“A bad settlement is better than a good lawsuit.” This phrase borders on mediocrity; it is nothing more than an attempt to undermine autonomy, equity, and good faith as sacred principles of civil and commercial law—all of which I discuss below.

Undoubtedly, one of our principal desires is to find peace, and furthermore, to serve as instruments of it within society. Very aptly, Fray Luis de León expressed: “Peace is the good to which we all aspire.”

Precisely, the Law provides instruments that are highly useful for peace, including the legal institution of the settlement (transacción), which, by the way, dates back to ancient times. As proof of this, the civil chapter regulating settlements still mentions the requirement for it to be recorded in writing “if the interest exceeds two hundred and fifty pesos.”

Thus, a settlement consists of nothing more and nothing less than a written agreement (which will enjoy the status of res judicata) executed between two or more natural persons and/or legal entities, with a view to achieving two main objectives: I) to produce, modify, and/or extinguish rights and obligations; and II) to avoid an actual or potential lawsuit between them.

Like any business transaction, a settlement is governed by the highest parameters of equity and good faith (both sheltered under the juris tantum presumption), coupled with the proper rules of consent, contractual freedom, irrevocability (it is the "law between the parties"), and the autonomy of the will.

Practically, the vast majority of civil or commercial matters—whether pending before the Courts of Justice or not—can be terminated through a settlement. As noted, this follows the general rules of private contracts, and in particular, the special provisions that have regulated this legal institution within the Civil Code (Código Civil) from 1888 to the present date.

By way of example, the Civil Code establishes, among other aspects, that a settlement must contain, "no matter what," an express waiver by the parties to exercise any action related to the dispute between them, and that a settlement regarding matters already decided by a final, binding judgment rendered by a judicial authority is null and void. Furthermore, it is also possible to incorporate sanctions ("liquidated damages" / "penalties") into the settlement for the party that breaches its obligations or promises.

Clearly, given the reality of international business, coupled with cross-border electronic commerce, settlements cannot be pigeonholed solely into local business operations. Therefore, it is worth adding that the rules of the “United Nations Convention on International Settlement Agreements Resulting from Mediation” (the Singapore Convention on Mediation), whose text was adopted in New York in late 2018, will enter into force in the coming months.

In my view, our country's accession to this international instrument underscores our conviction regarding the enormous value of settlements derived from timely mediation as effective alternative methods for resolving commercial disputes, and ultimately, with a view to achieving peace.