What the EU’s clash with AstraZeneca tells us about contract law

8 February 2021 | Thoughts and Opinions

After years of tense Brexit negotiations, it has barely taken four weeks for a messy legal row to break out between the EU and the UK. A dispute over the supply of the AstraZeneca Covid-19 vaccine was only resolved following a tense phone call between the Prime Minister and European leaders. 

But concerns about international co-operation and vaccines remain, and there is a real risk that another disagreement like this could happen again. At the heart of all of the controversy is an agreement, or indeed a lack of one, between AstraZeneca and the European Commission on the extent of the contractual obligations between them.

What the EU’s clash with AstraZeneca tells us about contract law

AstraZeneca (AZ), through a company statement as well comments from their chief executive Pascal Soriot, maintain that they have committed only to ‘best efforts’ to meet their supply timelines, which in their view does not confer a strict contractual burden upon them to actually meet those supply commitments. 

By contrast, EU Commissioner for Health, Stella Kyriakides, rejects this contention and argues that AZ are contractually obliged to use very significant efforts to meet delivery requirements, including tapping AZ manufacturing facilities in the UK.

The very public disagreement between the two parties regarding the extent of contractual relations between raises two questions:

  • What does it really mean, to commit to a ‘best reasonable effort’ or ‘best endeavour’? 
  • Is a ‘best reasonable efforts’ commitment good enough, to safeguard supply chains of a life-saving vaccine in the midst of a global health crisis?

Our commercial partner and contracts expert, Sarah Gunton considers this and gives her view on the issue. 

‘First of all it is important to note that it does not reflect well on the law – and those seeking to benefit from it – when the construction of a legal right might be a matter of life or death for many individual citizens. This is particularly the case where enforcement requires interpretation of very few words indeed.  

With the Astra-Zeneca contract, we are focusing on words over which lawyers frequently squabble over. It does not help that no one is really clear as to the meaning of ‘reasonable endeavours’, ‘best endeavours’ and, in this case, the hybrid compromise ‘best reasonable endeavours’.  

One of the biggest problems is that there are so few details publicly available relating to the contract, which lies at the heart of this matter. Part of the document was made public in a heavily redacted form. What you can read is far from crystal-clear from a legal point of view. In fact, the only thing that is crystal clear is the lack of clarity. 

AstraZeneca’s argument is that it pledged to “use its best reasonable efforts” to manufacture the initial doses agreed with the EU. The term “best reasonable efforts” is used 15 times in the parts of the published contract you can read.

The term is defined within the contract as: “The activities and degree of effort that a company of similar size with a similarly-sized infrastructure and similar resources as AstraZeneca would undertake or use in the development and manufacture of a Vaccine at the relative stage of development.” This does not help in a number of the contexts in which the term is used.

Frequently, the term “best endeavours” or variants are left undefined in a commercial contract so that, in the event of dispute, the courts interpret the term in the context of the particular contract. The law is, or should be, about fairness. However, where there are commercial issues involved, it is also about reflecting the allocation of risk agreed between the parties. Both the EU and AstraZeneca have the resources to procure the best in legal services.  

Given the complexity of the moral position here, it may be that the only option for those involved to enforce the commercial bargain. This row has also shone an important light on some of the perceived weaknesses of the EU: slowness, bureaucracy, a lack of commerciality.

I think these issues raise the risk of us seeing more disputes of this nature unfolding as additional vaccines are rolled out in the days, weeks and months ahead.’

If you have questions relating to the interpretation of a commercial contract in your business, we can put you in touch with our commercial law team, who advise companies at all stages of their lifecycle.

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