BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER

TWN Info Service on WTO and Trade Issues (Jun15/15)
22 June 2015
Third World Network

 
US, Big Pharma pushing to end NV dispute moratorium on TRIPS
Published in SUNS #8042 dated 16 June 2015
 
Geneva, 15 Jun (Kanaga Raja) -- The issue of the relevance and applicability of claims of "non-violation" (NV) or "situation" claims on disputes of "nullification and impairment" of rights under the TRIPS Agreement is continuing to divide the US, Switzerland and some of its supporters on one side, and on the other, the large majority of the membership at the World Trade Organisation (WTO).
 
This became evident at the meeting of the TRIPS Council last week when it discussed the proposal of 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.
 
In promoting and persisting with these claims to advance the interests of Big Pharma and its monopoly rentier incomes against the interests of public health and right of access of the public to affordable medicines, the efforts of the United States and its supporters are striking one more blow at the future of the multilateral trading system itself, according to Mr. Chakravarthi Raghavan, Editor-Emeritus of the SUNS and veteran analyst for nearly four decades of the trading system and the GATT and WTO trade negotiations.
 
The non-violation and situation claims of impairment and nullification, he notes, were smuggled into the Draft Final Act (DFA) of the Uruguay Round that was tabled by then GATT Director-General Arthur Dunkel in December 1991, as an outcome of the negotiations in Geneva after the spectacular collapse of the Brussels Ministerial Conference to end the Uruguay Round (UR) in 1991.
 
The post-Brussels talks in Geneva at the old GATT involved small groups of interested countries, and depending on the subjects, were "negotiated" in informal groups by officials from the substantive parts of the governments in capitals. Those who went into and drew up detailed provisions on intellectual property (IP) had full knowledge of these issues (till then dealt with by the World Intellectual Property Organisation and its Paris Union and other conventions).
 
On details that could not produce an accord in this area of negotiations, as in other subjects on the UR 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 GATT's dispute provisions in Articles XXII and XXIII became the dispute provisions in the TRIPS part of the Dunkel DFA, and that too by reference.
 
In bringing IP issues on the UR agenda, unlike in the areas of trade in goods and on trade in services, the proponents' contention was never "market access", but rather assuring globally minimum standards for IP protection - rewarding inventors by providing monopoly rights to marketing for a limited period in return for full disclosure - and avoiding trade frictions caused by infractions of IP Rights through copying etc.
 
The GATT's own dispute settlement provisions, including the non-violation and situation provisions, date back to the post-war Havana Charter talks, with its chapter on commercial policy.
 
The commercial policy chapter that became the General Agreement on Tariffs and Trade (GATT), brought into force provisionally, had clear provisions on the Most Favoured Nation (MFN) principle and on market access through exchange of bilateral tariff concessions that are multilateralised. All other provisions were aimed at ensuring fidelity to these basic market access and liberalization of trade issues, and with many of the details and disciplines sketched out in the Tokyo Round code, and subsequently made part of the UR accords.
 
The GATS negotiations in effect were for market liberalization in services, but given the variations in supply of services and competition via four modes of delivery, the application of the non-violation and situation provisions were worded differently.
 
Progress on the DFA text in the area of trade in goods was held up for a long while over US-EC differences in agriculture, first tentatively set in the Blair House accord, and detailed in further talks between the two, and some of the Cairns group members and a few others.
 
It was only in 1993, when Peter Sutherland took over as GATT DG and renewed intensive talks to conclude the Round, that the issue of dispute settlement in TRIPS received the attention of envoys familiar with the GATT and trade dispute processes.
 
It was only when the scrutiny of the TRIPS draft of the Dunkel text for consideration at the level of trade envoys was taken up before finalising, that the inapplicability of the original GATT provision on non-violation and situation complaints came to the fore, and was raised by India and others.
 
And when the US resisted any change, and India made known that it would withhold consensus on the entire bundle of UR texts over this issue that the wording in Articles 64.2 and 64.3 were agreed - for a moratorium on disputes, pending detailed consideration and further accord on applicability of the non-violation and situation complaints and conditions were set.
 
Even in terms of the history of dispute settlement of trade disputes under the old GATT, these concepts have been sought to be invoked only in disputes where one party felt that its expectations of market access in another through binding tariff concessions were frustrated by other actions like subsidy etc. of the other contracting 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 points out.
 
TRIPS NON-VIOLATION AND SITUATION COMPLAINTS
 
At the TRIPS Council, Brazil, on behalf of a group of developing countries, presented a revision of a 2002 document (IP/C/W/385/Rev. 1) 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 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 Pharma and its grievance with India and a few others who do not agree to what is called "evergreening" of existing patents, namely incorporating some new molecule into a drug, without any proven additional efficacy, and new patents sought.
 
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 propose that the Council recommend to the Ministerial Conference (MC10 in Nairobi) that these complaints shall not apply to the settlement of disputes under the TRIPS Agreement.
 
A number of developing countries including the LDC Group, the ACP Group, and the African Group, as well as Norway and Canada among the developed 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.
 
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 re-affirmed 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 64.2 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 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 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 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 DSU states, inter alia, that the DSB 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 beyond the express terms of the TRIPS Agreement. This is how the delicate balance that now exists will inevitably be affected.
 
The ambiguity and lack of clarity that NVCs will usher in the TRIPS context will especially affect developing and LDCs 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 overwhelming number of delegations in this 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.
 
Also speaking under this agenda item, Nepal said that in its understanding, the application of non-violation and situation complaints (NVCs), which is 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 TRIPS which basically intends to provide minimum protection to IP-related instruments.
 
Application of this in TRIPS regime is inappropriate, and will reduce flexibility and policy space of many developing countries in general and LDCs in particular and prevent them from pursuing developmental goals through legitimate exercise of policy choices in the field of IP regime, it 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 MC10 should end the moratorium given so far in this regard, which in its understanding "does not reflect the sentiment of majority of developing and LDC members."
 
In supporting the paper put forth by the developing country members, Nepal called upon the Council to recommend to the tenth Ministerial Conference that complaints of the type provided for under sub-paragraph 1 (b) and 1 (c) of Article XXIII of the GATT 1994, shall not apply to the settlement of disputes under the TRIPS Agreement. +

 


BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER