AI Regulation in Nepal

AI Regulation in Nepal

Navigating the Future of Intelligent Technology

As Artificial Intelligence transforms industries, the legal landscape in Nepal is rapidly adapting. With the government’s approval of the National AI Policy 2082 (2025), Nepal has established a strategic roadmap for ethical, transparent, and human-centric AI development. While a standalone AI Act is still on the horizon, AI deployment in Nepal is currently governed by a matrix of existing frameworks, including the Electronic Transactions Act (2063), the Privacy Act (2075), and intellectual property laws.

At Vidhijnya Lawyers, we help tech companies, startups, and enterprises innovate safely within these evolving boundaries.

Our AI Legal Services Include:

• Regulatory Compliance: Aligning your AI models and data scraping practices with Nepal's Privacy Act and the new National AI Policy standards.

• Intellectual Property Rights: Navigating the complex gray areas of copyright and ownership for AI-generated content and software.

• Liability & Risk Mitigation: Advising on product liability, algorithmic bias, and consumer protection for AI-driven financial, healthcare, and HR platforms.

• Policy Drafting: Creating clear terms of use and algorithmic transparency disclosures for your users.

Artificial Intelligence (AI) Law & Policy: Global Frameworks & Nepal’s Emerging Regulations

Artificial Intelligence is revolutionizing how businesses, governments, and individuals operate. As AI adoption accelerates across sectors like finance, healthcare, e-commerce, and governance, the legal landscape is rapidly evolving to address the unique risks associated with data privacy, intellectual property, bias, and algorithmic accountability.

At Vidhijnya Lawyers, we help local and international businesses navigate the complex intersection of technology and law. Whether you are a tech startup building AI tools, an Indian tech firm expanding into Nepal, or a corporate enterprise deploying AI, understanding the regulatory environment is critical to mitigating legal risks.

The Global & Regional AI Regulatory Landscape

AI does not operate within borders, and companies must often comply with international frameworks alongside domestic laws. The global regulatory approach is currently divided into a few key models:

• The European Union (The EU AI Act): The world's first comprehensive AI law introduces a strict, risk-based approach. AI systems are categorized from "Minimal Risk" to "Unacceptable Risk" (which are banned). High-risk AI systems face strict requirements for transparency, human oversight, and data governance, backed by massive financial penalties for non-compliance.

• India: As Nepal's primary cross-border business partner and a dominant regional tech hub, India has adopted a "pro-innovation, techno-legal" approach rather than immediately passing a standalone AI statute. The Ministry of Electronics and Information Technology (MeitY) issued the India AI Governance Guidelines in November 2025, emphasizing innovation, fairness, and accountability through voluntary frameworks. Legally, AI operations are tightly governed by the Digital Personal Data Protection (DPDP) Act, 2023, which strictly enforces consent, data minimization, and purpose limitation for any personal data used to train AI models. Furthermore, the anticipated Digital India Act is expected to replace the legacy IT Act to introduce specific regulations for algorithmic transparency and deepfakes.

• The United States: The US approach relies heavily on sector-specific guidelines and Federal Executive Orders (such as the mandate for Safe, Secure, and Trustworthy AI). State-level laws, such as those in California and Colorado, are actively introducing algorithmic discrimination and privacy protections.

• The United Kingdom: The UK has adopted a decentralized approach. Rather than a single sweeping AI law, existing regulators (like the ICO for data and CMA for competition) are empowered to issue guidance and enforce rules within their specific sectors.

• China: China has enacted targeted regulations focusing on specific AI applications, including strict rules governing generative AI, deepfakes, and recommendation algorithms, requiring developers to register their algorithms with the state.

AI Regulation in Nepal: The Legal Framework

Nepal is actively transitioning from an unregulated tech environment to a structured governance model. While Nepal does not yet have a dedicated "Artificial Intelligence Act," it has rapidly established a foundational policy framework guiding the tech and justice sectors.

1. The National Artificial Intelligence (A.I.) Policy, 2025

Approved by the Government of Nepal in August 2025, the National AI Policy serves as the country’s primary direction-setting framework. While it operates as soft law, it signals the government's regulatory priorities and the impending arrival of enforceable AI laws.

Key pillars of the 2025 AI Policy include:

• Ethical & Human-Centered AI: Prioritizes human welfare, fairness, non-discrimination, and the protection of human rights in AI systems.

• New Regulatory Institutions: The policy outlines the establishment of the AI Regulation Council to dictate national standards, and a National AI Centre to coordinate governance, research, and policy execution.

• Risk-Based Governance: Similar to international models, Nepal intends to classify AI systems based on risk and formulate specific laws to ensure transparency and accountability.

• Regulatory Sandboxes: The policy envisions creating safe testing environments where companies can pilot higher-risk AI systems under regulatory supervision before full-scale deployment.

2. The Judiciary Information and Communication Technology Policy, 2083 (2026)

In July 2026, the Supreme Court of Nepal endorsed the Judiciary Information and Communication Technology Policy-2083 BS to digitally transform the legal system into a modern "e-judiciary". This policy creates a direct framework for how AI and digital technology intersect with legal proceedings in Nepal:

• Permitted AI Legal Applications: The judiciary formally embraces AI to assist with administrative tasks, legal research, case management organization, and the drafting of non-decisional documents.

• Prohibition on AI Judgments: To prevent risks associated with AI hallucinating non-existent laws, the policy strictly bars AI from being used to write judgments, writ petitions, or influence any decisions that require human judicial discretion.

• E-Justice & Innovation: The policy mandates the creation of an integrated "e-justice portal" (allowing for e-filing, online payments, and case tracking), establishes a dedicated Justice Innovation Centre at the Supreme Court, and introduces "online courts" for small claims.

• Third-Party Oversight: Any external AI systems used by the courts must first undergo rigorous assessments regarding reliability, transparency, and potential bias.

3. Existing Data and Privacy Laws

Until a dedicated AI statute is enacted, AI operations in Nepal are strictly governed by existing technology laws:

• The Individual Privacy Act, 2075 (2018): Any AI system that collects, processes, or generates personal data must comply with strict consent and privacy requirements under this Act.

• The Data Act, 2079 (2022): Focuses on data governance, security, and institutional control over data sharing—critical for businesses training AI models on user data.

• The Electronic Transactions Act, 2063 (2006) & National Criminal Code, 2074 (2017): Serve as the basis for prosecuting cybercrimes, unauthorized data breaches, and privacy violations resulting from AI misuse.

What Businesses Operating in Nepal and India Need to Do Now

With the government's 2025 AI Policy, the Supreme Court's 2026 digital transformation roadmap, and neighboring India's DPDP Act in motion, regulatory scrutiny is officially here. Best practices include:

1. Conduct Data Audits: Review exactly what data is being fed into third-party AI tools. Feeding sensitive customer information, KYC files, or health records into public AI models can trigger severe liabilities under Nepal's Privacy Act or India's DPDP Act.

2. Draft Internal AI Policies: Implement clear workplace guidelines dictating how employees can and cannot use Generative AI tools to prevent intellectual property leaks and data breaches.

3. Cross-Border Data Compliance: If you are an Indian company operating in Nepal (or vice versa), ensure your AI data pipelines comply with cross-border data transfer restrictions and local consent requirements.

4. IP Protection: Assess whether the content generated by your AI tools can be copyrighted or if it infringes on existing third-party intellectual property rights.

How Vidhijnya Lawyers Can Help

Navigating the grey areas of emerging technology law requires forward-thinking legal expertise. At Vidhijnya Lawyers, we offer tailored legal solutions for the digital age:

• AI Compliance & Risk Audits: Assessing your company's AI deployment against Nepal’s National AI Policy 2025, the Judiciary's 2026 ICT Policy, India's DPDP Act, and existing privacy laws.

• Drafting AI Governance Frameworks: Creating robust internal AI usage policies for your employees.

• Technology Contracts & Licensing: Drafting, reviewing, and negotiating AI vendor agreements, SaaS contracts, and cross-border data-sharing agreements.

• Data Privacy Counsel: Ensuring your data collection, storage, and processing practices comply with applicable South Asian privacy frameworks.

• Intellectual Property Strategy: Advising on the protection of proprietary algorithms and the usage of AI-generated content.