13/n An Analysis of UAE's Commercial Mediation Law, Federal Law No. 6 of 2021, the Final Settlement Agreement
A successful mediation ends with the parties signing a settlement agreement. I have discussed the settlement agreement in earlier posts. I discussed it in the context of party control over the process choices here and here, in the context of confidentiality here, and in the context of the referring court's management of the litigated case here. I will include those discussions in this post for the ease of the reader.
Article 1 of the UAE Commercial Mediation Law defines the settlement agreement as: "A document created by the mediator, signed by the parties and setting out the settlement details eventually reached by the parties for amicable resolution of their dispute, in whole or in part. As discussed below, requiring the mediator to "create" the settlement agreement raises some concern.
Duties of the Mediator in Connection with the Settlement Agreement
Reports to the Center
Article 16 states that: "Judicial mediation shall be terminated . . . [w]hen the parties sign a settlement agreement." Article 23 makes extrajudicial mediation subject to the same "provisions, procedures and termination [of] cases set out in Chapter of this Law . . . ."
Article 16 sets out the duties of the mediator in connection with settlement agreement. It provides:
- "In all cases, the mediator shall . . . submit to the Centera written or electronic report on the outcome of judicial mediation, within three [3] business days starting from the expiry of judicial mediation for whatever reason."
Article 18 adds additional duties. It provides:
- "If, at the end of the mediation process, the parties reach agreement for the dispute, in whole or in part, the mediator shall furnish a report to the Center accompanied by the settlement agreement signed by the parties for affirmation."
As noted above, Article 1 says the mediator will "create" the settlement agreement. The word "create" has several definitions. They include to bring into existence something new; cause; occasion; or design. These definitions do not necessarily indicate a direct, participatory role in the drafting process, unlike the language used in the Qatar Mediation Law. The word choice in the UAE law suggests that the drafters of the law have more experience with commercial mediation, in which the parties' attorneys play the key role in drafting the settlement agreement and are highly competent in determining what terms they should include. It also respects a boundary establishing that the agreement does not involve any performance by the mediator, who is not even a third-party to the agreement. This approach is a great improvement over the approach taken in Qatar.
In the U.S., you will see a number of approaches to drafting the final settlement agreement. Before the parties terminate the session, the mediator will help draft a list of agreed terms. Based on that list, either the mediator or the lawyer for one of the parties will create the first draft of the agreement. Like any contract drafting process, the drafts will go back and forth between the parties until the language satisfies both lawyers. In some states, if the mediator is not licensed to practice law in that state, he or she cannot draft the settlement agreement. That act could be punished under laws governing the unauthorized practice of law.
In less complicated matters, where the parties appear pro se, the mediator will draft the settlement agreement, but he or she will advise the parties to have a lawyer look over it before they sign it. Parties can ignore that advice and sign it without a lawyer's input.
A well-trained mediator will handle the drafting process in a way consistent with the nature of the dispute and the needs of the parties.
Contents of the Settlement Agreement
Article 1 of the UAE Commercial Mediation Law defines the settlement agreement as "setting out the settlement details eventually reached by the parties . . . ." Unlike the Qatar Mediation Law, the UAE Commercial Law does not specify the elements of the required settlement agreement. In any event, the parties need a document with sufficient particularity to allow the parties to properly perform the agreement, for enforcement if performance problems arise later, and for the court so it can "authenticate" the settlement agreement, which I discuss below.
Unlike the Qatar Mediation Law, the UAE Commercial Mediation Law does not require the disclosure of the expert opinion in the settlement agreement. Unlike the Qatar Mediation Law, the UAE law does not require the mediator to sign the settlement agreement in order for it to be enforceable. The mediator is a neutral. He is not a party to the dispute. He is not bound by the settlement agreement as a performing contract party. Accordingly, he should not be required to sign the agreement.
Filing the Settlement Agreement with the Court
As noted above, Article 16 requires the mediator to notify the Center when the mediation ends by filing a report. The law does not indicate what the mediator must include in the report. Article 18 specifies that the report be accompanied by "the settlement agreement signed by the parties for affirmation." Article 16, states that the Center "shall keep the parties and the Competent Court informed of both the report and judicial mediation outcome within three [3] days." But, Article 18 requires the Center to "immediately submit both the agreement and report to the Competent Court."
Thus, the last duty of the mediator and the Center is to ensure that the court is made aware of the successful completion of the mediation by filing the settlement agreement with the Competent Court.
The law authorizes the Competent Court, under Articles 18 and 19, to authenticate the settlement agreement. As noted below, authentication creates significant legal effect.
Duties of the Court in Connection with the Settlement Agreement
The court's duties in connection with the settlement agreement fall into three categories: (1) authentication of the settlement agreement; (2) case management after the parties sign the settlement agreement, and (3) enforcement of the settlement agreement.
Authentication
After the Competent Court receives a request to authenticate the settlement agreement, Article 18 instructs that: "The Competent Court shall affirm such agreement and issue a decision terminating the dispute, in whole or in part as the case may be." Article 23, governing extrajudicial mediation, states: "The supervising judge shall have the same powers of the Competent Court in terms of . . . receipt of the mediator's reports and affirmation of the settlement agreement, as described in Chapter Two of this Law."
Under Article 19, the court may refuse to authenticate the agreement. A party claiming invalidity of the settlement agreement must file a case coinciding with the application to affirm the settlement agreement. Grounds for invalidity include a party's lack of mental capacity or diminished capacity at the end of the mediation; the parties' failure to reach a settlement agreement; the invalidity or voidability of the settlement agreement; that the parties reached agreement after the mediation timeframe expired; if the mediation agreement is invalid or avoidable; or when a party fails to offer a defense in mediation due to an invalid notice of the proceedings or was unaware of the pending mediation for "any other reason beyond its reasonable control." I note here that the defenses to a valid settlement agreement are quite narrow compared to those allowed under the Qatar Mediation Law.
While the language is confusing, it appears a party must seek invalidation within 30 days "following the date on which the judicial dispute termination is served upon that party." Even if the court finds the settlement agreement invalid, in whole or in part, the mediation agreement shall remain valid, unless its invalidity was the basis for invalidating the settlement agreement. Presumably, this provision of Article 19 would protect the parties' ability to return to mediation if it might result in a valid settlement agreement. Finally, if one of the parties has buyer's remorse, he or she will need to raise one of the defenses and provide sufficient proof of the defense all within 30 days required by Article 19.
Any decision on the validity of the settlement agreement is final and subject to appeal by way of cassation.
Litigated Case Management and Enforcement
Next, the court must manage the litigated case in light of the authenticated settlement agreement. Unlike the Qatar Mediation Law that expressly penalizes a party for filing a lawsuit on a claim resolved in mediation, the UAE Commercial Mediation Law focuses on enforcement of the settlement agreement. Article 20 provides: "Subject to Article 19 of this Law, the court-affirmed settlement agreement shall be binding upon the parties, may not be reevoked, and shall have the same probative force of court judgments. Hence, the merits and grounds of the same dispute between the parties may not be brought again to the Court, and the Court shall order such probative force sua sponte." It thus expressly invokes principles of res judicata or estoppel.
In addition, the law gives the court power to refund judicial fees. Article 6 provides that: "In case the dispute ends in a settlement agreement, the Claimant shall get back the judicial fees paid thereby as described in Article 21.2 of this Law." Article 21, in turn provides: "When the mediator's mission comes to an end and full settlement is reached for the dispute, all parties involved may get back the judicial fees paid. They may also get back half of the judicial fees paid by them in case the settlement involves part of the matter of dispute."
Next up? A short post on mediator fees.
Also, this reminder: The 2021 law has now been replaced by Federal Decree-Law No. 40/2023 On Mediation and Conciliation in Civil and Commercial Disputes, issued on September 28, 2023, and effective 90 days after its publication, which is some time in December 2023. A copy of the English-language version is available here.
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