European Medicines Agency loses battle to end UK lease over Brexit

The European Medicines Agency has lost a high court battle to cancel its £500m long-term office lease in London to move to Amsterdam because of Brexit.

It had argued that the lease on its Canary Wharf HQ had been “frustrated” by Britain’s impending departure from the EU, a legal term meaning that owing to an unforeseen event, the basis on which the contract was signed had changed, making it impossible to fulfil.

But landlord Canary Wharf Group took the agency to the court to enforce the contract, which lasts until 2039.

Ruling on the side of the landlord, Mr Justice Smith concluded that the UK’s transition to a non-EU member state did not constitute a “frustrating event”.

“The EMA remains obliged to perform its obligations under the lease,” he said.

City lawyers said the ruling would stop a wave of copycat lease cancellations from banks and other companies forced to move some or all operations to an EU member state because of Brexit.

Some of EMA’s 900 staff are still at Canary Wharf but the agency officially moved to Amsterdam in January.

“The judge has ruled that Brexit does not amount to an event of frustration of the EMA’s lease and this result will be welcome news in the property and legal market, bringing greater certainty as to the impact of Brexit on contracts,” said Ben Hatton, a lawyer for Clifford Chance, which represented Canary Wharf Group.

The EMA said it would take some time to study the implications of the decision. While it respected the high court ruling, it reiterated its initial claim that it had “no choice” but to leave London because of Brexit.

Smith disagreed. He said in his judgment: “This is a case where the legal effects on the EMA of the United Kingdom’s withdrawal from the European Union could have been, but were not, ameliorated by the European Union.

“This failure to do so is relevant to the question of frustration and, in my judgment, renders the frustration of the lease self-induced.”

In his 95-page ruling, the judge said the EMA had signed up to the lease under English law and could not escape its obligations just because it was an agency of the EU.

“It would seem a remarkable development for a contract involving an agency of the European Union to receive different treatment compared to a contract not involving such an agency,” he said.

The EMA said it believed a preliminary reference to the court of justice of the EU was still “the most appropriate way forward”.

Owen Talfan Davies, a partner at European law firm Fieldfisher, said the ruling was “no surprise”.

“Brexit may ultimately be the cause of some tenants being unable to comply with rental obligations under their leases, but it is not going to give rise to lawful grounds to avoid those obligations,” he said.

The judge confirmed that the EMA could sublet or assign the premises at 30 Churchill Place subject to the landlord’s consent.