Settlement Agreement and Enforceability
Successful mediations result in a settlement agreement that is contractually binding upon the parties.
result in a settlement agreement that is contractually binding upon the
parties. The binding effect of a settlement agreement as a contract results
from the applicable contract law. In case a settlement agreement is not
respected by one of the parties, a party may seek enforcement of the settlement
in courts like a breach of contract. A mediated settlement agreement is not an
arbitral award and can accordingly not be enforced internationally like an
arbitral award under the 1958 New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards. Nonetheless, a consent award, i.e. an arbitral
award rendered by an arbitral tribunal that is made to record a settlement
agreement reached through mediation may – under certain circumstances – be
enforceable under the New York Convention.
In Europe, and as a result
of the EU Directive of 21 May 2008 on certain aspects of mediation on civil and
commercial matters, many EU countries have enacted legislation to ensure that
mediated settlement agreements can be recognized and enforced from one Member
State to another as if they were court judgments or orders and provide for a
“mediated settlement enforcement orders”.