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The UNCITRAL Arbitration Rules - A Commentary, 2nd Edition by Caron, David D; Caplan, Lee M (7th March 2013)

Part VI The Award, Ch.25 Settlement and other Grounds for Termination

From: The UNCITRAL Arbitration Rules: A Commentary (2nd Edition)

David D Caron, Lee M Caplan

From: Investment Claims (http://oxia.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.  Subscriber: null; date: 22 May 2019

Subject(s):
Settlement of disputes — Awards — Settlement & discontinuance of cases — UNCITRAL Arbitration Rules

(p. 780) (p. 781) Chapter 25  Settlement and other Grounds for Termination

1. Introduction

In some cases, the parties may resolve their dispute during the course of the arbitration through a negotiated settlement. In other cases, the arbitration may become unnecessary or may be impossible to continue, for reasons such as the claimant's failure to pursue its claim, the resolution of the arbitral dispute in another forum, or the parties’ failure to fund the arbitral tribunal through required deposits of money. In these circumstances, and possibly others, the arbitration will not end with an award that reflects a full adjudication of the issues, but rather with an award on agreed terms or a termination order. Article 36 guides the conduct of the arbitral tribunal in these circumstances.

2. Settlement and other Termination—Article 36

A. Text of the 2010 UNCITRAL Rule

Article 36 of the 2010 UNCITRAL Rules provides:1

  1. 1. If, before the award is made, the parties agree on a settlement of the dispute, the arbitral tribunal shall either issue an order for the termination of the arbitral proceedings or, if (p. 782) requested by the parties and accepted by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. The arbitral tribunal is not obliged to give reasons for such an award.

  2. 2. If, before the award is made, the continuation of the arbitral proceedings becomes unnecessary or impossible for any reason not mentioned in paragraph 1, the arbitral tribunal shall inform the parties of its intention to issue an order for the termination of the proceedings. The arbitral tribunal shall have the power to issue such an order unless there are remaining matters that may need to be decided and the arbitral tribunal considers it appropriate to do so.

  3. 3. Copies of the order for termination of the arbitral proceedings or of the arbitral award on agreed terms, signed by the arbitrators, shall be communicated by the arbitral tribunal to the parties. Where an arbitral award on agreed terms is made, the provisions of article 34, paragraphs 2, 4 and 5, shall apply.

B. Commentary

(1)  Settlement—Article 36(1)

(a)  Types of settlement agreement and the practice of awards on agreed terms

Article 36(1) contemplates two situations for settlement by agreement by the parties depending on whether or not the parties wish to have their settlement recorded as an award on agreed terms.

In the first situation, where the parties choose not to have the arbitral tribunal record their settlement, their settlement agreement is not an award, but rather an agreement between the parties, enforceable to the extent that the governing law permits. Because no award is rendered in this situation to mark the conclusion of the arbitration, Article 36(1) requires the arbitral tribunal to issue an order for the termination of the arbitral proceedings. Article 36(1) imposes no deadline on the parties for informing the arbitral tribunal of a settlement. However, the parties should endeavor to state their intentions promptly to avoid incurring additional costs and to allow the arbitrators time to adjust their work schedules accordingly.2

Parties to a dispute may choose not to record a settlement in the form of an award on agreed terms because the terms of settlement are simple and easily enforceable without an award or the settlement is outside the scope of the tribunal's power. Case No B-25 before the Iran–US Claims Tribunal presents such an example. In that case, the United States (p. 783) agreed to withdraw its claim that Iran had expropriated US government funds held in an Iranian bank, once the Tribunal received notification that these funds had been transferred into the US Government's possession.3 Upon receipt of the funds by the US Government, the enforcement of the parties’ agreement was no longer an issue and thus an award on agreed terms was not necessary.

In the second situation, the parties have their settlement agreement recorded as an award on agreed terms, resulting in several important benefits. First and foremost, a recorded settlement becomes an “award” within the meaning of the Rules4 and is generally considered to be enforceable domestically and internationally.5 In addition, when a party invokes the recording procedure, the arbitrators have an opportunity to review the settlement agreement and, if necessary, offer suggestions to improve the parties’ final product.6 Such oversight is particularly useful in situations where the parties have agreed orally or only generally to settle the dispute and subsequently seek the tribunal's assistance in memorializing the agreement in precise terms.7

The process of recording the award under the Rules occurs in two steps. First, pursuant to Article 36(2), the parties jointly petition the arbitral tribunal to record the settlement agreement. Although not required by the Rules, it is preferable that the request be in writing and signed by both parties.8 The settlement agreement is typically attached to the joint request for the arbitral tribunal's review.9 Second, the tribunal renders the award on agreed (p. 784) terms in accordance with the applicable technical provisions of the Rules.10 The award on agreed terms should incorporate the settlement agreement by reference, include statements that the arbitral tribunal has accepted and recorded the settlement agreement, and set forth the operative terms of the settlement in the dispositif.

Examples of settlement agreements and awards on agreed terms appear below in sections 2(C) and 2(D)(1).11

(b)  Discretion to record a settlement agreement

According to Article 36(1), the parties’ decision to record their settlement as an award on agreed terms must be “accepted by the tribunal.” Whether the arbitral tribunal should have discretion to refuse to record an award on agreed terms was the subject of debate.12 Some members maintained that the decision to record a settlement should be determined solely by the will of the parties.13 The majority of representatives, however, believed that the arbitral tribunal should possess some measure of discretion to refuse an award on agreed terms, even if requested by the parties, in cases in which the settlement was deemed unlawful or against the ordre public at the place of the arbitration.14 In its final form, Article 36(1) grants the arbitral tribunal discretion to record a settlement.

This discretion is circumscribed by the duty to record only those settlements that fall within the arbitral tribunal's jurisdiction, as established by the arbitration agreement.15 If the parties’ settlement involves new subject matter outside the scope of the original agreement, the arbitral tribunal may interpret the settlement agreement as an implied amendment of the arbitration agreement.16 If the settlement includes third parties who are not original signatories to the arbitration agreement, however, then those new parties must accede to the arbitration agreement in order for the settlement agreement to be recorded as a valid award.17

(p. 785) The arbitral tribunal's power to refuse to record a settlement agreement is, in practice, limited.18 Only a light standard of review is appropriate with the aim of proofing the terms of the settlement agreement for egregious violations of the law and clear violations of the ordre public.19 It is not the task of the arbitrators to investigate the parties’ reasons for settlement.20 The arbitrators’ concern is not why a party has agreed to a particular term as part of the settlement, but rather whether such terms are valid and enforceable under the applicable law and policy.21 Suggestions by the arbitral tribunal regarding technical matters, such as with respect to the format or structure of the award, are of course helpful.

What are the circumstances under which refusal to record a settlement agreement is appropriate? Professor Sanders has suggested that a settlement agreement that violates foreign exchange controls should be refused.22 In negotiations on the UNCITRAL Model Law, the Secretariat observed that refusal may be appropriate “in case of suspected fraud, [or] illicit or utterly unfair terms.”23 Commentators have proposed additional examples, including awards that encourage or facilitate the performance of an illegal act, such as the manufacture of an internationally banned drug or the smuggling of contraband.24

In the unique context of the Iran–US Claims Tribunal, the standard for refusing to record an award established by the Algiers Declarations was addressed in Case No A/1.25 The case arose out of conflicting interpretations of the role of the Security Account in paying out settlements entered into by Iran and private claimants. While both the United States and Iran eventually agreed that the Security Account should serve this purpose, the governments’ views on the standard to be applied in recording a settlement continued to differ. Iran argued that the Tribunal should make an award on agreed terms any time a claim was found to be prima facie within the Tribunal's jurisdiction. The United States took the position that the Tribunal's discretion to record should be broader. It argued that in addition to determining that the claim to be settled was within the Tribunal's jurisdiction, the Tribunal must review the settlement to ensure that it represents a “reasonable resolution” of the claim.26

(p. 786) Recognizing the limits on the Tribunal's jurisdiction established by Iran and the United States in the Algiers Declarations, the Tribunal found that it could have “no jurisdiction over any matter not conferred on it by these Declarations.”27 Thus, the Tribunal determined that it was incumbent upon the Tribunal to determine whether the claim on which a settlement rests is within its jurisdiction with respect to each request for an award on agreed terms.28 However, given the complex nature of the Tribunal's jurisdiction, the Tribunal made no attempt to establish a standard for making such a determination. That task was left to the Tribunal to resolve in particular situations “as it deems necessary.”

The Tribunal went on to reject the US claim that a settlement must be reviewed for “reasonableness” before it can be recorded as an award. Based on a review of the travaux préparatoires of the 1976 UNCITRAL Rules, it concluded that while no agreement was reached among the drafters as to the appropriate grounds for refusal to record, it was certain that “the power to refuse to record a settlement cannot be exercised in an arbitrary manner.”29 Thus, to avoid acting arbitrarily the Tribunal found that the arbitrators “should not attempt to review the reasonableness of the settlement in the place of the arbitrating parties.”30 Finally, the Tribunal condoned refusals to record on grounds of lack of jurisdiction “if the settlement does not appear to be appropriate in view of the framework provided by the Algiers Declarations.”31

When a settlement agreement is recorded as an award on agreed terms, the arbitration comes to an end.32 When a request for recording a settlement agreement is denied, the arbitral tribunal may issue an order to terminate the proceedings, unless the parties agree to continue with the arbitration.33

(c)  Pre-settlement negotiations

A controversial topic in international arbitration is whether an arbitrator or arbitral panel should attempt to facilitate a settlement by the parties.34 The UNCITRAL Rules do not address the participation of the arbitral tribunal in settlement negotiations. Although the arbitrators may assist the parties in reaching agreement on substantive matters and in drafting the terms of an award on agreed terms,35 such negotiations can, and often do, fail. (p. 787) Consequently, the parties may hesitate to (and many would argue the arbitral panel should not) enter into arbitrator-assisted negotiations out of fear that information offered during the negotiation process may complicate subsequent arbitral proceedings if agreement cannot be reached.36 Arbitrators share a similar concern that by participating in settlement talks they might express a view on the merits that could serve as grounds for a party's future claim of bias or pre-judgment of the issues. Furthermore, ethical issues may arise as to the level of involvement that an arbitrator can engage in when encouraging or participating in settlement negotiations.37 The parties can avoid some of these concerns through full disclosure of the Tribunal's role in the settlement process and a well drafted agreement regarding the roles of all involved.38 Issues such as who the mediator will be, the Tribunal's authority during the settlement process, and how any disclosed evidence in the negotiations will affect the arbitration must be decided.39 Specifically, there are two principal paths for protecting confidentiality during settlement negotiations.

The parties may enlist the services of a third-party conciliator who is capable of conducting settlement discussions under strict rules of confidentiality.40 Articles 14, 19, and 20 of the UNCITRAL Conciliation Rules (“Conciliation Rules”), for example, prohibit the disclosure of the substance of the conciliation proceedings, including the settlement agreement, preclude the conciliator from acting as arbitrator, counsel, or witness in future proceedings, and prevent the use of evidence adduced in conciliation in future arbitral or judicial proceedings.41 Third-party conciliation, while providing a more secure environment for settlement negotiations, may come at a high price. Conciliation is itself an expensive process and, if unable to yield a positive result, will very likely draw out the arbitral proceedings.

(p. 788) Another possibility is the adoption of a rule of evidence similar to that in Article 20 of the Conciliation Rules, which at a minimum would ensure that evidence adduced in settlement talks will remain inadmissible in arbitration. The Iran–US Claims Tribunal, which did not itself actively promote third-party conciliation, has applied such a rule successfully on the basis of the following rationale:

It is well settled that a Tribunal, which must decide a case subsequent to the failure of the parties to arrive at a settlement by way of negotiations, need not take into account the proposals and concessions that either party might have made in the course of such negotiations. The reason is obvious: such proposals and concessions have no purpose other than to allow an agreement to be attained and may well be very far from what each party legitimately considered to be its rights. Since such proposals were rejected, they have lost all validity and become meaningless.42

While a rule of evidentiary exclusion cannot protect the arbitration from all the pitfalls of settlement negotiations, it nevertheless offers a cost-effective alternative to conciliation.

(2)  Other grounds for termination—Article 36(2)

(a)  Continuation of the arbitration is “unnecessary” or “impossible”

Article 36(2) applies to all other circumstances in which continuation of the arbitral proceedings becomes “unnecessary” or “impossible.” In early drafts of the 1976 UNCITRAL Rules (the final version of which contains provisions that are nearly identical to Article 36 of the 2010 Rules), the provisions pertaining to settlement and to “other grounds for termination” were grouped together in the same paragraph. At the urging of Committee members, this version of the Rules was amended to include a separate paragraph dedicated solely to the latter topic to underscore its distinct significance.43 Unlike Article 36(1), which deals with the manner in which the arbitral tribunal gives effect to a settlement by the parties, Article 36(2) sets the parameters for termination of the arbitration in all cases, except settlement, in which the arbitral proceedings cannot or should not proceed to conclusion.

The most typical case to arise under Article 36(2) is the claimant's decision to withdraw its claim.44 Withdrawal may occur when the claimant realizes, perhaps after reviewing the respondent's submissions, the relative weakness of his claims and the dim prospects for (p. 789) success. Another reason for withdrawal is that the claimant cannot obtain the documents or locate the witnesses necessary for presenting its case. This problem has arisen, for example, in a number of cases before the Iran–US Claims Tribunal where the claimant was forced to abandon his claims because of his inability to gather documentary evidence located in Iran.45

In deciding whether to terminate the proceedings on the basis of a claimant's request for withdrawal, the arbitral tribunal may wish to consider two factors. The first is whether the respondent agrees or objects to the withdrawal. If the respondent agrees, termination is uncontroversial and the claimant's request may be granted after notice has been provided pursuant to Article 36(2). If the respondent objects to the proposed withdrawal, the arbitral tribunal must determine whether the respondent, or any other party, has a legitimate interest in the continuation of the proceedings. In arbitration that has proceeded at least as far as the filing of the statement of defence, the key issues will most likely be the resolution of any outstanding counterclaims. Second, before deciding a request for withdrawal, the arbitral tribunal should verify that the party petitioning for the withdrawal is in fact authorized to do so. This factor is most relevant in cases in which one claimant withdraws a claim on behalf of another.46

Another likely scenario covered by Article 36(2) is a claimant's failure to pursue its claim.47 This may happen either when the claimant fails to submit a statement of claim, which results in procedural default pursuant to Article 30(1)(a), or when the claimant leaves its claim idle at a later stage of the proceedings.48 Still other circumstances requiring application of Article 36(2) may include: when the parties resolve their dispute in another forum thus eliminating the need for or having preclusive effect on the UNCITRAL arbitration;49 when the arbitral tribunal lacks jurisdiction because the dispute is determined to fall outside the scope of the arbitration agreement;50 and when the arbitrators decide, after the parties fail to make required deposits, to terminate the proceedings pursuant to Article 43(4).51

Once an arbitral tribunal concludes that continuation of the arbitral proceedings is “unnecessary” or “impossible,” Article 36(2) requires that it notify the parties of its (p. 790) “intention” to issue a termination order. As discussed in the following section, the arbitral tribunal has the power to terminate the proceedings, unless “there are remaining matters that need to be decided and the arbitral tribunal considers it appropriate to do so.” Though the arbitral tribunal has ultimate discretion to determine the existence of “remaining matters,” good practice nevertheless requires it to solicit the views of the parties on this question, in conjunction with its notification of its “intention” to end the proceedings.

(b)  The existence of “remaining matters”

Before the arbitral tribunal is empowered to terminate the proceedings pursuant to Article 36(2), it must determine that there are no “remaining matters” to be decided. This condition on the tribunal's authority is new to the 2010 UNCITRAL Rules and appears to have been included primarily to ensure consistency with revisions made to the rule on a claimant's default, adopted as Article 30(1)(a) of the 2010 Rules.52 The original 1976 rule, corresponding Article 28(1), required the tribunal to terminate the proceedings when a claimant failed to submit a statement of claim. As explained in Chapter 21, that rule was viewed by the Working Group charged with revising the Rules as too inflexible. It was thus changed so that even when a claimant defaults, a tribunal could retain jurisdiction to resolve any “remaining matters,” namely any counterclaims raised by the respondent.

(3)  Technical requirements for awards on agreed terms—Article 36(3)

The UNCITRAL drafters intended awards on agreed terms to be treated like any other award rendered under the Rules.53 Consequently, an award on agreed terms must satisfy the technical requirements governing the form and effect of an award contained in Article 34(2), (4), and (5) of the Rules. Article 34(3) is expressly inapplicable pursuant to Article 36(1), which provides that “[t]he arbitral tribunal is not obliged to give reasons.” This exemption is logical given that the parties, not the arbitrators, establish the terms of a settlement agreement. Article 34(1) regarding the types of permissible awards, ie, separate awards on different issues at different times, is also inapplicable, although in some cases it may be useful to record a separate award on agreed terms, such as where the parties resolve a discrete claim or group of claims but wish the tribunal to decide the remainder of the claims.54 Finally, Article 36(3) requires the tribunal to communicate to the parties copies of the award on agreed terms or the order for termination of the arbitral proceedings.

(4)  Comparison to the 1976 UNCITRAL Rules

Article 36 is nearly identical to corresponding Article 34 of the 1976 UNCITRAL Rules, save for the following differences.

(p. 791) In Article 36(1), the phrase “the parties” replaces the phrase “both parties” used in the 1976 version of the rule, reflecting UNCITRAL's decision to clarify that the Rules may be applied in cases of multi-party arbitration.55

Article 36(2), as explained above, conditions the arbitral tribunal's power to terminate the proceedings with the phrase “unless there are remaining matters that may need to be decided and the arbitral tribunal considers it appropriate to do so.” In contrast, corresponding Article 34(2) of the 1976 UNCITRAL Rules used the phrase “unless a party raises justifiable grounds for objection.”56 The travaux préparatoires indicate only that the change was made to ensure consistency with other revisions to the Rules.

The Iran–US Claims Tribunal has addressed the meaning of the phrase “justifiable grounds for objection.” In the Cherafat case, the claimants, Ms Gloria Jean Cherafat and her two daughters, sought compensation for the alleged expropriation by Iran of certain property that they claimed to own.57 After the claim was filed, Mr Hossein Cherafat, Gloria Cherafat's ex-husband, filed a submission requesting termination of the proceedings. According to a divorce decree rendered under Kansas law, a separation agreement, and a power of attorney designating Mr Cherafat as Ms Cherafat's attorney (all of which were ultimately submitted to the Tribunal), Mr Cherafat asserted that he was the natural guardian of the two daughters and that all the claimed property in the case belonged to him. The Tribunal requested comments from the parties, which they did not provide. As a result, the Tribunal informed the parties of its intention to terminate the proceedings, unless justifiable grounds for objection were raised by a designated date. Neither party raised objections and the proceedings were terminated.

In an unusual move, three and a half years later, Mr Cherafat submitted a letter to the Tribunal requesting reinstatement of the claimants’ case. The claimants, in support, argued inter alia that the Tribunal's decision to terminate the case was based on an “error of municipal law” because Kansas law, the alleged applicable law, did not authorize Mr Cherafat to withdraw his minor daughters’ claims. The claimants also alleged that Mr Cherafat was coerced by “Iranian political figures” into engineering the termination of the claims in exchange for the return of expropriated family land in Iran. The Tribunal rejected the claimants’ request for reinstatement, finding:

The fact remains that the [claimants] did not raise the error of law argument in 1985 when the Tribunal informed the Parties of its intention to terminate the proceedings in the Case, and they (p. 792) can justifiably raise this argument now only if the reason for the failure to object in 1985 was the fact that Mr. Cherafat was under duress and the [claimants] refrained from objecting for this reason.58

From the Tribunal's reasoning, one can easily infer that the withdrawal of a claim under duress would constitute justifiable grounds for objection and that an error in law may be justifiable grounds if raised in a timely manner.

Finally, Article 36(3) provides that an award on agreed terms must satisfy the technical requirements of Articles 34(4) through 34(6), whereas the 1976 version of the rule required satisfaction of corresponding Articles 32(4) through 32(7).59 The change results from UNCITRAL's decision, discussed in Chapter 24, to delete the text of Article 32(7) of the 1976 Rules from the 2010 Rules.60

C. Extracts from the Practice of Investment Tribunals

TCW Group, Inc, et al and Dominican Republic, Consent Award (July 16, 2009) (PCA administered, 1976 UNCITRAL Rules, CAFTA-DR Chapter 10), at 2:

After reviewing the Settlement, Transfer and Mutual Release Agreement dated May 26, 2009 (the “Agreement”) between Claimants and Respondent (each, a “Party” and collectively, the “Parties”), the Tribunal records by consent the irrevocable statements made to the Tribunal by the Parties in their letter dated June 30, 2009 (the “Joint Letter”) that:

  1. 1. This arbitral proceeding and the disputes and differences over which this Tribunal possesses jurisdiction have been fully and finally settled in accordance with and pursuant to the terms of the Agreement.

  2. 2. Claimants and Respondent submit themselves to the jurisdiction of the Tribunal for the purposes of making this Consent Award.

  3. 3. Claimants and Respondent jointly agree that no Party has admitted any liability by entering into the Agreement, and that neither the Agreement nor this Consent Award shall be construed or deemed to be evidence of a presumption, concession or admission of any liability or wrongdoing on the part of either Party.

Pursuant to Article 34(1) of the [1976] UNCITRAL Arbitration Rules, the Tribunal makes this Consent Award as follows:

  1. 1. In accordance with and pursuant to the terms of the full and final settlement agreed between Claimants and Respondent, the arbitral proceedings are hereby terminated.

  2. 2. Claimants on the one hand, and Respondent on the other, shall bear equally the Tribunal's fees and expenses.

  3. 3. Claimants on the one hand, and Respondent on the other, shall bear equally the fees and expenses of the Permanent Court of Arbitration incurred in connection with this arbitration.

  4. 4. Each Party shall bear its own attorneys’ fees, expenses and other costs with respect to these arbitral proceedings.

The Tribunal records that it has made this Consent Award in accordance with the Parties’ request in their Joint Letter.

MADE at the place of arbitration, New York, this 16th day of July 2009.

(p. 793) [signed]

Prof. Dr. Karl-Heinz Böckstiegel

Chairman of the Tribunal

[signed] [signed]

Prof. Dr. Juan Fernández Armesto Mr. Mark Kantor, Esq.

Arbitrator Arbitrator

D. Extracts from the Practice of the Iran–US Claims Tribunal

(1)  Tribunal Rules (1983), Article 34(1)

Iran Chevron Oil Co and Islamic Republic of Iran, Case No 73, Chamber Three, Order of April 15, 1986:

In Award No 208–73–3 filed on 13 January 1986 in this Case the Tribunal stated in paragraph 11:

“The proceedings in this case shall be terminated when evidence, satisfactorily proving receipt of the payment provided for in the Claims Settlement Agreement, has been filed with the Tribunal.”

On April 8 1986 the Claimant submitted a letter with an enclosed copy of a National Westminster Bank (London) statement of account for Iran Chevron Oil Company which confirmed the receipt of funds specified in paragraph 1 of the Claims Settlement Agreement dated 18 December 1985 entered into between the Parties to this Case.

The Tribunal accepts this confirmation as being according with the requirements of the paragraph 11 of the Tribunal's Award.

In view of the foregoing, the Tribunal hereby terminates the arbitral proceedings in this Case pursuant to Article 34(1) of the [1983] Tribunal Rules.

Sun Co, Inc and National Iranian Oil Co, Joint Request for Arbitral Award on Agreed Terms (September 28, 1992), reprinted in 28 Iran-US CTR 395 (1992):

JOINT REQUEST FOR ARBITRAL AWARD

ON AGREED TERMS

Pursuant to Article 34 of the Rules of Procedure of the Iran-United States Claims Tribunal (the “Tribunal”), Sun Company, Inc (“Claimant”), a Pennsylvania corporation, on one part, and National Iranian Oil Company (“NIOC”) and the Government of the Islamic Republic of Iran (“Iran”), hereinafter collectively called “Respondents,” on the other part, jointly request that the Tribunal issue an Arbitral Award on Agreed Terms that will record and give effect to the attached Settlement Agreement, which is incorporated herein by reference.

The Settlement Agreement, which was entered into on 14th August 1992, provides that in consideration of the full and final settlement of all disputes, differences, claims, counterclaims, and matters directly or indirectly raised or capable of arising out of the relationships, transactions, contracts, and events related to the subject matter of Case No 21, the sum of one hundred thirty million, four hundred fifty thousand United States Dollars (U.S. $130,450,000) shall be paid to the Claimant.

The representatives of the Parties expressly declare and warrant that they are duly empowered to sign this Joint Request, and the signing and submission of the Joint Request by the representatives of Iran, NIOC and Claimant shall signify that all necessary authorities have given their approval.

Respectfully submitted,

The Islamic Republic of Iran

[signed]

National Iranian Oil Company

[signed]

Sun Company, Inc.

[signed]

September 28, 1992

(p. 794) Sun Co, Inc and National Iranian Oil Co, Settlement Agreement (August 14, 1992), reprinted in 28 Iran-US CTR 396 (1992):

Settlement Agreement

This Settlement Agreement is made and entered into this 14th day of August, 1992, by and between Sun Company, Inc (“Claimant”), a corporation organized and existing under the laws of the Commonwealth of Pennsylvania, Iranian Sun Oil Company, a corporation organized and existing under the laws of the State of Delaware, and Sun International Limited, a corporation organized and existing under the laws of Bermuda, on one part; and National Iranian Oil Company (“NIOC”) and the Government of the Islamic Republic of Iran (“Iran”), hereinafter collectively called “Respondents,” on the other part. Claimant and Respondents are hereinafter collectively referred to as the “Parties.”

WHEREAS, Claimant, on behalf of its subsidiary, Sun International Limited, the assignee of the claim of Iranian Sun Oil Company as the successor to and transferee of rights, interests, benefits, obligations, and liabilities of Claimant pursuant to the Joint Structure Agreement (“JSA”) of February 13, 1965, between NIOC, as the First Party, and Claimant and three other companies, as the Second Party, filed a Statement of Claim with the Iran-United States Claims Tribunal (“the Tribunal”) raising certain claims against the Respondents relating to the JSA, which claim was docketed by the Tribunal as Case No 21;

WHEREAS, Respondents have asserted defences and filed counterclaims in Case No 21;

WHEREAS, the Parties desire to resolve and to make full, complete, and final settlement of all their claims and disputes existing or capable of arising between them related to Case No 21 and the claims and counterclaims filed therein;

NOW, THEREFORE, the Parties agree:

1. In consideration of the full and final settlement of all disputes, differences, claims, counterclaims, and matters directly or indirectly raised or capable of arising out of the relationships, transactions, contracts including but not limited to the JSA, and events in any manner related to the subject matter of the Statement of Claim, counterclaims, and other submissions by the Parties in Case No 21, and in consideration of the covenants and promises set forth herein, Claimant shall be paid the amount of One hundred thirty million, four hundred fifty thousand United States Dollars (U.S. $130,450,000) (the “Settlement Amount”). The Settlement Amount shall be paid out of the Security Account established pursuant to paragraph 7 of the Declaration of the Democratic and Popular Republic of Algeria of January 19, 1981. Payment shall be deemed to have occurred when the Settlement Amount is received by the Federal Reserve Bank of New York.

2. In consideration of the payment of the Settlement Amount, Claimant for itself and for its subsidiaries, affiliates, parents, predecessors, successors, and assigns hereby release, quitclaim, and forever discharge Respondents and their affiliates, subsidiaries, agencies, instrumentalities, predecessors, successors, and assigns, from and against any and all claims, demands, losses, damages, suits, actions and causes of action of any nature, whether in rem or in personam or otherwise, which they have ever had, now have or may have in the future arising out of or in connection with Case No 21 and related to the JSA.

3. In consideration of the covenants and promises set forth herein, the Respondents for themselves and for their affiliates, subsidiaries, agencies, instrumentalities, predecessors, successors, and assigns hereby release, quitclaim, and forever discharge Claimant and its subsidiaries, affiliates, parents, predecessors, successors, and assigns from and against any and all claims, demands, losses, damages, suits, actions and causes of action of any nature, whether in rem or in personam or otherwise, which they have ever had, now have or may have in the future arising out of or in connection with Case No 21, including, but not limited to, (a) the purchases of crude oil that are the subject matter of Counterclaim No Eight and (b) any Stated Payment, Additional Payment, or other financial imposition or tax of any kind by Iran or NIOC.

4. In consideration of the payment of the Settlement Amount, Claimant, its subsidiaries, affiliates, parents, predecessors, successors and assigns shall indemnify and hold harmless Respondents, (p. 795) their affiliates, subsidiaries, agencies and instrumentalities, predecessors, successors, and assigns against any claim, counterclaim, action or proceeding that any or all of the Claimant, its subsidiaries, affiliates, parents, predecessors, successors, and assigns may raise, assert, initiate or take against any or all of the Respondents, their affiliates, subsidiaries, agencies, instrumentalities, predecessors, successors, and assigns relating to, or arising out of, or capable of arising out of, the contracts, transactions, relationships, rights, or occurrences including but not limited to the JSA and any matters that are the subject of the claims raised in Case No 21.

5. In consideration of the covenants and promises set forth herein, Respondents, their affiliates, subsidiaries, agencies, instrumentalities, predecessors, successors and assigns shall indemnify and hold harmless, Claimant, its subsidiaries, affiliates, parents, predecessors, successors and assigns against any claim, counterclaim, action or proceeding that any or all of the Respondents, their affiliates, subsidiaries, agencies, instrumentalities, predecessors, successors and assigns may raise, assert, initiate or take against any or all of the Claimant, its subsidiaries, affiliates, parents, predecessors, successors, and assigns relating to or arising out of, or capable of arising out of, the contracts, transactions, relationships, rights or occurrences including but not limited to the JSA and any matters that are the subject of the counterclaims raised in Case No 21.

6. Upon payment of the Settlement Amount, the Parties shall not directly, indirectly, individually, or in conjunction with others at any time thereafter take or pursue any legal action or initiate or pursue arbitral or court proceedings or otherwise make any claim whatsoever against each other or any of their respective subsidiaries, affiliates, parents, predecessors, successors, assigns, agencies, or instrumentalities with respect to the subject matter of the claims and counterclaims in Case No 21.

7. In consideration of the payment of the Settlement Amount, Claimant, Sun International Limited, and Iranian Sun Oil Company hereby transfer and assign to and vest in NIOC unconditionally, irrevocably, without any lien or encumbrance, and without the right to any recourse all of their rights, benefits, interests, shares, and titles in LAPCO and LAPCO's properties, assets, and accounts whatsoever, that were kept or held in Iran or outside of the United States of America or the United Kingdom of Great Britain and Northern Ireland, and account number 910–1–222025 at the Chase Manhattan Bank, New York, New York. In consideration of the covenants and promises set forth herein, Respondents, their affiliates, subsidiaries, agencies, instrumentalities, predecessors, successors and assigns hereby transfer and assign to and vest in Claimant unconditionally, irrevocably, without any lien or encumbrance, and without the right to any recourse all of their rights, benefits, interests, shares, and titles in LAPCO's properties, assets and accounts whatsoever that were kept or held in the United States of America or the United Kingdom of Great Britain and Northern Ireland, except account number 910–1–222025 at the Chase Manhattan Bank, New York, New York.

8. Upon payment of the Settlement Amount, the Parties shall waive any and all claims for costs, including attorneys’ fees, arising out of or related in any way to the arbitration, prosecution, or defence of any claim before any forum including the Iran-United States Claims Tribunal with respect to Case No 21.

9. This Settlement Agreement is for the sole purpose of settling the disputes at issue in Case No 21. Nothing in this Settlement Agreement shall be relied upon or construed as relevant to or to affect in any way any argument or position that the Parties or their subsidiaries, affiliates, parents, predecessors, successors, assigns, agencies, or instrumentalities have raised or may raise concerning the jurisdiction or the merits of this case or other cases, whether before the Tribunal or any other forum or fora. This Settlement Agreement shall not constitute a legal precedent for any person or Party, and shall not be used except for the sole purpose of giving effect to its terms, and shall not prejudice or affect other rights of the Parties or the rights of any other person in other cases before the Tribunal or elsewhere.

10. The releases, waivers, transfers, undertakings, declarations, obligations, and agreements herein are self-executing upon payment of the Settlement Amount, and need not be authorized, evidenced, or signified by any additional document, agreement, or other writing.

(p. 796) 11. By September 28, 1992, the Parties shall submit to the Tribunal a Joint Request for Arbitral Award on Agreed Terms in the form attached as Exhibit 1 (“Joint Request”) asking the Tribunal to record this Settlement Agreement as an Arbitral Award on Agreed Terms giving effect to this Settlement Agreement. The Parties agree to take all reasonable steps necessary to file the Joint Request as soon hereafter as possible and to cooperate to effect the expeditious issuance by the Tribunal of an Arbitral Award on Agreed Terms. The Joint Request may be filed with the Tribunal by any Party on or after September 28, 1992, and such filing shall constitute the request of all Parties that the Tribunal record this Settlement Agreement as an Arbitral Award on Agreed Terms giving effect to this Settlement Agreement. Prior to September 28, 1992, Claimant may deliver written notice to any of the Respondents, or any Respondent may deliver written notice to the Claimant, at an address or in a manner designated by or acceptable to the Party receiving notice, that the Party receiving notice may file the Joint Request with the Tribunal. Such filing shall constitute the request of all Parties that the Tribunal record this Settlement Agreement as an Arbitral Award on Agreed Terms giving effect to this Settlement Agreement. Prior to October 28, 1992, neither Claimant nor Respondents shall request the Tribunal to amend, modify or change the terms of the Tribunal's scheduling Order in Cases 20 and 21 filed July 17, 1992, Tribunal document number 635. If the Joint Request is not submitted by October 28, 1992, this Settlement Agreement shall be null and void and of no effect whatsoever, unless otherwise agreed upon in writing by the Parties.

12. If for any reason the Arbitral Award on Agreed Terms is not issued, final, and binding, in accordance with the Tribunal Rules, within 30 days of the filing of the Joint Request, then, unless otherwise agreed in writing by the Parties, the Tribunal shall resume jurisdiction over all claims and counterclaims in Case No 21 and the Parties shall be placed in the same position as they had occupied prior to this Settlement Agreement as if it had not been entered into.

13. The representatives of the Parties expressly declare that they are duly empowered to sign this Settlement Agreement and that their signatures will commit their respective principals to fulfillment of their obligations under this Settlement Agreement without any limitations whatsoever, and the signing of this Settlement Agreement by the representatives of Iran, NIOC and Claimant shall signify that all such authorities have given their approval.

14. For the purpose of construction and interpretation of this Settlement Agreement the entire agreement shall be read and construed as a whole without giving any specific effect to any article separately.

15. This Settlement Agreement (in four originals in each language) has been written and signed in both English and Persian, and each text shall have equal validity.

IN WITNESS WHEREOF, the Parties have executed and delivered this Settlement Agreement this 14th day of August, 1992.

The Islamic Republic of Iran

[signed]

National Iranian Oil Company

[signed]

Sun Company, Inc

[signed]

Sun International Limited

[signed]

Sun Company, Inc and National Iranian Oil Co, Award on Agreed Terms No 537–21–1 (October 19, 1992), reprinted in 28 Iran-US CTR 394 (1992):

Award on agreed terms

1. SUN COMPANY, INC (“SUN” or the “Claimant”), on behalf of its subsidiary SUN INTERNATIONAL LIMITED (“Sun International”), the assignee of the claim of IRANIAN SUN OIL COMPANY (“Iranian Sun”) as the successor to and transferee of rights, (p. 797) interests, benefits, obligations, and liabilities of the Claimant pursuant to the Joint Structure Agreement (“JSA”) of February 13, 1965, filed its Statement of Claim on November 9, 1981 against THE GOVERNMENT OF THE ISLAMIC REPUBLIC OF IRAN (“IRAN”) and THE NATIONAL IRANIAN OIL COMPANY (“NIOC”) (the “Respondents”). On May 24, 1982 and June 15, 1984, the Respondents filed Statements of Defense and Counterclaim.

2. On September 28, 1992, the Claimant and the Respondents (the “Parties”) submitted a Joint Request for Arbitral Award on Agreed Terms (the “Joint Request”). Attached thereto the Parties submitted a Settlement Agreement dated August 14, 1992, signed by the Agent of IRAN and by representatives of NIOC, the Claimant, Sun International and Iranian Sun (the “Settlement Agreement”). The signatories to the Settlement Agreement stated their “desire to resolve and to make full, complete, and final settlement of all their claims and disputes existing or capable of arising between them related to Case No 21 and the claims and counterclaims filed therein.”

3. The Joint Request states that “in consideration of the full and final settlement of all disputes, differences, claims, counterclaims, and matters directly or indirectly raised or capable of arising out of the relationships, transactions, contracts, and events related to the subject matter of Case No 21, the sum of One hundred thirty million, four hundred fifty thousand United States Dollars (U.S. $130,450,000) shall be paid to the Claimant.” Furthermore, in the Joint Request the Parties requested that the Tribunal issue an Arbitral Award on Agreed Terms that will record and give effect to the Settlement Agreement. Copies of the Joint Request and Settlement Agreement are attached hereto and incorporated herein by reference.

4. The Tribunal accepts the Settlement Agreement in accordance with Article 34, paragraph 1, of the [1983] Tribunal Rules.

5. Finally, the Tribunal notes that as per its Order dated October 1, 1992, Judge Ansari's withdrawal as an arbitrator from Case No 21 was accepted by the Tribunal and Mr. Ahmed Sadek El-Kosheri was designated by Presidential Order No 79 (Rectified Version) dated October 6, 1992 to act as a Member of Chamber One in Case No 21 and accordingly signs this Arbitral Award on Agreed Terms.

6. Based on the foregoing,

THE TRIBUNAL AWARDS AS FOLLOWS:

  1. (a)  The Settlement Agreement is hereby recorded as an Award on Agreed Terms binding upon the Parties each of which is bound to fulfill the conditions set forth in the Settlement Agreement.

  2. (b)  The payment obligation specified in the Settlement Agreement in the amount of One hundred thirty million, four hundred and fifty thousand United States dollars (U.S. $130,450,000) shall be satisfied by payment to SUN COMPANY, INC. out of the Security Account established pursuant to Paragraph 7 of the Declaration of the Government of the Democratic and Popular Republic of Algeria dated January 19, 1981.

  3. (c)  This Award is hereby submitted to the President of the Tribunal for notification to the Escrow Agent.

Dated, The Hague

19 October 1992

[signed]

Karl-Heinz Böckstiegel

Chairman

Chamber One

In the name of God

[signed][signed]

Richard C Allison Ahmed Sadek El-Kosheri

(p. 798) (2)  Tribunal Rules (1983), Article 34(2)

Seaboard Flour Corp and Islamic Republic of Iran, Case No 318, Chamber Three, Order of April 9, 1985:

By its submission dated 30 May 1984 Claimant requested “that the Tribunal terminate this case with each party to bear its own costs and counsel fees.”

Commenting on this request, the Agent of the Islamic Republic of Iran, in a submission filed on 22 January 1985, informed the Tribunal that Respondent Morghe Kadkhoda Chicken Company agrees “with Claimant's request for termination provided that damages for costs and counsel fees be included in the award.”

By Order of 28 January 1985, the Tribunal notified the Parties “that it intends to terminate the proceedings in the Case, unless any of the Parties file with the Tribunal not later than 28 February 1985 objections in accordance with Article 34 of the [1983] Tribunal Rules.”

On 28 February 1985 Respondent Morghe Kadkhoda Chicken Company filed a submission in which it repeated the view point it had presented in its earlier submission. Other Parties did not file comments by the same date.

The Agent of the Islamic Republic of Iran filed 11 March 1985 a letter stating that “ … the Government of the Islamic Republic of Iran is in agreement with withdrawal of claim with prejudice.”

In view of the above, the Tribunal hereby terminates the proceedings in this case pursuant to Article 34 (2) of the [1983] Tribunal Rules. Each Party shall bear its costs of arbitration.

Brown & Root, Inc and Islamic Republic of Iran, Case No 432, Chamber One, Order of May 31, 1985:

Each of the Parties has requested that this Case be dismissed on the basis of lack of jurisdiction. In view of the apparent desire of both Parties that the case be terminated, the Tribunal sees no need to reach or decide the issue of whether or not it has jurisdiction.

Accordingly, it intends to terminate all proceedings in this case pursuant to Article 34, paragraph 2, of the [1983] Tribunal Rules unless either Party raises justifiable grounds for objection to this procedure to this procedure on or before 30 June 1985.

Bank Markazi Iran and Rainier National Bank, Case No 738, Chamber Two, Order of November 29, 1985:

In its Order of 24 July 1985, the Tribunal advised the Parties of the Decision of the Full Tribunal in Case No A–17 … in which the Tribunal held, inter alia, that:

“Claims by Iranian banks against United States banking institutions are within the jurisdiction of the Tribunal only to the extent, if any, that they are disputes as to amounts owing from Dollar Account No 2 for the types of debts payable out of that account which have been referred to the Tribunal in accordance with Paragraph 2(b) of the undertakings.”

In view of the Claimant's letter of 1 October 1985 stating that the present Claim does not involve an amount or amounts owing and payable to it from Dollar Account No 2, the Tribunal decides that it lacks jurisdiction over the Claim filed in this Case.

In view of the foregoing, the Tribunal hereby terminates the arbitral proceedings in this Case, pursuant to Article 34 of the [1983] Tribunal Rules. The Co-Registrars are instructed to strike the Case from the Register. …

Union Special Corp (a claim of less than US $250,000 presented by the United States of America) and Islamic Republic of Iran, Case No 10863, Chamber One, Order of August 29, 1988:

  1. 1. By its submission filed on March 8, 1988, the Claimant sought to withdraw its Claim.

  2. 2. By Order filed on March 10, 1988, the Tribunal informed the Parties that it intended to terminate this Case unless the Respondent by May 9, 1988 raised justifiable grounds for objection (p. 799) in accordance with Article 34 of the [1983] Tribunal Rules, which time limit was by Order filed on May 25, 1988 extended to July 8, 1988.

  3. 3. The Respondent has not filed any objection to date. Accordingly the Tribunal hereby terminates the proceedings in this Case pursuant to Article 34(2) of the [1983] Tribunal Rules.

Charles W Boyle (a claim of less than US $250,000 presented by the United States of America) and Islamic Republic of Iran, Case No 12129, Chamber Three, Order of September 13, 1990:

Reference is made to the submission of the Agent of the United States filed on 5 September 1990 in which he stated that the United States of America on behalf of the Claimant “hereby withdraws the … claim.”

On 5 September 1990, the Respondent informed the Tribunal that it has no objection to the Claimant's withdrawal.

Accordingly, the Tribunal hereby terminates the proceedings in this Case pursuant to Article 34(2) of the [1983] Tribunal Rules.

Xtra, Inc and Government of the Islamic Republic of Iran, Case No 500, Chamber One, Order of January 8, 1991:

  1. 1. By a submission filed on May 29 1989, the Claimant informed the Tribunal that it had “reached agreement” with Uiterwyk Corporation, “Claimant in Case No 381, … with respect to the replacement value of [150] containers.” The same submission identifies these 150 containers by number. The Claimant, by this submission, seeks to withdraw its entire claim against Respondent.

  2. 2. Claimant's withdrawal is made conditionally, so that it becomes effective only “at such time as th[e] Tribunal enters an award which will permit the release to Uiterwyk Corporation of that portion of the award which th[e] Tribunal set aside at paragraph 90 of Uiterwyk Corporation, et al. and Government of the Islamic Republic of Iran, et al., Partial Award No 375–381–1 (July 6, 1988).”

  3. 3. By Order filed on June 14, 1989, the Tribunal invited the Respondent to comment on this withdrawal. By a submission filed on December 27, 1989, Respondent the Islamic Republic of Iran objects to the withdrawal.

  4. 4. The Tribunal notes that a Final Award has been issued today in Case No 381 pursuant to the jurisdiction retained under Paragraph 98 of Partial Award No 381–375–1. The terms of the Final Award fulfill the conditions that Xtra has established for its withdrawal in the present Case. Therefore, pursuant to Article 34(2) of the [1983] Tribunal Rules, the Tribunal terminates the proceedings in this Case.

Isaac Poura and Islamic Republic of Iran, Case No 323, Chamber One, Order of March 3, 1993:

  1. 1. By Order filed on September 3, 1992, the Claimant was invited to file by November 22, 1992 copies of any documentary evidence on which he sought to rely in rebuttal of previously presented evidence. The Claimant neither filed any evidence nor any extension request.

  2. 2. On December 31, 1992, the Agent of the Government of the Islamic Republic of Iran filed a letter in which he construed the Claimant's failure to file any submission as an indication that the Claimant intended to withdraw his Case, and requested for that reason that the Tribunal terminate the Case by virtue of Article 34 of the [1983] Tribunal Rules.

  3. 3. In an Order of January 20, 1993 the Tribunal further took note of the Claimant's failure to provide any information pursuant to the Order of November 11, 1982 and in light of the procedural history of the Case assumed that the Claimant did not intend to pursue his Claim. By the same Order the Tribunal informed the Parties that it intended to terminate proceedings in the Case pursuant to Article 34 of the [1983] Tribunal Rules, unless the Claimant by February 18, 1993 raised justifiable grounds for objection.

  4. 4. The Claimant has not filed any objection to date. Accordingly, the Tribunal hereby terminates the proceedings in this Case pursuant to Article 34(2) of the [1983] Tribunal Rules.

(p. 800) Mercantile Trust Co National Association and Islamic Republic of Iran, Case No 351, Chamber Two, Order of April 23, 1993:

  1. 3. On 27 June 1990, the Tribunal issued an Order in which it noted that the arbitral proceedings in this Case had been suspended since the summer of 1984, and requested the Parties to inform the Tribunal by 15 August 1990 of the present status of the Case. The Tribunal also requested the Parties to identify the extent to which there remained a dispute between the Parties on the claims and counterclaims, if any, and to indicate whether the suspension should be continued and, if so, the reasons therefor.

  2. 4. The Respondents in their response filed on 15 August 1990 stated that the Claim in this Case had been entirely settled. There was no response from [Claimant] Mercantile.

  3. 5. The Tribunal in its Order of 10 September 1990 requested Mercantile to file its submission by 10 October 1990. Mercantile again having failed to respond, the Tribunal in its Order of 2 November 1990 requested Mercantile “to inform the Tribunal by 2 December 1990 whether it agrees that its Claim has been entirely settled, in which event the Tribunal intends to terminate the proceedings in this Case pursuant to Article 34 of the [1983] Tribunal Rules unless any Party raises justifiable grounds for objection by 2 January 1991.”

  4. 6. Mercantile did not respond to the Tribunal's Order of 2 November 1990. After having granted the Respondents two extensions of time to respond, the Tribunal in its Order of 8 July 1991 ordered the Parties to file any submission they wished to make by 30 August 1991. The Tribunal indicated that after that date it would make a decision on the remaining issues in this Case on the basis of the documents before it.

  5. 7. The Tribunal noted that the Parties made no submissions in response to the Tribunal's Order of 8 July 1991. Consequently, no justifiable grounds for objections having been raised by any Party, the Tribunal hereby terminates the arbitral proceedings in this Case … in accordance with Article 34, paragraph 2 of the [1983] Tribunal Rules. …

Footnotes:

1  Corresponding Article 34 of the 1976 UNCITRAL Rules provides:

  1. 1. If, before the award is made, the parties agree on a settlement of the dispute, the arbitral tribunal shall either issue an order for the termination of the arbitral proceedings or, if requested by both parties and accepted by the tribunal, record the settlement in the form of an arbitral award on agreed terms. The arbitral tribunal is not obliged to give reasons for such an award.

  2. 2. If, before the award is made, the continuation of the arbitral proceedings becomes unnecessary or impossible for any reason not mentioned in paragraph 1, the arbitral tribunal shall inform the parties of its intention to issue an order for the termination of the proceedings. The arbitral tribunal shall have the power to issue such an order unless a party raises justifiable grounds for objection.

  3. 3. Copies of the order for termination of the arbitral proceedings or of the arbitral award on agreed terms, signed by the arbitrators, shall be communicated by the arbitral tribunal to the parties. Where an arbitral award on agreed terms is made, the provisions of article 32, paragraph 2 and 4 to 7, shall apply.

2  According to Berger, the parties are under a “procedural obligation” to inform the arbitral tribunal of the settlement so it may dispense with the arbitration. See K Berger, International Economic Arbitration (1993) 590–1; S Baker and M Davis, The UNCITRAL Arbitration Rules in Practice: The Experience of the Iran-United States Claims Tribunal (1992) 183. But see N Blackaby and C Partasides with A Redfern and M Hunter, Redfern and Hunter on International Arbitration (5th edn 2009) 526 (maintaining there is no such obligation, although it would be “a normal act of courtesy” to inform the tribunal of any settlement).

3  In a letter dated April 27, 1987, the US Agent made a conditional request that the Tribunal not withdraw the US claim until it received confirmation that payment had been made. Upon receipt of the confirmation, the Tribunal terminated the proceedings in accordance with Article 34(1) of the Tribunal Rules. See Government of the United States and Islamic Republic of Iran, Case No B-25, Chamber One, Order of November 17, 1987.

4  See Report of the Secretary-General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), reprinted in (1976) VII UNCITRAL Ybk 166, 179 (Commentary on Draft Article 29) (“A settlement recorded in the form of an award on agreed terms acquires the legal force of an award.”); P Sanders, “Commentary on UNCITRAL Arbitration Rules,” (1977) II Ybk Commercial Arb 172, 212 (noting award on agreed terms is “final and binding on the parties and will be carried out by them without delay”).

5  See Article 30(2) of the Model Law, as amended (“The award on agreed terms has the status of any other award on the merits.”); A van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation (1981) 49–50 (“The award on agreed terms … can be deemed to come within the purview of the Convention, provided that in the country of origin such award is considered a genuine award, which is almost always the case.”).

6  The arbitral tribunal's discretion to record a settlement agreement is discussed below in section 2(B)(1)(b).

7  UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1, n 4, (Commentary on Draft Article 29). Another reason for obtaining a recorded settlement is “the desirability (particularly where a state or state agency is involved) of having a definite and identifiable ‘result’ of the arbitral proceedings, in the form of an award which may be passed to the appropriate paying authority for implementation.” N Blackaby and C Partasides, Redfern and Hunter on International Arbitration, n 2, 525.

8  See K Berger, International Economic Arbitration, n 2, 583. In the context of the Model Law, it has been noted that a request may come from only one party if no doubt remains that the request was made on behalf of the other party with that party's full consent. H Holtzmann and J Neuhaus, A Guide to the UNCITRAL Model Law on Commercial Arbitration: Legislative History and Commentary (1989) 822–3.

It is useful practice for all parties to the proposed settlement agreement to place their signatures on the joint request so that the tribunal has the appropriate contact information to confirm each party's consent, if necessary. The signatures of all the parties also informs the tribunal that, unless otherwise stated, the joint request is for an award on agreed terms that resolves all, not a part of, the arbitral claims. J Selby and D Stewart, “Practical Aspects of Arbitrating Claims Before the Iran-United States Claims Tribunal,” (1984) 18(2) Intl Lawyer 211, 241.

9  Although the contents of the settlement agreement will vary depending on the circumstances of the dispute, the parties may wish to consider the terms of the standard settlement agreement used by parties before the Iran–US Claims Tribunal: “(1) termination of all pending litigation by both parties wherever filed; (2) mutual release and discharge of claims; (3) indemnity and hold harmless against future claims by related parties; (4) transfer of all rights of property; (5) waiver of claims of costs and attorneys; and (6) agreement to submit jointly to the arbitral tribunal a request for approval of the settlement agreement and requiring approval for the agreement to have legal effect provision that agreement would have no legal effect if not approved.” See P Trooboff, “Settlements,” in D Caron and J Crook (eds) The Iran-United States Claims Tribunal and the Process of International Claims Resolution (2000) 295.

10  See section 2(B)(3).

11  See TCW Group, Inc (1976 Rules), reprinted in section 2(C), and Sun Co, Inc (1983 Tribunal Rules), reprinted in section 2(D)(1).

12  One commentator notes that “the parties are free to settle their claims as they wish, but they are not free to require that the tribunal exercise its own authority to approve that settlement” and to do so would “misconceiv[e] an arbitral tribunal's adjudicatory role” G Born, International Commercial Arbitration (2009) 2437.

13  See Report of the UNCITRAL, 8th Session, Summary of Discussion of the Preliminary Draft, UN Doc A/10017, para 194 (1975), reprinted in (1975) VI UNCITRAL Ybk 24, 42–3. See Summary Record of the 11th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.11, at 10, para 79 (1976) (Comment by Mr Melis, Austria).

14  UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.11, n 13, at 10, para 195; UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1, n 4, (Commentary on Draft Article 29(1)). See also Summary Record of the 151st Meeting of the UNCITRAL, 8th Session, UN Doc A/CN.9/SR.167, at 203 (1975) (Comment by Mr Holtzmann, United States, stating that the “arbitrators should be left free to decide whether they agreed or refused to record a settlement in the form of an arbitral award” because without this discretion “arbitrators [would be] at the mercy of possible abuses by the parties”).

15  K Berger, International Economic Arbitration, n 2, 586.

16  K Berger, International Economic Arbitration, n 2, 586.

17  K Berger, International Economic Arbitration, n 2, 586.

18  This accords with the drafters’ likely intention of narrow discretion, J Castello, “UNCITRAL Rules,” in F Weigand (ed) Practitioner's Handbook on International Commercial Arbitration (2nd edn 2009) 1516–17 (noting that the drafters “evidently expected the tribunal's discretion to be narrow, since they appeared to discuss only two grounds for refusing a request: ‘the settlement agreed on by the parties might be unlawful or contrary to public policy’”).

19  P Sanders, “Commentary on UNCITRAL Arbitration Rules,” n 4, 212 (“as a rule … the arbitrators will be prepared to incorporate the settlement into an award signed by them.”). In the context of the Model Law, Holtzmann and Neuhaus believe that refusal should occur only in “exceptional cases,” such as violations of law and policy, along with affronts to “fundamental notions of fairness and justice.” H Holtzmann and J Neuhaus, A Guide to the UNCITRAL Model Law, n 8, 824–5 (citing Commission Report, UN Doc A/40/17, para 249 (August 21, 1985).

20  H Holtzmann and J Neuhaus, A Guide to the UNCITRAL Model Law, n 8, 824–5.

21  See J van Hof “UNCITRAL Arbitration Rules, Section IV, Article 34 [Settlement or other grounds for termination]” in L Mistelis (ed) Concise International Arbitration (2010) 220.

22  See UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.11, n 13, at 10, para 82; P Sanders, “Commentary on UNCITRAL Arbitration Rules,” n 4, 212. See also UN Doc A/CN.9/SR.167, n 14, at 202 (Comment by Mr Gueiros, Brazil, proposing language that provides: “If the arbitrators are of the opinion that the settlement would be against public policy or against the rights or interests governed by the statutes of mandatory trade rules, they should refuse to record the settlement in the form of an arbitral award. … ”).

23  Seventh Secretariat Note, Analytical Commentary on Draft Text, UN Doc A/CN.9/264, at para 2 (March 25, 1985), reprinted in H Holtzmann and J Neuhaus, A Guide to the UNCITRAL Model Law, n 8, 832.

24  See N Blackaby and C Partasides, Redfern and Hunter on International Arbitration, n 2, 526–7.

25  See Iran and United States, Case A/1 (Issue II), Decision (May 14, 1982), reprinted in 1 Iran-US CTR 144 (1981–1982).

26  Iran and United States, Case A/1 (1983 Tribunal Rules), at 152.

27  Iran and United States, Case A/1 (1983 Tribunal Rules), at 152.

28  Iran and United States, Case A/1 (1983 Tribunal Rules), at 152.

29  Iran and United States, Case A/1 (1983 Tribunal Rules), at 153.

30  Iran and United States, Case A/1 (1983 Tribunal Rules), at 153.

31  Iran and United States, Case A/1 (1983 Tribunal Rules), at 153. For an in depth discussion, see J Carter, “The Iran-United States Claims Tribunal: Observations on the First Year,” (1982) 29 UCLA Law Review 1076, 1097–102; J Selby and D Stewart, “Practical Aspects of Arbitrating Claims,” n 8, 241.

32  In some cases before the Iran-US Claims Tribunal, the arbitral proceedings were not terminated until the parties fulfilled the conditions of the award on agreed terms. See, eg, Iran Chevron Oil Co (1983 Tribunal Rules), reprinted in section 2(D)(1). It is unlikely, as a practical matter, that this practice would extend to ad hoc commercial arbitration where the panel normally ceases to exist once the period for requesting correction, additional award, or interpretation has passed.

33  See UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1, n 4 (Commentary on Draft Article 29(1)).

34  For a continued discussion see H Raeschke-Kessler, “Making Arbitration More Efficient: Settlement Initiatives by the Arbitral Tribunal,” (2002) 6 Vindobona J Intl Commercial L and Arb 245; see also M Schneider, “Combining Arbitration with Conciliation,” in A van den Berg (ed) ICCA Congress Series No 8, International Dispute Resolution: Towards an International Arbitration Culture (1998) 57.

35  In fact, the UNCITRAL drafters anticipated such conduct. See Report of the Secretary-General on the Preliminary Draft Set of Arbitration Rules, UNCITRAL, 8th Session, UN Doc A/CN.9/97 (1974), reprinted in (1975) VI UNCITRAL Ybk 163, 179 (noting that a settlement might be reached during a hearing with the arbitrators’ assistance). According to Sanders, a settlement might also be facilitated after the hearing. P Sanders, “Commentary on UNCITRAL Arbitration Rules,” n 4, 212.

36  One commentator notes that it is possible for the Tribunal to exclude any evidence not in the arbitral record, however, “many sceptics regard this requirement as impossible to satisfy.” D Plant, “ADR and Arbitration,” in L Newman and R Hill (eds) The Leading Arbitrators’ Guide to International Arbitration (2nd edn 2008) 255; see also M Schneider, “Combining Arbitration with Conciliation,” in A van den Berg (ed) ICCA Congress Series No 8, International Dispute Resolution: Towards an International Arbitration Culture (1998) 57, 94–5.

37  See C Rogers, “The Ethics of International Arbitrators,” in L Newman and R Hill (eds) The Leading Arbitrators’ Guide to International Arbitration (2nd edn 2008) 647. For example, the IBA Rules of Ethics for International Arbitrators, Rule 8 allows for the arbitrator to be involved in settlement proposals if the parties consent, and notes that “the arbitral tribunal should point out to the parties that it is undesirable that any arbitrator should discuss settlement terms with a party in the absence of the other parties ….”

38  D Plant, “ADR and Arbitration,” n 36, 253 et seq.

39  D Plant, “ADR and Arbitration,” n 36, 253 et seq.

40  Conciliation offers a heightened standard of confidentiality in comparison to the UNCITRAL Rules and is increasingly recommended by experienced arbitrators. See P Sanders, The Work of UNCITRAL on Arbitration and Conciliation (2001) 18; K Berger, International Economic Arbitration, n 2, 581. However, at least one commentator is uncertain whether confidentiality applies when parties to an arbitration pursue conciliation unsuccessfully and then return to arbitration. See Berger, 450–1.

41  In particular, Article 14 provides:

The conciliator and the parties must keep confidential all matters relating to the conciliation proceedings. Confidentiality extends also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement.

Article 19 provides further:

The parties and the conciliator undertake that the conciliator will not act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceedings in respect of a dispute that is the subject of the conciliation proceedings. The parties undertake that they will not present the conciliator as a witness in any such proceedings.

Finally, Article 20 provides:

The parties undertake not to rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings;

  1. a. Views expressed or suggestions made by the other party in respect of a possible settlement of the dispute;

  2. b. Admissions made by the other party in the course of the conciliation proceedings;

  3. c. Proposals made by the conciliator;

  4. d. The fact that the other party had indicated his willingness to accept a proposal for settlement made by the conciliator.

In 2002, UNCITRAL adopted the Model Law on International Commercial Conciliation as a guide for establishing or improving national legislation governing the use of conciliation and mediation techniques.

42  Mobil Oil Iran, Inc, et al and Government of the Islamic Republic of Iran et al, Award No 311–74/76/81/150–3 (July 14, 1987), reprinted in 16 Iran-US CTR 3, 55 (1987-III). See also Iran and United States, Decision No DEC A1(I, III & IV)-FT (August 3, 1982), reprinted in 1 Iran-US CTR 189, 190–1 (1981–1982).

43  See UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.11, n 13, at 9, para 74 (Comments by Messrs Roehrich, France, and Mantilla-Molina, Mexico).

44  Withdrawal may be unilateral, see, eg, Seaboard Flour Corp (1983 Tribunal Rules), Union Special Corp (1983 Tribunal Rules), and Charles W Boyle (1983 Tribunal Rules), mutual, see, eg, Brown & Root (1983 Tribunal Rules), or conditional, see, eg, Xtra Inc (1983 Tribunal Rules), all reprinted in section 2(D)(2).

Article 32(2)(a) of the Model Law explicitly establishes withdrawal as grounds for termination of the arbitral proceedings. For commentary, see H Holtzmann and J Neuhaus, A Guide to the UNCITRAL Model Law, n 8, 869.

45  See, eg, W Jack Buckamier and Islamic Republic of Iran, et al, Award No 528–941–3 (March 6, 1992), reprinted in 28 Iran-US CTR 53, 75–6 (1992).

46  See Tchacosh, Inc and Government of the Islamic Republic of Iran, Award No 540–192–1 (December 9, 1992), reprinted in 28 Iran-US CTR 371, 376–7 (1992) (finding one claimant had authorization to withdraw the claims of two other claimants since those claimants had not submitted any documents since filing the statement of claim, and since all three claimants shared the same lawyer).

47  Mercantile Trust Co National Association (1983 Tribunal Rules), reprinted in section 2(D)(2).

48  For example, in the Poura case the claimant filed a statement of claim alleging he owned three parcels of land in Iran that were expropriated by the Iranian Government. The claimant, however, neither identified with particularity the location of the plots of land at issue nor provided the relevant land registration numbers. The claimant, a dual national, also failed to adduce evidence in support of the claim that his dominant and effective nationality was that of the United States. In light of the lack of evidence on which to rule, the Tribunal made repeated requests that the claimant provide evidence in support of his claims, to which the claimant failed to respond. Consequently, the Iranian Agent filed a letter with the Tribunal requesting that the Tribunal terminate the case since the claimant's failure to file any evidence signified his intention to withdraw his claim. Approximately one year later, on January 20, 1993, the Tribunal issued an order indicating that it assumed that the claimant did not intend to pursue his claim and requesting comments by the claimant to the contrary. Having received no comments, the Tribunal terminated the proceedings in accordance with Article 34(2) approximately five weeks later. Isaac Poura (1983 Tribunal Rules), reprinted in section 2(D)(2). See also P Sanders, “Commentary on UNCITRAL Arbitration Rules,” n 4, 206.

49  See UN Doc A/CN.9/SR.167, n 14, at 203 (Comment by Mr Krispis, Greece).

50  Bank Markazi Iran (1983 Tribunal Rules), reprinted in section 2(D)(2).

51  For a discussion of the consequences of the parties to make deposits, see Chapter 27, section 5.

52  See Settlement of Commercial Disputes: Revision of the UNCITRAL Arbitration Rules, Note by the Secretariat, UNCITRAL, UN Doc A/CN.9/WG.II/WP.157/Add.2 at 4–5, para 10 (2009). Accord J Castello, “UNCITRAL Rules,” n 18, 1518.

53  UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1, n 4, (Commentary on Draft Article 29(1)) (“[a] settlement recorded in the form of an award on agreed terms acquires the legal force of an award.”).

54  See, eg, Frederica Lincoln Riahi and Government of the Islamic Republic of Iran, Partial Award on Agreed Terms No 596–485–1 (February 24, 2000); Partial Award on Agreed Terms No 568–A13/A15(I and IV:C)/A26(I, II, and III)-FT, para 9 (February 22, 1996), reprinted in 32 Iran-US CTR 207 (1996); Westinghouse Electric Corp and Islamic Republic of Iran, et al, Partial Award on Agreed Terms No 177–389–2 (May 10, 1985), reprinted in 8 Iran-US CTR 183 (1985–I).

55  See Settlement of Commercial Disputes: Revision of the UNCITRAL Arbitration Rules, Note by the Secretariat, UNCITRAL, UN Doc A/CN.9/WG.II/WP.151/Add.1 at 15, para 33 (2008).

56  In a preliminary draft of the 1976 Rules, the arbitral tribunal was permitted to terminate the proceedings “unless a party objects,” which effectively granted each party a veto power. See Draft Article 29(1) of the Revised Draft. As adopted under the 1976 UNCITRAL Rules, the substance of Article 36(2) provides that a party's grounds for objections are only cognizable insofar as they are determined to be “justifiable” by the arbitral tribunal. UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.11, n 13, at 11, para 89 (Comment by Mr Dey, India, noting that the inconsistency in the provision since first sentence granted the arbitrators discretion while the second granted the parties the right to object).

Note in many cases, the request for justifiable objections may represent the parties’ last formal opportunity to communicate with the arbitral tribunal. This is by no means an open invitation for the parties to rehash the merits, but may provide a vehicle for bringing legitimate concerns to the arbitral tribunal's attention. For example, in Islamic Republic of Iran and United States of America (Case Nos A/3 and A/8), the United States objected to termination of the arbitration unless it received an award of costs. The objection prompted the Tribunal to undertake a full assessment of the matter. See Ministry of National Defence of the Islamic Republic of Iran and United States of America, et al, Decision No DEC 100-A3/A8-FT (November 22, 1991), reprinted in 27 Iran-US CTR 256 (1991-II).

57  Gloria Jean Cherafat, et al and Islamic Republic of Iran, Decision No DEC 106–277–2 (June 25, 1992), reprinted in 28 Iran-US CTR 216 (1992).

58  Gloria Jean Cherafat (1983 Tribunal Rules) at 222.

59  Settlement of Commercial Disputes: Revision of the UNCITRAL Arbitration Rules, Note by the Secretariat, UNCITRAL, UN Doc A/CN.9/WG.II/WP.149 at 18, para 69 (2007).

60  UNCITRAL, UN Doc A/CN.9/WG.II/WP.149, n 59, at 18, para 69.