New Delhi: It made big news last year when a volunteer in the Covishield clinical trials sued the Pune-based Serum Institute of India (SII) after allegedly experiencing “neurological and psychological” side-effects. The vaccine manufacturer dismissed the claim as “malicious and misconceived”, and slapped a defamation suit on the volunteer. SII chief Adar Poonawalla subsequently cited the potential toll of “frivolous claims” and raised a demand: Indemnity for vaccine manufacturers “against all lawsuits”.
Indemnity is also among the issues being thrashed out by the Government of India and US pharma major Pfizer — which has secured indemnity in the US, the UK and several other countries — during their discussions on bringing the latter’s vaccines to the country. Moderna, another US-based vaccine company India is in talks with, has demanded indemnity as well.
Indemnity has also been cited as a potential factor of delay for India’s share of vaccines from those being donated by the US.
In the realm of Covid vaccination, indemnity has emerged as one of the key buzzwords — a fact that can be attributed to the breakneck speed at which the Covid vaccines have been developed and rolled out.
The literal meaning of indemnity, according to the Oxford Dictionaries, is “protection against damage or loss, especially in the form of a promise to pay for any damage or loss that happens”.
Applied to vaccines, it is a legal bond that protects a company from being sued in case a recipient suffers grievous side-effects. If indemnified, the company stands protected against any potential civil liability caused by unforeseen complications.
But what indemnity constitutes in a certain jurisdiction depends on the exact agreements signed with the authorities there. The protection offered, for example, can be partial or complete. An indemnity clause may protect a vaccine maker from lawsuits about side-effects, but not if the adverse reaction was the result of careless manufacturing practices.
Also, an indemnity clause may not necessarily protect the vaccine maker against all lawsuits.
Why the demand
The signing of indemnity bonds is not new, according to advocate Anand Grover, who specialises in healthcare and pharmaceuticals.
“For instance: If a hospital has been taken over by a new company, the latter will sign an indemnity bond with the outgoing owner to ensure that if any patient (already admitted in the hospital) sues them, the compensation will be paid by the former owner,” he said.
However, it is the first time in India that indemnity is being discussed for vaccine manufacturers.
In the context of Covid, pharma and vaccine giants have primarily demanded indemnity bonds as part of their legal contracts because of the absence of long-term studies on the safety of the shots.
“These vaccines have been developed at a super speed… It took just 10 months in place of 10 years and then they got emergency-use approvals. In case of any unknown side-effects that may become visible tomorrow, companies want to protect themselves today,” said a senior official from a top vaccine maker seeking indemnity.
What is full or partial indemnity?
Former judge Bharat Chugh, an advocate in the Supreme Court, said “the crux of indemnity lies in its complex structure and clauses that are notoriously difficult to negotiate”.
Indemnity is a good principle, given the circumstances, he said, but pointed out that the US “has indemnified the vaccine manufacturers… with certain exceptions”.
“An indemnification provides some measure of protection to the manufacturer, but if there was a fault in the manufacturing process or the risks of the vaccine were not conveyed to the recipient, the manufacturer may still be liable (for giving compensation),” he said.
In the United Kingdom, while indemnity has been granted to Pfizer, the government has added Covid shots to its ‘Vaccine Damage Payments Scheme’, authorising a one-time payment of £120,000 for individuals left disabled by vaccine side-effects.
Experts in India have called for similar special processes to be instituted in the country.
“Currently, in India, no such system regarding indemnification has been worked out. These matters are still governed by the principles of the Contract Act. A separate law may be needed to streamline such matters,” said Chugh.
While legal experts said they were not clear on the exact clauses that the Government of India is planning to offer the vaccine makers, they said covering the company for just the unforeseen events could mean partial indemnity.
“Partial indemnity clauses may not protect the company against negligence or poor quality of vaccines, such as mixing of vaccines, lack of hygiene and good manufacturing standards. Full indemnity may protect them,” said Chugh.
According to advocate Anand Grover, “partial indemnity could also mean that the government will pay half of the damages, while the company will be liable to pay the rest”.
Malini Aisola, a public health activist and co-convenor of the NGO All India Drug Action Network (AIDAN), said the “process of granting indemnity should be transparent”.
“India needs to decide what would be the remedies and protections available to vaccine recipients that suffer injury, harm or death following Covid vaccination. All of the vaccines being used are under emergency authorisations that call for putting in place a compensation mechanism,” she added.
“The government should most definitely be on its guard and should take the public into confidence because of the risk of striking an uneven bargain for 50 million doses.”
What are regular conditions of indemnity bond?
Each company that signs an indemnity bond with governments does so in keeping with their final negotiations. However, usually, all such contracts ask the governments in question to first recognise the possible risks related to the vaccines.
For instance: In the island country of the Dominican Republic, Pfizer has signed a contract where the government “acknowledges and agrees that suppliers’ efforts to develop and manufacture the vaccine are aspirational in nature and subject to significant risks and uncertainties”. This document is unredacted and not the definitive agreement, but shows the broader provisions.
Under the indemnification clause, the document says the government must demonstrate that “suppliers and their affiliates will have adequate protection, as determined in suppliers’ sole discretion, from liability for claims arising out of or in connection with the vaccine or its use”.
The government has said it has adequate statutory and/or regulatory authority and adequate funding to undertake and completely fulfil the indemnification obligations and provide adequate protection to the suppliers and its affiliates from liability for claims stemming from vaccine use.
The contract also promises the suppliers “no liability for any failure”, including the failure to deliver doses by estimated delivery dates. The government, it adds, won’t have any right to “cancel orders” due to delivery failures.
Clauses of the bond vary
Speaking to ThePrint, a senior government official involved in the talks over indemnity said “signing a bond with limited indemnity, such as indemnifying the manufacturer for the unforeseen side-effects, is not harmful”.
“No one is responsible in emergency situations for the unknown side-effects that come on later,” the official added.
Legal and health experts pointed out that the way the bond is structured, and the clauses it includes, are important.
“Pfizer has tried to intimidate other countries with outrageous demands including putting up countries’ sovereign assets as collateral,” said Aisola. “We are also aware about expansive terms favouring the company in some of the contracts signed with Latin American countries.”
She cited the example of Peru, saying the contract for the country mandates that the government prove to the supplier that they have full capacity to fulfil indemnification obligations (including sufficient funding appropriation) and to protect them from liability claims.
The contract, which is in Spanish, also says that the agreement is governed by the law of the state of New York, where Pfizer is headquartered, and any dispute must be settled under the rules of arbitration of the International Chamber of Commerce.
“Contracts can vary from country to country. In smaller countries, these companies have kept sovereign assets such as government buildings as mortgages for getting indemnity,” said Grover.
You could still sue company under criminal laws
An indemnification, if done through a contractual agreement, may not be sufficient to provide complete protection to the manufacturer, say experts.
“Indemnity clauses in contracts are civil in nature. The government and the company can enter into any contract but citizens of the country may still have the right to sue in certain situations, for instance, under criminal laws,” Chugh said.
For instance: If there is a fault with the vaccine (and necessary guilty knowledge is proved) due to which someone dies, the case for ‘death by rash and negligent act’ may still be filed, at least hypothetically.
“Indemnity will not protect the company in such criminal cases, being a concept of civil law. If proven guilty, in that case, the company and responsible individuals may face a fine/compensation. And — in certain cases — even imprisonment,” said Chugh.