Hard Brexit? People's Vote? Judge Mulls EU Agency's London Lease

(Bloomberg) -- If politicians can’t figure out what will happen with Brexit, then even a London judge is bound to struggle.

Judge Marcus Smith is considering whether a European Union agency can use the U.K.’s withdrawal from the European Union to get out of its 500 million-pound ($660 million) rent bill in London. His problem is that the U.K. hasn’t left yet.

"What happens if one has some kind of different result?" the judge asked the assembled lawyers representing property developer Canary Wharf and the European Medicines Agency at a pre-trial hearing Wednesday. "Suppose there’s a second referendum, what is the court to do in light of that uncertainty?"

The EMA, which is moving its headquarters to Amsterdam, argued that the very act of Brexit would justify it breaking its 25-year lease, with 21 years left to run. The agency pays 13 million pounds per year to occupy more than 10 floors in the U.K. capital’s financial district.

"The agency threw out a grenade" when it declared it wanted to treat Brexit as the reason to break the lease, said Joanne Wicks, a lawyer for Canary Wharf. The property developer needs commercial certainty on the future of the rent, she said.

At a hearing in July, Wicks said that a ruling allowing the EMA to use Brexit to justify breaking its lease would have consequences for the property market throughout the country.

The question of who should bear the cost of relocating the EMA and the European Banking Authority, which also operates from Canary Wharf, forms part of the negotiations on the U.K.’s withdrawal, Wicks said.

The case is scheduled to be tried in January, at least six weeks before the U.K.’s official departure on March 29. Even after the trial "events may move with remarkable pace next year," the judge said.

"Who bears the risk of something happening that we all agree was something the parties didn’t contemplate?" said Jonathan Seitler, a lawyer for the EMA.

As for Brexit, Seitler said, March 29 "is the best prediction anyone can give."

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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