Liability or Indemnity: The New Debate In India's Vaccination Program

Liability or Indemnity: The New Debate In India's Vaccination Program

India recently commenced one of the biggest vaccination programs where eventually every citizen will need to be injected. But the question is who will be liable if something goes wrong? This question is essential considering the recent complaints of side effects being reported by many people. Vaccine liability has been an issue every time an epidemic has struck mankind.

This article presents a comparative analysis of how various countries deal with this issue of liability of vaccines. It discusses the present scenario of India, the problems therein, establishes the state’s liability; and lastly, provide suggestions that can help the manufacturers as well as the victims.


In India, the government has included a liability clause in the contract with the manufacturers. As per the contract, the producers will be liable to compensate the people in all claims that arise due to the vaccine.

According to Adar Poonawalla, CEO of Serum Institute of India, the “government should develop a law that will protect the companies from any legal liability”. He vouches for an indemnity clause instead of the existing liability clause in the contract with the government. This view was also supported by the World Health Organisation's chief scientist, Soumya Swaminathan, who talks about the COVAX facility and how the indemnity clause is included for the welfare of producers. Section 124 of the Indian Contract Act 1872 defines the Contract of Indemnity as a contract by which one party guarantees to save the other person from loss caused to him by the action of the guarantor himself, or by the action of any other person.

Countries like Canada, Singapore, the United Kingdom, the United States, and the European Union, have assumed a considerable amount of liability as opposed to the manufacturers.

This necessitates a discussion on why the Indian government is doing exactly the opposite of what is being followed in most countries.


The problem with the liability clause is manifold. Recently, a 5 crore legal notice was served against SII’s Covishield trials. The victim had alleged severe neurological side effects.

However, SII calls the allegations malicious and misconceived.

Such claims are problematic not only for the manufacturers but also for society at large. Firstly, because of the liability clause, manufacturers who are neither approving nor testing the vaccines are being made accountable for any side effects. This is prima-facie unfair. They are simply working on producing the vaccine which has been approved by competent authorities like FDA which enjoys sovereign immunity.

Secondly, it’s immoral for the governments to give entire liability for highly novel products developed and licensed quickly. The Second Restatement of Torts, whose products liability section is important for doctrines related to pharmaceutical products stated “vaccine manufacturers should not be held liable for unavoidable safety risks in vaccines or safety risks in a vaccine when there was not adequate time to guarantee its safety as long as the vaccine was properly prepared and accompanied by proper warnings”.

In the current context, Moderna, BioNTech, etc. managed to develop their vaccines in a few months. Even the drug regulators who are mostly state controlled have been giving temporary authorization while the testing is going on.

Thirdly and most importantly, manufacturers will be discouraged from such unverified claims, which will hinder the progress of the vaccination program. This was previously seen when a vaccine for Zika had been developed; its deployment was delayed by a company’s apprehensions about liability. The same was witnessed during the vaccine production of smallpox.

Even in 2009, when the world witnessed a swine-flu outbreak, drug-maker GlaxoSmithKline took a vaccine it had already developed to combat the H5N1 virus and adapted it for swine flu quickly. The new vaccine was pushed out in the UK and other European countries. But a year later, people were diagnosed with narcolepsy.

The government indemnified GSK against potential product liability claims because testing and licensing were done rather quickly. During the same time, WHO had also implemented the H1N1 Letters of Agreement which were part of WHO's Vaccine Deployment Initiative, which coordinated with governments, foundations, and manufacturers and provided immunity to manufacturers and vaccine distributors.

Today, with the vaccine for COVID-19 being in place, countries like the US, South Africa, and multinational organisations like the EU focus on reducing the vaccine manufacturers’ liability to avoid hindrances in the vaccination drive.

In February, the USA invoked the Public Readiness and Emergency Preparedness Act. The 2005 law empowers the HHS ( Health and Human Service) secretary to provide legal protection to companies making or distributing critical medical supplies, such as vaccines and treatments. The immunity will last till 2024.

A Countermeasures Injury Compensation Program has also been created under this act where a dedicated compensation amount is enough to treat and indemnify the loss of the aggrieved. While on the other hand, the South African government has launched its own $250 million compensation fund for its citizens waiving off the liability of the manufacturers. European governments will also pay claims above an agreed limit against AstraZeneca over potential claims of side effects.

Countries like England, have in place no-fault state compensation schemes. This implies that even when there has been no negligence proved on the part of the state, the aggrieved will be eligible for adequate compensation.

With countries recognizing the importance of reducing or even waiving off the liability of the vaccine manufacturers, it is important the Indian government also recognizes the same. India has a large population to be vaccinated and there will be many claims for compensation, the government cannot deny all liability and confer it on the manufacturers who are already overwhelmed with the demand.


Some people have pointed out that the state should be protected from liability because vaccine manufacture and distribution is a sovereign function. This is called the doctrine of sovereign immunity. It refers to the immunity from civil suits and criminal prosecution granted to a State when it commits a wrong in the discharge of a sovereign function.

In Peninsular and Oriental Steam Navigation Co. v. Secretary of State for India, the Supreme Court stated that the Secretary of the State will not be liable for its sovereign functions and would be liable for only the commercial functions.

Further, in the Ganesh Narin case also, the Supreme Court discussed how commercial transactions form an exception to the doctrine of sovereign immunity. The United Nations Convention on Jurisdictional Immunities of States and Their Property also lists commercial activities and transactions as an exception to the sovereign immunity. “Commercial transaction” under the UN Convention includes “any commercial contract or transaction for the sale of goods or supply of services; or any contract for a loan or other transaction of a financial nature, including any obligation of guarantee or of indemnity in respect of any such loan or transaction; or any other contract or transaction of a commercial, industrial, trading, or professional nature, but not including a contract of employment of persons.”

In the present instance, Serum Institute which has a share of 90% of the total administered doses in the country has been earning huge profits. The rates of the vaccine have also been increased from May 1 when the vaccination drive was made available to all adults. This makes it a commercial function instead of a sovereign function.

Hence, liability in cases of side effects cannot be escaped.

The question here is, who shall be made liable if a person suffers a loss because of the vaccine?

Article 294 (4) of the Constitution states that the liability of the Union Government may arise ‘out of any contract or otherwise. This means that by virtue of the contract between the vaccine manufacturers and the government, the latter can be held liable. Moreover, the state can also be made vicariously liable. Since, the manufacturers are working for the government and their production, sale, distribution is majorly governed by the policies of the government, these companies are acting as agents. In State of Rajasthan v. Vidhyawati, the Apex Court had held the state liable for the tortuous act of the person who was working on behalf of the government..

In the current context, however, the state has freed itself of all liability and shifted the liability to the vaccine manufacturers.


The complexity and the urgency of the current situation necessitate a new agreement that includes the indemnity clause. Governments must negotiate, consider and approve various requirements with the manufacturers. If there are disparities, manufacturers will face barriers to production and distribution. An efficient alternative for India can be national compensation funds, which honour claims for those who have suffered adverse effects from the vaccines.

Another effective alternative can be creating Vaccine Courts like the US, which is relatively easier to use.

India can also look at the experience of the United States, European countries, and a few countries in East Asia which implemented no-fault vaccine compensation programs to compensate victims and protect vaccine producers. Such schemes can remove the additional layer of mandatorily proving negligence on either the state’s part or the manufacturer’s part. This will prevent the manufacturers from wasting their time fighting a legal battle and make the litigation process quick for the victims.

Some employers will make the vaccine a health and safety work rule in the future and can use it as a PR tactic by saying that “our place is fully vaccinated”. This way, vaccination will indirectly become compulsory for such employees. This makes it all the more important for the government to make concrete rules and regulations on vaccine liability.

(The authors are first-year students at the Dr. Ram Manohar Lohiya National Law University, Lucknow)

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