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EU seeks large AstraZeneca fine for alleged contract breach

Stock MarketsMay 26, 2021 12:43PM ET
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4/4 © Reuters. Lawyers for the European Commission, Fanny Laune, Paul Alain Foriers, Charles-Edouard Lambert and Rafael Jafferali, arrive to attend a hearing at a Belgian court in the legal case against the AstraZeneca firm accused by the EU of having breached its contr 2/4

By Francesco Guarascio

BRUSSELS (Reuters) -A lawyer for the European Union accused AstraZeneca (NASDAQ:AZN) on Wednesday of failing to respect its contract with the 27-nation bloc for the supply of COVID-19 vaccines and asked a Belgian court to impose a large fine on the company.

The EU took the Anglo-Swedish firm to court in April after the drugmaker said it would aim to deliver only 100 million doses of its vaccine by the end of June, instead of the 300 million foreseen in the supply contract. Brussels wants the company to deliver at least 120 millionvaccines by the end of June. AstraZeneca had delivered 50 million doses by the beginning of May, just a quarter of the 200 million vaccines foreseen in the contract by then. "AstraZeneca did not even try to respect the contract," the EU's lawyer, Rafael Jafferali, told a Brussels court in the first hearing on the substance of the legal case.

He said the EU was seeking 10 euros ($12.2) for each day of delay for each dose as compensation for AstraZeneca's non-compliance with the contract.

This could be as high as 200 million euros ($244 million) per day from July 1, AstraZeneca's lawyer Hakim Boularbah told the court, asking the judge to revise it down in case of a negative verdict.

Jafferali said the EU was seeking an additional penalty of at least 10 million euros for each breach of the contract that the judge may decide.

The next hearing is on June 4 followed by a verdict which is expected sometime later that month.

NOT A CONTRACT FOR SHOES

"This is not a contract for the delivery of shoes or T-shirts," Boularbah said, stressing the complexity of manufacturing a new vaccine.

The EU accusations were "shocking", Boularbah said, noting the company had formulated its delivery targets based on early estimates of production capacity. He added that the vaccine was sold at cost.

AstraZeneca has repeatedly said the contract was notbinding as it only committed to make "best reasonable efforts" in delivering doses. Jafferali said that principle had not been respected because the drugmaker had not delivered to the bloc 50 million doses produced in factories that are listed in the contract as suppliers to the EU, including 39 million doses manufactured in Britain, 10 million produced in the United States and 1 million in the Netherlands.

The lawyer said these doses were "diverted" to other clients. The company has said that doses produced in Britain were reserved under a contract the British government signed with the University of Oxford, which developed the vaccine.

AstraZeneca's lawyer said the British factories were mentioned in the EU contract for information, but there was no commitment to use them. They were expected to produce vaccines solely for Britain until February 2021, when the company expected to deliver 100 million doses to London. It has not yet completed its deliveries to Britain. Jafferali said AstraZeneca had pledged in the EU contract not to have other engagements that would prevent it from abiding by the terms of the deal. The lawyer also said AstraZeneca had failed to communicate to the EU in a timely manner the magnitude of its supply problems because it repeatedly sent messages, including publicly, that it was able to meet its targets, before finally admitting there were large shortfalls in March. The company had warned the EU in December of productionproblems, but communicated only at the end of January, just before the start of deliveries, a much larger cut than initially expected for the first-quarter.

Boularbah said AstraZeneca had continuously kept the EU informed about its production plans and problems.

He said the company had informed the EU last summer that the UK-based factories making the vaccine were to be used exclusively to supply Britain as part of its contract with the government there.

($1 = 0.8173 euros)

EU seeks large AstraZeneca fine for alleged contract breach
 

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