7. Mediated settlement agreement

7. Mediated settlement agreement

When the parties have reached a resolution, it is strongly recommended that the settlement be recorded in writing and signed by the parties. The written agreement acts as a clear record of the settlement terms and assists future implementation. 

Although the Mediation Ordinance (Cap. 620) does not strictly require the agreement to be in writing to be binding as a contract, practitioners generally advise a written document to avoid evidential barriers during enforcement. Most institutional rules and the Hong Kong Mediation Code explicitly provide that a settlement is not binding until reduced to writing and signed by all parties.  

In some contexts, mediated settlement agreements must be in writing. For example, Practice Direction 6.1 imposes a stricter regime on cases assigned to the Construction and Arbitration List of the High Court. For matters on that list, no settlement reached in mediation is binding until it is reduced to writing and signed by both parties. 

This document is commonly called a mediated settlement agreement. It should set out exactly what each party has agreed to do. Depending on the case, it may include: 

• the amount of any payment; 
• the time and method of payment; 
• whether payment will be made by instalments; 
• what happens if a party defaults; 
• confidentiality terms; 
• release of claims; 
• costs arrangements; 
• discontinuance or stay of court proceedings; 
• disposal of arbitration proceedings; 
• tax or regulatory matters, if relevant; and 
• any future obligations between the parties. 

In practice, and often under the mediation agreement itself, settlement discussions are not treated as binding unless and until the settlement terms are put into writing and signed by the parties. This avoids later disagreement about whether a final settlement was actually reached. 

Once signed, a mediated settlement agreement will generally be legally binding as a contract, provided the normal requirements for a valid contract are satisfied, including certainty of terms and an intention to create legal relations. 

The mediator may help the parties record the agreement, but the mediator is not usually a party to it. The mediator may witness the signatures, but this is not always legally required. 

If the parties are legally represented, it is often beneficial for the lawyers to draft or review the settlement agreement. Lawyers may help ensure that the terms are clear, certain, enforceable and consistent with any existing court or arbitration proceedings. 

Parties who are legally represented may bring a draft mediated settlement agreement or precedent to the mediation. This can make it easier to prepare a clear and enforceable agreement before the mediation ends. 

When settlement terms are being drafted, care should be taken to ensure that they are: 

• clear and unambiguous; 
• sufficiently certain to be enforceable; 
• practical and capable of performance; 
• complete, so that important matters are not left unresolved; 
• consistent with any necessary approvals; and 
• appropriate for disposing of any related court, arbitration or complaint proceedings. 

If a party representative does not have full settlement authority, the written agreement should clearly state whether the settlement is subject to approval by a board of directors, senior management, insurer or other decision-maker, and when that approval must be obtained.