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Institutional Arbitration

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A Handy Guide Often times, businesses find themselves in situations where they need swift and decisive dispute resolution. A long pending litigious dispute can add a lot of monetary and administrative burden on any business, large or small. This is where Alternative Dispute Resolution (ADR), ie, resolution of conflicts/disputes out of court comes into picture. It is also important to be mindful of the fact that ADR does not provide solutions to situations relating to criminal offences. ADR does, however, make it comparatively much more streamlined for opposing parties to find workable solutions to civil disputes. One such method of ADR is arbitration, and one such type of arbitration is Institutional Arbitration. This is a term that a lot of business professionals must have come across at one point or another; and as imposing as the concept may seem, it is much easier to grasp.

What is Arbitration

Arbitration is a form of ADR and is characterised by the following:
  • An agreement between the parties to resolve dispute(s) through arbitration. This can be in the form of a clause in the said agreement or can also be in the form of a separate agreement.
  • The disputes are resolved by a panel/tribunal of arbitrator(s).Often, the arbitration agreement states the method of selecting the arbitrator(s) as mutually agreed upon between the parties to the said contract.
  • The procedure of the arbitration panel/tribunal may also be mutually decided by the parties to the concerned contract.
  • The decision of the arbitral panel/tribunal is binding on the parties.
  • A party aggrieved by the decision of the panel/tribunal may move a court of competent jurisdiction for setting aside/appealing the said decision.
  • A decision of the arbitral panel/tribunal is enforceable as per the law.
In Nepal, arbitration is governed by the Arbitration Act 2055 (1999). Section 31, 32, and 34 of the Act provide the law for the implementation of the award/decision of an arbitral tribunal/panel. Arbitrations are classified as ad hoc arbitrations, and Institutional Arbitrations. The latter takes place when an independent institution (not being a court of law) is explicitly given the responsibility of the administration of the arbitration. On the other hand, an ad hoc arbitration takes place when the dispute resolution is not institutionally administered. This article focuses on the concept of Institutional Arbitrations in order to provide a conceptual understanding of the same.

What is Institutional Arbitration

As briefly given above, an Institutional Arbitration is one which is administered by an independent institution (not being a court of law). These institutions are called Arbitration Centres and provide a variety of services, including consultations as early as the drafting stage of the contract between the parties. Arbitration Centres have their own set of rules of procedure for arbitrations, and also provide infrastructure for dispute resolution in the form of lists of qualified arbitrators, arbitration rooms, support staff, etc. A fee is applicable for these services which is to be borne as per the terms mutually agreed between the parties.

Institutional Arbitration as a Smart Business Solution

In today’s time, businesses need their processes to be streamlined – efficient in terms of both cost and time. With Institutional Arbitration, the ADR mechanism is serviced by professionals who are experts in their respective fields. Some characteristic benefits of Institutional Arbitrations are:
  • Assistance at the stage of drafting of arbitration clauses/agreements.
  • Comparatively more cost effective than traditional litigation, and ad hoc arbitrations.
  • Rules of arbitrations as established by experts in the field of arbitration.
  • Full administrative assistance.
  • A list of qualified, neutral and expert arbitrators.
  • Institutional Arbitration in Nepal
There is no law prohibiting Institutional Arbitration in Nepal. In fact, the Arbitration Act 2055 (1999) provides for the legal implementation of arbitral awards/decisions, including those that have been arrived at by means of Institutional Arbitration. At present, there are two arbitration centers in Nepal - Nepal Council for Arbitrators (NEPCA) and Nepal International ADR Centre with others being in the process of formalisation. These centres conduct both domestic and international arbitrations. Some renowned international Arbitration Centres are: Singapore International Arbitration Centre (SIAC), China International Economic and Trade Arbitration Commission (CIETAC), London Court of International Arbitration (LCIA), International Chambers of Commerce (ICC), etc. Several Arbitration Centres also follow the United Nations Commission on International Trade Law (UNCITRAL) Arbitrational Rules. Further, one can get an international arbitral award/decision implemented in Nepal in terms of section 34 of the Arbitration Act 2055 (1999).

How to submit a dispute to Institutional Arbitration

The submission of a dispute to Institutional Arbitration can happen in one of two ways – a) the contract between the parties already states that a dispute will be submitted to a specific Arbitration Centre, or b) upon arriving at a dispute, the parties decide to submit the said dispute to an Arbitration Centre.

Alternatives to Institutional Arbitration

Some alternatives to Institutional Arbitration are: a) early neutral evaluation, b) ad hoc arbitration, c) litigation. These are adjudicative in nature. The consensual (where parties themselves decide the outcome) alternatives are –a) mediation, b) facilitation, c) negotiation.


The aim of this article has been to provide the reader with a basic understanding of the concept of Institutional Arbitration so that s/he may find potential business disputes a little less daunting. It is good business practice to reach out to concerned professionals in case of technical legal issues, and while doing so, it always helps to have a basic understanding of some of the courses of action that one might take. Institutional Arbitration is one such course of action that can be undertaken when businesses want to streamline dispute resolution relating to their business activities. significant time and costs.
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MARCH 2024

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