The Settlement Agreement: How It Is Made, and Why It Is as Good as an Award

In one line

When the parties sign a conciliation settlement, it becomes as good as an arbitral award, which means it can be enforced like a decree.

In exam wording: section 73 of the Arbitration and Conciliation Act 1996 prescribes the procedure by which a settlement agreement is formulated, signed and authenticated, and section 74 provides that it shall have the same status and effect as if it were an arbitral award on agreed terms rendered under section 30.

Section 73: four steps, and every one of them matters

Section 73(1): when it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations.

Section 73(2): if the parties reach agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the conciliator may draw up, or assist the parties in drawing up, the settlement agreement.

Section 73(3): when the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively.

Section 73(4): the conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties.

Set the steps out as a sequence, because that is how the case below tests them:

1. The conciliator formulates terms of a possible settlement and submits them to the parties for observations.
2. He may reformulate in the light of those observations.
3. The parties draw up and sign a written settlement agreement; he may draw it up or assist if requested.
4. On signature, it is final and binding on the parties and those claiming under them.
5. He authenticates it and furnishes a copy to each party.

Notice where the binding force comes from. Not from the conciliator's view, not from his formulation, not from his authentication: from the parties' signatures under sub-section (3). Authentication under sub-section (4) is a duty that follows; it is not what creates the agreement.

Notice also the direction of travel in sub-section (1). The conciliator submits terms to the parties for their observations, and may then reformulate. He is not handing down a decision; he is testing a draft.

Section 74: the effect, in one sentence

The settlement agreement shall have the same status and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under section 30.

This is the most consequential sentence in Part III, and it works by a chain of references that a good answer sets out explicitly: