The Vaccine War: AstraZeneca vs the EU – A Fact-Check

In light of the recent controversy between AstraZeneca and the EU Commission relating to the supply of the Covid-19 vaccine, we have undertaken a fact-check of some of the key statements made by the parties concerned. Whilst acknowledging that the contract is governed by Belgian law, we have applied market standard legal principles that are generally applicable in circumstances such as these.

 

 

On the 27th August 2020, the European Commission and AstraZeneca PLC signed an Advance Purchase Agreement for the production, purchase and supply of 300 million doses of the Covid-19 vaccine (“the Vaccine”), with an option for a further 100 million doses, to be distributed to the EU population (“the Contract”). This was at a time when a vaccine had not been established or approved but rather was in development. In January 2021, AstraZeneca informed the EU that it would only receive about a quarter of the 100 million vaccines they were expecting to receive by March, a shortfall of about 75 million jabs¹, triggering the following statements:
  
1. Pascal Soriot (CEO, AstraZeneca): “The UK agreement was reached in June, three months before the European one… As you could imagine, the UK government said the supply coming out of the UK supply chain would go for the UK first. Basically, that’s how it is.”²

  
Stella Kyriakides (Health Commissioner, EU): “We reject the logic of first come first served. That may work at the neighbourhood butchers but not in contracts and not in our advanced purchase agreements.”³

  

Fact-check: Mr Soriot’s claim is incorrect. AstraZeneca contracted separately with both the EU and the UK to supply a certain volume of the vaccine. According to the EU, AstraZeneca has failed to meet its obligations to supply the required number of vaccines to the EU under the Contract. AstraZeneca have pointed to production problems at their plants, but continue to supply to the UK.Therefore, the dispute between the two parties is one relating to supply under the Contract and totally independent of AstraZeneca’s contract with the UK.

 

The absence of a term in the Contract that requires AstraZeneca to supply the UK first, and indeed nothing linking the UK supply with the EU Contract shows clearly that the agreement with the UK is irrelevant to the  EU Contract. Mr Soriot is precluded from justifying the lack of Vaccine supply to the EU by claiming a “first come, first served” in favour of the UK, a view supported by the President of the Law Society of England & Wales.⁴

  

That being said, Ms Stella’s statement is also incorrect in the context of contracts generally. A contract can have a first come first served obligation among the beneficiaries of the contract, but this would require an express clause in all relevant contracts to that effect. In the case of AstraZeneca, no such clause exists. The time-related component of the delivery of the Vaccine is not relevant; the two contracts exist independently and in parallel.

 
2. Pascal Soriot (CEO, AstraZeneca): “We didn’t commit with the EU, by the way. It’s not a commitment we have to Europe: it’s a best effort.”⁵

  

Fact-check on “no commitment”: This statement is incorrect. On the 29th January 2021, the EU and AstraZeneca mutually agreed to publish the Contract in the public domain. The Contract has all the vital elements needed to be considered a contract under the law i.e., an offer, the acceptance of that offer, consideration (which has been redacted from the published copy), the competency and intention to enter into a contract.  The effect of this is that legal obligations have been created on both sides and thus, commitments.

  

Fact-check on “best effort”: Mr Soriot’s statement is at least partially incorrect. The Contract does indeed oblige AstraZeneca to make “best reasonable efforts” to supply the EU. However, this phrase has an established meaning in the legal community and so is not as simple as a literal interpretation under everyday English language in the way Mr Soriot suggests.

  

Parties to a commercial contract often choose to qualify contractual obligations by agreeing to attempt to achieve them, rather than absolutely agreeing to do so. This may be because the obligation is contingent on a third-party performing an action or subject to an aim still to be achieved in the future, and this may be out of the contracting party’s control.  In this case, it was in all likelihood the development of a vaccine that qualified AstraZeneca’s ability to commit absolutely. However, the vaccine now exists and this together with the contractual commitment to supply the vaccine does in our view support the EU’s argument for being supplied with it as per the Contract. It would be fair to say that it is not the fault of the EU that AstraZeneca has issues at its production plants and no such limitations or exclusions to AstraZeneca’s liability on this basis appear in the Contract.

 

Under English law “reasonable efforts” and “best efforts,” are commonly used. “Reasonable efforts” clauses require the obligor to achieve a balance between its obligation to the oblige and its own commercial objectives. On the other hand, “best efforts” clauses require the obligor to incur significant costs and act against its own commercial interests, albeit not ruinously.

  

It is worth noting that the parties here have expressly defined “Best Reasonable Efforts” in the Contract itself to help create a level of clarity on a complex point and to avoid any ambiguity of the scope of their respective obligations.

  

The definition of “Best Reasonable Efforts” in the Contract reads as follows:

“…in the case of AstraZeneca, the activities and degree of effort that a company of similar size with a similarly-sized infrastructure and similar resources as AstraZeneca 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…”

 
The definition is then used in the Contract in the following context : 
“AstraZeneca has committed to use its Best Reasonable Efforts (as defined below) to build capacity to manufacture 300 million Doses of the Vaccine, at no profit and no loss to AstraZeneca, at the total cost currently estimated to be Euros for distribution within the EU (the “Initial Europe Doses”), with an option for the Commission…to order an additional 100 million Doses (the “Optional Doses”).”

 
The use of the term ‘Best Reasonable Efforts’ is not a common one and something of a hybrid. It can be argued that the language ‘having regard to the urgent need for a Vaccine to end a global pandemic…resulting in serious public health issues, restrictions on personal freedoms and economic impact, across the world but taking into account efficacy and safety’ imposes a high standard on AstraZeneca to perform under the Contract as the circumstances surrounding it are unusual, serious and urgent.

  
The definition additionally requires consideration of the size and resources of AstraZeneca. AstraZeneca plc is a British-Swedish global and science-led pharmaceutical and biopharmaceutical company with a portfolio of products for major disease areas including cancer. AstraZeneca may easily be considered a ‘Goliath’ of the pharmaceutical world⁶ and therefore fully capable of meeting the obligations it has committed itself to under the Contract.

 

3. Michael Gove (Minister for the Cabinet Office, UK): He was "confident" of the UK's vaccine supply and said its programme would continue as planned.⁷

 
Fact-check:  The validity of this statement remains to be seen, and remains doubtful in light of the following representation by AstraZeneca in its contract with the EU:
‘[AstraZeneca] is not under any obligation, contractual or otherwise, to any Person or third party in respect of the Initial Europe Doses or that conflicts with or is inconsistent in any material respect with the terms of this Agreement or that would impede the complete fulfilment of its obligations under this Agreement’.

  
This provision – an assurance to the EU, in effect – expressly excludes AstraZeneca from prioritizing the UK supply. In doing so, as expressly admitted to by the CEO (Pascal Soriot: ‘first come, first served’) AstraZeneca risks a material breach of the Contract. Consequently, AstraZeneca may feel obliged to shift its priorities between its customers..

 
Ultimately it may be for the courts to decide under Belgian law if AstraZeneca has met its ‘Best Reasonable Efforts’ obligation. It is evident that the dispute will lead to some form of dispute resolution or renegotiation as the ‘urgent’ circumstances of the pandemic require it.

  
The matter ultimately highlights the importance of careful drafting in  commercial contracts in order to avoid disputes such as this.

 
[1] https://www.bbc.co.uk/news/world-europe-55852698
[2] https://www.theguardian.com/world/2021/jan/26/head-of-astrazeneca-confirms-uk-has-prior-claim-on-vaccine
[3] https://www.politico.eu/article/health-commissioner-astrazeneca-logic-might-work-at-butcher-but-not-in-contracts/
[4] https://www.theguardian.com/business/2021/jan/28/astrazeneca-may-have-to-renegotiate-covid-vaccine-contracts-warn-experts?CMP=share_btn_wa
[5] https://www.cnbc.com/2021/01/27/astrazeneca-ceo-pascal-soriot-interview-on-supplies-to-the-eu.html
[6] https://www.astrazeneca.com/investor-relations/annual-reports/annual-report-2019.html
[7] https://www.bbc.co.uk/news/uk-55873288