Table of Contents
Alternative Dispute Resolution (ADR) in Nepal refers to methods of resolving legal disputes outside traditional court litigation, including mediation, arbitration, conciliation, and negotiation. ADR has become a transformative tool in Nepal's legal system, offering flexible, cost-effective, and efficient approaches to conflict resolution while easing the burden on judicial systems and preserving relationships between parties.
What is Alternative Dispute Resolution?
Alternative Dispute Resolution (ADR) is a system for resolving disputes outside of court with the assistance of a neutral third party through processes different from formal judicial proceedings. While courts remain the primary dispute resolution mechanism organized by the state, ADR provides informal yet effective alternatives that deliver justice in a timely and economical manner.
ADR mechanisms are classified into four main categories:
- Adjudicative: Arbitration where a third party makes binding decisions
- Evaluative: Professional and expert evaluation of disputes
- Meditative: Mediation, reconciliation, and consensus building
- Hybrid/Combined: Med-Arb, mini-trial, negotiation-mediation combinations
Historical Evolution of ADR in Nepal
ADR is not a new phenomenon in Nepal. Long before formal legal structures, traditional community-based systems served as the foundation for conflict resolution at the grassroots level. The practice of mediation and arbitration in Nepal has a long history that continues in advanced forms today.
Traditional Dispute Resolution Systems
| Historical Period | System | Function |
|---|---|---|
| Kirant Period | Pantumyang | Community dispute resolution |
| Lichhavi Period | Panchali (Panch-sabha) | Empowered to decide disputes at local level |
| Malla Period | Panchasamuchchaya | Local dispute settlement councils |
| Shah Period | Manyajan Kachahari | Council of respected persons for mediation |
| Traditional Villages | Panchayat, Mukhiya, Guthi Naike | Informal tribunal of five gentlemen for impartial decisions |
Modern Legal Development Timeline
| Year | Development | Significance |
|---|---|---|
| 1910 BS | Muluki Ain | Included provisions for businessmen and traders to resolve local disputes |
| 1956 (2013 BS) | Development Board Act | First formal recognition of arbitration for government contracts |
| 1962 | Nepal Airlines Corporation Act | Arbitration for corporation disputes |
| 1981 (2038 BS) | First Arbitration Act | First comprehensive arbitration legislation |
| 1983 BS | Sanad establishing Manyajan Kachahari | Mediation for land, irrigation, and dam disputes |
| 1998 | Accession to New York Convention | International recognition of arbitral awards |
| 1999 (2055 BS) | Arbitration Act 2055 | Current arbitration law based on UNCITRAL Model Law |
| 2011 (2068 BS) | Mediation Act 2068 | Comprehensive framework for mediation |
| 2015 (2072 BS) | Constitution of Nepal | Constitutional recognition of ADR as state policy |
| 2017 (2074 BS) | Local Government Operation Act | Empowered local judicial committees for mediation |
Constitutional and Legal Framework
The legal framework governing Alternative Dispute Resolution in Nepal is comprehensive and continually evolving, guided by constitutional provisions and statutory laws.
Constitutional Provisions
The Constitution of Nepal 2072 (2015) provides strong foundation for ADR:
- Article 51(k): State policy to employ alternative measures such as arbitration and mediation to settle disputes of a general nature
- Article 127(2): Allows establishment of judicial bodies or other entities for alternative dispute resolution at local level
- Article 217: Empowers three-member judicial committees at each local level, chaired by vice-chairman, to address disputes as specified by law
- Schedule 8: Places administration of local courts, mediation, and arbitration under exclusive jurisdiction of local level
Key Legislation Governing ADR
| Legislation | ADR Provisions |
|---|---|
| Arbitration Act 2055 (1999) | Primary arbitration law; procedures for appointment, proceedings, awards, and enforcement |
| Mediation Act 2068 (2011) | Comprehensive framework for mediation; mediator qualifications; settlement procedures |
| National Civil Code 2074 | Section 4 allows parties to choose dispute resolution mechanisms in contracts |
| Labor Act 2074 | Conciliation provisions for labor disputes through Labor Office |
| Foreign Investment and Technology Transfer Act 2075 | Section 40: Disputes between foreign and domestic investors to be resolved through mutual discussion or UNCITRAL arbitration |
| Banks and Financial Institution Act 2073 | Section 78: Nepal Rastra Bank may act as mediator/arbitrator in disputes between licensed institutions |
| Local Government Operation Act 2074 | Sections 47: Judicial committee to refer disputes to trained mediators |
| Contract Act 2056 | Recognizes arbitration clauses in commercial contracts |
| Public Procurement Act 2063 | Arbitration provisions for procurement disputes |
| Privatization Act 2050 | Section 13: Disputes to be settled by mutual consultation or arbitration |
Key ADR Mechanisms in Nepal
1. Negotiation
Negotiation is the process wherein both parties to a dispute, either directly or through their representatives, seek a mutually acceptable resolution. It is the most basic form of ADR and is often characterized as a bargaining process between involved parties.
Types of Negotiation:
- Position-based Negotiation: Focuses on asserting specific stances, often resulting in win-loss outcomes
- Interest-based Negotiation: Addresses underlying interests rather than fixed positions, aiming for win-win outcomes
Negotiation is typically the first step before other ADR mechanisms, and through this process, contentious issues are narrowed down leading to eventual formulation of agreements.
2. Mediation
Mediation is the process whereby a neutral third party (mediator) participates to help disputing parties identify key issues, facilitate communication, and come to a mutually acceptable agreement. The mediator stays between the disputing sides but does not impose decisions.
Definition under Mediation Act 2068: "Mediation refers to the method used by the parties to resolve a dispute or issue with the help of a Mediator."
Key Characteristics:
- Voluntary and confidential process
- Parties retain decision-making power
- Mediator facilitates but does not impose solutions
- Settlement agreement is enforceable once signed
- Focus on preserving relationships
3. Arbitration
Arbitration is the most formal ADR mechanism where disputes are referred to one or more arbitrators who make binding decisions after formal hearings. It is widely used for commercial disputes and is governed by the Arbitration Act 2055 (1999).
Definition: A process of dispute resolution where a neutral third-party (arbitrator) renders a decision after both parties have opportunity to be heard. The arbitrator's ruling is final and binding.
Key Features:
- Binding decision by neutral arbitrator(s)
- More formal than mediation but less than litigation
- Parties select arbitrators and procedures
- Confidential proceedings (in-camera hearings)
- Award enforceable as court judgment
4. Conciliation
Conciliation involves a third party (conciliator) who takes a more active role in suggesting outcomes and proposing solutions. The conciliator endeavors to identify potential solutions, reduce tension between parties, and guide them toward agreement.
Key Features:
- Conciliator actively suggests solutions
- Common in labor disputes and commercial conflicts
- More interventionist than mediation
- Focuses on reducing animosity between parties
Comparison of ADR Mechanisms
| Feature | Negotiation | Mediation | Conciliation | Arbitration |
|---|---|---|---|---|
| Third Party | None | Mediator (facilitates) | Conciliator (proposes) | Arbitrator (decides) |
| Decision Maker | Parties | Parties | Parties | Arbitrator |
| Binding Nature | If agreed | If agreed | If agreed | Binding award |
| Formality | Informal | Semi-formal | Semi-formal | Formal |
| Governing Law | Contract law | Mediation Act 2068 | Labor Act/specific laws | Arbitration Act 2055 |
| Court Enforcement | Limited | Yes (settlement) | Yes (agreement) | Yes (award) |
Arbitration in Nepal
Legal Framework
The Arbitration Act 2055 (1999) is the primary legislation governing arbitration in Nepal. It replaced the Arbitration Act 2038 (1981) and is broadly based on the UNCITRAL Model Law on International Commercial Arbitration (1985), with modifications to suit the Nepalese context.
Key Principles Under Arbitration Act 2055
- Party Autonomy: Parties are free to determine many aspects of the arbitration process (Section 3)
- Separability: Arbitration clause is separate from main contract; invalidity of main contract does not invalidate arbitration clause (Section 7)
- Kompetenz-Kompetenz: Arbitral tribunal has power to rule on its own jurisdiction (Section 16)
- Limited Court Intervention: Courts intervene mainly to support arbitration, not to interfere
- Confidentiality: Hearings held in-camera unless parties agree otherwise
When Disputes Must Be Settled Through Arbitration
Under Section 3 of the Arbitration Act 2055:
- Where an agreement provides for settlement of disputes through arbitration
- For disputes connected to or arising from such agreement
- Where parties to a civil suit of commercial nature apply for arbitration
Arbitration Agreement
The Arbitration Act defines "Agreement" as a written agreement between parties to settle disputes through arbitration regarding specific legal issues that have arisen or may arise in the future under a contract or not. This includes:
- Arbitration clauses in contracts
- Separate arbitration agreements
- Exchanges of letters/communications agreeing to arbitrate
- Submission of dispute to arbitration without objection
Appointment of Arbitrators
| Aspect | Provision |
|---|---|
| Number | As specified in agreement; if not specified, three arbitrators; must be odd number |
| Appointment Timeline | Process must start within 30 days of dispute arising |
| Default Procedure | Each party appoints one arbitrator; two appointed arbitrators select third as chair |
| Court Appointment | Appellate Court may appoint if parties fail; decision within 60 days is final |
| Vacancy | To be filled within 30 days following original procedure |
Disqualifications for Arbitrators
- Persons disqualified from entering contracts under law
- Persons punished for crimes involving moral turpitude
- Insolvents and declared bankrupts
- Persons with personal interest in the dispute
- Persons lacking qualifications specified in agreement
Arbitration Procedure
| Step | Description | Timeline |
|---|---|---|
| Step 1: Submission of Claims | Claimant submits written claim with details of dispute, remedy sought, and evidence; copy provided to other party | Within 3 months from dispute arising or arbitrator appointment |
| Step 2: Objection and Counter-Claims | Respondent submits objections and may submit counter-claims | Within 30 days of receiving claim |
| Step 3: Rejoinder | Claimant responds to counter-claims | Within 15 days of counter-claim |
| Step 4: Document Submission | All documents, evidence, and witness information submitted; copies provided to other party | Along with claims/objections |
| Step 5: Hearings | Arbitrator conducts hearings, examines evidence and witnesses; proceedings continue if party absent after notice | As scheduled by arbitrator |
| Step 6: Closure | Evidence and hearings conclude with formal closure order | Upon completion of hearings |
| Step 7: Award | Arbitrator pronounces verdict based on evidence; award in writing with reasons | Within 120 days of submissions (extendable) |
| Step 8: Implementation | Parties implement award; if not, petition District Court for enforcement | Within 45 days of award; court petition within 30 days after |
Powers of Arbitrators
- Rule on own jurisdiction (Kompetenz-Kompetenz)
- Order parties to produce documents and evidence
- Appoint experts
- Inspect relevant places and goods
- Issue interim and interlocutory orders
- Take conditional decisions
- Request court assistance to examine evidence
Arbitral Awards
Contents of Award:
- Summary of the dispute
- Reasoning on jurisdiction (if challenged)
- Decisions with reasons and grounds
- Relief granted and amounts awarded
- Interest payable
- Date and place of award
- Signatures of arbitrators
Decision Making: For tribunals with three or more arbitrators, decisions are by majority. If no majority, presiding arbitrator's decision prevails. Dissenting opinions may be recorded.
Grounds for Setting Aside Awards
A party may petition the Appellate Court to set aside an award within 35 days on limited grounds:
- A party was under some incapacity
- Arbitration agreement is not valid under applicable law
- Party was not given proper notice or unable to present case
- Award deals with disputes beyond scope of submission
- Composition of tribunal or procedure not in accordance with agreement
- Subject matter not arbitrable under Nepali law
- Award conflicts with public policy of Nepal
Enforcement of Foreign Arbitral Awards
Nepal acceded to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (1958) in 1998. Foreign arbitral awards may be enforced subject to:
- Reciprocity with country where award was made
- Award made as per arbitration agreement
- Proper notice given to parties
- Award final and binding under foreign law
- Application filed within 90 days of award
- Subject matter arbitrable under Nepali law
- Not contrary to public policy
Mediation in Nepal
Legal Framework
The Mediation Act 2068 (2011) is the primary legislation governing mediation in Nepal. It provides comprehensive provisions for court-referred mediation as well as community mediation.
When Disputes May Be Settled Through Mediation
Under the Mediation Act:
- If agreement includes mediation clause, disputes must follow that procedure
- Parties may choose mediation even without such clause for legally compromisable disputes
- If case is sub judice, parties may jointly request adjudicating body to allow mediation
- Court may order mediation if deemed suitable and both parties agree
Mediator Qualifications
| Requirement | Details |
|---|---|
| Citizenship | Must be Nepali citizen |
| Age | At least 25 years old |
| Education | Bachelor's degree from recognized institution |
| Training | Completed prescribed mediation training |
| Mental Capacity | Sound mind |
| Criminal Record | Not convicted of offense involving moral turpitude |
| Financial Status | Not declared bankrupt |
| Previous Removal | Not previously removed from mediator roster for misconduct |
Exception: If parties mutually agree, a literate person aged 25 or above may serve as mediator even without formal training. For disputes involving foreign parties, foreign nationals may also be appointed.
Appointment of Mediators
- If agreement includes provision for appointing mediator, follow that provision
- If no provision, parties must mutually agree on mediator
- If parties fail to appoint, adjudicating body directs parties to submit names within specified time
- If parties fail to propose, adjudicating body appoints from eligible persons list
Duties of Mediators
- Act with complete impartiality throughout the process
- Avoid favoritism, bias, or prejudice
- Refrain from using fear, coercion, deception, or manipulation
- Avoid financial dealings with parties until dispute is resolved
- Follow prescribed code of conduct
- Avoid conflicts of interest
Mediation Procedure
| Step | Description |
|---|---|
| Step 1: Commencement | Party serves notice to other party or applies to adjudicating body; for community mediation, party requests community intervention; parties present dispute to mediator |
| Step 2: Procedure | Procedure determined by parties themselves; may follow mediation service agency rules; includes presenting claims and replies, holding meetings, gathering information, exploring alternatives |
| Step 3: Settlement | Upon agreement, mediator prepares document signed by all parties; each party receives copy; if court-ordered, mediator presents document to adjudicating body |
| Step 4: Termination | Proceedings end if: parties decline mediation, fail to appear, absence impedes progress, or agreement reached and document prepared |
| Step 5: Report | Mediator submits report to adjudicating body within 7 days if mediation terminates; adjudicating body then hears and resolves case according to law |
Restrictions on Mediators
A mediator involved in a dispute cannot subsequently serve as a lawyer, arbitrator, or judge in the same case.
Community Mediation
Community mediation has shown impressive results in Nepal, with settlement rates of 80-90%. Traditional bodies continue practicing mediation at local levels:
- Mukhiya and Guthi systems
- Gyalbo and Thakali community councils
- Nyaya Committee of Jyapu Samaj (popular in Kathmandu Valley)
- Judicial Committees under Local Government Operation Act
Mediation Under Local Government
Under Local Government Operation Act 2074:
- Judicial Committee at each local level (chaired by vice-chairman/deputy chairperson)
- Section 47(1): Committee refers registered disputes to trained mediators; if successful, agreement enforced; if not, Committee may render decision appealable to District Court
- Section 47(2): Registered disputes referred to Committee for mediation; if mediation fails, cases forwarded to District Court
Institutions Governing ADR in Nepal
| Institution | Role | Functions |
|---|---|---|
| Nepal Council of Arbitration (NEPCA) | Primary arbitration institution | Administers arbitration proceedings; maintains list of qualified arbitrators; develops arbitration rules; promotes arbitration |
| Nepal International Arbitration Center (NIAC) | International arbitration body | Facilitates international and domestic arbitrations; provides administrative support; conducts training programs |
| Mediation Council | Oversees mediation practices | Ensures implementation of guidelines and standards; certifies mediators; develops model procedures |
| Supreme Court of Nepal | Highest judicial authority | Supervisory jurisdiction; interprets ADR laws; encourages court-annexed mediation |
| High Courts (Appellate Courts) | Appellate jurisdiction | Appoints arbitrators when parties fail; decides challenges to awards; enforces foreign awards |
| District Courts | Trial level | Refers cases to mediation; enforces domestic arbitral awards; maintains arbitration case files |
| Local Judicial Committees | Local level dispute resolution | Refers disputes to mediators; decides cases where mediation fails |
Role of Judiciary in Supporting ADR
The judiciary actively supports ADR in Nepal, acknowledging its capacity to deliver efficient, cost-effective, and accessible justice:
- Court-Referred Mediation: Courts frequently encourage parties to pursue mediation before resorting to litigation, especially in civil and family cases
- Enforcement of ADR Outcomes: Courts review ADR agreements to ensure compliance with law and public policy, then enforce them with same legal validity as court judgments
- Supporting Arbitration: Courts assist in arbitrator appointments, evidence examination, and award enforcement
- Limited Intervention: Courts maintain policy of minimal interference in arbitration proceedings
Landmark ADR Cases in Nepal
Rajendraman Sherchan v. Appellate Court, Patan (2064)
The Supreme Court ruled that failure to comply with Section 6(1) of the Arbitration Act 2055 (mandating initiation of arbitrator appointment within three months) precludes initiation through court under Section 7(1). The court affirmed that limitation period is a legal matter reviewable by Appellate Court.
National Construction Company v. Appellate Court, Patan (2065)
Key rulings:
- When arbitration clause exists, contract may specify appointment procedure
- If parties fail to appoint according to procedure, Appellate Court can undertake appointment under Section 7
- One party cannot obstruct arbitrator appointment when arbitration agreed
- For multi-tiered dispute resolution clauses, court must verify pre-arbitration mechanisms were utilized
- Arbitration provision remains effective even after agreement termination
Yashasvi Shamsher JBR v. Vaibers Developers Pvt. Ltd. (2074)
The Supreme Court clarified that if no arbitration agreement exists between parties as defined under Section 2(a) of Arbitration Act, the Act does not apply; instead, Contract Act 2056 governs dispute resolution.
Kishor Bikram Malla v. Gandaki Urja Pvt. Ltd. (2074)
The Supreme Court applied UNCITRAL-inspired principles in determining scope of arbitrable disputes and upheld the separability doctrine.
International Standards and Nepal
UNCITRAL Model Law
Nepal's Arbitration Act 2055 draws inspiration from the UNCITRAL Model Law on International Commercial Arbitration (1985), sharing fundamental principles:
- Party autonomy in arbitration proceedings
- Separability of arbitration agreements
- Kompetenz-Kompetenz (tribunal's power to rule on own jurisdiction)
- Grounds for setting aside awards largely consistent with Model Law
New York Convention (1958)
Nepal acceded to the Convention on Recognition and Enforcement of Foreign Arbitral Awards in 1998, ensuring:
- Arbitral awards made in Nepal are recognized internationally
- Foreign arbitral awards are enforceable in Nepal
- Uniform standards for cross-border dispute resolution
Benefits of ADR
- Cost-Effectiveness: Less expensive than litigation, especially in complex or prolonged cases
- Efficiency: Faster resolution than overloaded court procedures
- Confidentiality: Private proceedings protect sensitive information and business relationships
- Flexibility: Tailored processes meeting parties' specific needs
- Relationship Preservation: Collaborative approach maintains business and family relationships
- Party Control: Parties select arbitrators/mediators and procedures
- Expertise: Disputes decided by specialists in relevant fields
- Finality: Arbitral awards are generally final and binding
- Reduced Court Burden: Alleviates congestion in judicial system
Challenges in ADR Implementation
- Awareness Gap: Limited public knowledge of ADR options, particularly in rural areas
- Resource Constraints: Shortage of trained mediators, arbitrators, and specialized institutions
- Cultural Factors: Traditional preferences for court-based resolution in some communities
- Inconsistent Jurisprudence: Relatively few court precedents on international arbitration norms
- Legislative Gaps: Need for clearer distinction between domestic and international arbitration
- Enforcement Challenges: Public policy interpretations can complicate foreign award enforcement
Future of ADR in Nepal
The increasing adoption of ADR marks a shift toward a more efficient and accessible legal system:
- Legislative Reforms: Discussions underway to amend Arbitration Act for closer alignment with UNCITRAL Model Law
- Institutional Development: Strengthening of NEPCA and NIAC for better arbitration services
- Capacity Building: Increased training programs for arbitrators and mediators
- Online ADR: Introduction of online dispute resolution mechanisms
- Venue Promotion: Initiatives to promote Nepal as venue for international arbitrations
- Local Integration: Continued strengthening of judicial committees at local level
Need ADR Legal Assistance?
If you require assistance with arbitration, mediation, drafting ADR clauses in contracts, or enforcement of arbitral awards in Nepal, our experienced lawyers can provide expert guidance. Contact us for professional legal assistance with alternative dispute resolution matters.
Frequently Asked Questions
Alternative Dispute Resolution (ADR) in Nepal refers to methods of resolving legal disputes outside traditional court litigation. The primary ADR mechanisms include mediation, arbitration, conciliation, and negotiation. ADR is governed by laws including the Arbitration Act 2055 (1999) and Mediation Act 2068 (2011). The Constitution of Nepal 2072 (2015) recognizes ADR under Article 51(k) as state policy to settle disputes of general nature. ADR offers more flexible, cost-effective, and efficient approaches compared to litigation while preserving relationships between parties.
Nepal recognizes four main ADR mechanisms:
- Negotiation: Direct discussions between parties to reach mutually acceptable resolution without third-party intervention
- Mediation: Neutral third-party mediator facilitates communication to help parties reach agreement; governed by Mediation Act 2068
- Arbitration: Formal process where arbitrator(s) make binding decisions after hearing both parties; governed by Arbitration Act 2055
- Conciliation: Third-party conciliator actively suggests solutions; commonly used in labor disputes under Labor Act 2074 Each mechanism has different levels of formality, third-party involvement, and binding nature.
Arbitration in Nepal is primarily governed by the Arbitration Act 2055 (1999), which replaced the Arbitration Act 2038 (1981). The Act is based on the UNCITRAL Model Law on International Commercial Arbitration. Key principles include party autonomy (Section 3), separability of arbitration agreements (Section 7), and Kompetenz-Kompetenz allowing tribunals to rule on own jurisdiction (Section 16). Nepal also acceded to the New York Convention (1958) in 1998 for international arbitral award enforcement. Supporting laws include Contract Act 2056, Foreign Investment and Technology Transfer Act 2075, and various sector-specific legislation.
Under the Arbitration Act 2055:
- Number of arbitrators as specified in agreement; if not specified, three arbitrators (must be odd number)
- Appointment process must start within 30 days of dispute arising
- Arbitrators named in agreement are deemed appointed
- Default procedure: Each party appoints one arbitrator, who then appoint third as chair
- If parties fail to agree, Appellate Court may appoint within 60 days (decision is final)
- Arbitrators must meet qualifications including contractual capacity, no criminal conviction for moral turpitude, not bankrupt, and no personal interest in dispute.
The arbitration procedure under Arbitration Act 2055 follows these steps:
- Claims: Claimant submits written claim within 3 months of dispute arising
- Defense: Respondent submits objections and counter-claims within 30 days
- Rejoinder: Claimant responds to counter-claims within 15 days
- Document Submission: All evidence and witness information submitted
- Hearings: Arbitrator conducts hearings and examines evidence
- Award: Verdict pronounced within 120 days of submissions (extendable)
- Implementation: Parties implement award within 45 days; otherwise petition District Court for enforcement within 30 days
Under Section 30 of Arbitration Act 2055, a party may petition the Appellate Court within 35 days to set aside an award on these grounds:
- A party to the arbitration agreement was under some incapacity
- Arbitration agreement is not valid under applicable law
- Party was not given proper notice or unable to present case
- Award deals with disputes beyond scope of submission
- Composition of tribunal or procedure not in accordance with agreement
- Subject matter not arbitrable under Nepali law
- Award conflicts with public policy of Nepal
Nepal acceded to the New York Convention (1958) in 1998, enabling enforcement of foreign arbitral awards. Requirements include:
- Reciprocity with country where award was made
- Award made as per arbitration agreement
- Proper notice given to parties
- Award final and binding under foreign law
- Application filed within 90 days of award
- Application to Appellate Court, which forwards compliant awards to District Court for enforcement Awards may be refused if subject matter not arbitrable under Nepali law or contrary to public policy.
The Mediation Act 2068 (2011) is the primary legislation governing mediation in Nepal. Key provisions include:
- Disputes may be settled through mediation if agreement provides for it
- Parties may opt for mediation even if case is sub judice
- Courts may order mediation if suitable and both parties agree
- Mediator qualifications: Nepali citizen, 25+ years, bachelor's degree, mediation training, sound mind, no criminal conviction
- Settlement document signed by parties is enforceable
- Mediator cannot subsequently serve as lawyer, arbitrator, or judge in same case
Under Mediation Act 2068, a mediator must:
- Be a Nepali citizen
- Be at least 25 years old
- Hold bachelor's degree from recognized institution
- Have completed prescribed mediation training
- Be of sound mind
- Not be convicted of criminal offense involving moral turpitude
- Not be declared bankrupt
- Not be previously removed from mediator roster for misconduct Exception: If parties mutually agree, literate person aged 25+ may serve without formal training. Foreign nationals may be appointed for disputes involving foreign parties.
The Nepal Council of Arbitration (NEPCA) is the primary arbitration institution in Nepal playing vital roles:
- Administers arbitration proceedings and maintains registry of qualified arbitrators
- Develops arbitration rules (Arbitral Procedures Regulations 2072 incorporate UNCITRAL principles)
- Provides support to arbitration tribunals
- Promotes arbitration as efficient dispute resolution method
- Conducts training for arbitrators and legal professionals
- Facilitates both domestic and international arbitrations in sectors including construction, trade, and investment
Under Local Government Operation Act 2074:
- Judicial Committee at each local level (chaired by vice-chairman/deputy chairperson) empowered to address disputes
- Section 47(1): Committee refers registered disputes to trained mediators from approved list; if mediation successful, agreement enforced; if not, Committee renders decision appealable to District Court
- Section 47(2): For certain disputes, if mediation fails, cases forwarded to District Court without Committee decision
- Schedule 8 of Constitution places local courts, mediation, and arbitration under exclusive jurisdiction of local level
ADR offers significant advantages:
- Cost-Effectiveness: Less expensive than prolonged court proceedings
- Efficiency: Faster resolution compared to overloaded judicial system
- Confidentiality: Private proceedings protect sensitive information
- Flexibility: Procedures tailored to parties' needs
- Relationship Preservation: Collaborative approach maintains business and family relationships
- Party Control: Parties select arbitrators/mediators and determine procedures
- Expertise: Disputes decided by specialists in relevant fields
- Finality: Arbitral awards generally final and binding
- Reduced Court Burden: Alleviates congestion in judicial system
ADR in Nepal evolved from traditional community-based systems:
- Kirant Period: Pantumyang for community disputes
- Lichhavi Period: Panchali (Panch-sabha) for local-level decisions
- Malla Period: Panchasamuchchaya councils
- Shah Period: Manyajan Kachahari for mediation
- Traditional villages: Panchayat, Mukhiya, Guthi Naike systems Modern development: Development Board Act 2013 BS (1956) first introduced formal arbitration; Arbitration Act 2038 (1981) was first comprehensive law; current Arbitration Act 2055 (1999) based on UNCITRAL Model Law; Mediation Act 2068 (2011) established systematic mediation framework.
ADR implementation faces several challenges:
- Awareness Gap: Limited public knowledge of ADR options, particularly in rural areas
- Resource Constraints: Shortage of trained mediators, arbitrators, and specialized institutions in some regions
- Cultural Factors: Traditional preferences for court-based resolution; resistance to foreign concepts
- Inconsistent Jurisprudence: Relatively few court precedents on international arbitration norms
- Legislative Gaps: Need for clearer distinction between domestic and international arbitration; provisions on interim measures and emergency arbitrators
- Enforcement Issues: Public policy interpretations can complicate foreign award enforcement
The Constitution of Nepal 2072 (2015) provides strong constitutional basis for ADR:
- Article 51(k): State policy to employ alternative measures such as arbitration and mediation to settle disputes of general nature
- Article 127(2): Allows establishment of judicial bodies or other entities for alternative dispute resolution at local level
- Article 217: Empowers three-member judicial committees at each local level to address disputes as specified by law
- Schedule 8: Places administration of local courts, mediation, and arbitration under exclusive jurisdiction of local level These provisions demonstrate Nepal's constitutional commitment to efficient, accessible justice through ADR.
