Did the UK outsmart the EU over AstraZeneca vaccines?
The UK says its contract is better – it simply put tougher penalty clauses in place.
In the “vaccine spat” between the EU and the UK, the common perception is that the UK is winning. The UK health secretary, Matt Hancock, has said this is because his government secured a better contract with vaccine manufacturers, in particular with AstraZeneca, than the EU did.
The EU produces far more vaccines than the UK, but it also exports far more, including to the UK, whereas no vaccines go the other way. In response to this imbalance, which is creating shortages in the EU while the UK is well supplied, the EU has threatened to block exports to countries with higher vaccination rates until its member states catch up.
To date, 80% of the vaccines administered in the UK, 26 million out of the 32 million total, have been imports, of which 5 million came from India, and 21 million, or two-thirds came from the EU.
Put differently: the UK which, based on these figures, would only have been able to vaccinate about 10%-18% of its population if it had to rely on domestic supply, is enjoying a massive vaccine bailout from its European neighbours.
Why would the EU be so generous? Hancock referred to the clauses in the UK’s vaccine supply contracts requiring vaccine producers to supply it preferentially: if there are production shortages, then the UK order must be fulfilled by diverting supplies from other customers. A failure to do so attracts fierce penalties.
As a result, the UK has had its orders fully met, whereas the EU suffered early shortfalls from Pfizer, and is now receiving less than a quarter of what it contracted for from AstraZeneca, which has experienced production problems.
The EU takes the view that if production disappoints, all customers should see a proportional reduction in deliveries. The UK view is that it has a right to preferential supply, because that is what the contract says. The UK government invested in the research, done at the University of Oxford, that powered the AstraZeneca vaccine, and the firm has its headquarters in Cambridge, England.
Which contract to choose?
As a matter of law, both the EU and the UK have a case. Both contracts contain a “best reasonable efforts” clause, which is intended to cover the situation where force majeure – a legal term for an event outside one’s control – makes full delivery impossible or unreasonably difficult.
But signing a preferential contract with someone else is not force majeure: it is just selling the same stuff twice. AstraZeneca’s EU obligations are not diminished by its promises to the UK. But if AstraZeneca had distributed the output of its four European plants equally between the EU and UK, as the EU would like, it would be violating the UK contract. It appears to have promised too much to too many people.
The question is why AstraZeneca chose to breach the EU contract rather than the UK one. This will be largely because the UK deal had much harsher penalties – the EU deal has no penalties beyond non-payment and requires informal negotiation rather than litigation when problems arise.
So the UK did not contract better in the sense that it has a right to the vaccines it is obtaining; under the law governing the EU contract it does not. Rather, it seems that the UK contracted better in the sole sense that its contract was more expensive to breach.
That is partly a product of different legal systems and their styles: European contracting parties tend to see contracts as a tool to build up trust and long-term relationships. Anglo-American legal culture tends to see contracts as a way to avoid needing trust at all. Some Europeans seem jealous of this UK fierceness. On the other hand, if everyone did it, it wouldn’t work: grabbing more for yourself can only pay off for a few.
A question of fairness
In a situation of global shortage, any vaccine that one country obtains is one that another has lost, which puts a particular responsibility on states with power, money, and vaccine production facilities to consider where doses should go. Should the spoils go to the strongest, or are there issues of fairness?
The US and UK have been consistent and clear in their commitment to helping themselves first. While both have made promises to help others, this will only come after they have met their own needs, and there is no evidence either country has yet exported anything at all.
The EU is probably the third largest producer of vaccines, after the US and China, but has exported 77 million doses of COVID-19 vaccines to numerous countries and to Covax, the vaccine scheme for developing countries, to which it is the largest supplier.
The western European vaccine-producing countries have also agreed to supply the rest of their production to the EU as a whole to be made available on a per capita basis to all member states. They are adopting a policy of sharing with non-producing countries globally, and with their neighbours, which of course means less for themselves.
This is seen as utter foolishness, and failure, by the UK government. Its measure of success is how much its gets for people in the UK.
On the other hand, the EU hopes to reach a herd immunity level of vaccination in the summer, probably only a month or two after the UK. It will have done so while showing some sense of global responsibility.