from the time-to-wake-up dept
A couple of weeks ago, we wrote about the growing importance of investor-state dispute resolution in so-called free trade agreements (FTAs). One of the most troubling aspects is how potentially it can be used to undo the hard-won gains for important areas like access to medicines. The US law professor Brook K. Baker, whose work we discussed last year, has written an excellent exploration of this under-appreciated risk. After an introduction running through the recent wins in the field of access to medicines — a topic that we’ve covered extensively here on Techdirt — he explains how big pharma could employ investor-state dispute resolution to thwart these and similar moves to protect health:
Using loose and imprecise standards addressing “minimum standards of treatment,” “indirect expropriation,” and “national treatment,” multinational pharmaceuticals might claim that denying patents, granting oppositions, revoking patents, issuing compulsory licenses, and registering generics while referencing clinical data or doing so before patent expiration all violate their legitimate expectations for profit. Although the “minimum standards of treatment” clause [used to justify recourse to investor-state dispute resolution] was originally designed to prevent grossly abusive and discriminatory courtroom adjudications totally outside the bounds of normative due process, it has morphed to decisions with a much more lenient standard that rewards investors even when they have been given a full panoply of due process safeguards. The expropriation standard, originally adopted to deter nationalization of businesses and seizures of real property has similarly morphed to prevent indirect expropriations, what we call regulatory takings in the U.S., where changes in government regulations — many designed to protect public health, environment, and other legitimate public interests — are challenged as having diluted the investor’s expectations of profit. Finally, the national treatment standard, though originally adopted to ensure that foreign investors are treated equivalently to domestic investors, is also morphing in new directions.
As this makes clear, what started out as a series of measures for a few special cases in order to protect Western companies in countries with weak legal systems and a high risk of tangible investments being expropriated by the state, has been twisted to an entirely different use: enabling deep-pocketed multinationals to circumvent any kind of legislation they don’t like, even in countries with fair and independent judiciaries.
Baker concludes by offering some advice for nations involved in FTA negotiations with clauses that that call for investor-state dispute resolution to be put in place:
India and other trade negotiators should heed the entreaties of trade, IP, and health activists who are warning against the inclusion of an Investment Clause in the EU-India FTA, the Trans-Pacific Partnership Agreement, and in the many other trade agreements that are underway or soon-to-be initiated. Preferably, investment chapters will be rejected in their entirety, as they are becoming a corporate sword of Damocles that hangs over the head of rich and poor governments alike. At the very least, IP should be totally defined out of “investments” and no investor claims whatsoever should be available for alleged frustration of IP-based expectations. IP right holders already have multiple forms of enforcement including private lawsuits, border seizures, criminal prosecution, and state-state dispute resolution. Enough is enough. Expanded and unbound investment rights for Big Pharma under the cover of underscrutinized investment chapters is a grave threat — a threat with deadly consequences to millions of patients who rely on governments’ rights to regulate IPRs and to use any and all TRIPS-compliant flexibilities to ensure affordable access to medicines for all.
Worrying, few are even aware that the investor-state dispute resolution option exists, let alone its unprecedented power to circumvent government policy and override judicial decisions. That makes it all-too easy for negotiators to agree to its inclusion in trade agreements as an apparently minor concession that can be used as a bargaining chip to obtain measures they care more about. Let’s hope that Baker’s excellent contribution to the debate will alert people to this crucial area, and encourage others to speak up about the very real danger investor-state dispute resolution represents to a wide range of public interest issues.