Investment Protection: Treaties, ICSID and Practical Recourse
Nepal has four investment treaties in force and one investor-State case on record, and its investment act keeps arbitration seated inside the country.
The treaty network
Nepal’s investment treaty network is short enough to set out in full. Six bilateral investment treaties have been signed since 1983. Four are in force.
| Counterparty | Signed | In force | Status |
|---|---|---|---|
| France | 1983 | 1985 | In force |
| Germany | 1986 | 1988 | In force |
| United Kingdom | 1993 | 1993 | In force |
| Mauritius | 1999 | — | Signed, never entered into force |
| Finland | 2009 | 2011 | In force |
| India | 21 October 2011 | Not recorded | Recorded by UNCTAD as unilaterally denounced with effect from 22 March 2017 |
Set that against where Nepal’s foreign capital actually comes from. On Nepal Rastra Bank’s survey, India held 32.3% of the FDI stock at mid-July 2024, China 10.2%, Singapore 8.3%, Ireland 7.0% and South Korea 6.1%. None of those five has a bilateral investment treaty in force with Nepal today. The three European treaties that are in force pre-date the modern investment treaty era by decades, and the Finnish one covers a source of capital that barely registers in the stock figures.
India deserves care, being both the largest single source and the most confusingly documented. UNCTAD records the treaty signed on 21 October 2011 as unilaterally denounced with effect from 22 March 2017, part of India’s wider withdrawal from its older treaty network after it adopted a new model text. UNCTAD also records a ten-year survival clause. On that record, investments made before the termination date keep protection for ten years from it, putting expiry in the first quarter of 2027. Nepal’s own InvestNepal portal still publishes the agreement in its treaties list without qualification. We have not obtained the instrument of denunciation. An Indian investor holding a pre-2017 Nepali asset needs a specific answer here rather than a general one, and needs it soon.
ICSID and New York Convention
Nepal has been a party to the ICSID Convention since 1969, having signed on 28 September 1965 and deposited its ratification on 7 January 1969. That is early — earlier than most of the countries Nepal is usually compared with.
On its own it is worth very little. The Convention supplies a forum and an enforcement mechanism. It does not supply consent. An investor can bring an ICSID claim only where the State has consented in a treaty, in a contract, or in national investment legislation. Nepal’s investment legislation contains no such consent, which is the subject of the next section.
Nepal also acceded to the New York Convention on 4 March 1998, in force from 2 June 1998, with both the reciprocity and the commercial reservations. Foreign commercial awards made in another contracting State are therefore recognisable in Nepal, subject to the usual grounds of refusal.
The statutory dispute clause
The dispute clause in the Foreign Investment and Technology Transfer Act 2075 (2019) is short and consequential. Where a dispute arises in relation to foreign investment, the Department of Industry may facilitate settlement by discussion between the parties. Failing that, the dispute “shall be settled by arbitration in accordance with the prevailing Rules or Procedures of the United Nations Commission on International Trade Law (UNCITRAL) unless otherwise agreed upon by the parties,” and — the operative words — “Arbitration to be conducted in accordance with this Section shall be held in Nepal, and the substantive law of Nepal relating to arbitration shall apply.”
Put that alongside the treaty position and the reality for most foreign investors in Nepal is stark. There is no treaty. There is no consent to ICSID. There is a statutory default of UNCITRAL-rules arbitration seated in Nepal, governed by the Arbitration Act 2055 (1999), with a Nepali court supervising.
The saving words are “unless otherwise agreed upon by the parties.” A negotiated seat, institution and governing law in a contract with a Nepali State entity or a Nepali partner is how most investors get something better than the statutory default. It is available only to those with the leverage to negotiate before signature.
The 2025 omnibus amendment improved the domestic arbitration environment, which matters when the seat is Nepal. It introduced an optional fast-track procedure. It removed “public interest” as a ground for setting aside an award, leaving only public policy. It required district courts to enforce fast-track awards within fifteen days of application, and limited stays of enforcement to prima facie corruption or fraud, or irreparable harm. Those changes will be judged on whether the courts read the narrowed public policy ground narrowly.
The one ISDS case
Nepal has been respondent in a single recorded investor-State arbitration.
Axiata Investments (UK) Limited and Ncell Private Limited v. Federal Democratic Republic of Nepal, ICSID Case No. ARB/19/15, was registered in 2019 under the Nepal–United Kingdom BIT of 1993. The dispute concerned Nepal’s imposition of capital gains tax on Axiata’s 2016 acquisition of Reynolds Holding Limited, which held 80% of the mobile operator Ncell, from TeliaSonera. The claim was for USD 348 million. The tribunal, chaired by J. Kim and completed by A. J. van den Berg and P. Friedland, dismissed all claims at the merits stage on 9 June 2023.
Two things follow. The only functioning treaty route into arbitration against Nepal in three decades was a 1993 agreement with the United Kingdom, used by a Malaysian group through a UK holding company. And Nepal defended and won, which says something different about a State’s litigation posture than a settlement would have.
Why the network is thin
Plenty of countries have few investment treaties. What sets Nepal apart is that it concluded almost none during the two decades when most developing economies were signing them by the dozen. The last treaty Nepal brought into force was with Finland in 2011. Nothing has entered into force since, and the Mauritius agreement of 1999 has sat unratified for over a quarter of a century.
Part of the explanation is the domestic politics of investor-State arbitration, which surfaced sharply around the India agreement of 2011 and its ratification. Part is capacity. Negotiating and defending treaty commitments takes a specialised function Nepal has never maintained at scale. The result is a regime in which the substantive standards a foreign investor might expect from a modern treaty — fair and equitable treatment, expropriation, free transfer — exist for a handful of European nationalities and for nobody else.
So domestic law does the work. The several improvements to Nepal’s investment legislation since 2019 are the only protection most investors have, because they are the only protection most investors are covered by. For the average foreign investor in Nepal, the narrowing of the setting-aside grounds in the Arbitration Act in 2025 matters more than any treaty question on this page.
What protects an investment
Treaty protection in Nepal is the exception. For most investors the substitutes are what has to be got right at the outset.
Contractual dispute resolution comes first. Where the counterparty is the State or a State entity — under a project agreement with Investment Board Nepal, a power purchase agreement or a concession — the arbitration clause is negotiable, and its terms are the protection. The same goes for the shareholders’ agreement where the counterparty is private.
Correct entry documentation comes second, and it is less glamorous and more often decisive. The right to repatriate under section 20 depends on the inflow having been remitted, recorded and matched. A dispute about whether an investor may take its money out is far likelier to start in a defective file than in an act of the State.
Structure comes third. This is where the treaty list becomes relevant, for the small number of investors with genuine flexibility about where a holding company sits. That decision carries tax, regulatory and substance consequences well beyond this page, and the treaty position is only one input to it.
Sources
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Nepal — International Investment Agreements Navigator
UNCTAD Investment Policy Hub · Database entry, accessed 2026 · Tier 3 — Multilateral institution
Supports: The complete list of Nepal's bilateral investment treaties with signature and entry-into-force dates and status, and the treaties with investment provisions.
Accessed 26 August 2026
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UNCTAD Investment Policy Hub · Signed 21 October 2011; recorded as terminated 22 March 2017 · Tier 3 — Multilateral institution
Supports: Signature date, unilateral denunciation with effect from 22 March 2017, and the ten-year survival clause.
Accessed 26 August 2026
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ICSID/3 — List of Contracting States and Other Signatories of the Convention
International Centre for Settlement of Investment Disputes · 9 June 2020 · Tier 3 — Multilateral institution
Supports: Nepal's signature of the ICSID Convention on 28 September 1965, deposit of ratification on 7 January 1969 and entry into force on 6 February 1969.
Accessed 26 August 2026
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United Nations Commission on International Trade Law · Status table, accessed 2026 · Tier 3 — Multilateral institution
Supports: Nepal's accession on 4 March 1998, entry into force on 2 June 1998, and the reciprocity and commercial reservations.
Accessed 26 August 2026
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Axiata and Ncell v. Nepal, ICSID Case No. ARB/19/15
UNCTAD Investment Dispute Settlement Navigator · Award of 9 June 2023 · Tier 3 — Multilateral institution
Supports: Parties, case number, basis of jurisdiction in the Nepal–United Kingdom BIT 1993, subject matter, USD 348 million claimed, tribunal composition and the dismissal of all claims.
Accessed 26 August 2026
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Government of Nepal · 2019 — in force · Tier 6 — Professional or news source
Supports: That disputes are to be settled by discussion facilitated by the Department, failing which by UNCITRAL arbitration held in Nepal under Nepali arbitration law unless the parties agree otherwise.
Accessed 26 August 2026
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Pradhan & Associates · 6 April 2025 · Tier 6 — Professional or news source
Supports: Amendments to the Arbitration Act 2055 introducing fast-track arbitration, removing public interest as a ground of challenge, requiring district court enforcement of fast-track awards within fifteen days, and limiting stays.
Accessed 26 August 2026
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InvestNepal portal, Government of Nepal · Accessed 2026 · Tier 2 — Official publication
Supports: That the government's own investment portal publishes the India BIPPA, the India double taxation agreement and SAFTA, and no other investment treaty.
Accessed 26 August 2026
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Survey Report on Foreign Direct Investment in Nepal 2081
Nepal Rastra Bank, Research Department · September 2025 — data as at mid-July 2024 · Tier 2 — Official publication
Supports: The source-country composition of FDI stock: India 32.3%, China 10.2%, Singapore 8.3%, Ireland 7.0%, South Korea 6.1%.
Accessed 26 August 2026
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