What the India-US BIT could mean for the future of generic drugs in India.

A session on India-US Economic Relations was held in New Delhi yesterday wherein Adewale (Wally) Adeyemo, the Deputy Assistant to the US President and Deputy National Security Advisor for International Economics,  was quoted as saying,

“To be frank, we are far apart on number of issues with regard to trade and investment with India. We feel our colleagues in India have not been as ambitious (on concluding BIT) as we want them to be but we remain open.”

Given that the bilateral trade between the two countries is expected to reach US$ 500 billion in the near future (a four-fold jump from US$ 35 billion in 2015), the US is eager to seize the opportunity to trade with India, one of the fastest growing economies among the G20 countries. Negotiations over a BIT between India and the US first commenced in 2008.

As always, ‘protection of intellectual property rights’ remains a thorny issue. As Adeyomo notes,

“I do think there are issues where we can find ways to work together. For example digital issues, with regard to IPR this is the place both have interest in trying to find solutions. Finding places to work together will help us in finding solution to more contentious issues like IPR,”

Earlier this year, India had faced public condemnation over allegations that the Indian government had given secret assurance to the US that India would not be granting compulsory licences on US patented drugs. Shortly thereafter, the US released its Special 301 report which placed India on the Priority Watch List (list of countries which have “serious intellectual property rights deficiencies”).

Adeyomo’s statement is indicative of yet another instance of the US trying to pressure the Indian government to tighten IP protection in the country, this time through the BIT route.

Intellectual property is covered as an ‘investment’ under BITs and any State measure which adversely affects the investor’s IP can trigger investment arbitration against the host-state under the investor-state dispute settlement (ISDS) mechanism in BITs. It is not uncommon for investors such as US companies to challenge a host-state’s IP laws on the ground that their intellectual property (or investment) is not adequately protected in the host-state. This was in fact the legal basis for Philip Morris’ claim against Australia in an ISDS proceeding, where Philip Morris, a US tobacco company, had challenged Australia’s plain packaging laws for cigarettes. While the investment arbitral tribunal in Philip Morris declined jurisdiction to hear the matter, such investor claims, if successful, can compel States to withdraw regulatory measures (including measures addressing public health concerns).

India, on its part, has been more proactive in its attempt to avert future ISDS claims; in December 2015, the Indian government unveiled a revised version of the model India BIT, which aims at preserving the host State’s right to regulate. However, the revised model BIT sways the pendulum too heavily in favour of the host State. As investment law expert, Dr. Prabhash Ranjan notes, the model India BIT excludes wholly the issuance of compulsory licences and revocation of IPR from being challenged under the ISDS.

Given that intellectual property is integral to any trade negotiation between India and the US, it is a no-brainer that the US would not agree to the IP protection clauses in the model India BIT in its current form. Both sides, would have to meet each other half-way to conclude the India-US BIT.

If India gives in to the US demand to strengthen the IPR regime in the country, it could make it even more difficult for India to grant compulsory licences and would adversely affect the Indian generic drugs industry.

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