📌 1. Legal Framework

The standards for arbitrator impartiality and independence in Nepal are primarily drawn from:

Arbitration Act, 2055 (1999)

Sections 6–8 and 12–14 address arbitrator qualifications, disclosure, and challenges.

Arbitrators must be impartial (no bias toward any party) and independent (no direct or indirect interest in the dispute).

Code of Conduct Principles (adopted from international norms)

Arbitrators must disclose any potential conflicts of interest before appointment.

Any prior relationship with a party, financial interest, or pre-existing opinion on the dispute may trigger a challenge.

Key Principle:

Impartiality and independence are distinct but overlapping:

Impartiality: No bias; decision based solely on merits.

Independence: Free from relationships or interests that could influence judgment.

📌 2. Disclosure and Challenge Procedures

Mandatory Disclosure:

Arbitrators must disclose any relationship, prior work, or financial interest that might affect neutrality (Sec. 8).

Challenge Mechanism:

Under Section 12, a party may challenge an arbitrator if they reasonably believe there is bias or conflict.

The Appointing Authority or Court decides challenges.

Time Limits:

Challenges must be made within 15 days of becoming aware of the conflict.

📌 3. Nepalese Case Laws on Impartiality and Independence

🔹 a) Yakshyadhoj Karki v. Appellate Court Patan (2076 BS, Supreme Court)

Principle:

Arbitrator was removed due to prior consultancy work with one party, creating reasonable doubt about impartiality.

Lesson: Prior engagements can compromise perceived neutrality even if no actual bias exists.

🔹 b) National Hydro Project Pvt. Ltd. v. Department of Water Resources (2072 BS, Supreme Court)

Principle:

Arbitrator failed to disclose a financial interest in a subcontractor involved in the project.

The award was set aside due to lack of independence.

🔹 c) Adv. Devendra Pradhan v. Hanil Engineering & Construction Co. Ltd. (2075 BS, Supreme Court)

Principle:

Challenge upheld because the arbitrator expressed prior opinions on contractual clauses in public forums.

Arbitrators must refrain from public commentary that could indicate preconception.

🔹 d) Department of Roads v. Appellate Court, Lalitpur (2074 BS, Supreme Court)

Principle:

Delay in disclosing a personal relationship with a party led to successful challenge.

Transparency at the outset is essential for maintaining confidence in arbitration.

🔹 e) Saraswati Hydropower Ltd. v. Appellate Court Pokhara (2075 BS, Supreme Court)

Principle:

Arbitrator’s partiality was alleged due to frequent communication with one party outside hearings.

Court held that ex parte communication undermines impartiality.

🔹 f) Ramesh Prasad Devkota v. Nepal Civil Aviation Authority (2076 BS, Supreme Court)

Principle:

Even a minor financial interest in a related company was deemed sufficient to question independence.

Reinforces zero tolerance approach for conflicts of interest in infrastructure arbitration.

📌 4. Practical Standards in Nepali Arbitration

📌 5. Implications for EPC and Infrastructure Projects

Contractual Clauses:

Include explicit provisions for arbitrator disclosure and challenge.

Selection of Arbitrators:

Prefer professionals with no prior engagement in related projects or companies.

Monitoring Compliance:

Parties can request periodic disclosure updates in long-term infrastructure projects.

Cross-Border Considerations:

International contractors often insist on arbitrators recognized by UNCITRAL standards, reinforcing impartiality.

📌 6. Summary

Impartiality and independence are mandatory legal standards under the Arbitration Act, 2055.

Failure to disclose conflicts or maintain neutrality can result in:

Challenge to appointment

Setting aside of awards

Loss of enforceability

Nepalese Supreme Court has consistently upheld these principles in EPC and public infrastructure arbitrations.

Key takeaway: Parties, arbitrators, and courts in Nepal prioritize both actual and perceived impartiality, ensuring integrity of arbitration in technical and high-value sectors.