High Court rules that the EMA’s lease in Canary Wharf is not frustrated by Brexit

20/02/19

Canary Wharf (BP4) T1 Limited & Ors v European Medicines Agency [2019] EWHC 335 (Ch)

In a judgment handed down today, Mr Justice Marcus Smith ruled that the EMA’s 25-year lease in Canary Wharf would not be frustrated by Brexit.  

The EMA’s case on frustration proceeded on two broad bases: first, that this was a case of supervening illegality because the EMA would lose its vires to handle immovable property once the UK is no longer a Member State of the EU; and second, that this was a case of frustration of common purpose because both parties to the lease intended the premises to be used as the EMA’s headquarters. Both of these bases were rejected by the Judge.

In relation to the question of the EMA’s capacity to deal with immovable property in the UK, and to perform its obligations under the Lease, the Judge rejected, with complete confidence, the EMA’s contentions that such capacity would be lost upon the UK’s exit from the EU. In that regard, he also rejected the EMA’s arguments that it had to relocate as a matter of EU and regional customary international law.  

The Judge proceeded to consider that even if there were constraints on the EMA’s capacity or vires, these were irrelevant to the question of frustration by reason of supervening illegality as such constraints were not a matter that the English law of frustration took into account. However, the Judge went on to hold that even if he were wrong on that point, this was a case “where the legal effects on the EMA of the United Kingdom’s withdrawal from the European Union could have been, but were not, ameliorated by the European Union”. The Judge held that this failure is relevant to the question of frustration, and in his judgment, rendered the frustration of the lease self-induced.

The Judge went on to reject the EMA’s submission that the Lease was discharged because the common purpose of the bargain, namely that the building should serve as the EMA’s headquarters, is frustrated by Brexit. He held that the EMA’s involuntary departure from the premises, due to circumstances beyond its control, was not only merely envisaged but expressly provided for in the lease. The EMA, he held, “cannot not say this is not what it bargained for”.

In addressing the parties’ submissions on questions of relative justice, the Judge stated that his view is inevitably coloured by the risk allocation that he found was contained in the lease. He held that “the EMA chose to enter into a long-term relationship, with long-term obligations. It played a role in framing those obligations: it could have opted for different premises, with a shorter lease; it could have negotiation a break and paid a (far) higher price and forgone the inducements it received. It did none of those things, but instead accepted provisions contemplating its departure from the Premises and providing for this case”.

The judgment can be found here.