Brexit and the EMA: the end of the story?

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Brexit and the EMA: the end of the story?

Most commercial landlords will have been monitoring the European Medical Agency’s (EMA) well-publicised attempt to claim Brexit had frustrated its lease. While ongoing, the litigation created a worrying environment for commercial property owners and a real sense of uncertainty on the long-term effects of Brexit.

The initial trial concluded in February with Mr Justice Marcus Smith’s judgement that Brexit did not constitute a frustrating event for the purposes of the EMA’s lease. The EMA had tried to argue that the UK’s 2016 decision to leave the European Union and the EMA’s resultant and consequent decision to leave the UK, meant that its circa £500 million 25 year lease was inoperable. The EMA relied on the doctrine of frustration to seek a declaration to the effect that it should be released from that lease.

In essence, frustration allows parties to a contract (such as a lease) to end that contract in light of an unforeseen event that takes places after the contract has begun. The effect of the frustrating event must be to make the contract impossible to carry out or properly perform and the frustrating event itself must be fundamental to the terms of the contract.

Rarely is a frustration claim successful, but although most lawyers would have rated the EMA’s chances of success as slim, there was still an element of doubt. That doubt was capitalised by the EMA’s appeal of the High Court’s decision earlier this year.

In early July, however, the EMA withdrew its appeal against the High Court’s decision. As a result, the lease remains operable.

But is that the end of the story? Possibly not.

The EMA’s appeal provoked discussions between the EMA and its landlord, the outcome of which was an agreement that the EMA could sub-let its UK office. The identity of the new incoming tenant (WeWork) was also agreed. It appears to have been this agreement, rather than an assessment of the legal merits of its claim, that prompted the EMA to withdraw its appeal and there is nothing to suggest that a further, cash-strapped company would not try to adopt a similar argument in the future, particularly in the event of a no-deal Brexit.

For the moment, however, commercial landlords can breathe a sigh of relief … at least until 31 October 2019!

For more information, please get in touch with our litigation team.

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