Supreme Court Ruling in the First Case of Enforcement of Foreign Arbitral Award in Nepal
The Supreme Court of Nepal recently rendered its judgment in the first case of enforcement of foreign arbitral award in Nepal, Hanil Engineering & Construction Co. Ltd. v. KONECO Pvt. Ltd. et. al.
Hanil Engineering Co. Ltd. of South Korea filed a Writ Petition seeking enforcement of an arbitral award rendered by Korean Commercial Arbitration Board in its favor against KONECO Pvt. Ltd, a company incorporated in Nepal, pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 ("New York Convention") and Arbitration Act 2055 (1999). The Supreme Court interpreted various provisions of the New York Convention in its judgment. The Supreme Court ruled that the foreign arbitral award in the instant case was unenforceable laying down following principles:
Appointment of Arbitrator(s): An agreement must exist between the parties for appointment of arbitrator(s). An arbitral award must have been rendered by arbitrator(s) appointed in accordance with laws and procedures prescribed by such agreement.
Appointing Authority: In the event parties had not agreed on nominating person(s) or an institution as an appointing authority, procedural law prescribed by the agreement for arbitral proceedings shall be applicable while appointing arbitrator(s). However, in the event parties fail to reach to an agreement in relation with the procedures for appointment of arbitrator(s) or fail to appoint arbitrator(s) by mutual agreement, courts shall have authority to appoint arbitrator(s) pursuant to law.
Service of Notice: A notice must be served in an official manner so as to ensure right to fair hearing of parties. Separate notice must be issued during each step of arbitration proceedings in accordance with law in order for an award to be valid and enforceable.
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