Update 5 July 2019 EMA have dropped their appeal following settlement.
In [2019] EWHC 335 (Ch) Canary Wharf Limited v European Medicines Agency Smith J earlier this week held that Brexit is a seismic, but not a frustrating event under English contract law (at 241). The Agency’s lease would not be discharged by frustration upon Brexit and neither does EMA’s move to Amsterdam constitute a frustrating event. The EMA is to honour its lease obligations.
At 186 brief mention is made of the usefulness of Article 12 Rome I (which lists the isused covered by the lex contractus): ‘Article 12 of the Rome I Regulation provides that the law applicable to a contract by virtue of the Regulation governs – among other things – the “performance” of the contract and “the various ways of extinguishing obligations”. Both are subject therefore to English law (a choice of law clause in the contract, and the premises being in England) whichever way one classifies the theory of frustration.
At 187 the discussion is however extended to the issue of supervening illegality under a foreign law that is not the applicable law. The capacity of a corporation to exercise specific rights is determined – at least in the first instance – by the constitution of the corporation, which is itself governed by the law of the place of incorporation: lex loci corporationis. This itself is discussed at 130 ff, leading to interesting views on the status of EU law in the UK post Brexit and, one infers, a finding that ‘EU law’ is the lex loci corporationis. EMA’s argument then is that under EU law it would be acting ultra vires to continue the lease outside the EU’s territory.
At 188: ‘The question, then, is whether – assuming that the EMA is right as regards the points it makes on vires – these are relevant for the purpose of frustration by way of supervening illegality. The question is whether the English law of frustration, which has regard to questions of legality where the performance of the contract would be unlawful according to the law of the place of performance, should also have regard to the law of incorporation, at least where this affects the capacity of a party to continue to perform obligations under a transaction lawfully entered into by it.’ Smith J after discussing precedent, at 189 holds that it cannot.
Geert.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 3.
gavc law - geert van calster 