Cassini SAS v Emerald Pasture Designated Activity Company

Opening a French safeguard procedure does not, without more, render a non-ongoing contract unenforceable. The starting point remains pacta sunt servanda. Express statutory derogations apply, including the moratorium on monetary claims and the special regime for ongoing contracts. Applying a contrario reasoning, the special treatment of ongoing contracts does not create an equivalent prohibition for non-ongoing contracts. Non-monetary obligations may therefore remain potentially enforceable, subject to the court’s power under the French Civil Code to refuse specific performance where the cost to the debtor is manifestly disproportionate to the creditor’s interests. An appellate court may reassess expert evidence of foreign law, while taking account of the trial judge’s advantage in hearing the evidence.

Cassini, a French borrower, appealed against the decision of the High Court, reported at [2021] EWHC 2443 (Ch), declaring enforceable two information and access covenants in a fully drawn loan agreement.

Cassini was in the observation period of a French safeguard procedure. The parties agreed that the loan agreement was a non-ongoing contract under French law. Cassini argued that non-ongoing contracts became unenforceable during the observation period. Emerald argued that the contractual obligations continued, subject only to express statutory restrictions, including the moratorium on monetary claims.

The central issue was whether the covenants remained enforceable under French law during the observation period.

1. Disposition. Snowden LJ gave the leading judgment, with Arnold LJ and Underhill LJ agreeing. The appeal was dismissed. The High Court was entitled to declare that the information and access covenants remained enforceable.
2. Appellate review of foreign law. Findings of foreign law are treated as findings of fact, but an appellate court is not confined by the usual restrictions applicable to factual findings. It may consider the expert evidence afresh and form its own view of the cogency of the rival analyses, while bearing in mind the trial judge’s advantage in seeing and hearing the witnesses. Expert reputation is relevant, but the substance and cogency of the evidence, including its performance under cross-examination, are primary: Dalmia Dairy Industries Ltd v National Bank of Pakistan [1978] 2 Lloyd’s Rep 223.
3. French statutory scheme. The starting point was the pacta sunt servanda principle, embodied in Article 1103 of the French Civil Code. The French Commercial Code contains express derogations applicable to contracts generally, including the prohibitions in Articles L.622-7 and L.622-21. Article L.622-13 is a further derogation directed specifically to ongoing contracts. Applying a contrario reasoning, the absence of an equivalent provision for non-ongoing contracts supported the conclusion that their pre-safeguard regime continued, subject to the express statutory restrictions.
4. Non-monetary obligations. Non-monetary obligations under a non-ongoing contract could therefore be potentially enforced by an application under Article 1221 of the French Civil Code. The court could refuse specific performance where the cost to the debtor was manifestly disproportionate to the creditor’s interests. That approach was not inconsistent with the safeguard regime, which was available to debtors who were not insolvent and could end without a restructuring plan under Article L.622-12.
5. Authorities and remaining grounds. The proposed caducité theory was unsupported and circular, and did not explain how contracts could revive if the procedure ended without a plan. The HOLD decision concerned the effect of an approved safeguard plan on loan terms, not the effect of opening proceedings during the observation period, and therefore did not determine the issue on appeal. Any misunderstanding by the trial judge of one answer by Dr Dammann did not affect the central analysis. The criticisms of the judge’s treatment of Professor Le Corre and of his interventions in cross-examination were immaterial.

1. Court of Appeal (Civil Division). On 4 February 2022, the court dismissed Cassini’s appeal and upheld the declaration that the covenants were enforceable.
2. High Court of Justice, Business and Property Courts, Chancery Division. His Honour Judge Kramer, sitting as a High Court judge, decided on 27 August 2021 that the covenants were enforceable: [2021] EWHC 2443 (Ch).
3. High Court of Justice. Zacaroli J rejected Cassini’s jurisdictional challenge: [2021] EWHC 2010 (Ch).