TWN Info Service on WTO and Trade Issues (Mar05/3)

16 March 2005

MORE CONSULTATIONS NEEDED FOR TRIPS/HEALTH "PERMANENT SOLUTION"

The WTO's TRIPS Council met last week and was unable to reach agreement on the "permanent solution" to the issue of Paragraph 6 of the Doha Declaration on TRIPS and Public Health relating to countries having no or inadequate drug manufacturing capacity.

The Council decided to suspend its discussion on the issue and agreed that informal
consultations would instead be held in an attempt to find agreement by the deadline
of the end of March.

The discussions on this issue at the TRIPS Council on 9 March were marked by
strong differences in positions between several developing countries and major
developed countries.

The Doha Declaration in its para 6 recognised that countries with insufficient or no
manufacturing capacities could face difficulties in using compulsory licensing under
TRIPS and instructed the TRIPS Council to find an expeditious solution.  The
concern was that countries that wanted to import generic drugs might have difficulties
in finding supplies since the producing countries face limitations in exporting, as they
have to supply "predominantly" for the domestic market.

On 30 August 2003, the WTO General Council adopted a Decision containing a
"temporary solution" in the form of a waiver of Article 31(f) for countries that export
to eligible importing counties.  Para 11 of the 30 August decision also directed the TRIPS Council to prepare an amendment to the TRIPS agreement which "will be based, where appropriate, on this Decision."   The original deadline (end-June 2004) passed without a resolution and a new deadline for this "permanent solution" was set for 30 March 2005.

In December 2004, the African Group presented a paper proposing an amendment to Article 31(f).  At this week's TRIPS Council meeting, the Group presented another
paper providing legal arguments to support its December proposal.  Much of the
discussions at the meeting centred on the African Group paper.

Below is a report of the TRIPS meeting of 9 March.  It was first published in the South-North Development Monitor (SUNS) (14 March 2005) with whose permission it is being circulated here.

With best wishes
Martin Khor
TWN

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More talks needed on TRIPS and health "permanent solution"

By Martin Khor (TWN), Geneva, 11 March 2005

The TRIPS Council of the WTO, at its meeting this week, was unable to reach agreement on the "permanent solution" to the issue of Paragraph 6 of the Doha Declaration on TRIPS and Public Health relating to countries having no or inadequate drug manufacturing capacity.

The Council decided to suspend its discussion on the issue and agreed that informal consultations would instead be held in an attempt to find agreement by the deadline of the end of March.

The discussions on this issue at the TRIPS Council on 9 March were marked by strong differences in positions between several developing countries and major developed countries.

The main issue at stake is the present Article 31(f) of the TRIPS agreement which specifies that the use of the subject matter of a patent without authorisation of the right holder (for example, compulsory license to produce) shall be authorised "predominantly for the supply of the domestic market."

The Doha Declaration in its para 6 recognised that countries with insufficient or no
manufacturing capacities could face difficulties in using compulsory licensing under
TRIPS and instructed the TRIPS Council to find an expeditious solution.  The
concern was that countries that wanted to import generic drugs might have difficulties
in finding supplies since the producing countries face limitations in exporting, as they
have to supply "predominantly" for the domestic market.

On 30 August 2003, the WTO General Council adopted a Decision containing a
"temporary solution" in the form of a waiver of Article 31(f) for countries that export
to eligible importing counties.  The adoption of this decision was accompanied by a
Chairman's statement.  The decision and statement contains several conditions and
measures which exporting and importing countries have to comply with, causing
analysts and some countries concerns that these are too cumbersome and thus
rendering the "temporary solution" difficult to operate.

Para 11 of the 30 August decision also directed the TRIPS Council to prepare an
amendment to the TRIPS agreement which "will be based, where appropriate, on this
Decision."   The original deadline (end-June 2004) passed without a resolution and
a new deadline for this "permanent solution" was set for 30 March 2005.

In December 2004, the African Group presented a paper proposing an amendment to Article 31(f).  At this week's TRIPS Council meeting, the Group presented another
paper providing legal arguments to support its December proposal.  Much of the
discussions at the meeting centred on the African Group paper.

The main points of contention among the members included:

* Whether to amend Article 31 of TRIPS  (which the African Group proposes) or to
incorporate the 30 August decision in a footnote (which is preferred by the United
States);

* Whether the 30 August decision should be incorporated in its entirety,  or only
appropriate portions of it are incorporated in the amendment, and if the latter, then
which are the appropriate elements, and which elements should be left out or
modified;

* Whether the Chairman's statement accompanying the 30 August decision should be incorporated in the amendment.

As there was no agreement on these issues at the TRIPS Council meeting, it was
agreed that the meeting be suspended and that the Chairperson of the TRIPS Council Ambassador Tony Miller of Hong Kong China carry out consultations among the members.

At the meeting, Nigeria introduced the new African Group paper, and the US also
presented a paper responding to the original African Group paper.

The new African Group paper said that the Group's proposed amendment is based on the waivers adopted in the 30 August 2003 Decision with modifications but it would not include the Chairman's statement either as part of the amendment text or as a footnote.

It added that three issues had to be addressed.  The first issue is about the legal form of the solution.  Some Members have argued that there is no need to amend the text of the TRIPS Agreement and a footnote would be the most appropriate way to
implement paragraph 11 of the decision.

The second issue is about the proposed modifications to the 30 August Decision. The African Group based these modifications on the agreement that the 'amendment
would be based on the Decision, where appropriate', but some other Members have
argued that this amounts to a re-opening of the Decision as opposed to a technical
adaptation.

The third issue relates to the Chairman's Statement and how it would be dealt with in
the context of an amendment.  The African Group considered that the Chairman's
Statement should not be part of the amendment as it was not part of the 30 August
Decision.  Making it part of the amendment text including through a footnote would
elevate its legal status.  On the other hand, some other Members argue that the
Chairman's Statement has to be part of the amendment.

Regarding the legal form, the African Group said that its proposal to add a paragraph
to Article 31 (with the relevant footnotes of the Decision becoming footnotes in the
TRIPS Agreement) stands on sound legal ground in WTO law and jurisprudence as
confirmed by the Secretariat.

More importantly, this is the most direct and straightforward approach, which raises
no doubts about the legal standing of the amendment.

Because of a lack of any specific positive finding on this question by a WTO panel
or Appellate Body and considering the ordinary meaning of the word 'footnote', there
is a significant degree of uncertainty that arises with respect to using a footnote to
implement a very crucial amendment to the TRIPS Agreement and, in particular, to
give the solution certainty and legal security.  The footnote approach therefore raises
important concerns which have not been fully addressed and which are likely to
remain, said the African Group.

"Since there is a more straightforward, less complicated and legally secure route
which has not been doubted by any Member, that is, direct amendment of the TRIPS
Agreement by inserting the amending text in the body of the Agreement, there is no
basis to look for alternatives," said the Group.

The second issue relates to the modifications to the 30 August decision.  The paper
says that the African Group proposal modifies the 30 August decision as appropriate
and, in particular, proposes to eliminate a number of provisions in the decision.  There is a sound legal basis for proposing to eliminate these provisions.  The Group's proposal is legally based on the test that was established by the 30 August decision, which is "appropriateness".

Said the Group:  "The appropriateness of particular elements should be understood
to mean those elements in the Decision that are necessary to ensure the amendment
is legally predictable, secure and economically and socially sustainable, that is, that
the amendment fulfils the aspirations for those for whom paragraph 6 of the Doha
Declaration was meant to serve.  Arguments simply based on political expediency or
efficiency for its sake cannot therefore suffice.

"In particular, the argument that the amendment should simply be a technical transposition of the Decision does not find any legal basis in the 30 August Decision
itself or in the context of the negotiations leading to its adoption.  If the idea was to
undertake such a technical transposition, nothing would have been easier than for the
General Council simply saying that. Consequently, to proceed on the basis of a
technical transposition would be to deprive the appropriateness test established by the Decision of any meaning."

Based on the appropriateness test, the African Group proposed to eliminate, first,
those provisions whose purpose has already been served or that would be redundant
in the context of an amendment.  Secondly, it proposed to eliminate other provisions
whose purpose would otherwise be served by other provisions of the TRIPS
Agreement such as the Agreement's provisions on enforcement.

The African Group paper then provides details and justifications of why certain
elements of the 30 August decision had been eliminated or modified in the Group's
proposed amendments to Article 31.   Many of the elements include notifications that
importing or exporting members using the waiver system are obliged to comply with.

Among the provisions that the Group has proposed to eliminate or modify include
those relating to specifying the names and quantities of the drugs  needed;  the
confirmation of lack of capacity and the Annex to the Decision; confirmation of
intention to grant a compulsory licence; importation of only the amount necessary to
meet the needs of the importing Member; posting information on the website;
notifying the TRIPS Council of the grant of the licence etc.; and Paragraph 4 of the
Decision relating to re-exportation.

Regarding the Chairman's Statement, the African Group paper said that there is clear legal justification that it should not be part of the amendment either as part of the Group's proposed new Article 31(2) or as a footnote.  The Chairman's Statement was not part of the 30 August Decision and including it in the amendment, through a
footnote, would be giving the Statement a legal status which it never had.  This would
in essence significantly unbalance the text.

It says that the WTO's Legal Affairs Division's Note of 1 March 2004 and the
Addendum of 12 May 2004 support this proposition.  The Division concludes that
"Footnotes in covered agreements have been considered by WTO panels and
Appellate Body from a legal perspective to be an integral part of the text of the
articles to which they are attached".  As noted, the Chairman's Statement while
providing context to the Decision, was without doubt, not an integral part of the
Decision.

Consequently, the inclusion of the Chairman's Statement in the text of the amendment
or through a footnote would change its status to the detriment of the African Group.
However, consideration could be given to accepting some form of a Chairman's
statement to be read at the time of the adoption of the amendment.

In its paper, the US said that it appreciates the African Group's efforts to move the
discussion forward with its December 2004 paper but that its proposed position was
different from the solution agreed in August 2003.  For example, it makes no
reference to the Chairman's statement and omits many key safeguards on notification and diversion.  Thus, the Group's proposal does not preserve the consensus and delicate balance reached.

The US said that it is willing to work with the African Group and all members to
move ahead to a consensus on an amendment.  It remains open as to how this
technical exercise can be accomplished.  It believes that a footnote approach would
be an easy exercise and an optimum solution.  "We are also wiling to consider any
other options for placing an amendment that references both the decision and the
chairman's statement, including a new section in Article 31," the US said.

The US also stressed that it was essential to preserve explicitly in the amendment a
reference to the chairman's statement or its principles, as the solution would not have
been reached without the chairman's statement.

The EC said that it also sees this process as a technical exercise.  It said that the
August 30 decision is a compromise and that some members are trying to obtain from the current discussions what they could not obtain in 2003.  It criticised the
pick-and-choose approach of the African Group.  It did not share the African Group
position, as critical parts of the Decision were left out and others modified.  In
particular, it said that provisions on notifications that were removed in the proposal
should be restored.   The EC also proposed that the Chairman come out with his own
text as the basis for further discussion.

It agreed that the footnote approach was not appropriate and preferred direct
amendments and also that a statement can be issued during the adoption of the
amendment.

Japan said that this is a technical exercise and the footnote approach is the simplest.
It said that the African Group proposal leaves out important provisions and does not
refer to the Chairman's statement.

Korea said that the 2003 decision should not be re-opened and it was against the
elimination of the provisions as proposed by the African Group.   Canada also said
that this is a technical exercise and the substance of the 30 August decision should not be reopened.  Some issues left out by the African Group proposal are important to some other members.

Argentina supported the African Group proposal.  It said that nothing in para 11 of
the decision refers to a mere transposition of the decision.  It said that the footnote
approach is not acceptable and the Chairman's statement should have no place in the amendments.

India and Brazil said that the African Group proposal is positive and has a good basis. It had clearly explained why some parts of the decision should be left out of the
amendment.

The Philippines reminded that when it joined the 30 August consensus, it had raised
legitimate concerns.  It criticised the EC for saying that some members are trying to
get from this process what they could not get from the earlier process.

Kenya, speaking for the African Group, responded by saying that it was good that
members are all committed to end the work by the deadline at the end of March. What the African Group proposal did is to preserve the minimum standards set by the TRIPS agreement while incorporating the decision.

It said that the African Group proposal had mainly suggested leaving out what is
already contained in TRIPS as there is no point in duplicating these.

Referring to the EC idea that the Chairman produce his own text, Kenya said that this
implied that the EC rejected the African Group draft as the basis for discussion.  It
could not accept this idea especially since others did not reject the African Group text.

Kenya agreed with Argentina that the African Group looked at what were the
elements that were appropriate in the 30 August decision (being guided by para 11 of the decision) instead of transposing the whole decision.

It said that this (i.e. choosing what are the appropriate elements) was itself a technical exercise.  Simply cutting and pasting the whole 30 August decision is not a technical exercise.  Instead what the African Group did was a genuine technical exercise.

If the 30 August decision is to remain only a temporary waiver and not a permanent
solution, then a mere transposition would do.  But to obtain an amendment and
permanent solution, the exercise had to involve changes as some paragraphs are
inappropriate.

Regarding the footnote approach, Kenya said that the African Group had made clear
that this could not be used and there was a danger that important substance would be lost in a footnote approach. The important substance has to be in the main body or text of the agreement.

Regarding the chairman's statement, Kenya said that para 11 of the decision does not mention that the statement should be included.  The statement had a purpose at the time which it had served, and it should not now be considered in the amendment.
However, it was willing to consider a similar type of statement when adopting the
amendment.

At the end of the meeting, the Chairman said that he was suspending the meeting and would continue with consultations.  He encouraged delegates to talk with one another, and expressed hope that a deal would be reached by the end of March.