AstraZeneca and the European Union (EU) are at odds over vaccine deliveries. The British-Swedish firm has encountered production problems at a European plant and wants to deliver only about 31 million doses to the EU in the first quarter instead of 80 million doses, as planned. The stakes could not be higher: the more people are vaccinated quickly against COVID-19, the fewer lives will be lost. Every day counts.
However, the days pass with barren conversations, aggressive negotiation tactics, and recriminations. Last Wednesday evening, the disputing parties met in Brussels without result. The EU is owed only ‘best efforts’, says AstraZeneca, and British production is needed for the domestic market. It is alleged that the contract with the EU was concluded three months later than that with the United Kingdom (UK). The EU Commission is furious. Applying a ‘first come, first served’ principle to vaccine supplies would be unethical and illegal, said Stella Kyriakides, the EU Health Commissioner. The Commission argues that AstraZeneca has made firm supply commitments in the contract, a redacted version of which was published on Friday.
Irresponsible threats and posturing
The conflict escalated further when the EU revealed plans to control the export of vaccine to third countries, including by invoking Article 16 of the Northern Ireland Protocol of the Withdrawal Agreement. After a furious reaction from the UK, the Commission backtracked, but still: ‘To tackle the current lack of transparency of vaccine exports outside the EU, the Commission is putting in place a measure requiring that such exports are subject to an authorisation by Member States.’ The message is clear: if you do not deliver, we will not deliver.
The EU is sending inspectors to AstraZeneca's Belgian plant to investigate production problems. It is alleged that vaccine produced in Belgium may have been diverted to England. The emerging picture is that of a trade war and of controls, otherwise only known in the case of nuclear or chemical weapons. Trust between the parties has reached a low point.
This would be regrettable if the vaccine dispute was just about money. However, it is the lives of hundreds of thousands of humans which are at stake. Against this background, assigning blame, posturing and threats are not just ineffective tactics. It is irresponsible to engage in this kind of behaviour. The disputing parties are in effect gambling with the lives of thousands of people.
They should not delegate their responsibilities to courts or arbitral tribunals. No one (except a couple of law firms) is served by litigation before the courts in Brussels under the laws of Belgium over claims for damages due to infringed supply obligations, as foreseen in Section 18.5 of the AstraZeneca-EU contract. The task is to maximise vaccine supplies and to distribute production output as fast as possible, according to a plan that all parties can agree to because they see it as fair.
Mediation as a path towards a speedy, efficient and just solution
This is precisely what a mediation process could achieve. The (re-)negotiation of supply obligations would be assisted and guided by a trained and neutral mediator or panel of mediators.
The benefits of using mediation to resolve the vaccine dispute are obvious. The focus would be on the interests of the parties in speedy deliveries rather than on mutual reproaches and legalism.
The process is flexible. All parties to the conflict can and should be involved. This includes, in particular, the UK, which has also concluded a contract with AstraZeneca.
Production processes could be streamlined, possibly with the help of other suppliers and by the pooling of resources. This might ameliorate (if not eliminate) the problem of shortages. For example, French pharmaceutical company Sanofi has announced that it will manufacture 125 million doses of the BioNTech/Pfizer vaccine from summer 2021.
AstraZeneca could be given (stronger) incentives to supply as many doses as soon as possible by renegotiating price: vaccine price could be tied to delivery times, rewarding speedy deliveries with premia.
Distribution criteria can be discussed and defined in a transparent process. Allocating shortages pro rata based on total supply obligations vis-à-vis all partners could be a potential solution. At the same time, the amount and timing of contributions to the build-up of production capacities must also be considered.
Trust among long-term business partners could be restored. The reputational damage for all involved parties is already significant. It should not be allowed to become even greater.
A mediator is not a judge or arbitrator. He or she cannot impose a specific outcome on the parties. However, injecting ideas for a potential agreement is possible and potentially helpful. In escalated conflicts, proposals by the other side are regularly ‘reactively devalued’: they are treated with suspicion simply because it is the ‘opponent’ who makes them.
Dispute review board for future conflicts
As with other major supply contracts, a dispute review board could be set up, ie a panel of neutral experts who would accompany performance under the contracts and help resolve emerging conflicts early and quickly. Such boards are common in the construction industry but are also increasingly used in other areas. The current dispute between AstraZeneca and the EU will not be the last.
The responsibility of the disputing parties
In commercial conflicts, mediation is now part of our civil justice system and, indeed, of everyday life. Entrepreneurs appreciate its benefits. Politicians and bureaucrats, on the other hand, are often hesitant. They are usually untrained negotiators, overestimate their own negotiating skills, and they want to call any success their own.
This is a perilous mix of constraints and motives. The vaccine dispute is a conflict with enormous consequences for all of us. It must be handled with the utmost skill and professionalism. If you are sick, you go to a doctor or hospital and seek help from professionals. Negotiators who find themselves in a bitter and complex dispute should act likewise. Mediation professionals can help. At the same time, mediation is based on party autonomy: designing the mediation process and agreeing on a potential settlement remains the parties’ task and responsibility, guided by the mediator.
The parties to the current conflict should, indeed they must, immediately call in a mediator or panel of mediators in order to fulfil their historic responsibilities. It is against those responsibilities that the public will judge them.
For perceptive comments on a draft of this post I should like to thank Conor McLaughlin and Tilmann Frobenius.
Horst Eidenmüller is a statutory professor of commercial law at the University of Oxford.