International supply contracts: supplying Peter and snubbing Paul?

Catherine Penny (pictured above, left, with Laura Beagrie), partner, and Laura Beagrie, professional support lawyer, Stevens & Bolton, consider an important issue brought to light by the scramble for coronavirus vaccines.

The recent and very public skirmish between the European Commission and AstraZeneca (LSE: AZN) over the COVID-19 vaccine demonstrates the difficulties suppliers face when demand for their product exceeds supply. This is often a problem for life sciences companies, particularly those supplying drug products, but rarely is the issue debated so openly and hotly. That the competing customers are the recently-divorced UK and European Union (EU) member states has only added salt to the wound.

In brief: AstraZeneca is manufacturing the vital vaccine in the UK and in Europe. It has faced production delays at some European manufacturing sites but not in the UK, leading the Commission to insist that AstraZeneca must use the UK manufactured products to supply under their agreement. However, reportedly, AstraZeneca has said that its UK supply contract prevents this and its contract with the Commission requires it to make 'best reasonable efforts' to supply, which would not extend to breaching its UK supply contract.