European Medicines Agency settles dispute with Canary Wharf Group over Brexit frustration challenge

In February this year, the English High Court dismissed the European Medicines Agency (EMA) claim that if and when Brexit occurred, it would be an event that would frustrate the 25 year lease it had taken out with the Canary Wharf Group (CWG) for its London Headquarters.

The court held that Brexit would not 'frustrate' the contract and the EMA was unable to escape the lease. The decision was welcomed by many landlords who feared that the case risked opening the floodgates to companies seeking to abandon multi-million-pound property contracts because of Brexit if the EMA was successful. Please see our article for a more detailed look at the first instance decision.

The EMA appealed and the appeal was scheduled to be heard by the Court of Appeal in March 2020. The appeal has now been withdrawn following a settlement reached between the parties earlier this month.

The settlement – a commercial solution

Following an agreement to sublet all 284,704 square-foot of the EMA's London premises to US office space provider WeWork, for the full term of the original lease, the EMA simultaneously agreed with the CWG to withdraw its appeal against the decision of the High Court. Importantly, this means that the original High Court decision will stand and remains good law but the much anticipated Court of Appeal guidance on this highly topical issue will not be forthcoming.

Following the settlement, we still do not have a clear answer on whether Brexit could constitute a frustrating event in any contract given that the EMA decision was specific to its facts. As 31 October 2019, also known as 'Brexit day', fast approaches and with the risk of a 'no deal' scenario still looming, we will continue to see businesses attempting to manage their risk and exposure by relocating their offices and reducing their workforces outside of the UK, especially considering the significant expense of property leases in London. However, the approach taken by the EMA to sub-let the remainder of the term of the lease to WeWork shows that a commercial resolution can be found to what initially appeared to be an intractable legal issue.

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