EU promotes restrictive view of TRIPs on access to medicines

by Chakravarthi Raghavan

Geneva, 29 May 2001 - The European Community appears to be promoting a ‘restrictive’ view and interpretation of the provisions of the WTO’s Trade-Related Intellectual Property Rights (TRIPS) Agreement on the issue of the rights of WTO-member countries to ensure access to medicines at affordable prices for their citizens through compulsory licensing and parallel imports.

This is evident from an EU position paper titled “Legal Issues Related to Compulsory Licensing”, and a draft document that the EU Commission sent to its 113 Committee, and expected to be presented to the forthcoming meeting of the TRIPs Council in (18-22 June) as a communication from the EU and its member states on the ‘Relationship between the provisions of the TRIPs Agreement and the Issue of Access to Medicines.”

At the last meeting of the TRIPS Council the African country-members of the WTO had made a presentation on the issue of TRIPS, access to medicines at affordable prices, and the AIDS pandemic in Africa. At that time the African countries had asked for a special meeting of the TRIPS Council on this question, and had said that they wanted the discussions and conclusions to feed into the Doha Ministerial meeting for a decision by the Ministers on the occasion of the 4th ministerial meeting.

At the TRIPs Council meeting on the issue in May, the African move got very wide support from other developing countries, and the industrial nations found themselves on the defensive.

There was some resistance at special TRIPS Council meetings to deal with the African proposal for discussion of the issues at special TRIPS council sessions - with the EC and US ‘worried’ that it sounded too much like the Special Sessions of the Agriculture Committee and the GATS Council (where mandated negotiations are taking place). It was ultimately decided to hold a special discussion at the TRIPS Council on these issues on 18 June.

Parallel to these, have been the decisions and resolutions adopted on these issues at the UN Human Rights Commission, the workshop at Hosbjor in Norway organized by the WHO and WTO secretariats to promote the idea of transnational pharmaceutical corporations adopting variable pricing strategies by being enabled to segment markets and preventing parallel imports. The issue has also figured in the discussions at the recently concluded World Health Assembly, and the initiative of the UN Secretary-General to create a Global AIDS and Health Fund with an annual commitment of $7-10 billion to subsidise treatment, care and prevention of diseases associated with poverty, including HIV/AIDS, malaria and tuberculosis.

However, it is apparent that these and other moves have been triggered by the mobilization of the health activists and leading international non-government groups like Oxfam and Medicines Sans Frontier who have zeroed in on the high cost of medicines and health care, and the way the WTO and its TRIPS agreement have created a global monopoly system for transnational pharmaceutical corporations, and the need for governments of developing countries to use their powers of compulsory licensing and bulk purchase of drugs and other devices to bring down the prices.

The entire NGO campaign clearly caught the transnational pharmaceutical industry, and its patrons - the governments of the rich industrialized nations (the US, EU, Japan etc) - who found themselves faced with a backlash against globalization and the WTO as its promoter through its trade policy manifestation in the WTO trade agreements, like the TRIPS.

The transnational pharmaceutical companies, one of the driving forces behind the Uruguay Round and its TRIPS agreement, feel particularly vulnerable, over the growing public support for use of compulsory licencing and other instruments already allowed by the WTO, and for changes in the TRIPS and other trade agreements to put public health above trade concerns.

Apart from promoting a restrictive view of the rights and space available to developing countries under the TRIPS, several trade diplomats who did not want to be identified said there is a subtle attempt under way to ‘split’ the developing countries, and trying to persuade the African countries that they would be better off through the UN Global fund, and ‘negotiated’ agreements with pharmaceutical companies in obtaining drugs rather than in backing the compulsory licensing route.

This last is being presented as of benefit only to a few developing countries (India, Brazil, South Africa are among the countries mentioned in private conversations and lobbying efforts) with the scientific and technological capacity, and who are presented as ‘technological pirates’, and African countries and the smaller Caribbean and other economies should not back the drive for compulsory licensing.

Several of the smaller developing countries, and trade observers and NGO activists say that the occasion of the special discussion needs to be made use of by a large number of developing countries speaking up and insisting on the broader view and interpretations of the compulsory licensing and parallel imports and other safeguards to promote public health, and the need whether by way of interpretation or otherwise to do this now, and not wait for new negotiations or a new trade round.

Some trade observers say that if enough developing countries speak up now, and make their views clear, panels and the appellate body and the secretariat itself would be forced to take note.

As part of this strategy, the US, EC and some of the other major industrial nations have attempted to convert the proposed discussion on TRIPS and access to medicines at the TRIPS council into issues relating to health care, health infrastructure of developing countries and various related public health policy issues.

In line with this approach, the EC’s draft communication (before the 113 committee) for the TRIPs Council refers to the various EC initiatives and its development policy to promote ‘sustainable development’, and its funding for accelerated action targeted at major communicable diseases in the context of poverty reduction.

It is apparent that while these may be very relevant for discussion in competent organizations like the WHO or the UN, they are irrelevant for a consideration of the issue at the WTO and the TRIPS council.

Several articles of the TRIPS agreement are relevant in relation to the issues raised by patents, the principles and objectives of the TRIPS agreement, the technology transfer issues, the permissible exceptions, the scope for compulsory licensing (the non-voluntary licensing, as it is known to the TRIPS agreement) where TRIPS merely lays down some conditions and procedures to be followed, and last but not least the right of countries to use competition policies to attack anti-competitive practices of holders of patent or other intellectual property rights.

With several articles and their formulations involved, conflicts may give rise to disputes that will be taken to panels and the appellate body through the dispute settlement system. One such dispute against Brazil, raised by the US, is already before a panel, and involves the issues of scope and availability of patents and compulsory licensing issues. There is also a pending US vs Argentina dispute, where the dispute appears to be still in the stage of ‘consultations’ before seeking establishment of a panel.

In the dispute process, the panels (guided by the secretariat, with the legal and substantive divisions involved, with such secretariat advice and notes provided behind the backs of the parties), and the appellate body (guided by its secretariat) have been providing interpretation under the guise of the dispute panel’s duty to resolve conflicts, citing the treaty interpreter’s duty and role.

This claim though is against the specific provisions of the WTO and the DSU that the panels and appellate body cannot add to or diminish the rights and obligation of members, and the Ministerial Conferences and in between conferences the General Council have been vested with the exclusive right to provide authoritative interpretations of the agreement.

But with the panel, and appellate body rulings adopted automatically under the negative consensus rule, thus in effect creating new obligations (and it is more than a coincidence that successive rulings appear to have added to the obligations of developing countries), and the General Council not being able to perform its envisaged role of providing authoritative interpretations as envisaged because of the use of the ‘consensus decision-making’ (even though the WTO envisages voting where decisions cannot be reached by consensus), a major conflict has arisen.

This is having an effect on public and civil society challenges to the legitimacy of the WTO and its role and instruments, and the pressure was very evident at the recent World Health Assembly from public interest NGOs for international actions to ensure public health prevails over private corporate rights.

The panels and the appellate body, if there is a philosophy behind their interpretations have so far taken the position (in relation to disputes relating to trade in goods and trade in services) that exceptions (such as on health grounds, under Article XX of the GATT) are exceptions to the right of market access and trade and have to be interpreted and applied strictly and narrowly.

While it is not yet clear how the panels and appellate body will apply it in relation to TRIPS, it is evident that unlike the GATT and other trade agreements of the WTO in goods or the GATS and its sectoral agreements, where the philosophy is one of freeing international trade and reducing restrictions, the TRIPS is not a trade liberalizing agreement, but a trade restrictive one - as several free trade ideologues have accepted.

Given that the substantive provisions of TRIPS are based on a philosophy of restriction of trade visavis the private property rights of IPR holders, in any judicial interpretation, the approach should be to interpret the TRIPS rights (to property holders, whether of patents, trade markets or other) narrowly, and the exceptions widely.

This would be in line with the entire philosophy of intellectual property rights in a market system - where a possible market failure in provision of public good, namely innovation, is sought to be countered by a limited right or privilege of monopoly exploitation of the innovation - limitation in terms of the period specified, and the defined privilege.

Any judicial interpreter in normal limitations would interpret a statutorily created right narrowly.

But in the topsy-turvy world of the way the market system is now run in the advanced countries for the benefit of corporations, and even more, the WTO system where the neo-mercantalist agendas of the rich are promoted by the secretariat and prevail over the interests of the majority of nations, the opposite may well happen.

A corrective to this, and one on which the African group of countries have taken an initiative at the TRIPS Council, would be to have an authoritative interpretation in terms of Article IX of the WTO agreement of the TRIPS provisions on compulsory licensing and other rights that countries can exercise in the public interest and public health interest.

This is the line supported by not only a wide range of developing countries, but championed by NGOs and civil society groups in the developing and developed world.

And while the ‘denial’ of consensus may be used by the rich nations to prevent or hold up an authoritative interpretation, the WTO has provided a corrective in this, namely, taking the issue to a vote, as envisaged in Article IX of the WTO agreement in cases where a decision cannot be reached by consensus.

The EU position paper attempts to argue that compulsory licensing under TRIPS is a ‘complex’ matter and that though compulsory licensing is allowed under certain conditions, Article 31 does not contain ‘tailor-made solutions’ to problems raised by developing countries and NGOs in the debate on access to health.

The EC paper concedes that Art. 5A of the Paris convention is part and parcel of the TRIPS agreement which in Art 2.1 says that in respect of Parts II (standards concerning availability, scope and use of IPRs), Part III (enforcement of IPRs) and Part IV (acquisition and maintenance of IPRs), members shall comply with Articles 1 to 12 and Art.19 of the Paris Convention.

Article 5A of the Paris Convention enables its members to grant compulsory, but non-exclusive and non- transferable, licenses to prevent abuses of patents rights; such licences may be granted on application, after three years from grant of a patent, for failure to work or insufficient working.

As a result, concedes the EC, each WTO member still has the right “to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights,” but attempts to qualify this in a way by reference to Art.8.2 of the TRIPS (Principles) which says “appropriate measures ... may be needed to prevent abuse of IPRs by rights holders.”

The EC argues that Art.31 of the TRIPS (which provides for compulsory licenses - ‘other use without the authorization of the rights-holder’ - does not pursue the grounds on the basis of which compulsory licences can be issued, but sets the conditions and procedures to be respected when issuing them.

The EC tries to interpret the plain meaning of the wording in Article 31, by references to earlier drafts which sought to contain a limited list of cases where compulsory licenses could be granted, but which met with disagreement among negotiators, and that it was finally decided that instead of defining specific grounds, it was preferred to impose strict procedural safeguards.

According to Carlos Correa, an Argentine expert and one-time negotiator for his country on IPR issues, the Art.31 lays out five specific grounds on which compulsory licenses can be granted - refusal to deal, emergency and extreme urgency, anti-competitive practices, non-commercial use, and dependent patents.  But the agreement, Correa says in his book ‘Intellectual Property Rights, the WTO and Developing Countries’, does not limit the right to establish compulsory licenses on other grounds not explicitly mentioned. The only limitation on a ground for compulsory licensing is in respect of semi-conductor technology, where compulsory licenses can only be issued for public non-commercial use and to remedy anti-competitive practices. This was also the view adopted by an expert committee convened by the Third World Network on implementing TRIPS and Options for developing countries.

In trying to suggest that lack of working may not be an acceptable ground under TRIPS for grant of compulsory licenses (though it is allowed under Art.5A of the Paris convention which is part and parcel of TRIPS), the EC argues that industrial use in terms of local working, the EC tries to interpret (or is it misinterpret the plain meaning of the text) by reference to a draft text during negotiations put forward by the Swedish Chairman Annel which sought to limit this local working right.

The EC concedes that negotiators were far from agreed on the issue, but that the draft showed ‘clear willingness’ on the part of negotiators to exclude compulsory licensing based on lack of manufacturing.

[The WTO secretariat, and its TRIPS division, which Third World diplomats say work in a partisan way to further the interests of corporations of the US and EC, after the Hosbjor meeting, posted (in May 1991) on its website (and drew the attention of media and the NGOs), the documents of the Uruguay Round including purported minutes of the TRIPS negotiating group, which were derestricted as long ago as 1994. No real explanation was provided, but developing country diplomats suggested that the secretariat appeared to be preparing to provide ‘negotiating history’ to guide the panels in the TRIPS disputes.]

The EC paper goes on to suggest that the plain meaning of the rights and procedures on compulsory licensing under Article 31 needs to be interpreted in the light of Art. 27.1.

It tries to argue that the ‘negotiating history’ (of the wordings suggested by Anell but not incorporated?) suggests that the wording in 27.1 that “patents shall be available and patent rights enjoyable without discrimination as to..  whether products are imported or locally produced” was introduced to cover local working requirements. It cites the ruling against Canada in the pharmaceutical patents as proof.

In that case, the Art. 31 was not ruled upon, but was used to rule against Canada on Article 30. But the EC in footnoting the ruling - - that “the acknowledged fact” that Art. 31 exception for compulsory licences and government use is “understood to be” subject to the non-discrimination rule of Art.27.1, without the need for any textual provision so providing, further strengthens the case for treating non-discrimination rules as applicable to Art.30.

In a circuitous logic and reasoning, a WTO ruling on Art. 30 relaying on ‘understood to be’ meaning of Art.31 is now used to provide that meaning to Art.31.

If this view were to prevail in a future dispute at the WTO, whatever the way governments may react, it provides a strong basis for the civil society movement (shrink or sink the WTO) against the WTO legitimacy and legality achieved through such rulings of a biassed dispute system and its TRIPS agreement.

The EC argues from this reasoning (presumably aimed at hitting a Brazilian law under adjudication) that a distinction should be made in granting compulsory licenses for non-working (not set in the incorporated Art.5A of the Paris convention) that a local manufacturing requirement and grant of compulsory licenses for the sole reason that no local manufacturing takes place, without regard whether sufficient imports of products are taking place to meet market demand, would be incompatible with TRIPS. To discriminate against imported products (by issuing a compulsory licence), says the EC, would be at odds “with the general free trade and non-discrimination principles embodying the WTO Agreement.”

The EC concedes that this point of view is contested by developing countries and some commentators.

But it then goes on to say as a conclusion “that Article 27.1 of TRIPs prohibits WTO members from issuing compulsory licences for lack of local manufacturing.”

Can a product manufactured under compulsory licensing be exported to a third market?

This is of some importance to many smaller developing countries who do not have the infrastructure.

As many NGOs have pointed out, despite the claims of the WTO, WHO and the pharmaceutical lobby, the prices of medicines for AIDS have come down, not as a result of generosity of the manufacturers or the policy initiatives of the WHO/WTO/UN, but simply as a result of ‘competition’ from the generic manufacturers and suppliers.

The EC cites Art. 31.1 as only specifying that national authorities issuance of compulsory licences must be “predominantly to supply their domestic market” and that exports considerations may not be a factor in considering the grant of compulsory licences.

The EC then makes the proposition (and this is apparently the view privately provided by the WTO secretariat in some exchange with the UN agencies) that “it flows from this,... that the terms of a compulsory licence should not explicitly permit exportation.”

It concludes from this that it is not permitted under TRIPs to issue a compulsory licence with a view to supplying a third country market (unless in the case of anti-competitive practice), but export is possible as long as local supply remains predominant.

The EC also says that there is nothing in Art. 31 which prevents a member from issuing a licence for the use of its own domestic market to a foreign manufacturer, although such a situation has not been envisaged by TRIPS negotiators.

But it cites the Paris convention, Art 4bis(1), about the principle of territorial independence of a patent, to suggest that this would apply to compulsory licences on patents, and that no country is obliged to accept on its territory compulsory licenses issued by a foreign authority.

The EC paper refers to the arguments ‘by smaller developing countries’ that their right to issue compulsory licences would be meaningless if they could not grant a licence to a foreign manufacturer, and says this should be taken seriously, but that TRIPS does not seem to give any legal certainty on this issue.

The EC paper concludes that compulsory licensing is a complex matter under TRIPs, that the assumption behind such licensing had always been that compulsory licensing was a tool of industrial and competition policy.

And while to some extent, Articles 7, 8, 30 and 31 of the TRIPS Agreement could be envisaged to address some specific problems, “they would not offer a very high degree of legal certainty and could create huge risks of resort to dispute settlement by WTO members,” says the EC.

The EC adds: “the wider policy debate underlying compulsory licensing would not be well served by legal battles and resort to dispute settlement. WTO dispute settlement on these matters will remain risky as longas there is no consensus on such interpretations among all signatories.”

The EC Commission’s draft for its 113 committee, for a communication to the TRIPs Council, of the position of the EU and its member states argues that the TRIPS agreement represents a ‘delicate balance’ between interests of rights holders and consumers, but that the EU has always been willing to contribute to any debate concerning the interpretation of TRIPS.

The EC paper acknowledges that the spiralling health crisis in the developing world, “has led to ever more pressing calls for ‘something to be done’, with the TRIPs agreement “increasingly coming under fire for allegedly standing in the way of developing countries efforts to implement an effective public health policy.”

But the EC and their member states believe such criticisms to be “ill-founded”, but recognize that discussions leading where necessary to clarification of some of the TRIPs provisions “may prove helpful in the current climate”.

In the EC view, the TRIPS agreement may have aroused strong feelings in some quarters, but cannot be held responsible for the health crisis in developing countries.

Improving health at the same time as combatting poverty requires a mix of complementary social, economic, and health policies and practices. Health gains, the EC says, largely depend on using available resources in productive and efficient ways, as shown by the great strides made by some middle and low-income countries.

Perhaps, the EC has a point: changing TRIPs alone will not solve the health crisis.

But if the argument that other causes are also basic, then it adds strength to the campaign of NGOs that the primary cause is the WTO and its instruments promoting ‘liberalization’, without any regard for ‘development’, and this ought to be the real agenda before the WTO, not Mr. Moore’s attempts to launch a new round at Doha. – SUNS4904

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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