Do you want to avoid repeated litigation and additional costs when resolving disputes with a debtor?
Did you know that approval of a settlement agreement by the Riga Arbitration Court gives it the force of a court decision and simplifies enforcement?
Are you ready to take advantage of a fast and reliable way to protect your debt rights without lengthy litigation and hassle?
In modern business practice, dispute resolution between debtor and creditor often culminates in an agreement. However, not everyone knows that there are two fundamentally different approaches to formalizing such agreements, and the choice of one directly determines whether the agreement will be the final resolution of the dispute or merely a temporary respite before a new trial.
In this article, we want to clarify the key differences between a standard settlement agreement and an arbitration-approved settlement agreement, and show why the latter is a more reliable and effective tool for protecting your interests.
Option 1: Standard Dispute Resolution Agreement
Let’s imagine that a creditor and debtor have agreed on a debt repayment plan and signed a corresponding agreement. Legally, this is a standard civil contract. It records the parties’ intent but does not have the force of a court decision.
What happens if such an agreement is violated?
If the debtor fails to comply with the terms, the creditor cannot directly appeal to the bailiffs. They will have to start over: file a new lawsuit, prove the breach of the agreement, and participate in a full-fledged court proceeding, which can take months. Only after receiving a new court decision will it be possible to obtain a writ of execution for compulsory collection.
The main drawback: A standard agreement does not protect against repeated litigation. If it is not fulfilled, it itself becomes the subject of a new dispute, leading to lost time, money, and a lack of security.
Option 2: Settlement agreement approved by the arbitral tribunal
This approach radically changes the situation. The parties also reach agreements, but then ask the arbitration tribunal hearing their dispute to approve this agreement.
What difference does this make?
Once approved by the arbitral tribunal, the settlement agreement acquires the legal force of an arbitral award. It is no longer simply an agreement between two parties, but a binding act of justice.
What happens if such an agreement is violated?
This is where the main advantage lies. If the debtor violates the terms of the approved settlement agreement, the creditor does not need to return to court with a new claim. The agreement already has the force of a court decision. The creditor applies to the competent state court with a short petition for a writ of execution to enforce the arbitration award. The court does not consider the merits of the dispute, but merely verifies the formal grounds and issues a writ of execution.
Key advantage: A settlement agreement approved by an arbitration tribunal is final and enforceable. It allows for the enforcement of claims without re-litigation.
Comparison table
For clarity, let’s present the key differences in the form of a table:
Criterion
Standard agreement
Settlement agreement in arbitration proceedings
Legal force
Civil law contract
Equivalent to a court decision
Procedure in case of violation
Filing a new claim and a full trial
Filing an application for the issuance of a writ of execution
Time limit before coercion
6-12 months (or more)
1-2 weeks
Additional expenses
New state duty, legal expenses
Minimum state fee for issuing a writ of execution
Guarantee of performance
Low, requires a new court decision
High, secured by the force of a judicial act
Conclusion: Choose reliability and process savings
As practice shows, the desire to resolve a dispute amicably is commendable, but it’s important to do so legally. By entering into a standard agreement, the parties leave themselves open to future conflicts and litigation.
Approving a settlement agreement in arbitration is a strategically sound move that provides legal certainty to the parties, saves them time and money, and, most importantly, guarantees the enforceability of the agreements reached. Rather than complicating the process, it simplifies it, transforming the compromise into an inviolable law for both parties.
We encourage entrepreneurs to utilize modern and effective dispute resolution tools and remember that a properly executed settlement agreement is the key to your peace of mind and financial security.
This publication is for informational purposes only and does not constitute legal advice.