Canary Wharf (BP4) T1 Ltd & Ors v European Medicines Agency

This first-instance decision applies the English doctrine of frustration to a 25-year commercial lease taken by the European Medicines Agency ("EMA") and held that the United Kingdom’s withdrawal from the European Union ("Brexit") did not frustrate the Lease. The court analysed (i) the law of frustration, including frustration by supervening illegality and frustration of common purpose, (ii) the EMA’s institutional capacity under EU law (Article 71 of Regulation (EC) No 726/2004 and related provisions) and (iii) the impact of the European Union (Withdrawal) Act 2018 and the Withdrawal Agreement scenarios.

Key legal conclusions: (1) on the facts and law the EMA retained the legal capacity to hold, dispose of and deal with immovable property and to meet obligations under the Lease; (2) loss or modification of Protocol 7 protections and changes to jurisdiction for non-contractual claims (Article 72) are materially adverse but do not render continued performance impossible; (3) even if EU law produced a limit on capacity, English law would not treat that foreign incapacity as an automatic ground of frustration of an English-law contract; (4) there was no common purpose, objectively assessed at the contract date, that was frustrated; and (5) the EMA’s alternative contention that EU law required a bespoke remedy displacing the English doctrine of frustration was rejected.

Background and relief sought. The EMA held a 25-year underlease of part of 25-30 Churchill Place, Canary Wharf (the "Premises"). Canary Wharf ("CW") sought a declaration that the United Kingdom’s withdrawal from the EU and/or the EMA’s relocation would not frustrate the Lease and that the EMA would remain bound to its covenants, including payment of rent. The EMA contended the Lease would be frustrated for five "Frustrating Grounds" (loss of Protocol 7 protections; incapacity to use the Premises; inability to make lawful use or assign/sub-let; future performance ultra vires; and impairment from double rent), and advanced a separate EU-law based "Self-Standing Point" that EU law would excuse continued performance even if English law would not.

Procedural posture and issues tried. Mann J ordered an expedited trial. The court proceeded to decide issues on the assumption of two scenarios: Scenario 1 (no Withdrawal Agreement; exit day effective) and Scenario 3 (Withdrawal Agreement ratified and transitional arrangements). The principal legal issues were: (i) the applicable conflict-of-law and preliminary-reference questions; (ii) whether, under EU law or retained UK law, the EMA would lack capacity to perform the Lease after withdrawal; (iii) whether supervening illegality or frustration of common purpose had occurred; and (iv) whether EU law required the court to fashion a remedy separate from the English doctrine of frustration.

Court’s reasoning—capacity and applicable law. The court held the capacity question is characterised by reference to the law of incorporation / constitution of the corporate entity and to the law governing the relevant transaction. It analysed Article 71 of the 2004 Regulation, Article 335 TFEU and related case-law and concluded the EMA had legal personality and a capacity to acquire, dispose of and deal with immovable property (including outside the EU) and to be a party to proceedings. The court held that retained EU law under the European Union (Withdrawal) Act 2018 would not produce the sort of new EU-law rule relied on by the EMA in Scenario 1 and that the Withdrawal Agreement (Scenario 3) materially ameliorated the EMA’s concerns during the transition.

Court’s reasoning—frustration and remedies. On supervening illegality the court held that (i) English frustration law requires the supervening event to make performance "radically different", (ii) capacity arguments grounded in foreign or EU law do not of themselves operate to frustrate an English-law contract where English law governs performance, and (iii) in any event the EMA retained capacity so supervening illegality did not arise. On frustration of common purpose the court applied a multi‑factorial inquiry (terms of the contract, matrix, parties’ expectations at contracting, foreseeability, and relative justice). The Lease specifically contemplated assignment or sub-letting and contained detailed alienation provisions to protect CW; the court found no objectively shared common purpose (beyond the contractual terms) that was frustrated. The EMA’s Self-Standing Point that EU law obliged an English court to relieve the EMA of future performance was rejected: no bespoke EU remedy replacing frustration was identified.

Result. The court concluded the Lease was not frustrated and the EMA remains obliged to perform its covenants under the Lease.

The claim for a declaration that the Lease would not be frustrated succeeds. The court held the Lease is not frustrated by the United Kingdom’s withdrawal from the European Union (Scenario 1) and would not be frustrated under Scenario 3; the EMA retains capacity to perform or to deal with the Premises, supervening illegality (on the EMA’s case) does not give rise to frustration under English law, there was no frustrated common purpose, and the EMA’s argument for a separate EU-law remedy displacing English frustration was rejected.