EU in 'damage control' as bloc turns to Covid-19 vaccine export curbs

The bloc's executive arm announced that vaccine makers must obtain prior authorisation before sending shots manufactured in the bloc to other countries. PHOTO: REUTERS

BRUSSELS (BLOOMBERG) - The European Union's drastic plan to restrict exports of Covid-19 shots is more of a political ploy as prospects of successfully suing drugmaker AstraZeneca for reining in supplies of its vaccine appear slim, lawyers and trade experts said.

The bloc's executive arm announced on Friday (Jan 29) that vaccine makers, including AstraZeneca, must obtain prior authorisation before sending shots manufactured in the bloc to other countries. The escalation follows a very public dispute with the company triggered by production delays at a Belgian plant.

"It's pure damage control," says Mr Philip Haellmigk, a lawyer in Munich who specialises in trade and Customs controls. "This is a reaction to the failure of the EU to order enough vaccines in time" and is now about using "the tool of export control licences to keep the vaccines in the EU", he said.

The move - on the same day the EU's drug regulator cleared the Covid-19 vaccine from AstraZeneca and the University of Oxford for all adults - comes as pressure mounts on top EU officials for lagging far behind the UK and US in the race to inoculate citizens. The EU had administered just 2.5 doses per 100 people in the bloc, compared with 8.3 in the US and 11.9 in the UK, according to Bloomberg data.

EU Trade Commissioner Valdis Dombrovskis on Friday defended the restrictions, which will run until the end of March and allow EU states to block exports if a set of pre-defined criteria haven't been met.

"The protections and safety of our citizens is a priority and the challenges we now face left us with no choice but to act," Mr Dombrovskis told reporters in Brussels.

The EU further fanned political tensions with the UK on Friday by also seeking to limit exports to Northern Ireland before retreating hours later after a backlash over the move. Introducing restrictions between the Republic of Ireland, which is part of the EU, and Northern Ireland would contravene one of the key principles of the Brexit deal, which sought to avoid border controls after decades of violence over the status of Northern Ireland.

The EU's initial move prompted a rare show of unity by traditional political enemies in Northern Ireland, who uniformly decried the initial decision. Even with the Northern Ireland issue resolved, the bloc's actions remain hugely controversial and have been criticised by the World Health Organisation, businesses and governments.

Export curbs are not a new tool in the European Commission's arsenal and are typically applied to goods deemed sensitive, including weapons. But they are likely to inflame relations with the UK.

It "sets a dangerous precedent", said Mr Scott Rosenstein, healthcare adviser at the Eurasia group. "There has always been the expectation that when the supply exceeds the demand that countries who are manufacturing the vaccine will work to make sure that their domestic supply is spoken for. That's what we're seeing here."

Three million doses

Messages left with the AstraZeneca press office were not immediately returned. Mr Pascal Soriot, the company's chief executive officer, has said that once it got EU approval it would ship at least three million doses immediately, with a target of 17 million by February.

While the controversial step raises questions about legality, World Trade Organisation rules regarding export restrictions have exemptions in the event of critical shortages of essential products or the need to protect human life and health.

Far less clear are the chances of EU success in a simmering contractual dispute with AstraZeneca - even with home advantage in Belgian courts.

"What could they claim? Not so much at the moment, if you ask me," said Mr Christophe Ronse, a healthcare and IP lawyer for Altius in Brussels. "There is not so much they can do, unless they have some smoking gun. It's an issue of political pressure." Earlier on Friday, AstraZeneca succumbed to pressure from the commission to disclose its contract with the EU.

'Best reasonable efforts'

But rather than providing proof that the drugmaker was in breach of the agreement, lawyers said the fine print, including the phrase "best reasonable efforts", may give the drugmaker wiggle room to argue it didn't violate contractual terms.

While the contract refers to a "binding allocation" of initial Europe doses, that clause may be undermined by the best reasonable efforts expectation, said Professor Christopher Newdick, a health law expert at the University of Reading.

"What does the word 'binding' mean in a general context of best endeavours?" asked Prof Newdick. "As so often happens, a problem has arisen which is not squarely addressed and so lawyers need to interpret these clauses in the context of the contract as a whole."

If the EU believed it had such a strong claim, it would have gone to court in Belgium to make an order in its favour, said Mr Steven Barrett at Radcliffe Chambers in London.

"By not going down that route, it has chosen a political solution," he said.

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