Yesterday saw the publication of the judgement property professionals have been waiting for (1) Canary Wharf (BP4) T1 Ltd (2) Canary Wharf (BP4) T2 Ltd (3) Canary Wharf Management Ltd v European Medicines Agency.  The court ruled in favour of Canary Wharf and EMA remains bound by the terms of its lease.

EMA asserted that the UK's withdrawal from European Union constituted a ‘frustrating event’. A frustrating event is something which, through no fault of the parties, renders the obligations in a contract radically different to what was promised at the time it was entered into i.e. a drastic change to the common commercial purpose. Frustration can also make a contract legally or commercial impossible for the complaining party to perform.

The court held that Brexit (and EMA's decision to relocate to Amsterdam as a result) did not lead to a 'supervening illegality' (namely the capacity of EMA as a European Union institution to remain bound by the contract), nor was there frustration of common commercial purpose. Both parties were represented in the lease negotiations, both parties bargained hard and the fact that the EMA in hindsight had agreed a rent which was too high and failed to negotiate a break clause is not something which could justify it being released from its obligations under the lease.

Practically, EMA had other options to vacating and claiming frustration. It had been trying to assign or sublet the lease, to mitigate its losses, although the highly-bespoke fit out of the premises means it is not an easy space to dispose of. It could also have tried to negotiate a surrender of the lease with the landlord. Negotiation now seems unlikely, particularly as EMA may be considering an appeal.

A ruling in favour of EMA could have prompted a surge in similar claims, which could have had significant adverse consequences on the UK's property market. This judgement, together with this morning's breaking news that Theresa 'may' have brokered a more palatable deal, makes you wonder if there is now a glimmer of hope in the Brexit gloom…?