Brexit at Center of EU Agency's Bid to Break Canary Wharf Lease
The European Medicines Agency’s bid to use Brexit to get out of a 500 million-pound ($660 million) rent bill has triggered a court fight that could have wide ramifications for a property market already on edge from the U.K.’s decision to leave the European Union.
The agency, which will move its 900 jobs to Amsterdam, wants to break its lease in the U.K. capital’s Canary Wharf area, saying that it couldn’t have anticipated that Britain would vote to leave the European Union. Property owner Canary Wharf T1 Ltd. filed a lawsuit to enforce the lease because the issue is creating uncertainty for its shareholders and lenders.
Joanne Wicks, a lawyer for Canary Wharf, said at a hearing Thursday that a decision allowing the EMA to use Brexit to justify breaking its 25-year lease would have consequences for the property market throughout the country. She focused on U.K. banks’ ability to work outside of the country after the exit.
“What would be there to stop a city firm losing its passporting rights saying, my lease has been frustrated by Brexit?,” she said, referring to a legal term that indicates the initial purpose of a contract is no longer valid. “What would be there be to stop a manufacturing company using logistics systems across national borders saying, my lease has been frustrated by Brexit?”
Brexit is causing many banks and other financial institutions to question how much space they need in London while others have shrunk the offices they lease after firing workers. Barclays Plc subleased space in Canary Wharf to the U.K. government and Credit Suisse Group AG is vacating an office building owned by HNA Group Co. in the same area.
In an October tweet about the firm’s new London headquarters, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said the bank was still “expecting/hoping to fill it up but so much outside our control #Brexit.”
The EMA is among EU agencies forced to adjust after the June 2016 referendum backed leaving the bloc. While the move has raised concerns about disruptions at the agency as it begins evaluating more complex products, such as therapies that correct gene defects, the landlord says it needs certainty over the lease that was signed in 2014. Canary Wharf is 50 percent owned by Qatar Investment Authority and 50 percent owned by Brookfield Property Partners.
“We have been working with the EMA for nine months to see if they can resolve the issue,” a spokesperson for the landlord said. “We are seeking this declaration so that the EMA is clear that its lease obligations will not be affected by Brexit.”
The EMA said in court documents that it had written to its landlord to say that “as the EMA is inextricably intertwined with the EU institutions and the member states that host them, Brexit would be treated as an event of frustration of the lease.”
The EMA lawyers said that Brexit wasn’t foreseeable at the time of the lease agreement.
Canary Wharf T1 estimates the bill at around 500 million pounds and says that it is important that there is a ruling before the U.K. is scheduled to leave the EU in March 2019.
The EMA declined to comment while the case was pending.
The case is Canary Wharf (BP4) T1 Limited and others v European Medicines Agency, High Court of Justice, Business and Property Courts, Case No. PT-2018-000505.
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