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Indicator – Economy – AstraZeneca has an atypical contract with the European Union for vaccines

Ferenc Marovka, an official from the European Commission’s Directorate-General for Health and Food Safety, spoke in more detail at a webinar in February about member states purchasing medical equipment similar to the methods of the Wild West at the start of the pandemic to coerce Europeans. The Federation participates in obtaining a vaccine against the Corona virus. In June, European Union countries signed a joint strategy paper and then separately agreed with vaccine manufacturers, including AstraZeneca.

The European Commission agreed to deliver 300 million doses to the British-Swedish company, then requested another 100 million batches, but citing a failure at the company’s Belgian plant, AstraZeneca said it would deliver nearly a third of the first 100 million expected batches in March, finally 40 million. The company stated that it could not recoup the loss from batches produced in the UK, as its contract with the island nation did not allow this.

The battle between the company and the European Union has continued ever since, and steady dosing has continued since then – compounding its rare side effect of causing blood clots – and it all ended with the European Commission announcing this week that the contract with the manufacturer will expire at the end of 2021.

Well, what does a drugmaker sign a contract with another party, get paid for the doses sold, and then not deliver the prescribed amount? Experts from law firm Taylor Wessing Budapest issued a decision on the embarrassing case.

“In accordance with the agreement between the European Union and AstraZeneca, AstraZeneca pledges to make the ‘best reasonable effort’ to deliver the Coronavirus vaccines it produces to EU member states by the deadline specified in the agreement.

“All reasonable measures” is a concept alien to a model supply or business contract, in which case it is interpreted primarily as an obligation on the part of the party to do its best to comply with the contract.

Consequently, AstraZeneca considers that the contract requires only the best efforts expected of it and not its immediate execution after the authorization process. ” – Sums up Zoltán Novák, Taylor Wessing’s partner.

But he added that the European Union considers AstraZeneca in breach of contract due to the late performance.

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According to Taylor Wessing experts, this is not a traditional supply contract, however

Instead of a well-defined outcome, the agreement defined the goals that the parties should strive to achieve. This is confirmed by the fact that the parts of the contract published so far do not include the exact date of implementation.

However, according to press reports, AstraZeneca promised the arrival of the first 80 million doses of the vaccine by the first quarter of 2021. Under the interpretative provisions of the contract, the expected performance of a pharmaceutical company is determined by the performance of other companies with similar infrastructure, that is, if AstraZeneca performs less Much more than other suppliers with similar resources and infrastructure perform, they are liable for breach of contract.

At the same time, it is important that AstraZeneca intends to bring to the market a healthcare product developed with new technology that requires extra caution. In addition to meeting contractual performance targets, it can also be expected that the manufacturer will focus on the safe production of the vaccine in order to eliminate potential side effects and health risks.

Therefore, in an ongoing discussion, AstraZeneca could argue that it must take into account other contractual obligations in “all reasonable steps”, such as that the producer must be able to safely control a global pandemic when executed under the contract and must always act with the expertise and diligence expected. From it, especially in connection with the emergence of unexpected side effects.

A bitter awakening

The European Union has repeatedly stated that AstraZeneca has already entered into reciprocal commitments in some of its contracts for various shipments of vaccines. According to them, AstraZeneca will also be required to compensate the Belgian facility’s loss by republishing vaccines manufactured in the UK, as it can also count on its UK premises under the contract. However, so far no vaccine doses have reached the European Union from these factories, while AstraZeneca vaccines have already been exported from the European Union to the United Kingdom.

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The Union soon realized it had acted naively, and one of the main motivations for withdrawing AstraZeneca was a base modification. Before a batch of vaccine produced in the European Union leaves the borders of the European Union, it is verified that the shipment can begin according to the contracts. Meaning that a ban has been imposed on the export of the vaccine in certain cases.

Most importantly, AstraZeneca stated that it has no obligation to the third party (s) that would prevent it from fulfilling the terms of the supply agreement.

Meanwhile, the UK has refused to disclose its contract with AstraZeneca on national security grounds, so one can only guess whether we can really talk about the conflicting contractual obligations.

If the issue leads to a dispute, the European Union will have to prove that AstraZeneca is not making efforts to make vaccines available as quickly as possible. On the other hand, AstraZeneca may argue that it has no obligation to the European Union to redistribute vaccines from its location on the island.

The contract between the European Union and AstraZeneca is governed by Belgian law and contains provisions on dispute settlement. Thus, in the event that a contract dispute arises, the parties must first enter into negotiations in good faith in order to settle that dispute. If the parties fail to come to an agreement, the dispute between the parties will be settled under the contract under the jurisdiction of the Brussels court under Belgian law.

Zoltan Novak closed his thoughts.

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(Cover photo: AstraZeneca potion in the hand of a nurse in South Korea April 14, 2021 Photo: SeongJoon Cho / Bloomberg / Getty Images)