TRIPS Waiver and the Covid-19 Pandemic

[Prajjwal Rathore is a III Year B.A. LL.B. (Hons.) student at the National Law School of India University, Bangalore]

With the proposal led by India and South Africa for waiver of certain obligations of the TRIPS Agreement given the COVID-19 pandemic, the international community has been polarised along the lines of development. While several developing countries support the proposal for the waiver, it has been met with considerable resistance from the developed countries. The issue also, interestingly, reignites the debate on one of the most contentious aspects of international economic law – the conflict between the TRIPS Agreement and international human rights obligations. Several other issues have come to the forefront with the submission of this proposal. Here, I attempt to examine the issue through, firstly, a descriptive lens, looking at the competence of the WTO to issue such waivers and their legal validity and, secondly, the normativity of such a decision, including the potential ramifications of the same. The normativity of the decision is checked by evaluation of certain arguments presented by the developed countries and also looking at the effects of the proposal on innovation, human rights, bilateral treaties, and international trade.

Legal Validity and Competence

The legal foundation for waiver powers is available in the WTO Agreement itself. WTO, as a body, does not possess a general law-making competence. However, it has the power, inter alia, of granting waivers. The draft decision text of the General Council locates its powers in Article IX of the WTO Agreement. Further, it locates the provision for utilisation of such power on behalf of the Ministerial Conference in Article IV:2. 

The only substantive legal question concerns the existence of “exceptional circumstances”. The lack of recognition of the same has not acted as a substantive limit on the power of waiver. However, this becomes important because of the WTO jurisprudence. A panel constituted under the erstwhile GATT 1947 looked at the meaning of exceptional nature and its nexus to powers of waiver. Both the Panel report and the Appellate Body report concluded that waiver decisions have to be interpreted narrowly (Sugar Waiver, Panel Report, BISD 37S.228, [5.9]; EC-Bananas III, Appellate Body Report, WT/DS27/AB/R, [185]). 

COVID-19 has already been declared a Public Health Emergency of International Concern by the WHO. Further, the characteristics of urgency and temporariness are well met in this situation. Considering that the only ground to be met under Article IX for waivers is that of “exceptional circumstances”, it can be easily argued that the COVID-19 pandemic, because of its cross-border impact, novelty, and fatality rate, fulfils the condition. 

However, an argument may also arise against this position: can the existence of exceptional circumstances be claimed without utilising other mechanisms provided under the WTO and TRIPS Agreements? Some have forcefully argued that there are other better recourses to turn to instead of proposing for a waiver. A minor point argued by several against the waiver has been that the liberal reading of Articles 7 and 8 of the TRIPS Agreement, which provide for objectives and principles, is so wide that a host of policy options can be looked at in cases of health emergencies. However, the WTO has recognised that only a reading of Articles 7 and 8 cannot be the grounds for exceptions by itself.

Two flexibilities of WTO/TRIPS are significant: (1) right to grant compulsory licenses; and (2) claiming essential security interest under Article 73 of the TRIPS. The first argument is erroneous in the present context. This is because, according to Article 31(f) of the TRIPS Agreement, a compulsory license is to be issued on a patented drug for supply in domestic markets. This means that the export of generic medicines manufactured under compulsory licenses cannot be undertaken. Further, this cannot be utilised in the envisioned manner by LDCs, which do not have such infrastructural and manufacturing prowess. This was recognised by the WTO itself. As far as Article 73 is considered, a strong case may lie there. It has been clarified, however, that the claim of essential security interests is justiciable (Russia – Measures Concerning Traffic Transit, Report of the Panel, WT/DS512/R, [7.102]; Saudi Arabia -Measures Concerning the Protection of Intellectual Property Rights, Report of the Panel, WT/DS567/R). Further, there has to be a ‘good faith’ justification for the same. After the WHO declared the Covid-19 pandemic as a Public Health Emergency of International Concern, it seems that invocation of the security clause has become plausible. However, the problem of lack of manufacturing power persists. Additionally, it cannot be denied that the conditions for the proposal of a waiver also exist. 

The justifications for the waiver by the sponsors hovered around urgency and practicality of procedure, but there are other issues with the waiver as well. These are discussed in the next section.

The Waiver – A Host of Issues

The Question of Innovation

The foundation of IP law has been on the idea of encouragement and reward for creative work. The absence of such protection would make the extraction of economic value for the creators impossible because of the non-excludable and non-rivalrous nature of consumption. Therefore, there is an issue regarding the elimination of incentives that drive innovation. However, at the same time, there have been arguments related to the funding of these medicines, which has been largely governmental in nature. Similarly, arguments have been made to the effect that the costs are recouped by the pharmaceutical companies from the developed-countries markets. Taking these propositions together, it seems clear that the public-money driven R&D projects which can easily, even with a waiver, recoup their costs from the developed markets, are targeted towards profit-maximisation and not therapeutic innovation.

The Question of Human Rights

IPR protection in the present context seems prima facie to be perverse to international human rights obligations. Specifically, the obligation to protect the right to life and the obligation to respect, protect and fulfil the right to enjoyment of the highest attainable standard of physical and mental health seem to advance a very strong argument for easy flow of essential medicines in global supply chains. Additionally, serious violations of such international customary law and basic rights pertaining to human beings has the potential to trigger international criminal prosecutions (Rome Statute, Article 7(1)(k)). This further adds to the gravity of the situation and therefore supports existence of exceptional circumstances. However, because of the very fact that WTO and TRIPS Agreements provide for health-related exemptions, one can argue that these international human rights obligations do not represent a conflict in international norms, but rather an accumulation. Therefore, until there some measure is undertaken by the WTO, there does not seem to be a conflict with human rights.

The Question of Bilateral Treaties

Although a waiver may secure breathing space for countries, there does not seem to be any reservation present concerning Bilateral Investment Treaties (BITs). This means that countries can still move the Inter-State Dispute Settlement Tribunals in case of violation of bilateral treaties. The definition of ‘investment’ includes IPRs in these bilateral treaties, making them enforceable. The waiver at the ISDS tribunals would be seen as an ordinary instrument of international law, and evaluation of the dispute will not accord to it any special weight. It will not look at the matter as if there exists a hierarchy where TRIPS agreement is placed above the BITs. The investor claims will therefore be judged mainly on the anvil of language of the two documents, treating them as authoritatively similar. 

The Question of International Trade

A recurring issue in the international trade negotiations has been the impact of waivers on third parties or – substantial trade diversion. However, this is not a general requirement. On the contrary, most waivers do result in some kind of trade diversion. This waiver will not be any different. This is because the countries which have already developed the essential medicines will be working with simultaneous supply chains with the developing countries. This is almost an entirely new market for these medicines and for sure will result in a substantial diversion of trade. 

Conclusion

The power of the WTO to grant such a waiver seems to be well-founded. However, whether such a decision should be taken before exhausting other options like a declaration of essential security interests is still debatable. While looking at such other options, the time-sensitive nature of the issue at hand also should be kept in mind. The justifications provided by the sponsors of the proposal seem to be correct considering the urgency of the situation. However, the ramifications cannot be overlooked. The arguments made by the developed countries against the grant of the waiver seem to be weak. Therefore, the decisive factor seems to be how the developing countries approach the waiver and if they are willing to risk opening up to ISDS adjudication. This is because of the existence of negative consequences like the question of BITs. However, all things considered, the waiver does seem to be a viable option for the health emergency at hand.

– Prajjwal Rathore

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