European Union: Brexit: A Source Of Frustration?

Last Updated: 25 January 2019
Article by Keith Conway

Most Read Contributor in UK, March 2019

Canary Wharf (BP4) T1 Limited and others v European Medicines Agency is the first major property dispute with Brexit at its heart and is currently being determined by the High Court. Depending on its outcome, the case may result in a flurry of Brexit-related litigation in the months to come. These are likely to involve much wider sectors such as banking, finance and trade and not be confined to the property market. The ramifications for the wider economy would be significant.

Background and facts

In 2011, the European Medicines Agency (the EMA) entered into an agreement for lease for a 25 year term in respect of Churchill Place – a newly-constructed 10 floor building in Canary Wharf. The lease was entered into in 2014, however it crucially did not contain a break right allowing for early termination.

Following the result of the 2017 referendum on the United Kingdom's (the UK's) membership of the European Union (the EU), the EMA decided to relocate to Amsterdam. In June 2018, the EMA's landlord, Canary Wharf Group, issued a claim in the High Court for a declaration that Brexit (currently scheduled for 29 March 2019) and the relocation of the EMA will not frustrate the Lease – so that the EMA remains liable to meet all of its financial obligations under the lease for the duration of the term.

Legal principle of Frustration

The Courts can order that a contract (in this case a lease) is frustrated when an unforeseeable event (at the time of entering into the contract) happens after completion which makes it impossible (a) to fulfil the contract or (b) for the party to perform its obligations, as they have been radically changed. The principle is extremely difficult to argue in the courts and rare in its application.

Claim

EMA's claim

The EMA is arguing that Brexit will amount to an event of frustration in relation to the lease. As an agency of the EU, the EMA's headquarters must be within an EU Member State. The EMA is therefore claiming that Brexit will amount to an event which would render the EMA's future performance of the lease impossible.

Canary Wharf Group's claim

The Canary Wharf Group brought the case in an attempt to pre-empt the EMA's claim for frustration. They are claiming that Brexit was reasonably foreseeable as:

  1. The legal and political process for leaving the EU is enshrined in EU law under Article 50 and has therefore always been a possibility; and
  2. The Conservative Party manifesto for the 2010 general election (1 year before the parties entered into the agreement for lease) contained a pledge to hold a referendum on the UK's membership of the EU.

What next?

The key question for the High Court is whether Brexit constitutes a frustrating event for the purpose of the lease. To help determine this, it is necessary to know what the parties may have been expecting when entering into the agreement for lease. Mr Justice Marcus Smith has therefore allowed each party to call an expert in modern British history and political science to give expert evidence on this issue.

The Canary Wharf Group will be aiming for a ruling which avoids the EMA escaping its liabilities for the remainder of the term of the lease; however it is quite likely that the losing party will seek an expedited appeal to the Court of Appeal and possibly a leapfrog to the Supreme Court. The judgment of the High Court is expected to be published promptly and well before the 29 March 2019 withdrawal date as currently scheduled.

Comment

The case is very significant as it is not just the UK property industry who is following it closely. If the judgment is in favour of the EMA, its ramifications could be widespread and may be applicable to a number of contracts and industries where European markets are at the heart of performance. To take a couple of examples, UK financial institutions who perform EU based obligations, UK exporters delivering to EU markets; even UK courier companies who deliver parcels to the EU may want to use the judgment to terminate or vary their existing contractual obligations.

More generally, unless Brexit is avoided it is likely we can expect a marked increase in certain types of property disputes in 2019, notably:

  1. More break options being exercised by tenants;
  2. More cases where landlords challenge the validity of breaks; and
  3. More attempts by parties to renege on contractual obligations which are no longer attractive in light of Brexit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions