US, Big Pharma pushing to end NV dispute moratorium on TRIPS

WTO member states differ over whether to allow so-called “non-violation” disputes to be raised under the ambit of the WTO’s TRIPS Agreement on intellectual property rights.

by Kanaga Raja

GENEVA: The issue of the relevance and applicability of “non-violation” (NV) or “situation” claims in disputes regarding “nullification or impairment” of rights under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is continuing to divide the US, Switzerland and some of their supporters on one side, and on the other, the large majority of the membership at the WTO.

This became evident at a 9-10 June meeting of the WTO’s TRIPS Council when it discussed the proposal by a group of developing countries that the forthcoming Nairobi Ministerial Conference declare the inapplicability of such claims and disputes in respect of the dispute settlement provisions of the TRIPS Agreement.

According to informed trade sources, differences of view persisted among members on whether non-violation complaints should be applicable under the TRIPS Agreement.

Unlike with other WTO agreements, there is currently a moratorium on bringing disputes pertaining to nullification or impairment of benefits under the TRIPS Agreement as a result of “the application by another Member of any measure, whether or not it conflicts with the provisions of this Agreement”, or as a result of “the existence of any other situation”. During the period of the moratorium, the TRIPS Council is mandated to examine the scope and modalities for such complaints and submit its recommendations to the Ministerial Conference, which may either accept the recommendations or extend the moratorium.

In promoting non-violation and situation claims to advance the interests of Big Pharma (and its monopoly rentier incomes) against the interests of public health and access to affordable medicines, the efforts of the US and its supporters are striking one more blow at the future of the multilateral trading system itself, according to Chakravarthi Raghavan, Editor Emeritus of the South-North Development Monitor (SUNS) and veteran analyst of the trading system.

History of negotiations

The non-violation  and situation provisions, Raghavan notes, were smuggled into the Draft Final Act (DFA) of the Uruguay Round talks that was tabled by then GATT Director-General Arthur Dunkel in December 1991, as an outcome of negotiations in Geneva after the spectacular collapse of the Brussels Ministerial Conference to end the Uruguay Round.

The post-Brussels talks in Geneva involved small groups of interested countries; depending on the subject, the talks took place in informal groups among officials from the relevant capital-based government departments. Those who drew up detailed provisions on intellectual property (IP) had full knowledge of these issues (which till then had been dealt with by the World Intellectual Property Organization and its Paris Union and other conventions). (In bringing IP issues onto the Uruguay Round agenda, the proponents’ contention was never “market access” – unlike in the areas of trade in goods and trade in services – but rather assuring global minimum standards for IP protection.)

Where agreement could not be reached in this area of negotiations, as in other subjects on the Uruguay Round agenda, Dunkel and his staff supplied “compromises” that were collated and went into the DFA text of December 1991.

It was in this process that the dispute settlement provisions in Articles XXII and XXIII of the General Agreement on Tariffs and Trade (GATT) became the dispute settlement provisions in the TRIPS part of the Dunkel DFA, and that too by reference.

The GATT’s own dispute settlement provisions, including the non-violation and situation provisions, date back to the postwar talks on the Havana Charter, with its chapter on commercial policy. The commercial policy chapter, which would become the GATT, had clear provisions on the Most Favoured Nation (MFN) principle and on market access through exchange of bilateral tariff concessions that are multilateralized. All other provisions were aimed at ensuring fidelity to these principles of market access and trade liberalization, with many of the details and disciplines subsequently sketched out in the Tokyo Round and then later made part of the Uruguay Round accords.

[The Uruguay Round negotiations on services in effect were for market liberalization in the services sector, but given the variations in supply of services and competition via four modes of delivery, the application of the non-violation and situation provisions under the General Agreement on Trade in Services (GATS) differed from that in the GATT and trade in goods.]

Progress on the DFA text in the area of trade in goods was held up for a long while over US-Europe differences in agriculture. It was only in 1993, when Peter Sutherland took over from Dunkel as GATT Director-General and renewed intensive talks to conclude the Uruguay Round, that the issue of dispute settlement in TRIPS received the attention of envoys familiar with the GATT and trade dispute processes.

During scrutiny of the TRIPS section of the Dunkel text, the inapplicability to TRIPS of the original GATT non-violation and situation provisions came to the fore, raised by India and others. When the US  resisted  any  change,  India  made known that it would withhold consensus on the entire Uruguay Round accord. It was only then that the moratorium on non-violation and situation complaints (in Article 64.2 of the TRIPS Agreement) was agreed.

Even in terms of the history of dispute settlement under the old GATT, the non-violation and situation concepts have been sought to be invoked only in disputes where one party felt that its expectations of market access in another party through binding tariff concessions were frustrated by other actions such as subsidization by the other party.

There has been only one GATT dispute and panel report not involving tariff concessions, but even this was not adopted, and thus has no legal status as GATT acquis, Raghavan pointed out.

Developing-country proposal

At the 9-10 June TRIPS Council meeting, Brazil, on behalf of a group of developing countries, presented a revision of a 2002 document on non-violation and situation nullification or impairment under the TRIPS Agreement.

The paper was co-sponsored by Argentina, Bolivia, China, Colombia, Cuba, Ecuador, Egypt, India, Indonesia, Kenya, Malaysia, Pakistan, Peru, Russia, Sri Lanka and Venezuela.

The proponents of the paper said that like many WTO members, they believe that the application of non-violation and situation complaints to the TRIPS Agreement raises fundamental concerns, which they summarized in detail in their paper.

They proposed that “the Council for TRIPS recommend to the Ministerial Conference that complaints of the type provided for under subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994 [i.e., non-violation and situation complaints] shall not apply to the settlement of disputes under the TRIPS Agreement.”

According to one participant who attended the TRIPS Council meeting, the paper got a lot of support from all the developing countries, while most of the developed countries reiterated their existing positions, with most of them taking shelter under the plea that their governments were yet to reach a conclusion on this.

The US and Switzerland, other sources said, were opposed to the continuance of the moratorium.

According to some sources, the US stand is related to its advocacy of the interests of its big pharmaceutical corporations and its grievance with India and a few others who do not agree to what is called “evergreening”. Evergreening refers to the practice of seeking a new patent on a slight variation of an existing patented drug (even if the variation has no proven additional efficacy), thereby effectively extending the patent term. Allowing non-violation complaints could enable challenges against, for example, Indian legislation preventing evergreening. 

According to trade sources, Brazil told the TRIPS Council that the paper represented the common understanding among its co-sponsors that non-violation complaints are not necessary and are inconsistent with the balance of rights and obligations under the TRIPS Agreement, and as a whole in the WTO system itself.

The co-sponsors proposed that the Council recommend to the upcoming Ministerial Conference in Nairobi that these complaints shall not apply to the settlement of disputes under the TRIPS Agreement.

A number of developing countries, including the group of least developed countries, the Africa, Caribbean and Pacific (ACP) Group and the African Group, as well as Norway and Canada among the developed countries spoke in support, said the trade sources.

The US and Switzerland continued to argue that consensus was needed to extend the period for non-application of non-violation complaints, these trade sources added.

The TRIPS Council chair was asked to consult on this matter.

Serious concerns

Speaking under this agenda item, India, one of the co-sponsors of the paper, said that serious concerns on the ambiguity, incoherence and limit on flexibilities of members due to the applicability of non-violation complaints (NVCs) in the TRIPS context continue. Neither does past GATT/WTO jurisprudence nor do explanations to the contrary allay its fears. This has reaffirmed its belief on the detrimental consequences non-violation complaints would have in the TRIPS context.

According to India, it is clear that when negotiating the TRIPS Agreement, non-violation complaints were made inapplicable to TRIPS under Article 64.2. This is in  stark  contrast to the GATT and  GATS  where  NVCs  were made applicable without any discussion on scope and modalities. This, by itself, clearly indicates the serious concern the membership had in applying NVCs in the special context of the TRIPS Agreement.

Further, said India, Article 64.3 clearly mandated that there had to be an agreement on the scope and modalities of NVCs in the TRIPS context. This, again, is not present in the context of the GATT and GATS. The entire thrust of Article 64 and the intention of the negotiators clearly shows that members viewed TRIPS in a very different way in the context of applicability of NVCs.

If this was not the case, there would have been no issue in applying NVCs like in the case of the GATT without any debate or consensus on scope and modalities. It would also not be the case of proponents of NVCs in TRIPS that the TRIPS does not envisage a consensus on scope and modalities. If NVCs were to automatically apply after a timeframe, there would be no need for Article 64.3. The fact that scope and modalities need to be discussed and agreed upon recognizes the unique nature of the applicability of NVCs to TRIPS.

The negotiators recognized this and “we must not interpret it otherwise,” said India. The fears that many delegations, especially developing-country members, have expressed on the ambiguities that NVCs bring cannot be underestimated. Those fears have not been allayed by the discussion but have only strengthened, it added.

It strikes at the very ability of governments to function as well as the ability to deal with challenges to that ability. What are the circumstances in which they will be used to suppress members’ sovereign policy space? What are the limits? What are the various policy measures that will come under its scanner?

India said that it is afraid that there are no satisfactory answers to it and neither will there be any.

The TRIPS Agreement lays down a delicate balance between rights and obligations of members. NVCs tilt that balance. The very nature of NVCs makes it impossible to lay down various practical scenarios on how they would impact a member’s sovereign space. A new cause of action arises even when there is no textual violation of the TRIPS Agreement. Article 3.2 of the WTO’s Dispute Settlement Understanding states, inter alia, that the Dispute Settlement Body’s recommendations cannot diminish the rights and obligations provided in the covered agreements. The applicability of NVCs to TRIPS will widen the rights and obligations of the members under the TRIPS Agreement beyond the express terms of the agreement. This is how the delicate balance that now exists will inevitably be affected, said India.

The ambiguity and lack of clarity that NVCs will usher in the TRIPS context will especially affect developing and least developed countries severely. Lack of legal capacity to handle such cases will be a serious issue. It would inevitably lead to addition of litigation cost. The vast array of measures that will suddenly be open to potential challenge will be insurmountable.

India believes that this is an unnecessary burden that was not intended by the TRIPS Agreement. India requested members to seriously reflect on the concerns expressed by an overwhelming number of delegations in the TRIPS Council meeting and earlier. They should join the consensus that complaints on the grounds of nullification or impairment of the type identified in Article XXIII:1(b) and (c) of the GATT 1994 be determined inapplicable to the TRIPS Agreement, in the interest of the stability and certainty of the multilateral system.

Inappropriate application

Also speaking under this agenda item, Nepal said that in its understanding, the application of NVCs, originally a GATT provision, fits only in trade in goods and services but not in any sui-generis-type system like TRIPS. As NVCs are basically related to the market access issue, it has less possibility and less relevance of application with regard to the TRIPS Agreement, which basically intends to provide minimum protection to IP-related instruments.

Application of NVCs in the TRIPS regime is inappropriate and will reduce flexibility and policy space of many developing countries in general and least developed coutnries in particular, and prevent them from pursuing developmental goals through legitimate exercise of policy choices in the field of IP, Nepal added.

Nepal said it cannot support any idea to bring the non-violation and situation complaints issue within the ambit of TRIPS as has been argued by some members. It expressed deep concern over the views expressed by some delegations that the Nairobi Ministerial Conference should end the moratorium given so far in this regard, which in its understanding “does not reflect the sentiment of majority of developing and [least developed country] members.”

In supporting the paper put forth by the developing-country members, Nepal called upon the TRIPS Council to recommend to the Nairobi Ministerial Conference that complaints of the type provided for under sub-paragraphs 1(b) and 1(c) of Article XXIII of the GATT 1994 shall not apply to the settlement of disputes under the TRIPS Agreement. (SUNS8042)                  

Third World Economics, Issue No. 595, 16-30 Jun 2015, pp11-13