The Wire; November 2, 2015. By Priti Patnaik. The United States and Switzerland want the right to file complaints for loss of trade ‘benefits’ even against countries whose intellectual property rights laws are fully consistent with international agreements.
Geneva: A move to push for tighter intellectual property protection is being pursued relentlessly by the United States and Switzerland at the World Trade Organisation.
Their aim is to bring certain kinds of complaints under TRIPS – the Trade Related Aspects of Intellectual Property Rights agreement at the WTO – that are not possible currently because of a moratorium. If such complaints become admissible, this could lead to countries like India coming under pressure to provide higher IP protection to pharmaceutical companies from these countries.
In the most recent meeting of the TRIPS council which concluded last month, member countries failed to reach consensus on whether “non-violation complaints” can be brought under the agrement. The council is likely to meet again ahead of the Nairobi ministerial in December this year.
At stake is whether countries will be allowed to bring what are called “non-violation complaints” (NVCs) under the TRIPS agreement. NVCs will enable countries to bring complaints against other countries even though there has been no violation of a WTO agreement.
There are essentially three kinds of complaints that can be filed under the General Agreement of Tariffs and Trade (GATT) – violation complaints, non-violation complaints and situation complaints. According to Article XXIII(1) of GATT 1994, NVCs can be made when a member’s measures result in the “nullification or impairment of a benefit” to another member, irrespective of whether the policy or action violates GATT.
Ruse to put patents over patients?
Put simply, such complaints can be lodged at the Dispute Settlement Body of the WTO, if one country, say the United States, feels that another country, for example, India, has taken an action depriving the US of expected trade “benefits”, even though that action is consistent with WTO rules and has not violated any other WTO agreement.
Trade law analysts say that these complaints are likely to be used to press the point that dilution of intellectual property protection in some countries is causing a material loss to others, although these countries continue to remain consistent with the minimum standards of IP protection as enshrined in the TRIPS agreement.
Switzerland and the United States, under pressure from their domestic pharmaceutical industries, are now taking the battle to the WTO to fight stringent IP jurisdictions such as India that have strict patentability criteria.
NVCs cannot be brought under the TRIPS agreement due to a moratorium on such complaints (Article 64.2 of TRIPS). Initially, a moratorium of five years (1995-1999) was imposed to curtail countries from bringing in NVCs under TRIPS. Since then, the moratorium has been extended repeatedly. The US and Switzerland now want the moratorium to end, so that countries have the option of bringing in NVCs under TRIPS. A group of 17 countries have contested this and want NVCs to remain inapplicable under TRIPS.
Such complaints were envisaged as a tool that would aim to “preserve the balance of benefits struck during multilateral negotiations”. NVCs have been applicable to goods and market-opening commitments in services. For example, if a country agrees to lower tariffs on goods as a part of a negotiation, but goes ahead and subsidises domestic production, then this action can be contested.
The TRIPS council has discussed NVCs several times in the past and considered four options: banning non-violation complaints in the TRIPS Agreement, allowing the complaints to be brought under the WTO’s dispute settlement rules, allowing non-violation complaints subject to special “modalities”, and extending the moratorium. Barring Switzerland and the US, most members are in favour of extending the moratorium or banning such complaints under TRIPS. However, any decision on the extension of the moratorium has to be agreed by consensus.
Members have pointed out that TRIPS is a sui generis agreement that establishes minimum standards of intellectual property (which if abused, can even undermine market access) and the agreement is not designed to protect market access or the balance of tariff concessions.
The American and Swiss argument
The United States stated in a communication in June 2014 that it views TRIPS as a market access agreement underscoring the point that “intellectual property rights have the potential to impact market access”. NVCs, it says, citing previous WTO case law, “protect reasonable expectations of competitive opportunities through negotiated concessions.” NVCs are being seen as “a means to redress government actions not otherwise regulated by GATT rules that nonetheless nullify or impair a member’s legitimate expectations of benefits from tariff negotiations.”
The US believes that NVCs will protect countries from “intentional evasions of obligations under TRIPS while preserving the ability of any member to implement legitimate social, economic development, health, environmental and cultural policies.” Queries sent to the US mission to the WTO in Geneva were unanswered by the time this story was uploaded.
It is interesting to note that the US acknowledges that WTO panels in the past have advised caution and said that NVCs should remain an exceptional remedy.
Switzerland, on its part, believes that NVCs are a principle and applicable under the three pillars of WTO: GATT, GATS and TRIPS. The Swiss cite Article 64 of the TRIPS Agreement. Members in the Uruguay Round (in Art. 64.2 TRIPS Agreement) agreed on a five-year dispute settlement moratorium for NVCs under TRIPS to examine the exact scope and whether additional modalities are considered necessary or desirable by members for NVCs under the TRIPS Agreement. This was based on the understanding that, after the end of the moratorium, NVCs will also be applicable under TRIPS.
“The initial moratorium which would have ended in the year 2000, has since been extended several times. In all this time, however, no member has come forward with specific proposals re scope or modalities for NVCs under TRIPS. It is thus of no use to extend the moratorium again, rather should it end by the forthcoming ministerial conference,” sources in the Swiss government told The Wire.
“The TRIPS Agreement represents the consensus WTO Members agreed upon in the Uruguay Round. The TRIPS Council has neither the mandate nor the authority to change what was agreed then (pacta sunt servanda),” they added.
Further, Switzerland considers the dispute settlement understanding of the WTO (DSU) to give sufficient guidance for NVCs under TRIPS, and hence sees no need for TRIPS specific additional modalities.
BRIC and developing push back
India, Brazil and 15 other countries (Argentina, Bolivia, China, Colombia, Cuba, Ecuador, Egypt, Indonesia, Kenya, Malaysia, Pakistan, Peru, Russian Federation, Sri Lanka and Venezuela) believe that NVCs are unnecessary to protect any balance of rights and obligations inherent in the TRIPS Agreement. In fact they have said that it may upset the balance of rights and obligations in the agreement by “elevating private rights over users of intellectual property.” The TRIPS agreement defines a “balance between producers and users of intellectual property and not between WTO members.”
“The benefits to members under TRIPS should not be conflated with the interests of private right holders”, they said in a statement in May 2015.
The 17 countries feel that such complaints could limit the use of flexibilities in the TRIPS Agreement to secure objectives relating to public health, nutrition, and other issues of public interest vital to socio-economic and technological development.
They believe that NVCs could impinge on sovereign rights. Applying NVCs to TRIPS amounts to “establishing a new cause of action under the TRIPS.”
The countries believe that NVCs may encourage unilateral pressure and speculative claims to force countries to raise protection beyond minimum requirements or to refrain from using TRIPS-consistent measures such as compulsory licensing to ensure access to essential medicines or guarantee access to technology. They fear national legal decisions can be challenged – NVCs to the TRIPS agreement can be used to “chill”, through bilateral pressure, “the development of a wide range of domestic measures relating to IP holders.”
James Love, director, Knowledge Ecology International, told The Wire, “NVCs will introduce considerable uncertainty in the WTO over what constitutes a violation, and what the agreement requires. It will encourage the US, Switzerland, Germany, Japan, Sweden and others to press India and other countries on a diverse set of issues, including section 3(d) of the Indian patent law, delays in patent grants, discretion in granting injunctions, compensation standards for compulsory license and other issues.” It will have a negative impact and countries will be less inclined to protect patients. It will be a walk back from the more favourable outcomes achieved in the 2001 Doha Declaration on TRIPS and public health, he added.
Subsequently the group of 17 nations proposed in July 2015 that the TRIPS council recommend to the ministerial conference that such complaints shall not apply to the settlement of disputes under the TRIPS Agreement. Later, Lesotho, on behalf of the African Group, also sponsored the draft decision in September this year.
Representatives of the Indian mission to the WTO have recently said that bringing NVCs under TRIPS would create a lot of legal ambiguity and the mere threat of a dispute could act as a deterrent to countries using flexibilities or setting balanced policies.
Ellen ‘t Hoen, medicines law expert, and former executive director of the Medicines Patent Pool, told The Wire, “Bringing non-violation claims under TRIPS risks introducing further threats to the flexibilities contained in TRIPS. The current – increasingly global crisis – of high medicines prices shows how important it is to strengthen measures in patent law to protect public health and ensure access to medicines for all. Introducing non-violation claims under TRIPS will do the exact opposite.”
WTO sources familiar with the discussions on NVCs have said that it is not unusual for countries to discuss the moratorium, but this year has seen more hectic negotiations amongst parties than in the past. If consensus proves elusive, the Nairobi ministerial will need to take a call on this critical issue. While experts believe that the moratorium is most likely to continue, they say that there is still a chance that the US and Switzerland – or rather the big pharma interests they represent – could have their way.