Nepal has asked the German Embassy in Kathmandu to help resolve a payment dispute with Muehlbauer ID Services GmbH, the company that supports the country’s electronic passport system. About Rs 300 million is in dispute.
The government says it is withholding payment because a corruption case over the passport purchase is still in court and the authorities it consulted have not given the clearance it wanted.
Muehlbauer says it has met its contract duties and that continued non-payment makes it hard to keep operating in Nepal. The question for passport applicants is whether the dispute will interrupt services.
What the government says
Foreign Secretary Amrit Bahadur Rai said Nepal had sought legal guidance from the Commission for the Investigation of Abuse of Authority (CIAA) and the Office of the Attorney General. It did not receive the clearance it wanted to release the money, so it approached the German Embassy to find a way forward, he said. The embassy reportedly responded positively.
The approach is a diplomatic effort to ease a commercial and legal deadlock. In July, the German Embassy rejected media reports that it had issued a diplomatic warning over the passport purchase, saying Nepal’s chargé d’affaires in Berlin was invited, not summoned, and that no protest note was issued.
The corruption case
The payment dispute grows out of a purchase now under legal scrutiny. On 23 June 2026, the CIAA filed a corruption case against 18 people, including a former director general of the Department of Passports, government officials and local representatives of Muehlbauer and Veridos. The accused were later released from custody by the Special Court.
As of 14 October, the Special Court had not delivered a final verdict, and passport officials remained reluctant to approve the payment while the case continues.
On 21 September, the Supreme Court dismissed writ petitions filed by the French company IN Groupe (Idemia) challenging the award of the passport contract. It did not clear anyone of corruption.
What the contractor says
The first milestone, about Rs 300 million, falls under a contract that requires payment within 30 days of receiving the commissioning letter. It is split into 85 per cent payable in foreign currency and 15 per cent in Nepali rupees, which would be about Rs 45 million. Officials were reportedly considering releasing that rupee part as an initial payment.
Muehlbauer argues that withholding a certified milestone breaches the contract. It has reserved its rights under the contract’s dispute-resolution terms and the 1986 Nepal–Germany bilateral investment treaty.
Possible effect on passport services
Muehlbauer’s systems support pre-enrolment, biometric enrolment, data management and delivery. Biometric enrolment records an applicant’s fingerprints and photo. Veridos prints and supplies passport booklets. The roles are linked, so trouble in one part can affect the whole service.
The risk to applicants is delay. If Muehlbauer suspends essential system support, application processing could be delayed. If printing or supply of booklets stops, finished applications may not become passports on time. Employees had warned of a possible strike over unpaid salaries.
