Context: The Union government is in talks with foreign manufacturers of COVID-19 vaccines on their demand for indemnity from liability as a condition for selling their vaccines to the country. It has already given rise to a similar demand from domestic vaccine-maker Serum Institute of India (SII), which says all players should be treated the same way.

About Indemnity

• In simple terms, indemnity means security against a loss or other financial stress. This is commonly used in insurance contracts.
• In legal terms, It protects the manufacturers from any potential civil-legal liability or immunity from being sued by people for any unforeseen complications arising from their COVID-19 vaccine.

Is Indemnity defined under the law on Drugs?

• The law on drugs in India does not have a provision for indemnity related to the grant of approval for any new drug or vaccine in the country.

Where is Indemnity defined then?

• Section 124 of the Indian Contract Act, 1872 defines a contract of indemnity. It is defined as a contract by which one party promises to save the other from any loss caused to the latter.
• If the government gives an indemnity to vaccine manufacturers, then the government, and not the vaccine maker, would be liable to compensate any citizen who claims to have side effects/death due to taking the vaccine.
• In the event of a court ordering payment, the company will be in a position to recover the amount from the government.

Is the demand for indemnity a standard practice?

• Indemnity is essentially a contractual matter between the supplier and recipient.
• For example, Pfizer is believed to have obtained indemnity from several countries including the United Kingdom. However, it has declined to discuss the issue in public.

What have the overseas vaccines companies got so far?

• Firstly, the Drugs Controller-General of India has fast-tracked the import of vaccines by dispensing with the need for local trials.
• Secondly, foreign-produced vaccines that had been granted emergency approval for restricted use by certain regulators will also be granted Emergency Use Authorisation in India. These regulators include regulators in the US, UK, European Union and Japan or vaccines included in the WHO’s Emergency Use Listing.
• Thirdly, the New Drugs and Clinical Trial Rules, 2019 has set down stringent regulations for grant of approval as well as for trials.
• The Rules provide for payment of compensation by the sponsor of the trial or its representative to any participant who dies or suffers disability as a result of such trials.
• However, exemption from these trials has reduced the risk to overseas manufacturers.