Is Brexit even more frustrating than first thought?

1 February 2019

A High Court battle between the European Medicines Agency (the EMA) and Canary Wharf Group has taken place in January 2019 which has the ability to make Brexit a frustrating event for even more reasons than it might already be thought to be by some.

In 2014, the EMA signed a 25-year lease of purpose built premises in Churchill Place, Canary Wharf to be its HQ. Due to Brexit, the EMA's HQ has now been declared to be moving to Amsterdam after March 2019 with the EMA intending to move its operations out of London and into Amsterdam and Paris instead. In an attempt to get ahead of the game, Canary Wharf Group has sought a declaration from the Courts that Brexit alone will not frustrate the lease.

The lease did not include a break clause, but the EMA have since argued that Brexit is an unforeseeable event that makes the lease unable to be performed. The legal doctrine of frustration is where a contract can be brought to an end, releasing both parties from their obligations, if an unforeseen event occurs which results in the contract becoming impossible or illegal to perform. Generally, this is not available when it comes to leases but case law has demonstrated that it is possible, albeit rare.

The EMA argued that when the lease was entered into neither party expected the UK to leave the EU. However, Canary Wharf Group's counter argument is that Brexit was never unforeseeable due to the existence of Article 50 of the Treaty for the European Union.

The judgment is now awaited. If the Court orders in the EMA's favour it could mean that other tenants will potentially look to use Brexit, or other unforeseeable events, as a means of terminating their lease obligations when they have failed to negotiate a break clause. While it does seem unlikely that the Court will allow a lease to be ended just due to Brexit, it is possible that the Court may find in the EMA's favour in this particular situation given that it would lead to an EU institution operating out of a non-Member State. The court's decision is awaited with interest and it might have significant implications.

At Gepp Solicitors we are well equipped to assist both landlords and tenants in all issues relating to leases. If you require assistance at any point before, during or after the life-time of a lease, do not hesitate to get in touch with our Commercial Property or Dispute Resolution teams who will be pleased to help.

For further information please contact us on 01245 493939.

This is not legal advice; every case turns on its own facts and specialist advice should be sought in every instance. It is intended to provide information of general interest about current legal issues.