Force majeure under the “European Commission-AstraZeneca" & "European Commission-Curevac” contracts

by César Pires, 03 May 2021 

a) The use of force majeure clauses in commercial contracts

According to the International Chamber of Commerce model clause “force majeure  means the occurrence of an event or circumstance (“Force Majeure Event”) that prevents or impedes a party from performing one or more of its contractual obligations under the contract, if and to the extent that the party affected by the impediment (“the Affected Party”) proves: a) that such impediment is beyond its reasonable control; and b) that it could not reasonably have been foreseen at the time of the conclusion of the contract; and c) that the effects of the impediment could not reasonably have been avoided or overcome by the Affected Party.”[1]

When the contracting parties put these clauses in the agreement, they “try to neutralize the differences in national regulations as regards impossibility and supervenience in general, when it is not possible to use uniform rules, for example in the case of the international sale of mobile goods (such as the 1980 Vienna Convention, Article 79)” [2].

b) Interpretation of a force majeure clause

The term force majeure may have a different meaning when it is used within the framework of a legal rule or contract. In the latter case, it is important to note that we are dealing with a contractual clause that calls for a specific interpretation under Article 8 CISG. And we should not interpret this clause in accordance with domestic doctrines of interpretation, because “in the interpretation of this [article 8 CISG] regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.” 

The force majeure clause, once it has been incorporated in the contract, must be interpreted in accordance with the established canons. The interpretation of the force majeure clause shall be made in accordance with the provisions of Article 8 CISG.

According to Article 8(1) CISG “for the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was”, and according to n.º 2 “if the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.” On the other hand, n.º 3 of this Article states that “in determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.”

c) The force majeure clauses under the “European Commission-AstraZeneca and European Commission-Curevac” contracts.

The application of the CISG to the European Commission-AstraZeneca and European Commission-Curevac contracts is a topic that could be raised soon, as mentioned by Till Maier-Lohmann[3]. However, even if the contracts concluded by the European Commission (Advance Purchase Agreement) may not be regulated by the CISG, there will still be a broad path for the application of the CISG in the context of the contracts concluded between the Member States and the pharmaceutical companies. Portugal is one of them and the CISG will enter into force on 1 October 2021. The Commission has already decided to sue Astrazeneca. “The Commission's argument, laid out at the preliminary hearing this past Wednesday at the Belgian court of first instance by its lawyer Rafael Jafferali, is that the company was not using all the production sites included in its contract.”[4] A full-day hearing in Brussels is already scheduled for 26 May.

If we compare the Commission-Astrazeneca contract with the Commission-Curevac contract we should conclude that we are in front of individually negotiated contracts. 

Special Condition I.1.2. of Commission-Curevac contract define “Force majeure [has] any unforeseeable, exceptional situation or event beyond the control of the Parties that prevents either of them from fulfilling any of their obligations under the APA. The situation or event must not be attributable to error or negligence on the part of the Parties or on the part of the subcontractors and must prove to be inevitable despite their exercising due diligence. Defaults of service, defects in equipment or material or delays in making them available, labour disputes, strikes and financial difficulties may not be invoked as force majeure, unless they are caused by a relevant case of force majeure.”

General Condition II.11.11. of this contract stipulates that:

In contrast the Commission-AstraZeneza contract has a different wording in Condition 18.7:

But, according to clause 18.9 “this Agreement constitutes the entire agreement and understanding of the Parties relating to the subject matter of this Agreement and supersedes all prior oral or written agreements, representations, understandings or arrangements between the Parties relating to the subject matter of this Agreement including the Tender Specifications set forth in the Commission Call for Tenders SANTE/2020/C3/037 – for the development, production, priority-purchasing options and supply of COVID-19 Vaccines for EU Member States (“Tender Specifications”).

Apparently, this “Merger Clause [aims to] prevent recourse to extrinsic evidence”[5]. But the wording of this clause refers to “the subject matter of this Agreement”, which according to clause 3.1. of the contract is the “Order Form” and its nature of “an essential and important part of [the] Agreement” (3.1.(a)) seems not to prevent recourse to extrinsic evidence. According to all these clauses we should consider that the Merger Clause may not prevent absolutely the recourse to extrinsic evidence, because it is not “clear the parties’ intent to derogate from Article 8 CISG for purposes of contract interpretation”.   The wording of Article 8(3) CISG refers “any subsequent conduct of the parties” and the wording of the Merger Clause does not exclude this relevant factor to the interpretation of the contract.

 d) Some remarks and questions about the force majeure clause under the “Commission-Astrazeneca” contract

The Commission-Astrazeneca contract is quite original and may cause some problems because it introduces epidemics (during this pandemic moment) as an event beyond the reasonable control of the non-performing Party. We have a lot of new variants of the Virus. We may ask if the parties knew or ought to have known that new variants of the Virus will come into existence when they signed the contract, on 27 August 2020?

Is it possible to consider that the new variants of the Virus constitute an event beyond the reasonable control of the non-performing Party? What does it mean epidemics and quarantines as force majeure events in these COVID-19 times?

Apparently, the force majeure clause inserted in Commission-Curevac contract seems to be a broader force majeureexcuse due to the simplicity of the wording. Despite this fact, the parties may rely on Article 79 CISG to exonerate itself because the mere reference to national law does not constitute an exclusion of the CISG[6], and “clear intent is required for ex ante exclusion” [7] of this CISG provision.