Power of the arbitrator(s) to determine its own jurisdiction

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.