FL-2025-000012 - [2025] EWHC 2673 (Ch)

The parties are agreed on the legal principles to be applied when interpreting the contracts in issue in this claim. Both referred me to the judgment of Popplewell J in Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd [2018] EWHC 163 (Comm); [2018] 2 All ER (Comm) 108 at [8], which helpfully summarises the principles established by the very well-known House of Lords and Supreme Court decisions on interpretation of commercial contracts:

“The court's task is to ascertain the objective meaning of the language which the parties have chosen in which to express their agreement. The court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant.

The court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to the objective meaning of the language used. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.

Interpretation is a unitary exercise; In striking a balance between the indications given by the language and the implications of the competing constructions, the court must consider the quality of drafting of the clause and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest; Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise hold that the negotiators were not able to agree more precise terms.

This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. It does not matter whether the more detailed analysis commences would be factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.”

It is material that the Agreements in issue are carefully drawn, and obviously drafted by experts, bearing the name of Allen Overy Shearman Sterling LLP on their front pages. This is not a case in which the express language used in the documents can be given less weight, on the basis that they are poorly or inexpertly drafted, unless a particular mistake in the wording is obvious. No one has identified such a mistake, other than as to the numbering of a clause.

There is no relevant factual matrix to take into account in this case other than that which is obvious from the nature of the Subscription Agreements, the security structure for the bonds, and the default that is recorded in the terms of the Standstill Agreement and the Additional Agreement. Ms Proia, who made a witness statement on behalf of the Defendant, attempted to give some evidence about the way in which the Additional Agreement came into existence alongside the Standstill Agreement, and what its purpose was, but I agree with Ms Boase KC that this evidence is inadmissible. Mr Craig KC did not contend the contrary, and I therefore ignore that part of her evidence.

On that basis, the starting point in construing the relevant provisions of the Standstill and Additional Agreements must be the language of those agreements and whether, in the limited factual context that I have described, there is any ambiguity, latent or patent. However, I have in mind and will apply the principles that Popplewell J explains, bearing in mind the consequences of the alternative constructions and the limits on any assumption that can be made about any negotiations that led to the Agreements.

A further relevant aspect when considering the commercial sense of the rival constructions is whether the Defendant can be taken to have given up valuable legal rights, including recourse to the court, or courts, in case of future dispute, and whether the language is sufficiently clear to require that conclusion. Both sides referred me in this regard to the judgment of Lord Leggatt in Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29; [2021] AC 1148 at [108]-[111]. In that case, the Supreme Court considered the interpretation of a liquidated damages clause and a cap on recoverable damages. One question was whether the cap applied to loss caused by failure to comply with an implied duty to carry out work with reasonable care and skill. Lord Leggatt (with whom Lord Burrows agreed) identified, among his reasons for holding that the cap did not so apply, the fact that the parties had not used clear words to exclude a remedy that would otherwise be available as a matter of law.

The principle is summarised in a decision of Andrew Burrows QC, sitting as a deputy High Court judge in Federal Republic of Nigeria v JP Morgan Chase Bank NA [2019] 1 CLC 207, which was approved by Lord Leggatt:

“Applying the modern approach, the force of what was the contra proferentem rule is embraced by recognising that a party is unlikely to have agreed to give up a valuable right that it would otherwise have had without clear words. And as Moore-Bick LJ put it in the Stocznia case, at para 23, ‘The more valuable the right, the clearer the language will need to be’. So, for example, clear words will generally be needed before a court will conclude that the agreement excludes a party’s liability for its own negligence.”

In short, the Defendant says that there is insufficiently clear language to enable the court to conclude that it agreed to give up its rights to take a future dispute about the lawfulness of enforcement action to the Tribunal de Commerce de Paris or the courts of Luxembourg, as the case may be.

The Claimant’s case is that the effect of clause 5 is spelled out in clear language, and that the extent of the concessions made by the Company Parties is unsurprising, given the position that they were in November 2024 when the Standstill and Additional Agreements were made. There was admitted default, and they were unable to repay the debt and redeem without refinancing, which they were attempting to do. That would either be successful, in which case the bonds would be redeemed in full and there would be no enforcement, or it would fail, in which case the Company Parties had no defence to any enforcement that FV Debt wished to pursue, at its choice, from the various options available to it under the Security Documents. By the Standstill Agreement, FV Debt had agreed to give time for the refinancing to be concluded. In return, it was obtaining further valuable rights in the event that it was not paid off and enforcement was needed.

The Claimant argues that the effect of clause 5(a) is that the Company Parties are obliged to cooperate, not just by taking active steps to collaborate on Enforcement Action, when called upon to do so, as the Defendant suggests, but also by desisting from doing things that would undermine, obstruct or prevent the Company Parties from exercising their rights in relation to any Enforcement Action that they chose to pursue. That is, they submit, the natural way of reading an obligation to cooperate fully in relation to matters that were principally to be done by others, using the extensive rights that they had. There is no temporal limitation on the scope of the obligation, depending on when the Enforcement Action was or will be taken or the time at which the rights to be enforced accrued.

The Claimant argues that although clause 5(b) is expressed as an agreement and acknowledgment, it is not merely a statement intended to give rise to a contractual estoppel but also includes a negative obligation on the Defendant, namely that it must not contend to the contrary. Further, the issues of sequencing or partial enforcement specifically referred to in this clause are only instances of a greater range of enforcement measures, as denoted by the word “including”, and are not the entire scope of the clause.

Clause 5(d), submits the Claimant, falls into two parts, the first of which is a promise as to the future conduct of the Company Parties, namely that they will not challenge the exercise or validity of rights under any Finance Document – which again includes one specific instance of what they must not contest, but which is not the whole scope of the clause. The second part is a release of concomitant rights or claims, present or future, that the Defendant may have “in this regard”. This is not limited to any rights that FV Debt already had at the date of the agreement, and the release in the second part of the clause applies, generally, to any rights or claims that the Defendant might otherwise have to challenge exercise or validity of FV Debt’s rights, not just to the additional right conferred by clause 5(c).

The effect, the Claimant says, is that by bringing the Paris Proceedings seeking to undo or stay the execution that Aether and Aloe carried out on its behalf, the Defendant is in breach of clauses 5(a) (because it has done something to seek to undermine Enforcement Action that the Claimant and Aether had taken), 5(b) (by contending that Aether and Aloe on behalf of the Claimant were not entitled to enforce Transaction Security in the way that they did), and clause 5(d) (by contesting the validity and effect of the exercise by Aether of rights under the Lux Share Pledge and the Lux Receivables Pledge).

The Defendant’s case is that the Claimant’s interpretation of clause 5 is far too broad, and that it amounts to the Company Parties surrendering all their future rights to challenge, in Paris or Luxembourg, any wrongful exercise in future of the rights conferred by the Finance and Security Documents. The Defendant argues that such a surrender of all ability to control what FV Debt and Aether do, whether that is in accordance with the rights conferred by the Finance and Security Documents or not, is most improbable, and that the language of clause 5 is nowhere near clear enough for the court to conclude that it has that far-reaching effect.

To support this case, the Defendant advanced a different interpretation of clause 5, which it contends that the language expresses, thereby demonstrating that there is not the clarity required to conclude that the Defendant was giving up its right to raise any excessive or unlawful action in accordance with the jurisdiction clauses.

In that regard, the Defendant emphasised clause 11 of the Additional Agreement and argued that the parties were thereby asserting the primacy of the terms of the Finance Documents and the importance of not derogating from the overseas jurisdiction choice that the parties made in those documents.

I am not persuaded by this particular point. First, the effect of clause 11 is that the Finance Documents continue to apply to regulate the relationship of the Bondholder, the Agent and the Company Parties but subject to the terms of the Additional Agreement. If the Additional Agreement cuts across the terms of the Finance Documents, they are overridden to that extent. Thus, if under the Additional Agreement the Company Parties agree not to raise a challenge to any purported exercise of rights arising from the Finance Documents, the ability that the Defendant would otherwise have to assert unlawful exercise of those rights is excluded, by their agreement. (There is no suggestion that the Finance Documents cannot be varied by agreement, or can only be varied in an agreement governed by French law.). Whether an assertion of unlawful exercise could otherwise have been raised in Paris or Luxembourg matters not if the right to do has been released.

However, the question of whether the language used is sufficiently clear to justify a conclusion that the Defendant has indeed contracted out of recourse to the courts remains for decision.

As to that, the Defendant contends that there is a clear distinction in clause 5 between those parts of it that amount to obligations and those parts that are only an agreement and acknowledgement, which give rise to a contractual estoppel as to the matters agreed and acknowledged but not to an obligation, whether negative or positive. The Defendant points to the difference in the language used by the draftsman, in both the Standstill Agreement and the Additional Agreement, between matters that a party “agrees” or “undertakes” and matters that are “acknowledged” or “agreed and acknowledged”. Mr Craig argued that the words “agree and acknowledge” are consistently used to indicate a matter which amounts to no more than a contractual estoppel, preventing a party from asserting the contrary in any further proceedings but not amounting to an obligation not to bring proceedings. Such an estoppel may, he said, be as to a past, existing or future state of affairs.

Thus, while the express undertaking in clause 5(a) to cooperate fully with the Bondholder and the Agent in relation to any Enforcement Action is admitted to create an obligation, the Defendant contends that the rest of clause 5 does not.

As to clause 5(a), the Defendant argues that the obligation to cooperate extends only to cooperating before (not after) FV Debt or Aether conducts any Enforcement Action, and only where what is required is some positive collaboration on the part of a Company Party. Thus, to the extent that the Claimant has already taken Enforcement Action, as they arguably did (though the Defendant denies the validity of it) on 27 and 28 May 2025, the obligation in clause 5(a) no longer bites on the Company Parties unless and until the Claimant needs some further collaborative effort to conduct further Enforcement Action. There was therefore nothing in clause 5(a) to prevent the Defendant from commencing the Paris Proceedings, seeking to challenge the validity of, or to undo, the steps that Aether and Aloe took on and after 28 May 2025.

I unhesitatingly reject that argument. There is nothing in the language of clause 5(a) to restrict the obligation to cooperate to positive collaboration prior to Enforcement Action being taken, nor does it make commercial sense. The words in parenthesis (“including without limitation any preparatory steps they may wish to take while the Standstill Agreement is in force”) do not define the extent of the obligation but spell out something that is included in it. They are there in clause 5(a) because otherwise cooperation on preparatory steps would be caught by the opening words of clause 5 (“Subject to the terms of the Standstill Agreement”). The inclusion of those words recognises that preparatory steps prior to enforcement are within the obligation but does not limit the obligation to such steps – which is really the effect of the Defendant’s argument. The words “including without limitation” are unambiguous, and the reason for the inclusion of the words in parenthesis is clear.

Further, the words “any Enforcement Action they may wish to take” do not limit the obligation to a point in time when the Enforcement Action has not yet been carried out. They signify that the obligation bites on any future Enforcement Action, given the existence of the rights that FV Debt already had at the date of the Additional Agreement but which could not be enforced during the standstill period. If the Defendant were right in its interpretation of clause 5(a), the Defendant would be free to challenge any Enforcement Action after the event, in court proceedings or otherwise, which is self-evidently not what the clause intends.

I agree with the Claimant that the obligation to cooperate fully includes an obligation not to derogate from Enforcement Action in any way after it has been taken.

The Defendant’s next argument is that the obligation in clause 5(a) only applies in relation to valid Enforcement Action, and does not apply to invalid enforcement or other actions. Accordingly, there is nothing in clause 5(a) to prevent the Defendant from asserting in proceedings that what was done was not valid Enforcement Action.

If, at the time of the Additional Agreement, there could be seen to be doubt about what would happen in future and whether it could be enforced under the Finance or Security Documents, there might be force in this point. But the circumstances at the date of the Additional Agreement were quite different, namely that an Event of Default was admitted and rights to enforce had already indubitably accrued. Further, by the terms of the Additional Agreement, the Company Parties were accepting that if the bonds were not redeemed at the end of the standstill period, there would thereupon be a Luxembourg Security Enforcement Event, which would entitle FV Debt, by simple notice, to the full range of enforcement options. Either the refinancing would be in place or the Company and the Parent were insolvent and that was the end. What the Defendant needed was time, and that FV Debt agreed to give it, but at a price that would facilitate its enforcement if refinancing failed.

In those circumstances, I cannot accept the argument that any rights conferred on FV Debt and Aether by clause 5(a) were subject to proof by them (and therefore always liable to challenge by the Defendant) that what was done by way of Enforcement Action was or was not lawful. To construe the clause in that way would deprive it of much of its commercial effect, once it is accepted that it extends, as it does, to anything done by the Company Parties after Enforcement Action is taken to attempt to undermine its effect. Although that means that the Company Parties were giving up their rights of recourse to the court to adjudicate on the lawfulness of what FV Debt or Aether might do, both the language and the circumstances are sufficiently clear, in my judgment, that that is what was being agreed as the price of giving the Defendant the chance to refinance its subsidiaries’ debts.

Further, the Claimant accepts that the restriction on challenging Enforcement Action could not, as a matter of interpretation, prevent challenge to conduct which is fraudulent or dishonest. That concession is obviously appropriately made. Nor, the Claimant accepts, could it extend to seeking to prevent something that is manifestly not Enforcement Action as defined at all.

If the Claimant is right, the Company Parties were nevertheless giving up the right to challenge any action by FV Debt or Aether in the course of purported Enforcement Action on the basis that it was invalid formally, or by being a breach of a term of the Finance and Security Documents, or as being unlawful in some other respect. Recognising that clear language is needed for such a conclusion, I do however conclude that that is exactly what was being done, in order for the Company Parties to have a final chance to redeem the bonds. It is a conclusion supported by the other terms of the Additional Agreement, particularly clause 5(d), when properly construed, and the admitted circumstances of the Company Parties at the date when it was made.

As to clause 5(b), the Defendant’s case is that it does not give rise to an obligation, as previously explained, and that, if it does, it is limited to the sequencing of enforcement steps or partial enforcement. Although words such as “agrees and acknowledges” often signify a fact that is intended to take effect only as a contractual estoppel, those words do not necessarily have that effect. Whether they do or not is likely to depend on the substance of the matter stated. Here, that matter is the ability of Aether to enforce any Transaction Security as it sees fit. That is a right already provided by the Intercreditor Agreement. It may be that there was perceived to be uncertainty about the extent of the rights granted by it, or that FV Debt wanted clarification. There is therefore, to that extent, agreement as to future rights that FV Debt or Aether would have, but it does not appear to me that clause 5(b) imposes any obligation on the Company Parties separately from clause 5(a), nor did it need to do so. I therefore agree with the Defendant that clause 5(b) takes effect as a contractual estoppel as to the matters stated in it.

Turning to clause 5(d), it is common ground that it is to be read in two parts, the first concerned with contesting or preventing the exercise of rights under Finance or Security Documents, and the second with releasing certain rights or claims.

The Defendant’s case is as follows. The first part is only an agreement and acknowledgment, to take effect as a contractual estoppel as to the exercise of rights that the Agent actually had, under the Finance Documents, and which had accrued at the date of the Additional Agreement. These include, specifically, the way in which a valuer may be appointed as provided in clause 5(c), and that is the sole subject matter of the release in the second part of the clause. Clause 5(d) does not grant FV Debt or Aether any further rights except immunity from challenge to the exercise of the new right conferred by clause 5(c), and there is nothing to prevent the Defendant from challenging or seeking to prevent the exercise of rights that FV Debt and Aether do not have under the Finance Documents (i.e. from asserting that the exercise of rights was unlawful). The Defendant argues that “the rights” referred to must be present rights, acknowledged in the Additional Agreement, as these are more likely to be the subject of a contractual estoppel than unknown future rights. The Defendant would therefore not be precluded from maintaining in proceedings that any rights that were asserted to have accrued after the date of the Additional Agreement had not validly accrued, or indeed that any accrued rights were not being validly exercised.

Among the rights that had not accrued by the date of the Additional Agreement were rights pursuant to a Luxembourg Security Enforcement Event, since that would not arise until the expiry of the standstill period without payment in full, pursuant to clause 4(c). The right to appoint a valuer under the Lux Share Pledge or the Lux Receivables Pledge had not arisen, therefore. However, the Defendant’s argument is that an estoppel arises in relation to, among other things, the approach to the appointment of the expert valuer, and that the release in the second part of clause 5(d) relates to that specific matter.

In my judgment, the Defendant’s argument is ultimately self-defeating in trying to limit the application of clause 5(d). It does not make sense that it applies only to existing rights, including specifically the appointment of an expert valuer when no such right has yet accrued. Nor does a distinction between existing and future rights make commercial sense when the expiry of the standstill period without full repayment would give rise to a Luxembourg Security Enforcement Event, entitling FV Debt to instruct Aether to enforce under clause 10 of the Intercreditor Agreement as it saw fit. Indeed, all that FV Debt had to do under the Fiducie was to instruct Aether to notify Aloe of a Triggering Event (non-payment of the debt was sufficient) in the model form of notification (clause 12.1(b) and Annex 11 to the Fiducie). It is only on the date of notification of the Triggering Event that, under that clause, the Event and any enforcement are deemed to have occurred.

It can therefore be seen that there were important rights that would accrue, either automatically or upon service of a unilateral notice by Aether, upon expiry of the standstill period, and yet the Defendant says that clause 5(d) was not affording FV Debt even the benefit of an estoppel in relation to them, much less an obligation not to challenge their exercise. This strikes me as commercially highly improbable, and the interpretative gymnastics that the Defendant has to perform to reach that conclusion are a considerable stretch from the natural meaning of the words in their factual context.

In my judgment, clause 5(d) of the Additional Agreement means what it says, and has (and was intended to have) a wide effect. An agreement that something shall not be “contest[ed] or otherwise prevent[ed]” does not, despite the use of the words “agree and acknowledge”, have effect only as a contractual estoppel. It does not only prevent the Company Parties in future from contesting that rights were not validly executed but obliges the Company Parties not to seek to prevent the exercise by the Agent of its rights under any Finance Document. It therefore creates a binding obligation that the Company Parties were to perform.

Read in that way, the first part of the clause fits the natural reading of the words in the second part, an irrevocable release of “any rights or claims they may have now or in the future in this regard”. I cannot accept that the second part of the clause is directed only to the provisions of clause 5(c) and 5(d) relating to the appointment of the Expert. This argument fails to give any weight to the words “including, without limitation”, which introduce the extended rights to appoint the Expert and which make it clear that it is an example of a broader category that has gone before, namely the exercise of enforcement rights. The specific example of appointment of the Expert might have been included in clause 5(d) to avoid doubt, because, prior to the Additional Agreement, the provisions of clause 5(c) were not included in any Finance Document – though, admittedly, clause 10 of the Additional Agreement does designate it as a Finance Document, so that including the example in clause 5(d) was strictly unnecessary.

However, I do not accept that the second part of clause 5(d) serves only to exclude the ability of the Company Parties to challenge the exercise of the additional right conferred by clause 5(c), as the Defendant submits. This is not the natural reading, and it does not make literal sense (because there were no such rights then existing under the Lux Share Pledge or the Lux Receivables Pledge) or commercial sense (if it is providing a waiver of the right to object to one aspect only of the whole process of valuing the shares in the Parent or the receivables). Although the natural wording of the clause makes it wide in its effect, and excludes the right to challenge the exercise of rights under the Finance Documents in overseas jurisdictions, I consider that to be the right interpretation of clause 5(d) for reasons the same as those I have given in relation to clause 5(a), namely that this was the price of the last chance that the Company Parties were being given to refinance and discharge the debt.

That conclusion is not undermined by the contents of clause 6, which Mr Craig suggested would be otiose if clause 5 were given the wide meaning for which the Claimant contends. Clause 6 principally confers rights that can be exercised during the standstill period, unlike clause 5, which (with one limited exception) is subject to the terms of the Standstill Agreement. These clause 6 rights are rights to vote the shares of the Parent to protect Aether’s rights, separate rights granted in relation to the shares of FL, subject to an exclusivity period and the rights in clause 7, and a waiver of the Defendant’s rights of recourse to its subsidiaries.