An arbitration clause is your first defense against courtroom battles. In Nepal, precision in drafting can prevent costly disputes over interpretation.
Essential Elements of a Solid Clause
- Scope of Disputes – Clear phrasing like “any dispute arising out of or relating to this agreement.”
- Rules & Governing Law – Reference the Arbitration Act, 2055 and optionally institutional rules.
- Seat & Venue – For example: “Seat: Kathmandu, Nepal.”
- Number & Appointment of Arbitrators – Single or three arbitrators; appointment method.
- Language – Specify (e.g. Nepali or English).
- Timelines – 120-day award period and deadlines for claims/counterclaims as per statute
Sample Clause
“All disputes arising under this agreement shall be resolved by arbitration in Kathmandu, Nepal, under the Arbitration Act, 2055. The proceedings shall be in English, with a sole arbitrator appointed jointly. The award shall be rendered within 120 days and shall be final and binding.”
Optional Enhancements
– Expedited Arbitration: for simpler, faster dispute resolution.
– Interim Measures: specify arbitrator’s power to grant interim relief.
– Confidentiality Clause: essential to preserve sensitive business information.
Pitfalls to Avoid
– Vagueness around seat, arbitrator count, and applicable rules.
– Failure to state binding nature of awards.
– Ignoring translation or venue in cross-border contracts.
Conclusion
A well-crafted arbitration clause brings clarity, enforceability, and reduces future risks. Consulting legal counsel ensures your clause meets statutory requirements while reflecting business priorities.
