Settlement Agreements in Mediation

In a previous article, I discussed the legal effects of a mediation settlement agreement, including the Austrian rules on stamp duty applicable to settlement agreements. This article focuses on the different ways in which a mediation settlement agreement may be structured under Austrian law. What options are available, and what are their implications in terms of settlement and termination, procedural effects and enforceability in Austria and abroad?

Addressing these questions at the outset of the mediation is advisable. Beyond its impact on drafting costs, court fees and stamp duty, the chosen structure may help align the parties' expectations at an early stage and facilitate the implementation of any settlement reached.

Stage 1: Settlement and Termination Effect

As a general rule, mediation may also conclude without a written document. The parties may agree orally on the outcome of the mediation and on the further course of action. Such an agreement has a substantive settlement effect and terminates the mediation proceedings. In other words, the dispute is resolved and the parties are bound by the agreed outcome. If court proceedings have already been commenced and stayed pursuant to Section 168 of the Austrian Code of Civil Procedure (Zivilprozessordnung, ZPO), the mediation settlement agreement does not automatically terminate those proceedings. Unlike a court decision, it therefore has no procedural effect. A separate procedural step is required, for example the withdrawal of the claim.

Further, such an agreement is not automatically enforceable, either in Austria or abroad. If one party fails to comply with its obligations, the other party must initiate legal proceedings to enforce its rights.

Stage 2: Documentation – Contract or Out-of-Court Settlement Agreement

The parties are, of course, free to record their agreement in writing, whether in the form of a contract or an out-of-court settlement agreement. A written agreement provides greater legal certainty by clearly defining the scope of the settlement and creating a reliable record of its terms should subsequent proceedings arise.

Typically, such a document will not only record the substantive terms of the settlement, but also include provisions on the applicable law, jurisdiction or arbitration, the termination of any pending proceedings, the allocation of costs and the consequences of a failure to comply with the obligations assumed under the agreement.

The legal effect of a written settlement agreement is identical to that described in Stage 1. It gives rise to substantive legal effects only and has no procedural consequences. Further, it is not enforceable in its own right. Accordingly, should one of the parties fail to perform its obligations, the agreement must be enforced through separate legal proceedings.

One important aspect should be taken into account. In addition to costs for legal assistance in drawing up the settlement, recording a settlement agreement in writing may trigger Austrian stamp duty according to the Austrian Stamp Duty Act (Gebührengesetz, GebG). If the dispute is already pending before the courts, the applicable rate amounts to 1% of the total value of the obligations assumed by each party. In all other cases, the applicable rate is generally 2% (see in more detail here).

Stage 3: Enforceability in Austria and the European Union (and Termination of Proceedings)

No Pending Court Proceedings in Austria

Mediation settlement pursuant to Section 433a ZPO: According to Austrian law, a settlement reached in mediation can be formally recorded before the court (without initiating court proceedings) and declared enforceable. Consequently, the mediation settlement is directly enforceable in Austria (Section 1(5) of the Austrian Enforcement Act (Exekutionsordnung, EO)) and, according to the prevailing view, may also be enforced throughout the European Union (pursuant to Article 59 of the Brussels Ia Regulation).

In this case, only half of the ordinary court fee is payable pursuant to Section 32 Item 1 of the Austrian Court Fees Act (Gerichtsgebührengesetz, GGG). At present, these fees range from 31€ to 9,576€. For claims exceeding 350,000€, the applicable fee amounts to 1.2% of the amount in dispute plus 6,964€. These statutory fees are adjusted periodically by the Austrian legislator.

A mediation settlement pursuant to Section 433a ZPO may therefore prove more cost-efficient than documenting an out-of-court settlement where no court proceedings are pending, as the latter may trigger Austrian stamp duty.

However, some caution is warranted. The mechanism introduced by Section 433a ZPO, implementing the EU Mediation Directive, is designed to render an existing mediation settlement agreement enforceable. Consequently, if the settlement has already been prepared as a written (and executed) document before it is submitted to the court, that document may already trigger stamp duty, in addition to the court fees payable under the GGG.

Notarial deed: Alternatively, the parties may execute their settlement agreement in the form of a notarial deed before an Austrian civil law notary (Sections 3 and 54(1) of the Austrian Notarial Code (Notariatsordnung, NO)). A notarial deed is directly enforceable in Austria (Section 1(17) EO) and may also be enforced throughout the European Union (Article 58 Brussels Ia Regulation) without the need for exequatur proceedings, provided that the deed is enforceable in the Member State of origin.

The notary's fees are calculated on the basis of a value-dependent tariff under the Austrian Notarial Fees Act (Notariatstarifgesetz, NTG). In addition, the settlement agreement executed as a notarial deed will generally trigger Austrian stamp duty (Section 33 Item 20 GebG). The applicable rate depends on whether court proceedings are already pending at the time the settlement is concluded.

Pending Court or Arbitral Proceedings (with Lex Arbitri in Austria)

Court settlement: If court proceedings are already pending, the parties may conclude a settlement before the court. Such a settlement also terminates the proceedings (Sections 204 et seq. ZPO) and is directly enforceable in Austria (Section 1(5) EO) and throughout the European Union (Article 59 Brussels Ia Regulation). A court settlement does not trigger Austrian stamp duty. However, court fees for the proceedings remain payable. If the settlement is concluded at an early stage of the proceedings, the applicable court fee may be reduced by half (pursuant to Item 1 Note 4b GGG).

Arbitral settlement: A settlement may also be concluded in pending arbitral proceedings (Section 605 ZPO). In this case, the arbitral proceedings are terminated by procedural order rather than by an arbitral award. Such arbitral settlement is directly enforceable in Austria (Section 1(16) EO). However, unlike a court settlement, it is not enforceable under the Brussels Ia Regulation, as arbitration is expressly excluded from its scope of application pursuant to Article 1(2)(d).

In addition to the costs of the arbitration, an arbitral settlement also triggers Austrian stamp duty. Unlike a court settlement, it is not treated as a judicial settlement for stamp duty purposes (GebR 2025, Rz 1546 and 1554). Consequently, the provisions applicable to out-of-court settlement agreements apply and stamp duty is generally payable at a rate of 2%. Some legal scholars have argued, however, that the reduced rate of 1% should apply where arbitral proceedings are already pending.

In summary, neither a court settlement nor an arbitral settlement can be enforced internationally under the New York Convention in the same way as an arbitral award. Although the Singapore Convention seeks to establish an international framework for the enforcement of mediation settlement agreements, no EU Member State has signed or ratified the Convention to date.

Stage 4: Enforceability Abroad – Consent Award

To benefit from the New York Convention, the parties may obtain a Consent Award in pending arbitral proceedings or in arbitral proceedings commenced for that purpose. A Consent Award is an arbitral award that reflects the settlement agreed between the parties. Upon the parties' request, the arbitral tribunal must terminate the proceedings accordingly. Alternatively, the parties may request a partial award dealing with selected claims. A Consent Award therefore has both substantive and procedural effects.

The Austrian Code of Civil Procedure contains specific provisions governing Consent Awards where the seat of arbitration is in Austria. Comparable provisions are also contained in a number of institutional arbitration rules, including inter alia Article 37 of the Vienna Rules, Article 41 of the DIS Rules and Article 33 of the ICC Rules.

The parties may request a certificate confirming the finality and enforceability of the award pursuant to Section 606(6) ZPO, which is endorsed on the award by the presiding arbitrator. As a result, the Consent Award is directly enforceable in Austria (Section 1(16) EO) and, more importantly, under the New York Convention.

In addition to the costs of the arbitration itself, including institutional fees, arbitrators' fees, legal costs and the parties' expenses, no additional Austrian stamp duty is payable.

Conclusion

The appropriate structure of a mediation settlement agreement depends on the parties' strategic objectives. Where the primary aim is to create legal certainty, a written settlement agreement or a mediation settlement pursuant to Section 433a ZPO may be sufficient. Where international enforceability is a priority, particularly outside the European Union, commencing arbitration and obtaining a Consent Award may be the preferable option. These issues should be considered at the outset of the mediation, together with the associated cost implications and the allocation of those costs between the parties.