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JPEPA : The Philippine fall into the IPR bilateral trap

SEARICE (Manila) | Tuesday, April 24, 2007

Japan-Philippines Economic Partnership Agreement

The Philippine Fall into the IPR Bilateral Trap

On September of 2006, President Gloria Macapagal-Arroyo signed the Japan-Philippines Economic Partnership Agreement (JPEPA) with then Japanese Prime Minister Junichiro Koizumi, the Philippines’ first bilateral free trade and investment agreement since the Parity Rights Agreement with the United States in 1946. A comprehensive bilateral treaty covering various major areas which include : (1) trade in goods, (2) trade in services, (3) investments, (4) movement of natural persons, (5) intellectual property, (6) government procurement, (7) competition, and (8) cooperation, the JPEPA aims at strengthening the economic partnership between Japan and the Philippines beyond the minimum stipulated in the WTO.

The JPEPA already presents very serious issues concerning the grave consequences it may have on domestic livelihoods and enterprises, as well as the environment and natural resources. Particularly on the aspect of Intellectual Property Rights (IPR), the JPEPA effectively restricts and stifles the recognized flexibilities under the TRIPS (WTO Agreement on Trade-Related Aspects of Intellectual Property Rights) that the Philippines was railroaded to accept in 1994.

The agreement is premised on the false assumption that stringent IPR standards lead to increased innovation. Studies however show that these do not necessarily lead to increased innovation in developing countries, as they have been found as capable of harming public health, and as never appropriate to countries of lower levels of economic development.

The JPEPA poses serious questionable intellectual property provisions which ultimately undermine the rights of Filipino farmers, communities and the public in general. As experienced by developing countries, by endeavoring to open and strengthen intellectual property law, this leads to a monopoly control over technology development by transnational corporations. The JPEPA seeks to uphold Japanese corporate and governmental interests above and beyond the interests of the Filipino people.

JPEPA, in the guise of economic cooperation, expands the TRIPS flexibility on patenting.

The JPEPA expressly recognizes the Japan-Philippine relationship on the matter of the development and strengthening of Intellectual Property Rights as one of cooperation. The areas and forms of cooperation, as enumerated under the agreement, are not an exclusive list of activities. This does not safely assure the Philippines that the cooperation between the two countries concerning the development of IPR will simply be limited and restricted among the areas and forms enumerated under the Treaty, and will not go beyond the flexibilities recognized under the TRIPS concerning exclusions from patentability, i.e. plants, animals, and essentially biological processes.

The agreement also does not expressly recognize the exclusions and flexibilities provided under the TRIPS. The obligations of the countries with respect to IPR thus extend beyond what the TRIPS envisioned. The JPEPA opens the Philippines into providing intellectual property protection and patenting on biotechnology, plants and/or animals, which Japan recognizes as inventions under its patent law, under the guise of “cooperation” to develop and strengthen IPRs of both countries.

The task of detailing the implementation and enforcement of the IPR Chapter of the agreement is delegated by the JPEPA to a Sub-Committee on Intellectual Property , with its composition and the process by which it shall act not being clearly laid down by the agreement. Without acknowledging and affirming the flexibilities already recognized under the TRIPS, or providing sufficient restrictions to the scope of IPR, the Philippines is not assured of the actions that the Sub-Committee will undertake which is granted enough leeway by the JPEPA to implement and enforce the agreement on IPR beyond the recognized limitations of TRIPS. Hence, the JPEPA expands the Philippines’ scope of intellectual property protection beyond the TRIPS like patenting on plants, animals, and/or essentially biological processes, subject to the determination of a Sub-Committee in implementing the IPR Chapter of the agreement. Such patenting will only yield benefits to industrialized countries like Japan, and not the Philippines.

JPEPA does not assure protection of Farmers’ Rights to Seeds.

Farmers’ rights to seeds is embodied in the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA) which the Philippines acceded to already on September 28, 2006, but awaiting concrete implementation at the national level. The JPEPA, however, does not recognize the inherent rights of farmers to save, use, exchange and sell farm-saved seeds and/or propagating materials by either providing a limitation on its IPR provisions or sufficient safeguards acknowledging and protecting it.

The JPEPA in fact seeks to increase the number of plant genera and species that can be protected under laws and regulations. The Philippines has not even endeavored yet to exclude a list of food and staple crops from the coverage of the Plant Variety Protection Act of 2002 (PVP) in ensuring that the nation’s food security will not be threatened, and that the rights of small farmers to get access to local natural resources are sufficiently recognized and protected. The PVP itself already sufficiently limits the inherent rights of farmers over plant genetic resources.

Strengthening and increasing the scope of plant variety protection will only promote further monopoly control over seeds by transnational corporations. It should be observed that almost all applications for plant variety patents in the Philippines have been filed by corporations. Thus, with JPEPA, access and control to seeds by small farmers will continue to diminish in favor of Japanese corporations.

JPEPA promotes the intellectual property interests of Japanese corporations and investors.

The JPEPA classifies IPRs as investment assets which entitles IPRs to an additional and separate treatment beyond what the TRIPS provides. Hence, IPRs of Japanese investors in the Philippines will be given treatment not only as an IPR subject to protection by national IPR laws and the JPEPA Chapter on IPR. Additionally, the JPEPA provides separate and stricter rules to govern IPRs as investments, in favor of Japan as a developed country from where majority of investors in the Philippines originate. As a country governed to be dependent on foreign investments to sustain its economy, Japanese investors become entitled to a preferential protection under the agreement in contrast to the possible few Filipino investors in Japan. This is another important area of concern as there is clearly a lack of protection accorded to the Philippines under the agreement.

JPEPA does not provide restrictions in the scope of IPRs forming investments.

The JPEPA does not provide limitations on the intellectual property that should form investment assets, such as patenting on plants, animals and essentially biological processes which the TRIPS excludes from patentability. In fact, the JPEPA in defining IPRs as investments is a broad and non-exclusive list. This means that even though Philippine law does not provide protection for IPRs of a Japanese investor protected under Japanese law, the JPEPA will compel the Philippines to grant similar protection to such IPR.

Should for example an investor of Japan with a patent on a rice gene under Japanese Law want to invest in the Philippines by selling the seeds containing the rice gene in the Philippines which does not provide a similar patent protection on genes, must the Philippines provide the same level of patent protection on the rice gene to the Japanese investor that he enjoys in Japan ? Does this mean that the Philippines has to rewrite its patent laws to provide for gene patenting to comply with its obligations under the JPEPA to give protection and security to Japanese investments ? The Philippines in this case may be compelled to relax its legislations protecting national investments or worse amend its laws to remove nationalized legislations to provide for Japanese investors.

Even through the Nationality Treatment Clause where Japanese investors should be granted equal treatment with Filipinos as concerns their acquisition and use of IPRs as investment assets in the Philippines, the JPEPA effectively caters to Japanese investors which are more technologically advanced and financially capable over Filipino investors. The JPEPA fails to provide exceptions or even to recognize possible exceptions in national laws that may be needed to protect the Filipino people. For instance, in case the Philippines enacts a legislation recognizing rights of Filipino small farmers to save and re-use seeds even beyond the limitations provided under the Plant Variety Protection Act (PVP) as a possible compliance to the ITPGRFA, or should the Philippines provide for benefits to local seed companies and small farmers incentives in the development of local varieties, the all-encompassing national treatment principle under the JPEPA can provide a Japanese seed corporation a successful claim that such legislations are a denial of national treatment and discriminates the Japanese as a foreign investor.

JPEPA imposes separate and higher standards on government measures aimed at protecting the public interest.

With the JPEPA, the Philippines is additionally required to accord to the investments of Japanese investors fair and equitable treatment and full protection and security. In a suit by a Malaysian firm against the Chile government based on the failure of the government to protect its investment through its urban development and environmental policies, the International Center for Settlement of Investment Disputes (ICSID) had adopted the interpretation of the fair and equitable standard as : (1) the “manner most conducive to fulfill the objective of the bilateral investment treaty to protect investments and create conditions favorable to investments”, (2) the “treatment in an even-handed and just manner, conducive to fostering the promotion of foreign investment”, and (3) requiring states “to provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment.” Based on this investor-friendly standard, the JPEPA provides for an ambiguous rule that Japanese investors can use to question Philippine policies and laws, and sue the government in cases of frustrated expectations in their investments in the Philippines even on the basis of government measures intended to protect the public interest.

The JPEPA also requires the Philippines not to impair Japanese investments by unreasonable and discriminatory measures which can include policies nationalizing investments tantamount to expropriation. With the JPEPA, the Philippine government is further restricted in implementing certain public interest measures like compulsory licensing of IPRs of Japanese investors which is recognized by the TRIPS and allowed under the present Intellectual Property Code of the Philippines. The JPEPA also restricts the right of the Philippine government in future legislations to allow parallel importations and lower IPR standards on medicines. Compulsory licensing and parallel importations have the effect of limiting the economic benefits of Japanese investors in their investments, and would qualify as government attempt at expropriating their investments. The Philippine government is thus required to strictly fulfill additional investment requirements like public purpose, non-discriminatory basis, due process of law, and payment of prompt, adequate and effective compensation, before it can undertake to implement its public interest measures.

It is important to note that recently, Pfizer, a big pharmaceutical company, sued the Philippine International Trade Corporation before the Makati Regional Trial Court for violating the company’s IPR when the government agency started importing its Norvasc anti-hypertension drug while the company’s patent was still in effect. Doubts as to the legality of PITC’s importation is expected to be resolved by the enactment into law of the Roxas bill which would expressly allow parallel importations of cheaper medicines in the Philippines. Should for example the Roxas bill be enacted into law, Japanese pharmaceutical companies or licensees in the Philippines can claim that the law frustrates their expected profits from their investments considering that the effect of the law is to produce in the market same products at cheaper prices. Even a law that allows farmers to save and re-use seeds can be challenged by Japanese investors in that the law discriminates Japanese investments on seeds in favor of Filipino farmers and frustrates expected profits from these investments.

JPEPA allows direct investor suits against the Philippine government. It effectively undermines Philippine sovereignty to promote appropriate policies.

The dispute settlement mechanism in the JPEPA is still subject to further negotiations between Japan and the Philippines but it is clear that Japanese investors are entitled to sue the Philippine government through investment arbitration tribunals based on rules and standards that is “most conducive to fulfill the objective of the bilateral investment treaty to protect investments and create conditions favorable to investments”. Japanese investors can sue the Philippine government when its present laws have the effect of restricting Japanese investments in the Philippines. Even future legislations by the Philippines may be subjected to future suit should they affect Japanese investments. The enactment of a law allowing farmers’ rights, for example, can be the basis of a suit by a Japanese seed company against the Philippine government because the said law jeopardizes its investment and IPR on its seeds that are being re-used and shared by the farming communities.

With the JPEPA, Philippines will confront claims of substantial damages from Japanese investors. The JPEPA does not even recognize the availability of an appellate process for review. In the case of the government of the Czech Republic, it was required by an investment tribunal in Stockholm to pay a foreign company, Central European Media, US$350 million for its violation of a bilateral investment treaty that deprived the company of a stake in an English-language television station in Prague. In the case of Chile which was sued by a Malaysian firm for the government’s failure to re-zone a property subject of the Malaysian firm’s investment for being contrary to Chile’s urban development and environmental policies, the investment tribunal awarded US$5.8 million in favor of the Malaysian firm.

Meanwhile, with possible large investment suits and liabilities, the JPEPA effectively allows Japanese investors to control Philippine national policies. This will entail administrative and legislative costs on the Philippines in acceding its policies and laws to cater to Japanese investments. This is fundamentally an indirect disenfranchisement of the Philippines’ sovereignty over its political processes.

JPEPA fails to provide sufficient safeguards for the protection of national biological resources and provisions on access and benefit-sharing.

The JPEPA provides in weak language that Japan and the Philippines must strive to ensure that it does not waive or derogate from its environmental standards. It does not provide or acknowledge other sufficient protections based on internationally recognized standards. The JPEPA also fails to provide additional protection from potential bioprospecting and biopiracy activities by Japanese investors in the Philippines. The loosely-crafted anti-biopiracy law in the Philippines is not sufficient enough as it was not able to prevent U.S. companies to obtain patent over Philippine biological resources like : the Philippine sea snail (conus magus) which the U.S. company Neurex, Inc. had already obtained three patents on ; and Ampalaya (memordica charantia) which is now privately-owned by the US National Institute of Health, the US Army and the New York University.

With JPEPA, Japanese companies can all the more utilize biological resources in the Philippines and seek patent protection under an investors’ status. Should the government provide additional measures concerning acquisition of rights over Philippine biological resources, Japanese investors may raise complaints under the JPEPA on the basis of the government’s acts frustrating Japanese investments. The JPEPA does not recognize the Philippines’ sovereignty over its national biological resources. It does not even expressly provide, as an exception, restriction, or additional requirements to its investment provisions, obtaining permissions for any activity to get access to and utilize national biological resources and traditional knowledge, specifying origins of related biological resources and traditional knowledge and benefit-sharing.

A Japanese collector of biological materials investing in research of biological resources, upon obtaining legitimate possession of biological samples under an access permit, can claim protection as an investor with respect to the collected materials. If the government were to request him to return the samples to the Philippines or share benefits with the local communities, claims of violation of investor’s rights might arise.

Call not to Ratify but Junk JPEPA

Investment agreements are complex instruments that require assiduous review. With JPEPA, the Philippines must reconsider adopting the agreement as it presents substantial implications on the development of the country concerning the environment, trade, agriculture, and intellectual property, among others. The JPEPA represents a repressive agreement that sacrifices the public interest, the rights of farmers and communities, national biological resources, and the future of Philippine legislation in favor of monopolistic corporate interests of Japanese investors. It represents a policy environment which encourages foreign and corporate interests that do not necessarily aim for the welfare of small farmers, local communities and the national interest.

Moreover, the JPEPA is surrounded by aberrant circumstances which deprive the Filipinos of a meaningful participation, either through public consultation, transparency, access to information, or a meaningful discourse on policies which affect national development.

Rightfully, the JPEPA should not be ratified. The Senate is called to junk the proposed agreement that deprives the Filipino people of their rights and national sovereignty.

 source: SEARICE