Civil Law and UAE: Mediation and Settlement Concepts

1. Introduction

Mediation and settlement are important parts of dispute resolution in the UAE. Instead of requiring every civil or commercial dispute to proceed through a full trial, UAE law provides mechanisms through which parties can resolve disputes amicably, reduce costs, preserve commercial relationships, and obtain an enforceable resolution.

The principal federal legislation is Federal Decree-Law No. 40 of 2023 on Mediation and Conciliation in Civil and Commercial Disputes. It provides a structured framework for mediation, conciliation, confidentiality, settlement agreements, mediators, electronic procedures, and enforcement. (UAE Legislation)

Settlement is also recognised as a substantive contractual concept under the 2025 Civil Transactions Law, which became effective on 1 June 2026. Articles 671–678 specifically deal with the settlement contract and its effects. (UAE Legislation)

2. Meaning of Mediation

Mediation is a consensual dispute-resolution process in which a neutral third person—the mediator—assists the parties in reaching an agreement.

The mediator generally:

facilitates communication;

identifies disputed issues;

helps the parties understand their respective positions;

may hold joint or private sessions;

may help formulate settlement options; and

does not ordinarily impose a binding judgment on the parties.

Under the UAE mediation framework, a mediator may conduct joint discussions and separate private sessions, subject to confidentiality requirements. The mediator can also examine documents and, with appropriate arrangements, obtain technical assistance. (Khairallah Legal)

Simple example

A construction company claims AED 5 million from a developer for additional work. The developer disputes AED 2 million of the claim.

Instead of going through a lengthy trial, a mediator may help the parties agree:

developer pays AED 3.8 million;

payment is made in instalments;

contractor abandons the remaining claim;

both parties release each other from further claims.

That agreement becomes the settlement.

3. Meaning of Conciliation

Conciliation is closely related to mediation but has a more formal statutory structure in the UAE.

Under Federal Decree-Law No. 40 of 2023, conciliation is an alternative method for amicable dispute resolution involving a neutral conciliator and is used in circumstances prescribed by the law. The resulting settlement can be formally approved and given legal effect. (Littdb)

Therefore:

4. Meaning of Settlement

The new UAE Civil Transactions Law gives a particularly important definition.

Article 671 provides that settlement is a contract by which parties resolve an existing dispute or prevent a potential dispute through reciprocal concessions concerning their claims. (UAE Legislation)

Thus, settlement normally involves:

Dispute + Mutual concessions + Agreement = Settlement

For example:

A claims AED 1 million.

B disputes the claim.

B agrees to pay AED 700,000.

A agrees to abandon the remaining AED 300,000 claim.

The reciprocal concessions are central to the settlement concept.

5. Mediation vs Settlement

These concepts should not be confused.

Mediation

Mediation is the process used to help parties reach agreement.

Settlement

Settlement is the resulting agreement resolving the dispute.

Therefore:

Mediation is the mechanism; settlement is the possible outcome.

A mediation may fail without producing a settlement.

6. Settlement Under the 2025 UAE Civil Transactions Law

The new Civil Transactions Law contains specific provisions dealing with settlement.

Article 671 — Definition

Settlement resolves an existing dispute or prevents a potential dispute through reciprocal concessions. (UAE Legislation)

Article 672 — Capacity

A person entering into settlement must have capacity to dispose of the rights covered by the settlement.

Where the settlement involves waiver of rights, the law additionally requires the relevant capacity for donation. (UAE Legislation)

Article 674 — Restrictions

Settlement is not permitted concerning matters involving:

personal status; or

public order.

However, financial rights arising from personal-status matters may be capable of settlement, subject to the applicable law. (UAE Legislation)

Article 675 — Evidence

Settlement must be proved according to the applicable general rules of evidence. (UAE Legislation)

Article 676 — Subject Matter

The subject of settlement and its consideration must satisfy statutory requirements, including being lawful and sufficiently known. (UAE Legislation)

7. Fundamental Principles of UAE Mediation

A. Party Autonomy

The parties generally control whether and on what terms they settle.

A mediator does not normally decide:

“Party A wins and Party B loses.”

Instead, the mediator assists the parties in constructing their own resolution.

B. Neutrality

The mediator must act neutrally and should not improperly favour one party.

Neutrality is particularly important where:

parties have unequal bargaining power;

the dispute involves technical issues;

multiple parties are involved; or

one party is represented by sophisticated legal counsel.

C. Confidentiality

Confidentiality is one of the central features of the UAE statutory mediation framework.

Federal Decree-Law No. 40 of 2023 provides extensive confidentiality protection for mediation and conciliation proceedings and restricts disclosure or later reliance on mediation material, subject to statutory exceptions. (Khairallah Legal)

This allows parties to make concessions without automatically converting every concession into evidence against them in subsequent litigation.

8. Private Sessions or Caucuses

A mediator may communicate separately with each party.

For example:

Joint session → Party A private session → Party B private session → Joint negotiation → Settlement

Private sessions can allow a party to reveal commercially sensitive information to the mediator without automatically disclosing it to the opponent.

The UAE framework specifically recognises private mediation sessions while restricting the mediator from disclosing confidential information without the necessary consent. (Khairallah Legal)

9. Mediation Is Not Arbitration

This distinction is extremely important.

Thus, a mediator should not simply transform the mediation into an arbitration.

10. Enforceability of Settlement

A settlement should not be treated merely as an informal promise.

Under the UAE mediation framework, an approved/ratified settlement can obtain the legal effect of a court judgment for evidentiary and enforcement purposes. The legislation provides that a ratified settlement agreement is binding and that the same dispute should not simply be re-litigated between the same parties. (Littdb)

The UAE Ministry of Justice has also described the current framework as providing settlement agreements with enforceable force equivalent to court orders where the prescribed procedures are followed. (Moj)

11. Settlement and Res Judicata-Type Effects

Once a properly approved settlement resolves a dispute, the parties generally cannot simply reopen the same dispute as though no settlement had occurred.

The legal purpose is finality.

Therefore:

Valid settlement → Binding obligations → Finality → Enforcement

This prevents a party from accepting the benefits of settlement and later attempting to litigate the same resolved dispute again.

12. Settlement Agreements Must Be Carefully Drafted

A settlement should normally identify:

the parties;

existing claims;

disputed amounts;

agreed payment;

payment dates;

interest, if legally permissible;

release of claims;

confidentiality;

default consequences;

governing law;

dispute-resolution mechanism;

enforcement mechanism.

Poor drafting can create a second dispute about the meaning of the settlement itself.

13. Settlement of Part of a Dispute

Settlement does not necessarily have to resolve every issue.

A settlement may cover:

the principal debt but not costs;

liability but not quantum;

some defendants but not others;

past claims but not future contractual obligations.

The new Civil Transactions Law expressly contemplates settlement concerning part of a claim and provides consequences where a party settles for part of what it claims. (LEXAI)

14. Good Faith in Mediation

Good faith is practically important.

A party should not normally participate merely to create artificial delay while having no genuine intention to consider resolution.

Good-faith mediation can involve:

exchanging relevant information;

identifying the actual dispute;

considering reasonable proposals;

attending sessions through authorised representatives;

having appropriate settlement authority.

The DIFC courts have expressly required mediation participants in appropriate cases to participate in good faith. (DIFC Courts)

15. Authority of Representatives

A major issue in settlement litigation is:

Did the person signing the settlement actually have authority to bind the party?

For companies, this can involve:

directors;

authorised signatories;

lawyers;

general managers;

parent companies;

agents.

A settlement signed by an unauthorised person may generate a dispute over validity and enforceability.

This issue was significant in Ginette PJSC v Geary Middle East FZE & Geary Ltd, where a substantial settlement agreement was entered into by an authorised company representative. The case demonstrates the importance of authority and the binding nature of properly concluded settlements. (DIFC Courts)

16. Settlement and Economic Duress

A settlement can potentially be challenged where it was obtained through legally recognised coercion or duress.

However, merely regretting a settlement or later believing that the bargain was economically unfavourable does not automatically invalidate it.

Case: Alistair James Company Limited v Sakson Drilling & Oil Services [2017] DIFC CFI 003

The court considered allegations of economic duress concerning a settlement agreement. The settlement was held to be effective, and the subsequent conduct of the parties—including payments under the agreement—was important to the court's conclusion. (DIFC Courts)

Principle: A clear settlement supported by subsequent performance is difficult to displace merely through later dissatisfaction.

17. Settlement and Dispute-Resolution Clauses

A settlement agreement can itself contain a dispute-resolution clause.

Case: Murin v Mola [2022] DIFC SCT 455

The parties had entered into a settlement agreement containing an arbitration clause. The DIFC Small Claims Tribunal held that the settlement agreement's dispute-resolution arrangement had to be respected and therefore declined jurisdiction where the contractual mechanism required arbitration. (DIFC Courts)

Principle: A settlement agreement can create a new contractual dispute-resolution framework.

18. Settlement and Negotiation Clauses

Parties sometimes agree:

“The parties shall first attempt to negotiate an amicable settlement before commencing proceedings.”

Such clauses can have procedural consequences.

Case: Latins v Lidina [2021] DIFC CFI 094

The contract required the parties initially to attempt amicable settlement through consultation before disputes could proceed to the agreed court forum. (DIFC Courts)

Principle: Contractual pre-dispute negotiation obligations can be relevant to determining how and when litigation may properly proceed.

19. Mediation and Confidentiality: Alexandra Wilson v Simmons & Simmons

Alexandra Wilson v Simmons & Simmons Middle East LLP & Syed Raza Abbas Rizvi [2020] DIFC CFI 029

The DIFC Court's mediation directions contained extensive confidentiality provisions.

They addressed:

confidentiality of mediation communications;

privilege;

settlement terms;

restrictions on using mediation material in later proceedings;

authority of representatives;

the mediator's independence;

written settlement requirements.

The directions specifically provided that a settlement would not become legally binding until recorded in writing and signed by authorised representatives. (DIFC Courts)

Principle: Formal mediation requires clear procedural and documentary safeguards.

20. Mediation Does Not Guarantee Settlement

Mahesh Srichand Tourani v Dusty Tourani & Duzty LLC [2018] DIFC CFI

The DIFC Court encouraged the parties to attempt mediation and arranged for another judge to act as mediator so that the trial judge would remain independent from the mediation process.

The mediation ultimately failed. The judgment is useful because it demonstrates that:

Referral to mediation does not guarantee settlement.

It also illustrates the importance of keeping the mediator functionally separate from the adjudicator. (DIFC Courts)

21. Settlement in Employment Disputes

Settlement can also arise in employment disputes.

Linsi v Limda Brokers [2020] DIFC SCT 033

The parties entered into a settlement agreement following an employment dispute concerning termination and amounts claimed between them. The case demonstrates how settlement agreements can be used to resolve employment-related financial claims. (DIFC Courts)

The enforceability of any employment settlement, however, remains subject to mandatory employment legislation and public policy.

22. Settlement and Misrepresentation

Heitor v Helah [2017] DIFC SCT 141

The claimant sought relief concerning money paid under a settlement agreement and alleged that the settlement had been induced by misrepresentation involving non-disclosure.

The case illustrates an important principle:

A settlement is itself capable of being challenged where a recognised vitiating factor is properly established.

Settlement therefore does not automatically cure fraud, misrepresentation, coercion or other fundamental defects.

(DIFC Courts)

23. Additional Case: Normand v Nathaniel [2024] DIFC SCT 125

In Normand v Nathaniel, the court considered a contractual provision requiring the parties to attempt good-faith negotiation before referring disputes to the DIFC Courts. (DIFC Courts)

Principle: The precise language of a contractual negotiation/settlement clause matters when determining the parties' procedural obligations.

24. At Least Six Important Case Laws — Revision Table

These are primarily DIFC authorities. They should not be treated automatically as binding precedents for mainland UAE Federal Courts; their persuasive or binding force depends on the applicable jurisdiction and governing law.

25. Mandatory and Voluntary Mediation in the UAE

The UAE system contains both consensual and legally required mechanisms depending on the category of dispute and the applicable judicial framework.

The 2023 Federal Decree-Law establishes circumstances in which conciliation is to be pursued before a case proceeds in the ordinary way. The implementing framework has subsequently been developed through judicial decisions and regulations. In 2025–2026, the Federal Judiciary Council introduced additional regulatory measures concerning mediation centres, mediator registration, remote participation, confidentiality and settlement enforcement. (Moj)

Therefore, lawyers should always ask:

Is pre-action mediation/conciliation mandatory?

Which court has jurisdiction?

Is the dispute within the statutory exceptions?

Is there a contractual ADR clause?

Has the limitation period been affected?

What procedure is required to make the settlement enforceable?

26. Electronic and Online Mediation

Modern UAE mediation is increasingly digital.

The statutory framework contemplates an electronic mediation and conciliation platform, and the 2025–2026 implementing framework expressly addresses remote participation and identity verification. (Littdb)

This permits mediation to take place through:

videoconferencing;

electronic notices;

electronic documents;

remote attendance;

digital settlement documentation.

This is particularly important for international commercial disputes where the parties are located in different countries.

27. DIFC Mediation Framework

The DIFC has developed a particularly structured mediation environment.

Under the current DIFC Courts Mediation Centre rules, a signed mediation settlement agreement can operate as a mediation order/enforcement writ under the applicable DIFC framework, unless the parties opt out according to the prescribed procedure. (DIFC Courts)

This demonstrates an important UAE trend:

Mediation → Written Settlement → Judicial recognition → Direct enforcement

The DIFC Courts also launched a Commercial Mediation Scheme in July 2026 aimed at early commercial dispute resolution and preservation of business relationships. (DIFC Courts)

28. Advantages of Mediation

1. Speed

Mediation can resolve a dispute much faster than a full trial.

2. Lower Cost

It can reduce:

court costs;

expert costs;

lawyer fees;

disclosure expenses;

enforcement uncertainty.

3. Confidentiality

Commercially sensitive information can be protected.

4. Flexibility

Parties can create solutions that a court might not have power to order.

5. Relationship Preservation

This is especially important in:

joint ventures;

construction projects;

franchises;

employment;

distribution;

banking;

family businesses.

6. International Commercial Utility

Parties from different jurisdictions can negotiate a commercial solution without requiring one party to accept the other's domestic litigation system.

29. Limitations of Mediation

Mediation is not suitable for every dispute.

Problems can arise where:

one party refuses to negotiate;

bargaining power is extremely unequal;

there is no meaningful authority to settle;

fraud or criminal conduct is central;

public-order issues are involved;

urgent injunctive relief is required;

limitation periods are at risk;

the settlement is poorly drafted.

Mediation cannot simply be used to contract out of mandatory UAE law.

30. Mediation and Public Order

Party autonomy has limits.

A settlement cannot legitimately validate something prohibited by mandatory law or public order.

This is consistent with the Civil Transactions Law's treatment of settlement, which expressly restricts settlement concerning matters involving personal status or public order, subject to the statutory treatment of related financial rights. (UAE Legislation)

Therefore:

Freedom to settle ≠ freedom to violate mandatory law.

31. Settlement and Release of Claims

A settlement commonly contains a release clause.

For example:

“Upon payment of AED 2 million, each party releases the other from all claims arising from the contract.”

Such clauses can be extremely significant.

The court will examine:

wording;

scope;

identified claims;

parties covered;

dates;

known and unknown claims;

applicable mandatory legislation.

A general release should therefore be drafted carefully rather than using generic language.

32. Settlement and Future Disputes

A settlement can also prevent future disputes if the parties clearly identify future obligations.

For example:

A developer and contractor may settle existing delay claims while agreeing that:

the contractor will complete outstanding works;

the developer will make specified payments;

defects will be rectified;

future claims concerning newly arising obligations will be governed by the settlement.

The settlement therefore becomes a new contractual framework governing the parties' relationship.

33. Mediation in Mass and Multi-Party Disputes

Mediation can be particularly useful where there are:

multiple contractors;

insurers;

developers;

subcontractors;

investors;

lenders;

shareholders.

A mediator can attempt to construct a global settlement instead of requiring every party to litigate separately.

The UAE framework also accommodates multi-party mediation subject to the applicable procedural safeguards. (Khairallah Legal)

34. Mediation and Insurance Disputes

Insurance disputes often contain several overlapping issues:

coverage;

liability;

causation;

quantum;

deductibles;

contribution;

subrogation.

Mediation can allow insurers and insured parties to negotiate commercial solutions while avoiding the uncertainty of a lengthy determination.

35. Mediation and Construction Disputes

Construction disputes are particularly suitable for mediation because the parties often have an ongoing commercial relationship.

A settlement may combine:

payment;

extension of time;

variation orders;

defects correction;

retention release;

revised completion date;

waiver of delay claims.

This is sometimes more commercially useful than an all-or-nothing judgment.

36. Mediation, Arbitration and Litigation: UAE Model

A simplified UAE dispute-resolution pathway can be represented as:

Dispute arises

↓

Negotiation

↓

Mediation / Conciliation where applicable

↓

Settlement?

→ Yes → Written settlement → Approval/enforcement

→ No → Arbitration or litigation

This reflects the increasing emphasis on consensual dispute resolution while preserving access to adjudication where settlement fails.

37. Important Legal Formula

Mediation

Neutral Facilitator + Party Participation + Confidential Process + Voluntary Agreement

Settlement

Existing/Potential Dispute + Reciprocal Concessions + Capacity + Lawful Subject Matter + Agreement

Enforceable Settlement

Valid Settlement + Proper Documentation/Approval + Legal Authority = Enforceable Resolution

38. Practical Example

Suppose:

Developer: claims contractor owes AED 4 million.

Contractor: counterclaims AED 3 million for variations.

The mediator identifies:

AED 4m alleged debt;

AED 3m variation claim;

disputed delay responsibility;

disputed defects.

After negotiation:

Developer pays AED 2.5m;

Contractor abandons AED 1.5m of its counterclaim;

Contractor completes specified remedial works;

Both parties release existing claims;

Future obligations are defined;

Settlement is documented and submitted through the applicable procedure.

The original litigation dispute is transformed into a binding settlement framework.

39. Key Examination Points

For an exam, remember these points:

Mediation is a consensual ADR mechanism.

The mediator facilitates rather than normally adjudicates.

Settlement is the agreement resulting from successful negotiation/mediation.

Federal Decree-Law No. 40 of 2023 is the principal federal mediation and conciliation framework.

The 2025 Civil Transactions Law specifically regulates settlement contracts in Articles 671–678.

Capacity is essential for settlement.

Public-order and certain personal-status matters cannot simply be compromised.

Confidentiality is a fundamental statutory feature of mediation.

Settlement agreements can acquire strong binding and enforcement effects through the prescribed procedures.

Authority of the person signing the settlement is crucial.

Fraud, misrepresentation, duress or other recognised defects can potentially affect a settlement.

A settlement may contain its own arbitration or court-jurisdiction clause.

DIFC mediation has its own procedural and enforcement framework.

DIFC cases are not automatically binding on mainland UAE courts.

Mediation does not prevent litigation or arbitration when settlement fails.

40. Conclusion

The UAE's approach to mediation and settlement combines contractual autonomy, judicial supervision, confidentiality and enforceability. Federal Decree-Law No. 40 of 2023 provides the principal statutory framework for mediation and conciliation, while the new Civil Transactions Law expressly recognises settlement as a contractual mechanism for resolving existing or preventing potential disputes. (UAE Legislation)

The central legal idea is:

The court decides when adjudication is necessary; mediation allows the parties themselves to construct the solution.

A properly concluded settlement can therefore transform a disputed legal relationship into a new set of binding obligations, while mediation provides the confidential and flexible process through which that settlement may be achieved.

Revision formula:

UAE Mediation = Neutrality + Confidentiality + Party Autonomy + Good Faith + Negotiation

UAE Settlement = Dispute + Reciprocal Concessions + Capacity + Lawful Subject Matter + Binding Agreement

Enforceable Settlement = Valid Agreement + Statutory Approval/Recognition + Enforcement Mechanism.