The court disputes may be terminated further to a settlement between the parties and thus they make no exception to any other dispute. The settlement regarding a court case may be signed with the court (i.e. “court settlement”) or entirely out-of-court.
The court settlement has its undeniable advantages. Their better understanding depends on clarification of its nature and effect.
Nature and effect of the court settlement
A court settlement is an exception from the typical end of a case. Most civil and commercial cases are terminated with a court decision on the merits of the dispute.
In the event of a court settlement, however, the dispute is settled by mutual consent of the parties.
The court settlement represents an agreement of the parties under an ongoing court case where they:
- Settle entirely or partially the court dispute and
- End the proceedings within the framework of the agreement reached.
Most often the dispute is settled with mutual concessions. However, one of the parties may give way completely. The concession is a means, not an aim, of the court settlement. The concession is a partial waiver of party’s initial statement. It could also represent partial waiver of right or partial undertaking of an obligation.
The court settlement includes the parties’ consent to consider as real a legal situation that may differ from the facts. The court settlement contains also the parties’ will to accept in the future to comply with the legal situation declared by them.
The effect of the court settlement consists in:
- Establishment of the situation existing between the parties;
- Acceptance of changes in the real legal situation through concessions;
- Acceptance of behaviour in compliance with the legal situation established with the settlement.
The court settlement may also have the following effect:
- Transfer of rights, property rights including, between the parties under the dispute.
If the court settlement covers the entire legal dispute, the proceedings should be terminated. However, if the legal dispute is settled only in part, for the unsettled part the court proceedings shall continue.
The court settlement is like a court decision which has entered into force. The court settlement shall not be appealed and new court case for the dispute under it shall not be initiated. The court settlement is subject to execution, enforcement including.
The court settlement consists of three acts:
- Agreement for settlement of the parties;
- Court ruling for approval of the settlement;
- Court ruling for termination of the court case.
The conclusion of a court settlement shall be certified in the court record of proceedings, which shall be signed not only by the judge and the secretary, but also by the parties to the case. Compliance with the form is a condition for validity. The court settlement can be concluded only in a court hearing.
An explicit power of attorney is required if the court settlement is signed through an authorized person.
The parties are entitled to agree entirely out-of-court and the plaintiff is entitled to withdraw from/abandon the claim on that ground. Then however no court settlement will be at hand and the parties shall not profit from its advantages.
The out-of-court settlement can become a court settlement if presented with the court at a court hearing under the court case and the proceedings for validity of a court settlement are carried out regarding that settlement.
The court settlement may be concluded at the first court instance. If prior to entry into force of the court decision the parties declare that they have agreed on settlement and ask the court case to be terminated, the court then invalidates its decision. If the court settlement is concluded at the second court instance, the court invalidates the first instance court decision and approves the settlement.
The consent for conclusion of the settlement of all the plaintiffs, respectively defendants, is required provided that the court decision is supposed to be identical for all of them because of the essence of the dispute or further to the law.
Upon approval of the agreement, the court checks only its compliance with the compulsory legal norms of the law and good morals.
Upon termination of the case by settlement, half of the paid state fee is returned to the plaintiff. The costs of the proceedings and of the settlement shall remain at the expense of the parties, unless otherwise agreed.
The court settlement has the following advantages:
- The parties settle the court dispute in a desired, clear and predictable way;
- The parties can assess their interests and concessions to be made, the parties’ consent having preeminence to the facts;
- Voluntary settlement and termination of the dispute improve relations between the parties;
- The dispute is resolved with an effect equal to an entered into force decision;
- The parties save time and resources – the court dispute will not continue at this and subsequent instances;
- The parties save costs – the court returns half of the state fee to the plaintiff;
- Due to the consent there is a higher probability of voluntary execution;
- In the absence of voluntary execution, the settlement approved by the court is subject to enforcement.
Declaration as null and void, annulment, dissolution of the court settlement. Repeal of court rulings
The means for attacking the court settlement follow the nature of the three acts:
- The settlement
Even if approved by the court, a court settlement never becomes a court act. The court settlement is not subject to appealing, attacking by extraordinary means of repeal and interpretation of court acts.
The court settlement as an agreement may be subject to annulment or declaration as null and void on the grounds provided by law about the agreements. This is to become clear further to a claim proceeding before a court.
The court settlement may be dissolved due to its non-execution. If the settlement transfers, establishes, recognizes or terminates property rights over real estate, the dissolution takes place in court.
- The court ruling for approval of the settlement
That ruling is not subject to appeal, as it does not resolve the legal dispute. The ruling aims to prevent the termination of a case further to a settlement that is contrary to law or good morals.
However, the ruling may be attacked by the prosecutor in cases of a settlement which contradicts the law or good morals.
- The court ruling for termination of the case
It blocks the development of the case and is subject to appeal. The grounds should relate to the court ruling itself, and not to the court settlement.
The court dispute will be resumed in cases of declaration as null and void, annulment, dissolution of the court settlement or repeal of a court ruling.
The court settlement as an option
The court settlement remains an exception from the typical termination of a court case. The decision whether to enter into a court settlement, to reach an out-of-court settlement or to let the court settle the dispute is a question of facts and assessment of interests.
In any and all cases, however, knowledge of the nature, advantages and consequences of a court settlement would help us to make an informed and justified choice of how to act upon a civil or commercial case.