The High Court has just handed down its eagerly awaited decision in Canary Wharf Limited v. European Medicines Agency [2019] EWHC 335 (Ch) confirming that Brexit will not frustrate (i.e. bring to a premature end) a lease.
Background
In 2017 the European Medicines Agency (EMA) wrote to its landlords, Canary Wharf Group, stating that having considered the position under English law, if Brexit occurred, it would consider that to be an event that would frustrate its lease. Canary Wharf Group subsequently brought proceedings seeking a declaration that Brexit would not amount to a frustration of the lease. The stakes were high as the rent payable under the lease is in the region of £13 million and the term does not expire until 2039.
Analysis in a nutshell
In a detailed ruling the High Court concluded that Brexit is not a frustrating event and the lease will continue even if the United Kingdom leaves the European Union without any deal. The judge also dismissed an argument that, if the lease was not frustrated, there was a self-standing rule of EU law that would absolve the EMA of its obligations as tenant.
Wider impact
Had the EMA succeeded, the floodgates would have likely opened to similar claims from other tenants and contracting parties. The ruling in favour of Canary Wharf Group will therefore come as a significant relief to landlords and the wider market.
Appeal?
The sums at stake mean EMA will likely seek to appeal. But the fact that this decision follows a long line of cases where tenants have unsuccessfully argued that their leases are frustrated and that the High Court has given such a thorough judgment suggest that the prospects of a successful appeal are not currently high.
So it seems that, for the time being, while Brexit may be frustrating, it is not enough to frustrate a lease.
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