14 August, 2015
With a delay of more than eight years and counting, the India-EU Broad-Based Bilateral Trade and Investment Agreement (BTIA) has again come to standstill after EU banned sale of around 700 pharma products clinically tested by GVK Biosciences, Hyderabad. Disappointed with the ban the government of India has deferred the meeting which was scheduled for August 28 for negotiating the terms of BTIA. The government emphasised on the fact that the pharmaceutical industry is one of the flagship sectors of India which has developed its reputation through strong research and safety protocols over the years. As per the Indian government most of the drugs banned by the EU were already in the market for many years without any adverse pharmaco-vigilance report from any member state.
Though the government of India is keen to carry out this agreement as technology and expertise from EU is essential for its Make in India and Digital India campaigns to be successful, the recent ban put by the EU has made India to rethink about the negotiations once again.
The bilateral trade between India and the European Union, presently, is worth a massive 100 billion Euros which is expected to double after the FTA. But, even with such potential, both parties have failed to come to a mutual agreement. One of the major roadblocks to the FTA is the deadlock over changes in the intellectual property rights regime of India demanded by EU in the said deal. Recently, the Indian commerce 3ministry said that it would introduce a National IPR Policy to further strengthen its IPR laws. Yet, it is highly unlikely that India will agree to the demands and the provisions suggested by the EU. Hence, it still remains a major obstacle to the much awaited agreement.
The Conflict
The ultimate objective of BTIA is to liberalise two-way trade in goods and services and flow of investments. By introducing a stronger IPR regime, the EU wants to protect the rights of its IP holders. But, it has been observed that legislations sought with such an over protective mind set tilt the law in favour of one party that can easily take full advantage of the same. In this case, the provisions by EU tilt the law in favour of the IP holders that can cause great damage to India’s cause while they exploit the law to their benefit.
In recent times, the pharmaceutical industry of India has boomed to the extent that India has come to be known as the ‘pharmacy of the developing world’. The much cheaper Indian versions of western drugs have flourished in the developing and underdeveloped nations vastly improving the public health of such countries due to their affordability.
According to critics, the demands of the EU to strengthen IPR laws in India, if accepted, would have a huge negative impact on the Indian pharmaceutical industry. These effective and affordable Indian generics would no longer be cheap that will adversely affect the public health of not only India but a number of developing countries constituting a big chunk of the population of the world.
These affordable yet good quality Indian drugs were possible, principally due to the IPR laws of India. For instance, there were no product patents on pharmaceuticals under the Indian Patent Act, 1970. India tactfully utilized the transition period under TRIPS to its advantage to postpone the implementation of minimum standards of the WTO for protection of IP rights until 2005. Using the flexibility provided by the TRIPS Agreement, important safety measures were introduced in the patent laws that allowed manufacture of cheap Indian generics even after the implementation of TRIPS in 2005. Modification of the above laws that prevent the west from bringing generic drugs into India can spell doom for the industry as well as the right to health, especially of the poor as they will not be able to afford them.
If India accedes to the demands of EU, it could lead to ever greening of patents or data exclusivity that will prevent India from manufacturing cheaper copies of the drugs as it would require expensive clinical trials. At present, they can bypass these trials by demonstrating that the copies are as effective as the original by using bio-equivalent data.
The Demands
The provisions put forward by the EU can be divided broadly into 2 categories:
- Changes in the intellectual property regime:
The EU has sought to increase protection of IP rights by asking India to enforce the ‘TRIPS plus’ provisions that go much beyond the protection given by TRIPS. But such provisions are said to stall the development process and have been extremely criticized.
Demands of the EU in the FTA are:
- Imposing TRIPS plus measures based on EU regulations. For example, bestowing such powers to the custom officials that at the wish of the company, they have the right to seize or destroy shipments on the basis of mere allegations of infringements of IPR sans judicial review or notification of the patent holder.
- Increasing the term of patents beyond twenty years. This will make products based on the patented technology unaffordable for the poor for longer duration.
- Data Exclusivity: It will stop the regulatory authority from registering medicines on the basis of bioequivalent data. This will directly impact public health.
- “Investment”
The investment related part of the India-EU FTA negotiations is equally controversial. The contentious provisions are as follows:
- A broad definition of “investment” that includes IPR including know-how, good will as well as technical processes. This is an over protective measure which will enable a foreign IP holders to cite provisions relating to investment protection besides stringent protective measures given to protect IPRs. This empowers foreign companies to challenge anything that seems to be an expropriation to them. This has happened before in other nations as well. It gives them unmatched power, for instance, to address access to medicines (which is essential for right to health and life) as expropriation if they feel that their IP rights have been infringed.
- Forbidding parties to take any ‘measure of expropriation’ that may come in the way of reaping the benefits from an investment. Such measures include any regulatory action including one taken by the Government in public interest. Like in Brazil in 2007, a compulsory license granted for the antiretroviral, efavirenz was called as an expropriation of intellectual property by Merck. Moreover, weak safeguards are available to such challenges in the draft. Only compulsory licenses are protected that are consistent with TRIPS cannot be challenged. Furthermore, it is ambiguous whether an arbitration tribunal has the jurisdiction to ascertain the above when it solely lies with the WTO panels.
- An arbitration tribunal to handle investor-state disputes is again a dangerous provision for India where the investor can easily bypass the legal process as well as judicial and administrative institutions by filing a lawsuit directly in the tribunal. The Indian legal system via the powers conferred on it by the Constitution maintains the precarious balance between IPR and human rights in India. Such circumvention of due legal process could easily lead to infringement of human rights by tilting the balance in favour of the investors.
- Ambiguity in definition of ‘fair and equitable treatment’ of investors can allow arbitration tribunal to decide on its own what constitutes the above on a case-by case basis. This gives the investors an opportunity to take undue advantage of this ambiguous provision. Additionally, the EU doesn’t want the above definition to be subjected to the public interest proviso.
- Moreover, The European Commission seems to limit the scope of performance requirements on the foreign investors. If this is implemented, then it will be difficult for India to ask the investors to use local personnel. This would lead in reduction of transfer of technology and know-how.
Analysis & Conclusion:
There is rising pressure on India to go for stronger IP protection as those who own inventions cough up millions of dollars in research and development. Not only the EU but developed countries such as Japan and the US as well have been asking for a stronger IP regime. They fear that their IP rights will be infringed easily in India, given the present Indian IP regime.
The solution to the above problem cannot lie in India agreeing to EU’s demands. The broad coverage of the provisions sought by EU allows challenges not only to government laws and policies but also court decisions and judgments. Indian courts have constantly strived to strike a balance between India’s human rights and constitutional obligations regarding the right to life as well as health and its obligations under the TRIPS Agreement. Thus, they are absolutely competent to handle such cases and there is no need for a separate arbitration tribunal. The demands would make medicines scarce and costlier in a country which is home to the largest population of the poor in the world. The situation of public health in India is already dismal, if EU’s demands are met, it would be a body blow to the health of especially the poor in India. Most affected, would be the HIV-AIDS patients in various developing and under developed nations that depend on the cheaper Indian generics for their survival. Public interest cannot come second to the IPR of foreign investors. It should be the other way round. Moreover, right to health is a part of the Directive Principles of State Policy of the Constitution of India. Acceding to their demands will be in contravention to the above.
They want India to comply with the TRIPS Plus measures. After considerable deliberations, the Satwant Reddy Committee found that Article 39.3 does not require data exclusivity (a TRIPS Plus measure) and that it may not be in India's national interest to grant data exclusivity to pharmaceutical drug data. Some provisions asked for by the EU are draconian and seem to be focused at setting up a European monopoly in India. The aforementioned demands clearly grant an upper hand to the foreign investors by giving unequal protection to their interests. European companies using superior technology and technical know-how coupled with these over protective measures can easily overwhelm the Indian industries that could buckle under pressure and collapse. This is something which the Prime Minister, who has come out with his ‘Make In India’ initiative, may not want. The EU wants to exploit the Indian market but at the same time is not ready to share its technology and expertise. Such a ‘suit yourself policy’ cannot lead to an effective and mutually beneficial agreement between the two. At the same time, knowing that the deal is crucial for a developing country like India, it seems that the EU is taking advantage of its dominating position to put undue pressure so that it accedes to its demands.
Examples of the above ‘theoretical fears’ has been observed in both Canada as well as Uruguay. Ironically, EU is a Nobel Peace Prize Laureate. It should live up to its expectations and not put demands that reek of monopolization with complete disregard to public interest. Seeming positive about the FTA, Joao Carvinho recognized that the Indian Government needs to make compromises but at the same time he failed to address the same (or, maybe greater) need from the side he represents.
A trade agreement is all about give and take. Not finalizing the BTIA will be a lost opportunity for both parties. However to be accomplished with sure success the agreement would require compromises from both the parties.
For further information, please contact:
Zoya Nafis, LexOrbis
mail@lexorbis.com
Ayush Puri, LexOrbis
mail@lexorbis.com
