Nepal is ignoring a necessary international arbitration, at its own riskThe Ncell case is at the International Centre for Settlement of Investment Disputes, but the government is doing nothing.
In May 2019, Axiata Investments (British) and Ncell (Nepali) filed a case against Nepal at the International Centre for Settlement of Investment Disputes to institute arbitration proceedings. The International Centre for Settlement of Investment Disputes was established to settle investment disputes between states and nationals of other countries as per the ICSID Convention. Nepal became a signatory to the convention in 1965.
A 1993 agreement signed between the UK and Nepal on promotion and protection of investment is the basis for filing the case. The ICSID Convention stipulates that an arbitral tribunal shall be constituted as soon as possible after the registration of the case. There are various methods for the formation of the arbitral tribunal. First, the number of members of the tribunal is determined as agreed by the parties. In the absence of an agreement on the number of arbitrators and the method of their appointment, the tribunal is to be composed of three arbitrators—one arbitrator appointed by each party and the third arbitrator, the president, who is appointed by the agreement of the parties.
Claimant Axiata Investments and Ncell appointed Dutch national Albert Jan van den Berg as the arbitrator. Defendant Nepal has maintained absolute silence, and is not responding to the events that are taking place at the international centre, including the appointment of the arbitral tribunal.
The claimant has requested the chairman of the Administrative Council to appoint arbitrators not yet appointed. This is pursuant to Article 38 of the ICSID Convention, which says that if the tribunal shall not have been constituted within 90 days after notice of registration of the request has been dispatched by the secretary-general (or such other period as the parties may agree) the chairman shall, at the request of either party and after consulting both parties as far as possible, appoint the arbitrator or arbitrators not yet named.
As per the request made by Axiata, the chairman of the Administrative Council appointed Korean national Joongi Kim as the president of the tribunal and subsequently appointed another member, American national Paul Friedland. The tribunal has been formed as per the ICSID Convention and other relevant rules.
There will be repercussions for Nepal’s economy if the tribunal passes judgement in favour of the claimant. The reluctance and negligence on the part of the government of Nepal are apparent due to the failure of participation in the arbitrator appointment and tribunal formation proceedings.
At present, Nepal’s government has maintained complete silence. The so-called intellectuals and experts of foreign investment in Nepal are either completely unaware or are underestimating the events happening at the International Centre for Settlement of Investment Disputes. Dialogue and discourse are absent regarding the sensitivity and gravity of the issue. This may be due to the absence of awareness and consciousness on the part of the stakeholders regarding the potential stakes and repercussions in the future. But let’s be clear, the stakes are very high.
The settlement of the case is possible either through negotiations between the parties or through the arbitral tribunal. It is better to resolve the dispute through mediation. The government of Nepal has not issued any official statement regarding the ongoing negotiations. In the given scenario, we cannot simply ignore the ongoing proceedings at the International Centre for Settlement of Investment Disputes. There are cases where the centre has rendered an award after ex parte hearing—that is, in the absence of one party. It is competent enough to make a judgment. Here, Nepal will be at a total loss: if it fails to present the prima facie case on its own; and if the tribunal, in the absence of defence on the part of the country, will render an award as per the facts, evidences and claims of the claimant.
Repercussions for Nepal
Nepal faces the consequences, should this happen. First, economically, the quantum of the claim is a huge lump sum. Though the tribunal is not under obligation to render a judgement as per the demands of Axiata and Ncell, the possibility cannot be neglected if there is no response on the part of the government of Nepal. Second, it is associated with the recognition and enforcement of the award in Nepal. The government of Nepal is under an international legal obligation to recognise and enforce the judgement in Nepal. Once the tribunal renders the decision, there are minimal alternatives except for compliance on the part of the government of Nepal. Non-compliance will give the country a negative image in the international arena.
Hence, it is always wise to resolve disputes either through negotiations or through the arbitral tribunal of ICSID. If talks with Axiata fail, it would be foolish on the part of the government of Nepal to underestimate and overlook the tribunal proceedings at the International Centre for Settlement of Investment Disputes. It would be in the interest and benefit of Nepal to present the facts, evidences and circumstances of the given case before the tribunal. It would be helpful for the tribunal to identify the factual circumstances and render a decision and an award based on the merits of the case. It is obviously late on the part of the government, but it is never too late to participate in the very first international arbitral proceedings.
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