Termination Of Arbitrator’S Mandate In Nepali Arbitration
1. Legal Framework for Replacement of Arbitrators
The relevant provisions are mainly found in the Arbitration Act, 2055, particularly in the sections dealing with:
Termination of arbitrator’s mandate
Appointment procedure
Removal and substitution
Replacement occurs when an arbitrator:
Resigns voluntarily
Dies or becomes incapable of performing duties
Is removed due to bias or misconduct
Fails to perform duties or delays proceedings
Becomes legally disqualified
Mandate is terminated by court order
When such circumstances occur, a new arbitrator must be appointed following the same procedure used for the original appointment.
2. Situations Leading to Replacement of Arbitrators
2.1 Resignation of Arbitrator
An arbitrator may voluntarily resign due to personal reasons, conflict of interest, or inability to perform duties.
When resignation occurs:
The arbitration agreement procedure for appointment is followed.
If the agreement is silent, the court may appoint a substitute arbitrator.
Case Law
Yakshyadhoj Karki v. High Court Patan & Others (2076 B.S., Decision No. 10369)
The Supreme Court held that when an arbitrator is unable to continue, a substitute arbitrator should be appointed according to the arbitration agreement to ensure the continuity of the arbitration proceedings.
2.2 Removal of Arbitrator
An arbitrator may be removed if:
They demonstrate bias or partiality
They commit procedural misconduct
They violate principles of natural justice
If removed, the arbitrator’s mandate terminates and replacement is necessary.
Case Law
Umakant Jha v. Appellate Court Patan (Decision No. 8156)
The Supreme Court clarified that courts may intervene when arbitration procedures violate fairness, and replacement of arbitrators can be necessary to preserve justice.
2.3 Failure to Perform Duties
If an arbitrator repeatedly fails to attend hearings or delays proceedings without justification, the parties may seek removal and replacement.
Case Law
National Construction Company Nepal v. Appellate Court Patan (Decision No. 7933)
The Supreme Court emphasized that arbitration must proceed efficiently and failure of arbitrators to fulfill responsibilities may justify intervention and substitution.
2.4 Loss of Qualification
An arbitrator may lose eligibility due to:
Legal disqualification
Conflict of interest discovered later
Professional incapacity
In such circumstances, the arbitrator’s mandate ends and a replacement must be appointed.
Case Law
Nepal Transit and Warehousing Co. Ltd. v. Himalayan Construction Co.
The court highlighted that arbitrators must maintain qualifications throughout proceedings, and loss of qualification may require substitution.
2.5 Death or Incapacity of Arbitrator
If an arbitrator dies or becomes mentally or physically incapable of continuing their duties, the arbitration agreement provides for replacement.
Case Law
Department of Roads v. Sharma & Company
The court recognized that the death of an arbitrator automatically terminates their mandate and replacement is necessary to continue proceedings.
2.6 Court-Ordered Replacement
If parties cannot agree on a substitute arbitrator, the Appellate Court may appoint a new arbitrator.
Case Law
Nepal Electricity Authority v. Himal Hydro Construction Ltd.
The court ruled that when parties fail to appoint a substitute arbitrator, judicial appointment ensures that arbitration proceedings are not stalled.
3. Procedure for Replacement of Arbitrators
The procedure generally follows these steps:
Step 1 – Termination of Mandate
The arbitrator’s mandate ends due to resignation, removal, death, incapacity, or legal disqualification.
Step 2 – Initiating Replacement
The parties initiate replacement according to the arbitration agreement.
Step 3 – Appointment of Substitute Arbitrator
The new arbitrator is appointed using the same procedure used for appointing the original arbitrator.
Step 4 – Court Intervention (If Necessary)
If parties cannot agree on replacement, the Appellate Court appoints the arbitrator.
Step 5 – Continuation of Proceedings
Once the substitute arbitrator is appointed:
Arbitration proceedings resume.
Previous hearings may be repeated if necessary.
4. Effect of Replacement on Arbitration Proceedings
Replacement may affect the arbitration process in the following ways:
Continuation of proceedings – Arbitration normally continues from the stage already reached.
Re-hearing possibility – New arbitrator may rehear evidence if required.
Preservation of procedural fairness – Ensures no party is prejudiced due to change in tribunal.
5. Important Principles from Nepali Arbitration Jurisprudence
Nepalese courts have emphasized several principles regarding replacement of arbitrators:
Respect for arbitration agreements
Minimal judicial interference
Fairness and impartiality
Efficiency of arbitration proceedings
Continuity of arbitral process
These principles ensure arbitration remains an effective alternative dispute resolution mechanism.
6. Summary of Important Case Laws
| Case | Principle Established |
|---|---|
| Yakshyadhoj Karki v. High Court Patan | Replacement required when arbitrator cannot continue |
| Umakant Jha v. Appellate Court Patan | Court intervention allowed to preserve fairness |
| National Construction Company Nepal v. Appellate Court Patan | Arbitrator failure to perform duties may justify replacement |
| Nepal Transit & Warehousing Co. Ltd. v. Himalayan Construction | Loss of qualification leads to substitution |
| Department of Roads v. Sharma & Company | Death of arbitrator terminates mandate |
| Nepal Electricity Authority v. Himal Hydro Construction | Court may appoint substitute arbitrator |
✅ Conclusion
Replacement of arbitrators under Nepal’s Arbitration Act ensures that arbitration proceedings are not disrupted due to incapacity, resignation, or misconduct of arbitrators. The law prioritizes continuity, impartiality, and procedural fairness, allowing parties or courts to appoint substitute arbitrators whenever necessary. Nepalese courts have consistently supported arbitration by facilitating the timely replacement of arbitrators while respecting party autonomy.
RELATED Blog
comments