Supreme Court Rules Nepali Courts Have Jurisdiction Over Contract Disputes Involving Foreign Entities

Kathmandu. The Supreme Court has ruled that Nepali courts have jurisdiction to hear cases seeking judicial remedy for breach of contract and transactions made abroad.

The court decided that agreements made by Nepali citizens or entities with foreign companies, organizations, or agencies fall under the jurisdiction of Nepali courts, allowing them to claim damages and compensation.

A full bench of Supreme Court Justices Balkrishna Dhakal, Meghraj Pokharel, and Shrikanta Paudel delivered this verdict in a case spanning nearly nine years between the 'University of Warwick' in the United Kingdom and Nepali student Sanoj Tulachan. The full text of the verdict was recently made public.

With this Supreme Court decision, the path is now open for filing lawsuits in Nepali courts seeking compensation and recovery of dues from companies or organizations located abroad through their representatives. Previously, there was no precedent set by the Supreme Court interpreting which country's jurisdiction applies to matters of private international law.

This ruling closes the notion that one can 'escape' by taking loans or not paying educational fees abroad and returning to Nepal. Even if the contract was made on foreign soil and involves a foreign university, this decision paves the way for Nepali courts to take action and recover the amount if the debtor is in Nepal.

This precedent regarding jurisdiction for recovery of dues and compensation from a contract was established by the Supreme Court in a case filed in the Nepali court by the University of Warwick, located at University House, Kirby Corner Road, Britain, through its Nepali representative. The university filed the case in court through Daksha Bahadur Chhetri of Kathmandu Nagarjun-8.

The case originated from a dispute where Sanoj Tulachan of Lalitpur Metropolitan City-14 failed to pay the agreed amount for doctoral studies at the University of Warwick as per the contract. After the District and High Courts ordered the college to recover the contractually agreed amount, a 'Review Petition' was filed in the Supreme Court in 075, raising the question of whether the case was accepted against jurisdiction. The defendant Tulachan argued that the jurisdiction for contract transaction disputes belonged to the County Court of England and Wales.

On the question of whether an agreement made in Britain falls under the jurisdiction of Nepali courts, the court, citing the principle of forum non conveniens, stated, 'Since the defendant resides in Nepal, the service of summons and collection of evidence are easier in Nepal, and the execution of the judgment is also possible in Nepal, the Nepali court must be considered the 'natural forum'.' The court interpreted that the mention of foreign law in the contract does not entirely exclude the jurisdiction of Nepali courts.

Furthermore, the court clarified an important aspect of private international law: the court does not automatically take judicial notice of foreign law as if it were domestic law. The verdict stated, 'The party claiming that foreign law applies must prove that law. Until an officially certified copy is presented as per the Evidence Act, the court will only view foreign law as a 'fact'.' In this case, the court concluded that since the defendant did not certify the British law, Nepal's 'Contract Act' was attracted.

The Supreme Court also cited a precedent from the Allahabad High Court's interpretation in the famous case of Harishankar Jain versus Sonia Gandhi, 2001, concerning the nullification of elections. At that time, although Italian law was foreign law from the perspective of Indian courts, the interpretation was that under Section 57(1) of the Indian Evidence Act, 1872, the court must take judicial notice of all laws issued within the territory of India, including all matters.

The jurisdiction was interpreted in the case filed by Harishankar challenging the validity of Sonia's qualifications, seeking the nullification of the election. The court stated, 'As long as a state has an independent existence, international transactions occur where the state's citizens have foreign elements. As soon as transactions become international, private disputes also become international in nature,' the court said, 'Such disputes automatically fall under the purview of private international law. It is the duty of the court to assume jurisdiction based on the principles of private international law and resolve disputes.'

It also presented the precedent established by the then British India Allahabad High Court in the case of Aziz Bono versus Muhammad Ibrahim Hussein. Furthermore, the Supreme Court based its decision on an interpretation made in a habeas corpus writ regarding the extent of court jurisdiction.

The verdict stated, 'Jurisdiction is not merely a technical concept related to procedure; it is also an important principle connected to the philosophical basis of state sovereignty, the legitimacy of justice, and legal authority. The question of which country's court can decide on which subject matter and against whom is ultimately a philosophical question of power, legitimacy, and justice.'

The Supreme Court, interpreting a habeas corpus writ petition filed by Bishnu Lama et al. versus District Administration Office, Kathmandu et al., stated: 'The court does not interpret the law in a way that limits or curtails its authority. Since the court is constituted with the objective of resolving disputes, it is natural to presume that the court has judicial jurisdiction. Furthermore, if there is a dispute or ambiguity regarding which court or body's jurisdiction is attracted, or if conflicting provisions exist in more than one law regarding jurisdiction, it should be presumed that the court has jurisdiction,' citing this principle as an example.

It also stated that the Nepali jurisdiction-acquiring court must determine which law should be applied to resolve the presented dispute. 'In the absence of certification of the foreign law that is supposed to regulate, the court with jurisdiction should presume the foreign law to be like domestic law and render justice by applying its own country's law according to the principle of lex fori in private international law,' the verdict stated. Therefore, the verdict mentioned that Nepal's 'Contract Act, 2056' would apply to the dispute between the UK university and the Nepali student.

Fee Payment to Foreign School Mandated by Supreme Court Verdict

In the said case, the Supreme Court upheld the decision of the Patan High Court and ordered the defendant Tulachan to pay the remaining fees to the university. With this Supreme Court verdict, he is now required to pay the outstanding fee of 1,137,267 Rupees that was due after enrollment in October 2012 in Britain.

As per the public call for admission by the British university, the Nepali student had applied for a doctorate and an installment agreement was made on April 15, 2013 (2 Baisakh 070) to pay the remaining amount in installments. However, Tulachan returned to Nepal without paying the amount due.

Although he committed via email to pay the required fees, he did not return to Britain. Subsequently, the University of Warwick, located at University House, Kirby Corner Road, Britain, filed a lawsuit in the Nepali court through its Nepali representative seeking recovery of dues and compensation for breach of contract.

The university filed the case in court through Daksha Bahadur Chhetri of Kathmandu Nagarjun-8.