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No. 375, 10 June 2021

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Investment agreements and intellectual property: concerns for developing countries on possible investor claims in the context of the COVID-19 pandemic


On 28 May 2021, the South Centre organized the first of a series of webinars on emerging trends related to free trade agreements (FTAs) and investment agreements that impact public health. The first webinar in this series discussed the topic of investment agreements and intellectual property. Investment agreements include intellectual property (IP) as a category of investment, which may give rise to claims based on “indirect expropriation” and “fair and equitable treatment” of foreign companies to the detriment of legitimate public policy measures undertaken by countries, such as to respond to a public health need.
The topics addressed during the webinar include perspectives for post COVID-19 agreements, the legal construction of IP as a category of investment, the challenges of investor-State dispute settlement (ISDS) and policy reform options, and the analysis of interpretations provided in one investment dispute regarding tobacco and public health. The session also discussed possible solutions and suggestions for developing countries in the context of potential investment claims due to the COVID-19 response, including renegotiation of certain agreements to explicitly exclude COVID-19 health measures (such as compulsory licenses and other instruments of the Agreement of Trade-related Aspects of Intellectual Property Rights (TRIPS) flexibilities), to adopt a moratorium on all claims related to COVID-19, to amend national legislations, and/or to terminate the agreements. The difficulties of a system which was designed to protect private investment in the first place were brought to the discussion. This also relates to the mindset of the arbitration tribunals that adjudicate such cases and the overarching architecture of IP, investment and trade.
The webinar was moderated by Dr. Viviana Muñoz, Coordinator, Health, Intellectual Property and Biodiversity Programme, South Centre. Dr. Muñoz set the background, noting how in light of the COVID-19 pandemic, there is concern about the impact of investment agreements. This is therefore a critical moment for reflection and to draw lessons from agreements that have already been crafted, looking at case studies and explore what could be the right policy moving forward.
Professor Cynthia Ho, Director of the Intellectual Property Program, Loyola University, Chicago, discussed the general framework and the increased risks associated with IP as investments and the impact on public health. She suggested that countries should be alert to the clear possibility of ISDS claims based on various forms of practices related to the COVID-19 response—from compulsory licensing to mobility restrictions and beyond. Prof. Ho suggested the adoption of a moratorium on investment agreement claims, at least with respect to COVID-19, as a necessary tool for developing countries, which should also take the opportunity to reconceptualize the agreements and eventually terminate them.
Professor Federico Suárez, Faculty of Law, Universidad Externado de Colombia, recalled how the international IP regime is constituted to protect the interests of the global North firms, which also prevents developing countries from adopting their own industrial and health policies. He noted that the pharmaceutical company Novartis was not successful in defending its patent for the drug imatinib in India, and how attempts by Colombia (which had granted a patent for the same compound) to issue a compulsory license on the drug was thwarted through the use of threats of possible investor claims. This shows the limitations of governments from the global South who may be threatened by such a system that is entangled with the IP system.
Pratyush Upreti, Postdoctoral Researcher, University of Helsinki, Finland, suggested some defenses that countries may have under investment agreements, including general policy norms, national security, and policy power doctrine. He proposed the use of arts. 37 and 38 of the Vienna Convention on the Law of Treaties to suspend some obligations of investment agreements as a “subsequent agreement” related to a possible TRIPS waiver. He emphasized the role of domestic laws and courts, and proposed ways to recalibrate investment agreements with provisions that explicitly refer to flexibilities, exceptions and limitations in domestic laws, and to ensure that such laws contain ample defense mechanisms, as well as a different conceptualization of intellectual property rights in the national laws.
Vivian Daniele Rocha Gabriel and Alebe Linhares, International Trade and IP Attorneys, University of São Paulo, Brazil, drew on the case of Philip Morris v. Uruguay to recall how the arbitral tribunal had rejected the claims of Philip Morris against Uruguay based on the legitimacy of the country’s policy regarding tobacco packaging to achieve public health, and how the measures did not deprive the company from profits in the country. They offered proposals for countries in the COVID-19 context to improve international investment agreements, including languages to safeguard legitimacy of measures for public health, security, environment, etc. (Netherlands model bilateral investment treaty has included those); explicit exclusion of certain policies such as for tobacco from trade agreements (e.g. the Comprehensive Trans-Pacific Partnership Agreement); and explicit exclusion of certain practices such as compulsory licensing from the scope of indirect expropriation. These could be adopted now via side letters, applicability of the principle of systemic integration in case of litigation, and inclusion of public health for COVID-19 in the agreements.
Nicolás Perrone, Research Associate Professor of International Law at Universidad Andrés Bello, Chile, recalled that both investment and IP regimes were created to ensure protection of property rights, with the assumption that they would be conducive to development. The reality now suggests otherwise in terms of their consequences. He noted how investment courts tend to abide by notions of “global standards”, which tend to negatively affect countries adopting policies or standards that “deviate” from what is considered to be the “global” norm. Dealing with the arbitrators’ legal reasoning, mindset and the history of ISDS are needed to reflect on how cases will be adjudicated. Another point highlighted was the lack of a multilateral institution that could enable some form of diplomacy that is not possible for investment treaties which are disperse. This makes the adoption of concrete measures more difficult.

Author: Vitor Henrique Pinto Ido is Programme Officer of the Health, Intellectual Property and Biodiversity Programme (HIPB) of the South Centre. 
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