Key takeaway

On appeal from the High Court, the Court of Appeal upheld terms that deprived a party of contractual enforcement rights. In Unik Bond S.A. v Catbalogan Holdings S.À.R.L. [2025] (“Unik v Catbalogan”), it was held that the Appellant had contractually waived the right to challenge enforcement action under a standstill agreement.

The decision confirms that the court will enforce waivers of legal rights if the contract’s language is clear and unambiguous. While the courts require clarity before concluding that rights have been waived, they will not avoid that conclusion merely because the outcome is commercially harsh. It underlines the importance of careful drafting of standstill and contract enforcement provisions to ensure that they achieve their intended effect. In the example of Unik v Catbalogan, where the intention is to prevent challenges to enforcement, whether in England or abroad, this must be expressed in unequivocal terms.

How do English courts interpret contractual waivers of legal rights?

The High Court’s reasoning in Unik v Catbalogan reflects well-established principles of contractual interpretation, three of which are particularly relevant in this context:

1)    The contract must be read as a whole

Individual clauses cannot be construed in isolation. Waiver provisions must be consistent with the broader contractual scheme as language that appears to waive rights may be undermined if other provisions imply a continuing entitlement to contest enforcement.

2)    Commercial common sense has limits

Commercial common sense is a relevant but limited tool of interpretation in contracts. Where the language is clear, the court will generally give effect to it even if it produces an onerous contractual outcome. Parties cannot rely on perceived unfairness to escape clearly agreed terms entered into as part of a commercial compromise.

3)    Clauses can restrict rights and remedies

It is possible to restrict or exclude valuable legal rights under a contract and these terms are construed by the court in accordance with ordinary principles. Unambiguous wording is required before the court will conclude that these rights have been surrendered. The more valuable the right, the clearer the language must be. However, the mere existence of two possible interpretations does not compel the court to prefer the one that preserves the party’s rights.

These principles were applied by the High Court in Unik v Catbalogan which was a dispute arising out of a cross-border financing and subsequent contractual enforcement action.

What were the facts in Unik v Catbalogan?

The bonds, worth €43m, were issued in March 2023 to Hôtel de Mandelieu La Napoule S.a.S. (“the Company”) and its parent, Poséïdon Hospitality S.à.r.l (“the Parent”) to fund a luxury hotel development and casino near Cannes. The original bondholder was Regera S.à.r.l (“Regera”). Unik Bond SA held 50% of the shares in the Parent.

The bonds were secured by a share pledge and a receivables pledge governed by Luxembourg law and a fiducie governed by French law. The bonds fell due in September 2024 and were not repaid by the Company and the Parent which constituted an event of default under the terms of the bonds.

In November 2024, a standstill agreement and an additional agreement governed by English law was entered into by the Company, the Parent, Unik, the security agent (Aether) and FV Debt so that the Company parties could acknowledge the default. The Company and the Parent further undertook to cooperate with enforcement and not to contest the validity or exercise of rights.

In return, the Regera agreed temporarily not to enforce until 14 March 2025, the agreed date of the expiry of the standstill agreement. When refinancing efforts failed, Regera assigned its interest in the bonds to Catbalogan who then proceeded to enforce the security by taking control of the hotel.

Unik then commenced proceedings in the Tribunal de Commerce in Paris to challenge the enforcement actions.

Catbalogan sought injunctive relief in England on the basis that the standstill agreement and the additional agreement prevented Unik from challenging enforcement action.

Did the standstill agreement waive the right to challenge contract enforcement in foreign courts?

The High Court found that Unik had breached contractual clauses of the additional agreement by commencing the Paris proceedings and granted an injunction requiring Unik to discontinue the proceedings. Despite appealing, the Court of Appeal upheld this judgement.  The Court of Appeal found that the language of the contract was sufficiently clear to conclude that the right to challenge contractual enforcement actions through proceedings in foreign courts had been waived. Fraud or dishonesty was the only recognised exception. Although this interpretation involved the surrender of significant and valuable legal rights, the court held that this was the commercial price paid for a final opportunity to refinance.

What are the drafting implications for standstill agreements and contract enforcement waivers?

The decision provides a clear illustration of the English courts’ approach to enforcement waivers in commercial contracts. Where parties have clearly agreed to give up valuable rights, the courts will generally uphold this intention of the parties.

For practitioners, the case reinforces not only the need for precision when drafting standstill and non-challenge provisions but also importance of ensuring clients fully understand the legal and commercial consequences of waiving the right to challenge enforcement action.

Please contact the Commercial Litigation team at Barnes Law for advice on contract disputes.

Authored by Barnes Law Managing Partner, Yulia Barnes.

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