Unresolved issues in the law on penalties

The article examines several unresolved issues in the law on penalties, following the UK Supreme Court’s restatement of the penalties rule in Makdessi v Cavendish Square Holding [2015] UKSC 67. The discussion is divided into three main sections, concerning: the jurisdiction (or scope) of the rule; the test for the validity of impugned clauses; and the effect of the rule. The central argument is that although the court’s decision to limit the rule’s application at both the jurisdiction and validity stages will increase parties’ certainty that their clauses will be enforced, the restatement leaves the law itself uncertain in several key respects.