Today we’re chatting a bit about a Covid-EU related legal update. So, we all know that for the past while there have been some major tensions and issues growing between the EU and AstraZeneca
So what’s the lowdown?
Well, it all comes down to a shortfall in the initial dose of the vaccines – a major case of overpromising and underdelivering in the eyes of the European Commission. On the 27th of August 2020, the Advance Purchase Agreement (fancy words for the contract) was signed between the EU and AstraZeneca, obviously for AstraZeneca to provide the vaccine to EU member states for their vaccination programme.
This is where the problems begin. Earlier this year, the European Commission published a redacted version of their written contract with AstraZeneca (with their permission, don’t worry!). It was revealed that AstraZeneca had overpromised how many doses of the initial vaccine could be supplied to EU states.
The EU had expected to receive between 80 million and 100 million doses of the vaccine by the end of the first quarter in 2021, then reaching 300 million by the end of June. Let’s take a look at what the actual outcome has been…AstraZeneca rolled out 30 million doses of the vaccine by the end of the first quarter in April, a vast amount lower than what was pledged in the contract. AstraZeneca also projected that they would be delivering around 70 million doses by the end of the 2nd quarter of 2021 – again, hugely different to the numbers which were secured in the legal document.
Why has this happened? It seems there have been major production and manufacturing problems of the vaccine at their Belgian site, meaning they’ve been unable to deliver the promised amount. Adequate manufacturing challenges and delays also seem to come down to AstraZeneca’s obligations to multiple other clients, namely the UK. The UK-AstraZeneca contract was signed 3 months before their contract with the EU. EU officials state this should not impact the production and roll out of the vaccine – although in reality this could potentially be what has happened.
Is there a legal case?
The EU have now served a legal letter on AstraZeneca regarding this. The European Commission raised the issue at a meeting of ambassadors on the 21st of April. Here it was decided that the majority the EU member states would support legal proceedings, although not all governments are fully on board to bring fully-fledged legal action. A decision should be made in the next few weeks as to whether proper legal action will go ahead.
What do the European Commission hope to gain from this? The hopes are that it will be made mandatory for AstraZeneca to provide the doses of the vaccine set out in the contract.
But is there actually a case to be had here? That remains to be answered. It comes down to some pedantic legal jargon, something called a ‘best endeavours clause’. You’ve maybe seen these in your own contracts before. Basically, with a contract you can either fully agree to do X, Y and Z agreed in the contract, you can use best endeavours to what was agreed OR reasonable endeavours. What does this mean in simple terms?
- Fully agree: An absolute obligation to fulfil the contract
- Best endeavours: You’ll do everything that the other party would have done in their power to fulfil the contracts
- Reasonable endeavours: You’ll take reasonable steps to fulfil the contract
This case will come down to if AstraZeneca have taken all physically possible steps, even if it wasn’t in their commercial interest to do so, to deliver the amount of vaccines promised in the legal contract.
It’s a case of ‘watch this space’ on this one!
Now this really underlines the importance of your contracts being SUPER transparent, clear cut and easy to understand, and most importantly clear on the other parties’ obligations. Crystal clear = the way forward, always.