U.S. drugmaker Pfizer targeted Poland's and Romania's air traffic control fees to recoup $2.2 billion (about 2.95 trillion won) in unpaid COVID-19 vaccine payments. After the two countries failed to honor the vaccine purchase contracts signed during the COVID-19 pandemic, Pfizer sued and won, then placed a lien on the control fees paid by airlines for using the two countries' airspace.
On the 13th (local time), the Wall Street Journal (WSJ) reported that in July Pfizer won court approval to place liens on air traffic control fees payable to Poland and Romania. The total vaccine payments Pfizer says it is owed by the two countries come to $2.2 billion (about 2.95 trillion won).
The dispute began in 2021, at the height of COVID-19, when the European Union (EU) signed a contract with Pfizer to buy hundreds of millions of doses of COVID-19 vaccines on behalf of its 27 member states. Pfizer produced and supplied the vaccine it co-developed with Germany's BioNTech in Europe.
The situation changed as the pandemic subsided. Because the contracts were signed amid fierce competition for vaccines, the EU was left with far more doses than it actually needed. Some EU member states reached agreements with Pfizer to exit the existing contracts, but Poland refused to perform, saying it lacked the financial capacity to take delivery of an additional 63 million doses in 2022, shortly after Russia invaded Ukraine, and Romania followed suit.
Pfizer took legal action against the two countries and, in April, won after years of litigation. The vaccines the two countries contracted for exceed 90 million doses. The amounts Pfizer seeks are about 1.3 billion euros (about $1.506 billion; 2.0246 trillion won) from Poland and 600 million euros (about $695 million; 934.4 billion won) from Romania.
◇ To get paid for vaccines, liens on "air traffic control fees"
Pfizer's choice to use air traffic control fees as a recovery tool to collect vaccine payments stems from Europe's unique fee collection structure. In the United States, airlines pay air traffic control fees directly to the Federal Aviation Administration (FAA), but Europe is different. The European Organisation for the Safety of Air Navigation (Eurocontrol, hereafter Eurocontrol) collects fees from airlines and distributes them to individual countries. Pfizer placed liens on funds to be passed to Poland and Romania during this process.
Eurocontrol recently set up protections to prevent corporations from targeting related funds for debt recovery, but the new rules took effect on the 9th of last month and do not apply to liens Pfizer had already placed. The two countries have appealed the asset freeze decisions. The appeals are scheduled for October and next January, respectively.
◇ Air traffic control agencies face "cash crunch" amid vaccine payment dispute
The problem is that air traffic control fees are a core revenue source for the two countries' air navigation agencies. For Poland's Polish Air Navigation Services Agency (PANAS), the funds rendered inaccessible by Pfizer's move account for more than 80% of its total budget. PANAS recently received emergency funding from the government with less than 24 hours of cash left, to cover employee salaries, backup power systems, and cybersecurity expense.
Romania's air traffic control agency Romatsa also cut pay for its 1,700 employees by 20% and renegotiated payment terms with suppliers. Romatsa, warning it could run out of funds before the appeals hearing in January, won a temporary stay of execution from the court last month.
The two countries argue Pfizer's measures could threaten aviation safety and even European security. With flights to and from the Persian Gulf reduced due to the U.S.-Iran war, fee income from airlines using their airspace has fallen, and flight operations also declined due to Ukraine's drone attacks on Russian airspace.
In particular, Polish controllers are prepared to reroute civilian aircraft within one minute if Russia attacks western Ukraine. They also handle air traffic coordination for North Atlantic Treaty Organization (NATO) military aircraft.
PANAS Chief Executive Magdalena Jaworska-Maćkowiak said, "The money airlines paid for control services is tied up with Pfizer," adding, "The vaccine lawsuit is solely between the government and Pfizer and has nothing to do with aviation." She further argued Pfizer's actions could threaten European security.
Pfizer, meanwhile, says it is lawfully collecting on a judgment. The company said, "This ruling confirms the importance of honoring contractual obligations that underpinned Europe's COVID-19 pandemic response," adding, "Our actions are an appropriate and measured response."