Life Sciences A to Z: S is for specific performance

Life Sciences A to Z: S is for specific performance

Life Sciences A to Z: S is for Specific Performance

The dispute between the European Commission and AstraZeneca regarding supply of the COVID-19 vaccine has been covered widely in the news. AstraZeneca faced production delays, resulting in a demand by the European Commission that AstraZeneca must use UK manufactured products to supply the EU. AstraZeneca argued that it was prohibited from doing so due to the terms of its contract with the UK.

In April 2021, the European Commission commenced legal action against AstraZeneca in Belgium. While we have not seen the legal papers, we understand from press reports that the Commission is seeking delivery of 120 million vaccine doses by the end of June 2021. Lawyers representing the Commission have confirmed that the Commission is seeking, “preliminary injunctions in emergency proceedings... The main goal of the action is to speed up the production and delivery of vaccines to the Member States”. The legal action will be dealt with according to an accelerated timetable.

Such mandatory injunctions are relatively unusual. In what circumstances can a contractual party seek a court order for the ongoing supply of a product rather than, or as well as, damages or compensation for breach of contract?

Specific performance is a recognised remedy under English law. An order for specific performance will oblige a party to perform its positive contractual obligations. It is a discretionary and exceptional remedy and can be awarded where damages alone would not be adequate.

Often in commercial cases for the supply of goods, an order for specific performance would not be appropriate as the same or a similar product might readily be obtained elsewhere. In such a case, damages for breach of contract would be an adequate remedy. However, where a product is unique and not easily obtained from another source, specific performance can be ordered.

While unusual, specific performance can also be ordered in cases concerning the provision of services. For instance, it may be possible to seek an order for specific performance in the context of collaboration, marketing and distribution agreements. One such case, where our firm successfully obtained an order for specific performance, involved an agreement for the sale, co-promotion and distribution of a pharmaceutical product. The defendant owned the rights to the product. The claimant promoted the product and formed part of the supply chain, and was paid commission.

There was not an intense or close day-to-day relationship required for the provision of the services. The relationship proceeded positively until the defendant purported out of the blue to terminate the contract. We were able to show that the alleged grounds for termination were not merited and a court order that the defendant should permit the claimant to continue promotion and distribution of the product in accordance with the contract was granted.

The case concerned commercial arrangements made between independent companies involving the employment of no named individuals and where the services being provided were not personal in nature. Damages were considered not to be adequate because of the relatively unique nature of the product and where that sat within the claimant’s suite of products. Effectively the court order preserved the status quo.

However, specific performance cannot be ordered in certain circumstances. An example might be where a dispute arises under a contract that is highly personal in nature, such as an employment contract, or circumstances that would require constant supervision or monitoring to enforce the order made.

Whether the European Commission will obtain an order for specific performance of its agreement with AstraZeneca, and accelerated delivery of vaccines, remains to be seen. More generally, sometimes rigorous and tenacious action is required to address contractual disputes where out of court resolution is not possible, and all options should be considered and explored.

Our article from earlier this year about the EU-AstraZeneca dispute can be found here.

A to Z LISTINGS (TO DATE)

Search our site