How to Draft a Reconciliation and Settlement Agreement in the UAE: A Step-by-Step Guide

Are you involved in a dispute that you want to resolve amicably and efficiently? Do you want to avoid the hassle and expense of going to court? If so, you may want to consider drafting a reconciliation and settlement agreement with the other party. A reconciliation and settlement agreement is a contract that settles a dispute between two or more parties and outlines the terms of their settlement. It can help you save time, money, and stress, as well as preserve your relationship and reputation.

In this article, we will show you how to draft a reconciliation and settlement agreement in the UAE, and what are the key elements and best practices to follow. By following this step-by-step guide, you will be able to draft a reconciliation and settlement agreement that is legally valid and enforceable in the UAE.

Understanding Reconciliation and Settlement Agreements

Reconciliation and settlement agreements are contracts used to resolve disputes between parties, usually in a legal or business context. They allow parties to avoid going to court and reach a mutually satisfactory solution. These agreements can cover various issues, such as payment, compensation, termination, confidentiality, non-disclosure, non-disparagement, non-competition, release, waiver, mediation, arbitration, and more.

The nature of reconciliation and settlement agreements can vary depending on the jurisdiction, the dispute’s nature, and the parties’ preferences. In the UAE, different laws and regulations apply to settlement agreements in various free zones, such as the DIFC and the ADGM. Alternative methods of dispute resolution, such as conciliation, mediation, and arbitration, can be used, offering faster, cheaper, and more confidential resolutions than litigation.

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Benefits of Reconciliation and Settlement Agreement in the UAE

Here are some of the benefits of reconciliation and settlement agreements:

• Avoids Litigation: Saves time, expense, and uncertainty associated with litigation.
• Preserves Relationships: Helps preserve business relationships by allowing parties to resolve disputes amicably.
• Avoids Negative Publicity: Prevents negative publicity or reputational damage that may arise from a court judgment.
• Confidentiality: Settlement agreements are confidential unless expressly labeled otherwise.
• Continuation of Relationships: Allows parties to continue their commercial relationship after settling the dispute through an agreement.

Key Elements of a Reconciliation and Settlement Agreement

When drafting a reconciliation and settlement agreement, certain essential elements should be included:

1. Identifying the Parties: Clearly state the names and contact details of the parties involved in the dispute and the settlement.
2. Agreement Details: Specify the nature and scope of the dispute, including any claims or allegations made by either party or how they are resolved by the settlement.
3. Payment and Benefits: Outline the agreed-upon settlement amount, severance pay, unpaid wages, or any other financial compensation due to either party. Address the continuation or termination of benefits like health insurance or pension plans.
4. Confidentiality and Non-disclosure: Include provisions ensuring both parties maintain confidentiality regarding settlement terms, facts, and circumstances leading to the dispute. Parties cannot disclose or use any information related to the settlement without the other party’s consent, unless required by law or court order.
5. Release and Waiver: Include a release clause where parties agree to waive any future claims or rights against each other related to the dispute settled in the agreement.
6. Governing Law and Jurisdiction: Specify the applicable law and jurisdiction under which the settlement agreement is governed and enforced.
7. Mediation and Arbitration: Include provisions requiring or allowing parties to attempt mediation or arbitration before resorting to litigation.
8. Non-disparagement and Non-competition Clauses: Include clauses prohibiting both parties from making negative comments or engaging in actions that could harm the other party’s reputation or business interests.
9. Language and Translation: Draft the agreement in a clear and understandable language. Specify the prevailing language in case of any inconsistency.

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How to enforce reconciliation and settlement agreement in the UAE?

A reconciliation and settlement agreement is enforceable in the UAE if it meets the following conditions:

• It is drafted and signed by the parties voluntarily and without coercion or fraud.
• It is clear and precise, and does not contain any ambiguity or contradiction.
• It does not violate any public policy or morality, or any mandatory provisions of the UAE law.
• It is attested by a competent authority, such as a court, an arbitration center, or a notary public.

Depending on the nature and jurisdiction of the dispute, different authorities may be involved in attesting and enforcing reconciliation and settlement agreements in the UAE. For example:

• In the Dubai International Financial Centre (DIFC), a free zone that operates under a common law system, the parties can apply to the DIFC courts to have a reconciliation and settlement agreement recorded as a consent order, which can be enforced as a judgment of the court.
• In the mainland UAE, which operates under a civil law system, parties can register their reconciliation and settlement agreement with the Centre for Amicable Settlement of Disputes (CASD), which is affiliated with the Dubai courts. The CASD is a specialized body that aims to resolve disputes through mediation and conciliation. If the parties reach a reconciliation and settlement agreement, such an agreement must be recorded in writing, signed by the parties and attested by a judge. Such reconciliation and settlement agreement is legally enforceable and is equivalent to an executive instrument which may be directly enforced through the Execution Courts.
• In other free zones, such as Abu Dhabi Global Market (ADGM), parties can also use alternative dispute resolution methods, such as mediation and arbitration, to reach a reconciliation and settlement agreement. The ADGM Arbitration Regulations 2015, as amended in 2020, provide that an arbitral tribunal may record a reconciliation and settlement agreement as an arbitral award on agreed terms, which can be enforced as any other arbitral award.

How may Private Notary Dubai assist?

Reconciliation and settlement agreements are a great way to resolve disputes in the UAE without going to court. They offer many benefits, such as saving time, money, and stress, preserving relationships, avoiding negative publicity, and maintaining confidentiality. To draft a reconciliation and settlement agreement, you need to include certain essential elements that make the agreement legally valid and enforceable. If you need help with drafting such an agreement, you can contact our expert drafting lawyers at Private Notary Dubai.