The short answer is NO – at least, not yet.
This very question has just been answered by High Court judge, Mr Justice Smith, in the recent case of Canary Wharf (BP4) T1 Ltd & Ors v European Medicines Agency. This case concerns the ongoing battle between the Canary Wharf Group (“CWG”), the landlord, and the European Medicines Agency (“EMA”), the tenant, as to whether the EMA can terminate its existing 25-year lease because of Brexit.
Following the Brexit referendum, the EMA decided to relocate its headquarters to Amsterdam. The EMA is an EU agency responsible for protecting and promoting public and animal health through its evaluation and supervision of medicines for human and veterinary use. The EMA is required by EU law to be based in an EU member state in order to receive the privileges and immunities granted by EU law, which, of course, it would not have access to if it stays in the UK post-Brexit. Consequently, the EMA is seeking to get out of its lease by arguing that Brexit was an unforeseen event which would undermine the lease’s purpose and that it would be unlawful for the EMA to continue the lease thereby ‘frustrating’ the agreement, making it terminable by law.
An agreement can be ‘frustrated’ if an event occurs which renders a contract physically or commercially impossible to fulfil or where a significant supervening event changes the nature of a contract to make it unjust to hold the parties to what they agreed. This may include, for example, a change of law which makes the agreement illegal to uphold. In practice, arguing that an unforeseen event is sufficient to defeat the purpose of an agreement can be extremely difficult.
CWG initiated the case to seek a declaration from the High Court that the UK's withdrawal from the EU and/or the relocation of the EMA did not cause the lease between the parties to be frustrated so that the EMA would continue to be bound by all of its covenants and obligations in the lease – and that is exactly what CWG got (they should have asked for world peace while they were at it!).
Having considered the case on the basis of a “no deal” situation, Mr Justice Smith concluded that the lease provided for the circumstances by which the EMA could get out of its lease (e.g. by sub-letting/assigning the lease) and the reasons why EMA had to re-locate were not relevant. Furthermore, Mr Justice Smith further ruled that the EMA clearly had the legal capacity to maintain or wind down the property in the UK, notwithstanding that the UK ceased to be a member state of the EU.
This decision was well received by commercial landlords. No doubt, if the decision went the other way, it could have posed a substantial threat to the UK’s property industry as many European companies would have the ability to terminate existing leases. Furthermore, it could have, potentially, opened the floodgates to challenge other agreements due to Brexit.
Please note, the EMA has since been granted the right to appeal the High Court’s ruling, which will be heard at the Court of Appeal in due course.
To read the full 95 page judgment, please click here.