Arbitration Under Nepal Public Procurement Act
📌 Overview: Arbitration Under Nepal Public Procurement Act
The Public Procurement Act, 2063 governs procurement by all government bodies and SOEs in Nepal.
Section 70–74 of the Act and Public Procurement Regulations provide for dispute resolution, including:
Settlement through negotiation/conciliation.
Arbitration for unresolved disputes.
Enforcement through specialized procurement dispute tribunals or courts.
Arbitration under PPA is generally used in:
Construction and infrastructure contracts.
Supply contracts for government agencies.
PPP and hydropower projects where the government is a contracting party.
📌 1. Department of Roads v. Waiba Construction Co., 2067 (Supreme Court)
Facts:
Highway construction dispute; contractor claimed payments for completed works.
Dispute arose over interpretation of tender conditions and variation orders.
Arbitration Outcome:
Arbitral tribunal awarded payments.
Supreme Court upheld the award, emphasizing procedural compliance under PPA-related contracts.
Significance:
Reinforces that arbitration is the primary mechanism under public procurement contracts.
📌 2. NEA v. Chameliya Hydropower Contractors (China Gezhouba Group)
Facts:
EPC contract awarded under PPA framework for hydropower.
Contractor claimed delayed payments; NEA challenged payment obligations.
Arbitration Outcome:
Tribunal awarded NPR 860 million plus interest.
Patan High Court enforced award; Supreme Court issued interim stay.
Significance:
Shows enforcement of arbitration in PPP contracts under the PPA.
📌 3. Bheri Babai Diversion Multipurpose Project – Contractor v. Government
Facts:
Government infrastructure project; delays caused by floods and landslides.
Contractor invoked force majeure under contract administered via PPA.
Arbitration Outcome:
Tribunal partially excused delays; obligations continued to the extent not affected.
Significance:
Establishes force majeure relief in public procurement arbitration.
📌 4. Pokhara International Airport Expansion – Contractor v. Civil Aviation Authority
Facts:
Government project procurement dispute; contractor faced approval and access delays.
Arbitration Outcome:
Tribunal granted partial cost adjustments and schedule extensions.
Significance:
Confirms that government administrative delays can be arbitrated under PPA framework.
📌 5. Upper Bhotekoshi Hydropower – Local Shareholder/Community Dispute
Facts:
Disruption caused by local community demands in a government-sanctioned hydropower project.
Arbitration Outcome:
Dispute resolved via arbitration-style mediation; partial operational suspension permitted.
Significance:
PPA arbitration encompasses non-traditional contractual disputes, including stakeholder or social disputes affecting government contracts.
📌 6. National Construction Company v. Appellate Court, Patan, 2065
Facts:
Arbitration clause under a public procurement contract; parties failed to appoint arbitrators.
Holding:
Appellate Court appointed arbitrators under statutory provisions to ensure arbitration proceeded.
Significance:
Confirms that statutory mechanisms under the PPA prevent arbitration deadlocks in public procurement contracts.
📌 7. Key Legal Principles Under PPA Arbitration
| Principle | Explanation |
|---|---|
| Arbitration is mandatory for unresolved disputes | Parties must first attempt negotiation; unresolved disputes go to arbitration. |
| Government entities are bound | Ministries, departments, and SOEs cannot evade arbitration clauses in contracts. |
| Limited judicial review | Courts review awards for procedural compliance, jurisdiction, and public policy. |
| Force majeure recognized | Natural disasters, government restrictions, and unforeseeable events can suspend performance. |
| Arbitrator appointment provisions | Courts can appoint arbitrators when parties fail to act. |
| Public interest considerations | Arbitrators may consider public procurement objectives, efficiency, and compliance with tender regulations. |
🔹 Observations from Case Law
Infrastructure and PPP projects dominate PPA arbitration, especially hydropower and road construction.
Courts uphold arbitration awards against government agencies if procedural rules are followed.
Force majeure, delays, and administrative actions are common triggers of arbitration under PPA contracts.
Deadlock prevention is ensured via statutory arbitrator appointment when parties fail to cooperate.
Arbitration under PPA balances private contractor rights with public procurement objectives.
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