Despite AstraZeneca’s amazing success story in developing and manufacturing a vaccine to fight Covid-19, the company has been in the news more recently for a different reason: the disagreement with the EU as to whether AstraZeneca is in breach of its contractual obligations.
The EU believes that AstraZeneca has failed to supply the agreed quantity of vaccines to the EU as provided for in the relevant contract. It wants AstraZeneca to deliver doses produced in the UK to the EU to make up for the shortfall. However, AstraZeneca’s CEO has been reported as saying: “Our contract is not a contractual commitment. It’s a best effort.”
In English law, the wording of the contract is key. However, the AstraZeneca/EU contract is governed by Belgian law and gives jurisdiction to Brussels, which may take a different approach to English courts applying English law. Nevertheless, we can all learn some lessons from it.
The publicly available contract between the EU and AstraZeneca is heavily redacted. However, we can see that it requires AstraZeneca to use its ‘best reasonable efforts’ to manufacture the ‘initial Europe doses’. ‘Best reasonable efforts’ is defined in 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’. ‘Initial Europe doses’ is defined in the contract as ‘300 million doses of the vaccine’.
Qualifying wording such as ‘reasonable efforts’, ‘best efforts’ or a hybrid (as is used in this case) ‘best reasonable efforts’ is frequently squabbled over by lawyers.
The aim of such qualifying wording is to avoid absolute, unqualified obligations regardless of circumstances and to give some protection to parties like AstraZeneca in the event that they are not able to deliver. Unfortunately, this can often by its nature result in a lack of clarity and the potential for disagreement, as has happened in this case. The defined term in this contract does not afford a precise interpretation and leaves room for arguments. Interpreting the meaning of the wording in the circumstances may require a factual investigation and detailed review of the heavily redacted agreement (of which we have not had sight).
This case highlights the importance of certainty of terms. Whilst it is understandable that a delivering party will want to protect themselves from absolute obligations, particularly where there are uncertainties regarding the deliverables, it can be best (especially from a receiving party’s point of view) to agree specific measurable actions from the outset where possible. It also shows that widely drafted definitions are not always helpful and may lead to disputes, uncertainty and expense further down the line. On the other hand, however, for a delivering party it may be advantageous to build a degree of flexibility into the contract, which is why these types of clauses are so often deployed.
Whilst the current situation therefore leaves it open to the parties to dispute their interpretation of the contractual terms, it has been reported by POLITICO that in the unredacted version of the contract (which we have not seen) the EU has also waived its right to sue AstraZeneca over any delays in vaccine deliveries. If that is the case then this will, of course, give AstraZeneca some comfort in resisting any claim threatened by the EU.
With that in mind, we hope this grey cloud of disagreement blows over soon and that AstraZeneca is able to shine in all its vaccine glory once again!