The question on everyone’s lips now is when are we going to receive that much-anticipated jab in our arms? Given the ongoing dispute regarding AstraZeneca’s contractual obligations under the EU-AstraZeneca contract, that jab in your arm might take longer than anticipated if you’re an EU citizen.
Facts of the case
- The EU signed an advanced purchasing agreement with pharmaceutical company AstraZeneca (AZ) in August 2020 ahead of the release of the working vaccine.
- The EU ordered 300 million doses of the vaccine for delivery after the vaccine was approved by the regulator. There was also an option for 100 million more.
- The EU approved the Oxford-AZ vaccine on Friday 29 January 2021.
- EU sources say they now expect to receive only a quarter of the 100 million vaccines expected by March due to production problems at AZ plants.
- This contract is governed by Belgian law.
So, I think it’s safe to say that the EU aren’t happy about this situation as it has a direct impact on EU citizens. They believe that AZ is not upholding its side of the bargain. The EU has asked AZ to send some doses manufactured in the UK plants to the EU Member States to make up the shortfall, but according to AZ, the earlier contract that they signed with the UK regarding UK supplies of the vaccine prevents this.
Ursula von der Leyen, the President of the European Commission, thinks that the EU has a clear-cut case as these are “binding orders and the contract is crystal clear”. But after analysing the contract myself and reading extensive commentary by other lawyers, I’m not so sure I share her enthusiasm. Things are rarely that simple when it comes to the law and I don’t think this is an open and shut case.
Like many cases, this will require specialist legal interpretation and some lengthy discussions about the meaning of the relevant clauses to determine who is right. While I specialise in English and French law and not Belgian law, drawing comparisons between the two jurisdictions can still be useful to try and determine how this contract may be interpreted in other jurisdictions and ultimately, under Belgian law.
After the European Commission’s request on 27 January 2021, AZ agreed to publish the redacted contract on Friday 29 January. Commercial agreements such as this are private documents and normally eyes only. Unfortunately, the European Commission released an unredacted copy of the EU-AZ contract first (oops!) before releasing the redacted version which omitted any sensitive commercial information.
Some think that the EU hoped that publishing the contract would strengthen their case but I’m not so sure about that because as one source points out, “neither side would have published this if either side thought it was legally conclusive”.
When I first cast my eyes over the redacted contract, I immediately found myself immersed in legalese and wondered that, perhaps, if we adopted a plainer English approach to drafting contracts, this might all have been avoided and EU citizens would be getting that much-needed vaccine much quicker.
After analysing the contract and picking it apart, I must say that I’m still on the fence. It really is open to interpretation. And I’m not the first lawyer to say that.
Any breach of contract claims and lengthy litigation aside, the EU’s issue, in a nutshell, is that they can’t get their hands on enough of the vaccine. That’s what it boils down to and that is affecting people’s lives. In a global pandemic, time is of the essence and any delay in administering the vaccine is precious time indeed.
What are AZ’s obligations under the contract?
The contract stipulates that AZ must make its “best reasonable efforts” (BRE) to meet EU demand for the supply of the vaccine. But what constitutes BRE? Luckily, it’s defined within the contract itself. Bingo, this should be straightforward right? No, it isn’t. This is where the parties’ lawyers start to argue about what that definition itself means. According to the contract, BRE in AZ’s case means:
the activities and degree of effort that a company of similar size with a similarly-sized infrastructure and similar resources as AstraZeneca [that is AstraZeneca AB] would undertake or use in the development and manufacture of a Vaccine at the relevant stage of development or commercialization having regard to the urgent need for a Vaccine to end a global pandemic which is resulting in serious public health issues, restrictions on personal freedoms and economic impact, across the world but taking into account efficacy and safety.
There’s still some room for interpretation here wouldn’t you agree? The contract is governed by Belgian law but under English law, whilst there isn’t a clear-cut breach of the BRE obligation, it would turn on the evidence of what you would expect from a $9 billion company. And I think we can all agree, you would expect quite a lot. A company of its size with production facilities across the world should be making a reasonable effort to stop the significant shortfalls in Europe.
However, BRE in a global pandemic are also not straightforward. These are not normal times that we live in, which ironically is the reason that these two parties have contracted with one another. Some lawyers have suggested that the definition of the term in the contract itself does allay to a commitment that may be bigger than that generally expected in a standard commercial agreement. As I said, these are not normal times so should the contractual obligation require a ‘normal’ response, or should they be going above and beyond?
For commercial contracts under English law, ‘best reasonable efforts’ is often a drafting compromise because one party stipulates the “best effort” and the other stipulates “reasonable efforts”. Therefore, the compromise of ‘best reasonable efforts’ or ‘reasonable best efforts’ was born. But none of these usually amount to an outright obligation.
Even though BRE is a defined term in the EU-AZ contract, it’s not as specific as the wording in the Curevac-EU vaccine contract where the definition of reasonable best efforts is “a reasonable degree of best effort to accomplish a given task”. This is much clearer and imposes more of an obligation.
The delivery deadlines have been redacted from the contract, but Clause 5.1 stipulates that AZ shall use BRE to manufacture the “Initial Europe Doses” within the EU within a redacted timeline. The EU is arguing that AZ should be using its UK plant to meet EU demand. The contract only refers to manufacture in the EU.
Clause 5.4 is concerned with Manufacturing Sites and it states that AZ must use BRE to manufacture the vaccine within the EU and the UK. A literal interpretation would suggest that AZ must use the degree of effort that a company like AZ would use to manufacture in both the EU and the UK and must use the same level of effort to manufacture the Initial Europe Doses within the EU. However, the contract does not say that AZ must use efforts to manufacture the Initial Europe Doses in the UK. That being said, would be it reasonable for them to manufacture in the UK plant to meet EU demand?
Another bone of contention here is that AZ signed a deal with the UK Government for 100 million doses three months before the EU deal was agreed. In a post-Brexit landscape, this isn’t helping UK-EU relations. Especially when the EU took the initial decision to trigger a Brexit deal clause to place controls on the export of vaccines before backtracking last week.
I think that the EU will also seek to rely on Clause 13.1(e) because AZ says that it’s not under an obligation to anyone else (like the UK) “in respect of the Initial Europe Doses” or that conflicts with the agreement. However, AZ may argue that this was true when the contract was signed and that it has since made BRE to manufacture the vaccine but there are no guarantees.
It would be remiss of me not to point out that the EU Member States are way behind the UK, Israel, the UAE, and the United States in rolling out their vaccine campaigns and I do think this is a relevant factor here. Any drawn-out legal proceedings will do nothing to improve the situation. Both sides have acknowledged that parts of the contract would be for a judge to rule on which is certainly not an ideal scenario. Let’s hope both parties will arbitrate rather than litigate to prioritise the lives of EU citizens and roll out the vaccine campaign as soon as possible. Litigation certainly wouldn’t be the right way to go about that and with concepts such as “vaccine nationalism” being thrown around, I think it’s fair to say that this needs to be resolved very quickly.
But the fact remains, the contract is not clear-cut, and it does leave a lot to interpretation. As a language practitioner, I’m always interested to know how a situation could be described in another language and James Turner QC, of Quadrant Chambers, who specialises in cross-border commercial disputes provides the perfect example. “There’s an expression in German, which is our equivalent of ‘clear as mud’, which is ‘clear as noodle soup’. And that’s what I think this particular kerfuffle in the contract is. I think this is clear as noodle soup”, and I’m inclined to agree with him.
Clear as mud, clear as noodle soup or crystal clear- the jury’s still out. But I think it’s time for both sides to put their big girl pants on and find a solution and fast.
And I could go on, but I won’t. If you fancy some further reading, have a read of the contract yourself here. I’d love to hear what you think.
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Take care of yourselves and drop me a line if you fancy a chat.
Disclaimer: Anything posted in this blog is for general information only and is not intended to provide legal advice on any general or specific matter.