Laws governing the arbitration proceedings in Nepal:

The Arbitration Act, 2055 (1999) and the Arbitration Rules 2059 govern arbitration in Nepal. Arbitration is also recommended by the Public Procurement Monitoring Office as the standard dispute resolution procedure for government procurement agreements. An arbitration agreement is a contract that specifies that arbitration will be used instead of litigation by the parties to settle any disputes that may arise between them. Section 14 of the Arbitration Act of 2055 specifies the arbitration process.

• The claimant must provide the arbitrator with a written claim that includes all relevant information regarding the dispute, the remedy sought, and supporting documentation. The claimant must also provide a copy of the written claim to the other party within any applicable time frame specified in the agreement. If the agreement only specifies the name of arbitration without specifying a deadline, then within three months of the date the dispute has to be resolved through arbitration; if the arbitrator was chosen after the dispute has occurred, then within three months of that date as well.
• If the agreement specifies a time frame, the opposing party must file its objection within that time frame. Counterclaims must be filed within 30 days of the claim's receipt if such a clause has not been included.
• Rejoiners must file their rejoinders within fifteen days of the counterclaim's submission date. The opposing party should also receive a copy of the rejoinder.
• If in case a party fails to submit its rejoinder and counter claims with the time limitation , the party can submit an application for the time extension providing satisfactory reasons within 15 days from the date of expiry.
• All supporting documentation, if any, must be included with any claims, counterclaims, objections, or rejoinders made in accordance with this section.

Appointment of the Arbitrator:

The appointment procedure for arbitrators must begin no later than three months from the date that the need for arbitration to settle a dispute emerges.

Each party to the agreement will designate one arbitrator in turn, and the arbitrators themselves will choose the third arbitrator, who will serve as the chief arbitrator.

If the agreement contains a separate clause pertaining to the appointment of arbitrators, the appointment process must follow the terms specified in the agreement.

Appointment of the Arbitrator by Court:

According to the provisions of Section 7 of the Arbitration Act 2055, any party may apply to the Appellate Court for the appointment of arbitrators if the agreement makes no mention of it or if no arbitrator can be appointed in accordance with its procedures.

Qualifications of Arbitrator:

As provisioned in section 10 of Arbitration Act 2055, The following persons are disqualified for appointment as arbitrators according to the arbitration law in Nepal:

1.       Disqualified for entering into contracts as per prevailing laws.
2.     Punished by a court on criminal charges involving moral turpitude.
3.       Become insolvent or declared bankrupt.
4.     Have any personal interest in the dispute.
5.     Do not have the specific qualification specified in the agreement.

Removal of Arbitrators:

The arbitration agreement will specify how arbitrators will be removed. In addition, should the arbitration agreement contain no provisions pertaining to the removal of arbitrators, any party may request the removal of arbitrators under the terms outlined in Section 11 of the Arbitration Act 2055 by submitting an application within 15 days of the arbitrator's appointment.

1. If any arbitrator is seen to have shown bias or discrimination against any party instead of performing in an impartial manner,
2. If any arbitrator involves themselves in any misconduct or commits fraud,
3. If any arbitrator frequently vomits mistakes of irregularities in the time of arbitration,
4.  If any arbitrator does not attend arbitration meetings or refuses to take participation in arbitration proceedings for 3 times without any satisfactory reasons with the objective of prolonging or delaying the arbitration proceedings in improper manner,  
5.  If any arbitrator carries out any action that is against the natural justice principles,
6. If any arbitrator is either no longer qualified or does not meet the requirements.

Advantages of choosing Arbitration over traditional litigation:

1. The arbitration process has less formalities and delays and gives the parties greater control over the timetable.
2. Compared to going to court, arbitration provides a less formal setting for dispute resolution. The arbitration can be conducted in a more customized and effective manner because the parties are free to select the rules and procedures that will apply. 
3. In Nepal, arbitration may prove to be a more economical option than litigation.
4. In Nepal, arbitration procedures are typically private and confidential, giving parties discretion and privacy when settling their differences. This can be especially helpful in business disputes where maintaining confidentiality is crucial to safeguarding sensitive company data.
5. Nepal is a party to the New York Convention, which makes it easier for foreign arbitral awards to be recognized and enforced.

Power of Arbitrator:

The following mentioned points are the powers that are exercise by the Arbitrators:

1. To order the parties in question to appear before an arbitrator, provide documentation, and make any necessary statements recordings,
2. To document the witness's statements,
3. To appoint an specialist and seek about their opinion or conduct the examination on specific matter,
4. Obtain the bank guarantee or, in the case of foreign nationals, any suitable guarantee,
5. To exercise any particular power that has been granted by the parties.
6. At any party's request, to make a conditional decision or to issue preliminary, interim, or interlocutionary orders regarding any matter related to the dispute and
7. To provide a document in certified copy.

The Arbitration Act 2055, which is in accordance with worldwide best practices, limits the extent to which the courts may intervene in arbitration proceedings. This makes arbitration a more effective and adaptable technique for resolving disputes.