‘Frustration’ continues as European Medicines Agency granted permission to appeal
With economic instability at the top of the agenda, there are commercial tenants are looking to escape their leases, using the pressures of Brexit as a reason for termination. The European Medicines Agency (EMA) is one of them.
At the initial hearing, the EMA failed to convince the High Court that a Brexit ‘frustration’ argument should be invoked to allow their 25-year lease at Canary Wharf to be broken. However, the EMA chose to appeal this decision and the Court of Appeal will hear their case.
Julian Joseph, our real estate partner, had this to say:
“The doctrine of frustration is difficult to invoke, and the EMA’s attempt to use this as a reason to break its £500m lease early was certainly bold. Although originally rejected, the news that the organisation has been granted permission to appeal means the battle is to continue.
“The 25-year lease is unusually long, but the Judge ruled that even with the company’s move to the Netherlands approaching, there was not enough evidence to terminate the lease using the frustration route. Every aspect of the frustration claim was explored, creating a 95-page long ruling.
“Disposal provisions, were the EMA to move to Amsterdam, were agreed upon by the parties at the creation of the contract. These comprised the options permitting the EMA to assign the lease or to sublet the premises, and if that wasn’t possible, they would have to retain the premises and pay the rent. The judge was clear that this agreement must be followed.
“To avoid these issues, it is vital for organisations to consider whether the terms and the durations of leases will be suitable for them in the future as well as now, including in difficult trading conditions.
“If EMA were to have succeeded in invoking the Brexit ‘frustration’ argument to terminate their lease, many other companies would have attempted the same. For now, this has been avoided, but if the appeal is successful, it could cause huge waves in an already volatile property market.”