20 Feb 2019

In a significant ruling today, Mr Justice Marcus Smith has decided that the European Medicines Agency's £13 million a year lease of premises at Canary Wharf will not be frustrated by Brexit. The decision will be a relief not only for the property industry but also for the UK economy as a whole.

Frustration is a rarely used legal doctrine which, if it had been held to apply, would have resulted in the lease coming to an end and the EMA being able to walk away from its liabilities. In response to the EMA's contention that Brexit would frustrate the lease, Canary Wharf had sought a declaration from the court that Brexit would not cause the lease to be frustrated and that the EMA would continue to be bound by its obligations.

The Court has ruled that neither Brexit nor the EMA's shift of headquarters from London to Amsterdam constitutes a "frustrating event" and that the EMA remains liable to perform its obligations. The lease set out terms on which the EMA may assign or sub-let. If they wanted to leave and were not able to assign or sub-let on the terms agreed, then they would retain the premises and continue to be bound by their obligations.

If the decision had gone the other way it might have encouraged other claimants to argue that contracts were frustrated as a result of Brexit, which would have added to the existing commercial uncertainty. The decision will therefore be welcomed. However, it may not be the end of the story because the EMA can appeal up until 29 March 2019. As the lease term runs until 2039 and there is around €400 million at stake, it would not be entirely surprising if it chose to do so.