January 28: AstraZeneca appears to be in danger of breaching its contract to supply the EU, and may have to renegotiate its contract to supply vaccines to the EU, the UK or both, legal experts have warned.
To the anger of European leaders, the Anglo-Swedish company has said it will only be able to deliver 25 per cent of the 100m doses pledged to the bloc by the end of March due to a production problem in Belgium, the Guardian reported.
AstraZeneca has claimed that its vaccine contract with the EU obliges it only to make “best efforts” to supply the bloc. Although the terms of the deal are unknown, AstraZeneca has indicated it may publish the contract on Friday.
But an agreement between the EU and CureVac, another vaccine supplier, published last week, suggests AstraZeneca may be legally obliged to deliver more vaccines to the EU if it can be established that the company is diverting supplies to the UK.
David Greene, the president of the Law Society and a senior partner at Edwin Coe, where he litigates contracts, said: “If they [AZ] gave assurances that they made reasonable best efforts to supply the EU but were in fact diverting material from one place to another, that would on the face of it be a potential breach of obligations to use reasonable best efforts.”
The published contract with CureVac, which was highlighted by the legal writer David Allen Green , says “reasonable best efforts” include a commitment to “establish sufficient manufacturing capacities to enable the manufacturing and supply of contractually agreed volumes of the product … in accordance with the estimated delivery schedule”.
As Green noted in a blogpost: “The existence of that ‘best efforts’ provision may not be that helpful to AstraZeneca, if the correct construction of the contract is that it does not cover diverted capacity as opposed to lack of capacity.”
AstraZeneca’s chief executive, Pascal Soriot, had said that he was contractually obliged to fulfil the UK government’s order for 100m doses before the EU.
The European health commissioner, Stella Kyriakides, dismissed the company’s argument, insisting that millions of doses made in the UK should now be transported to the EU.
“We reject the logic of first come, first served,” she said.
Greene said the timing of the separate agreements AstraZeneca made with the UK and EU was irrelevant.
He said: “Unless there is a term in the agreements that AstraZeneca must supply the UK first, any separate arrangement they have with the UK is probably irrelevant to the arrangement with the commission. It is not first come, first served.”
He predicted the row was likely to be settled by arbitration to avoid a court battle.
“There will be detailed provisions within the agreement as to how they resolve arguments of this nature,” Greene said.
He added: “It is difficult to speculate, but they may say: ‘We can’t meet our contractual obligations to both at the same time and therefore we are going to have to make some choices, or renegotiations.’
“If they chose the European commission over the UK they may be in breach of the British contract, and vice versa. If they supply only some vaccine to both, they may be in breach of both contracts.
Ultimately this is a supply question. Whilst there may be shouts and screams at a particularly point, that doesn’t mean they won’t get round a table and resolve the issue.
That may mean a slower delivery or a change of delivery in due course. And given the current circumstances and limited supply, this will be resolved in some fashion.”