The Latest Amendment to the Arbitration Act, 2055 (1999)

The Government of Nepal has introduced a significant amendment to the Arbitration Act, 2055 (1999) aimed at enhancing efficiency and aligning the arbitration framework with international standards. These changes were brought into effect on 18 Chaitra 2081 (31 March 2025) through the Act to Amend Some Nepal Acts Relating to Improving Economic and Business Environment and Enhancing Investment, 2081 (2025).

The key highlights of the amendment are provided below:

1. Introduction to Fast-track Arbitration

Previously, the Arbitration Act 2055 (1999) did not recognize or provide for the mechanism of fast-track arbitration.

Now, the amendment has introduced a new provision under Section 13A of the Arbitration Act 2055 (1999), which allows the parties to settle disputes through fast-track arbitration services as prescribed by contract or agreement between them.

• Grounds to invalidate an arbitral award

Previously, as per Section 30(3) (b) of the Arbitration Act 2055 (1999), arbitral awards could be invalidated on a few grounds, including:

• where the dispute decided by the arbitral tribunal was not capable of settlement by arbitration under the laws of Nepal; and
• where the decision of the arbitrator was likely to prove detrimental to public interests or policies.

Now, the amendment has revised Section 30(3) (b), removing “detrimental to public interests” as a ground for invalidating arbitral awards.

In addition, the newly inserted Section 30(4) provides that, while adjudicating applications to invalidate an arbitral award, the High Court shall not re-examine the merits of the case by re-evaluating the evidence. Furthermore, in case a party submits a separate application requesting to halt the enforcement proceeding, the High court may grant such a stay order only in the following circumstances:

1. There is prima facie evidence of fraud or corruption, or
2. There is substantive evidence that the applicant will suffer from irreparable harm if enforcement proceeds. 

• Enforcement of an arbitral award

For the enforcement of an arbitral award, the concerned parties are under an obligation to implement the award of the arbitrator within 45 days from the date when they receive a copy of the award pursuant to Section 31 of the Arbitration Act 2055 (1999).

In this regard, previously, where an arbitral award was not implemented within the aforementioned time limit, the concerned party could file a petition before the District Court within 30 days of the expiry of such time limit. Upon such petition, the District Court was required to implement the award, ordinarily within 30 days, as if it were its own judgment pursuant to Section 32 of the Arbitration Act 2055 (1999).

Now, with the amendment to Section 32, in case of an award through fast-track arbitration, the District Court is required to enforce the award within 15 days.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice, advertisement, personal communication, solicitation or inducement. No attorney-client relationship is created through this content. Gandhi & Associates assumes no liability for any consequences resulting from actions taken based on information contained herein.

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