22 MAY 2014

Canada acts to protect public interest, the EU declines: unfinished business

of CETA is a bad sign for TTIP
Perhaps the Canadian trade minister should replace Karel De Gucht, argues Galle Krikorian
ADVISOR ON INTELLECTUAL PROPERTY AND ACCESS TO KNOWLEDGE, GREENS/EFA,
EUROPEAN PARLIAMENT

Although, it was announced several months ago that the Comprehensive Trade and Investment
Agreement (CETA) between the EU and Canada had concluded, it was only recently that we
learned that negotiations were in fact stuck and that no deal has been reached. Why is that? In
part because Canada has refused EU demands on investor-state dispute settlement (ISDS) and
intellectual property rights provisions. These negotiations tell a worrying tale: its the story of
European citizens' interests being protected by the Canadian government while the European
Commission keeps itself busy pleasing a handful of multinationals. Nothing about this story
reassures us in the way the EU-US TTIP negotiations are being conducted or about the
Commissions understanding of ISDS mechanisms.
Negotiations with Canada were launched in May 2009. On October 18, 2013 an announcement
was made with Canada's Prime Minister Harper and President Barroso that an "Agreement in
Principle" on CETA had been reached -- although it was not exactly clear at the time what an
"Agreement in Principle" was. Since then, no information has been provided by the European
Commission regarding the contents of the deal. No text has been released. Some chapters have
been leaked, but these do not include recent texts on ISDS. When rumours began to spread that
the investment chapter in CETA was going to be the template used by the Commission in other
free trade agreements, we became seriously concerned.
Canada requested that arbitration procedures in certain intellectual property (IP) areas be
excluded from the scope of the ISDS mechanism in CETA. It is not hard to understand why the
government of Canada is suspicious of such rules. In 2012 the pharmaceutical company Eli Lilly
launched an attack on Canada claiming that the invalidation of a patent on one of its drugs
amounted to an expropriation of the "exclusive rights" conferred by the patent. The claim was
based on the Investor-State Dispute Settlement chapter of the North American Free Trade
Agreement (NAFTA), the alleged objective of which is to guarantee fair and equal treatment to
foreign investors and protect them from expropriation of their investments.
The origin of Eli Lilly action dates back to a 2010 decision by the Canadian Federal Court to
invalidate the patent of the drug Strattera (atomoxtine), a treatment used for Attention Deficit
Disorder, on the basis that it was lacking "utility" and did not fulfill the "inventive promise" of
the patent when it was granted. The company argued that the Canadian Federal Court's decision
was not in compliance with patent treaties and international obligations and was a breach of
NAFTA investment rules. It demanded 100 million Canadian dollars in compensation for
damages.
In 2011 a Federal court decision voided the patent for Zyprexa (olanzapine), another Eli Lilly
drug, used against schizophrenia. Here again the judge found that the drug did not meet the utility
criteria as it was not superior to other drugs on the market for the treatment of schizophrenia. The
company amended its complaint against Canada to include the case of Zyprexa and brought its
demand to 500 million Canadian dollars.
Lately the volume of patents filed every year has become innumerable. Too often patents are
granted without enough vigilance from patent office examiners, resulting in insufficient quality.
In this context, the possibility to invalidate them in court is an indispensable last resort. It is one
of the only ways to halt illegitimate monopolies and allow generic competition. And it is obvious
why large pharmaceutical multinationals would want to fight it.
Canada has also been threatened by multinationals in other fields under free trade provisions. In
the most recent example, Lone Pine Resources Inc., has taken a lawsuit against a moratorium on
hydraulic fracturing for natural gas in the province of Quebec and is seeking 250 million
Canadian dollars in compensation. The Canadian government have already spent at least 160
million Canadian dollars in awards or settlements over Investor-State Disputes.
So, Canada would like CETA to exclude certain type of decisions on IP in the scope of what can
be considered as "expropriation". The EU has strongly opposed this request. EU Trade
Commissioner Karel De Gucht explained during a discussion with the EU trade ministers on May
8 that he had made clear to the Canadian Trade Minister that the Canadian request was not
acceptable to the EU (see Inside U.S. Trade, 09/05/C2014). The European Commission recently
responded to questions submitted by members of the European Parliament. When asked if it will
use the "CETA model" for the investment protection chapter in other FTAs, the Commission
responded in writing:
"Even though the Commission does not use a particular model agreement stricto sensu with any
trading partner, we are very satisfied with the outcome of the CETA negotiations as reflected in
the text of the investment chapter and intend to propose the innovative elements contained therein
which improve the clarity of interpretation of our obligations and reform the ISDS system in all
our future negotiations with other countries."
It seems to us that EU citizens should be somewhat envious of Canadians, whose government
have had a little more commonsense when it comes to the protection of the public interest than
that of DG Trade on this matter. De Gucht should take note. The Commission has opened
a public consultation on investment protections in the US-EU trade deal. Although it does not
seem to be obvious for DG Trade, clearly the EU should not try to settle any deal on the ISDS
mechanism in CETA while this consultation on TTIP has not yet been concluded. If the "CETA
model" is anything to go by, things are not looking good for agreements like TTIP.

com_tl_admk_blo 6c2627bdf66e3f8

Mandatory field Name*
Mandatory field E-mail (not published)*