Just like death and taxes, there appears to be no escape for the casualties of Brexit. The latest victim is the European Medicines Agency.
Let’s go back to 2014.
We were all dancing to Happy by Pharrell Williams, shivering under the effects of the ice bucket challenge and watching Team Scotland win 53 medals – and a fourth place in the medal table – at the Commonwealth Games hosted in Glasgow.
In less well-known good news, the European Medicines Agency signed a 25-year lease for its new headquarters in London.
Fast forward to 2016 and the referendum.
The EU picture
The EMA is of course an EU agency and didn’t want headquarters in London if the UK wasn’t going to stay in the union. Even worse, the EU had ordered the EMA to establish its headquarters in the Netherlands: so it couldn’t continue to be based in the UK’s largest city.
In an effort to get out of its lease, the organisation wrote to its landlords to say should Brexit come to pass, it would treat the lease contract as frustrated.
Bit of a heads up on frustration: it’s not just a board game you may have played as a kid.
Frustration is a legal concept. Very rarely, after a contract has been entered into, something may happen, or there may be changes of circumstances so catastrophic or fundamental in nature, that they bring a contract to an end prematurely. That’s frustration.
It’s not specific to commercial leases either. Frustration, though rare, may arise in any contract from building contracts to missives of sale.
The outcome
EMA was saying Brexit would be such a frustrating event – specifically that the UK would leave without a deal and would no longer be part of the EU – and was something that was not even a consideration when it took on the lease in 2014.
The common purpose of the contract (it said) was to provide the EMA with a headquarters for the next 25 years. On that basis, the lease was frustrated because it was no longer any use to them for that function.
Further, because of the EU regulation which ordered it to have its HQ in Amsterdam, the organisation argued it wasn’t legal to have an HQ in London either.
The landlords were very unhappy with that suggestion.
They asked the court to confirm the EMA couldn’t frustrate the contract if Brexit comes to pass. The court obligingly agreed.
The judge agreed Brexit was a seismic event, but didn’t think it was a frustrating one. Brexit wouldn’t prevent EMA continuing with the lease in the UK.
Even if he was wrong on that, he considered the frustration had been effectively self-induced because the EU (of which EMA is an agency) had chosen to order the EMA be located to the Netherlands.
All-in-all a frustrating day in court for EMA.
EMA is not prepared to leave it there and has appealed this decision and that could be significant: if Brexit can amount to frustration, there may potentially be hundreds of contracts which parties can pull out of early without financial consequence.
So watch this space for a frustrating update…
About the author: Inverness-based senior associate Karen Cameron is an experienced commercial litigator and solicitor advocate who specialises in property and building disputes.
Inverness-based senior associate Karen Cameron is an experienced commercial
litigator and solicitor advocate who specialises in property and building disputes.
