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Brexit: a cause of frustration for the EMA?

Friday, 20 September 2019
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Wednesday, 10 October 2018

The European Medicines Agency is set to relocate to Amsterdam after Brexit and, as a result, will have no need of their current premises in Canary Wharf. Problematically for them, their lease doesn't expire until 2039 and contains no break right that they, as tenant, could exercise. They have been looking to assign their lease but, pending any such assignment, their landlord, Canary Warf Group, has sought a declaration from Court that Brexit will not be sufficient grounds for the EMA to claim that their lease has been frustrated. 

Frustration is a legal principle that can allow both parties to a contract to be released from their obligations under it. It is usually only available if there is an event that renders the contract physically or commercially impossible to fulfil (not just more inconvenient or expensive) and, in the context of leases, is not usually a basis for a tenant being able to vacate, unless the lease terms expressly say so.

The EMA claims that, as an agency of the EU, its headquarters must be within an EU Member State and that Brexit was not an event that was foreseeable by the parties at the time of negotiating the lease.  Canary Wharf Group argue that Brexit was foreseeable at the time of entry into the lease; Article 50 was already in place and there had already been promise of a referendum in David Cameron's pre-election campaign.

The hearing is scheduled for January 2019, with direction that the judgement should be delivered prior to 29 March 2019. The UK property industry is contemplating whether this is likely to have wider implications for landlords and tenants: our view is that the effects are most likely to be limited due to the very fact-specific nature of this case. We will be following the case with interest and will publish further updates as soon as we hear of any developments. 

For our full article on this topic please click here.

Contact

Andrew Ross
Head of Property Disputes 
Email Andrew
+44 (0)20 7295 3272

Sarah Faull
Real Estate  
Email Sarah
+44 (0)20 7295 3175

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