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Visa asserted that the terms of the settlement agreement obliged Luxottica to ensure that GrandVision’s claim was withdrawn.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).

Background

In an earlier judgment in the same proceedings, Picken J concluded that the so-called Shareholder Rule should be regarded as no longer existing, a conclusion the Privy Council subsequently agreed with in Jardine Strategic Limited v. Oasis Investments II Master Fund Ltd.[3][4] The judgment in this matter returned to the question of privilege to address a separate question: the scope of legal advice privilege and, in particular, the extent to which that privilege applies to internal communications between members of the client group and/or documents created by a member of the client group for the dominant purpose of seeking legal advice.

The genesis of the dispute was in the position taken by Glencore when providing its disclosure. Glencore argued it was entitled to assert privilege over communications between members of the “client group” as defined in Three Rivers (No 5) – that is, those individuals within a business who are authorised to seek and receive legal advice on its behalf (i.e. intra-client documents), even where no lawyer was a party to the communication. The claimants disagreed. The claimants’ position was straightforward: Glencore should be ordered to produce all documents it had withheld on the basis of legal advice privilege which are communications between members of the “client group” (rather than between the “client group” and lawyers), other than those which evidence the substance of privileged communications. The argument relied heavily on Three Rivers (No 5), which the claimants read as establishing that legal advice privilege is confined to communications passing between the client and their legal advisors.

The High Court decision

The court reviewed Three Rivers (No 5) carefully and in light of subsequent case law which interpreted the same question of privilege. The court considered that the issue before the Court of Appeal in Three Rivers (No 5) focused exclusively on categories of documents that were prepared by individuals falling outside of the agreed “client group”. It did not address documents created by or circulated between members of an agreed “client group”. The court therefore concluded that Glencore was right to argue that Three Rivers (No 5) should be treated as concerned only with “non-client” documents, and not with “client” documents, including “intra-client” documents.

Therefore, the court concluded that Three Rivers (No 5) was not a binding authority on how privilege should be decided in connection with internal communications between members of the client group and/or documents created by a member of the client group for the dominant purpose of seeking legal advice. Having concluded that there was no binding authority from the Court of Appeal, the court then turned to consider the public policy principles attaching to the law of privilege.

The court held that there can be no distinction in principle between, on the one hand, an engagement or instruction letter that identifies the issue on which legal advice will be sought and, on the other hand, another document or communication created by the client which identifies the same issue. There is, in practical terms, no difference between the two types of documents, and it would be illogical to permit legal advice privilege to apply in the one case but not the other.

Similarly, the court remarked that it would not make sense for legal advice privilege not to apply to intra-client documents whose dominant purpose is to identify facts that the client proposes to communicate to a lawyer for the purpose of seeking legal advice – but where the document itself is not intended to be sent to the lawyer (e.g. a client writing themselves a memorandum with notes for a forthcoming meeting with their lawyer or one member of the client group emailing another with information or thoughts in preparation for such a meeting). If a lawyer’s working papers are the subject of legal advice privilege – which was obviously the case and not in dispute – then the court found it difficult to see why a client’s working papers should not also attract such privilege, as they are the mirror image of each other and should be treated in the same way.

The court concluded that Glencore was entitled to assert legal advice privilege in respect of intra-client documents, provided that those documents were created with the dominant purpose of seeking legal advice.

Takeaway

This judgment is a significant development in the law of privilege. For years, Three Rivers (No 5) cast a long shadow – with practitioners, textbook authors and multiple Courts of Appeallamenting its perceived scope, and the UK Supreme Court never finding an appropriate vehicle to revisit it. The court in this matter found a path through; rather than overruling Three Rivers (No 5) – which, as a matter before the High Court, could not be done – the scope of Three Rivers (No 5) was carefully circumscribed.

The practical implications are material. By recognising that intra-client documents attract legal advice privilege (where created for the dominant purpose of seeking legal advice), the judgment goes some way to addressing the concerns raised in relation to Three Rivers (No 5), without needing to wait for the Supreme Court to deal with them. For now, at least, corporations engaging in litigation can take some comfort that the internal deliberations of those within the client group, prepared with the genuine dominant purpose of seeking legal advice, are not rendered disclosable merely because a lawyer was not sitting in copy.

[1] [2003] QB 1556.

[2] [2026] EWHC 877 (Comm).

[3] [2025] UKPC 34.

[4] See this On The Record blog post for further details.

What is a public inquiry?

A public inquiry is an independent investigation designed to uncover the facts behind events that have caused widespread public concern. Public inquiries are not courts: they do not determine civil or criminal liability or award compensation. Instead, they are inquisitorial, focusing on fact-finding and making recommendations for future improvements. Ultimately, they aim to answer three fundamental questions:

1. What happened?
2. Why did it happen and who is responsible?
3. What can be done to prevent it from happening again?

There are two main types of public inquiry:

1. Statutory inquiries, which are governed by the Inquiries Act 2005 and have legal powers to compel witnesses and documents. They follow strict procedural rules and must publish their findings.
2. Non-statutory inquiries, which are not governed by legislation, making them more flexible and less formal. However, they rely on voluntary cooperation and are often used when speed or sensitivity is required, but lack the power to compel evidence.

Recent examples of public inquiries include the Infected Blood Inquiry, which examined how thousands of people were given contaminated blood products by the NHS in the 1970s and 1980s, leading to recommendations on compensation and systemic healthcare reforms; the Post Office Horizon IT Inquiry, which investigated the development and rollout of the Horizon IT system and resulted in recommendations for full and fair compensation for affected sub-postmasters; and the Grenfell Tower Inquiry, which investigated the 2017 fire that killed 72 people and led to recommendations, and ultimately reforms, in building and fire safety.

Public inquiries differ from Parliamentary Select Committee hearings, which are led by permanent committees in Parliament focusing on specific areas such as health and social care, defence, and business and trade. Their main role is oversight, ensuring that government departments and public bodies are held accountable. Committees invite witnesses – including ministers, civil servants, experts, industry representatives and, in some cases, members of the public – to give oral evidence.

Framework

As mentioned above, most statutory inquiries operate under the Inquiries Act 2005. This legislation gives government ministers the power to establish an inquiry, set its terms of reference (i.e. its scope) and appoint the chair, usually a judge or senior legal figure, or a panel, to preside over the inquiry. The Inquiries Act also gives inquiries the power to compel witnesses and documents, hold hearings and gather evidence under oath.

A breach of an inquiry order is a serious matter and can lead to referral to the High Court, where the breach is treated as contempt of court. Sanctions can include a fine and/or imprisonment. The chair sets the rules for how evidence is gathered and presented, and a counsel team is appointed to review the documents and cross-examine the witnesses called to give evidence.

Witness evidence plays a central role in most public inquiries, often forming the backbone of the factual record. Individuals may be asked to provide written statements, and some will be required to give oral evidence at public hearings. This can be an intensive and sometimes uncomfortable process. Although inquiries are not adversarial, witnesses can still face robust questioning from counsel to the inquiry, and their evidence will be scrutinised in detail alongside large volumes of documentary material.

For businesses, it is crucial to ensure that witnesses are thoroughly prepared, both so they understand the process of giving evidence and so their witness statements contain a clear record of their recollection of events. Early engagement with legal advisors can help to achieve those aims.

The Inquiries Act provides that at the end of the evidence, the chair submits a report to the minister who called for the inquiry, who in turn publishes it to Parliament. Reports include the inquiry’s findings and recommendations, which are advisory and not legally binding. Nor, as mentioned above, are they determinative of civil liability.

Public inquiries are significant undertakings. The complexity involved with their implementation and conduct often translates into substantial cost and time commitments. Many inquiries run for several years, with budgets reaching tens of millions of pounds, sometimes more, due to the scale of document review, expert analysis and hearings.

Takeaways

Public inquiries are a powerful tool for learning lessons from tragedy and failure. They can provide a forum for transparency, accountability and systemic change. However, they can also pose significant risks to businesses, both reputationally, if an inquiry makes adverse findings, and commercially, as their length can place a significant burden on management’s time and resources, particularly where directors are called to give evidence.

Companies are therefore well advised to seek legal advice at the earliest possible stage if they are involved, or likely to be involved, in a public inquiry, in order to help minimise those risks.

Cooley has a proven track record in helping businesses navigate the high-stakes landscape of public inquiries, having advised and supported clients in some of the most high-profile inquiries in recent years.

For more information, please contact Sascha Grimm, Tom Epps, Oliver McGlashan or any member of the Cooley global hearings practice group.

Background

The dispute was between Zaha Hadid Limited, which operates the renowned international architecture practice founded by Dame Zaha Hadid (the company), and The Zaha Hadid Foundation, which became the owner of the ZAHA HADID trademarks following Dame Zaha Hadid’s death (the foundation).

Under a licensing agreement between the parties, the company was required to pay the foundation a royalty of 6% of net income for “licensed services” – a definition broad enough to cover any and all services provided by the company, not limited to services actually using the trademarks. The critical clause, 12.1, provided that the agreement “shall continue indefinitely, unless terminated earlier in accordance with this clause 12”. Clause 12.2 conferred on the foundation alone a right to terminate on three months’ written notice, and Clause 12.3 allowed the foundation to terminate in the event of the company’s breach. The company asserted that it was entitled to terminate on reasonable notice; the foundation disagreed. 

The High Court held that the contract contained no term giving the company such a right to terminate, meaning the company was locked into the contract forever. The company appealed.

The Court of Appeal’s decision

The Court of Appeal allowed the appeal.

The court, having considered the line of authorities on the point, confirmed a two-stage approach:

1. A decision as to whether the agreement was intended to run in perpetuity or not. A contract which is not intended to be perpetual and has no other explicit duration is one of indefinite duration (and therefore may be terminated at some unspecified point). The court emphasised that this is a matter of construction as to the common intention of the parties, not a question of implying a term (which would be subject to the rigorous tests in case law for finding implied terms in commercial agreements).

2. Having decided that the contract may be terminated at some unspecified point, the only way to give effect to that common intention would be for the court to infer that all parties have the ability to terminate on reasonable notice.

The court noted the first and obvious point that the word used in clause 12.1 was “indefinitely” and not “perpetually”. While it acknowledged that it could not be said that the former may never be understood as meaning the latter, the court concluded as a matter of principle that to describe the duration of a contract as indefinite is fundamentally different from describing it as perpetual and, therefore, the word “indefinitely” is not, without more, to be read as meaning “perpetually”.

The court rejected the argument that the one-sided nature of the termination provisions (that only gave the foundation express termination rights) supported an inference of perpetuity. The court considered that such express rights were to be expected in a licensing agreement where the licensor has a clear interest in ensuring the trademark is used appropriately to ensure goodwill accrues to it, and it is not invalidated.

The court also considered that the conclusion that the contract was intended to be indefinite rather than perpetual accorded with business commonsense. While it emphasised that no presumptions should be either way, it commented that one might expect commercial parties not to lock each other into a relationship in perpetuity.

Crucially, the court held that to infer a power to terminate on reasonable notice would not be inconsistent with the express rights of termination conferred on the foundation under clauses 12.2 or 12.3 on three months’ notice or in the event of the company’s default.

Finally, the court explained that what amounts to reasonable notice depends on the circumstances at the time notice is given, so that in the early stages of the contract a very considerable period of notice might have been required (much longer than the three months’ notice required of the foundation under clause 12.2), whereas as the contract advanced, that period may reduce considerably (to significantly less than the three months required of the foundation).

Key takeaways

Certainty is usually what contract drafters strive for, but it can come at the cost of flexibility. There are circumstances in which an open-ended contract (and the degree of uncertainty it brings) is preferable to the rigidity of a fixed term, but even in those instances, the relevant terms should be drafted to avoid ambiguity as far as possible. Silence in this context is far from golden. Contracts – even open-ended ones – must address exactly what rights of termination each of the parties have, and if they have none, they must address that.

[1] [2026] EWCA Civ 192.

Background

Zedra, a minority shareholder holding approximately 13.2% of THG, brought an unfair prejudice petition in 2019 under section 994 of the Companies Act. The petition alleged various forms of unfairly prejudicial conduct by THG’s management. The central issue in the matter arose in 2022 when Zedra sought to amend its petition to allege that it was unfairly excluded from a 2016 bonus share issue, which Zedra argued caused it compensatory loss. THG opposed the amendment, contending that the claim was time?barred under the Limitation Act 1980, specifically under:

• Section 8: Imposing a 12 year period for “actions on a specialty”
• Section 9: Imposing a six year period for “actions to recover any sum recoverable by virtue of an enactment”

The High Court and Court of Appeal

At first instance, the High Court held that no limitation period applied, allowing the amendment. However, in a move that surprised many practitioners, the Court of Appeal overturned that decision. The Court of Appeal concluded that:

• Most section 994 petitions fall under section 8 as “actions upon a specialty”, and therefore have a 12 year limitation period.
• Monetary based petitions fall under section 9, attracting a shorter six year limitation period.

Because Zedra sought only monetary compensation, the Court of Appeal held the amendment was time?barred, having been brought more than six years after the 2016 events. This ruling created immediate concern within corporate litigation circles, as it imposed time limits where none had previously been understood to exist.

The Supreme Court

The Supreme Court was asked to determine the single (critical) issue: Do any statutory limitation periods in the Limitation Act 1980 apply to a petition under section 994 of the Companies Act 2006?

The Supreme Court allowed Zedra’s appeal by a 4 – 1 majority, holding that neither section 8 nor section 9 of the Limitation Act applies to section 994 petitions. The majority’s reasoning was as follows:

1. Unfair prejudice petitions are not “actions on a specialty” (Section 8).The majority emphasised that an “action on a specialty” historically referred to enforcing obligations created by deeds or statutes (and historical sources as far back as the 19th century were consulted on the issue). Unfair prejudice petitions do not enforce a preexisting obligation but instead invoke a discretionary, equitable jurisdiction. Therefore, they fall outside section 8.
2. Section 9 does not apply because section 994 provides a wide discretionary remedy. Section 9 covers claims where a statute mandates payment of a sum of money. By contrast, section 994 empowers the court to make any order it considers appropriate, including but not limited to compensation. Because monetary relief is discretionary – that is, not fixed or automatically recoverable – section 9 cannot apply.
3. Delay is governed by equitable principles. Affirming the conventional view, the Supreme Court held that delay should be addressed through equitable doctrines, such as laches or discretionary refusal of relief, and not by imposing statutory bars.

Lord Burrows dissented, finding the Court of Appeal’s reasoning persuasive and preferring an interpretation that subjected section 994 petitions to the section 8 limitation period of 12 years.

Key takeaways

The Supreme Court’s decision restores certainty and continuity in the law. By confirming that no statutory limitation period applies to unfair prejudice petitions, the Supreme Court has ensured that this key shareholder protection mechanism remains flexible, equitable and aligned with its historic purpose. It also underscores the need for companies to maintain proper governance records, as historic conduct may be scrutinised years later.

[1] [2026] UKSC 6.

Background

The proceedings arose from a property development dispute. Sanman Property Management Limited (Sanman) had agreed to lend 2020 Living Limited £1.5 million to purchase a property known as ‘The Square’ in Birmingham. The contract entitled Sanman to 50% of the profit from any on sale. Sanman alleged that to avoid paying its profit share, 2020 Living disposed of its interest in ‘The Square’ to a related company, Taylor Grange 2 Limited, for no consideration. Sanman brought claims for breach of contract, inducing breach of contract and unlawful means conspiracy against Samuel Ginda and various corporate defendants he controlled.

During the litigation, concerns arose about document deletion. The defendants had disclosed that Ginda’s practice was, and had been, to routinely delete his emails at the end of each day. This prompted the claimants to apply for an order requiring Ginda to preserve documents and permit forensic imaging of his electronic devices and online storage accounts.

On 3 July 2024, the High Court approved a consent order requiring the defendants to instruct an e-disclosure provider, Consilio, to take forensic images of Ginda’s devices and online accounts, interrogate them for deleted documents and produce a schedule and report detailing the results. On 31 July 2024, an unless order was made providing that the defendants’ defences would be struck out unless they complied with certain provisions of the 3 July order within specified time frames.

Critically, two problems emerged with Consilio’s work. First, Consilio was unaware that one of Ginda’s email accounts contained data in a separate Microsoft 365 tenant and did not image it. Second, Consilio applied a date range ending on 31 January 2023 to another account, even though the order imposed no such limitation. The result was that the schedule served on the claimants was incomplete.

The central legal question was whether the defendants had breached the unless order and, if so, whether they should be granted relief from sanction or have their defences struck out.

The High Court’s decision

The High Court concluded that the defendants had breached the unless order by failing to serve a complete and sufficient schedule. The judge held that the schedule was ‘plainly incomplete and insufficient’ because it did not contain information from all of the online storage accounts that should have been imaged.

The judge found that the defendants’ solicitor ought to have known that the schedule was incomplete because Consilio had not imaged all the online storage accounts that they were meant to image. He refused relief from sanction and struck out the defendants’ defences, debarring them from defending.

The judge also held that even if the unless order had not been breached, he would still have considered it appropriate to strike out the defences on account of the defendants’ failure to comply with court orders. He concluded that the disclosure exercise could not be completed in time for trial and that it was proportionate to take the draconian step of striking out.

The Court of Appeal’s decision

The Court of Appeal, in a judgment delivered by Lord Justice Newey (with Lord Justice Lewison and Lord Justice Cobb agreeing), allowed the appeal and ordered a retrial before a different judge.

The court’s first key finding was that the judge had misconstrued the unless order, which obliged the defendants only to ‘instruct’ Consilio to produce a schedule and ‘supply a copy of what Consilio provided’. It did not require the defendants to guarantee the completeness or accuracy of Consilio’s work. The court reasoned that this interpretation made sense because the preparation of the schedule had been entrusted to an external contractor and it would not be surprising if the appellants had assumed responsibility for giving the instructions rather than guaranteeing the result.

The court confirmed that the instructions given to Consilio complied with the terms of the order and took into account comments made by the claimants’ solicitors under the scheme set out in the order. There was no complaint about the instructions. Since the defendants had done what was required of them, namely given the specified instructions and supplied a copy of the resulting schedule, the order was not breached.

On the general principles governing unless orders, the court emphasised that such orders must be restrictively construed given the severe consequences of noncompliance. An unless order must make it clear what the party concerned has to do – ‘any order dealing with the dismissal of an action unless something is done should be absolutely and perfectly precise in its terms’.

Turning to the judge’s alternative ground for striking out, the court identified the key problem as the judge’s failure to address the possibility of making a further unless order instead of immediately debarring the defendants from defending. The court observed that: ‘an order debarring a defendant from defending is draconian and must be seen as a remedy of last resort’.

Takeaways

This judgment offers important guidance for commercial parties and their legal advisors.

First, unless orders must specify with precision what the party concerned must do. If the sanction attaches to giving instructions to a third party, compliance will be judged on whether those instructions were given, not by the quality of the third party’s output. Parties seeking to enforce unless orders should ensure that the order imposes clear obligations on the defaulting party itself, rather than relying on implied requirements.

Second, where third-party service providers are involved in compliance, those instructing them should consider whether the unless order makes them responsible for the result or only for the instruction. In this case, the defendants avoided sanction because they were required only to instruct Consilio; not to guarantee its performance.

Finally, parties should pay close attention to how draft instructions to e-disclosure providers are handled. The defendants benefited from having shared their draft instructions with the claimants for comment under the scheme in the order, and the claimants had not suggested any improvements. This collaborative approach ultimately provided a shield against allegations of noncompliance.

[1] [2026] EWCA Civ 117

Background

The dispute arose from a 2013 contract under which Sahara had supplied crude oil to SONARA, a Cameroonian refinery operator, between 2013 and 2016. In addition to claims for the principal amount of the invoices and contractual interest, Sahara claimed the following categories of loss:

• Incremental Interest, representing the difference between the contractual interest rate and the rates that Sahara had to pay its own banks over the period of nonpayment.
• Penal Charges, being excess interest and penalty charges levied by Sahara’s banks when Sahara failed to make payment on various letters of credit it used to finance the relevant cargoes.
• FX Differential, representing foreign exchange losses incurred by Sahara due to the depreciation of the Euro against the US dollar during the payment delay.

On 4 and 5 September 2019, the parties held a “reconciliation meeting”, following which a Joint Report was concluded and signed by the attendees. This Joint Report contained tables setting out SONARA’s claims as follows:

• The first table, headed 2013 Outstanding on Principal, recorded a sum due of approximately €8.8 million.
• The second table, headed Reconciled Claims, listed contractual interest and other items totalling approximately €27.3 million and US$4.97 million.
• The third table, the primary focus of the subsequent dispute, headed Undisputed Claims, contained the claims for Incremental Interest and FX Differential, totalling almost US$77 million.
• The fourth table, headed Disputed Claims, contained the Penal Charges claim of US$50+ million. This table had an additional column headed Comments, which included a comment to the effect that SONARA rejected the claim for Penal Charges.

Under a section headed Resolution, which included the following bullet points:

• SONARA would review and collate the documents for submission to the government of Cameroon.
• SONARA completely rejects all Penal charges and requests a waiver of the same.
• SONARA will communicate a date within two weeks to [sic] for the parties to reconvene and to propose potential flexible payment terms, a schedule and further negotiations on the undisputed claims.

With regard to the first of these, following a fire at its refinery, SONARA was in financial difficulty and would be reliant on the Cameroon government to fund any payments it made to Sahara.

The dispute continued and Sahara issued proceedings. By the time the claim reached trial, SONARA had paid the amounts set out in the first and second tables. The primary issue in dispute was whether the Joint Report constituted a binding agreement by SONARA to pay the amounts listed under Undisputed Claims.

The High Court’s decision

The judge at first instance held that the Joint Report was a legally binding agreement, but only in relation to the amounts set out in the 2013 Outstanding on Principal and Reconciled Claims tables. She rejected Sahara’s contention that there was also a binding agreement to pay the Incremental Interest and FX Differential amounts listed under Undisputed Claims.

The judge’s reasoning hinged on the meaning of the word “undisputed” in the context of the agreement. She considered that the parties had used “reconciled” to mean agreed as to both liability and quantum, but “undisputed” to mean something narrower – “undisputed” as to quantum but disputed as to liability, or vice versa. In her view, this interpretation was necessary to give full weight to the reference in the agreement to “further negotiations on the undisputed claims”. She reasoned that if the claims were truly agreed, there would be nothing to negotiate.

The judge also placed weight on the factual background, including SONARA’s dependency on the Cameroon government to fund payment to Sahara. She found that any “agreement” on the Undisputed Claims was, at best, an agreement to present the matter before the Cameroon government and reconvene for negotiations if the government refused to pay.

Finally, the judge considered previous drafts of the agreement that had been produced and were relied upon by both parties. She noted in particular that while the Incremental Interest and FX Differential were listed under an Undisputed and Reconciled heading in the first draft produced by Sahara, these were moved to appear under the Disputed heading by SONARA in the second draft and, even though they were moved under a new heading of Undisputed Claims in the final agreement, they remained separate from the Reconciled Claims.

For these reasons, she dismissed Sahara’s claims.

The Court of Appeal’s decision

The Court of Appeal allowed Sahara’s appeal.

The court started by setting out the nature of its task when interpreting an agreement: it is to ascertain objectivity, with the benefit of the admissible background, the meaning of the words that the parties used. The court will consider the words used in the context of the agreement as a whole; it will have regard to the nature, formality and quality of drafting the agreement; and it will have regard to the wider context. However, “notwithstanding the approach taken by the parties in this case, evidence of the negotiations and earlier drafts is not admissible as an aid to interpretation of the final agreement” – emphasis in the original.

The Court of Appeal considered, unsurprisingly, that the ordinary and natural meaning of the words “undisputed claims” was simply that there was no dispute about those claims.

In support of this being the correct meaning in the context of the agreement, the court noted that there was no difference in format between the tables for the agreed claims and the Undisputed Claims. Both lacked any Comments column indicating unresolved issues. The Disputed Claims table, by contrast, expressly recorded SONARA’s rejection.

With respect to the High Court’s reliance on the reference to “further negotiations on the undisputed claims”, the Court of Appeal determined that that could perfectly well be understood as referring to negotiations over SONARA’s proposed flexible payment terms and payment schedule, rather than negotiations over liability itself.

In the court’s view, it was not right to adopt a strained interpretation of “undisputed claims” to give meaning to the word “negotiations”.

As for the judge’s reliance on the requirement to submit documents to the Cameroon government, the Court of Appeal observed that this did not support a conclusion that government approval was a condition precedent to any binding agreement between the parties. There were no words to that effect anywhere in the Joint Report. Nor was there any evidence that any such condition had been communicated to Sahara. The documents were more likely being provided to enable the government to decide how much financial support to provide, rather than to give the government a veto over SONARA’s commercial autonomy. The court also observed that if the judge’s conclusion were correct, there was no obvious explanation why the government’s consent would have been required for the Undisputed Claims but not for the 2013 Outstanding on Principal and the Reconciled Claims.

While the Court of Appeal stressed that the prior drafts of the agreement were inadmissible, it was noted that these actually supported Sahara’s case. The claims for Incremental Interest and FX Differential had been deliberately moved from a Disputed Claims heading in an earlier draft to the new Undisputed Claims heading in the final document – a change that could hardly signal anything other than a fundamental shift in SONARA’s position. Furthermore, the earlier draft had referred to flexible payment terms being negotiated “if an agreement is arrived at”, whereas this condition was deleted from the final document and replaced with an unconditional requirement for SONARA to propose terms. This strongly indicated that an agreement had in fact been arrived at.

Accordingly, the court held that the Joint Report constituted a binding agreement by SONARA to pay the Undisputed Claims.

Takeaways

This is not a groundbreaking judgment; it simply restores the normal and proper status quo. Nevertheless, there are a few points to take from this:

• Firstly, while the courts often emphasise that labels and headings are not determinative, this case demonstrates that they are still extremely important.
• Secondly, references to subsequent steps to be taken or agreed – in this case negotiations regarding payment terms – do not prevent an agreement from becoming legally binding.
• Thirdly, if an agreement is to be conditional on, for example, third-party approval, it must clearly state that.
• Finally, it is easy while negotiating contracts for one’s understanding of a particular term to be clouded by its evolution over the course of several drafts. It is vital to review the final form of the agreement with fresh eyes to satisfy oneself that it properly and objectively captures the parties’ true intentions

[1] [2026] EWCA Civ 54

The judgment in Houssein & Others v. London Credit Ltd[1] provides a useful summary of the English penalty rule and guidance on its application in practice. It is an important reminder that a clause will be struck out in its entirety if any element of it is determined to be penal.

Background

The case concerned a default interest clause in a bridging loan agreement between the third claimant, CEK Investments, and the first defendant, London Credit Limited.

The loan agreement contained two interest rates: a standard rate of 1% compounded monthly and a default rate of 4% compounded monthly, triggered by an event of default. Events of default included CEK failing to make a payment under the loan agreement itself, making a false representation or warranty, and failing to make a payment on a third-party loan or judgment debt.

London Credit alleged that there had been a breach of the loan agreement and sought to charge CEK the default interest rate. CEK claimed that the default interest rate was an unenforceable penalty.

The High Court’s decision

The court set out the now familiar three?stage analysis. First, the penalty rule only applies to secondary obligations arising on breach of a primary obligation. Second, the court must identify the innocent party’s legitimate interest in performance for each primary obligation to which the same secondary remedy applies. Third, the court asks whether the secondary obligation is exorbitant or unconscionable in amount or effect. The judge emphasised that if any element of the clause is penal, the clause is unenforceable in its entirety.

Quoting from the leading Supreme Court decision on penalty clauses, Cavendish Square Holdings BV v. Makdessi[2], the judge reiterated that where a contract has been negotiated between properly advised parties of comparable bargaining power, “the strong initial presumption” is that the parties themselves are the best judges of what is legitimate in a provision dealing with the consequences of breach. At the same time, there is a recognised presumption, “though no more than that”, that a sum is penal if it is payable on event of varying gravity.

In this case, although the agreement was negotiated between sophisticated parties, the same default rate was engaged by multiple primary obligations, prompting the court to analyse the lender’s legitimate interest for each event of default.

The court readily accepted that there was a clear legitimate interest in protecting against the risk of nonpayment, and that a higher rate for nonpayment and other material defaults can, in principle, be justified. The more difficult question concerned defaults not obviously linked to repayment, such as failing to pay unrelated borrowings or judgment debts. The court found that it was not self?evident that the same default rate should apply to such events.

Ultimately, following a detailed, commercial analysis of bridging finance dynamics, the court accepted that a default on other borrowings or outstanding judgment debts would significantly reduce the borrower’s ability to refinance and repay the bridging facility; thereby grounding a legitimate interest for applying the same default rate.

As to the size of the increase in interest rate, while 4% compounded monthly was above the standard market rate, it was not exorbitant or unconscionable in the circumstances and therefore did not fall foul of the penalty rule.

Takeaway

The penalty bar remains a high one, and courts are slow to interfere in negotiated contracts between parties of equal bargaining power. Nevertheless, parties should carefully assess how a single secondary remedy applies across different primary obligations. If a legitimate interest cannot be articulated for imposing the remedy in respect of each obligation, the entire clause risks being struck out. Further, the court’s acceptance of 4% compounded monthly in this case should not be read as blanket approval for that rate in other contexts; penalty analysis is fact-sensitive and contract specific.

[1] [2025] EWHC 2749 (Ch)

[2] [2015] UKSC 67

Background

The claim was brought by 216 claimants said to represent about 1,410 funds, all investors in Standard Chartered, seeking around £1.5 billion in damages under sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA). The claims were based on alleged misstatements and omissions in Standard Chartered’s published information between 2007 and 2019.

In 2012 and 2019, Standard Chartered entered into settlements with US authorities admitting to sanctions violations and anti-money laundering systems and controls failings. Alongside those, a whistleblower, pursued claims (ultimately dismissed) alleging that Standard Chartered concealed post-2007 Iran sanctions breaches.

The claimants, relying in part on the conduct addressed in the Settlements and on allegations in the Brutus complaint, asserted that Standard Chartered’s disclosures were misleading or incomplete and that persons discharging managerial responsibilities (PDMR) knowledge was engaged for liability under section 90A.

Against that backdrop, Standard Chartered made an application to withhold approximately 250 documents on grounds of foreign regulatory confidentiality and risk of prosecution or sanction in the US. The documents in issue comprised two categories:

1. US SAR documents (the reports themselves and information revealing their existence) subject to the US Bank Secrecy Act and Financial Crimes Enforcement Network regulations.
2. CSI documents, over which the Federal Reserve Bank and the New York State Department of Financial Services claim property and confidentiality restrictions, save where regulators authorise disclosure.

Standard Chartered confirmed that the US regulators had refused consent for the SARs and for most CSI communications to be disclosed.

The High Court’s decision

Mr Justice Michael Green dismissed Standard Chartered’s application to withhold disclosure of the US SAR and CSI materials, ordering disclosure into a confidentiality ring. He applied the principles in Bank Mellat v. HM Treasury[2] and related authorities, focusing on whether there was a ‘real’ or ‘actual’ risk of prosecution or sanction under foreign law and, if so, balancing that risk against the documents’ importance to the fair disposal of the English proceedings.

On the CSI (non?SAR) materials, the judge rejected Standard Chartered’s assessment that communications with US regulators were only tangentially relevant. He emphasised their potential to illuminate oversight, compliance and PDMR knowledge in relation to the misconduct underpinning the Settlements and the alleged misstatements/omissions, especially where the claimants lacked underlying evidence beyond public settlement findings. He found that a confidentiality ring would adequately protect comity and regulatory sensitivities.

On risk, the judge found that Standard Chartered had ‘got nowhere near’ demonstrating a real risk of US criminal prosecution for disclosing CSI under an English court order. He preferred the claimants’ expert’s evidence that the prospect was remote, noting the absence of prosecutions in analogous circumstances. He reached a similar conclusion regarding civil/regulatory action, considering that any penalties were likely to be small, particularly given compelled disclosure and protective measures.

For US SARs, the judge accepted that US law prohibits unauthorised disclosure and provides for civil/criminal penalties. However, he noted that Standard Chartered’s expert had not assessed the risk of sanction in the specific scenario of compliance with a foreign court’s order, and there were no examples of penalties in that fact pattern. He again ordered disclosure into a confidentiality ring.

The Court of Appeal’s decision

The Court of Appeal (Miles LJ, with Snowden LJ and Newey LJ agreeing) dismissed Standard Chartered’s appeal on all grounds, endorsing the High Court’s application of Bank Mellat and its evaluative conclusions.

First, as to the applicable legal framework, the Court of Appeal reiterated that disclosure is a core feature of the English procedural code, controlled by relevance and proportionality. Confidentiality is a factor, not a bar, and the court may adopt safeguards, such as confidentiality rings, to protect third-party interests. It emphasised that procedural orders for production and inspection are governed by English law, and that the court must balance any real foreign prosecution risk against the importance of the documents to the fair disposal of the case, acknowledging that comity cuts both ways.

As to the risk of prosecution for disclosure of US SARs, the Court of Appeal rejected the contention that the judge set an unduly high threshold. It read the judgment as applying the correct test of a real or actual risk rather than ‘more probable than not’. The court also rejected the suggestion that the judge treated evidence of prior prosecutions as a threshold requirement, noting that he properly treated the absence of prosecutions as a pertinent factor while analysing the expert evidence in full.

Evaluating the risk associated with US SARs, the Court of Appeal accepted that there was no direct evidence assessing the likelihood of sanctions where disclosure is compelled by an English court and confined to a confidentiality ring. It was entitled to use ‘its own intelligence’ per Bank Mellat. Given mitigation factors – including historic SARs, cooperation with regulators, lack of ongoing investigations evidenced, compelled disclosure and protective measures – the court held that the judge’s conclusion that any prosecution/sanction risk was remote was rationally supportable.

As to the materiality of the documents to the litigation, the Court of Appeal confirmed that the judge did not adopt a simplistic ‘relevance-only’ test or irrebuttable tilt. Rather, he recognised the default of disclosure, the burden on the withholding party, and undertook the required assessment of the SARs’ potential significance to PDMR knowledge and the pleaded case. His conclusion that the documents could be highly relevant was not irrational.

As to the CSI (non?SAR) documents and issues regarding comity, the Court of Appeal rejected the submission that regulatory confidentiality owed to foreign regulators should, as a category, be accorded special or enhanced weight beyond other serious confidentiality interests. While the court confirmed comity remains relevant, it emphasised that it ‘cuts both ways’, and that an English court is entitled to expect foreign authorities to respect English procedural orders, especially where protections are in place. In circumstances where the US regulators did not intervene and had themselves authorised certain disclosures into a confidentiality ring based on relevance, the judge’s conclusion that a confidentiality ring adequately protected regulatory interests was sound.

Accordingly, the appeal was dismissed.

Key takeaways

The English court will apply its own procedural law and default to disclosure, even where foreign criminal or regulatory laws restrict disclosure, but will carefully balance any demonstrated real or actual risk of foreign prosecution/sanction against the importance of the documents. Protective measures such as confidentiality rings are central tools in striking that balance.

A party seeking to withhold documents bears a substantial burden. It must produce concrete, case-specific evidence of a real risk of prosecution or sanction under foreign law in the actual circumstances (e.g., compelled disclosure into a confidentiality ring), not merely show that the foreign law prohibits disclosure in the abstract. Absence of analogous prosecutions is not determinative, but it is a highly pertinent factor.

Expert evidence must squarely address the precise risk question the court must decide: the likelihood of enforcement in the factual setting of compelled foreign disclosure with safeguards and the mitigating factors regulators actually weigh. General propositions about prohibitions or maximum penalties will not suffice.

For practitioners conducting complex securities and FSMA litigation, early identification of foreign?regulated materials, proactive engagement with regulators and designing robust confidentiality regimes are critical to managing comity concerns while ensuring access to potentially important evidence.

[1] [2025] EWCA Civ 1581

[2] [2019] EWCA Civ 449

Multinational companies should monitor cross-border implications, especially in light of other evolving regimes like the EU AI Act and the proposed Digital Omnibus on AI, which will impact businesses’ AI compliance roadmaps.

Read Cooley’s full article on the Executive Order.