ASTRAZENECA AND THE VACCINE CONTRACT. VON DER LEYEN’S INEXCUSABLE BLUNDER

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Prima facie the contract, now published in redacted form, is pretty clear and appears to support the  Astrazeneca position. Meanwhile the Commission’s threats to intervene across a range of vaccine export arrangements not only represent the worst kind of vaccine nationalism, but also threaten the wider credibility of governments (not just in the EU) across a range of vital public policy concerns, from public health to energy and climate.

The basics are well known. Astrazeneca has hit production problems at its European plants, a common problem with new pharma products, and has had to reduce its estimated deliveries in the next few months. Most such contracts, with a new product and new facilities, necessarily include best endeavours clauses to protect the producer, and this is no exception. Interpretation of such clauses can give rise to legal disputes, but the main issue between the parties in this case appears to be whether those best endeavours can be deemed to include the diversion of supplies promised to other parties under earlier contractual obligations. Since this at the centre of the dispute, it is worth understanding the detail.

If AstraZeneca had made multiple promises which were in conflict with one another, there might be a cause for a major contractual dispute. But in this case, at least on first inspection and according to the EU, the question seems to be the slightly simpler one of whether best endeavours under the contract should oblige AstraZeneca to divert supplies already under production to satisfy its UK client, including those produced in UK plants. If AstraZeneca’s claims are correct then the EU Commission is guilty of the worst kinds of vaccine nationalism and government bullying.

Read the contract! It tells you exactly what AstraZeneca promised!

The specific obligation that is set out in the contract appears under the heading Manufacturing and Supply. It reads as follows:

5.1. Initial Europe Doses. AstraZeneca shall use its Best Reasonable Efforts (BRE) to manufacture the initial Europe doses within the EU for distribution, and to deliver to the Distribution Hubs .... following authorisation ….  [my italics]

Prima facie this is an obligation of BRE in respect of EU manufacturing plants (which do not include those of the UK). This does not appear to confer a right to access supplies ordered much earlier by the UK.

Game over. Or is it?  Two other claims have been made: first that the UK should be deemed to be part of the EU, and second that UK manufacturing plant is mentioned in the contract. Unfortunately for Von der Leyen and Kyriakides, both claims are demolished by a careful reading of a later section.

The relevant section in this case is 5.4 – Manufacturing Sites. In summary it is dealing with the question of where AstraZeneca is permitted to produce under the contract, reflecting the obvious concern that any such facilities should meet European standards. In summary it obliges AstraZeneca to make BRE to use EU or UK sites as far as possible. They may use other non-EU non-UK sites, but only after obtaining EU permission. It also states another remedy for the EU, if production is delayed. This is that the EU may present to AstraZeneca a list of firms (CMOs) with whom they can contract.  AZ is to use BRE to contract with these CMOs to boost production capacity within the EU.

This clause also defines the UK as part of the EU, but only for the purpose of this clause, 5.4. In other words the EU in 5.1 cannot be considered to include the UK. Clause 5.4 does not refer to any obligation on the delivery of the initial dose. It is solely concerned with permissions for where AstraZeneca should be allowed to manufacture, and possible steps if production is delayed.

Personally, therefore, I have found it very hard to find an interpretation of the contract that supports the Commission’s position, although no doubt other legal challenges and arguments may be made.  This contract is of course only one element in the pandemic crisis, and we all know that ultimately solutions depend on international cooperation. As it happens, the UK vaccine bets have paid off and it should soon be in a position to share some of its good fortune, whether with its EU neighbours or through the offices of the WHO, with others.

The Political Fallout is Bad News

I have long been an enthusiastic supporter of the European project, but the Commission’s inept management of the EU vaccine programme, followed by its abysmal tantrum over a not-for-profit contract with a firm that has developed one of the world’s leading vaccines, is utterly inexcusable. To assert an unsustainable interpretation of a contract makes it worse. With its clumsy and hastily reversed Article 16 intervention on the Irish border issue, it has undermined the Northern Ireland Protocol, with potentially disastrous ramifications for the Irish peace process and its own single market. It has damaged the credibility of Western democracies just at a time when they should be recovering from the twin disasters of Trump and Brexit. Fury at the Commission’s performance will not be confined to the UK, is widespread in the member states, and we need to see some high-level resignations, preferably soon.

Falling Credibility in Government and international Bodies is also a Disaster for Climate Policies

The damage cannot be confined to the immediate issue. International agreements depend on good faith, and investment in climate measures depends on the ability of governments to commit to and honour contracts. The Commission has managed to damage both these fundamental building bricks at the same time. This is bad news for the COP 26 climate conference later this year, and its longer term effects may well play out in higher than necessary costs of capital for the climate-related investments we all need to make. A climate coalition with Europe should have been the UK’s best policy. That now looks increasingly problematic.