Covid-19 vaccines and pharmaceutical disputes: how can arbitration be used to resolve these effectively?

Article 24 November 2021 Experience

If 2020 was the year of the coronavirus pandemic, 2021 is the year of vaccines. The distribution of vaccines and pharmaceuticals in general poses legal challenges and complex, multi-jurisdictional, and high value disputes may arise from it.

Arbitration can be an effective dispute resolution mechanism to solve potential disputes stemming from the distribution of coronavirus vaccines and pharmaceuticals – here we explore why.

Agreements that support the distribution of Covid-19 vaccines

To achieve greater equity in getting access to vaccines, the WHO, UNICEF, Gavi, and CEPI have created the Covax Facility. The Covax Facility, by connecting States in need of vaccines and manufacturers, ensures that countries will be guaranteed sufficient doses to protect a certain proportion of their population and lower-income countries can secure vaccines doses. Covax has signed agreements with States regulating the distribution of Covid-19 vaccines under the programme. These agreements include an arbitration clause to solve disputes before an ad hoc arbitral tribunal according to the UNCITRAL rules.

The Covax Facility programme’s use of alternative dispute resolution mechanisms is indicative of the effectiveness of arbitration to solve dispute stemming from the distribution of Covid-19 vaccines and pharmaceuticals in general.

Distribution of Covid-19 vaccines and pharmaceuticals comprises a net of agreements among different stakeholders, such as collaboration and R&D, licence, and distribution agreements. These agreements reveal the diversity among players in the pharma industry, including API or drugs developers, pharma manufacturers, and buyers, such as States or public entities. Moreover, such agreements often provide for the allocation and sharing of IP rights, particularly patents.

The benefits of using arbitration to resolve pharmaceutical disputes

Disputes stemming from pharmaceuticals agreements are complex as they often involve parties from different jurisdictions — which have signed connected agreements — high value claims, and technical issues related to life sciences and IP rights. Arbitration offers an opportunity to resolve these disputes in a flexible and confidential fashion. Some of the key benefits are:

Selecting an expert who understands your area

The will of the parties is a mantra in arbitration. The parties can choose the arbitral rules that they want to use in the proceedings and appoint arbitrators, who are impartial and independent, therefore guaranteeing neutrality. As pharmaceutical disputes require a high level of expertise in the life sciences field, international arbitration allows the parties involved to select arbitrators with the required technical expertise to resolve pharmaceutical disputes. Equally, the parties may ensure that the tribunal appoints an independent expert appointed by the arbitral tribunal.

Choosing a neutral jurisdiction to hear the dispute

Parties drafting an arbitration clause in pharmaceutical agreements should also include the seat of the arbitration proceedings. The seat of arbitration proceedings determines the law governing the arbitral proceedings. Choosing a jurisdiction with developed arbitration legislation and arbitration friendly domestic courts, such as London, is key for the success of arbitration proceedings. Moreover, choosing a solid seat of the arbitral tribunal guarantees a level of neutrality in the negotiation and dispute resolution process, particularly between parties from different jurisdictions.

It’s private
Arbitration proceedings are confidential. As pharmaceutical disputes involve high-value claims revolving around IP rights, such as patents, and trade secrets, parties involved in pharmaceutical disputes will be able to have the arbitration proceedings confidential, including the submission of the evidence — documents and witness/expert evidence — and hearings.

Injunctive relief is available

Besides confidentiality, the availability of injunctive relief is critical for patent disputes where breaches of patent rights may result in significant losses in terms of market share and profits. Many arbitral institution rules also include provisions on the use of an emergency arbitrator, who allows a party to request emergency interim measures before the constitution of the arbitral tribunal.

It’s easier to enforce arbitral awards

Another advantage of arbitration is the easier degree of enforceability of awards, as opposed to judgements of domestic courts. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards provides for a swift process to recognise and enforce foreign arbitral awards in more than 160 countries. The courts of the seat will have jurisdiction to recognise and enforce the arbitral award. Therefore, choosing a seat where domestic courts do not interfere with the enforcement of the award is important when pharmaceutical companies sign distribution agreements with public entities in foreign jurisdictions, such as the agreements that Covax has signed with States to distribute Covid-19 vaccines.

Introduce arbitration clauses at the outset

Pharmaceutical companies involved in the distribution of Covid-19 vaccines and pharmaceuticals should consider the introduction of robust arbitration clauses in their collaboration and R&D, licence, and distribution agreements. These clauses can help solve potential disputes with stakeholders in different jurisdictions through a confidential and flexible dispute resolution mechanism, with benefits to both parties.

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