Brussels has published its coronavirus vaccine contract with AstraZeneca in the latest gambit in the escalating row between the two over a delivery shortfall.
The company agreed to disclose a redacted version of the August 2020 contract, while contesting the European Commission’s claim that supply commitments within the deal are binding.
The FT looked at what the document, drawn up under Belgian law, tells us about a dispute that has caused chaos in the EU’s already lagging Covid-19 vaccine rollout.
Why was the commission eager to publish the contract?
The EU sees the document as support for its central contention that AstraZeneca needs to do far more to step up vaccine deliveries, including tapping its UK manufacturing facilities. These appear to be producing jabs at a faster rate than the EU operation, where the company has acknowledged it has had production problems.
Brussels’ key contentions rest on the contract’s requirement that AstraZeneca applies its “best reasonable efforts” to deliver the vaccines. The commission also points to provisions suggesting the UK factories were part of the supply chain feeding the EU’s vaccine programme. EU officials argue that AstraZeneca should not be giving priority to the UK just because its contract with Britain was signed three months earlier.
But the legal ground is more uncertain than Brussels’s confident statements suggest, say some lawyers — especially given the unique backdrop of the global health crisis. “The commission sounds more certain than it should — because these are quite unprecedented circumstances,” said one lawyer with expertise in Belgian law.
Does the contract commit AstraZeneca to binding delivery schedules?
The document obliges AstraZeneca only to make “best reasonable efforts” to meet its supply timetables, rather than it being compelled to do so — a distinction flagged this week by Pascal Soriot, the company’s chief executive. But the definition of the term implies the commitment is bigger than might be expected in a standard commercial agreement.
The commission-AstraZeneca contract says the meaning of the term “best reasonable efforts” takes into account “the urgent need for a vaccine to end a global pandemic”. It points out that the health emergency has stoked “serious public health issues, restrictions on personal freedoms and economic impact, across the world”.
But Benjamin Haberkorn, a partner with law firm Eversheds Sutherland in Brussels, has said that in any legal proceedings the commission would have to prove AstraZeneca had failed to meet normal standards of professional diligence. Any court case might be drawn-out, he warned. “Best efforts is not a meaningless concept in Belgian law,” he said. “However it’s going to be very hard for the commission. This is super high stakes.”
Does the contract show the EU is entitled to tap UK production?
The EU firmly believes it does. A clause in the contract entitled “manufacturing sites” encompasses plants located within the EU — which, crucially, it defines for the purposes of the particular clause as including the UK.
This appears to support the EU’s argument that AstraZeneca needs to use UK factories to compensate for shortfalls in expected deliveries to EU customers.
However the matter is not straightforward. A separate clause, which sets out when AstraZeneca is meant to deliver the drugs and in what quantities, says the company should manufacture initial shipments within the EU. But in this case it does not explicitly include the UK, which left the bloc last year.
One EU official insisted Brussels was confident of its position and would be very happy to argue the point before a court.
The EU also disputes AstraZeneca’s claims that it is entitled to prioritise UK orders. The commission points to a pledge in the contract that the company had not undertaken any obligation to third parties that would prevent it from fulfilling its agreement with the commission.
Does the contract conclusively favour one side or the other?
Like many commercial agreements, the contract contains legally arguable terms. A senior EU official acknowledged that interpretations of parts of the document “would be for a judge to decide upon”. Officials concede, however, that any court case would be far too drawn-out to address the immediate jab shortfall the EU faces in the coming weeks.
The EU official insisted he’d be confident about winning a legal ruling that AstraZeneca should send UK production to the bloc. But he added that it would be better if the conflict didn’t end up before a judge: “I don’t want to be there. I want those vaccines coming.”