When parties in a dispute arrive at a cooperation before a dispute is established by a court or arbitral tribunal, it is great to record the terms of the agreement in writing to procure both certainty and finality. The concept of settling a dispute is straightforward but the task of writing a settlement can be complicated. Here’re some key considerations to keep in mind when drafting a settlement agreement.
The extent of the settlement agreement
Settlements generally include a minimum of unilateral release of claims by one party against another. The parties should think whether the release is to be unilateral or mutual, and how the possibility of the release is to be stated. For instance, does the release affect only existing claims made in earlier proceedings, or is it an extensive release extending to present and future claims associating to the same subject matter?
Payment of a settlement sum
Typically, the purpose of the parties and the settlement agreement lawyers related to the settlement is to replace the existing rights with the rights emerging under the settlement. The settlement agreement should reveal this and also meet the penalties of non-payment.
Tax implications
Where a settlement sum is being reimbursed, the tax implications should be kept in mind. For example, the parties may decide to state specifically that the settlement sum is inclusive of any value added tax (VAT). This is also a major consideration for parties based in the Gulf, now that VAT has been brought in the UAE and other Gulf regions.
Confidentiality
It is quite common to bring an obligation on the parties to keep the terms of the settlement agreement confidential, save that revelation may be made in limited conditions, such as in compliance with the law or requirement of any regulatory body, or for the intention of enforcing the settlement agreement.
Who will give the costs?
The settlement agreement lawyers in London should define clearly how the parties' costs, suffered in the proceedings and in the drafting and negotiation of the settlement, are to be owed.
Dispute Resolution
Alike in any agreement, it is necessary that a settlement agreement includes a governing law delivery and a dispute resolution provision (for example, an arbitration agreement) so that the procedure for resolving any disputes rising out of the settlement document is strong.
Application of "Without Prejudice" rule
It is very much necessary for parties to make sure that drafts of the settlement agreement are shaped on a "without prejudice" and "subject to contract" basis. In jurisdictions where the "without prejudice" principle is followed, this will ensure that if no eventual settlement is reached, it will not be feasible for the draft settlement agreement to be place before the court or arbitral tribunal as proof of certain admissions.
Settlement conditions
The parties should think about whether there are conditions model to the settlement, or specific terms of settlement being into effect. The instrument and process by which a settlement becomes effective is extremely important. For example, it will commonly be the case that a party is not grateful to take measures to dispose of proceedings until the settlement sum is submitted.
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