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They concern you more than you know: On the perils and potential of international investment agreements for the Agreement on Trade-Related Aspects of Intellectual Property Rights and COVID-19 discussions at the World Trade Organization

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IISD | December 20, 2021

They concern you more than you know: On the perils and potential of international investment agreements for the Agreement on Trade-Related Aspects of Intellectual Property Rights and COVID-19 discussions at the World Trade Organization

Talks on a possible COVID-19-related Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)[1] decision aimed at scaling up vaccine and therapeutics production and equitable distribution continue, despite the postponement of the 12th World Trade Organization (WTO) Ministerial Conference. Against this backdrop, it is worth drawing attention to a blind spot in the current discussion, namely the absence of IIAs from it. Indeed, without coordination between a TRIPS decision and WTO members’ IIA obligations, these obligations could significantly reduce any decision’s effectiveness. Conversely, addressing investment liability as part of the discussion may also present an opportunity for WTO members to close the gaps between their respective positions dispelling the growing (and, sadly, reasonable) doubts over their commitment to the negotiations in the first place.

IIAs and the effectiveness of a TRIPS decision

There are currently two texts on the table at the WTO aiming to address COVID-19-related therapeutics and the TRIPS Agreement. The first one, put forward by India and South Africa, proposes a General Council decision to waive the application of the TRIPS Agreement for a range of COVID-19-related medical products, including, but not limited to vaccines. As a response to this proposal, the EU, which opposes the waiver and considers it unnecessary to scale up manufacturing, has come up with its own proposal, which envisages a General Council declaration clarifying and facilitating the use of the TRIPS Agreement flexibilities relating to compulsory licensing.[2] Under the EU proposal, inter alia, the obligation to negotiate with an intellectual property (IP) right holder prior to the issuance of a compulsory licence can be waived, and the remuneration for patent-holders must reflect affordable prices when the products are destined for middle- and low-income countries. I refer to both possible forms generically as the TRIPS decision.

While members disagree on the means to achieve the policy goal of more equitable distribution of COVID therapeutics and vaccines, there are several uncontroversial points in the discussion. First, alleviating litigation risk is one of the key perceived advantages of a TRIPS decision, as it would help with regulatory hesitancy on the part of lower-capacity states and investment in production capacity hesitancy on the part of private actors. The cost of potential litigation is seen as a deterrent on the part of lower-income states to act in the absence of a TRIPS decision. Second, it is commonly understood that a TRIPS waiver is not a sufficient measure to scale up production and distribution, such that implementing and complementary measures at the national level would be required. Third, even though negotiations are, in the words of Director General Ngozi Okonjo-Iweala, ‘stuck’, all sides seem to agree in their statements that time is of the essence. Finally, and this point is implied, pharmaceutical companies insist on voluntary know-how sharing and are against both a waiver and compulsory licensing.

Against this backdrop, it seems surprising that ISDS based on IIAs is virtually absent from the discussion, as it has the potential to significantly undermine the effectiveness of any agreement reached at the WTO.

ISDS presents a similar litigation risk to WTO proceedings, but in addition, access to it is not limited to states. ISDS provides a litigation avenue, the costs of which are just as burdensome as those of WTO litigation: between 1988 and 2017, the median state party costs for an ISDS case were USD 2.9 million. The fact that ISDS is open directly to IP rights holders also renders recourse to it more likely, as pharmaceutical companies are not subject to the same reputational and retaliation disincentives that apply to states regarding WTO proceedings. Given the publicity surrounding the TRIPS-related discussion and the similar implementing measures required in multiple states, the current context also mirrors circumstances in which two ISDS cases contributed to states delaying the adoption of planned policy measures in the past.[3] Taking the risk of ISDS litigation to delay the implementation of a putative TRIPS decision would be particularly problematic in view of the agreed-upon urgency of vaccine equity.

In addition, state measures taken in implementation of the TRIPS decision will not be automatically exempt from review under IIAs, as Prabhash Ranjan shows in detail with respect to a TRIPS waiver.[4] In the absence of express language to that effect, non-investment international norms have had only a limited impact on states’ liability under these treaties. Moreover, IIAs do not currently address the most likely litigation risks that would result from state action in furtherance of a TRIPS decision.

Indeed, fewer than 10% of IIAs limit the protection of IP rights by reference to the TRIPS Agreement. They are also mostly recent, while 65% of investment disputes continue to be initiated under treaties signed before 2000.[5] In addition, most of these IIAs include only standard-specific exceptions from provisions that require a relatively high threshold for liability, such as expropriation or, more rarely, non-discrimination and the prohibition of performance requirements (see Figure 1). By contrast, IIAs are silent on the FET standard of protection, which gives rise both to most claims and to most findings of breach in ISDS.[6] Thus, state measures implementing a TRIPS decision would be subject to review under IIAs, and the outcome of this review will not be significantly affected by the existence of that decision.

Finally, because of the fragmented nature of the international investment regime, addressing the undue overlap in that regime in a timely fashion is virtually impossible. The investment regime is largely based on bilateral treaties with no institutional setting for multilateral decision making. Multilateral action on the much less controversial issue of transparency in ISDS took several years of negotiations and, 7 years after the adoption of the resulting Mauritius Convention, the Convention is in force in only nine states. Action at the bilateral level is bound to involve countries with no incentive to sit at the negotiating table and, in any event, would entail significant delay and heavy transaction costs.

Altogether, these facts suggest that if negotiators want to achieve the goals they assign to the TRIPS decision to alleviate litigation risk in order to reassure both private parties and governments, they must address ISDS in the text of the decision itself.

A way forward: What if the TRIPS decision excluded liability under IIAs?

On the basis of the above, WTO members should consider excluding measures related to the implementation of the TRIPS decision from the scope of IIA protection. Such a move to coordination can be effective in limiting the ISDS litigation risk without requiring members to go beyond practices they have already used in the context of the trade and investment regimes.

Clarifying the intended relationship of the TRIPS decision with IIAs is both permissible under the law of treaties and within the powers of the WTO General Council. From the perspective of the law of treaties, a TRIPS decision is likely to be considered a subsequent agreement on the interpretation of the TRIPS Agreement under Article 31(3)(a) of the VCLT. Nothing prevents the decision from embodying a clarification with a similar effect regarding all IIAs in force among all members too. There are no formal requirements for subsequent agreements under Article 31(3)(a) to be effective,[7] and the General Council is composed of representatives of the WTO membership, which gives them the power to represent their states under Article 7 of the VCLT.

In addition, WTO members include language clarifying the respective scope of application of norms from other fields of international economic law in their treaties as a matter of course, such that there is no reason for a clarification of the effect of the TRIPS decision in IIAs to be beyond the mandate of the General Council.

Addressing a question relevant for multiple treaties in the same instrument is not novel either. In the context of investment governance, both the Mauritius Convention on Transparency and the Agreement to Terminate Bilateral Investment Treaties between the Member States of the European Union amend and/or terminate a large number of treaties simultaneously. States can a fortiori provide for a subsequent agreement on the interpretation and application of several treaties at once too.

Content-wise, a clarification under which measures taken in furtherance of the TRIPS decision do not constitute a breach of the substantive protections under IIAs (i.e., a TRIPS decision exception)[8] provides the most promising way to ensure effective coordination. A clause to that effect could be formulated in the following terms:

For greater certainty, we, the WTO Members, agree that no treaty in force between two or more WTO Members which contains provisions on the protection of investments or investors shall be interpreted to prevent the adoption of measures aimed at implementing [the TRIPS decision].*

[*For greater certainty, the phrase ‘interpreted to prevent the adoption’ includes interpretations that would require payment of damages related to the adoption of such measures.]

Weighing competing interests suggests that the exception should ideally be unconditional. A more restrictive formulation is unlikely to deter litigation, as it would invite back the currently applicable type of review of the procedure and content of implementing measures. Given the narrow scope of a TRIPS decision, an unconditional exception would not empty investment standards of their content either. Importantly, a TRIPS decision would already embody the level of protection for IP rights holders that WTO members consider appropriate. Thus, in the context at hand, rendering IIA standards inapplicable for the ensuing implementation measures would preserve the integrity of the agreement reached at the WTO, rather than unduly lowering investor protection.

Such a clarification is not out of political reach, either. Even WTO members that currently favour a narrow TRIPS decision have included unconditional exceptions in their IIAs for certain measures. By way of example, the EU-Singapore Investment Protection Agreement, excludes liability for any measure aimed at the prevention of tax evasion “pursuant to the tax provisions of agreements to avoid double taxation or other tax arrangements or domestic fiscal legislation.”[9] More generally, both Canada and the EU have also moved away from a broad FET standard in their recent practice and have opted for a closed list approach instead, under which implementing measures would be sanctioned only if they are “manifestly arbitrary.”[10] Supporting an exception that covers implementing measures for a TRIPS decision under the same terms would not require more than aligning their practice under earlier treaties to their current policy position.

Beyond questions of feasibility, the possibility to exclude IIA liability for measures furthering a TRIPS decision would not only ensure the effectiveness of any putative TRIPS decision; it may have the potential to show a reconciliatory path among the currently irreconcilable positions at the WTO. For WTO members that resist a waiver on account of perceived ineffectiveness, agreeing to exclude investment liability can demonstrate that their position is not a stalling manoeuvre. Conversely, given the higher likelihood of litigation under IIAs, excluding investment liability may help reassure members favouring a broad waiver to agree to a decision with a narrower scope. For all WTO members, a compromise seems sorely needed in the face of striking vaccine inequality, and it is thus worth bringing this additional bargaining chip to the negotiating table.

Author: Dafina Atanasova is a lecturer at the Master in International Dispute Settlement (MIDS), a joint program of the University of Geneva and the Graduate Institute (IHEID), Geneva.


[1] World Trade Organization. (1994). The WTO agreement on trade-related aspects of intellectual property rights (TRIPS).

[2] It is worth noting that the European Parliament called for the EU to support a temporary Covid-19-related waiver from certain provisions of the TRIPS Agreement in a Resolution from 25 November 2021.

[3] Moehlecke, C. (2020). The chilling effect of international investment disputes: Limited challenges to state sovereignty. International Studies Quarterly, 64, 1–12.

[4] Ranjan, P. (2021). Trade-related aspects of intellectual property rights waiver at the World Trade Organization: A BIT of a challenge.

[5] United Nations Conference on Trade and Development. (2021). World investment report 2021: Investing in sustainable recovery. United Nations Publishing. 130.

[6] United Nations Conference on Trade and Development. (n.d.). Investment dispute settlement navigator. Breaches.

[7] International Law Commission. (2018). Draft conclusions on subsequent agreements and subsequent practice in relation to the interpretation of treaties, with commentaries. (A/73/10). Conclusion 6(2) and commentary.

[8] In the abstract, excluding recourse to ISDS altogether is the most direct way to neutralize investment litigation risk. However, subsequent agreements on interpretation are not equivalent to an amendment. They rather insert themselves in the broader interpretative process, as do to other international norms under Article 31(3)(c) of the VCLT. Based on ISDS cases dealing with arguments based on Article 31(3)(c), an agreement under Article 31(3)(a) is more likely to produce its desired effect if it sets an interpretation of the standards of protection in IIAs, which are typically broadly drafted, than regarding the more detailed provisions on dispute settlement. Also, states have only excluded issues from ISDS, which may render an agreement to do so in the context of a TRIPS decision more unlikely.

[9] Article 16.6.4.

[10] Canada Model Foreign Investment Protection Agreement 2021, Article 8(1)(c). European Union–Viet Nam Investment Protection Agreement 2018, Article 2.5(2)(c).

 source: IISD