Nepal As Seat Of Commercial Arbitration

Nepal has, for some time now, been highlighted as the potential seat of internal commercial arbitration in South Asia, if not in the world. Speaking at an international conference organised by Nepal International ADR Centre (NIAC) at Godavari, Kathmandu, not very long back, Prime Minister KP Sharma Oli had talked of the natural and cultural gorgeousness of Nepal as the prerequisite to qualify this country as a seat of resolution of international commercial disputes, especially negotiation, mediation, and arbitration. He had also committed to make necessary amendments to the laws to adapt them to the needs of expedited arbitration in the country.   

The conference was participated in by dispute resolution practitioners representing key institutions from around seventeen countries, including Switzerland and Japan. The view pronounced by the prime minister was echoed by participants, particularly by dispute resolution scholar and expert Dr. Rajesh Sharma from Australia who had made a brilliant presentation on the green arbitration protocols. The protocols emphasise on behavioural practices of arbitral practitioners to lend impact in substantially reducing carbon emissions - a key measure in reversing the disastrous consequences of climate change.  

Green arbitration protocols 

The green arbitration protocols primarily focus on such areas as to encourage the arbitration practitioners to adopt and promote clean forms of energy, reduce or eliminate long–haul travel and minimise waste, for example, by eliminating the use, among others, of hard paper copy filings and so on. The Godavari conference had also issued a communiqué urging the government of Nepal to take leadership to work on green arbitration, among others, considering the climate change risks faced by Nepal and other countries in the Hindu-Kush region. 

Barrister and arbitrator Sheraz Mian Javaid, who heads the Pakistan branch of the Chartered Institute of Arbitrators (CIArb) has been frequenting Nepal of late to support the capacity building of dispute resolution practitioners, especially arbitrators in Nepal. He actively participated in the conference and articulated his views on the subject. At a discussion programme held recently, Javaid appreciated and pleaded in favour of making Nepal an important and viable seat of international commercial arbitration because of its inherent features like location, the image of neutrality, and so on. Needless to say, London-based CIArb is committed to promoting arbitration for effective dispute resolution, bringing benefits to society and economies across the world. It also supports its members at every step of their dispute resolution career journey. 

When we talk about the seat of international commercial arbitration, the choice and preference of corporate entities have shifted to Asian countries during contemporary times. London, New York, Paris, and many other centres in Western countries have been overtaken by Asian cities like Singapore, Hong Kong, and so on. Singapore has been at the top as the preferred seat of commercial arbitration where corporate disputes from across the globe are taken for arbitral award. Singapore International Arbitration Centre (SIAC) has been chosen by the disputing parties as this institution meets most of the requirements for the same.  

It is a global arbitral institution providing case management services to parties from all over the world. Its arbitration awards have been enforced in many jurisdictions, including Australia, China, Hong Kong SAR, India, Indonesia, Jordan, Thailand, the UK, the USA and Vietnam, amongst other New York Convention signatories. It has unveiled the 7th edition of its Arbitration Rules, updated after extensive consultation with a diverse group of stakeholders, including arbitration practitioners, businesses, in-house counsel, government representatives, and academics.    

Several factors contribute to making the seat of arbitration popular and preferred. In a survey conducted by a Singapore-based agency recently, an overwhelming majority of users (respondents) considered the enforceability of the arbitral award, as well as the domestic law governing international arbitration, as ‘important’ factors. These two factors have consistently been the top two considerations for users for many years. This reinforces the importance of the seat of arbitration, which determines the domestic legal framework applicable to an arbitration process, as well as procedures for the annulment of arbitral awards.

The other significant considerations, according to the survey, were the political stability of the jurisdiction and the quality of local court proceedings. Turning to the issue of how satisfied respondents were with their chosen seats of arbitration, the survey data shows that a big majority of respondents were ‘somewhat satisfied’ or ‘very satisfied’ with the enforceability of their arbitral awards, and a fair majority were ‘somewhat satisfied’ or ‘very satisfied’ with the domestic law governing international arbitration. 

Choosing an arbitral institution

This suggests that respondents as a whole are quite satisfied with the factors that they deem most important when choosing their seats of arbitration with domestic laws at the seat appearing to be working well. Respondents in the survey were asked to identify their top three most commonly used international commercial arbitration seats. Singapore, London, and Hong Kong were chosen most frequently. When choosing an arbitral institution, the top considerations were efficiency, quality of services in administering arbitral proceedings, and institutional rules such as emergency and expedited arbitration rules. 

Other significant considerations were cost, award scrutiny, size and expertise of the panel of arbitrators, the availability of information about the panel of arbitrators, and so on. Against this backdrop, it can be stated that Nepal needs to go a long way to develop itself as a chosen seat of international commercial arbitration and mediation. Nepal’s poor institutional and legal infrastructure should be updated and radically transformed to respond to and meet the requirements of international commercial arbitration. It calls for sincerity, and government determination to work in the direction.

  (The author is presently associated with Policy Research Institute (PRI) as a senior research fellow.  rijalmukti@gmail.com)