Judicial principles and studies
Arbitration Clause in Light of Settlement / Reconciliation Agreement
A settlement between parties constitutes a compromise under Article 647 of the Civil Code, limited to the rights it addresses; it implicitly waives the original arbitration clause for the settled dispute unless the settlement contains a new arbitration clause.
Updated: 10 September 2026
Prepared and reviewed by: Ashraf Al-Khawaja
Subject
The points address the effect of a settlement/release agreement on an arbitration clause contained in the original contract. They state that a settlement is a compromise under Article 647 of the Civil Code, which terminates the dispute by mutual agreement and that its effect is limited to the rights it addresses.
Summary
- Parties' agreement to end a prior dispute by concluding a settlement and release constitutes a new agreement and amounts to an implicit withdrawal from the original arbitration agreement with respect to the settled dispute. - A dispute arising from the terms of the settlement is not automatically subject to the arbitration clause in the original contract; an arbitral tribunal lacks jurisdiction over such a dispute after the release is executed, due to absence of an arbitration agreement linked to the settlement. - For a settlement-related dispute to be arbitrable, the settlement must contain an express arbitration clause or the parties must enter a separate arbitration agreement regarding that dispute. - Arbitration is treated as an exceptional means of dispute resolution and should be interpreted narrowly, avoiding extensions that would defeat or waive its purpose.
Practical significance
- In practice, concluding a settlement or release generally precludes applying the original arbitration clause to disputes covered by that settlement unless the parties explicitly agree otherwise. - If the parties wish to refer a dispute about the settlement to arbitration, they must include an arbitration clause in the settlement or conclude a subsequent arbitration agreement. This content is an educational summary only and does not constitute judicial text or legal advice.
Sources and references
Verify the official text and latest amendments before relying on this material professionally.