The Act of Settlement 1662 passed by the Irish Parliament in Dublin. It was a partial reversal of the Cromwellian Act of Settlement 1652, which punished Irish Catholics and Royalists for fighting against the English Parliament in the Wars of the Three Kingdoms by the wholesale confiscation of their lands and property. The Act describes itself An act for the better execution of His Majesty's gracious declaration for the Settlement of his Kingdom of Ireland, and the satisfaction of the several interests of adventurers1, soldiers, and other his subjects there.
When the Long Parliament in London passed the Act of Settlement 1652 after the Cromwellian conquest of Ireland, its purpose was two-fold. First, it was to provide for summary execution of the leaders and supporters of the Irish Rebellion of 1641. Second, it was to confiscate sufficient land in Ireland as was necessary to repay the loans extracted from the City of London, and to reward the soldiers who had engaged in the war (and were not really welcome back to England to cause trouble). This was achieved by the confiscation of almost all Catholic-owned land in Ireland - something that also served to punish Irish Catholics for their rebellion and war against Parliament.
The Act of 1652 said (paragraphs VI, VII VIII) that anyone who fought against the parliament in Ireland during the civil wars would lose some lands.
If they surrendered within the time allowed, they would be pardoned for their life, but lose up to two thirds of their estates.
If they didn't surrender within the time allowed, they could stand to lose all their lands and even their lives.
If they were "of the Popish religion" and had not taken any part in the wars, they would still lose a third of their lands unless they had actually fought for the parliament.
In practice, Protestant Royalists in Ireland could avoid confiscation by paying fines, while Catholics could not. Although some Parliamentarians talked about deporting all of the Irish to Connacht, in fact, they only ever got around to the land-owning class. The 1652 Act ordered that all confiscated lands east of the Shannon (Ulster, Leinster and Munster) be cleared and the inhabitants transplant themselves to the west (to Connacht and County Clare), to be replaced by English Puritans (who were later to be known as Dissenters). As a result of this Settlement, Irish Catholic landholding fell from 60% before the Irish Confederate Wars to 8-9% during the Cromwellian Commonwealth (mostly in Connacht).
On the Restoration of the Monarchy, those (notably the Duke of Ormonde) who had taken the Royalist side pleaded with the King for the injustice to be undone. Accordingly, the Parliament of Ireland (in Dublin) passed a new Act of Settlement in 1662 which ordered that the Cromwellian settlers give up a portion of their allotted land to "Old English" and "innocent Catholics", as would be determined by Commissioners.
However, the Irish Parliament was now Protestant only, as Catholics had been barred from voting or standing for election under the Commonwealth. As a result, the Parliament amended the Act of Settlement so that land could be returned to "innocent Catholics" - that is ones who had been Royalists in the civil wars and had not carried out massacres of English Protestants - only on the condition that the Cromwellian settlers be compensated with an equal amount of land elsewhere in Ireland. Since there was simply not enough land available for this to work, very few Catholic landowners recovered their estates under this Act.
A Court of Claims was set up to investigate who was eligible for recovery of their lands. Unfortunately, the Commissioners found that too many Catholics were "innocent", so a further Act of Explanation 1665 was need to find a workable solution. The Act of Explanation stated that Cromwellian settlers (with some named exceptions) had to give up one third of the lands they had received after 1652 in order to compensate innocent Catholics.
By this measure, what has been described as a, "favoured minority" of Irish Catholics - mostly Old English Royalists - recovered all or most of their pre-war estates. Examples of this include Ormonde and his relatives and supporters like Richard Bellings. The people who had been militant Irish Confederates during the wars - who had rejected an alliance with the English Royalists, or sought better terms from Charles I in return for an alliance - got little or nothing from the settlement. Many of them regarded it as a betrayal by the Stuart monarchy, which they had fought for in the Civil Wars. The poet Daibhi O Bruadair wrote that the Restoration was "Purgatory" for Irish Catholics, while the former Confederate and Catholic Bishop Nicholas French wrote a pamphlet about Charles II titled, The Unkind Deserter of Loyal men and true Friends.
By 1685, Catholic land ownership was put at 20% of the land in Ireland. Many Protestants in Ireland felt that the Restoration Settlements were far too lenient towards Irish Catholics, who had rebelled against the sovereignty of England in 1641 and had been justly punished for it by the loss of their property and power.