Commercial Justice at a Crossroads: Semanta Dahal on Reforming Nepal’s Business Laws

Semanta Dahal, Advocate and Partner, Abhinawa Law Chambers

Semanta Dahal is an advocate and partner at Abhinawa Law Chambers, recognised for his expertise in corporate law, international transactions and commercial dispute resolution in Nepal. Over the years, he has established himself as a leading voice for structural and procedural reforms within the country’s legal framework, consistently advocating for a legal environment that balances robust regulatory oversight with the predictability required to foster private investment and economic growth. 

Throughout his career, Dahal has focused closely on the evolution of Nepal’s commercial justice system, specifically tracking the performance of the specialised Commercial Benches established within the High Courts. His insights frequently address critical contemporary challenges in the Nepali business landscape, including the necessity of decriminalising minor regulatory non-compliance, the strategic introduction of anticipatory bail to protect corporate executives from arbitrary pre-trial detentions, and the implementation of continuous court hearings to drastically reduce systemic delays. 

In a conversation with Business 360, Dahal discusses the critical need to insulate specialised commercial judges from general casework, the expanding complexity of financial crimes like market manipulation and insider trading, and the essential institutional reforms required to elevate Nepal’s investment climate and competitiveness on the global stage. Excerpts: 

Why do you believe Nepal needs a dedicated Commercial (Economic) Court and what problem would it solve that existing courts cannot?

Nepal’s current three-tiered judicial system consists of generalist courts designed to adjudicate diverse legal issues, including civil claims, sophisticated corporate transactions and high-stakes criminal trials. Understanding the need for a separate system for commercial dispute settlement, the Government of Nepal introduced a Commercial Bench in five Appellate Courts (Patan, Biratnagar, Butwal, Nepalgunj and later in Hetauda) on January 14, 2009 (Magh 1, 2065), having jurisdiction only for certain types of commercial cases. After the nation adopted a federal structure, on December 28, 2017 (Paush 13, 2074), the government established specialised Commercial Benches (Vanijya Ijlas) across various High Courts to handle and adjudicate cases under Secured Transaction Act, 2063, Competition Promotion and Market Promotion Act, 2063, Company Act, 2063, Insolvency Act, 2063, and Banking Offence and Punishment Act, 2066. 

The Commercial Benches were established to boost business confidence in the legal system, reassure international investors, and ensure commercial disputes are resolved efficiently with minimal time, expense and effort. While nations like India have established dedicated, standalone Commercial Courts to handle business disputes exclusively, Nepal has adopted a different approach by merely creating specialised commercial benches within its existing High Court structure. Both the fully segregated model of India and integrated specialised model of Nepal have their advantages and disadvantages. India’s approach of standalone, dedicated commercial courts offer rapid, expert dispute resolution insulated from general court backlogs, though adds higher infrastructure cost. Conversely, Nepal’s model relies on specialised benches within existing High Courts, providing a highly cost-effective solution that remains vulnerable to broader systemic delays and judicial rotations.

While the establishment of Commercial Benches has brought specialised focus to commercial disputes and yielded some success, these benches still face challenges regarding efficiency and business trust. 

In recent time, we have seen business leaders, bankers and investors being arrested and investigated under criminal procedures for financial and corporate disputes. Do you think Nepal is adequately distinguishing between economic offences and conventional crimes?

Nepal’s criminal justice system addresses complex financial crimes, like corporate fraud or financial embezzlement, using the same investigative tools and penal philosophies designed for conventional crimes. Under our laws, even minor compliance errors or activities, in the conduct of business, that do not harm individuals, society or the environment get penalised with harsh criminal provisions. To foster an investment-friendly environment while maintaining proper regulation, it is essential to amend and update acts and laws by removing unnecessary criminal penalties for corporate crimes. Some of the main reasons why decriminalisation is necessary in the commercial sector are: 

a. Criminal penalties in commercial laws should only be imposed if there is a clear fraudulent intent or bad faith. 
b. Removing harsh criminal penalties helps promote and attract foreign direct investment (FDI).
c. Without decriminalisation, industry experts are reluctant to join companies as board directors due to the risk of personal liability.

Therefore, commercial activities which do not harm individuals, society or the environment should be regulated by fines rather than imprisonment by amending the current laws. Because commercial activities are purely financial in nature, fines are largely sufficient for their regulation.

In addition, implementing a provision for anticipatory bail in Nepal could serve as an effective measure to prevent the unexpected arrests of corporate executives, bankers and investors.

Anticipatory bail, as a legal remedy, is a pre-arrest direction issued by a competent court, granting a person the protection of bail effective from the very moment of their arrest, upon a reasonable apprehension that they may be arrested. Having been long established in jurisdictions such as India, Nepal is now actively considering its formal introduction through an amendment to Section 67 of National Criminal Procedure Code, 2074. The introduction of anticipatory bail will operationalise the principle of ‘listen first, arrest only thereafter’.

How should the legal system balance two equally important objectives: protecting the public from fraud and corruption while also ensuring that entrepreneurs are not discouraged from taking business risks?

It is important to recognise that certain market participants undertake legitimate commercial risks inherent in business activities. Where such ventures fail to generate the anticipated returns despite being undertaken in good faith, subjecting those individuals to criminal liability may have a chilling effect on entrepreneurship and discourage future investment in Nepal.

However, the issue must also be viewed from the opposite perspective where genuine business-related crimes have the potential to severely undermine public confidence in commercial institutions and the broader economy, for example: the recent cooperative scandals in Nepal.

These two sides are equally important to balance and the idea is to frame a legal system that is strict against fraud and corruption, but flexible toward genuine business failure and failure to take precaution in corporate compliances. One of the ways this balance can be achieved is by decriminalising commercial crimes and introducing provisions of anticipatory bail. 

The business community argues that fear of arrest and prolonged criminal investigations create uncertainty and can affect investment decisions. What are your thoughts?

Deterrence is the purpose of imposing punishment. It is a principle that penalises offenders to prevent future crimes. If criminal investigations and prosecutions send a clear message that actual economic offences will be met with serious consequences, then the law is functioning precisely as it should. That purpose is served and served well. But here is where the analysis must go further. Deterrence, to be effective, must be targeted. When the fear of arrest becomes generalised, prolonged investigation is used as a tool by the government to threaten individuals, then it extends beyond what it is to serve, then we are deterring commerce itself, which is concerning.  

What lessons can Nepal learn from countries that have established specialised commercial or economic courts to deal with financial disputes, insolvency matters and corporate misconduct?

Drawing upon two decades of domestic commercial jurisprudence, alongside comparative international experiences, provides Nepal with a foundation for reform. Few important ones are: 

First, there is need for procedural reform to shorten the court procedures for long summons notices, detentions and recording of deposition statements. Secondly, while the Commercial Bench is meant for specialised commercial cases, its judges are frequently assigned general matters and writ petitions at the High Court. To ensure efficiency, these specialised judges should not be burdened with non-commercial cases. Lastly, we should adopt continuous hearings (Nirantar Sunwai) for commercial disputes and strictly control the duration of oral pleadings by the lawyers.

Moreover, Nepal should recognise that specialisation alone is insufficient. Successful commercial courts are typically accompanied by adequate resources, case-management systems, digitalisation and transparent procedures. Without these institutional reforms, specialised courts may simply inherit the delays and inefficiencies of the ordinary court system. 

Should economic crimes such as insider trading, market manipulation, money laundering and corporate fraud be handled by a specialised judicial mechanism with financial and technical expertise? 

Economic crimes such as insider trading, market manipulation, money laundering and corporate fraud are not conventional crimes. They involve layered financial transactions, complex corporate structures, sophisticated accounting practices and increasingly, digital evidence that requires forensic interpretation. Placing such matters before generalist courts is not merely inefficient, it is structurally unfair to all parties, because a court that cannot fully comprehend the transaction before it cannot adjudicate it justly. Therefore, specialised commercial benches are required to hear these disputes. The main reasons are to avoid prolonged proceedings, inconsistent verdicts and a dangerous inability to distinguish legitimate commercial conduct from genuine criminality. Thus, such cases should be heard by judges who understand not just the law, but the economic and technical realities underlying it. 

One criticism often heard from the private sector is that regulatory failures are sometimes treated as criminal acts. Where should the law draw the line between regulatory non-compliance and criminal liability?

The distinction ought to be based on the nature of the behaviour, intent and harm. Regulatory non-compliances should typically result in fines and penalties because they are frequently the consequence of mistakes, miscommunications or administrative oversight.

Cases involving fraud, intentional deceit, corruption, money laundering, market manipulation or behaviour that seriously harm the public should be the only ones subject to criminal liability. 

How does the current legal approach to business disputes affect Nepal’s ambition of attracting foreign direct investment and becoming a more competitive economy?

Nepal has started faring relatively better in contract enforcement and dispute resolution in World Bank’s Business Ready Report, scoring 64.4 out of 100 and landing Nepal in the top 40% of measured economies for its dispute resolution framework. But Nepal can further increase its score if it can scale up alternative dispute resolution mechanisms, especially commercial arbitration and fast-tracked mediation, operationalise digital case management, and restrict frequent rotation of judges to increase dedicated sectoral expertise in corporate law, procurement disputes and complex contract interpretation. 

Predictability, efficiency and certainty are important to investors. Investors perceive greater risks when business conflicts take years to settle, when regulatory measures seem inconsistent, or when commercial issues run the potential of turning into criminal investigations. Nepal can boost its competitiveness by enhancing commercial dispute resolution, promoting arbitration and mediation, guaranteeing contract enforcement, and encouraging greater uniformity among regulators and courts. This raises the cost of conducting business and may cause investment to be diverted elsewhere.

A business-friendly legal system is one that offers transparency, equity and prompt results rather than one that favours companies. 

If Nepal were to establish a Commercial Court tomorrow, what types of cases should fall within its jurisdiction, and what safeguards would be necessary to ensure its credibility and independence?

I would not argue for creating separate commercial courts, instead, I think we should focus on strengthening the High Court’s existing specialised Commercial Benches.  
Some of the areas where we could focus on is to embed procedural deadlines for commercial cases, introduce mandatory cases management hearings to map the timeline of the case such as fixing dates for evidence, framing issues and setting a strict time for presenting oral arguments. Importantly, judges having corporate, intellectual property, arbitration, taxation expertise must be assigned to Commercial Benches.

Do you believe Nepal’s investigators, prosecutors, judges and regulators currently possess sufficient expertise to handle increasingly complex financial transactions, digital assets, securities markets and cross-border business disputes?

Although there are many competent professionals in Nepal, development of individual capacity is a continuous process to keep up with the complexity of modern commerce. For this there is a need for ongoing education, training, cooperation with foreign specialists, and investment in technical resources. Specialised trainings by National Judicial Academy for judges and Lawyers Academy for lawyers is imperative to maintain consistency in complex corporate jurisprudence. 

There is often a public perception that every large financial controversy must result in arrests.  How can policymakers ensure accountability while also respecting due process and the presumption of innocence?

Due process and accountability are complementing cornerstones of the rule of law. Instead of being motivated by public pressure or media narratives, investigators should make sure that investigations are comprehensive, independent and grounded in evidence. Arrests should not be for the sake of investigations, but rather when they are legally required, such as to stop someone from fleeing, tampering with evidence or obstructing justice. We must reject the cynical adage, “For my friends, everything; for my enemies, the law,” and instead demand a system of impartial justice. Justice is not about accomplishing personal vendetta, being a celebrated government vigilante or weaponising it for hiding your failures.

Looking ahead, what three legal and institutional reforms do you believe are most urgent if Nepal wants to become a more predictable, investment-friendly and rule-based economy?

First, business dispute settlement must be made more robust. Nepal requires quicker and more specialised commercial court, arbitration and mediation procedures to settle corporate disputes. 

Second, capacity building and side-by-side training must be provided by National Judicial Academy and Lawyers Academy to handle increasingly complex cases like digital finance, capital markets, infrastructure financing and cross-border transactions.  

Third, expanding the jurisdiction of Commercial Benches for true specialisation. Other disputes, such as commercial contract disagreements, public procurement (tender) issues, shareholder and partnership conflicts, insurance and reinsurance claims, and import/export matters, can be brought under the ambit of Commercial Benches.