The EU and UK’s AstraZeneca Tug of War

The EU and UK’s AstraZeneca Tug of War

Commentary
Posted on: 31st March 2021
Daniel Sleat
Special Advisor

The UK’s comparative success in rolling out vaccinations for its population has stood in contrast to the situation in the EU. Tensions have arisen with the EU claiming AstraZeneca (AZ) has not been meeting its commitments to the bloc to supply it with the quantities of vaccine it ordered and instead prioritising the UK. EU leaders went as far as proposing an export ban to keep vaccines produced on the continent within the union. Beneath the headlines there has been considerable confusion on the facts of AstraZeneca’s agreements with the UK and EU. This blog seeks to clarify that confusion.

While the EU and UK contracts with AstraZeneca were agreed within a day of each other, and share a number of similarities, there are also considerable differences.

The UK engaged earlier and more strategically with AstraZeneca

While the EU and UK agreed their contract at roughly the same time, on the 26th and 27th August respectively, the UK engaged earlier and more strategically.

The UK government committed £65m to AstraZeneca in April 2020 to support a UK-specific supply line for its vaccine. This commitment evolved into a binding agreement in May to ensure “the development of a dedicated supply chain for the UK”.

Business Secretary Alok Sharma went as far as to state that in May that, “The UK will be the first to get access,” to the vaccine.

These arrangements were then formalised into a contract in August.

The contracts are based on different legal systems

The EU’s contract with AZ is written in Belgian law, which means it is enforceable only in the scope of the parties acting in good faith and making best reasonable efforts to keep to the commitments.

The UK’s contract is written in English law, enforceable by its exact wording. This becomes significant in the context of the enforcement mechanisms the UK contract contains.

The UK’s contract has better enforcement mechanisms

A major difference between the contracts is that the UK’s agreement contains better enforcement mechanisms.

The UK contract sets out, for instance, that if any party tries to pressure AstraZeneca (or any subcontractors) to do anything that could impact supply of the vaccine, the UK government may terminate the deal and action what appear to be punishment clauses (although they are redacted).

By contrast the EU is only able to withhold payments until AstraZeneca delivers the vaccine, or until it assists in finding more producers to make the vaccine.

The EU also waived its right to sue AZ in the event of delays. The contract states that if AZ’s performance is: “impeded by any such competing agreements, AstraZeneca shall not be deemed in breach” of its agreement with the EU.

The UK secured a specific supply line

Through its early and strategic engagement with AstraZeneca, dating back to April last year, the UK government secured a UK-specific supply line for the vaccine.

The UK contract states that AstraZeneca “owns or operates the facilities to ensure supply and Delivery of Products”. It contains a specific commitment by AZ that the UK supply chain “will be appropriate and sufficient” for the supply of the doses the UK purchased.

The EU’s contract by contrast states AZ will only make “best reasonable efforts” to supply and manufacture in the EU, which includes the UK sites.

The EU paid upfront, the UK pays on delivery

The EU paid €336m upfront to AstraZeneca to support production. This was paid before the vaccine existed and had been validated. The UK government, by contrast, only needs to pay by invoice 30 days after delivery.

The EU’s problem with AZ is not one of supply

Despite what you may have come to believe from the headlines, the EU’s issue with AZ vaccines is not, in fact, supply.

The back and forth stance the bloc has taken on the safety of AZ, despite the European Medicines Agency declaring it safe, has damaged confidence in the vaccine.

A recent survey by YouGov has shown that fewer than half of Spaniards, Italians, French and Germans view the AZ vaccine as safe. Of these populations the following percentages now believe AZ is unsafe: Germany, 55 per cent; France, 61 per cent; Italy, 54 per cent; Spain, 59 per cent.

In significant part for this reason, the EU is not making full use of the vaccines it is getting from AZ. As of 22 March France had distributed 1.4m out of 2.7m doses of the vaccine that are available. Germany has received 3.4m doses but only used 1.8m. The Netherlands has only used 38 per cent of the supply of AstraZeneca it has.

Conclusions

The UK moved faster and more strategically to secure its agreement with AstraZeneca. This includes securing a UK-specific supply line and a contract that includes better enforcement mechanisms.

The EU by contrast came later to the game, appears to have used less strategic negotiators for the task of securing its agreement and secured a less advantageous agreement than the UK’s.

On top of this the union has been beset by internal missteps on handling the rollout of AZ, causing alarm and a lack of confidence.

All of the above leaves two key implications for next steps:

  1. Improved communications campaigns:
  • A communications campaign within the EU to restore confidence in the AZ vaccine.
  • A new approach to communicating the need to vaccinate the world, this year: no one is safe until everyone is safe.
  1. Clear roadmap: AstraZeneca should set out urgently and publicly a clear roadmap on how, when and in what quantity it will supply the UK and the EU. 

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