Out-of-Court Settlements Through Commercial Mediation
There are various ways to document and formalize the outcome of a commercial mediation:
- Mediated settlement under the Austrian Code of Civil Procedure (Zivilprozessordnung, ZPO),
- Notarial deed
- Attorney-negotiated settlement agreements (Anwaltsvergleich)
- Memorandum of agreement (Punktation),
- Informal record of settlement.
The choice depends on the document’s intended use. If the parties require more than an internal record and need an enforceable instrument that can be enforced, if necessary, they must select one of the mechanisms listed above.
Out-of-court settlements: Enforceability through a notarial deed
A settlement is an agreement by which the parties to a dispute resolve their differences by mutual agreement. It may be concluded out of court or in the course of court proceedings, in which case it is referred to as a judicial settlement.
An out-of-court settlement entered into without any special formalities constitutes a new contract reflecting the terms agreed upon by the parties. The parties may reach such a settlement through mediation, with the assistance of legal counsel, or directly between themselves without third-party assistance.
Note
Under Austrian law, out-of-court settlements are also subject to legal transaction fees.
If a party fails to fulfill its obligations under such a settlement, the other party must initiate legal proceedings to obtain judicial enforcement.
The parties may, however, render an out-of-court settlement enforceable, in the same manner as a judicial settlement or judgment, by executing a notarial deed. This is standard practice in Austria: the terms agreed upon in mediation are incorporated into a notarial deed that formalizes the parties’ contractual obligations and constitutes an enforceable instrument. The parties formally confirm their agreement before a civil-law notary.
Further information
Out-of-court settlement: Memorandum of agreement or contractual agreement / notarial deed (Austria)
In Austrian mediation practice, the parties generally formalize their settlement either in a binding contractual agreement or in a signed memorandum setting out the essential terms of their agreement (Punktation). If the parties wish to make their settlement directly enforceable, they may execute a notarial deed. This option is also available to parties who reach a settlement through mediation.
Settlement agreement resulting from mediation under Section 433a of the Austrian Code of Civil Procedure (ZPO)
Following the transposition of the EU Mediation Directive (Directive 2008/52/EC), Section 433a was added to the Austrian Code of Civil Procedure, introducing a procedure for judicial approval of settlement agreements reached through mediation.
Text of Section 433a ZPO: “A judicial settlement may be entered into before any District Court (Bezirksgericht) with respect to the terms of a written agreement reached in mediation proceedings concerning a civil-law matter.” (This provision applies to both domestic and cross-border mediation proceedings).
A judicial settlement of an agreement reached through mediation is inherently at odds with the fundamental principles of mediation. As a rule, it is inconsistent with the very purpose of mediation to subject a mutually agreed upon resolution that is:
- reached autonomously by the parties,
- based on self-determination, and
- achieved voluntarily
to subsequent judicial review and a declaration of enforceability.
The Singapore Convention: International enforcement of settlement agreements resulting from commercial mediation
The United Nations Convention on International Settlement Agreements Resulting from Mediation (the “Singapore Convention on Mediation”).
Austria has not yet become a party to the Singapore Convention on Mediation, nor has the European Union. As regards the international enforceability of mediated settlement agreements, it remains to be seen when Austria and/or the EU will sign the Convention.
The purpose of this international treaty:
Signed on 7 August 2019, the United Nations Convention on International Settlement Agreements Resulting from Mediation (also referred to as the “Singapore Convention on Mediation”) entered into force on 12 September 2020, marking a new chapter in international mediation. Its objective is to establish a framework for the international recognition and enforcement of settlement agreements resulting from mediation, enabling such agreements to be enforced across borders without the need for separate court proceedings to obtain a judgment or other enforceable title.
The Singapore Convention on Mediation establishes a uniform and efficient framework for the cross-border enforcement of international settlement agreements resulting from mediation. In particular, it facilitates international trade by enabling parties to invoke and enforce such agreements across jurisdictions in a cost-effective and streamlined manner. By enhancing legal certainty and predictability for businesses, the Convention also provides an incentive for companies and corporate groups to use commercial mediation as an effective means of resolving disputes.
https://www.singaporeconvention.org/convention/text Convention text https://uncitral.un.org/sites/uncitral.un.org/files/singapore_convention_eng.pdf