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
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
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
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. +