UNITED NATIONS COMMISION ON INTERNATIONAL TRADE LAW

Article 30. Settlement

“(1) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms.

(2) An award on agreed terms shall be made in accordance with the provisions of article 31 and shall state that it is an award. Such an award has the same status and effect as any other award on the merits of the case.”

Scope of Article 30:

Article 30 contemplates two situations for settlement by agreement by parties depending on whether or not the parties wish to have their settlement recorded as an award on agreed terms.

In the first situation, where parties decide not to record their settlement agreement in the form of an award , but concerning agreement is rather a contract between the parties, enforceable to the extent that the governing contract law permits. Parties to dispute may choose this way because the terms of settlement are simple and easily enforceable without an award.

Case no. B-25 before the Iran-US Claims Tribunal presents such an example. In that case, the United states agreed to an Iranian bank, once the Tribunal received notification that these funds had been transferred into the US Goverment’s possession. Upon receipt of the funds by the US goverment, the enforcement of the parties’ agreement was no longer an issue and thus an award on agreed terms was not necessary.

In the second situation, the parties have their settlement agreement recorded as an award on agreed terms, resulting in several important benefits. First and foremost, a recorded settlement becomes an “award by consent” withing the meaning of the Rules and is generally considered to be enforceable domestically and internationally. The ‘award by consent’ does provide such a binding and enforceable title.

As regards to the second paragraph of the article, ‘award by consent’ has the same status and effect as any other award on the merits of the case. And as any other awards, it must be in writing and signed by the arbitrator or arbitrators. Second paragraph refers to article 31 stating that no reasons are to be given or the award is an award on agreed terms under article 30. Thus according to this article, parties are not obliged to give reasons with respect to award by constent

The Process of Recording Award :

First Step,

The parties jointly petition the arbitral tribunal to record the settlement agreement.

Second Step,

The tribunal renders the award on agreed terms in accordance with the applicable technical provisions of the rules. The award on agreed terms should incorporate the settlement agreement by reference, include statements that the arbitral tribunal has accepted and recorded the settlement agreement by reference, include statements that the arbitral tribunal has accepted and recorded the settlement agreement, and set forth the operative terms of the settlement in the dispositif.

Discretion to record a settlement agreement

The parties decision to record their settlement as an award must be “accepted by the tribunal.” The arbitral tribunal should possess some measure of discretion to refuse an award on agreed terms, even if requested by the parties, in cases in which the settlement was deemed unlawful or against ordre public at the place of the arbitration. In its final form, article 30 grants the arbitral tribunal a discretion to refuse recording a settlement. Additionally, If the parties settlement involves new subject matter outside the scope of the original agreement, the arbitral tribunal may interpret the settlement agreement as an implied amendment of the arbitration agreement. If the settlement includes third parties who are not orginal signatories to the arbitration agreement, however then those new parties must accede to the arbitration agreement in order for the settlement agreement to be recorded as a valid award.

TURKISH PERSPECTIVE OF ARTICLE 30 OF UNCITRAL MODEL LAW

International Commercial Arbitration Act, 2001

Prior to the act, Turkish International Private Law Act was setting out the provisions with respect to arbitration rules. By passage of time, a new amendment was needed therefore in 2001, Turkish goverment enacted recent act called as International Commercial Arbitration Law.

Article 12(d) of Turkish act sets out the settlement matter with respect to arbitration rules. It describes settlement as :

“During arbitral proceedings, if the parties settle the dispute, arbitral proceeding shall be terminated. In the case that arbitrator or arbitrator tribunal approves request of parties, settlement shall be recorded in the form of award.”

DIFFERENCE BETWEEN ARTICLE 30 OF MODEL LAW AND ARTICLE 12(D) OF INTERNATIONAL COMMERCIAL ARBITRATION ACT, 2001

According to Turkish Act, during the proceedings, there is no possibility to establish a settlement agreement without award. Therefore, all settlement agreements must be in the form of award, on the contrary, according to Model Law unless parties request to record the settlement agreement in the form of award, the settlement agreement is not obliged to be recorded in the form of award.