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EU v AstraZeneca: Lessons on contractual agreements for the life sciences industry

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The news has been flooded with stories that the EU is finalising a lawsuit against AstraZeneca, creators of one of the foremost covid-19 vaccines. Fieldfisher life sciences regulatory expert, Gemma Colomer looks at the merits of the dispute and offers insights on contractual agreements in the pharmaceutical industry.

The European Commission is finalising a lawsuit against AstraZeneca to be presented before the Belgian courts for failure to comply with the delivery deadlines of the vaccines and the quantities of doses agreed by contract. The legal initiative was announced end of April but very soon after, the day on which it was planned to take the first step of the claim, the president of the European Commission, Ursula von der Layen seemed to have second thoughts about the decision. But alas, the lawsuit is back on.

The binding document between AstraZeneca and the EU came to light weeks ago, with many shadows. Everything related to delivery times, vaccine quantities and prices is crossed out in the text made public because it is part of the confidentiality of the agreement.

AstraZeneca is not aware of any legal procedure

According to data released from Brussels, AstraZeneca delivered just 29.8 million vaccines in the first quarter and expects to deliver 70 million more in the second. So, in the first six months of the year the company would only reach a total dose figure of 100 million, compared to the expected 300 million.

The EU is carrying out the process as stated in the contract that must be made to solve any problem between supplier and customer, which is informal discussions prior to filing a claim in court.

Chronology of the disagreement

According to official EU sources, on 19 March, the Community Executive requested in a letter to the Anglo-Swedish pharmaceutical company to explain the reasons for the delays, thus complying with the provisions. But earlier, at the end of January, with the announcement by AstraZeneca that it would not be able to comply with the doses of the vaccines agreed with the EU, up to three meetings were held between representatives of the laboratory and the EU.

Against this background, on Wednesday 22 April, the EU announced that it would take legal action and communicated this to the member countries. Germany, France and Denmark were reluctant to make that leap. But, as stated in the contract, the European Commission and the member states would be able to claim before the courts the breaches of the contract, so the Commission could go alone and would not be necessary for all the member states'.

The courts to which the claim is made are the ordinary courts of the Belgian civil-commercial jurisdiction. Why? In principle, because this has been established in the text that binds the parties and, on the substantive reasons, one can only speculate that it's most likely because the process will be faster than going through the Court of Justice of the EU.

'Reasonable efforts'

The conflict over the delivery of the agreed vaccines - which is the object of the claim between the parties - is to see if there has been a breach or not. In this sense, the letter of the contract says that AstraZeneca will make all "reasonable efforts" [reasonable efforts, as stated in the contract in English] to comply with the agreement. However, this term is subject to interpretation and isn't always quite clear.

In addition, reasonable efforts is an expression that is repeated on numerous occasions throughout the contract to refer to delivery commitments.

Another important question is whether the Anglo-Swedish laboratory had other obligations to deliver vaccines prior to the agreement with the EU. Well, as stated in this binding text, "AstraZeneca admits that it has no other contractual obligations that prevent it from fulfilling the contract on the agreed terms." This statement by the company is important because it would complicate any defence based on the existence of other vaccine delivery commitments, for example, with the UK, to justify this lack of supplies to the EU.

In any case, these are the aspects of the contract on which, with great certainty, the resolution of the conflict will focus, and that, in the end, it will be a matter of evidence, in the defence before the court.

Future of pharmaceutical commercial contracts

The EU's dispute with AstraZeneca should act to provide lessons that the pharmaceutical industry can learn from, not just when entering into contractual agreements with supranational organisations but for all contracts.
 
As explored above the main qualm of the EU is AstraZeneca's failure to deliver the contractually agreed doses of the vaccine (not just by a margin but by a mile) and not having a 'robust plan' in place to be able to meet contractual agreed amount.
 
While the EU might embark on this journey it is difficult to predict if they will be successful due to the wording of certain clauses of the Contract. It is clear that AstraZeneca added in the necessary clauses to protect themselves in the unfortunate event that they couldn't deliver on the contract and it will be difficult for the EU to concretely prove otherwise. However, with the contract written according to Belgian law and the proceedings taking place in the Belgian court, any possibility of success will require to file documentary means of evidence strong enough to prove that “best efforts” were not adopted by the Company.  
 
So what are the lessons for the pharmaceutical industry? Should contracts be written using a certain jurisdictions law? For instance, if the EU – AstraZeneca contract had been written according to English law, it would clear there would be no case at all.
 
Furthermore, use of the contractual terms is very important. Strictly speaking if the EU wanted certainty, certainty should have been written into the agreement. As mentioned above 'reasonable efforts' is ambiguous concept and interpretation could vary depending on the means of evidence the parties are able to provide. Furthermore, written into the contract is protection against lawsuits over late deliveries. When embarking on contracts, especially during a difficult period of uncertainty such as the Covid-19 pandemic it's vital that flexibility is embedded in a contract.
 
Also, looking at the outcome of the case, what does it hope to achieve? Lawsuits must have a reasonable aim. If the EU does win, AstraZeneca is going to be unable to provide them with more doses – it's just not possible. This revelation is again likely to work against the EU.
 
Overall, the case between the EU and AstraZeneca will be an interesting one for the industry to watch unravel and will provide many important lessons to the future of contractual agreements in life sciences.
 
A version of this article was first published by Diario Médico
 

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