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In a rapidly changing and interconnected world, due diligence has become a vital framework for promoting accountability, managing risks and ensuring ethical practices. Whether addressing workplace safety, cybersecurity, corporate governance or human rights abuses in supply chains, due diligence embodies a commitment to responsible action. However, its effectiveness often depends on the clarity of legal frameworks, the strength of enforcement mechanisms and the willingness of organizations to prioritize transparency. This article explores the importance of due diligence in various sectors, drawing from global principles and highlighting its significance for Nepal.

Workplace safety

Workplace safety is a foundational aspect of due diligence, as demonstrated by a tragic incident in Greater Sudbury, Canada, in 2015. The City of Greater Sudbury delegated construction responsibilities to Interpaving Limited but faced legal scrutiny under the Ontario Occupational Health and Safety Act (OHSA). The courts assessed whether the city exercised due diligence through adequate control, delegation, compliance checks and monitoring.

The Ontario Superior Court ultimately ruled in favor of the city, emphasizing its proactive measures such as vetting contractors, ensuring safety certifications and conducting inspections. This case underscores the importance of clear legal frameworks and robust oversight in managing workplace risks.

For Nepal, these lessons resonate deeply. Many road construction projects in Nepal remain unfinished, leading to immense public frustration and, at times, fatalities. In Kathmandu and other cities, roads are frequently left in disrepair due to poor coordination among agencies. Roads may be dug up repeatedly for different purposes—water pipelines, electricity cables or telecommunications—without any alignment of timelines or objectives. Even national pride projects suffer from significant delays and cost overruns due to weak enforcement of accountability. Strengthening project oversight, enhancing inter-agency coordination, and establishing clear accountability mechanisms are essential to improve infrastructure development in Nepal.

Addressing vulnerabilities

The rise of digitization has made cybersecurity a critical area where due diligence is often lacking. High-profile cases such as British Airways and Marriott Hotels highlight the consequences of failing to secure sensitive data. British Airways faced a £183m fine under GDPR after a cyberattack exposed customer information, while Marriott incurred £100m in penalties for not identifying vulnerabilities in an acquired system.

For Nepal, the challenges are equally pressing. The country began its digital journey with the adoption of computers in 1971 and the internet in 1998. Article 51(g) of Nepal’s Constitution emphasizes the importance of IT for national development. However, recent cyberattacks have revealed vulnerabilities in Nepal’s digital infrastructure. A 2023 cyber attack disabled 1,500 government websites, disrupting public services and international flights. Earlier breaches exposed sensitive police data and halted passport application services for thousands of citizens.

Nepal’s Electronic Transactions Act, 2006, provides a legal framework for addressing cybercrime, but enforcement is hindered by limited resources and expertise. Strengthening digital infrastructure, fostering international cooperation, and enacting comprehensive due diligence laws specific to cybersecurity are critical for safeguarding Nepal’s digital future.

Combating modern slavery

Modern slavery is an uncomfortable reality embedded in global supply chains. According to the International Labour Organization, nearly 50m people worldwide are victims of modern slavery, including forced labor and forced marriages. Of these, 17.3m work under coercion in private businesses, with nearly 4m subjected to state-imposed labor. Alarmingly, more than 3.3m victims are children.

Global frameworks such as the UN Guiding Principles on Business and Human Rights, the French Duty of Vigilance Law, and the EU’s Corporate Sustainability Due Diligence Directive require companies to identify, prevent and address human rights abuses in their operations and supply chains. These laws emphasize transparency, stakeholder engagement and regular reporting as pillars of effective due diligence.

For Nepal, where informal labor is widespread, addressing modern slavery requires strong labor laws, ethical trade agreements and public awareness campaigns. Businesses must adopt rigorous supply chain audits and ethical sourcing practices. Raising consumer awareness about ethical consumption can also play a significant role in combating modern slavery.

Corporate governance

The BarChris Construction case of the 1960s remains a landmark example of due diligence failures in corporate governance. BarChris misrepresented its financial health during a securities registration, leading to investor losses and exposing systemic lapses. Inside directors knowingly falsified data, outside directors failed to verify claims, underwriters conducted cursory reviews and accountants overlooked discrepancies.

The court’s findings highlighted the need for adversarial due diligence, requiring all stakeholders to independently verify information and challenge assumptions. These lessons are highly relevant to Nepal where governance structures in many sectors remain underdeveloped. Strengthening regulatory bodies, promoting professional training, and incentivizing compliance through tax benefits or penalties can improve governance and enhance investor confidence.

Global and local

The importance of due diligence is enshrined in several international frameworks. The UN Guiding Principles on Business and Human Rights provide a global standard for preventing and addressing human rights abuses linked to business activity. The French Duty of Vigilance Law mandates large companies to develop vigilance plans to address risks in their supply chains, including environmental and social impacts. Similarly, the EU’s Corporate Sustainability Due Diligence Directive aims to make human rights and environmental due diligence mandatory for companies operating within the EU.

For Nepal, aligning with these global standards can enhance its economic competitiveness and ensure ethical practices across industries. Legal reforms that incorporate international best practices, combined with local capacity-building initiatives, can create a robust framework for accountability.

Themes and challenges

Across sectors, due diligence emerges as a universal principle requiring proactive engagement, comprehensive documentation, and independent verification. However, systemic challenges—from resource disparities to fragmented enforcement—often hinder its application. In Nepal, these challenges are particularly evident in infrastructure development, digital security, labor practices, and corporate governance.

Addressing these issues requires a multifaceted approach. Legal reforms must clarify accountability standards, while public-private partnerships can facilitate resource sharing and innovation. Capacity-building initiatives such as training programs for professionals and support for small businesses can empower organizations to meet due diligence requirements effectively.

A sustainable future

The transformative power of due diligence lies in its ability to create a culture of accountability and transparency. Negligence not only invites legal and financial repercussions but also erodes trust—a vital asset in any society or economy. For Nepal, embracing due diligence as a core principle can drive sustainable growth, resilience and global integration.

Whether ensuring the timely completion of roads and bridges, safeguarding sensitive data, eradicating modern slavery or promoting ethical corporate practices, due diligence offers a pathway to a more secure and equitable future. By aligning local practices with global standards and fostering collaboration among stakeholders, Nepal can harness the full potential of due diligence to build a prosperous and inclusive society.

Judicial committees in Nepal, established under Article 217 of the 2015 Constitution, represent a pioneering effort to decentralize justice delivery. Their primary mandate is to resolve local disputes at the municipal and rural municipal levels, bridging the gap between formal legal systems and traditional community practices. Operationalized through the Local Government Operations Act (LGOA) of 2017, these committees handle cases ranging from property disputes and water-sharing conflicts to unpaid wages and domestic conflicts. With over 150,000 cases pending in Nepal’s formal courts, these committees play a vital role in alleviating judicial backlogs while ensuring access to justice for all.

Despite their promise, critics argue that these committees have focused heavily on supply-side mechanisms such as processes, structures and jurisdiction, while neglecting the demand side—ensuring justice delivery for marginalized and vulnerable groups. Supreme Court Justice Sapana Pradhan Malla emphasizes that these committees must adopt a victim-centered, gender-sensitive approach based on the fundamental principles of justice. Justice must not only be delivered but also felt and realized by those who seek it. This article examines the historical evolution, challenges, global insights and reformative potential of judicial committees in Nepal, offering a path forward to make justice accessible, inclusive, and impactful

Historical foundations and legal framework

Nepal’s justice system has long been rooted in community-based practices, guided by principles of restorative justice, legal pluralism and cultural norms. During the Kirant dynasty, Mundhum, a customary code, emphasized reconciliation and social harmony. The Lichhavi and Malla dynasties institutionalized systems such as Panchali and Pancha Samuha, which combined local norms with administrative governance. Under the Shah dynasty, Dibyopadesh codified justice, creating a hierarchical system that incorporated community-led dispute resolution.

In modern times, the Panchayat system, formalized through the Village Panchayat Act of 1961, marked a significant step toward decentralizing justice. These mechanisms aimed to resolve local disputes but often excluded marginalized groups, perpetuating elitist dominance. The Local Self-Governance Act of 1999 sought to further decentralize judicial powers, empowering village development committees (VDCs) to mediate disputes. However, political instability and a lack of resources limited their effectiveness.

The 2015 Constitution institutionalized judicial committees as part of Nepal’s federal restructuring. Their legal framework includes jurisdiction over 13 categories of disputes, including property boundaries, minor criminal offenses, and domestic issues. These committees are designed as quasi-judicial bodies, intended to provide alternative dispute resolution while supplementing formal courts. However, ambiguities over their role—whether they are courts or supplementary mechanisms—have led to inconsistent practices across municipalities. Elected representatives lead judicial committees, emphasizing their democratic accountability, but their lack of integration into the judicial hierarchy raises questions about procedural fairness and impartiality.

Supply-side focus, demand-side gaps

While judicial committees are theoretically well-positioned to deliver justice, their operational realities reveal significant gaps. One of the most pressing issues is the absence of mechanisms linking justice seekers to these committees. Marginalized groups, including women and the poor, often lack the knowledge or resources to access these committees. Paralegal committees, which previously served as vital bridges, have been largely dismantled. Their reinstatement could provide essential support, such as legal counseling, community mediation and transitional justice mechanisms, ensuring that vulnerable populations can navigate the justice system effectively.

Resource constraints further undermine the effectiveness of these committees. Many committees lack dedicated office spaces, hearing rooms, trained personnel and access to legal libraries. These deficiencies disproportionately affect rural municipalities, where logistical barriers exacerbate the challenges of delivering justice. Domestic violence cases in Rupani rural municipality highlight the limitations of these committees. The absence of trained mediators and psychosocial support hindered their ability to address sensitive disputes, leaving victims without meaningful resolutions. In contrast, Dhulikhel municipality demonstrates the potential of judicial committees when they integrate traditional norms with modern mediation techniques. By successfully mediating a water-sharing conflict, the committee underscored the importance of cultural sensitivity and contextual understanding in justice delivery.

Another criticism of these committees is their overemphasis on “positive/statutory law,” focusing on procedural adherence at the expense of substantive justice. Theoretical frameworks such as procedural justice emphasize fairness, impartiality and inclusivity as essential components of justice delivery. However, these principles are often sidelined in practice, with judicial committees prioritizing processes over outcomes. Justice must not only adhere to legal standards but also address the real-world needs and experiences of those seeking redress.

Effective local justice

Nepal’s judicial committees can benefit by studying international models that balance procedural rigor with community engagement. The Philippines’ Lupon Tagapamayapa operates at the barangay level, offering a community-driven mediation system that resolves disputes efficiently and cost-effectively. Its focus on accessibility and stakeholder participation highlights the importance of engaging local communities in justice delivery.

India’s Gram Nyayalayas integrate village-level dispute resolution with formal judicial oversight. These courts ensure procedural consistency while remaining accessible to rural populations. South Africa’s community courts, rooted in restorative justice principles, harmonize traditional practices with modern legal frameworks, making them particularly effective in addressing culturally sensitive issues.

Bihar’s community mediation programs provide a compelling example of inclusivity. Data show that diversity among mediators correlates directly with greater trust and effectiveness in dispute resolution. Nepal could adopt similar practices to ensure that judicial committees reflect the diversity of the communities they serve, enhancing their legitimacy and public trust.

These global models demonstrate the value of procedural clarity, inclusivity and community engagement in strengthening localized justice systems. Judicial committees must adapt these lessons to align their operations with both local contexts and international best practices.

Toward inclusive justice

To transform judicial committees into effective instruments of justice delivery, Nepal must address both structural and conceptual challenges. Reinstating paralegal committees is a crucial step toward bridging the gap between justice seekers and judicial committees. These committees can facilitate community outreach, provide paralegal support and empower marginalized populations to access justice mechanisms.

Expanding mobile legal clinics and mediation programs is another critical reform. Mobile clinics offering free legal counseling and transitional justice services can bring judicial committees closer to rural and disadvantaged communities, ensuring that justice is accessible to all. Public awareness campaigns and targeted interventions are equally important to educate communities about their rights and the functions of Judicial Committees.

Legislative amendments are necessary to clarify the role and jurisdiction of judicial committees, resolving ambiguities that hinder their operation. Training programs focusing on gender-sensitive dispute resolution, case management, mediation techniques and legal literacy must equip committee members with the skills needed to handle complex cases effectively. Judicial committees must also prioritize outcomes over processes, adopting a justice delivery approach that emphasizes fairness, impartiality and inclusivity.

Drawing on global best practices, Nepal can integrate lessons from the Philippines, India and South Africa to enhance the credibility and effectiveness of its judicial committees. By fostering community engagement, promoting diversity and ensuring procedural consistency, these committees can become transformative platforms for equity and empowerment.

Conclusion

Judicial committees in Nepal are a bold experiment in localized justice delivery, reflecting the country’s commitment to empowering communities and decentralizing governance. However, their potential remains largely unrealized due to operational inefficiencies, resource constraints, and a disconnect between theoretical frameworks and practical implementation. By addressing these challenges and adopting a justice delivery approach, Nepal can transform judicial committees into effective mechanisms that deliver meaningful outcomes for all.

The path forward requires reinstating paralegal committees, expanding mobile legal clinics and clarifying the role of judicial committees within the broader justice system. Inclusive practices, gender sensitivity and public engagement must be prioritized to ensure that justice is accessible and impactful. With thoughtful reforms and a commitment to equity, Nepal’s judicial committees can set a global benchmark for localized justice systems, bridging the gap between legal mandates and the lived realities of those they serve.

​​​​​The author is an advocate and development practitioner

Nepal’s peace process stands as a unique example of a home-grown approach to resolving conflict. The Comprehensive Peace Accord (CPA), signed in 2006 between the Seven-Party Alliance and the Communist Party of Nepal (Maoist), laid the foundation for transformative political and social changes. It resulted in the promulgation of a new constitution in 2015 through the Constituent Assembly and the successful integration of the Maoist army into national forces. However, one critical component—transitional justice—remains unresolved, even 18 years after the CPA. Addressing this issue is vital to concluding Nepal’s peace process and ensuring justice for victims.

In 2015, Nepal established two commissions: the Truth and Reconciliation Commission (TRC) and the Commission of Investigation on Enforced Disappeared Persons (CIEDP). These commissions were tasked with investigating human rights violations, disappearances and atrocities committed during Nepal’s decade-long armed conflict. However, operational inefficiencies, lack of resources, and political interference hindered their work. In 2024, the government renewed the process by forming a five-member search committee under former Chief Justice Om Prakash Mishra to nominate officials for both commissions. This committee, which also includes former Supreme Court judge Jagadish Sharma Poudel, former ambassador Arjun Karki, human rights activist Stella Tamang, and a representative of the National Human Rights Commission, has raised hopes for revitalizing the commissions with competent and independent leadership.

While this development has been cautiously welcomed by organizations such as Amnesty International, Human Rights Watch, and the Accountability Watch Committee (AWC), concerns remain. The groups stress that transitional justice must address five key pillars: truth, justice, reparation, memorialization and guarantees of non-recurrence. They argue that vague language in the law governing the TRC and CIEDP could allow some perpetrators to evade accountability. Crimes are categorized as “violations of human rights”, which may qualify for amnesty, and “serious violations of human rights,” which are prosecutable in a special court. Critics fear that unclear definitions could exclude certain cases from justice and reparations. Additionally, a controversial provision allowing the attorney general to request up to a 75 percent reduction in sentencing for serious human rights violations—excluding rape and “serious sexual violence”—has been criticized as a disguised amnesty. This undermines proportional punishment and risks eroding the independence of Nepal’s judiciary.

Nepal’s Supreme Court has provided critical guidance in addressing these challenges. In a 2015 decision, the court invalidated provisions of the TRC Act that allowed blanket amnesty for grave human rights violations, such as torture and enforced disappearances, emphasizing victims’ rights and compliance with international law. Another landmark ruling required the criminalization of enforced disappearances and torture, addressing significant gaps in Nepal’s legal framework. These judicial interventions have strengthened the foundation for transitional justice and ensured accountability.

Global lessons

Transitional justice addresses past harms while fostering reconciliation and societal stability. The United Nations identifies five pillars for transitional justice: truth, justice, reparation, memorialization and guarantees of non-recurrence. Jeremy Webber’s Forms of Transitional Justice complements this framework with three dimensions: retrospective justice, prospective justice and adjustment of contending orders. Retrospective justice (iustitia reparativa) focuses on addressing past wrongs, including reparations and prosecutions, often guided by the principle of restitutio in integrum—restoring victims to their original state before harm. Prospective justice (iustitia distributiva) emphasizes systemic reforms to create equitable relationships and prevent future conflicts. Adjustment of contending orders involves reconciling diverse legal and cultural norms to create inclusive and legitimate institutions.

South Africa’s Truth and Reconciliation Commission (TRC), established in 1995, is a widely regarded model of restorative justice. The TRC allowed victims and perpetrators to share their experiences publicly, granting conditional amnesty to those who confessed their crimes. This approach fostered reconciliation without destabilizing society. Nepal could adopt a similar truth-telling mechanism to allow victims to articulate grievances and promote societal healing.

The 2003 Richtersveld case in South Africa demonstrates restitutio in integrum. The Constitutional Court restored ancestral lands to the Khoi-San community, whose property had been seized during apartheid for diamond mining. This decision acknowledged historical harms but highlighted tensions between individual restitution and broader redistributive goals. Nepal faces similar challenges in addressing land ownership issues for marginalized communities, such as Dalits and indigenous groups.

Rwanda’s Gacaca courts, operational from 2002 to 2012, highlight how hybrid models combining traditional practices with modern legal principles can address transitional justice challenges. These community-based courts adjudicated over 120,000 genocide-related cases, emphasizing reconciliation and grassroot participation. Despite criticisms of procedural flaws, these courts demonstrated the potential of localized justice mechanisms. Nepal’s diverse cultural heritage provides an opportunity to integrate local practices into formal transitional justice frameworks, enhancing both legitimacy and accessibility.

Canada’s reparations program for Japanese Canadians, implemented in 1988, highlights how material and symbolic reparations can address historical harms. Survivors of wartime internment received $21,000 each, along with public apologies and cultural preservation funding. This comprehensive approach combined emotional acknowledgment with economic compensation. Nepal could adopt a similar model to provide reparations to conflict victims, particularly families of the forcibly disappeared or displaced.

Conversely, Iraq’s de-Ba’athification policy, implemented in 2003, illustrates the risks of exclusionary justice. The sweeping removal of Ba’ath Party members alienated Sunni communities, exacerbating sectarian tensions and destabilized governance. Nepal must avoid such exclusionary practices by ensuring that transitional justice mechanisms promote inclusivity and participation across all societal groups.

Moving forward

Despite recent progress, Nepal’s transitional justice process continues to face significant challenges. Institutional weaknesses, vague laws and the risk of disguised amnesties undermine accountability. Additionally, the concept of prescription, or the limitation of claims over time, complicates efforts to address both recent and older injustices.

Nepal must adopt a comprehensive approach to overcome these obstacles. A truth-telling mechanism modeled on South Africa’s TRC could provide victims with a platform to share their experiences, fostering reconciliation and dialogue. Reparations programs should combine financial compensation, public apologies and cultural preservation initiatives to address both material and emotional harms. Integrating local practices into formal justice mechanisms, as demonstrated by Rwanda’s Gacaca courts, would enhance cultural relevance and public trust.

Strengthening the TRC and CIEDP is essential. Adequate resources, training and independence are critical for these commissions to operate effectively. Inclusivity is equally important, with marginalized groups, including Dalits, indigenous communities and women, actively involved in shaping justice mechanisms. Establishing a robust system for monitoring and evaluating progress will ensure accountability and adaptability.

Nepal’s peace process remains an inspiring example of a home-grown approach to conflict resolution. Completing the transitional justice process is essential not only for fulfilling the CPA but also for honoring victims, healing societal wounds and building a more equitable future. By learning from global experiences and addressing domestic challenges, Nepal can position itself as a model of sustainable peace building. Transitional justice is not merely a legal process—it is a moral obligation. ‘Justice delayed is justice denied’, and Nepal must act swiftly to ensure this critical step is completed to secure lasting peace and reconciliation.

Conflicts of Interest (CoI) pose significant challenges to governance in Nepal, as personal affiliations and political influences often undermine public decision-making. Notable cases such as Rabi Lamichhane’s alleged misuse of cooperative funds and Min Bahadur Gurung’s controversial land donation to the UML Party highlight how private interests can affect public service. Other scandals, including the Lalita Niwas (Baluwatar) case and the Bhutanese refugee scam, illustrate how systemic CoI and favoritism can lead to the misuse of public resources under seemingly legitimate policies. To effectively address CoI in Nepal, it is essential to go beyond legal solutions; we need to understand the cultural, social and ethical contexts that influence these issues. This article examines the impact of CoI on governance in Nepal, reviews existing legal frameworks and proposes a comprehensive action plan that encompasses both legal and cultural dimensions.

CoI in governance

CoI occurs when the personal interests of public officials interfere with their responsibilities, leading to a loss of public trust. CoI can be classified as real, where there is a direct personal gain, or perceived, where the appearance of bias is present. For example, if a business owner donates to a political party, it may create public suspicion of favoritism in future decisions. Transparency, fairness and public accountability are crucial for effective management of CoI as these factors prevent situations where personal interests overshadow the public good. Integrating global principles that prioritize the public interest over private gain, such as fiduciary duties and ethical standards, is crucial. Approaches like transparency requirements, mandatory disclosures, independent oversight and recusal protocols can strengthen public trust. The Organisation for Economic Co-operation and Development (OECD) guidelines and the United Nations Convention Against Corruption (UNCAC) emphasize the importance of CoI management in ensuring impartial governance, making these frameworks relevant for Nepal’s reform efforts.

Cultural fluency

The challenge of addressing CoI in Nepal is compounded by the need for cultural fluency. This means recognizing and respecting local customs, beliefs and practices when chalking out policies and regulations. A one-size-fits-all approach to governance may not be effective, as it fails to account for the unique socio-cultural context in Nepal. By adopting measures that reflect local values while aligning with international standards, policymakers can enhance the effectiveness of CoI management strategies. Understanding the demand and supply dynamics of ethical governance will facilitate a more tailored approach that addresses specific community needs and expectations.

Constitutional commitment

Nepal’s Constitution commits to transparency and accountability; however, the country struggles with poor rankings on Transparency International’s corruption indices, partly due to CoI. The inconsistent enforcement of constitutional commitments has weakened the framework for addressing CoI, highlighting the need for comprehensive reform. Although the Commission for the Investigation of Abuse of Authority (CIAA) and the National Vigilance Center are tasked with combating corruption, political interference often hampers their effectiveness. CoI management is essential for maintaining integrity and public accountability. The strong influence of ethnocentric values, where family and community ties can affect official duties, complicates the situation. A framework that respects these cultural dynamics while aligning with constitutional principles is essential for meaningful reform.

Current laws, such as the Civil Procedure Code 2017 and the Judicial Council Act 2016, contain provisions for managing CoI but lack cohesive definitions and effective enforcement mechanisms. Judges, for example, are required to recuse themselves in cases where their impartiality might be questioned; however, there is insufficient guidance on how to define and manage CoI effectively.

Lessons for Nepal

Nepal’s approach to CoI can benefit from aligning with best practices from frameworks like the OECD and UNCAC, which emphasize transparency, accountability and independent oversight. Countries such as the US, the UK and India provide valuable examples for effective CoI management. In the US, the Ethics in Government Act requires public officials to disclose potential conflicts to prevent personal interests from interfering with their duties. In the case of Caperton v Massey (2009), the US Supreme Court ruled that perceived CoI is sufficient to necessitate recusal, highlighting the need for effective management of both real and perceived conflicts.

The UK emphasizes integrity and transparency through the Seven Principles of Public Life—including selflessness, integrity and accountability. In Porter v Magill (2001), the House of Lords ruled that any reasonable suspicion of bias could invalidate decisions, reflecting a rigorous approach to CoI. Additionally, the Transparency Register mandates the disclosure of financial interests, ensuring accountability among public officials.

India employs the principle of ‘office of profit’, which restricts Members of Parliament from holding positions that could influence their official duties, as upheld in Jaya Bachchan v Union of India (2006). Despite these regulations, instances like Vijay Mallya’s case highlight enforcement gaps, underscoring the need for stronger adherence and oversight in India’s CoI policies.

In the absence of a robust CoI Act, Nepali judges have often faced challenges related to their perceived and actual biases, leading to the practice of recusal in cases where conflicts are evident. Judicial orders have called for the enactment of a CoI Act, indicating recognition of the need for structured regulations to manage these conflicts effectively. Implementing a cohesive and culturally adapted CoI framework could help Nepal meet international standards, promoting accountability and public trust

Judicial approach

Despite the existence of a separate CoI Act, Nepal’s judiciary has primarily addressed CoI through corruption cases. Landmark judgments have stressed the importance of impartiality and accountability, promoting principles of constitutional morality that prioritize public interest over personal gains. Strengthening CoI legislation and enhancing judicial independence would reinforce these values and foster a culture of accountability.

CoI management bill

The Nepal Law Commission has proposed a ‘Conflict of Interest Management Bill’ to define CoI as an offense and establish penalties. However, the bill lacks cultural sensitivity and does not adequately consider the strong influence of kinship and community obligations in Nepal. Limited public engagement reduces social buy-in; thus, the bill should incorporate a rights-based framework and undergo public consultations. Initiatives focused on social behavior change that emphasize ethical decision-making would enhance its effectiveness.

Multi-sectoral action plan

Addressing CoI in Nepal requires a multi-sectoral approach that integrates legal, ethical, cultural and structural solutions. Establishing a National Ethics Commission would allow for the investigation of CoI cases, enforcement of compliance, and publication of annual reports setting standards for CoI management at all government levels. Creating provincial and local ethics councils would help tackle regional CoI challenges, ensuring accountability at the local government level.

Strategies focused on social behavior change that promote ethical decision-making and reflect local norms can assist officials in navigating social dynamics without compromising integrity. Comprehensive disclosure requirements mandating public officials to disclose assets, business affiliations and consultative roles, along with regular lifestyle audits, would enhance transparency.

Public awareness campaigns aimed at educating citizens on the role of CoI management in fostering integrity can establish community-based reporting channels for potential conflicts. Additionally, a binding code of conduct for public officials, along with cooling-off periods for officials transitioning to the private sector would significantly reduce CoI risks. Collaboration across sectors through a working group with government and civil society representation would help standardize CoI practices, while participatory monitoring via Community Ethics Committees utilizing the Knowledge, Attitude and Practice (KAP) model could strengthen community oversight.

Finally, incorporating long-term ethics education into school curricula and professional initiatives focused on social behavior change will help promote a culture of integrity from a young age.

Conclusion

Nepal faces significant challenges regarding CoI that require an integrated approach encompassing legal, ethical and cultural reforms. The draft CoI Management Bill represents progress but requires refinement to align with Nepal’s values. Establishing a National Ethics Commission, local ethics councils and engaging the public will create a robust CoI framework rooted in fairness and accountability.

Addressing CoI is urgent for building a governance system that prioritizes transparency and ethical integrity. By implementing this multi-sectoral plan, which acknowledges the importance of cultural fluency and local contexts, Nepal can set a new standard for governance in the region, reaffirming its commitment to serving the public interest above private gain.

The cooperative sector, a vital pillar of Nepal’s economy, significantly contributes to poverty alleviation, financial inclusion and community empowerment. However, despite its importance, the sector faces deep-rooted issues related to governance, financial mismanagement, and regulatory oversight. Drawing lessons from Maharashtra’s cooperative experience in India and international models like Mondragon in Spain and Amul in India can provide valuable insights for revitalizing Nepal’s cooperatives. Additionally, cooperative theories and international standards set by organizations such as the United Nations (UN), International Labour Organization (ILO) and International Cooperative Alliance (ICA) can guide necessary reforms to restore integrity and sustainability in the sector.

Cooperatives in Nepal are intended to function as empowerment centers, focusing on mutual support and self-help, rather than mere service centers. Unlike traditional organizations, the formation of a cooperative institution involves specific requirements. As per Section 5 of the cooperative registration guidelines, three categories qualify for forming cooperatives: primary producers (those directly involved in production), actual workers (engaged in labor) and bona fide consumers (genuine consumers). However, these principles were often disregarded during registration, leading to deviations from cooperative standards, resulting in governance issues and misappropriation of funds. Officials failed to consistently enforce these guidelines, allowing intermediaries to capture control of cooperatives instead of genuine members, which compromised the essence of cooperativism.

The deep-rooted challenges in Nepal’s cooperative sector came into the spotlight with a series of scandals involving high-profile individuals. The arrest of Rabi Lamichhane, a former Deputy Prime Minister, Home Minister and Chair of the Rastriya Swatantra Party (RSP), along with 13 others, highlighted the issues plaguing the sector. A parliamentary special probe committee was formed in 2024 to investigate crisis-ridden cooperatives. The committee accused Lamichhane of misusing approximately Rs 650m that had been funneled into Gorkha Media Network, where he served as the Managing Director of Galaxy Television. The funds were allegedly sourced from multiple cooperatives, including Suryadarshan in Pokhara, Supreme in Butwal, Swanalaxmi in Kathmandu, Sahara Chitwan and Sano Paila in Birgunj. The incident showcased how influential individuals misused cooperative resources for personal or political gain, leading to significant financial crises and eroding trust in the sector. This case was not an isolated one, but rather indicative of a systemic issue where politically connected figures exploited cooperatives, leaving ordinary citizens, who invested their savings in the cooperatives, to bear the consequences. These individuals, many of whom work under harsh conditions in Nepal and abroad, saving diligently for their future, were among the primary victims.

Another case that drew public attention involved Congress Vice-president Dhanraj Gurung and his wife, who were accused of embezzling Rs 148.1m from the Miteri Cooperative. The unresolved nature of this case has fueled suspicions, emphasizing the urgent need for stringent reforms to address corruption and financial mismanagement in the sector. These incidents collectively underscored the systemic governance failures and the necessity for comprehensive regulatory reforms.

The cooperative movement in Maharashtra during the 1960s to 1980s stands out as a model of successful rural economic development, offering crucial lessons for Nepal. Maharashtra’s cooperatives emerged as a central force in the state’s economic and political landscape, with their influence paralleling that of Panchayati Raj institutions and the Congress Party. For many aspiring politicians, cooperatives were a critical platform for advancing their careers, making the cooperative network integral to rural development and political life. By 1988, Maharashtra had overtaken Uttar Pradesh as India’s largest sugar-producing state, with over 100 cooperative sugar factories driving economic growth. The sector expanded beyond sugar production to include related industries, such as dairies, spinning mills, agricultural processing units, poultry farms and cooperative banks, thus establishing a robust network that supported local economies. 

An illustrative example is the Hutatma Ahir Sugar Cooperative in Sangli district, which became a model of how cooperatives can drive regional development by fostering economic self-reliance and empowering communities.

However, despite its early success, Maharashtra’s cooperative movement eventually encountered significant challenges. Corruption, financial mismanagement and political interference became rampant, with cooperative leadership often falling into the hands of influential families connected to the Congress Party. The resulting dynastic control led to resource misallocation and weakened governance structures. Political entanglement with cooperative management eroded democratic principles and undermined financial oversight, allowing personal interests to take precedence over cooperative ideals of member empowerment and mutual benefit. The decline of the movement highlighted the vulnerabilities that arise when political power and cooperative management become intertwined.

To address these setbacks, Maharashtra implemented a series of reforms aimed at restoring the integrity of its cooperatives. Mandatory audits were introduced to ensure transparency, while term limits for leadership positions were established to prevent power concentration. Stricter financial regulations aimed at curbing corruption and state-supported cooperative banks played a crucial role in providing financial resources to distressed cooperatives, enabling them to continue supporting rural development. These reforms demonstrated the importance of robust governance practices, financial transparency and effective regulatory oversight—lessons that are relevant for revitalizing Nepal’s cooperatives.

The principles that guide cooperative reforms in Nepal should be informed by theoretical frameworks that emphasize ethical governance and accountability. Fiduciary duty requires cooperative leaders to prioritize the interests of members, maintaining loyalty and transparency. The business judgment rule protects leaders who make decisions in good faith, using informed judgment, provided their actions do not serve personal interests. Agency theory highlights the need for mechanisms like regular audits and transparent reporting to monitor leadership behavior and mitigate conflicts of interest. Stakeholder theory broadens the scope to consider the interests of all stakeholders, particularly marginalized groups, while social capital theory underscores the importance of building trust and reciprocal relationships to promote cooperative development.

International standards and legal frameworks also play a crucial role in guiding cooperative reforms. The United Nations, through Resolution A/RES/56/114 and the declaration of the International Year of Cooperatives in 2012, emphasizes cooperatives' role in promoting sustainable development, social inclusion and poverty alleviation. The ILO’s Recommendation No 193 advocates for cooperative development aligned with international labor standards, promoting democratic member control and legal compliance. The ICA’s principles, such as voluntary membership, democratic governance, economic participation and continuous education, provide essential guidelines for enhancing cooperative governance. Aligning Nepal’s policies with these international standards can modernize the legal framework and improve the sector’s sustainability.

Successful models such as Mondragon in Spain and Amul in India offer valuable lessons on how cooperatives can thrive through effective management and member engagement. Founded in 1956, Mondragon operates on principles of shared ownership, democratic governance and profit-sharing. It has demonstrated resilience and adaptability across various industries, including manufacturing and finance, by emphasizing member participation and collective decision-making. Mondragon’s cooperative model shows the benefits of a structure where economic growth is shared equitably among members, ensuring long-term stability even in challenging economic times. 

Amul is a case in point. Founded in 1946, it transformed India’s dairy sector by creating a cooperative network that connected small-scale producers directly to consumers, thereby maximizing returns for farmers. Its ‘milk to market’ model, supported by government partnerships, facilitated rural development by eliminating intermediaries and promoting sustainable agricultural practices.

To address the existing challenges in Nepal’s cooperative sector, several key measures must be considered. Strengthening governance and regulatory frameworks is essential, with the modernization of the Cooperative Act of 1992 to close legal gaps. The revised act should incorporate stringent financial regulations, anti-corruption measures and enforceable penalties for violations. Establishing a central regulatory authority akin to a central bank would enhance oversight and ensure consistent enforcement across federal, provincial and local levels. Governance reforms should also include independent supervisory boards, transparent election processes for leadership positions and term limits to prevent the concentration of power.

Improving financial management practices is equally crucial. Regular independent audits and financial ‘health checks’ would help detect risks early and prevent financial mismanagement. Establishing a cooperative development fund could provide financial support to cooperatives that adhere to governance standards, promoting stability and ethical practices. Financial literacy programs for cooperative members would enhance understanding of budgeting, risk management and proper financial conduct, ensuring informed decision-making.

Investing in training programs for cooperative staff and regulatory bodies would build technical capacity, addressing the skill gap that has affected management quality. The adoption of modern management practices, such as result-based planning, would optimize decision-making and operational efficiency, while the use of technology would streamline cooperative operations and reduce costs.

Promoting inclusiveness and gender equality is vital to bringing diverse perspectives into cooperative governance. Ensuring women and marginalized groups are represented in leadership roles through leadership development programs would prepare future leaders from underrepresented backgrounds, ensuring inclusiveness in decision-making.

Finally, minimizing political interference is essential for maintaining the integrity of the cooperative movement. Policies should be implemented to prevent political manipulation in cooperative elections, and whistleblower protections must be established to encourage the reporting of unethical practices without fear of retaliation. Training cooperative leaders in ethical governance and cooperative values would further combat corruption and uphold the principles of member empowerment.

Nepal’s cooperative sector holds immense potential to drive economic development and support inclusive growth. Learning from Maharashtra's experiences and international models like Mondragon and Amul offers valuable guidance for addressing current challenges. By strengthening governance, modernizing regulations, enhancing financial management and investing in capacity-building, Nepal’s cooperatives can be revitalized to empower communities, support small businesses and promote sustainable development. Through these comprehensive reforms, the state can transition from a controlling role to that of a facilitator, allowing cooperatives to thrive and fulfill their role as a crucial component of the national economy.