AstraZeneca’s handling of the contracts to supply the EU and UK with its vaccine have been under extreme scrutiny by the EU following its decision recently to notify Brussels of delays in production. But there is a lot more to this issue and Brian Milne investigates.
‘Oh what a tangled web we weave
When first we practice to deceive’
When Sir Walter Scott wrote these words in his epic poem Marmion: A Tale of Flodden Field in 1808 he would hardly have imagined that at the beginning of 2021 a tale of deceit by a combination of politics and business could ever happen. But it did and now that web of deceit is coming out in the open.
This story began when a hastily written regulation, the Northern Ireland Protocol, was agreed by the UK and EU as part of the trade deal agreed on 24 December put that compromise on Northern Ireland in jeopardy. It was an error of judgement that became a major diplomatic incident between the EU and UK. The story behind it is indeed a web of deceit that is now unravelling but is likely to remain a deceit to be tolerated all round because the need for vaccine goes before the ethics of how the Covid vaccine was produced and distributed.
It began on Friday, 22 January when AstraZeneca informed EU officials that the number of vaccine doses it expected to deliver by the end of March would be 60% lower than expected.
There was an immediate chorus of disapproval from EU capitals and the European Commission. AstraZeneca CEO Pascal Soriot gave an interview to an Italian newspaper in which he stated there were currently no such problems in ‘the UK supply chain’. The notion that doses of vaccine made in laboratories in the UK were exclusively for the UK market was news to Brussels, considering that the first batches of vaccine delivered to the UK had been made in the Netherlands and Germany. By the following Monday, the EU was announcing plans for action against pharmaceutical companies. The new regulation would require them to notify national governments of any vaccine produced that they planned to export out of the EU, described as an ‘export transparency mechanism’ in order to get ‘clarity’ on where they were going. In the case of deliveries going to the UK first, in this case Northern Ireland, the EU threatened to invoke Article 16 of the Protocol on Ireland/Northern Ireland. It states that if the Protocol ‘leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade’ then either the EU or UK can unilaterally implement ‘appropriate safeguard measures’.
It became something of a debacle that eventually Ursula von der Leyen who had been the mouthpiece of the European Commission and EU member states threatening to invoke Article 16 was forced to apologise for. In Northern Ireland the unionist DUP were demanding the Protocol be immediately revoked. In the end, mediation by the Irish government calmed troubled waters, the EU voted against the Protocol being abolished and the UK prime minister swept the issue under his carpet.
There was an entirely hypocritical element to the whole affair. On 13 January, a Democratic Unionist Party (DUP) MP , Jeffrey Donaldson, had asked Boris Johnson about the issues facing Northern Ireland in the House of Commons. He stated there were empty shelves in supermarkets, parcel deliveries from the mainland were having difficulties, there were supply chain issues for small businesses and Northern Ireland’s steel importers were facing stiff tariffs. He made it clear that despite the prime minister’s promise, Northern Ireland would continue to have free access to the UK single market. Boris Johnson, in response claimed stated goods were flowing effectively, in normal volumes between the UK and Northern Ireland, moreover that no trucks had been turned back. He said there were ‘teething problems’ and stated that if there should be problems the government believed to disproportionate, they would have no hesitation in invoking Article 16. It was interpreted as a real threat in Brussels, but along with the prime minister’s conscience, swept under the carpet in Westminster. This was the lead up that belongs to the events beginning nine days later on 22 January that are part of the web of deceit but that have very conveniently been cast aside by the UK government.
All of this raises the question as to why Pascal Soriot said what he did when interviewed by the Italian newspaper La Repubblica on 26 January, claiming that the UK had a better contract and that it signed before the EU then? He should have made it clear that the EU paid €336m in advance, thereby to all intents and purposes sponsored the vaccine whilst the UK conditions were that they pay every 30 days? In fact it now transpires that the EU had signed their contract a day before the UK. In effect, that is to say that before the vaccine actually existed, was in production and had been authorised for use, the EU had in essence helped pre-fund production of vaccines that the UK only has to pay for after delivery. What Pascal Soriot then said when interviewed by La Repubblica again on 18 February was a very different story to the one he had told at the end of January.
Thus AstraZeneca appear to have acted in bad faith. It is also very possible that they showed the UK the EU contract before it was signed by either party. It now seems that the UK contract was intentionally signed after the EU contract to get round restrictions. Now AstraZeneca is very likely to get away with what they did because everybody wants to have their vaccine. The UK also has a lot of explaining to do about the fuss they made, especially the hypocritical response to the threat to invoke Article 16 after their earlier hatchet waving, although we can be sure the prime minister will ignore that. But remember, above all else that EU in effect subsidised the UK’s supply by giving €336m in advance.
The Verhofstadt letter
This is what MEP Guy Verhofstadt, formerly the European Parliament’s Brexit Coordinator and Chair of the Brexit Steering Group from 2016 to 2020 wrote on 19 February:
“The devil is in the detail. The revelation of the contract between AstraZeneca and the UK yesterday is ample proof of that wisdom.
As the UK contract speaks of “best reasonable efforts” in the production and delivery of AstraZeneca’s Covid vaccine — which is also the case with the EU contract — part of the press was quick to conclude that there is no significant difference between both. At least not a difference that can explain the dramatic gap in delivery of doses between the EU and the UK. A more in-depth analysis however tells a different story.
While there is already a huge difference in size and detail between both contracts (the EU contract contains 18 articles over 34 pages, the UK agreement has 31 articles on 46 pages), and the two diverge in some of their essential provisions:
– The first thing to note is the timing of the signature: While the UK and AstraZeneca had an agreement already in May, it was eventually signed only a day after the contract with the EU.
Unlike the EU, the UK contract has an additional article (13.2.9) stating that AstraZeneca “shall not enter into any agreement with any foreign government, funder or third party that would by its terms conflict with AZ’s obligation hereunder or would be reasonably expected to prevent AZ from performing its obligation hereunder.” Clearly, Astra already saw its commitments to the EU, finalised a day earlier, as not impacting on its agreement with UK.
– Important, because differing outcomes in supply and delivery have off course become the main issue since.
The EU contract is based on an “estimated time schedule”, full stop. In the British contract by contrast, there is a precisely described procedure to guarantee a timely delivery of doses. This procedure is based on a “preliminary calendar” (with five delivery dates and volumes). AstraZeneca is obliged to notify to the UK authorities ultimately 30 days in advance the details of each of these deliveries. Once notified, AstraZeneca can no longer escape these precise commitments without permission of the UK authorities. Only a minor variance of dates (up to 5 business days) compared to the delivery schedule is possible due to the “unpredictable nature of the manufacturing of the products”, the so called “grace period”. All this is not foreseen in the EU agreement.
– Also different is the pricing. In both contracts the price is based on the “Cost of Goods”. But while the EU contract contains a fixed figure, the UK contract does not. The price charged in the UK contract will be calculated on an “Open Book Basis”, giving flexibility to AstraZeneca to later include costs that were not initially foreseen. And conversely giving the UK authorities leverage, through the open book method, to oblige AstraZeneca to fulfil its commitments on supply and delivery.
– The UK contract is fully concentrated on the UK supply chain, so as to guarantee the UK deliveries, while the EU contracts are solely focused on the overall supply chain, without special emphasis on the fulfillment of the EU-wide demand for doses.
This is the case in art. 4.2 of the UK contract, which states that AstraZeneca “owns or operates the facilities [to] ensure supply and Delivery of Products”. It also states that to “AstraZeneca’s knowledge” the UK supply chain is sufficient to provide the ordered quantities. No such clause is visible in the EU contract. (Interestingly, part of the UK supply chain appears to be based on the continent.)
– Remember that the EU has paid €336 million upfront to support production, before the products existed and had been authorized. The UK however only pays on invoice 30 days after delivery. So in effect the EU has helped pre-fund the production of vaccines that the UK only has to pay for afterwards.
– Lastly, there is the issue of transparency: The UK has written in provisions that it may disclose confidential information under certain circumstances, notably “to Parliament and Parliamentary Committees or if required by any Parliamentary reporting requirement “(17.13.2). The European Parliament will note that the Commission has failed to demand or achieve a similar opening.
In sum, the balance of power tilts notably towards the UK. Considering the timing and difference in approach of the two contracts, this appears to be no coincidence.
Since trust between the parties to any agreement is vital, and since the outcome of this particular contract has led to an enormous amount of public distrust, both the Commission and AstraZeneca have a lot of explaining to do.”
Questions need to be raised about the ethics of AstraZeneca’s handling of the contracts the EU and UK respectively signed, before the vaccine existed and had been authorised for use, although it is thought, as Verhofstadt says, that the UK had specific provisions written into their contract that gave them priority, despite what had previously been understood and signed for in the preceding EU contract. If, as suspected, AstraZeneca based their negotiations on the basis of having revealed all or any of the EU’s provisions to the UK then a great deal more than the EU’s apology for their rash action is due from Pascal Soriot for his contradiction and, possibly, ‘distortion of facts’ with his company the main beneficiary all round. Politicians and businessmen have colluded to deceive in a way that is at the very least, in terms of relations between governments, highly unethical and for the millions of people waiting for vaccinations frustrating. It is, indeed a tangled web in which deceit hangs from every strand.