Nepal’s tourism sector is at an interesting crossroads following last year’s major earthquakes and even more recent “obstruction of supplies.” The impact of these back-to-back natural and unnatural disasters is difficult even for Nepal’s closest neighbors to understand. Felt as slight vibrations in parts of Delhi, some bars actually introduced “Shaken Not Stirred” drink specials on signboards until they learned that thousands of Nepalis had died. Then they became sick, having accidentally made light of earthquakes that had just decimated and shattered so many human lives in the Himalayas. They quickly took down their signs. Many Indians do not seem understand their country’s fragile diplomatic relationship with Nepal. I don’t really either. But I can say a thing or two about how these crises might affect future hotel deals that are bound to take place in Nepal.
In law school classrooms and law libraries across the United States, law students study the legal concepts of force majeure, impossibility, and impracticability, largely in the abstract. We read English cases from 1647 and 1863. When Egypt nationalized the Suez Canal Company in 1956, took over the canal itself, and then completely blocked it with sunken vessels, this brought trade to a complete standstill. The usual trade line broke. Ships carrying goods, most already bought and paid for or at least financed, stopped cold. Ships had to be rerouted to carry goods without the benefit of this all-important and most convenient Mediterranean shortcut. Many ships, including one carrying U.S. wheat from Texas, had to traverse all the way around the Cape of Good Hope—the entire continent of Africa—to land their goods at port in Iran. The shippers, whose costs had increased significantly by then, sued whomever they could to make up the difference. Ten years later, when legal cases were finally being decided by the courts, the judges had surprisingly little sympathy.
In one such case, the United States Court of Appeals for the District of Columbia Circuit applied a three-part test to see if the operator of the ship SS CHRISTOS could sue on the contract for the costs of its unanticipated trip around the tip of Africa.
First, a contingency — something unexpected — must have occurred. Second, the risk of the unexpected occurrence must not have been allocated either by agreement or by custom. Finally, occurrence of the contingency must have rendered performance commercially impracticable. Unless the court finds these three requirements satisfied, the plea of impossibility must fail.
The closing of the canal was certainly unexpected. Check box one. But then again, the parties couldn’t have been completely blind to stirrings in the Middle East. Leave box two unchecked. It was certainly, more expensive to traverse an entire continent, but the wheat wasn’t going to expire that quickly, the sailors were able, and one could’ve bought insurance for such things. The third box remained uncheck as well. The shipper was out of luck, just like most of the others that faced the canal’s closure.
While we liked to imagine that some our professors may have remembered the crisis from when it happened, most of them could not have been directly affected by the crisis. And it was, for most of us more recently in law school, an academic exercise.
This is simply not the case in Nepal. Force majeure, impossibility, and impracticability have unfortunately become a way of life in Nepal. The crises, piled upon one another, have lingering affects felt by Nepalese people and businesses even today, a year after the last major earthquake and months after the end of the Indian border blockade. Just to make ends meet, businesses and families did things unimaginable to most people who read the above cases from a legal casebook. The black market became, for a time, the only market. And things still have not yet returned to what even passes for “normal” in Nepal these days.
Following the earthquake, many hotels were operating somewhere around seven percent (7%) occupancy. That means that more than ninety percent (90%) of their rooms were empty. That is no way for a hotel to make any money. And this was at the same time that so many Nepalis were left homeless from the earthquake. Many remain without permanent and safe housing. Amid this human tragedy, the suffering, and the business interruption, many Nepalese people, and businesses, showed their true spirit and helped each other.
Dwarika’s Hotel, for example, opened an entire village to help give housing to those who most needed it when they most needed. It was great that Mrs. Sangita Shrestha Einhaus and her family were able to help. Babies have since been born in that village. If not for the fuel crisis, I have no doubt that other hotels could have or would have displayed similar kindness. But the distance between empty hotels and shelter-less earthquake victims were made very long by damaged roads and shortages of fuel.
Even today, there are only five or six major branded hotels in Nepal, but because tourism is such an important part of the country’s economy Nepal should probably expect many more to come. Few hotels can offer what an establishment like Dwarika’s can when tourist are looking for a uniquely Nepali experience in an upscale hotel. But the industry will support Dwarika’s, local hotels, and the instant and international familiarity that some guests crave and only the brand standards of the major hotel chains can offer. This will likely bring jobs and Nepalese people will become experts in hotel management, international accounting standards, and dispute resolution. I say dispute resolution because multinational corporations have many tricks up their sleeve to avoid ending up in court other than just arbitration, though this is not necessarily a bad thing. But who knows what will happen in (or out of) Nepal? Disputes may end up in court anyway.
When local hotel owners or developers negotiate hotel management agreements, license agreements, and conversion services agreements with major international hotel chains, the realities of earthquake and blockade survival need to be expressed and allowed to sink in with those negotiating across the table because often they will not understand unless and until they come to Nepal. It is then they will hear, and more importantly begin to understand, Nepal’s stories of survival. About driving in a car, when all four tires seem to explode at once. About being on the third floor of your house when the ground fails you and traps you and your family in the stair case. About running to the door shouting for your mother and then turning around to grab your young son who is still sleeping while the very ground beneath your feet becomes unreliable and seemingly threatens to swallow you both whole.
It would be a shame then, for established and otherwise profitable hotel businesses, having survived a major earthquake or two and a complete interruption of supplies, to succumb to a nasty turn of phrase in a contract that was only meant to deter bad faith abuses. But once this baseline is established, and some of the unique intricacies of Nepalese law explained, the real negotiations can begin in earnest. Let’s make some deals, shall we?