Nepal is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention“), having acceded in 1998 with both reciprocity and commercial reservations. Under the Arbitration Act, 1999 as amended by the 2025 Ordinance (“Arbitration Act”), Nepalese courts recognize and enforce foreign arbitral awards rendered in commercial matters, provided certain statutory and procedural conditions are fulfilled.
While procedural reforms in recent years have improved the enforceability of domestic arbitral awards, these reforms have yet to be fully extended to foreign awards. This guide outlines how foreign awards are enforced in Nepal, the applicable limitations, and how courts approach challenges to enforcement.
Reciprocity and Recognition
A fundamental threshold in the enforcement process is the principle of reciprocity. Nepal only enforces foreign arbitral awards if the country where the award was rendered also enforces Nepalese awards. This requirement stems from Nepal’s reciprocity reservation under the New York Convention.
This has posed challenges in practice. Although India is a party to the Convention, it has not notified Nepal as a reciprocating territory under Indian Law. Therefore, in Sanghi Brothers (Indore) Pvt. Ltd. v. High Court, Patan, the Supreme Court of Nepal upheld the High Court’s refusal to enforce an Indian arbitral award due to the absence of formally established reciprocity.
Procedural Requirements
To initiate enforcement, the award creditor must apply to the High Court with jurisdiction over the award-debtor. The application must be supported by:
- The original or certified copy of the arbitral award
- The original or certified copy of the arbitration agreement
- A certified Nepali translation of both documents, if issued in a foreign language.
The applicant must demonstrate that the award is final and binding in its home jurisdiction and that no challenge is currently pending. The application must be filed for enforcement at the District Court if the party does not voluntarily implement the award within 45 days of the receipt of the award (“Non-Compliance Date“). Such application must be filed within 30 days after the expiry of Non-Compliance Date.
Where the parties have agreed to expedited arbitration, enforcement may proceed on an earlier date.
Re-examination of Evidence
Nepalese courts do not engage in re-evaluation of facts or evidence during enforcement proceedings. The 2025 amendment to the Arbitration Act introduced a formal bar on the re-examination of evidence, restricting the court’s role to procedural and jurisdictional oversight.
Grounds for Refusal of Enforcement
Recognition and enforcement of a foreign award may be refused on specific grounds prescribed by the Arbitration Act and consistent with the New York Convention. These include:
- Invalidity of the arbitration agreement or lack of jurisdiction by the tribunal
- Lack of proper notice or denial of opportunity to present the case
- Award exceeding the scope of arbitration
- Non-arbitrable subject matter under Nepalese law
- Violation of Nepalese public policy
In Hanil Engineering & Construction Co. Ltd. v. Appellate Court, Patan (NKP 2075, Decision No. 10138), the Supreme Court refused enforcement due to non-compliance with pre-arbitration requirements and procedural unfairness.
Suspension of Enforcement
An award debtor may seek suspension of enforcement under section 31 of the Arbitration Act. The application must be made prior to the issuance of an enforcement order, ideally at the time of responding to the recognition petition.
Suspension may be granted on limited grounds, namely:
- The award or arbitration agreement is affected by fraud or corruption
- (ii) The enforcement of the award would cause irreparable harm.