TRIPS Waiver: A BIT of a Challenge for India

Potential BIT (bilateral investment treaties) claims by foreign pharma firms against India for the revocation, suspension or non-enforcement of IPRs could undermine the benefits of a potential TRIPS waiver.

Much ink has been spilled on the potential benefits of waiving the intellectual property rights (IPR) on COVID-19 vaccines, drugs and therapeutics protected by the trade-related aspects of intellectual property rights (TRIPS) agreement of the World Trade Organization (WTO). However, in this debate, an interesting aspect that has not been explored is the relationship of the TRIPS waiver with bilateral investment treaties (BITs) and investment chapters in free trade agreements (FTAs).

BITs or investment chapters in FTAs shield foreign investment under international law by imposing conditions on the regulatory behaviour of the host country and thus prevent undue interference with the rights of the foreign investors. These conditions include restricting the host country from expropriating foreign investment barring in certain situations, imposing obligations on the host country to accord fair and equitable treatment (FET) to foreign investment, etc. An integral part of these investment treaties is that they allow foreign investors to directly bring claims against host countries for alleged treaty breaches before investor state dispute settlement (ISDS) tribunals.

Foreign investors using ISDS for IP enforcement 

The definition of investment in these treaties covers IPRs. Consequently, pharmaceutical companies can use the ISDS tribunals to adjudicate over the host country’s regulatory measures that impair their IPRs. Indeed, in the last few years, foreign investors have employed the ISDS regime to challenge the host country’s regulatory measures relating to IPRs.

For example, in a case known as Eli Lilly v CanadaEli Lilly, an American pharmaceutical company challenged the invalidation of its patent by a Canadian federal court on the ground of ‘inutility’, under the investment chapter of the North American Free Trade Agreement (NAFTA). Likewise, Philip Morris, a tobacco company, brought separate claims against Australia and Uruguay under the Hong Kong-Australia and Switzerland-Uruguay BITs, respectively, alleging that the legislations of these two countries mandating plain packaging of tobacco products adversely impacted its IPR.

Also read: Public Health Must Be the Highest Law

If a TRIPS waiver were adopted, WTO member countries such as India where international treaties do not automatically become part of domestic law would have to make suitable changes in their domestic IPR laws to implement the waiver. These changes would depend on the actual terms that the waiver would be subjected to, which we do not as of today. For instance, countries may be allowed to temporarily suspend or not enforce IPRs on COVID-19 vaccines, drugs and therapeutics. In such a situation, pharmaceutical companies may bring BIT claims against the host country alleging that the suspension or the non-enforcement of the IPR amounts to a breach of BIT standards like expropriation, FET, etc.

BITs and TRIPS: a normative hierarchy in Indian investment treaties?  

To understand the BIT challenge to the TRIPS waiver in the case of India, one can divide the Indian investment treaties into three sets. The first set of Indian BITs such as the recent ones signed with countries like Belarus, Taiwan, Kyrgyzstan and Brazil, comprises of those treaties, which state that sovereign actions on the revocation, limitation or creation of IPRs, to the extent that such action is consistent with the WTO agreement, would fall outside the scope of the treaty.

Under such BITs, India’s sovereign actions that are consistent with the TRIPS waiver would not amount to a violation of foreign investment protection standards.

As against the above-mentioned BITs, the second set of treaties is India’s investment chapters in FTAs signed with the ASEAN and Japan. These FTA investment chapters exempt compulsory licenses issued following the TRIPS agreement from the application of the expropriation provision of the BIT. In other words, if India issues a compulsory license following the requirements of the TRIPS agreement, the ISDS tribunal would have no jurisdiction over the foreign investor’s claim that such license amounts to an expropriation of her investment. However, in these treaties, this exception does not extend to other substantive standards such as the FET provision.

Also read: At Summit, India and EU to Discuss Differing Positions on Vaccine Patent Waiver Proposal

In the third set of treaties that comprises the majority of Indian BITs, there is no mention of the WTO or the TRIPS agreement. Although India has unilaterally terminated several of these BITs, the sunset clause in these treaties allows the treaty provisions to continue to exist for a period of 10 to 15 years after the termination, for the investment that came in before the treaty was axed.

In these treaties, the ISDS tribunal would not be under an obligation to accord a higher normative value to the TRIPS agreement over the BIT. It would take the TRIPS waiver as merely another piece of international law in examining the investor’s claim. This critical difference in the language can have a major impact on the outcome of the investor’s claim. This is not to suggest that the foreign investor would prevail over India in its challenge of IPR-related regulatory measures. Nonetheless, given the unpredictable manner in which ISDS tribunals operate, one is unsure of what normative weight the tribunal would accord to the TRIPS waiver while deciding the BIT claim.

The way forward 

Potential BIT claims by foreign pharmaceutical companies against India for the revocation, suspension or non-enforcement of IPRs could undermine the benefits of a potential TRIPS waiver. Therefore, to preserve its regulatory autonomy, India should negotiate, multilaterally or bilaterally, with its treaty partners, a binding agreement, which makes IPR-related measures on products needed to combat COVID-19 non-justiciable before ISDS tribunals.

This BIT-specific IPR waiver agreement could either take the form of a separate multilateral or a bilateral treaty stating that it would override all the existing BITs as regards COVID-19 products are concerned till the time the pandemic lasts. The other option is that India and its treaty partners could sign this BIT-specific IPR waiver bilaterally as a subsequent agreement under Article 31(3)(a) of the Vienna Convention on the Law of Treaties.

Prabhash Ranjan is a senior assistant professor at the South Asian University’s faculty of legal studies and author of the book India and bilateral investment treaties: refusal, acceptance, backlash. Views expressed are personal.