UAE Arbitration Settlement: Consent Awards and Timing

Arbitration Settlement in the UAE: Negotiating a Resolution During Proceedings

Settlement is a normal part of arbitration in the UAE, not a sign that a case has gone wrong. Commercial parties who have already filed a request for arbitration frequently agree terms before the tribunal issues its award, and the way that agreement is recorded decides whether it can be enforced afterwards. Arbitration settlement in the UAE therefore turns on three practical questions: when to open talks, what form the settlement should take, and how to bring the arbitration to a close once terms are agreed.

The framework is set by a combination of federal law, including the UAE Arbitration Law (Federal Decree-Law No. 6 of 2018), and the institutional rules of centres such as the Dubai International Arbitration Centre (DIAC) and arbitrateAD in Abu Dhabi. Those rules and that statute set out the procedural and substantive rights of the parties, including their rights on settlement during an arbitration. Unlike court litigation, arbitration gives the parties a flexible procedure in which to negotiate, including the option of recording the settlement as a consent award, which carries the enforceability of an arbitral award.

Negotiating a resolution while an arbitration is running involves both strategy and procedure. Timing matters, because parties may look to settle at several points: before the tribunal is constituted, during the evidentiary phase, or after the hearing but before the award is issued. Arbitration is also confidential and less combative than court proceedings, which makes frank discussion easier. This article looks at how settlement works in a UAE arbitration, covering consent awards, settlement agreements, mediation windows, and the tactics that suit each stage.

Legal framework for arbitration settlements in the UAE

Understanding the law behind arbitration settlement in the UAE is the starting point for any negotiation during proceedings. The UAE Arbitration Law, which follows the UNCITRAL Model Law closely, is the statutory basis for arbitration and deals expressly with the parties’ ability to settle while the arbitration is under way. Article 29 of the UAE Arbitration Law provides that the parties may agree to terminate the arbitration at any time, including by settlement, and that such a settlement may be recorded as a consent award.

The consent award is the central mechanism here. Unlike a plain settlement agreement, a consent award is an arbitral award issued by the tribunal on the basis of the parties’ agreement to resolve the dispute. That makes the settlement enforceable as an arbitral award under the New York Convention, to which the UAE is a party. A consent award removes much of the risk that the other side simply fails to perform, because it gives the settlement its own enforcement route. For parties who want finality and certainty, this is usually the stronger option.

Institutional rules in the UAE, including those of DIAC and arbitrateAD, also build in procedural openings for settlement. They often invite the tribunal to assist settlement discussions, and may include provisions for mediation or conciliation during the arbitration. That institutional encouragement reflects a wider approach in the UAE: a dispute resolution system that runs contested proceedings while leaving room for an agreed outcome.

The UAE courts take a supportive line as well, generally recognising and enforcing consent awards and settlement agreements, provided they meet public policy and procedural requirements. That judicial backing gives parties reason to negotiate during proceedings, since they know an agreed outcome can be carried out rather than reopened.

When to open settlement talks during an arbitration

Timing is the strategic question that most often decides whether settlement talks succeed. Parties use different tactics at different stages, and the approach should match the point the arbitration has reached. Early talks tend to be about setting up a process for discussion; later talks are detailed bargaining over numbers and terms.

In the opening stages, a party may take the heat out of the dispute by proposing mediation or another form of alternative dispute resolution (ADR). Several institutional rules, including those of DIAC, provide for a mediation window early in the arbitration. That window lets the parties test settlement with the help of a neutral mediator before committing fully to contested proceedings. It can work particularly well where bargaining power between the parties is uneven but the stronger side still wants to keep the commercial relationship.

As the arbitration moves on, the evidentiary phase creates openings for offers informed by how each side’s case is actually holding up. A party may make a limited concession or admission to invite a reciprocal proposal. Positions often soften at this point, because both sides can see the cost and risk of a long arbitration. Counsel’s role is to shape offers that are credible and pitched to the other side’s real interests and weak points.

Talks after the hearing are a further stage, usually under more pressure because the tribunal is about to issue its award. By then each party understands its legal and factual position, so terms can be realistic and complete rather than speculative. The procedural advantage is that the settlement can still be recorded as a consent award, giving finality and an enforcement route. An offer made shortly before the award can also head off the cost of contested enforcement later.

Consent awards and settlement agreements: which form to use

A party negotiating a resolution during a UAE arbitration has to decide what form the settlement will take: a consent award or a standalone settlement agreement. Both bring the dispute to an end, but they differ on enforceability, procedural requirements and strategic value.

A consent award is an arbitral award issued by the tribunal on the basis of the parties’ agreement to settle. It is binding and enforceable under the New York Convention as if it were a final arbitral award. That enforceability matters most in cross-border disputes, where the paying party’s assets may sit in another jurisdiction. Recording a settlement as a consent award gives it the same legal force as a contested award, which cuts the chance of a fresh fight at the enforcement stage.

A settlement agreement, by contrast, is a private contract between the parties to resolve the dispute. It may include clauses on jurisdiction, confidentiality and enforcement, but it does not by itself carry the enforcement machinery of an arbitral award. UAE courts generally recognise and enforce settlement agreements under contract law, though enforcement may call for further proceedings, such as an application for judicial approval or recognition. That leaves an imbalance of risk if one party is reluctant to perform voluntarily.

The choice between the two forms depends on the nature of the dispute, the relationship between the parties, and how much finality is wanted. Parties with continuing business together often prefer a settlement agreement, because it allows more flexible terms and tighter confidentiality. Parties who care most about finality and enforcement, especially in a hostile dispute, usually prefer a consent award.

Counsel also has to think about procedural timing before proposing a consent award. The tribunal must be prepared to issue the award, and the parties must put forward a clear and unequivocal settlement agreement. Planning the settlement with those requirements in mind is what keeps the consent award valid and enforceable.

Mediation and other ADR methods alongside arbitration settlements

Mediation and other forms of ADR are increasingly used alongside arbitration in the UAE to reach settlement. UAE arbitration rules often encourage, and sometimes require, the parties to consider mediation before or during the arbitration, on the basis that a neutral third party can lower the temperature of a dispute.

Mediation offers a confidential and flexible forum in which a neutral mediator helps the parties find common ground and build solutions that a tribunal could not order. The neutral setting is the opposite of contested arbitration, so the parties can speak more openly and address interests that go beyond their strict legal entitlements.

In the UAE, mediation may run as a standalone process or sit inside the arbitration timetable. The DIAC Rules, for example, provide a mediation window designed to let the parties pause the arbitration and hold settlement discussions with a mediator’s advice. Using that window at the right moment can bring early resolution, which in turn reduces arbitration costs and keeps the dispute from hardening.

Parties may also combine the two processes, in what is often called “med-arb”, where issues left unresolved after mediation go on to arbitration. That combination keeps momentum towards a settlement while preserving the enforceability of an arbitral award where one is still needed.

Using mediation alongside arbitration also lets the parties build terms around commercial reality, such as phased payments, confidentiality clauses or future business arrangements. That flexibility counts for a great deal where bargaining positions are uneven and the parties’ interests run wider than the claims as pleaded.

Conclusion

Negotiating an arbitration settlement in the UAE during proceedings calls for a working grasp of the legal framework, the procedure and the timing. Parties need tactics that reduce conflict and still produce an enforceable outcome. The UAE arbitration regime, with consent awards and mediation windows available, gives a sound basis on which to negotiate.

A well-timed offer reduces the risk and cost of a long arbitration, and the choice between a consent award and a settlement agreement should be matched to the parties’ enforcement and confidentiality aims. Mediation, in turn, is a practical way to keep talks moving and close the gap between positions, particularly where bargaining power is uneven.

In a demanding commercial market, parties and their counsel should treat settlement as part of case strategy rather than an afterthought, addressing the legal and the business needs together. Working with arbitration practitioners who know UAE arbitration law and the institutional rules in detail is what turns a negotiated outcome into a durable one.

For businesses working on settlement strategy in a UAE arbitration, Nour Attorneys advises on international arbitration, commercial litigation, dispute resolution and contract drafting. Our team builds approaches to dispute resolution that protect the commercial result while keeping valuable business relationships intact.

Related Services: See our arbitration practice for the UAE and ADGM and our arbitration compliance support for practical legal help in this area.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Please consult with a qualified attorney for specific guidance on your situation.

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