Are TRIPS Waiver Enough? Vaccine Developers’ Recourse to Investment Treaty Arbitration

Introduction:

Last year in October, South Africa and India made it to the headlines for they had submitted a proposal at the World Trade Organisation (WTO) requesting a waiver of certain provisions of the Trade-Related Aspects of Intellectual Property (TRIPS) Agreement for a fair and equitable distribution of Covid-19 vaccines throughout the globe. It was considered to be a step to counter ‘Vaccine Nationalism’. It was alleged that the Vaccinations were being controlled by high-income countries, leaving the third-world countries with minimal, if any, supplies of such life-saving medicines. Vaccine Nationalism is seen as a grave violation of Human rights. Art. 12 of the International Covenant on Economic, Social, and Cultural Rights (ICESCR), for example, codifies the right to health. This article, among other things, mandates the 171 state parties to establish policy frameworks that promote, safeguard, and guarantee the right to health. The Committee on Economic, Social and Cultural Rights in General Comment No. 14 on right to health emphasized the role to incorporate new aspects of care in the interpretation of Art. 12 ICESCR, such as resource allocation to tackle severe discovered illnesses. One could attribute this to free and fair distribution of vaccination as a human right.

Background

To some relief recently a majority of the country have shown their support for the TRIPS waiver on the Covid-19 vaccination. The effort, which drew an endorsement from over 100 countries, including the likes of USA, UK, France etc who were initially accused of keeping the vaccine from the rest of the world, led to persuaded the WTO to suggest a waiver of responsibilities under different provisions of the TRIPS Agreement that would otherwise apply to WTO members. But the question arises, even though the TRIPS Waiver is essential, but is it insufficient to provide equal access to COVID-19 vaccines?

Though agreement between the majority of the country about the TRIPS waiver might be a good sign for the many developing nations, this might not come as pleasant news for the vaccine developers who have spent billions of dollars. Though the proposal for a waiver has gained massive support but it has received some backlash too. The idea has been attacked by pharmaceutical corporations and several other European governments as being ineffective and undermining future research and innovation. Such waiver can be countered through recourse to Invest Treaty Arbitration (IIA). The companies may have an actionable claim under the current International Investment regime, which would act as a major hurdle. It must be noted that Fair and equitable economic growth in the time of multilateralism seems to be on an unstable foundation today, as the WTO functions on a consensus basis, needing the approval of all of its members whenever new disciplines are formed.

TRIPS Agreement and Waivers.

The proposition majorly focuses on waiver of Sec. 5 of the TRIPS agreement which envisions patent safeguards, along with the rights of patent owners to restrict illegal usage of their protected inventions. The trips agreement TRIPS which was a consequence of the Uruguay Round of General Agreement on Trade and Tariff talks from 1986 to 1984, is a significant example and comprehensive product of multilateralism for the protection of intellectual property. Vaccines, that are industrial products (protected by Patents), which are of major concern here are governed under the provision of Part II of the TRIPS agreement (Art. 15-38). It is Art. IX.3 of the Marrakesh Agreement which dictates, only under ‘Exceptional Circumstances’ the obligation imposed on the WTO member nations maybe be waived at a ministerial conference, with support of at least Three-Fourth of the total membership. Art. 30 and 31 provide for some detailed and limited exceptions and in the form of compulsory licensing research exception on the meeting of certain conditions of emergencies. Adding more to that the 2001 Doha Ministerial conference explicitly recognised ‘public health emergencies’ as one of the exceptions.

Patents as an Investment

Today we live in a world where international trade is dictated by IIAs. These agreements regulate the behaviour of the nations by restricting their interference with the rights of foreign companies. IIAs impose an obligation of Fair and Equitable Treatment (FET) of the foreign investors on the host-nations, which is the fundamental element of international investment. And, if the provisions of the IIAs are allegedly violated, these regulations and duties empower companies to pursue direct claims against the host governments at various tribunals. Intellectual property rights are generally protected under the scope of investment under IIAs, consequently allowing vaccine developers to sue host-nations if their regulations tend to infringe on their IP rights for example in Elli Lilly v. Canada the pharmaceutical company under the North American Free Trade Agreement (NAFTA), challenged the infringement of its patent by Canada’s Court. Pfizer has claimed that the Indian generic medication company is apparently targeting it for a compulsory license, which might be an infringement on Pfizer’s patent with the backing of the Indian government, and maybe even export such goods. But it has brought no claims against India, yet.

It must be understood the arbitration claims cannot just be brought because the developer wishes so. The developers will confront a fundamental jurisdictional question in investment treaty arbitration: that they made an investment on the territory of the States surrendering their IP protections. Many IIAs specifically mention intellectual property rights as a potential investment. However, several developing nations who are presently calling for patent exemptions have yet to register the developers’ patents, Pfizer’s claim against India being one the most debated examples. If this is the case, developers may encounter a jurisdictional hurdle as a consequence of their lack of assets under the respondent State’s jurisdiction. Which would already add to the existing problem of the respondent state not having registered their patent and even if it is registered in the host state the developers might have a tough time proving such patents qualify as an investment under the agreements. For those developers who might knock the doors of the International Centre for Settlement of Investment Dispute (ICSID) for any relief they must first prove that their patents have certain qualities which makes it an investment i.e.: “(1) a contribution of money or assets; (2) a certain duration over which the project was to be implemented; (3) an element of risk; and (4) a contribution to the host state’s economy.” Taking into consideration the conditions set out in Art. 25 of the ICSID convention, in addition to the definition of investment, this might be a challenging task. IIAs, on the whole, safeguard existing investments and occasionally guarantee the right to make a new one. As a consequence, if the respondent State has not registered the patent at issue, the developers may face great difficulty proving that the IIA applies. While the developers have definitely committed significant resources in the states in which the vaccinations were created, they haven’t yet done so in many underdeveloped nations where the vaccines are simply sold.

The situation might favour the developers and the approach may change if they have additional assets and holdings in a specific respondent state in addition to the registered patent such as Pfizer and Johnson & Johnson having plants in India and China respectively. If the Developer has a pre-existing production facility, distribution facility, or substantial foothold in any other form under the responding State’s jurisdiction, the patent may constitute as part of the total investment and be safeguarded under the relevant IIA. Even though the respondent State has rejected to register the applicable patent, this denial might well become a ground for raising a dispute as an example of probable unjust treatment of such existing investment.

Compensation

There are certain IIAs that contain few exceptions, which provide for compensation resulting from expropriation by the state in matters of compulsory licensing. Some recent IIAs have even gone to an extent where the imposition of few restrictions on intellectual property, would not be considered as an expropriation. If such exclusions are included under the appropriate IIAs, the patent waiver effort would come under them. The limitations, on the other hand, generally apply solely to the expropriation provision, leaving the Developers free to use other principles of protection, like the FET.

When it comes to patent waivers, there are some substantive safeguard standards that apply. The patent holder has the sole authority to approve the use of their invention. Waivers that are necessitated and justified by the health crisis may be construed as expropriation in some form for others. Which obliges the states to pay compensation which must not be less than the fair market value of the patent.  The Developers might sought full compensation under the prevailing IIAs if the waiving States offer falls short of this threshold. Even if the patent’s value does not suffer a significant loss, the Developer may try to recover its cost under the doctrine of legitimate exceptions, which forms a significant part of FET and the Full Protection and Security standards. It may claim, for instance, that the exemption infringes with legal certainty, in which case it will almost certainly need to show that it had got explicit assurances from the State regarding the legal framework’s stability. It might also claim that perhaps the patent waiver is an unnecessary step that’s not really justified by the preferred result.

Conclusion

Though the patent waiver on Covid-19 vaccines might be a good step towards ensuring better health conditions, this could lead to a skirmish on legal turf between Developers and the States. To avoid this States and the developer must try to come to an agreement, regarding the patent waiver which is specific to the IIAs and guarantees a fair and just compensation to the developers. This could be done by the inclusion of new provisions in the existing IIAs which would not only help the nations vaccinate the entire population as soon as possible and leave this pandemic far behind us but also, help in dealing with similar situations in an effective and efficient way if it arises in future. The international community needs to learn from its mistake so that when faced with another health crisis in future, we don’t have to go through what we are experiencing with the Covid-19 pandemic.

ABOUT THE AUTHOR

Priyansh Priyadarshi, Third Year – Student and Chanakya National Law University, Patna.