TWN Info Service on Biodiversity and Traditional Knowledge (Jan15/01)
5 January 2015
Third World Network

Dear friends and colleagues,

We are pleased to share with you a report on the second meeting of the Ad Hoc Open-Ended Working Group to Enhance the Functioning of the Multilateral System of the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRA) that took place on 8-11 December 2014 in Geneva.  The author, Edward Hammond who is Director of Prickly Research based in the United States, attended the meeting.

The Committee is tasked with reviewing the Treaty's Multilateral System (MLS) of access and benefit sharing for a list of key crops contained in Annex 1 of the Treaty, with the objective of increasing payments from seed companies that use the MLS to the Treaty's Benefit Sharing Fund (BSF), whose income has fallen well short of expectations. As the report shows, the situation is grim. A major loophole is that with the United States not being a Party to the ITPGRFA, the big players in the seed industry are obtaining materials from gene banks in that country that are outside the MLS and Treaty obligations for benefit sharing.

It is also of concern that the Committee's discussions seem to give considerable weight to the voice of the seed industry, raising concerns among many developing countries and civil society observers,

The next meeting of the Committee will be in April 2015 in Brasilia, Brazil. The outcome of the 3 meetings will be presented to the Governing Body of the Treaty which meets in October 2015.

With best wishes,

Third World Network

Benefit Sharing under the ITPGRFA – “too little for too long”

A report of the 2^nd meeting of the Ad Hoc Open-Ended Working Group to Enhance the Functioning of the Multilateral System of the International Treaty

By Edward Hammond (eh@pricklyresearch.com)

5 January 2015

The Ad Hoc Open-Ended Working Group to Enhance the Functioning of the Multilateral System of the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRA) met in Geneva on 8-11 December 2014.  It was the second of three meetings of the Committee to take place before the Treaty's Governing Body next meets in October 2015.

The Committee’s job is to recommend changes to the Treaty's Multilateral System (MLS) of access and benefit sharing (ABS) for a list of key crops, so that seed companies that use the MLS contribute more to the Treaty's Benefit Sharing Fund (BSF), whose income has fallen well short of expectations.  That shortfall has disappointed developing countries and civil society groups and, along with a perceived challenge to the MLS from the Nagoya Protocol of the Convention on Biological Diversity (CBD), has propelled the ITPGRFA's efforts to try to fix the BSF's problems.

(The Nagoya Protocol on ABS entered into force in October 2014.)

No clear answers have yet emerged from the Committee's discussions, and successful fulfillment of its mandate appears to be an ever more daunting task.  On the one hand, it is increasingly apparent that reshaping the Treaty's Standard Material Transfer Agreement (SMTA) so as to generate sufficient income for the BSF may be impossible. In significant measure this is due to the fact that the United States, which has not ratified the Treaty, gives away many of the same varieties of seeds that require signing the SMTA when they are accessed from the genebanks within the Treaty's MLS.

This problem is termed “avoidance” in Treaty discussions, since companies avoid using MLS materials in favor of other sources, like the US genebanks, from which seeds come with no strings attached.  It is one of the key reasons why the Treaty’s problems may be impossible to heal – if the SMTA is made stronger, so as to require more benefit sharing, this may only encourage more avoidance of the MLS.

And on the other hand, while the seed industry feels pressure to contribute more funding, it is internally divided by company size and geography, and has thus far mustered only generic expressions of support for the Committee’s process. And in return for potential contributions, industry groups are specifying demands above and beyond the current Treaty for greater access to genetic resources. Thus industry wants more crops and more kinds of material in the MLS while at the same time being unwilling to enter into specifics on what financial support it will commit to provide to the BSF.

European, especially Dutch, companies are reportedly very interested in greater access to high value vegetable crop seeds – tomatoes, for example – that are presently not in the MLS and are thus accessed under ABS rules developed under the CBD/Nagoya Protocol, rather than the Treaty.  European industry is also keen for a revised SMTA to serve as a certificate of compliance for the purposes of the Nagoya Protocol, implementation of which is raising the bar for industry to demonstrate that the seeds it uses have been legitimately accessed, and not biopirated.

Other industry representatives, however, questioned the reflection of the CBD's definition of genetic resources (“functional units of heredity”) in the MLS SMTA. These companies argued that use of the Convention definition creates an “unreasonable requirement” in tracking seed companies' use of MLS seeds.  Since the ITPGRFA is an international ABS instrument negotiated to be in harmony with the Convention, industry's reluctance to embrace one of the CBD's core definitions in the MLS raised many eyebrows.

Prelude:  Studies Drop Expectations

On the day prior to the official meeting opening, a forum was held where consultants to the Treaty presented the findings of several studies requested by the Committee at its first meeting.  Most notable among these were revised economic projections of what contributions to the Treaty BSF might be expected under different options for revising the SMTA.  These studies presented a much darker outlook than prior papers commissioned by the Treaty, in significant measure because they discounted possible voluntary contributions from industry.

Treaty consultants walked through various scenarios, including collection of mandatory benefit sharing payments when companies take out plant variety protection (PVP) on seeds that include MLS material (a type of payments opposed by seed companies). The consultants concluded that there is a “mismatch” between the SMTA and financial expectations for the BSF and that a revised SMTA “cannot meet the target” and “must be supplemented”. (Officially no financial target for the BSF exists, although figures ranging from US $20 to $200 million per year have been mentioned.)

The financial shortfalls in the projections were severe. In many cases, even including benefit sharing mechanisms that industry opposes, the SMTA would only yield a few million dollars per year, well short of even the low-end figures expected for the Fund.

Yet even those projections were rosy, as they did not make provision for avoidance – the phenomenon of companies avoiding the MLS and SMTA by accessing genetic resources from the genebanks of non-Parties. In places, the studies also counted potential income from “regulated materials”, meaning seeds not covered by intellectual property claim, but covered by other restrictions, such as seed certification laws – a class of benefit sharing especially strongly opposed by industry.

And also disturbing, an estimate of the additional income that would result from expanding the list of crops in the MLS (contained in the Treaty’s Annex 1) to all plant genetic resources for food and agriculture – a move currently opposed by many developing countries and which would require re-ratification of the Treaty or a new supplementary agreement – would yield less than US $7 million per year. That figure again included possible income from industry-opposed benefit sharing from PVP-protected and “regulated materials”.

That paltry figure raised questions if there was any real economic rationale to expanding the Annex, considering the low income even under a high benefit sharing scenario and the great amount of work that negotiation of an expanded Annex 1 and new ratifications would entail.

Thus, the outputs of economic studies commissioned by the Secretariat were very grim.

Interviews of industry representatives by the consultants also painted an unencouraging picture.  Many industry representatives, especially from large companies, said they might go for decades without accessing the MLS for some crops.  At the same time, smaller companies were often less independent of the MLS and more likely to access it, creating situations where small companies were more likely to encounter mandatory payments than large ones.  Industry also sought a “de minimis” clause in the SMTA, meaning that benefit sharing would not apply in cases where the amount of MLS genetic material in a variety was below a certain threshold.  And it wanted time limitations on the SMTA, and complained that tracking and tracing seeds in breeding programs was too burdensome.

A study on the legal implications of various options to change the SMTA, prepared by Secretariat staff, focused on what changes would require re-ratification of the Treaty (e.g. expanding its Annex 1 to other crops) and which would not (e.g. altering payment rates, and stratifying them by user type).  Further legal studies will be presented at the next Committee meeting in 2015.

In discussion of the studies, European delegates acknowledged, “one [possible] conclusion is to go home,” but tried to emphasize that the Treaty was not purely about “Homo economicus”. An Asian delegate suggested that industry wanted to avoid payment, not avoid using the MLS material, and questioned if the trust that underlies the Treaty was being undermined by industry's positions. The delegate wondered, “what's the point?” (of continuing).  Industry replied by saying that it had signed relatively few SMTAs and said there were rational reasons to go to seed collections not in the MLS. Industry complained that discussion of avoidance sounded, to it, to be too pejorative.

Opening in Generalities

At its formal opening on Tuesday 9 December 2014, the Dutch and Cuban Co-Chairs of the Committee said that they had decided to keep the meeting focused on general concepts and principles, and to avoid “technical”, detailed discussion of SMTA and other provisions.  A more detailed discussion, they said, could take place at the Committee's third meeting, scheduled for April 2015 in Brazil.

While this avoided getting bogged down, observers were concerned for the process because the third meeting is already scheduled to address the difficult issue of “improving the functioning” of the MLS, a topic interpreted by Europe to be all about expanding Annex 1, a move generally opposed by developing countries, especially before the details of a revised SMTA are worked out and proven effective at increasing benefit sharing.

The meeting process was, then, to review and offer comments on bullet points on slides prepared by the Co-chairs on agenda items.  These slides and comments will be transformed into papers for discussion at the next meeting, where concrete advice to the Governing Body will need to be adopted (and which, it may be reasonably anticipated, will include a recommendation for continuance of the Committee in some form into 2016 and beyond).

Delegates passed, at least for the time being, on discussing whether the Treaty SMTA would suffice as an internationally recognized certificate of compliance under the Nagoya Protocol.  Australia called it a “side issue” and Europe also supported postponing this.

Delegates discussed avoiding the topic of avoidance.  Whereas European delegates expressed sympathy for industry's complaint that the discussion involved too much criticism of companies, Asia and Africa agreed that the issue was a critical one. Asia however added that coming up with mechanisms stop avoidance would be difficult and feared a discussion might degenerate into “complex nonsense” and inconclusive studies.

Africa rather proposed to discuss avoidance, but at European, Canadian, and other prompting, avoidance and incentives (to industry to use the MLS) became intertwined.  (Developed countries, and industry, say that more 'carrots' are needed to increase MLS seeds, whereas developing countries also more want 'sticks', coercive measures to encourage use and benefit sharing).

La Via Campesina (a global coalition speakingnfor small farmers) said discussion of avoidance was critical, while industry wanted to discuss other things.

Co-Chair Bert Visser of The Netherlands, himself unenthusiastic about discussing avoidance, asked if the discussion could be closed, proposing that the Committee “note it is a fact of life, and conclude that it is better to deal with this as a question of incentives.”

Little more was concretely said on avoidance on that first day, although at the end of the discussion European industry said that increasing use of germplasm was not an incentive to it. “We see more in the general funding strategy and not in the BSF per se,” said Industry, suggesting that what contributions it could make to the Treaty it wishes to make less as mandatory benefit sharing under the SMTA than in the form of voluntary contributions outside the BSF structure – a position further calling into question if the SMTA can be fixed at all. (And disjointed from the mandate of the Committee, which is to recommend how to increase user-based payments into the BSF.)

Another item on the Co-Chair's slides, also prompted by industry, was that of “tracking and tracing”, an industry phrase referring to the need to document use of germplasm in order to know, for example, when benefit sharing was due, or a subsequent recipient of a seed needed to agree to the SMTA. 

Asia, with Malaysia speaking for the region, noted that tracking and tracing was necessary in order for the Food and Agriculture Organization to ensure that the terms of the SMTA are followed, while the Near East, represented by Iran, noted that plant breeders track seeds as a regular part of their work. Asia said that some tracking and tracing was necessary in order to provide legal certainty – another of industry's priorities.

France noted that the Treaty's Article 6.9 speaks of sharing of non-confidential information that comes from use of MLS seeds, and wondered how many SMTA signatories had provided such information. The Secretariat allowed that sharing of such information was “not a systematically established practice” (i.e. rare).

The Southwest Pacific and Near East saw links between Article 6.9 and tracking and tracing, however, the Co-Chair proposed to have discussion on information sharing (Article 6.9) separately and to use the term “administrative burden” in lieu of “tracking and tracing” in order to distinguish the issues.

On the subject of industry's interest in an “incorporation threshold”, that is, a minimum proportion of MLS material incorporated in a commercial variety in order to trigger benefit sharing, industry (here represented by an employee of a US company) said that it had received legal opinions that it would need to track and pay benefit sharing if it used “functional units of heredity” from MLS materials.

The phrase comes from the definition of genetic resources in the CBD, although the industry representative did not identify it as such.  Having to track functional units of heredity, industry claimed, presented an “unreasonable requirement” for compliance with the SMTA hence, in industry’s view, the need to discuss a threshold.

Asia noted that a threshold had been discussed for many years by the Treaty and its SMTA committee and, at the end of the day, it had been concluded not to have a threshold, in part because of technical complexities of tracking genes.  Asia asked of such a discussion “Would it lead to another definition of genetic resources?” implying such a move could raise difficulty vis-เ-vis keeping ITPGRFA in harmony with the CBD.

Africa, with Angola speaking, agreed with Asia's comments, as did the Near East.

The Co-chair concluded that if industry wanted to make a concrete proposal on an incorporation threshold that the Committee could consider it.  Otherwise, the Committee seemed unlikely to take any such action.

With the discussion tapering off, France chimed in to say “we should commit to pay no matter the percentage used in the final product.”

Industry concluded that a threshold is “extremely important to us.” It said commercial varieties might have “adventitious presence [of genes] of no value” from MLS seeds that should not require benefit sharing, and sourly predicted “if the Treaty requires tracking and payment on that basis, the Treaty is going to have problems.”

In the afternoon, delegates began to discuss a termination clause for the SMTA, meaning that the SMTA should have a provision saying that the agreement's obligations would end at a fixed date after seeds are accessed.  At present, no such clause exists.

Brazil, the Near East, and Europe all wondered about the legal implications of a termination clause, with Asia recalling that it proved to be a complex issue in previous discussions.  Industry suggested that the absence of a termination clause in the SMTA created a competitive disadvantage for those companies using the MLS.

Comments from the legal officer did not fully clarify the implications of a termination clause and it was decided to request a more detailed legal opinion for the next Committee meeting.

Delegates then moved to a discussion of “financial expectations”, that is, money. Specifically, what level of annual funding for the BSF was appropriate?  On the screen, the Co-Chair's slide indicated a figure of $25 million, said to reflect the Treaty's strategic plan and to stem from cost estimates for support of the BSF's priorities, however, no target has actually been agreed.

Civil Society Organizations questioned the $25 million figure, considering it too low.  They noted that it does not stem from a proper needs assessment for conserving agricultural biodiversity in the field and is based on a somewhat arbitrary selection of cost estimates now nearly two decades old. They also noted that the financial plan anticipated growing funding for the BSF with each year, by now exceeding $25 million and growing.

(Europe is especially wary of talk of a needs assessment to rationally determine what funding the BSF needs to accomplish its objectives, and what proportion can come from industry, instead preferring to ask industry what it wants to contribute.)

Europe thought it would take time for user-based payments to bring funding to the BSF, and the Swiss delegate said that in his country's view there was no legal obligation in the Treaty for governments to support the Fund.

The Near East noted that the strategic plan was now several years old and said it needed to be updated.  But Australia did not think the strategic plan needed updating, noting that “some income is better than none.”  Canada urged “realism” but did not know what realism meant in terms of a specific figure.

Asia took some issue with Switzerland's view about government support for the BSF, noting that the Treaty's Article 18 says that developed countries should provide funds.

Africa thought the MLS users (i.e. industry) could provide “considerable” income to the BSF and the focus should be there.

Delegates then discussed if SMTA Article 6.11, the so-called “African Proposal”, should be the “default option” in the SMTA.  The African Proposal, several variants of which are now under discussion, is for MLS users to share benefits based on a percentage of sales of seeds of the crops for which they access MLS germplasm (as opposed to Article 6.7, which links payment to sales of specific intellectual property-protected varieties derived from MLS material).

Many countries support 6.11 becoming the default option, however, important issues remain unclear.  Such as: What would the payment rate be under a revised 6.11?  Could 6.7 be removed altogether or made so unattractive (e.g. with a very high payment rate) so as to force use of 6.11?  What, if any, variation in rates should exist depending upon the user and crop?  (And, of course, in the back of many minds, is the effort worth it at all?)

Noting that questions surrounding 6.11 really could not be discussed in isolation from the other SMTA provisions, Asia (with new member Japan) put forward a package for discussion, including placing a high payment rate on 6.7, a lower one for 6.11, different rates of payment for different users, and different rates of payment for patented, plant variety-protected (PVP), and hybrid varieties.  Asia would also make presently voluntary payments (in Article 6.8) mandatory. Asia said the specific rates would need to be negotiated.

Industry objected to payments on PVP-protected crops, protesting that doing so would destroy the “breeders exemption”, a provision in (UPOV) PVP laws that permits PVP-protected crops to be used in further breeding programs.  Industry claimed that many government negotiators did not understand the breeder's exemption.  Europe questioned if payments for PVP-protected crops would have the deleterious impact that industry claimed, and Asia nodded in its agreement with the point.

The following morning (10 December) discussion continued, with Asia clarifying that its proposal only contemplated changes to the SMTA and not to the Treaty itself.  The Near East urged that, in addition to the options Asia had included in its proposal, that user-based payments outside the SMTA, such as Norway's tax on seed sales, which it contributes to the BSF, should also be kept on the table.

Canada tried to sound optimistic but brought up a number of its and industry's problems with the Asian package, rejecting a Norwegian-style tax approach for its own use, preferring not to enter into discussion about patent-specific payment rates for fear of scaring non-Parties (i.e. the US), and wanting to take a queue from industry in terms of the size of payments.  Canada did endorse different payment rates for different crops, again “taking into consideration input from industry”.  Canada also wanted to revisit the “functional units of heredity” discussion kicked off by industry.

Australia agreed with Canada and did not want to make Article 6.8 mandatory, as Asia proposed.

Africa emphasized that Parties had sacrificed sovereignty in entering into the Treaty in and placing many crop genetic resources in a common pool. In capitals, Africa said, its delegates were being asked “Where's the benefit [of the Treaty]?” That benefit, Africa said, had been too little for too long.

Africa wanted to study Asia's ideas more carefully.  For the time being, it endorsed removing Articles 6.7 and 6.8 (voluntary payments) from the SMTA altogether (rather than increasing their cost, as Asia proposed) and leaving a modified version of 6.11 as the only benefit sharing option.  Talk of different levels of payments by different types of users, Africa said, should be in the context of 6.11, not the other articles.

France was concerned that if payment rates were differentiated both between crops and between users that “we're going to have 1000 different rates.”  France thought that deleting Articles 6.7 and 6.8 as Africa proposed would require a change to the Treaty.

Asia said that there would be reduced “tracking and tracing” in its idea of a revised 6.11, and therefore in addition to the inducement of a lower payment rate, its version of 6.11 would be attractive to industry from an administrative standpoint.

Brazil, responding to Asia's suggestion that if the SMTA were fixed and functional, then addition of crops to Annex 1 could be considered – a move that would require ratifications – said that multiple rounds of ratifications would be difficult.  Brazil has repeatedly supported expanding the scope of Annex 1 beyond the present list of crops to all plant genetic resources for food and agriculture.

La Via Campesina said that the BSF needed to be functional, and the Farmers' Rights provisions of the Treaty must be implemented, before considering expanding the Annex.

Industry said it realized the status quo was unacceptable but did not support making benefit sharing payments under Article 6.8 of the SMTA mandatory.  Like Canada, the US industry representative suggested that differentiating payment level between patent, PVP, and other forms of variety protection would interfere with potential US ratification of the ITPGRFA, which it purported to be actively promoting.  Industry reiterated that tracking functional units of heredity was “unreasonable”, and claimed hybrids are not a form of restriction on use of genetic resources.  Industry said it had options on the SMTA benefit sharing provisions that it was willing to share but did not mention specifics.

Australia thought industry should work with the Secretariat to table proposals at the next meeting, which raised procedural questions in some observers’ minds.

The Treaty Secretariat’s Legal Officer said that deleting SMTA Articles 6.7 and 6.8 altogether (Africa's proposal) is a “tricky question” vis-เ-vis Article 12.3 of the Treaty and that the question would need further study.

Article 12.3 establishes the SMTA and general conditions for access to MLS genetic resources, including that it be “free: or at only minimal cost.

Several delegates pointed out other aspects of 6.11 that need consideration, especially if the other articles were eliminated, although many questions were premature to consider in detail.  One receiving more attention was the question of what terms could/would be used if a user received seeds under Article 6.11 and then transferred them to a third party.  Would 6.11 still apply or would other options (if kept) be a possibility?  What were the tracking implications?

Turning the tables, the Near East asked what the proposals were from developed countries to get more funding into the BSF.  Switzerland replied that it thought the Asian proposals was a basis for discussion.

A United States (non-Party) official, attending as part of the Canadian delegation, replied that it wanted to keep 6.7, 6.8, and 6.11, adding inputs from industry, whose (unrevealed) proposals it mentioned.  The US thought differentiation by crop and user was possible, and that 6.8 should be “streamlined” (meaning unclear).  The US opposed making 6.8 mandatory, and opposed introducing benefit sharing payments on hybrids.

Asia replied that if 6.8 is not made mandatory then users will not be inclined to select 6.11, a revised version of which is the option most countries prefer.

Australia still opposed making 6.8 mandatory. Canada agreed but more boldly asked industry what kind of rates it would agree to.  Industry again declined to get into detail about rates, noting that some crops could bear benefit sharing payments but others not, making the situation complex. “Asking 'What are you going to pay?' is not a fair conversation,” industry claimed.

In the afternoon, the final substantive negotiating session (the final day was reserved for report translation and adoption), delegates began with a short discussion on technology transfer.  Africa mentioned the importance of scholarships for PhD training programs for developing country seed conservation scientists, and how this would help enrich the MLS by making more information and material available.  Asia mentioned that it attached importance to co-development of technology among developing countries and Globally Important Agricultural Heritage Sites, a concept under discussion elsewhere which, it said, might eventually have some sort of international recognition, similar to that afforded to wetlands under the RAMSAR convention.

Delegates then opened the thorny issue of expansion of the MLS.  Most developing countries oppose expanding the MLS until the Benefit Sharing Fund is demonstrably fixed, whereas developed countries and industry – especially the vegetable seed industry – generally want Annex 1 expanded sooner.  Developed countries also complain that developing countries should do more to put their national collections into the MLS.

Countries generally reiterated established positions on expansion of the MLS, which would require re-ratification of the Treaty or a separately ratified supplementary agreement (protocol).  Europe and North America particularly favor expansion, with support from Brazil, which is alone among developing countries in favoring fast and wide expansion of the MLS.  A particular question that emerged, but which was not resolved, is whether any discussion of possibly expanding the system should be about expanding to all PGRFA or to a more limited number of crops.

Conversation also briefly touched, without drawing conclusions, on the possibility of a “club” or “subscription model” for access to the MLS. Many delegates regard this idea as a potentially attractive and more radical form of modification of Article 6.11, however, some, such as European industry, think of a “club” as existing outside the SMTA (and, hence, beyond its binding effect).  At an informal discussion on Thursday morning (11 December), there were further exchanges on the “subscription model”.

Concluding the session, it was confirmed that that the Committee will next meet in Brasilia in the second quarter of 2015, possibly the penultimate week of April, when major tasks will be a discussion of proposals based on the present Committee meeting, possible expansion of the MLS, and adoption of advice to the Treaty's Governing Body, which will meet in October 2015.+