Permission mode resets from 'Bypass' to 'Accept Edits' on projects with special characters in path

Bug Description

Permission mode keeps resetting from "Bypass permissions" to "Accept edits" automatically. This happens only on one specific project — all other projects retain the setting correctly.

Key Detail: Project Path Contains Special Characters

The affected project path:

/Users/dominik/VisionXLab Dropbox/Dominik Žuffa/Mac/Desktop/Ai Hub/Marketing : Copywriting/USA B2C Bedr LP Mortgage

This path contains:

• Spaces (multiple)
• Colon : (in Marketing : Copywriting)
• Diacritics ž (in Žuffa)
• Total length: 116 characters

Other projects without these special characters in their paths work correctly — permission mode stays on Bypass as configured.

Configuration

Both global and project-level settings explicitly set "defaultMode": "bypassPermissions" and "skipDangerousModePermissionPrompt": true.

Global ~/.claude/settings.json:

{
  "permissions": {
    "defaultMode": "bypassPermissions",
    ...
  },
  "skipDangerousModePermissionPrompt": true
}

Project .claude/settings.local.json:

{
  "permissions": {
    "defaultMode": "bypassPermissions"
  },
  "skipDangerousModePermissionPrompt": true
}

Despite both levels being configured, the mode resets to "Accept edits" in this project.

Steps to Reproduce

1. Open a project whose path contains spaces, colons, and/or Unicode diacritics
2. Set permission mode to "Bypass permissions" via the VS Code UI
3. Observe that it switches back to "Accept edits" (either immediately or after a short time)

Expected Behavior

Permission mode should persist as "Bypass permissions" regardless of special characters in the project path.

Actual Behavior

Permission mode resets to "Accept edits" despite being configured at both global and project level.

Environment

• Claude Code CLI: 2.1.76
• VS Code Extension: anthropic.claude-code
• macOS: 26.4 (Tahoe beta, build 25E5233c)
• Running in: VS Code native extension (not CLI terminal)
• Model: Claude Opus 4.6 (1M context)

Hypothesis

The colon (:) and/or spaces in the project path likely cause a path-matching or settings-lookup failure when Claude Code tries to resolve the project-level permission configuration. The path may not be properly escaped/quoted internally, causing the settings file to not be found or not be associated with the correct project, falling back to a default mode.

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🤖 Report filed with help from Claude Code