The High Court’s judgment in Visa Inc & Others v. Luxottica Retail UK Limited[1] is a stark reminder of the risks inherent in broadly drafted settlement agreements, particularly agreements that cover (or potentially cover) claims of other group companies. In this case, the court held that a settlement agreement entered into by Luxottica extended to the claims of a company that was unconnected with Luxottica at the time of the settlement agreement, but which subsequently became part of Luxottica’s corporate group.
Background
The context of this case was the long-running, multijurisdictional litigation regarding the fees Visa and Mastercard charge for use of their card payment systems. When a retailer accepts a card payment from a customer, the retailer’s bank pays the customer’s bank a fee, known as a multilateral interchange fee (MIF). While this fee is paid by the retailer’s bank, it will be reflected in what the bank charges the retailer for allowing it to accept card payments. The litigation is based on allegations that MIFs have been set at artificially high prices.
In 2017, Luxottica issued a claim against Visa for damages in respect of MIFs it had paid. In January 2021, that claim was settled for £200,000. Under the terms of the agreement, Luxottica released the claims it or any associated company had or may have. It undertook not to bring or continue a claim in respect of the settled claim and to ensure no associated company did so. It also indemnified Visa for any losses arising in the event it or an associated company brought or continued such a claim.
Meanwhile, in 2018, a then-unrelated company, GrandVision, had commenced an MIF-related claim against Visa. In July 2021, while GrandVision’s claim was still ongoing, it was acquired by Luxottica’s parent company.
Shortly after the acquisition, Visa asserted that the terms of the settlement agreement obliged Luxottica to ensure that GrandVision’s claim was withdrawn. When Luxottica refused, Visa brought these proceedings seeking a declaration that GrandVision’s claim was caught by the settlement, damages for Luxottica’s alleged breach of the indemnity, and specific performance requiring Luxottica to secure withdrawal of the claim.
The High Court’s judgment
Interpretation of the settlement agreement
Rather than turning straight to the operative settlement provisions, the judge first looked to the recitals to determine the parties’ intention as to the scope of the agreement.
The first three recitals made it clear that the primary objective of the agreement was to settle Luxottica’s MIF claim. However, the fourth recital extended the scope of the settlement beyond Luxottica’s claim to all “settled claims”, which encompassed “any and all MIF-Related Claim[s]” that “Luxottica or any Associated Company have or may have”.
The judge then naturally turned to the definitions of “MIF-related claim” and “associated company”.
The definition of “MIF-related claim” was expansive: Any actual or potential claim, counterclaim, demand, action or proceeding of any nature whatsoever, in any jurisdiction, whether past, present or future, whether known or unknown at the time of the agreement, whether or not contemplated or foreseen, concerning or in any way relating to any MIF or other merchant fee applicable to any Visa-branded card transaction in any jurisdiction.
“Associated company” was given the same meaning as s. 256 of the Companies Act 2006: Companies are “associated” if one is a subsidiary of the other or both are subsidiaries of the same corporate body – and expressly included “past, present or future Associated Companies”.
Accordingly, the fourth recital recorded an apparent intention to settle past, present or future claims in any way related to MIFs of any company that was, is or becomes part of Luxottica’s corporate group. Given this highly unusual breadth, the judge considered that this conclusion required a “hard second look” to determine whether any limitation should be applied to the natural meaning of the words. He therefore went on to consider the wording of the release and indemnity provisions.
The release clause provided that, “[Luxottica] on its own behalf, and for and on behalf of each Associated Company, agrees to fully and finally release, and irrevocably waiver, the Settled Claims”. If one were to apply the above definitions, this would mean that Luxottica was here acting on its own behalf and on behalf of any past, present or future group company. The judge considered it was improbable that this was the parties’ intention: first, Luxottica could not do anything on behalf of a company that was formerly part of the Luxottica group but was now liquidated. Second, it was unlikely to be doing anything on behalf of a company that was formerly part of the group but now owned outside it (although technically it could have been given authority to do so). Third, it could not possibly act on behalf of future companies that may either exist but be outside the group at the date of the settlement, or which might not yet be in existence. Accordingly, either “associated company” in this context meant “present associated company”, or one should read this as an agreement to obtain authority to settle claims in the future. The judge considered the former to be the easier and more natural reading.
Having determined that the release clause indicated there should be a more restricted reading of associated company, the judge went on to consider the indemnification provision: “[Luxottica] shall not, and shall ensure that its Associated Companies do not, initiate, bring, pursue, commence or continue any claim for the recovery of damages or any other remedy in respect of the Settled Claim. … In the event that [Luxottica] breaches [this provision] or any Associated Company takes any action which [Luxottica] is required to ensure that such Associated Company shall not take … then [Luxottica] shall be liable to indemnify … Visa”.
The judge noted that the wording of this provision contrasted with the release clause in significant respects. While the release clause focussed on the past and the present, this provision was forward-looking; it therefore had no difficulty in accommodating future associated companies and claims. Further, the issue of Luxottica’s present authority to act on its associated companies’ behalf is not problematic as these are obligations of result: Luxottica will “ensure” that associated companies do not (in the future) bring settled claims. How it will do so is left to it to work out, and if it fails, it will indemnify Visa. Luxottica needs no present authority to do any of those things.
On that basis, despite the necessary more limited meaning of “associated companies” in the release, the judge considered that the wording of this indemnity provision should be given its natural meaning, and that GrandVision’s MIF claim was therefore caught.
The judge rejected Luxottica’s argument that such a reading is commercially absurd. The judge agreed that one would expect anyone to “think hard” before agreeing to indemnify Visa against liability to any company that ever was or ever becomes part of a large corporate family, but reasoned that Visa had good reasons to extend the settlement beyond Luxottica’s existing claims and to other companies in Luxottica’s group. Had it not done so, it might have been enough for Luxottica to create a subsidiary and divert all its business there to enable it, once again, to challenge MIFs in the future.
Relief
Having determined that Luxottica was liable to pay damages in accordance with the indemnity provision, the judge went on to consider whether it would be appropriate to make an order for specific performance requiring Luxottica to ensure GrandVision’s claim was withdrawn.
The judge noted that while there was authority that an obligation to do a particular thing may be specifically enforced even where it requires the consent of a third party (provided it is not very unlikely that such consent will be given), the parties had been unable to point to any authority dealing with the specific enforcement of broad obligations to ensure that third parties act in particular ways.
The judge stated that if the claim being brought contrary to the settlement agreement were Luxottica’s own claim, he would grant specific performance because damages are not a fully adequate remedy where proceedings are improperly brought. However, he did not think it appropriate to order specific performance of an obligation to “ensure” that someone else does something, where the relevant act is not within the legal power of the party against whom enforcement is sought. He reasoned that an obligation framed in general terms to procure a particular outcome, with no concrete mechanism by whichthat outcome would be achieved, is not apt for specific performance. In his view, for such an order to be appropriate, it must be clear what the defendant is required to do, so that the court can determine whether it has done those things.
Takeaways
It is trite that the English courts will not rescue contracting parties from a bad bargain. It is incumbent on parties to any agreement to work through the potential implications of every provision. This case demonstrates that overlooking the implications of just one element – here, primarily the definition of “associated company” – can have devastating consequences. Definitions are a common source of hidden risk; they may be settled early in the drafting process and then not fully considered in every operative context in which they are deployed. It is critical that contracting parties step back from the draft to analyse it with fresh eyes, work through all definitions and how they operate in each provision, and consider all possible implications prior to execution.
[1] [2026] EWHC 615 (Comm).
Contributors
Alex Radcliffe