Nov 252013

BrookBakerInvestor-state dispute resolution is a growing concern for governments like Canada that should want to preserve policy space for regulating business activity.  From licenses for fracking, mining, and timber cutting, to health and safety regulations, to labor policy, and to intellectual property rules, countries are finding their regulatory rules and decisions attached by investors whose expectations of future profits are affected by even-handed regulations or by appellate court decisions.

Canada is currently embroiled in negotiations for a Trans-Pacific Partnership Agreement with the U.S. And ten other countries where a proposed investment chapter would reimpose all of the risks of abusive corporate claims that Canada is now experiencing under NAFTA.  As described in a story in last weekend’s Globe and Mail, one of the most egregious claims currently pending is one for $500 million by Eli Lilly challenging decisions by Canada’s appellate courts revoking or invalidating previously granted patents on two medicines.  Eli Lilly lost in Canadian courts fair and square, but it is pursuing a third bite at the apple by taking Canada to private arbitration, where a panel of three trade lawyers might undo Canada’s effort to require strict standards of patentability with respect to the “promise” made in patent applications on medicines.

U.S. Negotiators seem blind to the possibility that the same kind of claims might be brought in the U.S. by foreign corporations who are upset with a U.S. Supreme Court decision, for example the Myriad decision which barred patents on isolated genes.  The U.S. could soon learn that investor-state dispute resolution is a double-edged sword that punishes any effort to decrease monopoly rights of medical-related IP rightholders.

The impact on affordability of medical care could be enormous.


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