Not Leading By Example

Setting an example is not the main means of influencing others, it’s the only means, declared Einstein.

In August 2010, the EU Commission issued a press release calling for increased use of mediation. It followed the EU Mediation Directive in 2008, hailed as an act of inspired leadership by the EU and represented a crucial step to encourage increased use of mediation in cross-border deals in Europe.

A decade later, almost to the day in August 2020, the EU Commission signed a €336 million/$408 million Advanced Purchase Agreement (“APA”) with AstraZeneca AB for the production, purchase and supply of the Oxford COVID-19 vaccine in the European Union. AstraZeneca is a British-Swedish pharmaceutical company based in Cambridge, England with $24 billion in annual revenues. It already had vaccine supply contracts with the governments of other countries, including the UK.

Within months, an intense dispute erupted. The Commission claimed the APA required AstraZeneca’s UK vaccine production plant to stop supplying the UK Government under its pre-existing contract with London, and to switch supplies to the EU. Caught in the middle, AstraZeneca, which produces this vaccine at cost, pointed to a provision in the APA that its contractual obligation is to use “Best Reasonable Efforts” to resolve problems resulting from supply agreements with other nations. 

Media reported that Commission officials met with AstraZeneca to try and resolve the EU’s problem. Evidently, they failed. To prove their arguments, the parties published the APA with a few redactions for public scrutiny. The EU Commission then announced that it would control exports to the UK and other non-EU countries of approved vaccines produced in the EU by both Pfizer/BioNTech and AstraZeneca in order to protect the EU’s own supplies. This caused an instantaneous political storm involving heads of governments in the EU itself, the UK and around the world. The WHO angrily declared that such vaccine nationalism risked prolonging the pandemic worldwide. 

Within 48 hours, failure to resolve this dispute resulted in the EU losing the trust and respect of many nations.  While the EU then backtracked, it was too late. The damage had been done and continues.  Launching questionable public threats to other nations proved to be a doomed negotiating strategy.

All this might have been avoided by the EU insisting on a mediation clause in the APA. The last part of the APA, clause 18 entitled “Miscellaneous”, comprises sub-clauses on interpretation, notices (the only part of clause 18 to be redacted in part), force majeure, waiver and governing law. Tucked away in the middle is sub-clause 18.5 headed “Resolution”. In a dozen lines, this states that in the event of a dispute arising, the parties will first refer such dispute to informal dispute resolution discussions between their respective Executive Officers. It immediately goes on to say that the parties irrevocably submit to the exclusive jurisdiction of the courts located in Brussels, Belgium to settle any dispute which may arise under or in connection with this Agreement or the legal relationships established by this Agreement. Missing from the 34-page APA is any mention of mediation in the event of a dispute.

If the EU Commission is serious about promoting mediation, they need to walk their talk. Dispute resolution provisions, including those on mediation, are not “miscellaneous” matters. Not providing for mediation in their own contracts shows a lack of seriousness and conviction by the institution that claims to be a global leader in promoting it and robs the EU’s stance on mediation of credibility. 

To reset its authority and credibility, the EU Commission could now publicly announce that it will insist on a mediation clause being included in all its procurement and other commercial contracts. Failure to set that example would be a failure of leadership.

                        author

Michael Leathes

Michael Leathes is a former in-house counsel and in that capacity a frequent user of mediation services. After retiring in 2007, Michael helped establish the International Mediation Institute (IMI) as a charitable institution and served in a pro bono capacity as the first Executive Director of the IMI. He stepped… MORE >

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