The High Court vs Brussels
Brexit has often been synonymous with the word ‘frustration’. However, frustration also has relevance in the legal sense. Withdrawal from the EU has raised questions for many EU related bodies regarding contracts within the UK.
An ongoing example is the European Medicines Agency (EMA) v Canary Wharf (2019). In 2014, the EMA signed a contract renting offices in the skyscraper until 2039. This deal is worth £500m to the defendant party in rent. Britain’s withdrawal from the EU however has led to the EMA claiming that the contract has been ‘frustrated’ and thus should now be void. This follows a decision in Brussels to move the EMA to Amsterdam following Brexit. The British high court must now rule whether Brexit does justify the contract to be voided.
Frustration of contracts occurs only very rarely, and for sound reason. Allowing a disadvantaged party an early exit from a contract sets a precedent and would allow further European contracts to be cancelled prematurely. Frustration of contract can only occur in very limited circumstances. For it to become effective the circumstances must change such to make the original scenario commercially or physically impossible to continue. Further, the change in circumstance concerning a contract must have been unforeseeable.
Does Brexit constitute grounds for contract frustration? I believe not. Article 50 has been enshrined in British law since 2009. Further, the 2010 Conservative manifesto agreed to hold a referendum on Europe. As such, the EMA merely thought it unlikely that the UK would vote to leave, not categorically impossible and unforeseeable. Additionally, the dubious nature of future regulatory alignments clouds any clarity over how feasible it would be for the EMA to continue to operate from London. Posturing over the need for an EU agency to operate from an EU country is simply symbolic and not necessarily required.
The High Court absolutely should refuse the EMA its claim to cancel its contract early and as such force the agency to pay the British firm full dues. This also bodes well for general commercial real estate inter alia in the City. While EU agencies may move abroad following the 29th of March, they will still fortunately be forced to pay all unpaid duties to British creditors. In this instance, as in many more to come, British national law will reign supreme over the European jurisdictions.