Can Brexit Frustrate a Contract?

This article explains the High Court’s decision in Canary Wharf v European Medicines Agency, which held that Brexit could not frustrate the EMA’s 25‑year lease of its London headquarters.

The EMA, an EU agency, planned to relocate to Amsterdam after the EU decided to move its operations in response to Brexit. It argued that Brexit was a supervening event that discharged the lease. The court disagreed.

For contract law students, the case is a clear illustration of how difficult it is to plead frustration successfully. As interview season approaches, it is also a strong example to raise when asked about a recent case, especially for firms with clients considering how Brexit affects long‑term commercial contracts.

Frustration Recap

Frustration allows a contract to be discharged when an unforeseen event occurs that fundamentally alters the nature of the obligations.

The classic definition comes from National Carriers v Panalpina, where Lord Simon explained that frustration applies only when the event significantly changes the nature of the outstanding obligations from what the parties reasonably contemplated.

Performance does not need to be impossible, but it must be “radically different” from what was agreed. A familiar example is Krell v Henry, where a flat rented solely to view the coronation procession became pointless once the procession was cancelled. The contract’s purpose had disappeared.

This article focuses on the EMA’s argument that Brexit frustrated the “common purpose” of the lease. The EMA also argued supervening illegality, but those points turned heavily on EU law and are less generally relevant.

When assessing frustration of common purpose, the court applied the multi‑factorial approach from The Sea Angel, considering:

• the parties’ expectations and whether the risk was foreseeable or provided for
• the nature of the supervening event
• whether the event made performance “radically different” from the parties’ shared purpose

The Judgment: Frustration of Common Purpose

1. The Parties’ Expectations

The court first considered whether Brexit was foreseeable in 2011 when the lease was signed.

It concluded that Brexit was only a theoretical possibility and not “relevantly foreseeable” at that time. This may change for contracts entered closer to the 2016 referendum, and future cases may explore when Brexit became foreseeable enough to defeat frustration arguments.

The court also rejected the idea that the lease had a shared purpose of providing the EMA with a permanent headquarters for 25 years. The lease allowed assignment and subletting, which showed that relocation was contemplated. The parties never agreed that the EMA must remain in London for the entire term.

2. The Nature of the Supervening Event

The court found that Brexit, even a “hard” version, would not make continued occupation of the premises impossible. Although relocating to Amsterdam was understandable given the EMA’s functions, it was not legally required. Brexit was therefore a materially adverse change, but not one that made performance unlawful or impossible.

3. Was Performance Radically Different?

The key question was whether Brexit made the EMA’s obligations radically different from what the parties had agreed. The court held that it did not. The possibility of relocation was already built into the lease through assignment and subletting clauses, including involuntary departure for reasons beyond the EMA’s control. Because the contract already allocated this risk, Brexit did not meet the “radically different” threshold.

Takeaways

This high‑level summary of a dense 92‑page judgment shows how narrow the doctrine of frustration is. Although the facts were specific, the case signals that Brexit alone will rarely frustrate a contract. Parties may instead rely on other mechanisms, such as force majeure clauses or bespoke Brexit clauses.

The EMA has appealed the decision, and the case will continue to be significant as it progresses through the courts.