High Courts finds European Medicines Agency lease not frustrated by Brexit

The High Court has rejected an argument that the European Medicines Agency’s (EMA’s) lease of premises at Canary Wharf will be frustrated as a result of the UK’s withdrawal from the EU: Canary Wharf (BP4) T1 Ltd and others v European Medicines Agency [2019] EWHC 335 (Ch).

The EMA argued that, as a result of Brexit, and as a matter of EU law, it would lack capacity to make use of the premises or perform its obligations under the lease, and therefore the lease was frustrated under English law. The judge rejected the EMA’s case that it would lack such capacity under EU law, and in any event found that an intervening lack of capacity under foreign law, after the contract had lawfully been entered into by the relevant foreign party, would not be relevant to questions of frustration under English law.

Overall, the decision illustrates the uphill struggle that is likely to face a party seeking to establish that its contracts are frustrated as a result of Brexit. The EMA is in a fairly unique position, as a European agency with good reasons to be located in an EU member state – even if the judge rejected its case about a broader lack of capacity to make use of premises located elsewhere – and it could not succeed in establishing its case on frustration. In principle, however, the decision leaves open the possibility of establishing frustration where a party is able to show that, as a result of Brexit, it will be deprived of all or substantially all of the benefit of a contract, or that it will simply not get what it bargained for, rather than performance merely becoming more onerous or inconvenient.

The EMA is reported to be studying its options for appeal, so this may not be the last word on the issue.

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Court of Appeal decision illustrates high hurdle for establishing contract has been frustrated

A recent Court of Appeal decision acts as a reminder that the court will not lightly conclude that a contract has been frustrated, particularly where (as here) the court takes the view that the alleged frustrating event was foreseen by the parties and was caused, in part, by the actions of the party seeking to rely on the doctrine. It also shows that a delay in invoking the doctrine of frustration, while not determinative, will not be helpful: Armchair Answercall Limited v People in Mind Limited [2016] EWCA Civ 1039.

Under the common law doctrine of frustration, a contract is brought to an end automatically where something happens which makes performance impossible or which changes the nature of the outstanding contractual rights and obligations so significantly that it would be unjust to hold the parties to the contract. Cases considering the doctrine arise relatively infrequently, which makes the present decision all the more interesting.

There has been much discussion of the doctrine of frustration in recent months, in the context of whether a party might successfully argue that its contract has been frustrated by Brexit-related events. That question is considered in our recent publication English law contracts post-Brexit: What changes should commercial parties expect?, which is part of our series of contract disputes practical guides.  

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