Earlier in the year I wrote in the The Times’ Brief (subscription required) about a case being brought by the European Medicines Agency (EMA) against its landlord in relation to its extensive premises at Canary Wharf. The EMA was just a few years into its 25 year lease when it relocated to Amsterdam along with its 900 staff, in preparation for Brexit. It argued that its £500 million lease had been “frustrated” as a result of Brexit.
Whether one is a keen Leaver or an ardent Remainer, I think it is safe to say that many have found the Brexit process frustrating. However, in order for an agreement to be frustrated in law, something must occur after the formation of the contract that renders it physically or commercially impossible to fulfil a contract, or somehow transforms the contractual obligation to be performed into something “radically different” from that undertaken at the time of making the agreement.
The EMA argued that its lease would become frustrated by reason of illegality. Once the UK leaves the EU, the EMA argued that as a matter of EU law, it could no longer occupy the premises and would have no legal power to meet its obligations under the lease. This argument was not accepted by the Court, which found that post-Brexit the EMA would retain capacity to deal with the property.
The EMA also argued that there had been frustration of a common purpose. This must be a purpose that goes beyond the agreement at issue, in this case the lease. This argument was also rejected, with the Court finding that the landlord and its tenant in fact had divergent purposes. For example, the landlord’s purpose is long term cash flow at the highest rate and the EMA’s purpose was to pay the lowest possible rent.
It remains to be seen whether or not the EMA will appeal this decision. Clearly a lot is at stake in this case – not only for the EMA which has expensive leased premises it is no longer using, but also for other entities leaving the UK or reducing their UK presence as a result of Brexit. This case continues to be keenly watched as its implications could be far-reaching.