Non Violation Complaints and The Future Flexibilities of TRIPS

The 11th WTO Ministerial Conference, currently taking place in Buenos Aires (10-13 December), is to decide on whether to extend the moratorium on non-violation complaints (NVC) under the TRIPS Agreement. In WTO parlance, NVC is understood as an agreement that has not been breached, but it arises when a complainant alleges that an expected benefit under the agreement has been abrogated, or an expectation of an agreed benefit arising from the agreement has been nullified or impaired.

Article 64.2 of TRIPS Agreement established a five-year moratorium on the initiation of non-violation complaints. During that period, members were to examine the scope and modalities for such complaints and submit recommendations to the Ministerial Conference. Article 64.3 states: “During the time period referred to in paragraph 2, the Council for TRIPS shall examine the scope and modalities for complaints of the type provided for under subparagraphs 1(b) and 1(c) of ArticleXXIII of GATT 1994 made pursuant to this Agreement, and submit its recommendations to the Ministerial Conference for approval. Any decision of the Ministerial Conference to approve such recommendations or to extend the period in paragraph 2 shall be made only by consensus, and approved recommendations shall be effective for all Members without further formal acceptance process”. So far, there is no consensus on the scope and modalities. As a consequence of this,the moratorium has had to be extended six times. The last extension was at the Nairobi Ministerial Conference in 2015. The ongoing conference is expected to either extend the moratorium or end it.

In the past the moratorium was linked to the moratorium on ecommerce, which prevents states from imposing customs duties on electronic transmissions such as eBook, music etc. However, in the run up to the ministerial conference in 2015, the US opposed the extension of moratorium on NVC under TRIPS. This year, the US has proposed a permanent moratorium on customs duties on transmissions. The fear is that US may either push for permanent moratorium on customs duties on transmissions or an agreement to include ecommerce in the trade negotiations for a temporary moratorium on NVC.

Implications of NVC

Extending the scope of the non-violation remedy to the TRIPS Agreement is inappropriate for a number of reasons. NVC under the TRIPS Agreement may give rise to incoherence among the WTO agreements and would upset the delicate balance of rights and obligations in the Agreement by elevating private rights over the interest of the users of the intellectual property both within and between the countries. Further, there is a possibility that a panel would determine that something a WTO member agreed to accept less than one part of that single undertaking could nullify and impair benefits in another area. Three, as a part of single undertaking, WTO obligations apply cumulatively and so a measure consistent with one WTO agreement (e.g GATT) can still be found to nullify and impair benefits under another (e.g. TRIPS).

Non-violation causes of action could be used to threaten developing Members’ use of flexibilities inherent in the TRIPS Agreement. Actions taken by developing Members to implement exceptions to TRIPS patent rules under Article 30, or to grant compulsory license under Article 31, could be alleged to deprive patent holders of the expectations. In short the threat of litigation would prevent the developing countries form using the TRIPS flexibilities.

Even though one can argue that NVC can be used against the TRIPS Plus provisions containing in FTAs the resource constraints would prevent developing countries from using it against the developed countries.

Conclusion

Applying NVC in the TRIPS Agreement can introduce legal uncertainties and incoherence between the WTO agreements which is likely to further increase public concern over the impact of the TRIPS Agreement on important issues like biodiversity protection, transfer of technology and public health. Thus the non-violation complaint, which is currently inapplicable to the TRIPS related disputes, will potentially function as a tool to circumscribe the developing country Member from effectively using flexibilities concerning public health in the TRIPS Agreement.

The possible impact of NVC on the flexibilities, an important outcome of the Doha Declaration, cannot be ruled out. Thus the application of NVC could potentially create conflict relating to the rights of the intellectual property holders and legitimate exercise of the regulatory policy measures by the government. Considering the need for policy space on ecommerce developing countries cannot exchange NVC for permanent moratorium on customs duties on transmissions or inclusion of ecommerce agenda in trade negotiations.

At this stage, the best expected outcome would be for status quo to continue.