Update: European Medicines Agency must fulfil £500m lease obligations despite Brexit

In an eagerly anticipated decision, the High Court has ruled that the European Medicines Agency (EMA) must continue to fulfil its Canary Wharf lease obligations, rejecting the argument of the EU Regulator that the £500m lease has been frustrated by Brexit.

What is frustration?

Frustration is a legal doctrine which applies where an event significantly changes the nature of the contract or where the central obligation of the contract can no longer be performed. The EMA sought to argue that the UK’s withdrawal from the EU and the consequent necessity of its relocation to Amsterdam operated to frustrate its commercial lease.

The High Court however disagreed, much to the relief of other landlords, who may otherwise have been faced with a deluge of similar claims from companies seeking to re-locate after Brexit in a difficult economic climate.

What does this mean?

Noting that the UK’s withdrawal from the EU is a seismic event which neither party could have foreseen, the judge nevertheless found that there was nothing to prevent the EMA paying rent to a landlord in a third country. Furthermore the judge ruled that the EMA had quite consciously entered into the lease without a break clause, so it had in effect taken on board any risk of change over the 25 year term.

Unsurprisingly given the value of the lease, the EMA has sought and been granted permission to appeal the decision to the Court of Appeal. It remains to be seen whether that Court will reach a different conclusion and find that the high threshold to establish frustration has in fact been met.