In response to the escalating risks posed by social networks, particularly to susceptible demographics like children and vulnerable adults, the Government of Nepal (the “GoN”) has introduced the “Directive for Regulating the Use of Social Netwrok2023 (2080)” (hereinafter referred to as the “Directive”). The Directive not only aims to regulate the social network usage but also establish a robust mechanism which empowers affected individuals to report distressing online activities, ensuring the prompt removal of such harmful content from such platforms. The Directive has been issued by the GoN by virtue of the power provided under section 79 of the Electronic Transaction Act 2008 (2063).
The key provisions of the Directive have been set out below:
Definition of the Social Networks and Social Network Platforms
As per the Directive, Social Networks refer to facilities provided by Social Network Platforms through electronic communication mediums like computers or the internet. This includes services that facilitate interactive communication among individuals, groups, or organizations. This also encompasses the facility to disseminate content created by users, including groups, blogs, apps and other networks.
Similarly, Social Network Platforms refers to a platform operated publicly based on the internet or information technology that enable individuals or organizations to exchange ideas or information and offer the capacity to disseminate content created by the users. This includes platforms such as Facebook, TikTok, Twitter, Viber, Pinterest, WhatsApp, Messenger, Instagram, YouTube, LinkedIn, WeChat, etc.
The Directive provides that whosoever wishes to operate a social network platform, must be listed in the Ministry of Communications and Information Technology (Ministry). Any social network entity operating prior to the commencement of this Directive must get listed in the Ministry within 3 months from the date of commencement of this directive. The listed social networks must update its information every three years.
Platforms dedicated exclusively to civic education and social empowerment are not subjected to such these listing requirements.
Prohibited Activities for users.
Under the Directive, users are forbidden from creating anonymized or disguised identities (Fake Ids) to produce, comment, or share content. Targeting individuals or groups based on gender, religion, age, social class, and more, through hate speech (defined as posts, shares, or comments whose content can lead to violence among individuals, groups, or communities, disrupt social harmony and result in other negative consequences. This includes any form of expression such as voices, words, pictures, and videos that can cause such outcome) or unauthorized publication of photographs or trolling/ publication of memes targeting such individual or groups are not allowed. The Directive also prohibits encouraging activities that are illegal, including but not limited to child labor and human trafficking.
Abusive language and hate speech whether in words, audiovisuals, or images, are strictly banned. Users cannot distort images of individuals using technologies like animation or montage, nor publish private photos or videos without requisite permission. The promotion of obscene content, whether in words, pictures, or videos, is also forbidden.
Additionally, the Directive safeguards children against material harm, including sexual exploitation and abuse. Spreading false or misleading information is not allowed, and neither is any form of cyberbullying. Users are discouraged from engaging in activities related to narcotics, terrorism, or any actions that violate individual privacy. Hacking, phishing, and impersonation using social networks are also prohibited, as is the publication of obscene content and the advertising or trading of items that are illegal. Lastly, replicating and sharing any activities that are prohibited by law are equally forbidden.
The Directive imposes further responsibilities for social network users providing that users shall not inspire or conspire to spread hate and malice on the basis of class, caste, religion and function in a way that adversely affects Nepal’s sovereignty, geographical integrity, national security, independence, self-respect, national interest and act in a way to affect good relations between different levels of Government. It further provides that a user cannot intentionally like, repost, broadcast, tag, mention, comment or subscribe to any of the aforementioned acts.
Classification of Social Network Platforms
The Directive makes a distinction on social network platforms based on the number of users, classifying those with fewer than 100,000 users as “small” platforms and those with more than 100,000 users as “large\” platforms. This classification has significant implications, particularly for the larger platforms. Specifically, large-scale social network platforms are mandated to establish a residential “point of contact” official and officials inspection compliance of self-regulation.
Point of Contact and its responsibilities:
Pursuant to this Act, all social network operators are required to establish a dedicated ‘point of contact’ within Nepal. This mandate is specifically aimed at facilitating the resolution of complaints and issues relating to the use and management of social network platforms.
The point of contact would, identify material communicated on social network that is contrary to the Directive, temporarily or permanently remove such content, and inform such activities to the ‘social network management unit’ and other concerned authorities and periodically publish information regarding responsible use of social network platforms.
Responsibilities of social network operators:
Under the Directives, social network operators have various responsibilities. These include developing algorithms and other measures to prevent the publication and transmission of information, advertisements, and content that contravene prevailing laws. Operators are required to promptly, within a 24-hour window, identify and assess the legality of content that is subject to complaints, removing any material that is found to be in violation of the prescribed user conduct guidelines (see the above section on ‘Prohibited Activities’). Additionally, if found that content is being or is about to be posted that contradicts provisions of the Directive, under the instructions of the social network management committee or related body, operators must ensure its removal within a 24-hour timeframe.
Furthermore, social network operators are obliged to establish robust measures for the protection of individual privacy, explicitly prohibiting the unauthorized publication or sharing of personal data. They are also tasked with the development and dissemination of educational and informative content that caters to the safety and interests of social network users, as necessary. Maintaining a comprehensive record of all complaints received, along with the subsequent actions taken, forms a crucial part of these responsibilities.
Operators are also required to actively prevent the circulation of content on social network platforms that could potentially undermine national integrity and independence, among other sensitive matters. The management of social network usage should align with international principles and standards.
Lastly, it provides that any transactions through social network platforms must occur through a banking system.
The Social Network Management Unit
The Social Network Management Unit is tasked under the Ministry of Communications and Information Technology to hear complaints and issues not addressed at the point of contact or by the social network operator itself. It is tasked with register complaints arising from social network use (for example by verifying screenshots of purported victim), to enhance capacity of the human resources employed in the social network management unit, organizing coordination meetings regarding the systematic use and regulation of social networks with the participation of related authorities. They are also tasked to send a written notice to the contact point of the social network platform to immediately remove any material published or disseminated contrary to these Directives.
Consequence of non-compliance
The Directive does not explicitly state the consequences for users of social networks who do not comply with its regulations. It can be inferred that non-compliance could result consequences as per the Electronic Transaction Act 2063, as the Directive has been issued by virtue of the power provided under section 79.
Startup Enterprise Fund Procedure, 2079 (the “Act”) was approved on 10th Falgun 2079. This Procedure tries to make the operations related to granting concessional loans simple, clear, comprehensive and effective to encourage entrepreneurs with the latest knowledge, thinking, skills and abilities to engage in start-up enterprises.
1. What is a startup enterprise according to the Government of Nepal (“GoN”)?
A startup enterprise refers to any enterprise or business operating with the use of novel innovation and creative idea by an entrepreneurial group for the development, production, operation, and distribution of any goods, services, or process, that have the potential for progress.
2. In which sectors of enterprise can startup industries operate?
In following sectors enterprises can operate as startup industries:
|1.||Agriculture and poultry based,|
|2.||Forest based (herbs, and forestry products),|
|3.||Tourism promotion, entertainment and hospitality related,|
|4.||Science, technology, information, and communication technology based,|
|5.||Human health services related,|
|6.||Education and educational institutions related,|
|7.||Accessible and safe travel and transportation related,|
|8.||Infrastructure construction related,|
|10.||Dedicated to improving processes related to traditional technology, production methods and services,|
|11.||Mines and mining research and development related,|
|12.||Dedicated to aiding domestic and daily affairs, their ease, convenience and safety,|
|13.||Food production and processing based,|
|14.||Waste management and environment-related.|
3. What are the criteria for startup enterprises/entrepreneurs to apply for this scheme?
Startup enterprises that fulfil the following criteria may apply for the Startup Enterprise Fund Scheme, 2079:
i. Registered and in operation, but for no more than 7 years before the publication of this notice,
ii. Fulfil at least 3 of the following criteria from (a) – (d), and 2 of the following criteria from (e) – (g).
(a) Paid-up Capital: Paid-up capital of no more than NPR 5 million (NPR 50 lakhs),
(b) Gross Income: Gross income of no more than NPR 5 million (NPR 50 lakhs),
(c) Fixed Capital: Fixed capital (apart from land and building) of no more than NPR 20 million (NPR 2 crore),
(d) Employment: Employing no more than 10 full-time employees,
(e) Use of Information Technology: Utilization of information technology and innovation for providing goods or services that have come into development for the purpose of resolving consumer issues,
(f) Allocation of Expenditure: At least 5% of total expenditure allocated for product development, market research and development,
(g) Intellectual Property Protection: Either registered intellectual property of goods/service as patent, or design, or software, or eligible to be registered as patent, or design, or software.
4. Notwithstanding anything mentioned above, what are the conditions under which a startup enterprise will not be able to obtain the loan?
Following are the conditions under which a startup enterprise will not be able to obtain loan:
a. The enterprise has not been legally registered in Nepal,
b. The enterprise has not utilized technology and innovation found in Nepal, and are simply importing goods and services from abroad,
c. The enterprise is a subsidiary company/firm of an existing company/business,
d. The enterprise or entrepreneur behind the enterprise has been blacklisted in the Credit Information Bureau,
e. The enterprise has not obtained a Permanent Account Number (PAN) for taxation purposes,
f. The enterprise is classified as a medium-large holding company as per the Industry Enterprises Act (EIA), 2076, or
g. The enterprise has been banned by existing laws for other reasons.
5. What are the obligations of the entrepreneur?
In addition to the obligations mentioned elsewhere in this procedure, the obligations of the entrepreneur who has received the loan pursuant to this procedure shall be as follows:
a. The loan amount should be used only for the purpose mentioned in the project,
b. To repay the installment amount along with the principal and interest of the loan as mentioned in the agreement,
c. Provide necessary information and data during the monitoring carried out by the committee and the bank,
d. Submit the progress report of the startup entrepreneurship to the committee secretariat and lending bank annually,
e. At the project site, a board with the words ‘Government of Nepal’s Subsidized Loan Facilities’ shall be put up for the general public to see,
f. To follow the instructions given by the committee and the bank.
6. What is the amount chargeable by the bank for receiving the loan?
According to this procedure, the bank that provides the concessional loan, may take payments of the following:
a. Upon providing the concessional loan based on the agreement between the entrepreneur and the bank, the administrative/service tax shall be a maximum of 0.1%
b. Entrepreneur shall be provided 0.5% of the installment amount out of the principal amount as a reward.
7. How long will the loan payment duration be?
a. The entrepreneur who has acquired the concessional loan based on this procedure, shall clear off the principal amount and interest as according to the agreement of the payment. However, if one wishes to pay off the debt before the time period, such entrepreneur will be able to do so, and the excessive charge will no longer be required.
b. An entrepreneur who does not clear off the loan principal and interest, such entrepreneur will be according to the prevailing law, will be put under default and the remaining amount will be collected as a government loan.
8. How will the bank keep a security on the loan ?
The bank will keep a security on loan by keeping the approved project as collateral for providing the concessional loan, by securing the loan with the Deposit and Credit Guarantee Fund as per the prevailing law for providing the loan according to this procedure and depositing the required fee while securing the loan, or the Deposit and Credit Guarantee Fund must be requested to the NRB.
9. What is the process map for submitting a proposal?
Following are the process of applying for fund scheme and particulars to pay attention to:
|Step 1||The Executive Committee will inform the willing startup entrepreneurs who have applied for the scheme that they have 21 days in which they must propose their projects.||This will be done through publication in the national daily newspaper, and electric means.|
|Step 2||The eligible startup entrepreneurs may apply for this loan concession.||However, this application for the loan is only on the basis that the above mentioned criteria have been satisfied. Furthermore, such startup enterprises may only submit their project proposals for the loan once.|
|Step 3||Submission of the project proposal for the loan concession.||The project proposal may be submitted in electrical form, in the manner as attached in Schedule-1 of the Notice.|
|Step 4||Self- declaration of documents.||The project proposal shall contain all documents and descriptions as required, and the related entrepreneur shall self-declare that all such documents and descriptions contained in the proposal are accurate and correct.|
|Step 5||Punishment for falsified self-declaration.||If the self-declaration documents and descriptions are found to be false, the proposal will be cancelled, and as per the prevailing law, will be sent to the relevant institution for punishment. Such proposers will be barred from applying in the future.|
|Step 6||Certification of the proposal by the Secretariat.||After the submission, the Secretariat of the Executive Committee will certify the application.|
|Step 7||Submission to the Executive Committee.||The proposal will then be submitted to the Executive Committee within 7 days of the submission deadline, after the certification.|
10. Who will constitute the startup enterprise Executive Committee?
In order to carry-out the startup enterprise planning, select the environmental protection and investment protection plans, operate the enterprise in an organized manner, promote the startup enterprise, and support the startup enterprise in strategic, financial and technological matters, the startup enterprise Executive Committee shall consist of:
a. Director General, (Department of Industries (DOI)) – Coordinator
b. Deputy Secretary, (Ministry of Industry, Commerce and Supplies – Facilitation Branch) – Member
c. Assistant Registrar, (Office of the Company Registrar (OCR)) – Member
d. Director, (Commerce, Supplies and Consumer Protection Department) – Member
e. Assistant Director, (Nepal Rastra Bank (NRB)) – Member
f. Director, (Cottage and Small Industry Office) – Member
g. Director, (Department of Industries (DOI) – Honorable Member
Meetings of the Executive Committee shall be held at the appointed time, date and place, as decided by the Coordinator. The meetings of the Executive Committee may invite representatives, experts, and investors from the industry and commerce sectors, as deemed necessary.
The additional duties, obligations, and authority of the startup enterprise Executive Committee shall be as follows:
a. Entrepreneurs who fulfil the criteria mentioned above must be called to present their ideas and apply for the startup loan application,
b. Prepare details of the proposed project that has applied for the startup loan grant,
c. Prepare the evaluation and selection of the proposed project, creating a list and loan limit to be submitted/recommended to NRB,
d. The project proposal that has been selected for recommendation shall be informed to the NRB,
e. For the purpose of securing the loan, to facilitate and coordinate, or cause to facilitate and coordinate with the concerned body,
f. To prepare and submit a comprehensive annual report outlining the achievement of the project and the work progress of the project approved for the loan disbursement,
g. To organize or cause to organize the investigation of the startup enterprise,
h. To fulfil other obligations as specified by the Ministry.
11. Who is the Executive Committee Secretariat and what role will they play?
The Executive Committee Secretariat shall remain at the DOI. The Ministry shall arrange the necessary personnel and budget for the operation of the Secretariat’s obligations. The Secretariat shall carry out the following duties:
a. Record, collect and process information in respect of the project proposal for the loan disbursement,
b. Carryout and prepare a comparison examining whether the received project proposal has fulfilled the criteria for application,
c. Evaluate, select and recommend the proposed project before the decision making committee,
d. The project proposal that has been selected and recommended by the Executive Committee shall be sent to the relevant bank with the related documents,
e. Fulfil other obligations as specified by the Executive Committee.
12. What evaluation and recommendation process will the proposed project be subject to?
a. The Executive Committee must, and be made to evaluate the project proposal submitted through electronic means (as required in the format detailed under Schedule 1).
b. This evaluation must be done by either the Executive Committee themselves, or through the formation of a sub-committee. Depending on the area of the proposed project, the loan concession request might be subject to multiple sub-committees.
c. Until formed, during the formation of such sub-committees, the proposed project’s sector expert, entrepreneurship expert, the bank assigned for the loan disbursement, and other the members representing the organization of private industry professionals may be invited.
d. In conducting an evaluation, the proposed project and the presentation according to the format listed in Schedule 1 must be submitted.
The evaluation must be conducted according to the following (as per the format listed in Schedule 2):
i. Criteria mentioned above fulfilled,
ii. Innovative work applied for project operation,
iii. Creation of more full-time employment within the first incoming year,
iv. The scope of requirement of the proposed good/service in the market
v. Source of labor extrapolated for the proposed project,
vi. Source of raw materials used for the proposed project,
vii. Proposer’s educational qualification and experience in the relevant area,
viii. Possible expansion and regeneration of the proposed project,
ix. Predicted growth or decline of the good or services proposed by the project,
x. Availability of infrastructure at the proposed site,
xi. Feasibility of implementing the proposed idea,
xii. Risk analysis and management,
xiii. Discussions in relation to the proposed project.
13. How will the evaluation take place and what are the details?
In conducting the evaluation of the proposed project, the proposer themselves may be present in person or virtually. The evaluation process of the project proposal will be as follows:
a. The report of the evaluated project, along with the received amount submitted to the subcommittee will be submitted by the subcommittee to the Executive Committee,
b. In accordance with the received report, the Executive Committee will then prepare an integrated assessment report, selecting the best project proposal to be recommended,
c. Although the requested loan concession amount shall be no more than NPR 25 million (NPR 25 lakhs), where it is found that the amount required for the operation of the proposed project is less than the amount requested for the loan concession, with base and reasoning, such will be mentioned, and the proposer will be subject to a loan lesser than the amount requested,
d. Within 30 days of the submission of the proposed project, the request will be evaluated, selected and recommended for the loan concession,
e. Details of the project will be published by the DOI on their website, along with the accepted budget, giving priority to the parameters,
f. The DOI must write to the NRB regarding the selected proposer who is to receive the loan concession, and inform the proposer of such as well,
g. Accordingly, the NRB must immediately inform the bank granting the loan concession of the recommendation, along with the explanation, in order to make the sum available,
h. The selected proposer must then contact the relevant bank regarding their selection for the loan concession, if not, the proposed project will automatically cancel,
i. Where the proposal has been cancelled, other chosen high scoring projects, according to the integrated assessment report will respectively be recommended.
14. What are the complaint arrangements available to each of the parties?
Following are the Procedure for complaint arrangement available to each of the parties:
a. According to this procedure, if there are any reasonably reasons for not disbursing the loan from the bank on the basis of the recommendation of the committee, the concerned bank should disclose the reason for the same and inform the concerned entrepreneur.
b. If the bank does not disburse the loan, such entrepreneur may file a written complaint to the committee.
c. If any complaint is received, the committee may give necessary directions to the bank to investigate and address such complaint within fifteen days from the date of receipt of the complaint.
d. It is the duty of the bank to comply with the instructions received.
The Companies Directives (Second Amendment), 2079 (2022) (the “Second Amendment”) has been issued by the Office of the Company Registrar (the “OCR”) to make necessary revisions in the prevalent Companies Directives, 2072 (2015) (the “Directives”). The Second Amendment was published on 22 August 2022 (2079/05/06) and was brought to effect since the date of its publication.
The primary objective of the Second Amendment is to facilitate and assist effective administration of Nepalese companies in compliance with the Companies Act, 2063 (2006) (the “Companies Act”).
The key provisions of the Second Amendment have been set out below:
Associations registered under Association Registration Act, 2034 (1977) such as NGOs were not allowed to own shares in companies as per the Directives. The Second Amendment now allows such NGOs to own shares of other companies.
Clause 10B of the Second Amendment has incorporated certain provisions in relation to the general meeting of a private company, which is generally conducted as per the AOA of the company.
If the concerned promoter shareholder does not correspond as requested in the notice, the other promoter shareholder must publish a public notice in a national daily newspaper requesting the promoter or its legal heir to contact the company within 35 days.
If any errors are found to have been made in the documents already submitted at OCR (such as annual compliance documents, share transfer documents), the Second Amendment allows the company to rectify such error for once. The board of directors will have to pass a resolution for such rectification and resubmission of documents.
The Second Amendment allows for cancellation of registration of a company which is not able to commence its business since its incorporation. The promoter shareholder(s) of such company holding at least 67% shares (instead of the previous requirement of 75%) of the company is eligible to apply for such deregistration. However, this provision is not applicable in case of companies which have already commenced operations but could not continue for any reason.
The Second Amendment however does not explicitly define the term commencement of business.
The Second Amendment requires approval from the board and the OCR for transfer of shares of public companies that have not issued shares to the public.
The Registrar of the OCR has the authority to adjudicate complaints made by the company, shareholders, directors or concerned stakeholders pursuant to the Companies Act. The decision so made by the Registrar may be challenged in the Patan High Court within 35 days.
The Second Amendment empowers the Registrar to order parties to settle disputes through mediation facilitated by the OCR. The OCR will appoint a sole mediator or mediators prescribed in its roster. A mediation room shall also be provided, and the cost of mediation shall be mutually determined by the parties and the mediator.
As an extension of our endeavor of knowledge sharing with the legal fraternity and concerned stakeholders, Pioneer Law Associates (“PLA”) shares resources pertaining to various issues concerning arbitration in Nepal. The following brief is prepared in relation to ‘Power of the arbitrator(s) to determine its own jurisdiction’.
The power of the arbitral tribunal to rule on the question of whether it has jurisdiction before any intervention by national courts is known as the principle of kompetenz-kompetenz. It is a well-established principle in international arbitration and is also accepted in many national laws. The principle involves two types of effects: (a) the positive effect: arbitral tribunal has the power to consider and decide jurisdictional objections and (b) the negative effect: national courts lack authority to determine jurisdictional objections at least until the arbitral tribunal renders an award on jurisdictional issue. The negative effects of the principle may be wholly or partially rejected by: (a) having contrary agreement between the parties to limit the power of arbitral tribunal to rules on its own jurisdiction and (b) permitting national courts to hear jurisdictional issues on an interlocutory basis.
The Arbitration Act, 1999 (2055) (“Arbitration Act”) of Nepal recognizes the principle of kompetenz-kompetenz. Under Section 16 of the Arbitration Act, the arbitral tribunal/arbitrator is competent to rule on its own jurisdiction, including with regards to the validity or effectiveness of the contract before the commencement of the proceedings. Any unsatisfied party may file an appeal with the High Court within 30 days from the date of decision/award of arbitral tribunal, and such decision rendered by the High Court shall be final.
As per Arbitration Act, jurisdictional objections are time barred in case brought after the expiry of time limit for submitting objections i.e., within 30 days from the date of receipt of claim (unless provided otherwise in the agreement). The party cannot be deprived of its right to claim jurisdictional challenges merely due to the reasons of having appointed an arbitrator on its behalf or participated in or agreed for the appointment of arbitrator. Importantly, an appeal made to High Court will not prejudice the power of arbitrator to continue the proceedings and render the award before the petition is disposed off by the court.
Please click here to read the full article by our Consultant Nida Doon Malla published in Business 3600
Though the arbitral tribunal is generally selected based on their experience or expertise in a field relevant to the subject matter of the dispute, oftentimes the arbitral tribunal may not be fully equipped to assess all the facets of the issue. This is especially true in disputes involving complex issues or technical factors.
In such instances, expert witnesses are appointed by either parties to the dispute or by the arbitral tribunal. Expert witnesses are individuals with specialized training and expertise in particular issues relevant to the dispute. Their expert opinion provides assistance the arbitral tribunal during their decision making process. In international construction arbitrations for example, one or several expert witnesses may be appointed to give testimony on topics such as delay, quantum, geotechnics, defects or forensic accounting.
Although the expert opinion has persuasive value, the decision making power ultimately rests with the arbitral tribunal. The expert opinion is simply a means of evidence which is not intended to favor any single party and is expected to be based on factual evidence and technical expertise. Even if the expert witness has been appointed by the parties, they are expected to perform an independent assessment of the case and their ultimate duty is towards the arbitral tribunal. The more objective and independent the expert appears, the more credible she or he is and the more weight their expert opinion would have.
If it is felt that expert witnesses would be required in an arbitration, it may be wise to identify and appoint an expert as soon as possible. This would allow the us to identify and understand the key technical issues in the dispute, assess the client’s chances of success and plead the client’s case from the start in the knowledge that the expert’s evidence will be fully supportive.
Compendium of Landmark Arbitration Case Laws in Nepal
Pioneer Law Associates has created this compendium of case law
|S.N.||CASE DETAIL AND CITATION||RELEVANT LAWS||PRINCIPLE(S) ESTABLISHED
(inter alia, as applicable)
|1.||Department of Roads, Babarmahal v. Arbitral Tribunal comprising of Mr. Sureshman Shrestha, Ms. Kamala Upreti and Mr. Narendra Kumar Shrestha & ors., 2077
Decision No. 10586
Arbitration Act, 2055
Evidence Act, 2031
|The Hon’ble Supreme Court held that the Hon’ble Appellate Court has the authority to invalidate an arbitral award and revert the matter back to arbitration only under the circumstances given under Section 30(2) of the Arbitration Act, 2055.
[Para 6, and 7]
|2.||Yakshyadhoj Karki v. High Court Patan and others, 2076
Decision No. 10369
|Arbitration Act, 2055
Public Procurement Act, 2063
Contract Act, 2056
|The Hon’ble Supreme Court held that:
1. When an arbitration clause is included in a contract, the same is severable from the main contract and remains enforceable until disputes pertaining to the contract or performance of the contract have been resolved.
2. Behavior of one party, general communications or one-sided offer cannot be deemed to have amended the contract.
3. Where the parties have not agreed to resolve disputes through arbitration, Section 3 of the Arbitration Act, 2055 in relation to resolution of disputes through arbitration would not be applicable.
[Para 12, and16]
|3.||Adv. Devendra Pradhan (on behalf of Hanil Engeeneering & Construction Co. Ltd.) v. Appellate Court, Patan, 2075
Decision No. 10138
|Sections 34(2)(a) and (b); and Section 16(3)
Arbitration Act, 2055
Article V.1.b and Article V.1.d of United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), 1958
|The Hon’ble Supreme Court held that:
1. A dispute resolution clause is considered to be a separate contractual agreement in terms of the doctrine of severability, and the arbitration clause is not affected by the status of the main contract.
2. The parties are free to choose separate substantive and procedural laws for the purpose of the arbitration clause. If the parties choose the law of one country for substantive part of a contract, it shall not be understood that the parties have chosen the law of the same country for procedural and appointment related matters.
2. Where the contract provides that disputes shall be settled through amicable settlement, the parties must attempt to amicably resolve the dispute as envisioned by the contract.
3. Initiating arbitration proceeding or giving of an award overlooking the provision requiring the parties to first attempt dispute resolution through amicable settlement is contrary to the intention of the contract in terms of which the parties were to first attempt amicable settlement. (Note: This is in relation to multi-tiered dispute resolution clauses i.e. dispute resolution clauses that stipulate recourse to one or more alternative dispute resolution methods before arbitration can be initiated)
4. Separate notices should be served for separate matters as prescribed by the law. The arbitral award shall lose its validity if the notice requirements have not been adequately fulfilled. If one of the parties has not been given sufficient opportunity to be heard, the same is contrary to the principles of natural justice and the resultant arbitral award is not enforceable.
[Para 3, 4, 5, 10, 11, 12, 13, 14, and 17]
|4.||Yashasvi Shamsher JBR v. Vaiwers Developers Pvt. Ltd., 2074
Decision No. 9847
|Section 3, Arbitration Act
|The Court stated that an Arbitration Agreement is deemed to be constituted in the following situations:
1. agreement between the parties to resolve dispute through arbitration as per Section 3(a) of the Arbitration Act, 2055 within the contract, or;
2. through a separate agreement, or;
3. when parties exchange written communications deciding to submit the dispute to arbitration, or;
4. when Respondent submits its Statement of Defense in response to Statement of Claim submitted by Claimant without protesting arbitration as the dispute settlement mechanism.
The Hon’ble Supreme Court also held that in the absence of the above-mentioned conditions, an agreement between parties to resolve any dispute themselves cannot be construed to mean that the parties had an intention to resolve the dispute through arbitration.
|5.||Raju K.C. on behalf of Nepal Air Service Corporation v. Appellate Court Patan, 2067
Decision No. 8523
|Sections 7(3), 29(1), 30(1), and 42((2) and (3)) Arbitration Act, 2055
Chapter on Court Management, No. 193, 208
Muluki Ain, 2020
|The Hon’ble Supreme Court held that if any party refuses to participate in the arbitration proceeding despite receiving notice of the same, such party cannot approach the Hon’ble Appellate Court in order to invalidate the arbitral award on the ground of non-issuance of notice.
|6.|| Bhanu Prasad Acharya on behalf of Nepal
Government, Ministry of Finance V.
Damodar Ropeways and Construction
Company et al., 2067
Decision No. 8368
|Sections 19, and 21(2)
Arbitration Act, 2038
|The Hon’ble Supreme Court, inter alia, held the following:
1. Validity of an arbitral award cannot be determined in the same manner as other cases. In terms of factual interpretation, the arbitral tribunal is to be considered well informed and knowledgeable.
2. The Hon’ble Supreme Court needs to conduct judicial examination of the arbitral award and decision of the Hon’ble Appellate Court to ascertain if the conditions under Section 21(2) of the Arbitration Act, 2038 have been met.
3. When both parties have clearly established and agreed on certain aspects, the decision maker should not create a dispute out of such matters.
4. The process of dispute resolution through arbitration is an informal and alternate process within the larger judicial process. An arbitral award must be supported by established facts, corroborating evidence and the written language of the contract. Interpretation based on prevalent laws and established principles should only be done when the contract is unclear or silent.
[Para 1, 7, 15, and 18]
|7.||Bikram Pandey on behalf of Kalika, Kanchanjangha JV. V. Ministry of Physical Planning and Construction, Department of Road et al., 2067
Decision No. 8437
|Sections 5, 6(4), 7, and 7(1), 7(2)
Arbitration Act, 2055
|The Hon’ble Supreme Court held the following:
1. The UNCITRAL Rules become applicable in a manner similar to provisions of a contract when parties have opted to resolve disputes through arbitration in accordance with the UNCITRAL Rules, and these Rules are only applicable to the arbitration proceeding.
2. The UNCITRAL Rules do not apply in a manner similar to laws and the scope of the same can be restricted by the parties through mutual consent.
3. The provision of the UNCITRAL Rules whereby a party may request the secretary general of the Permanent Court of Arbitration to designate the appointing authority is not a restrictive provision. The parties are free to approach the national Hon’ble Appellate Court pursuant to the national law for appointment of arbitrators.
[Para 2, 3, and 5]
|8.||Department of Road et al. V. Waiba Construction Co. Pvt. Ltd., Samakhusi, Kathmandu et al., 2067
Decision No. 8479
|Sections 30(1)(c) and(d), and 32 of the
Arbitration Act, 2055
|The Hon’ble Supreme Court held that where the dispute is to be resolved through arbitration, the court cannot enter into factual questions, consider evidence and provide a decision in a manner similar to a normal case. Further, the Hon’ble Supreme Court also held that where there has not been any grave error in law, the court cannot invalidate an arbitral award.
|9.||Manjit Singh on behalf of Bakhtawar Singh V. Kankai Irrigation Project, Irrigation Department et al., 2067
Decision No. 8397
|Section 11(2), and 21(2)
Arbitration Act, 2038
Arbitration Act, 2055
No. 192, Chapter on Court Management.
Muluki Ain, 2020
|The Hon’ble Supreme Court held that laws of Nepal are not substituted by applicable rules in relation to international commercial disputes and that the provisions of Arbitration Act, 2038 would remain applicable. Further, it was held that the Hon’ble Appellate Court, in arbitration matters derives its authority from Section 21(2).
[Para 4, and 5]
|10.||Umakant Jha V. Appellate Court, Patan, 2066
Decision No. 8156
|Sections 3, 3(2), 30(1), and 30(3)
Arbitration Act, 2055
|The Hon’ble Supreme Court held that the Hon’ble Appellate Court only has a correctional jurisdiction pursuant to Section 30 of the Arbitration Act, 2055.
The Hon’ble Supreme Court also held that the question of limitation period is purely a legal question and can arise at any stage.
[Para 12, and13]
|11.||Anil Goyal on behalf of Varun Beverage Pvt. Ltd. V. National Marketing and Sales Pvt. Ltd. et al., 2066
Decision No. 8097
|Section 3, and 21(2)
Arbitration Act, 2038
|The Hon’ble Supreme Court held that the decision of the arbitral tribunal in relation to an agreement which is connected to and cannot exist without the main contract, does not exceed the jurisdiction of the tribunal.
Further, the Hon’ble Supreme Court also held that when a party has already implemented the arbitral award and the decision of the Hon’ble Appellate Court upholding such award, then the same cannot be challenged through writ jurisdiction of the Hon’ble Supreme Court.
[Para 4, 5, and 6]
|12.|| Krishna Chandra Jha V. Dinesh Bhakta
Shrestha on behalf of Sumit Prakash
Asia Pvt. Ltd., 2066
Decision No. 8128
|Section 9, and 21
Arbitration Act, 2038
|The Hon’ble Supreme Court held that the arbitral tribunal cannot decide on matters outside the conditions and provisions of the contract and that the tribunal does not have any discretionary powers.
|13.|| Krishi Samagri Co. Ltd., Head Office, Kathmandu V. Appellate Court, Patan, 2064
Decision No. 7905
|Section 21(2) and (3) of the
Arbitration Act, 2038
|The Hon’ble Supreme Court held that the intention of the parties at the time of the contract should be interpreted through the contract itself. The contract cannot be interpreted outside the conditions mentioned in the contract.
However, if the dispute pertains to any condition not specifically mentioned in the contract, the contract and intention of the parties may be interpreted in the context of the contract document, previous correspondences, general principles of contract law, international practice and previous practice of the court.
[Para 15, and 20]
|14.||National Construction Company, Nepal V. Appellate Court, Patan, 2065
Decision No. 7933
|Section 6(1), 7(1), 7(3), and 16 Arbitration Act, 2055
|The Hon’ble Supreme Court held the following:
1. When an arbitration clause is included, the contract may also provide for the procedure for appointment of arbitrators, number of arbitrators and other similar conditions. However, when the contract is silent on these issues, or if the parties are not able to appoint arbitrator/s as per the procedure provided for by the parties in the contract, the same may be done by the Hon’ble Appellate Court pursuant to Section 7 of the Arbitration Act, 2055
2. When the parties have agreed to resolve disputes through arbitration, one party cannot refuse to appoint arbitrators and prevent arbitrators from being appointed by the other party.
3. When the contract contains a multi-tiered dispute resolution clause, the Hon’ble Appellate Court, in the role of appointing authority pursuant to Section 7 of the Arbitration Act, 2055, must confirm whether the dispute resolution mechanisms prior to arbitration have been invoked.
4. Even when an agreement has been terminated, the provision to resolve disputes arising from such an agreement through arbitration still survives. The provision to resolve disputes through arbitration may not be frustrated by any party for any reason.
[Para 3, 4, 8, 11, 13]
|15.||Rajendraman Sherchan on behalf of Vijay Construction Pvt. Ltd. V. Appellate Court, Patan, 2064
Decision No. 7823
|Sections 6(1) & 7(1)
Arbitration Act, 2055
|The Hon’ble Supreme Court held that when a party has not complied with Section 6(1) of the Arbitration Act, 2055, which requires the parties to initiate appointment of arbitrators within three months of reason to commence arbitration arising, unless otherwise provided by the contract, the procedure for appointment of arbitrators through the court pursuant to Section 7(1) of the Arbitration Act, 2055 cannot be initiated.
The Hon’ble Supreme Court also held that the question of limitation period is a legal question and there is no legal provision which restricts the Hon’ble Appellate Court from examining the same.
[Para 9, 10]
|16.||Anil Kumar Pokhrel on behalf of Sunsari Morang Irrigation Development Planning/Project V. District Court, Kathmandu, 2064
Decision No. 7836
|Sections 30, 31 & 32
Arbitration Act, 2055
|The Hon’ble Supreme Court held that when an arbitral award is sought to be invalidated at the court, the limitation period for implementation of arbitral award pursuant to Section 32 of the Arbitration Act, 2055 only begins after the final judgment on the invalidation petition has been rendered.
[Para 17, 18]
|17.||Suman Prasad Sharma on behalf of Melamchi Khane Pani Bikash Samiti V. Lasunaula Khimti Construction, 2063
Decision No. 7699
2055; Rule 14(3),
Regulation, 2059; Chapter on
Muluki Ain, 2020
|The Hon’ble Supreme Court held that when the Petitioner is within the limitation period prescribed by law, the Petitioner cannot be denied justice based on the fact that an incorrect law was cited by the petitioner.
|18.||Rakesh Kumar on behalf of The Oriental Insurance Company Ltd. V. Ramkrishna Rawal, 2066
Decision No. 8078
Arbitration Act, 2038
|The Hon’ble Supreme Court held that where parties have agreed to resolve disputes through arbitration and oust the jurisdiction of the court, the court does not have the jurisdiction to hear such disputes. Under such circumstances, if a petition is filed at the court, then the same is contrary to provisions of the contract, and the court does not have jurisdiction to hear the same.
[Para 7, 9]
|19.||Aamodanand Mishra V. Appellate Court, Patan, 2062
Decision No. 7546
Arbitration Act, 2055
|The Hon’ble Supreme Court held that if a contract requires disputes to be resolved through adjudication prior to arbitration and if an adjudicator cannot be appointed by the parties as per the contract, it cannot be deemed that the Arbitration Act, 2055 is silent on such matters and the right of the parties to resolve the dispute through arbitration cannot be deemed frustrated.
|20.|| Yadav Prasad Pokhrel on behalf of The Bridgeline Corporation V. Appellate Court, Patan, 2062
Decision No. 7508
Arbitration Act, 2038
Administration of Justice Act, 2048
The Constitution of Kingdom of Nepal, 2047
|The Hon’ble Supreme Court held the following:
1. Judicial review is a constitutionally guaranteed remedy and that the Hon’ble Supreme Court has a duty to review decisions which are contrary to the principles of law and established precedents.
2. Pursuant to Article 88(2) of the Constitution of Nepal, 2047 (B.S.), if there is no effective alternate remedy, disputes may be submitted to the writ jurisdiction of the Hon’ble Supreme Court.
3. Pursuant to the authority granted by Section 21 of the Arbitration Act, 2038 (B.S.), when an arbitral award is invalidated by the Hon’ble Appellate Court, the Hon’ble Appellate Court may either revert the dispute back to the same arbitral tribunal or to a different arbitral tribunal and direct that the dispute be resolved through arbitration. Other than this, the Hon’ble Appellate Court may not give any final decision on the matter.
[Para 37, 45, 48]
|21.||Chandra Kumar Golchha V. Patan Hon’ble Appellate Court, 2062
Decision No. 7516
|Sections 6, 7 and 16, Arbitration Act;
2055, Section 74,
2056 and Article 84, Constitution of
|The Hon’ble Supreme Court held that the Hon’ble Appellate Court must limit itself within the subject matter of appointment of arbitrators in petitions submitted to the Hon’ble Appellate Court pursuant to Section 7 of the Arbitration Act, 2055 which provides the mechanism for appointment of arbitrators by the Hon’ble Appellate Court.
|22.||Krishna Chandra Jha on behalf of Krishi Samagri Corporation V. Dinesh Bhakta Shrestha on behalf of Sumit Prakash Asia, 2059
Decision No. 7089
|Section 9, 21(2)
Arbitration Act, 2038
Section 8, 9, 12
Administration of Justice Act, 2048
|The Hon’ble Supreme Court held the following:
1. The decision to resolve disputes through alternate dispute resolution practices is based on party autonomy and the arbitral award is final and binding on the parties. Even if the arbitral award is erroneous, the same can only be invalidated if the exceptions provided by law are applicable.
2. The Hon’ble Appellate Court may at the most invalidate the arbitral award and revert the dispute to arbitration if any of the conditions pursuant to Section 21(2) of the Arbitration Act, 2038 are satisfied.
3. There is no legal provision enabling the Hon’ble Supreme Court to hear appeal or revision petitions regarding decisions of the Hon’ble Appellate Court made pursuant to Section 21(2) of the Arbitration Act, 2038.
4. Previous rulings of the joint bench of the Hon’ble Supreme Court whereby such appellate and revision petitions were allowed (Decision No. 6110 and Writ No. 3302 of 2056 B.S.) were overruled.
5. If no alternate remedies are available in relation to challenging the decisions of Hon’ble Appellate Court in relation to Section 21 of the Arbitration Act, 2038 (B.S.), writ jurisdiction of the Hon’ble Supreme Court may be exercised.
[Para 16, 17, 18, 20, 21]
|23.|| Governor Harishankhar Tripathi et al. V. Rajendraman Sherchan on behalf of Vijay
Construction Pvt. Ltd., 2052
Decision No. 6110
|Section 5(2), 21 (2)
Arbitration Act, 2038
|The Hon’ble Supreme Court held the following:
1. The jurisdiction of the Hon’ble Appellate Court is restricted by Section 21(2) of the Arbitration Act, 2038. The Hon’ble Appellate Court cannot go beyond this limited jurisdiction and decide on factual matters considered by the arbitral tribunal.
2. The Arbitration Act, 2038 is silent in terms of how parties to arbitration should present their claim and response before the tribunal. In such a situation the parties may themselves decide on a specific procedure through mutual agreement. When the parties do not decide on such a procedure, the Arbitration Act, 2038 does not bar the tribunal from deciding upon such procedure.
3. Where the parties have contractually agreed to resolve disputes through arbitration, refusal of one of the parties to do the same is a violation of the contractual agreement.
4. Arbitral tribunals are barred from deciding on issues other than those for which the tribunal is appointed, unless parties to the arbitration provide their mutual consent.
[Para 12, 13, 14, 17]
|24.||Faruk Solan on behalf of National Project Construction Corporation V. Secretary of the Water Resource Ministry et al., 2052
Decision No. 5088
|Article 23, 88(2)
Constitution of Kingdom of Nepal, 2047
Arbitration Act, 2038
|The Hon’ble Supreme Court held that when parties have mutually agreed to include an arbitration clause in the contract, such parties are required to resolve any dispute arising pursuant to the contract through arbitration.
|25.||Bakhtawar Singh Dhan on behalf of B.S.Dhan And Company V. HMG Kankai
Development Board, 2048
Decision No. 4296
|Section 5, 21
Arbitration Act, 2038
No. 12, Chapter on Court Management
Muluki Ain, 2020
|The Hon’ble Supreme Court held that arbitration can be commenced even without written consent between the parties to appoint arbitrators as there is no legal provision to that effect.
|26.||Poshan Nath Nepal on behalf of Water Supply and Sewerage Committee V. Western Regional Court, 2044
Decision No. 3111
Arbitration Act, 2038
Administration of Justice Act, 2031
|The Hon’ble Supreme Court held that there is no provision for appeal with regard to an order for appointment of arbitrator pursuant to Section 5(2) of the Arbitration Act, 2038 and that such orders are final.
Foreign Investment and Transfer of Technology Act 2019 (the “FITTA” or “Act”) was passed by the Parliament and received assent by the President on 27 March 2019. The Act was published in the Nepal Gazette and has become effective from 27 March 2019. However, provision on venture capital fund and issuance of securities in foreign market would be effective after a notification has been published by Government of Nepal (the “GON”). The FITTA repealed the Foreign Investment and Transfer of Technology Act 1992 (the “Previous Act”) and aims to bring reform in the regime of foreign investment in Nepal. Moreover, this piece of legislation was passed together with Public Private Partnership and Investment Act 2019 (the “PPPI Act”). The FITTA has brought various changes in the foreign investment regime in Nepal. The major changes brought by the FITTA have been briefly set out below:
1. Applicability of the FITTA
1.1. The reading of the FITTA needs to be done together with PPPI Act, Industrial Enterprises Act, 2016 (the “IEA”) as well as Foreign Exchange Regulation Act 1962 (the “FERA”). For the full implementation of the FITTA, regulations need to be made for both the FITTA and the PPPI Act. Investment in the infrastructure project to be developed under public private partnership modality or with private investment as specified under the PPPI Act, will require approval from Investment Board of Nepal (the “IBN”). Investment in and development of such projects are regulated under the PPPI Act.
1.2. The FITTA will not be applicable in foreign investment in certain sectors regulated by separate legislations, for example, foreign investment in the banking sector, as it is regulated by Nepal Rastra Bank, the Central Bank of Nepal (the “NRB”).
1.3. The FITTA provides that the minimum cap for equity amount of foreign investment would be as prescribed. The GON has prescribed minimum investment of NPR 50 million by each foreign investor through Gazette Notification on May 29, 2019.
2. Foreign Investment and its forms
2.1. Foreign Investor: The definition of foreign investor has included Non-resident Nepali along with foreign person, firm, company, government as well as international institutions. Thus, investment made by a Non-resident Nepali will also be regarded as foreign investment under the current regime.
2.2. Forms of foreign investment: The Previous Act limited the form of foreign investment to (i) share investment in foreign currency, (ii) re-investment of dividends and (iii) investment made in the form of loan or loan facilities. In contrast, by listing the following investment as foreign investment, the FITTA has broaden the scope of foreign investment:
2.3. Positive List and Negative List: Foreign investment is only allowed in industrial activities and not in trading activities. Moreover, it is only permissible in sectors that are (i) classified as an industry under IEA (the “Positive List”) and (ii) sectors that are not included in the restricted sectors provided under Schedule of the FITTA (the “Negative List”). So, even if a sector is not included in the Negative List, if it is not classified as an industry under the Positive List then foreign investment in such sector is not allowed. Moreover, the FITTA provides for more restrictive regime than the Previous Act as business of mass communication, travel agency, primary sectors of agricultural productions and others have been added in the Negative List. Besides, the Negative List is applicable in the case of investment and loan, however, it is not applicable in the case of transfer of technology in industry set up with local investment.
2.4. Maximum limit of foreign investment: FITTA provides that the maximum limit of the amount and proportion of foreign investment is not be determined, except in the following two cases:
3. Foreign Loan Investment
3.1. Permissibility: The FITTA fails to define what amounts to foreign loan investment. An industry with foreign investment can take loan from foreign financial institution by way of project loan agreement or project financing agreement. This is a restrictive regime and there is lack of clarity as to whether foreign loan also covers shareholder loan. Also, it lacks clarity on whether industries without foreign investment can take foreign loan.
3.2. Foreign Loan: The FITTA permits- (a) public company, or (b) corporate body (which is allowed to issue securities) to obtain loan by issuing its debentures, bond or other securities in foreign stock exchange market.
3.3. Escrow Agreement: A foreign investor for the purpose of their foreign investment can enter into a tripartite escrow agreement between their partner investor or another foreign investor and any commercial bank certified by NRB or Infrastructure Development Bank. As per the separate circular issued by NRB, the bank as a party to the escrow agreement acts as an agent for the parties and will also have right of enforcement. However, it appears that the bank has been treated as a trustee rather than agent with wider enforcement power under the FITTA.
3.4. Self-help remedy: A foreign investor providing loan to an industry or company against mortgage or collateral of movable or immovable property can auction such property for non-payment of loan for recovering the amount. However, such action can be exercised against an industry or company and not against a person.
4. Technology Transfer
4.1. Coverage: The definition of technology transfer is same as provided under the Previous Act which includes Patent, Design, Trademark, Goodwill, Technical know-how, Formula, Process, User’s License, know-how sharing, etc.
4.2. Requirements and approval: A foreign investor can invest through technology transfer in any industry incorporated in Nepal. The terms of technology transfer are to be in accordance to agreement related Technology Transfer. Such agreement needs to be approved from the approving authority for foreign investment.
4.3. Cap on royalty: The amount exceeding royalty as affixed in technology transfer agreement cannot be repatriated. Unlike the Previous Act, the FITTA provides that amount of royalty or net profit for use of trademark cannot be more than prescribed percentage except for 100% export liquor industry.
5. Approval based regime for foreign investment
5.1. Automatic route: The FITTA has introduced automatic route in relation to foreign investment approval. Even though the FITTA provides automatic route, approval based regime will be followed till provision on automatic route is given effect by making regulation.
5.2. Monetary jurisdiction: The FITTA provides that foreign investment amount up to NPR 6 Billion is under the jurisdiction of Department of Industry (the “DOI”) and above NPR 6 Billion is under the jurisdiction of IBN. Projects that come under PPPI Act will be regulated under the PPPI Act.
5.3. Approving agencies: The table below provides for the type of foreign investment and approving authority for approval of foreign investment:
|Type of foreign investment||Approving Authority|
||Share investment||DOI, NRB|
||Lease finance||DOI, NRB|
||Venture capital fund||Securities Board of Nepal (the “SEBON”), DOI, NRB|
||Issuance of securities in foreign exchange||SEBON, NRB|
||Foreign loan from foreign financial institution||Ministry of Industry, Commerce and Supply (Recommendation), NRB|
||Technology Transfer||DOI, NRB|
Even though the FITTA provides that NRB has to be notified once the approving authority has approved, an approval of NRB is still a requirement under FERA and NRB Circular. Thus, there is no clarity on whether notification in itself would suffice until the provisions of FERA and NRB Circular are amended. The provision of the FERA and NRB circular will need to be amended in the spirit of the FITTA.
5.4. Change in ownership structure of company with foreign investment: If any change occurs in the ownership structure of any company having foreign investment due to transfer of its shares, assets or financial instruments within or outside Nepal, such transaction has to be recorded in the concerned authority approving foreign investment, i.e. DOI or IBN. The FITTA requires such authority to record the transaction only after payment of the applicable tax arising out of such transaction.
5.5. Information on change in ownership structure: If there occurs change in ownership structure of a company in Nepal due to change in ownership structure of a holding company outside then such needs to be notified to the approving authority.
5.6. Timeline for bringing foreign investment: It is a requirement under FITTA that the foreign investment amount has to be brought in Nepal within the prescribed period or within the period of maximum 2 years. Failure to comply with such requirement without any specific reason can result into ineffectiveness of foreign investment approval.
6. Concession and facilities for industries with foreign investment
An industry with foreign investment is entitled to exemptions, facilities or concessions available under the IEA and other prevailing laws in additions to what has been provided under the FITTA. Moreover, industry with foreign investment is entitled to other facilities such as visa, repatriation, opening of a foreign currency account as well as national treatment, etc. Such provision was not provided under the Previous Act.
7. Prohibition on nationalization or acquisition
The FITTA prohibits nationalization of industry with foreign investment. Unless for public purpose, no industry can be acquired directly or indirectly. Constitution of Nepal permits nationalization only for public cause and by paying reasonable compensation.
8. National treatment
8.1. Stabilization provision: The FITTA provides that foreign investment is to be treated in same terms applicable on management, maintenance, utilization, transfer or sale of investment made by Nepalese person, until such investment is retained in Nepal. However, previous law is applicable for foreign investment approval obtained under the previous law and no change in law is to be made without the consent of foreign investor in a manner that is detrimental to any facilities enjoyed by the foreign investor under such law.
8.2. Non- applicability of national treatment: For certain matters, national treatment is not applicable such as compulsory licensing for intellectual property mentioned in agreement concluded under World Trade Organization (“WTO”), benefits enjoyed by domestic industry under public procurement law, government subsidy, on-commercial services provided by government, financial services adopted or managed by government for protection of investors, special treatment provided government as a party to any regional or multi-sectoral organization, terms prescribed by regulatory body under on repatriation of investment, payment of loan (including, principal, interest and fee) or payment of service fee outside Nepal as well as protection of public health, animals, plant or environment.
9. Provision on Visa
9.1. Types of visa: The FITTA clearly lays down eligibility for different types of visa such as non-tourist visa, business visa and residential visa for foreign citizens on foreign investment, which is consistent with the Immigration Laws.
9.2. Residential visa: Previously, only a foreign investor and family member of such person were eligible for residential visa. In contrast, under the FITTA, even the authorized representative of the foreign investor and his/her family members are eligible for residential visa.
9.3. Business visa: Under the Previous Act, a foreign investor and his/her dependent family or authorized representative of such investor and his/her dependent family were eligible for business visa. However, in terms of the number of authorized representatives, the FITTA has specifically restricted such privilege to the one authorized representative of the foreign investor. Nevertheless, FITTA provides such benefit to maximum two people in case the amount exceeds the prescribed investment amount.
9.4. Non- tourist visa: The FITTA also provides for non-tourist visa for foreign specialist, technician or managerial employee coming to work in an industry, which was not provided under Previous Act.
10.1. Eligibility: The FITTA provides that a foreign investor can repatriate all forms of investment in accordance to prevailing laws and after paying all the taxes. Moreover, residual amount after payment of all liabilities in case of dissolution or liquidation and amount of compensation or damages from final settlement of disputes. Foreign investor can repatriate the amount in the same currency of investment or in other convertible foreign currency with approval of NRB.
10.2. Repatriation process: Steps for repatriation of foreign investment is provided in the table below:
||Application for repatriation||DOI/IBN|
||Inquiry on fulfillment of terms and liabilities under the law||DOI/IBN|
||Application for facility of foreign currency exchange||NRB|
||Approval for repatriation||NRB|
11. One-Stop Service Mechanism
11.1. Establishment of one-stop mechanism: The FITTA has introduced One-Stop Service Mechanism, which is to be established as per the prevailing law on Industrial Enterprise. Such One-Stop Service Mechanism has already been set up under the IEA and such One-Stop Service Mechanism for the time being has been established within premises of DOI.
11.2. Services of one-stop mechanism: Government of Nepal can provide exemptions, facilities, concession or services to foreign investors through One-Stop Service Mechanism. Such services are registration of Industries, various approvals, labor permit, visa service, quality check and control of products produced by industries and others.
12. Complaint mechanism
Any complaint against actions of officials looking after matters of industry or One-point Center can be filed before DOI. Similarly, any complaint in relation to DOI or One-point Center can be filed to the Ministry of Industry, Commerce and Supply.
13. Use of Electronic medium
FITTA provides that an approving authority can use electronic medium for approval and other necessary activities. However, in practice, even though electronic medium is used, submission of physical copies is still required.
14. Sub- contract
Any industry can except for main activity of the industry, sub-contract other activities. However, FITTA fails to state what amounts to main activity of the industry.
15. Dispute Settlement Mechanism
15.1. Freedom on dispute settlement mechanism: The FITTA provides the freedom to parties to enter into an agreement for settlement of dispute. This means that investment agreement can be governed by foreign law and any dispute under such agreement can be submitted to the foreign courts or arbitration.
15.2. Two major concerns on dispute settlement: Even though the FITTA provides freedom to parties to enter into an agreement for dispute settlement, there two important concerns that needs to be kept in mind.
15.3. Notification to approving authority on settlement of dispute: The FITTA does provide for requirement of providing information of settlement of dispute to the approving authority with 15 days of settlement of dispute as per the agreement between the parties, even though the parties are not obliged to provide information of terms agreed.
ANNEXURE- I Negative List (Sectors restricted for foreign investment)
Negative list under FITTA
||Sectors of primary agricultural production as well as poultry farming, fisheries and bee-keeping, fruits, vegetable, oil seeds, pulse seeds, milk industry and priority production in agricultural sector|
||Cottage and Small industry|
||Personal Service Business (Business such as Hair Cutting, Beauty Parlor, Tailoring, Driving Training etc.)|
||Industry producing arms and ammunitions, bullets and shell, gunpower, explosive materials, nuclear, biological and chemical (N.B.C.) weapon, atomic energy, radio-active materials|
||Real estate business (Excluding Construction Industries.)|
||Moneychanger and Remittance service|
||Internal Courier Service|
||Local Catering Service|
||Rural Tourism and Travel Agency|
||Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language;|
||Management, account, engineering, legal consultancy service and language training, music training, computer training; and|
||Consultancy service having foreign investment of more than 51 percent|
Social Security Schemes Operational Directives, 2075 (the “Directive”) which was approved by the Ministry of Labor, Employment and Social Security on November 22, 2018 (2075/08/06), has been amended on July 14, 2019 (2076/03/29).
The changes that have been brought by the new directives have been incorporated in the following comparison table.
|S.N.||Section/Issue||Previous Provision||Key Amended Provision|
||Grace Period for coverage of Medical Treatment, Health and Motherhood Protection Scheme (Sec. 4)
||The time period for contribution has been reduced to 3 months from 6 months and the contributor will be eligible for both Medical and Maternity Schemes.
This coverage is extended till 3 months after the contributor stops making contribution in SSF.
||Permissibility to obtain similar benefits from other Schemes. (Sec. 6(6))||No provision.||Contributors receiving health benefits under Social Security Scheme are not prevented from obtaining any other health related benefits from Nepal Government or under any other insurance schemes.|
||Coverage of Employment related accidents and occupational diseases (Sec. 10(2), 10(3)||
|Coverage of Non Employment related accidents (Section 10(1), 11(2)||
||Scope of entitlement (Section 15(1) and 15(2)
||Funeral Expenses (Sec. 18)||Contributor who dies or dies after being permanently disabled was entitled to this benefit.||Contributor who dies or dies after being both temporarily or permanently disable are entitled to this benefit.|
||Provident Fund and Gratuity of the past period (Sec. 19(3), 19(4))||
(a) get it paid out or
(b) continue to maintain the amount in the retirement fund where it has been deposited.
||Participation in Pension Scheme (Sec. 20(b))||Employees hired after July 17, 2019.
Existing employees if they agree on participation under Collective Bargaining Agreement
|The employees hired after July 17, 2019
Existing employees if they apply in writing for the participation (NO CBA REQUIRED)
||Payment in the case of total length of contribution is less than the required months. (Sec. 22(2))||No Provision.||Contributor reaching the age of sixty (60) years before making 180 months of contribution has two options
(a) receive lump sum amount consisting of principal with the accrued income or
(b) receive pension for lifetime calculated by multiplying the sum (contribution + accrued income) by 180.
||Retirement Benefit (Sec. 23(1))||Existing employees are entitled to the Retirement Benefit.||Employees who do not elect to participate in the Pension Scheme are entitled to Retirement Benefit.|
||Foreign employees allowed to withdraw the amount under Old Age Protection Scheme (Sec. 24A)||No Provision.||
||Benefit under Pension Scheme to the spouses (Sec. 24C)
|No Provision.||In case of death of the contributor before completion of 180 months from the of date of beginning of receiving the pension, his/her spouse would be entitled to receive 50% of total monthy pension received by the contributor if:
(a) the spouse has no alternative employment or (b) has not receiving pension in any other sources.
If the marital relation ends with such contributor, the spouse shall not be entitled to the pension.
||Other pension allowed (Sec. 24D)||No Provision.||A person receiving pension from Nepal government or other sources may obtain pension from SSF, if he/she has made contribution to SSF and is eligible for pension.|
||Voluntary participation after 60 years (Sec. 24E)||No Provision.||A person, who has completed the age of 60 but is still maintaining employment relationship, can voluntarily participate in SSS.|
||Contribution for the continuity of benefits
|No Provision.||A person who has not attained eligible age for pension may continue to make contribution on SSF even after leaving a job or in between two jobs. Such contribution shall entitle the employee to receive the benefits.|
Date of publication in Nepal Gazette
2075/11/13 (25 February 2019)
First Amendment on 2076/12/03 (16 March 2020)
Note: The changes made through first amendment have been underlined.
The Government of Nepal in accordance with the rights provided by section 22 of Foreign Exchange (Regulation) Act, 2019, has formulated the following rules.
1. Short Title and Commencement:
1. The name the Regulation shall be “Hedging Related Regulation, 2075”.
2. This Regulation shall come into force immediately.
2. Definition: Unless the subject and the context otherwise requires, in this Regulation:
3. Availability of Hedging Facilities: Bank may provide the facility of hedging to the following projects with foreign loan investment:
4. Approval is required: The projects intending to obtain hedging facility under Rule 3 shall obtain approval for foreign investment and bringing in foreign loan in foreign currency, in accordance with prevailing federal laws.
5. Application to be made :
6. Examination of the application:
7. Granting Approval: After examination of the application pursuant to Rule 6, if it appears to be reasonable to provide hedging facility as requested, the Bank shall provide approval for providing the hedging facility to the applicant, on the conditions prescribed below:
8. Depositing foreign currency:
9. Locking of foreign exchange rate:
10. Hedging Charge:
11. Period of hedging facility: The period of hedging facility provided under this Regulation period shall be provided for a maximum of 5 (five) years, depending on the nature of project.
13. Currency for Hedging facility: The hedging facility under this Regulation shall be provided for only those foreign currencies which have been specified by the Bank by publishing public notice.
14. Establishing a hedging fund:
15. Coordination and Consultation: In relation to providing hedging facility under this Regulation, the Bank shall coordinate and consult with Ministry of Finance, concerned ministry for the project, concerned authority of Government of Nepal and the investor.
16. Maintenance of Foreign Exchange: The bank shall maintain the foreign currency provided for hedging facility pursuant to Rule 9 as if the foreign currency was maintained for activities prescribed under Sub-section (2) of Section 6 of the Act. .
17. Accounts of hedging: The bank shall maintain details of accounts related to hedging as per the Nepalese accounting standards.
18. Report to be submitted: The bank shall prepare report regarding activities related hedging facility each year and shall be submitted it to Ministry of Finance within 3 months from the end of each fiscal year.
1. Introduction of the act
The Advertisement (Regulation) Act 2019 (the “Act”) was published in the Nepal Gazette on 25 October 2019. The Act is the primary legislation that regulates advertisement and marketing of goods, services, program or event in Nepal. The Act is the first of its kind, and aims to bring reform in the regime of advertisement in Nepal.
A brief summary of the provisions on Advertisement Act have been briefly set out below:
2. Scope of the Act
The scope of the Act ensures the regulation of Advertisement sector. As the pioneer of the Advertisement related laws, this Act extends to ensure (a) regulation of different forms of Advertisement (b) authenticity and responsibility of Advertising Agency and Advertisement Provider (c) restrictions on content that may or may not be advertised.
However, the Advertisement through social media/internet has not been addressed in detail.
3. Provisions related to Advertisement
“Advertisement” means any word, sentence, drawing, image, symbol, poster, pamphlet, publication, sign, structure or any other audio, visual or audio-visual publication or prepared for publication in public regarding any product, service, event or occasion through the means including print, electronic media, online, social networks, hoarding board, balloon.
3.1. Permitted Advertisement
The Act provides person to advertise for the following purposes:
a. Promote a product or service,
b. Make aware and inform the consumers about a product or service,
c. Provide information about a program or event, or
d. Provide information with regards to public information, such goods, amongst others.
3.2. Advertisement that is not permitted
Advertisement activity such as the following are restricted
The Act provides person to advertise for the following purposes:
In addition to that, the Act also prohibits advertisements of the following nature:
3.3. Advertisement Prohibited Area
The Act provides authority to the local level to declare the restricted areas for advertisement. The areas that can be restricted are (a) Religious (b) Cultural Site (c) Archaeological Site (d) Educational institution (e) Health Institution and, (f) any place within distance from such site or institution. The information regarding such prohibited area must be made public.
3.4. Information of Advertisement Provider to be listed by Advertiser
There are certain details that are necessarily required while publishing or displaying an advertisement such as:
i. Name, Address of the Advertisement Provider. Under the Act, “Advertisement Provider” means individual or institution which publishes or broadcasts the Advertisment, including promotion and advertisement.
ii. Warning details of the effect after consumption of goods
In absence of mentioning the abovementioned details, the liability of the content will shift on the publishers and owners of media outlets; both print and electronic. The act done against this provision would be charged with fine NPR 5 lakh. Depending on who has advertised the advertisement, the liability may be on either Advertisement Agency and/ or Advertisement Provider.
4. Requirements and regulation of different kinds of advertisement
4.1. Hoarding Boards
“Hoarding Boards” means object used or kept to display advertisement or any kinds of external advertisement objects.
4.1.1. Approval for Hoarding Boards
The management of Hoarding Boards, banners, posters and wall paintings in public areas used to be handled by the concerned municipality. However, after the enactment of the Act, advertisements to be done through Hoarding Board that is in public display needs to get approval from the concerned Local Level Authority, which would be the relevant Ward Office or Village Development Committee.
The interested party should file an application to get permission in order to have the Hoarding Boards to Local Level Office. Such permission is given by the Local Level Office for a time period, and will contain terms and conditions to be abided by. The removal of advertisement materials (including Hoarding Boards) is mandatory once the approval expires.
However, Hoarding Boards that is kept within the premises of the home or office that is in relation to promoting such business, that does not disturb public road or land, will not be hampered.
4.1.2. Circumstances where Application may be rejected
An application for Hoarding Boards will rejected in the following circumstances:
In relation to advertisements in Television, the Act requires clean feed policy for foreign television channels in Nepal. This Act bars Television channels from broadcasting foreign advertisements, both in recorded and live feeds, so that the foreign channels are broadcasted without any advertisements in Nepal. For agreement(s) made with foreign channel in regards to broadcasting advertisement before the commencement of Act, such channels are to adopt a clean feed within a year after the commencement of the act. It is specifically provided that no Nepali media should dub the foreign advertisement and broadcast it.
4.3. Written Forms of Advertisement
Printing and Press is specifically dealt by Press and Publication Act, 1991 and Press and Publication Rules, 1992. However, the Advertisement through Press and Publication is regulated by Advertisement (Regulation) Act.
The Supreme Court had ordered to remove all types of business Hoarding Boards, advertising posters, pamphlets, flexes etc. After the commencement of the Act, Kathmandu Metropolitan has been steering work forces i.e. District Administration Office, Nepal Police, Nepal Electricity Authority and Nepal telecom in order to remove provided forms of Advertisement.
4.4. Social Media
Currently, there is no regulation prescribed particularly for advertisements in Social Media. The necessity of online advertisement regulation has also increased with the excess use of social media for advertising.Recently however, the Nepal Rastra Bank has published a directive mandating all payments for advertisements in Social Media to be made through the banking channel. Although the NRB has sought to bring all advertisement related transactions under the taxation regime, due to its evolving nature, advertisements in Social Media also needs to be covered under the ambit of laws and policies.
4.5. No email or SMS without consent for the purpose of advertisement
In relation to emails or messages, the Act provides that no one should circulate message to mobile phones or send an email without the consent of the concerned persons. The intention of the legislation appears to restrict sending unsolicited messages, thus, taking consent for text messages and push notifications is necessary. However, the Act is silent about the advertisement made through calls.
The Act allows federal government, provincial governments or local levels to circulate message of public service announcements or message of early warning through mobile phones or emails at the time of disaster. No consent is required for this matter.
5. Free or standard rate for advertisement
At the time of disaster, ministry, state government or local level can publish or broadcast notice or advertisement for the public service and information, for free or standard rate.
6. Advertisement Board
The Act provides for an eight member Advertisement Board which has the authoritative power to regulate the advertisement standard. The Advertisement Board checks the contents of advertisements and public service announcements. It also provides that the board will distribute government advertisements to media houses proportionally.
In addition, the Board also has power to determine the fixed time frame for publishing the notice that needs to be publish in public manner through radio, television or online or any similar electronic media.
6.1 Power, Function and Duty of Advertisement Board
The power, function and duty of the Advertisement Board as per the Act is as follows:
7. Regulation of Advertisement through State and Local Level
For those who have taken permission or approval from state or local level to advertise through print or electronic communication are regulated by the Information and Communication Ministry from state level. Under the chairmanship of Secretary, Monitoring and Regulatory Committee of six members is formed. The Committee has the power to inspect and decide on the appropriateness of the advertisements (including Hoarding Boards) based on the abovementioned criteria.
8. Advertisement Agency
“Advertising Agency” means firm, institute or company producing and/ or distributing advertisements, established under the prevailing law with intention to run business of advertisements.
Advertisement Agency must be enlisted in the Advertisement Board with prescribed details. The established agency operating before this Act should be enlisted within a year after the commencement of the Act.
9. Complaint Mechanism
Any complaint in relation to the Act or standard set by the Act can be filed to Advertisement Board or concerned Committee or Local Level Authority. If the Committee or Local Level Authority has the jurisdiction to take action then, they should proceed themselves or else should handover such complaints to the Advertisement Board, committee or local level who has jurisdiction to take further action. The action pursuant to the complaint filed should be informed to the complainant by Advertisement Board, committee or local level.
10. Jurisdiction of Court
The Act prescribes that the court procedure should take place as per the prevailing law. However, in absence of such law in the Act, one should file a case in District Court.
Anyone affected by the actions done contrary to the Act or rules made under this Act can file an application to Advertisement Board claiming compensation. Such application should be investigated to check whether the harm has been done or not. If such harm is found then, applicant should be compensated reasonable amount by Advertiser.
Any person being informed about the decision of the case, may file an appeal against the decision in the below mentioned Court within 35 days from the date of receiving of such decision;
13. Offences and Punishment
The Act provide that if anyone advertise against the Act, it should be considered as offences pursuant to the Act. Offences committed contrary to the Act will be punished. The punishment will be in accordance to the existing law, provided that if there is no punishment for the offense then imprisonment not exceeding 1 year of term and fine not exceeding ten thousand rupees will be charged.
The punishments have been categorized as follows:
The Act has provision of imposing fine ranging from NPR 1 Lakh to NPR 5 Lakh to anyone who publishes/broadcasts or causes to publish/broadcast advertisement in contravention of this law. No editor of media shall be punished for publication or broadcast of advertisement in breach of law simply by virtue of such reason. However, if the editor is also the owner of the media, nothing in this law will prevent the authorities concerned from punishing him or her.
1. The Safeguards, Anti-dumping and Countervailing Act, 2019 (“SACA”)
1.1. The Safeguards, Anti-dumping and Countervailing Act, 2019 (“SACA“) was passed by the Parliament and received assent by the President on 14 October 2019 (2076-06-27 BS) and published in the Nepal Gazette on the same date. The SACA is effective from January 13, 2020 i.e. from 91 days from the date of Presidential assent.
1.2. This is a new legislation enacted by Nepal which is based on the World Trade Organization’s ( “WTO”) Agreements namely, (a) Agreement on Safeguards (“Safeguards Agreement”) (b) Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade ( “GATT”) (“Anti-Dumping Agreement”) and (c) Agreement on Subsidies and Countervailing Duty (“Subsidies and Countervailing Agreement”).
1.3. The Safeguards, Anti-dumping and Countervailing Regulations, 2021 (“SACR”) was published in the Nepal Gazette on 18 January 2021 (2077-10-05 BS), by Government of Nepal (“GON”) pursuant to Section 47 of SACA.
1.4. The GON has prescribed that the definition of Department under SACA shall mean Department of Commerce, Supplies and Consumer Protection (“Department”) through Gazette Notification dated 10 February 2020 (2076-10-27). The Department shall carry out the function of an investigating authority and for that purpose it shall designate an investigating officer.
2. Provisions related to Safeguards measures
2.1. Safeguards measures to be imposed: The Act provides that safeguard measures may be imposed in case of serious injury/ threat of injury which is clearly imminent to the domestic industries producing similar/ identical / directly competitive goods, due to the unprecedented and unconventional increase in import of goods. The Ministry may either initiate suo moto investigation, or the domestic industries producing similar/ identical goods can also file a complaint to the Ministry.
2.2. While imposing of these Safeguard measures common/ different/ quantitative rate of duties can be imposed. To elaborate, following safeguard measures can be imposed: (a) additional customs duty exceeding the duty chargeable under the prevailing laws; (b) additional duty on the duty charged, in case of import of goods exceeding prescribed quota (c) full or partial quantitative restriction on import of such goods (d) other measures as prescribed.
2.3. Threshold for Safeguard Measures: The Safeguard measures is not imposed if the similar/ identical/ directly competitive goods being imported from the developing country the import from where is less than three percentage (3%) of the total import of such goods. However, this exception does not apply if the total import of the goods exceeds nine percentage (9%) of the identical/similar/directly competitive goods produced in Nepal. In such case, Safeguard measures can be imposed even if the import from a particular devel oping country represents less than 3% of the total import.
2.4. Term of Safeguards measures: Four (4) years from the date of imposition of Safeguards measures. The term may be extended for additional four (4) years upon recommendation of the investigating authority.
2.5. Interim Safeguards measures: Government of Nepal (“GON“) can impose interim Safeguards measures to prevent immediately the serious injury /threat of injury which is clearly imminent to domestic industries. Interim Safeguards measures can only be imposed in case of existence of any of the following situations if (a) the Initial Report from investigating authority finds that Safeguards should be immediately imposed, or (b) the evidence collected in the initial investigation finds that the goods has caused/ is likely to cause serious injury / threat of serious injury to the domestic industries. The maximum term of interim Safeguard measure may be two hundred (200) days.
2.6. Enforcement of decision imposing safeguard measures: SACR provides that the Department and the Department of Customs shall be the prescribed enforcement authorities to implement GON’s decision to impose safeguards measures on the import of any goods.
3. Provisions related to Anti-Dumping
3.1. Restriction in Dumping goods: No importer is permitted to import goods in import value lower than the normal value of goods (grounds for determination of common value is outlined in the following paragraph), which causes/ is likely to cause injury/ serious injury to the domestic industries producing similar/ identical goods.
3.2. Anti-Dumping Duty: GON can impose Anti-Dumping Duty in addition to the customs duty chargeable on goods if the goods are found to be dumped as per the report submitted by the investigating authority.
3.3. Threshold for Anti-Dumping– Anti-Dumping Duty is not imposed if (a) dumping margin is less than two percent (2%) of the dumped goods and (b) the import of the similar or identical goods from any country or separate customs territory is limited to three percent (3%) of the total import. However, this exception does not apply if the total import from more than a single country or separate customs territories exceeds seven percent (7%) of the total import of identical or similar goods. In such case the Anti-Dumping duty can be imposed even if the import from a particular country or separate customs territory represents less than three percent (3%) of the total import.
3.4. Fixation of rate of Anti-Dumping Duty: Rates shall be fixed by GON on the basis of inter alia, investigation report. Different rates can be imposed as per the nature of imported goods.
3.5. Term of Anti-Dumping Duty: The duty may be imposed for maximum five (5) years from the date of imposition. It can be extended for further term of five years upon recommendation of the investigating authority.
3.6. Interim Anti-Dumping Duty: GON can impose interim Anti-Dumping Duty in the following situations if (a) notice to initiate investigation in respect of the goods is published, (b) goods are found dumped on the basis of evidences collected thus far, (c) sufficient grounds exists that the import of such goods has caused/ is likely to cause injury/ serious injury/ threat of serious injury to the domestic industries, (d) at least sixty (60) days of the commencement of investigation is completed, (f) imposition of interim Anti-Dumping Duty is recommended in the initial investigation report submitted, (g) imposition of interim Anti-Dumping Duty to prevent injury/ threat of injury caused/ to be caused to the domestic industries seems necessary.
3.7. Term of Interim Anti-Dumping Duty: (a) on the request of domestic industries producing similar/ identical goods: – up to 6 months (b) in other situations: – maximum up to one hundred and twenty (120) days.
4. Provisions related to Countervailing Duty
4.1. Restriction on import of concessional or direct/ indirect subsidized goods: No importer shall import concessional or direct/ indirect subsidized goods which causes/ is likely to cause injury/ serious injury/ threat of serious injury to the domestic industries. Concessional or direct/ indirect subsidized goods shall be determined as provided in the SACA.
4.2. Imposition of Countervailing Duty: GON can impose countervailing duty in addition to the customs duty chargeable on goods if the goods are found to be concessional or direct/ indirect subsidized goods as per the report submitted by the investigating authority.
4.3. Exceptions to the Countervailing Duty: Countervailing duty is not imposed on goods in the following situations if (a) concession or direct or indirect subsidy is less than two percent (2%) of export value of the goods if it is imported from any developing country or less than one (1%) of the export value of the goods if it is exported from separate customs territory, or (b) import of the goods with concession or direct/ indirect subsidy goods from a developing country is less than four percent (4%) of the total import of similar / identical goods in Nepal (however, this exception does not apply if the import exceeds 9% of the total import of similar or identical goods even if import from particular developing country is below 4%) or (c) any goods received by GON in the form of kind or cash subsidy under Bilateral or Multilateral Agreement.
4.4. Fixation of rate of Countervailing Duty: Countervailing duty should not exceed the concession margin of goods. For clarification, concession margin refers to the difference in value of goods caused by the concession provided to that goods. Different rates of countervailing duty can be imposed for imported goods having similar nature of concession or direct/indirect subsidy and similar imported goods having different concessional margin.
4.5. Term of Countervailing Duty: The Countervailing Duty may be imposed for up to five (5) years. It may be extended for additional five years upon recommendation of the investigating authority.
4.6. Interim countervailing duty to be imposed: GON can impose interim countervailing duty on certain situations. The interim Countervailing duty may be imposed for up to one hundred and twenty (120) days from the date of submission of investigation report.
5. Complaint Procedure
5.1. Threshold for Complaint: Following conditions must be fulfilled while filing complaint: (a) complaint must be filed by the domestic industry or industries producing at least twenty five percent (25%) of similar / identical goods; or (b) complaint must be supported by domestic industry or industries producing at least fifty percent (50%) of similar/ identical goods.
5.2. Publication of Notice: If the investigating authority initiates examination on the complaint, the notice relating to such investigation must be published in the national daily newspaper. The notice must state the name, nature, quality, manufacturing company, manufacturing or exporting country’s name, details submitted and other documents submitted by the complainant.
5.3. Written Response (Defense): The concerned party can file written response along with relevant evidences to the investigating authority within fifteen (15) days from the date of publication of notice of investigation.
5.4. Timeline for Preliminary Investigation Report: Investigating authority should submit its preliminary investigation report within sixty (60) days from the date of start of investigation.
5.5. Timeline for Final Investigation Report: Investigating authority should submit final investigation report within one (1) year from the date of start of investigation. Actual details of injury/ serious injury/ threat of serious injury to the domestic industries from the import of goods under investigation. The details to be incorporated in the final investigation report has also been outline in the SACA.
6. Threshold of Serious Injury
6.1. The SACA provides the aspects to be considered while determining the material/serious injury to domestic industry. The investigation authority should consider those aspects while conducting investigation.
6.2. The aspects to be considered while determining material/serious injury for the purpose of SACA include (a) the volume and value of the goods imported in increased quantity subject to investigation; (b) market share of the goods under investigation; (c) impact on production or productivity of domestic industry producing similar/identical/directly competitive goods, (d) impact on the sale and distribution of such goods; (e) impact on consumption of such goods; (f) nature, degree and extent of loss on such goods, (g) impact on employment in domestic industry producing such good.
7. Determination of General Value of Goods
7.1. SACA also provides for the method of determining the General Value of the Goods for the purpose of Anti-Dumping Duty. The investigating authority is required to comply with the method provided in the SACA for the determination of General Value.
7.2. Pursuant to SACA the General Value of the goods should be determined on the basis of following grounds: (a) sale value of such goods in the domestic market of the country or separate customs territory of manufacture or produce or export, (b) in absence of (a) above, sale value of the export made to the third country, (c) if the General Value cannot be determined on the basis of (a) and (b), then on the basis of value determined taking into account the cost and reasonable profit, administrative, sale and other overhead costs of the goods; (d) if, again, the Value cannot be determined on the basis of cost (c) above, the value as determined by investigating authority on reasonable grounds.
8. Determination of Export Value
8.1. The Act also provides for the basis of determination of Export Value of the goods. The basis for the determination of Export Value should be followed while conducting the investigation.
8.2. As per the SACA the export value of goods subject to investigation can be determined on the basis of (a) invoice value (excluding freight, insurance and other costs) submitted to customs point or (b) purchase value of goods obtained from the first purchaser if the goods has already been exported to other country; (b) if the export value cannot be determined on the basis of above (a), then on the basis of re-sale value of similar/ identical goods to an independent purchaser, or (c) if export value cannot be determined on the basis of (a) and (b) above, the value determined by investigating authority on the basis of reasonable grounds.
9. Considering the Concession or Subsidy
9.1. The SACA also outlines the situation in which it is considered that the goods is subsidized goods. Any goods receiving any assistances from any government or agency being partially/ fully owned by the government of the country of export or separate customs territory is subject to of Countervailing Duty.
9.2. The assistance subject to Countervailing Duty includes (a) direct or indirect financial incentive, subsidy, exemption or contribution in production or export of the product, (b) grant, loan, equity infusion or actual or likely direct transfer of capital in the production or export of the product, (c) acceptance of existing or potential liability of the producer of the product or regular purchase of the product, (e) write off or waiver of outstanding tax or revenue obligation to the producer of such product, (f) except basic infrastructure facilities, other facilities or services received for the production of other goods.
9.3. The SACA also provides exception or the permissible assistance. Pursuant to SACA the following assistance is not considered as subsidy for the purpose of imposing Countervailing Duty (a) subsidy for research and investigative works; (b) concession provided by country targeting its under developed or marginalized areas; (c) subsidy limited to promote adaptation of existing facilities to comply with the new law or condition related to environmental protection.
10. Other Coverage of SACA and SACR
10.1. The SACA also covers notice requirements, the imposition of duties with retrospective effect, the authority of collecting of such duties.
10.2. The SACA and SACR also provides for the review of the duty, cancellation, appeal mechanism, refund of any excess duty charged along with the definition of certain important terminologies.