We’ll explore two dispute resolution tools and explain when each works against you.
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You’ve agreed on an installment plan with the debtor and signed an agreement—why do you have to start all over again in six months?
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Do you know the difference between an out-of-court settlement and a court-approved settlement agreement—and why is it important?
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How can an agreement with a debtor be converted into an enforceable document—without a second trial if they violate the terms?
The creditor and debtor reached an agreement. They signed a six-month repayment schedule. They parted satisfied. Three months later, the debtor stopped paying.
The creditor goes to a lawyer. He says, “We need to file a lawsuit. This time, for collection under the agreement.” Several more months of proceedings. More expenses. More waiting.
This could have been avoided if the agreement had been drawn up correctly.
MYTH 1: “A signed agreement is a reliable guarantee”
Fact: an out-of-court settlement is simply a new contract. If the debtor breaches it, you pursue collection under this agreement. A new lawsuit, new costs, new deadlines.
A signed document without judicial confirmation does not give you a writ of execution. To collect, you need a court order.
MYTH 2: “A settlement agreement takes a long time and only works during a trial.”
Fact: The Riga Arbitration Court’s Rules provide for a special procedure for approving a settlement agreement concluded outside of court proceedings. Section VII of the Rules allows for the approval of a settlement agreement even if the parties reached an agreement independently, without active dispute.
Condition: the parties must enter into an arbitration agreement and jointly apply to the arbitration court with a request to approve the settlement agreement.
What is the fundamental difference?
Out-of-court settlement (vienošanās): the parties agree and sign the document. It has the same legal force as a regular contract. If the agreement is breached, a court hearing is required to recover the debt. Pros: quick and easy. Cons: if breached, another court hearing.
Court-approved settlement agreement (izlīgums): the parties have reached an agreement, and the court has approved it. It has the same legal force as a court decision. If the agreement is violated, the court proceeds directly to the bailiff with a writ of execution. No new trial required. Pros: maximum protection. Cons: requires joint filing and payment of a court fee.
When to use what
An out-of-court settlement makes sense when: the debtor is a reliable partner with whom you have a long history, the amount is small and court costs are disproportionate, you are confident the debtor will comply and simply need to formalize the agreement, and you need maximum speed without procedural formalities.
A settlement agreement through the court makes sense when: the amount is significant and the risk of a repeat violation is real; the relationship with the debtor is tense and you are unsure of their integrity; you are already in the process of litigation—in which case, approving a settlement agreement ends the case and the defense; you want the debtor to understand that a violation will lead directly to the bailiff without a new trial.
How much does it cost to approve a settlement agreement in the Riga Arbitration Court?
The procedure for approving a settlement agreement concluded out of court is provided for in Section VII of the RTS Rules. Check the current fee directly with the court—it is calculated based on the settlement amount. This is typically significantly cheaper than a full court case.
A real case
Two entrepreneurs settled a lease dispute. The tenant owed €22,000. They agreed to an installment plan: €5,000 upfront and €17,000 in equal payments over eight months.
The first creditor simply signed an agreement. Four months later, the tenant stopped paying. A new lawsuit had to be filed. Another six weeks of the process.
A second creditor in a similar situation filed a lawsuit in arbitration court to approve a settlement agreement. When the debtor missed a payment, the creditor filed a writ of execution with the bailiff the next day. The money was recovered within three weeks.
Three steps to take
First: if you’re negotiating an installment plan or partial debt forgiveness with a debtor, immediately assess the likelihood that they’ll fulfill the terms. The lower your confidence, the stronger the argument for a settlement through the courts.
Second: if you decide to go to court, prepare the agreement in advance. The court must ensure that the terms do not violate the rights of third parties and comply with the law.
Third, make sure the contract includes an arbitration clause—it opens the door to a settlement agreement in the Riga Arbitration Court without having to initiate a full-fledged dispute.
Coming to an agreement is an art. But formalizing the agreement so that it works is a legal technique. Don’t confuse the two.
This article is for informational purposes only and does not constitute legal advice.