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Review of AstraZeneca’s contract with the European Commission

29 January 2021 | Paul Hardman

Pharma giant AstraZeneca has published its contract with the EU amid a row over whether it broke its vaccine commitments. 

Paul Hardman, Head of Commercial & Corporate Law, reviews the contract:

Bowing to intense pressure AstraZeneca has agreed to allow the European Commission to publish a redacted copy of the actual contract agreed between the parties.  These are private documents and normally kept private by the parties although in particular because of the Freedom of Information Act, they cannot be kept private (except for commercially sensitive information). 

It is dated 27 August 2020 and therefore before UK approval of the vaccine (on 30 December 2020) and specifically refers to ongoing research being done by AstraZeneca with Oxford University.  It is for the supply of ChADOx1 nCov-19 vaccine (defined as a ‘Vaccine’).  It is between AstraZeneca AB, a Swedish company in the AstraZeneca Group and the European Commission acting for the ‘Participating Member States’.

It is a governed by the laws of Belgium but helpfully is very much in the style of an English contract in terms of layout and where you would expect clauses to be with a notable exception and that is the recitals (that is the ‘Whereas’ provisions) which in keeping with European regulations and contracts run to some length and are regarded as important to contract interpretation.   

It is a framework agreement and does not commit AstraZeneca to supply until it has received an Order Form:  conversely as you would imagine the Commission has had to commit to buying at least 300m doses (the ‘Binding Allocation’).

On the key question of AstraZeneca’s obligation to supply, the Order Form contains the recital ‘AstraZeneca has agreed to supply the Initial Europe Doses allocated to each Participating Member State in a given timeframe, should it manage to develop a safe and effective vaccine against COVID-19’.  For reasons that are not immediately apparent, the expression is also defined as ‘Vaccine’ (in other words the Order Form has a different definition of ‘Vaccine’ than the Agreement).

AstraZeneca has an obligation to use Best Reasonable Efforts to supply.  The parties have clearly given this careful thought including an obligation on the Commission to provide materials and resources to enable AstraZeneca to fulfil its part of the bargain.  As you would expect in any supply agreement, there is no absolute guarantee from AstraZeneca that it will meet all Orders and to that extent the Order Form is slightly (but possibly critically) out of kilter with the main Agreement. 

Interestingly on a strict interpretation the question of whether AstraZeneca is using its Best Reasonable Efforts is judged against AstraZeneca AB (not the AstraZeneca Group as a whole).  Having said that according to D&B ‘Astrazeneca AB has 5000 employees at this location [in Stockholm] and generates $9.08 billion in sales (USD)’ so it is no mouse.

‘Best Reasonable Efforts in AstraZeneca’s case means ‘ the activities and degree of effort that a company of similar size with a similarly-sized infrastructure and similar resources as AstraZeneca [that is AstraZeneca AB] 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.

This will be judged under Belgian law but on an English law view, whilst there isn’t a clear cut breach of the Best Reasonable Efforts obligation, it will turn on the evidence of what you would expect from a $9 billion company.  The Order Form does not help AstraZeneca.

 

To contact Paul Hardman please call 0117 906 9400 or email p.hardman@gl.law 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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