As previously reported here, at the end of March 2019, the European Medicines Agency (EMA) officially relocated from London to Amsterdam.
EMA first moved to a temporary address at the Spark building in the north of Amsterdam while waiting for the completion of its purpose built new premises in the Zuidas business district. The permanent EMA building, which has become a prestigious project, is an 80-metre high building with 19 floors. It will provide workspace for approximately 900 employees and is expected to welcome around 36,000 visitors each year. It should be ready for occupation by the end of this year.
Since the move to the Netherlands was announced in November 2017, the number of EMA’s staff members has decreased. However, according to recent public statements by EMA delegates, this loss is not affecting the core services related to the authorisation and supervision of medicines.
The relocation to Amsterdam is a consequence of UK’s planned withdrawal from the European Union . In June 2018, EMA and the Netherlands signed the Seat Agreement, the content of which is similar to agreements with other EU agencies established such as Europol, that ensures that EMA can function properly and independently in the Netherlands. After Brexit, the UK will become a ‘third country’. This means that the UK will no longer be able to engage as (co)-rapporteur for new European marketing authorisation applications through the centralised procedure, unless the Brexit negotiations result in another arrangement. Around 60% of the current staff members have already been relocated to the Netherlands. The majority of staff who are teleworking from London are expected to move to Amsterdam after the summer.
Court battle over former premises in London
EMA’s relocation to Amsterdam has left it with significant ongoing liabilities under the lease of its former London headquarters. EMA entered into its 25 year Canary Wharf lease in 2014, at an annual rent of £13 million, with five yearly rent reviews and, crucially, no tenant’s break clause (but with the ability to assign and underlet). Following the invocation of Article 50 in 2017, the EU ordered EMA to relocate its headquarters to Amsterdam (Regulation (EU) 2018/1718), and EMA notified its landlord that it would be treating the occurrence of Brexit as an event which would frustrate its lease, thereby bringing its ongoing tenant liabilities to an end. Under UK law, a contract can be terminated on the grounds of frustration if an unforeseen, supervening event occurs (through no fault of either party) which makes it either impossible or illegal to fulfil its terms or renders performance of the contract radically different to what was originally agreed.
The matter was heard by the High Court earlier this year. EMA’s principal argument (though there were others) was that the lease would be frustrated by reason of supervening illegality – the 2018 Regulation had made it legally impossible for EMA to have its headquarters in the UK after Brexit, and it would be ultra vires for it to continue to pay rent. EMA contested that it could not have predicted that the UK would leave the EU when it agreed to enter the lease. In delivering its lengthy judgement, the Court had regard to EU regulations relating to EMA’s formation and operation, and the likely impact of the European Union (Withdrawal) Act 2018 on EMA post-Brexit. Whilst acknowledging that many of EMA’s protections and immunities under relevant EU Regulations and its recourse to the ECJ would be significantly degraded if it remained in London after Brexit, the Court determined that it did not affect EMA’s capacity to continue performing its lease obligations, not least because the requirement to relocate had been subsequently imposed by the EU. Neither the UK’s transition from member state to “third country” nor EMA’s headquarters move constituted an event of frustration in this case.
The judgement has been a huge relief to landlords, who feared that a successful frustration argument could lead to a landslide of claims from European tenants wishing to relocate. However, the matter is far from over, and an appeal was lodged by EMA which is likely to be heard later this year. Failing a successful appeal, EMA will remain liable for payment of rents and compliance with tenant’s covenants on the London premises (as well as those for its new premises) from its finite revenue, unless and until it can dispose of the property.
For further information contact Martine van de Laar or Renate Bik of our Amsterdam office, or Ben Farnell or Jo Shakespeare of our London office.