appoint any person it thinks fir for the
purpose within sixty days from the application
filed.
 Award
• Judgment to the dispute
• Essential:
• Writing
• Signed
• Certain
• As per agreement
• Final
• Reasonable, legal and possible
• Settlement of differences
 Award Rules
• Time : 120 days after submission.
• Decision: majority,
• Signature, may not sign by giving reason.

• Award to inform:
• Must read infornt of parties.
• Notice must be given if absent.
• Award cannot be altered.
• Award to be invalidated if filed to appellate Court
within 45 days from hearing and if Appellate Court
found reasonable.
 Enforcement and Foreign award
• Parties shall enforce within 45 days
• To file within 30 days if not fulfilled by the
parties.
 Foreign award
• If foreign award, application to be made to appeal
court.
• If nepal is party to treaty to accept and enforce foreign
award, then foreign award is valid to enforce.
• If:
• Appointment is made as per contract.
• If informed timely about proceeding.
• If award is within scope and conditions of contract.
• If cannot be enforced in Nepal.
• If submitted within 90 days.
• If court is satisfied.
 When not enforced:
• If the subject matter for which such foreign
award given under arbitration is of the nature
which cannot be settled through arbitration in
Nepal as per Nepalese law.
• If foreign award is against public policy and
decency