[Ip-health] FW: EU, Canada Fail To Close CETA; Stuck Over Issue Related To Eli Lilly Case

Stephanie Rosenberg srosenberg at citizen.org
Fri May 9 08:57:25 PDT 2014

Inside U.S. Trade - 05/09/2016 
EU, Canada Fail To Close CETA; Stuck Over Issue Related To Eli Lilly Case 
Posted: May 8, 2014 

The European Union and Canada this week failed to resolve the outstanding issues in their negotiations for a Comprehensive Trade and Investment Agreement (CETA) in time for their trade ministers to initial the deal on the sidelines of a gathering at Organization for Economic Cooperation and Development ministerial in Paris.

The biggest obstacle to concluding a deal in time for the May 7 bilateral meeting was Canada's request to exclude certain intellectual property (IP) policies from the scope of an investor-state dispute settlement (ISDS) mechanism, which the EU strongly opposes, said a source familiar with the talks. But there are other outstanding issues as well.

According to a text of the CETA investment chapter dated April 4 and obtained by Inside U.S. Trade, Canada is pushing for language that would exclude certain administrative and court decisions on IP from coverage under the obligation not to expropriate investments, which is one of the obligations that can be challenged using ISDS.

This is notable because U.S. drug company Eli Lilly has launched an investor-state challenge under the North American Free Trade Agreement (NAFTA), taking issue with Canadian court rulings that invalidated two of its patents based on what the company claims is a restrictive definition of "utility." Eli Lilly charges that these court rulings violate the NAFTA obligations on expropriation and minimum standard of treatment.

EU Trade Commissioner Karel De Gucht highlighted the Canadian demand to exclude IP decisions from ISDS as a major outstanding issue in CETA during his discussion with EU trade ministers at their May 8 meeting in the Foreign Affairs Council. De Gucht said he told Canadian Trade Minister Ed Fast during their May 7 meeting in Paris that the Canadian language on this issue was not acceptable to EU, this source said.

This source speculated that Canada may be hesitant more broadly about concluding negotiations on the CETA investment chapter since the EU has now opened a public consultation about how to approach investment protections and ISDS in the separate U.S.-EU trade deal.

Canada may want to ensure that any changes the EU makes on its approach to investment in the Transatlantic Trade and Investment Partnership (TTIP) are also reflected in the CETA, this source said.

Similarly, some EU member states and European stakeholders are also opposed to concluding the CETA investment chapter while the public consultation on TTIP investment is still open. One source said this is because the draft CETA investment text was included for reference in the public consultation request, implying that the commission is seeking input from stakeholders on how to improve that text. Going ahead with that CETA text before concluding the consultation seems like a "sham," this source charged.

The leaders of the EU and Canada reached an "agreement in principle" on CETA in October that resolved all major political issues but left technical work outstanding. During his remarks to the Foreign Affairs Council, De Gucht indicated that, apart from the dispute over IP and the investment chapter, the EU and Canada were close to resolving several other outstanding technical issues in the talks. They include: the management of negotiated tariff-rate quotas (TRQs); financial services; protection of geographical indications; rules of origin and services.

"Both sides are continuing to work diligently to conclude negotiations on the small number of outstanding technical matters," said Shannon Gutoskie, Fast's press secretary.

De Gucht told EU trade ministers that the two sides would try to conclude the CETA negotiations in the coming weeks, this source said. But the commission is backing off its earlier plan to initial the deal without first providing member states and the parliament a chance to review the text. De Gucht said that, once the two sides conclude CETA talks, the text will be sent to member states and parliament for review, only after which the commission would initial it. That would be followed by a legal scrub and translation before the final text would be ready for ratification by each side.

Canada's push for language in CETA excluding certain administrative and court decisions on IP from being challenged under ISDS seems aimed at preserving a level of protection against investor-state challenges that is already included in NAFTA, according to an informed source.

NAFTA carved out a range of IP policies from being covered under the obligation on expropriation. Specifically, Article 1110.7 states that the article on expropriation "does not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to the revocation, limitation or creation of intellectual property rights, to the extent that such issuance, revocation, limitation or creation is consistent" with the NAFTA IP chapter.

The Canadian government appears confident that this exception will successfully shield it from Eli Lilly's claims that the Canadian court decisions revoking its patents amounted to expropriation, the informed source said. Ottawa likely wants to maintain a similar level of protection against ISDS disputes on IP issues in CETA, the source added.

In the CETA discussions, Canada is proposing that, for greater certainty, the article on expropriation "does not apply to a decision by a court, administrative tribunal, or other governmental intellectual property authority, limiting or creating an intellectual property right, except where the decision amounts to a denial of justice or an abuse of right," according to the April 4 investment text.

The EU objects to that language and has proposed alternative wording to be included in an "separate annex or joint understanding." The EU proposal states: "For greater certainty, the revocation, limitation or creation of intellectual property rights to the extent that these measures are consistent with [Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)] and the IPR Chapter of CETA, do not constitute expropriation. Moreover, a determination that these actions are inconsistent with the TRIPS Agreement does not establish that there has been an expropriation." -- Matthew Schewel
Inside U.S. Trade - 05/09/2016, Vol. 32, No. 19   

More information about the Ip-health mailing list