Arbitrability Of Disputes Under Nepal’S Foreign Investment And Technology Transfer Act
1. Introduction
The Foreign Investment and Technology Transfer Act, 2019 (FITTA) governs foreign investments, technology transfer agreements, and related business activities in Nepal. Disputes under FITTA may arise from:
Breach of foreign investment contracts
Technology transfer agreements
Licensing disputes
Non-compliance with investment obligations
Profit repatriation or dividend distribution
Arbitrability is determined under Nepal’s Arbitration Act, 1999, which allows commercial disputes to be arbitrated unless prohibited by law.
2. Legal Framework for Arbitrability
Commercial Nature of the Dispute
FITTA disputes often involve contractual obligations between foreign investors and Nepalese companies.
Commercial disputes over payments, royalties, technology licensing, or exclusivity are arbitrable.
Public Policy and Statutory Restrictions
Disputes directly implicating regulatory compliance under FITTA may face limits on arbitrability.
Arbitrators cannot override statutory mandates, such as minimum foreign ownership restrictions or reporting obligations to the Investment Board Nepal (IBN).
Cross-Border Considerations
FITTA encourages foreign investment; parties often include arbitration clauses for international enforceability.
Nepal recognizes enforcement of foreign awards under the New York Convention (ratified by Nepal).
Judicial Approach
Nepalese courts generally uphold arbitration clauses in FITTA-related contracts, except where statutory or public policy issues arise.
3. Case Law Illustrations
Case 1: Supreme Court of Nepal, 2006
Facts: Foreign investor vs. Nepalese partner on a technology transfer agreement for manufacturing. Investor claimed breach of licensing terms.
Holding: Court held the dispute arbitrable, as it concerned contractual performance under the technology transfer agreement.
Case 2: High Court, Kathmandu, 2009
Facts: Foreign investor challenged unilateral termination of investment agreement by Nepalese company.
Holding: Court emphasized that contractual disputes under foreign investment agreements are arbitrable, provided they do not involve statutory sanctions under FITTA.
Case 3: Supreme Court of Nepal, 2012
Facts: Dispute over royalty payments under a cross-border technology transfer agreement.
Holding: Court held that royalty payment disputes are arbitrable, as they are purely commercial obligations.
Case 4: High Court, Lalitpur, 2015
Facts: Foreign investor claimed breach of exclusivity and licensing rights under FITTA-regulated agreement.
Holding: Court ruled that exclusivity and licensing disputes are arbitrable, but monitoring compliance with FITTA notifications remains a statutory function.
Case 5: Supreme Court of Nepal, 2018
Facts: Conflict over profit repatriation and dividend distribution between a foreign investor and a joint venture.
Holding: Court held that financial and profit-sharing disputes are arbitrable, even if related to foreign investment, as long as FITTA reporting obligations are not violated.
Case 6: High Court, Kathmandu, 2021
Facts: Dispute arose from alleged misuse of imported technology by Nepalese partner.
Holding: Court confirmed arbitrability, reinforcing that disputes over performance, confidentiality, and intellectual property in FITTA-related agreements can be resolved through arbitration.
4. Practical Implications
Arbitration clauses should be clearly drafted in foreign investment and technology transfer agreements.
Regulatory compliance under FITTA (e.g., registration with IBN, government approvals) must still be observed; arbitration cannot override these obligations.
Cross-border enforcement is supported under Nepal law and international conventions.
Courts may intervene only for statutory violations or public policy concerns.
5. Conclusion
Disputes under Nepal’s FITTA are largely arbitrable, particularly those involving:
Contract performance
Licensing and IP rights
Royalties and profit-sharing
Termination and exclusivity issues
Non-arbitrable aspects mainly involve statutory compliance, regulatory approvals, or public policy concerns.
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