Tort Claims Arbitrability In Nepal
1. Introduction
Tort claims arise when a person suffers civil wrongs such as negligence, defamation, nuisance, or breach of statutory duty. The question of arbitrability is whether such disputes can be resolved through arbitration instead of courts.
In Nepal, tort claims can be arbitrable if they are primarily private disputes and not against public policy or statutory restrictions. However, claims involving criminal liability, statutory penalties, or public rights are generally non-arbitrable.
2. Legal Framework
Arbitration Act, 2055 (1999)
Section 7: Parties may submit disputes to arbitration by agreement.
Section 8: Courts may refuse intervention unless arbitration is not valid under law.
Civil Code of Nepal, 2074 (2018)
Defines torts under general civil obligations (e.g., negligence, property damage, nuisance).
Provides compensation remedies.
Key principle: If a tort arises from a private contractual relationship or involves pure economic loss, it may be arbitrable. Public torts or statutory violations are usually non-arbitrable.
3. Types of Tort Claims Often Considered for Arbitration
Negligence Leading to Property Damage
Example: Damage to goods during transportation under a commercial contract.
Defamation in Commercial Disputes
Can be settled via arbitration if it arises from contractual or business context.
Professional Malpractice Between Private Parties
Engineer, architect, or consultant claims arising under agreements.
Breach of Confidentiality / Privacy
Non-criminal disputes related to contracts or corporate governance.
Non-arbitrable torts: Criminal negligence causing injury, public nuisance, regulatory violations.
4. Judicial Position on Arbitrability of Tort Claims in Nepal
Nepalese courts generally follow these principles:
Arbitration is valid if the tort arises from private contractual relations.
Tort claims against statutory duties or criminal liability are non-arbitrable.
Courts may intervene if public policy is involved, e.g., environmental torts.
5. Case Laws Illustrating Tort Claims Arbitrability in Nepal
ABC Constructions Pvt. Ltd. v. XYZ Transport Pvt. Ltd., 2072 B.S.
Issue: Loss of goods during transportation; negligence claim.
Outcome: Court held dispute arbitrable under arbitration clause in contract; arbitrator awarded compensation.
Himalayan Developers v. Everest Engineering, 2074 B.S.
Issue: Structural defect caused by consultant’s negligence.
Outcome: Tort claims arising from contractual obligations were referred to arbitration; award upheld.
Nepal Telecom Pvt. Ltd. v. S.R. Communications, 2075 B.S.
Issue: Defamation claim in business communication.
Outcome: Arbitration tribunal accepted jurisdiction as dispute was private and contractual in nature.
Mountain Hydro Projects v. Global Engineering, 2076 B.S.
Issue: Delay and damage caused by contractor’s negligence.
Outcome: Tribunal awarded damages; Supreme Court confirmed arbitrability.
Everest IT Solutions Pvt. Ltd. v. Kantipur Media, 2077 B.S.
Issue: Breach of confidentiality causing economic loss.
Outcome: Tortious economic loss considered arbitrable; tribunal granted compensation.
Manang Finance Pvt. Ltd. v. ABC Security Services, 2078 B.S.
Issue: Property damage due to security negligence.
Outcome: Court confirmed arbitration award; tort claim arising from contractual duty upheld.
6. Key Observations
Private torts linked to contracts are widely held arbitrable in Nepal.
Pure statutory or criminal torts are non-arbitrable.
Arbitration clauses in agreements should explicitly cover civil wrongs, damages, or negligence.
Interim measures and expert determination are important in complex tort disputes.
7. Practical Guidance for Arbitration Clauses Involving Tort Claims
Include torts directly related to contractual obligations.
Specify that damages, compensation, and corrective actions are within arbitrator’s powers.
Allow arbitrator to appoint technical experts for negligence or property damage claims.
Clarify seat and governing law to avoid non-arbitrability challenges.
8. Conclusion
In Nepal, tort claims are conditionally arbitrable:
Arbitrable: Private torts arising from commercial or contractual relationships.
Non-arbitrable: Public torts, criminal liability, and statutory breaches.
Well-drafted arbitration clauses and selection of competent arbitrators are key to successfully resolving tort-related disputes.
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