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Two contracts, two different legal systems, but one goal: Getting doses of a life-saving vaccine to people as quickly as possible.
Just how the U.K. has secured doses more quickly than the EU from pharmaceutical giant AstraZeneca has been a matter of intense scrutiny. Some clues can be found in comparing the contract that AstraZeneca signed with London to the one it inked with Brussels.
On the whole, the contracts appear roughly the same when it comes to their language and their tone, says Sébastien De Rey, a contract law specialist at Leuven University. But there’s one key difference, he notes: “The U.K. contract is, on some specific points, more detailed.”
The level of specificity is partially due to the legal systems they’re based on. The U.K. contract is written in English law, which will judge whether both parties delivered the goods based on the exact wording of the contract. The EU contract is written in Belgian law, which focuses on whether both parties tried their best to deliver the goods and acted in good faith.
It’s these extra details that give the U.K. more leverage to ensure its contract is delivered effectively. While both contracts say all parties will make their “best reasonable effort” to deliver the vaccine, the U.K. government is clearer in asserting its oversight of the agreement.
This core difference, according to a lawyer familiar with the development of the U.K. text, can be chalked up to the fact that the contract sealed with London was written by people with significant experience of purchasing agreements, specifically drug-buying deals. The European Commission’s contract, by contrast, shows a lack of commercial common sense, in the lawyer’s view.
The starkest example of this difference is a clause in the U.K. contract stating that if any party tries to force or persuade AstraZeneca or its subcontractors to do anything that could hold up the supply of the vaccine doses, the government may terminate the deal and invoke what appear to be punishment clauses — although these are largely redacted.
The EU, on the other hand, can only withhold payments until the company delivers the goods, or until it helps find more producers to make the vaccine. And as POLITICO reported last week, the non-redacted version of the contract shows that the EU also waived its right to sue AstraZeneca in the event of delivery delays.
Furthermore, officials with knowledge of the U.K. contract say the British government was a more active participant in the manufacturing of the home-grown vaccine — even though the U.K. contract was signed just a day after the one with the EU. This aggressive approach gave London a lead in securing AstraZeneca’s doses.
“In sum, the balance of power tilts notably towards the U.K.,” senior MEP and former Belgian Prime Minister Guy Verhofstadt wrote in a post Friday. “Since the outcome of this particular contract has led to an enormous amount of public distrust, both the Commision [sic] and AstraZeneca have a lot of explaining to do.”
Stronger supply chains
The U.K. contract makes it clear that London had thought through the entire Oxford/AstraZeneca supply chain, rather than just focusing on the delivery of the vaccines. The EU, by comparison, was more unclear, even as to where its plants would be.
The U.K. contract contains a commitment by AstraZeneca that the British supply chain “will be appropriate and sufficient” for the supply of the doses the U.K. purchased. London understood, then, that if the supply chain were not “sufficient,” the drug company would be on the hook for meeting any shortfall from somewhere else, according to a person familiar with the U.K. contract’s development.
The British contract also indicates the deal would cover “other manufacturing facilities in Europe” in the event that the European Medicines Agency approved the Oxford/AstraZeneca vaccine before British regulators after the Brexit transition period.
It didn’t specify what would happen if approval came first in the U.K., which is in fact what happened. But the U.K. Task Force told journalists in December that it would get vaccines from Germany and the Netherlands to meet any potential shortages on the island ahead of the U.K.’s earlier approval.
By contrast, the EU’s contract basically states that AstraZeneca will only make its “best reasonable efforts” to supply and manufacture the vaccines in the EU, which in the contract includes the U.K. manufacturing sites. In the full version of the contract and order form, the three British plants — as well as a Dutch and German subcontractor that haven’t been used for the EU doses — are included in the EU’s supply chain. The company hasn’t used the U.K. doses to fix the shortage of EU supply.
Instead, AstraZeneca has largely relied on a Belgian subcontractor, Thermo Fisher Scientific (originally Novasep), to supply the EU with drug substance. It has also gotten some doses from a U.S. plant in Maryland.
More broadly, the specifics of the EU’s plants have been a subject of confusion. For example, the Commission’s published contract said the EU would get drug substance from “IIL.” When a redacted version was published on January 29, the Commission at first kept on insisting that this referred to Italy and Ireland. It later turned out to be a copy error that should have said “NL,” for the Netherlands, according to Dutch broadcaster NOS.
As with supply chains, the timeline is also disputed. But it does appear that the U.K. got an earlier start on the ground — even though that’s not clear on paper.
AstraZeneca CEO Pascal Soriot made the argument that the U.K. had better vaccine supply because the U.K. signed an agreement for vaccines months earlier than the EU. Formally, this isn’t true: The U.K. contract was signed on August 28, while the EU’s was signed a day earlier on August 27.
However, the key lies in an earlier agreement that AstraZeneca made back in May with the U.K., which was a binding deal establishing “the development of a dedicated supply chain for the U.K.,” an AstraZeneca spokesperson said.
One official close to the U.K. contract said the agreement began as an email in April from the U.K. government saying it would provide £65 million to help the University of Oxford execute its production plan. It later evolved into a fully-fledged contract between the government and the British-Swedish company, which also might explain why it took until August for the contract to be signed.
Most important, however, is that it meant that the British government was “effectively a major shareholder” in the jab’s development as early as April. After Oxford and AstraZeneca agreed to team up at the end of April, for example, the British government filled seats on Oxford-AstraZeneca joint liaison committees.
“Protecting the U.K.‘s supply was a central objective … as that was being negotiated from April onwards,” the official said. Even though this isn’t explicitly stated in the contract, the official said that the government’s role in the early stages of the vaccine meant “there is absolutely no way that AstraZeneca would have been able to enter a contract which gave away equal priority of access to the U.K. doses.”
This British supply was therefore already secured by the time four EU countries — Germany, the Netherlands, France and Italy — signed an agreement in June to obtain up to 300 million doses of the vaccines. The countries’ deal at the time was a fairly bare-bones agreement, and it’s unclear whether it established a European supply chain, but over the summer it was transferred into the formal purchasing agreement managed by the Commission.
The Commission wouldn’t comment this week on the publication of the U.K.’s AstraZeneca contract, but it has underscored that the EU’s agreement provided money — up to €336 million — to the company to ramp up manufacturing of vaccines at-risk for the bloc.
“We did not invest in the company on the assumption that they would not be able to pre-produce,” a Commission official wrote in an email. “Investing and ramping up pre-production capacity was one of the premises of our agreements.”
“There are clear delivery quantities, both for December of last year as well as the coming quarters for this year,” the official added.
A further difference is that the British and Belgian legal systems have different views of how these contracts should be delivered and adjudicated if issues arise.
Many companies choose the U.K. for contracts involving the purchase of goods or other agreements that deal with a point of sale. That’s because English law is an effective route for suing a company if it doesn’t deliver goods in time. The U.K. contract is testament to that advantage, lawyers said.
English contract law also has much more literal interpretation — what’s on paper is what counts, lawyers say. By contrast, Belgian law, which the Commission chose for its contract, takes a wider view that includes the context a contract’s written in and the good intentions of both parties. The court system in Belgium also tends to reach a decision in a legal dispute far more slowly than its English counterpart.
That said, while the EU’s contract may be less precise, it can still carry weight in a court of law, De Rey said. It’s more detailed in laying out what it means by best reasonable efforts, he added, pointing to the preamble of the EU contract, which goes into great detail about the great need for vaccines during the pandemic.
“In the end, it will always come back to this ‘best reasonable efforts’ and the interpretation of this,” he said. “But the standard of these ‘best reasonable efforts’ is quite high.”
The U.K. contract is also more clear in how it will monitor the delivery of the doses, as well as what happens if the company doesn’t come through.
Although the delivery schedule itself is redacted, the U.K. contract clearly states that AstraZeneca shall notify the British government about any changes to the schedule and use its “Best Reasonable Efforts to keep as close to the original” delivery schedule. The company also has 30 days to notify the U.K. ahead of its delivery about the number of doses it should expect.
Once that happens, “AstraZeneca may not adjust the Delivery Schedule without the prior consent” of the British government.
An exception: AstraZeneca isn’t in violation if there’s a “minor variance” to the delivery schedules, up to five business days, “due to the unpredictable nature of the Manufacturing of the Products” — as long as the U.K. is notified within a reasonable timeframe.
The EU contract, by contrast, doesn’t go into this level of detail about notification when manufacturing plans change. But it does have another remedy in the Belgian system, De Rey explains: If a company is in breach of a contract, the other party can appoint another producer to do the job at the expense of the company in breach.
Indeed, the Commission’s contract says it or EU countries can present plans to boost production and “AstraZeneca shall use its Best Reasonable Efforts” to contact producers “to increase the available manufacturing capacity within the EU,” it states.
The problem with this provision, however, is it doesn’t ensure a rapid timeline, which is crucial amid a global race to vaccinate populations.
Furthermore, the U.K. contract gave more clear powers to managers on the ground in executing and validating the contract, while the EU contract focused more on ensuring equitable distribution of the vaccines between each EU country.
The EU contract also says the Commission and EU countries should use their “Best Reasonable Efforts” to help AstraZeneca secure enough drug substance, vials and other materials to produce its vaccines, and the company should report to the Commission in “regular intervals” on whether it can meet its supply promises. AstraZeneca will “promptly notify the Commission if it encounters difficulties in this regard that place at significant risk AstraZeneca’s ability to manufacture or sell the Vaccine Doses as contemplated by this Agreement,” it reads.
What this meant on the ground: When AstraZeneca faced supply issues at the start of 2021, it gave the EU little notice. It informed the Commission that the EU would receive at least 70 million fewer doses in the first quarter of 2021 just a week ahead of the European Medicines Agency’s expected approval date. The company still has not updated the EU on what it can provide them in the second quarter of the year.
To be sure, the EU contract says Brussels may suspend payments if AstraZeneca fails to deliver, and it specifically states that AstraZeneca may not have any impending contracts that would hinder its ability to supply the EU. But it also states that if AstraZeneca’s performance is “impeded by any such competing agreements, AstraZeneca shall not be deemed in breach” of its agreement with the EU.
And in the end, the EU waived its right to take AstraZeneca to court if there are delivery delays.
This article is part of POLITICO’s premium policy service: Pro Health Care. From drug pricing, EMA, vaccines, pharma and more, our specialized journalists keep you on top of the topics driving the health care policy agenda. Email [email protected]olitico.eu for a complimentary trial.