Terms of reference
"To examine, in the light of the relevant provisions of the covered agreements cited by the European Communities and their member States in document WT/DS79/2, the matter referred to the DSB by the European Communities and their member States in that document and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
Chairman: Mr. Stuart Harbinson
Panelists: Mr. Douglas Chester
Mr. Yanyong Phuangrach
- Obligations arising under international agreements or treaties are not, by their own force, binding in Indian domestic law. Appropriate legislative or executive action has to be taken for bringing them into force. Although not self-executing under Indian law, implementation of a treaty does not require fresh legislative or executive action if existing administrative regulations or statutory or constitutional provisions permit the implementation of the treaty in question. The Indian courts may construe, in this context, statutory or constitutional provisions that pre-exist a treaty obligation in order to render them consistent with such a treaty obligation.
- The Directive Principles of State Policy as enshrined in Article 51 of the Indian Constitution enjoin upon the State to endeavour, inter alia, to foster respect for international law and treaty obligations in the dealings of organized people with one another. It is a fundamental principle of statutory interpretation in Indian domestic law that, wherever possible, a statutory provision must be interpreted consistently with India's international obligations, whether under customary international law or an international treaty or convention. If the terms of the legislation are not clear and are reasonably capable of more than one meaning, the treaty itself becomes relevant, for there is a prima facie presumption that Parliament does not intend to act in breach of international law, including therein a specific treaty obligation; and if one of the meanings which can reasonably be ascribed to the legislation is consonant with the treaty obligations and another or others are not, the meaning which is consonant is to be preferred.
- A treaty may be implemented by the exercise of executive power. However, where implementation of a treaty requires legislation, the legislative power belongs, under Article 253 of the Indian Constitution, exclusively to Parliament. Where the Constitution does not require action to be taken only by legislation or there is no existing law to fetter the executive power of the Union (or a State, as the case may be), the Government would not only be free to take such action by an executive order or to lay down a policy for the making of such executive orders, but also to change such orders or the policy itself, as often as the Government so requires. The executive power of the Government of India to enter into, and implement, treaties is derived from the legislative power of the Union of India incorporated in Articles 246 and 253 read with Entry 14 of List I of the Seventh Schedule of the Indian Constitution. The Government also has executive power over "patents, inventions and designs", which fall under Entry 49 of List I.
- Article 123, clause 1 of the Indian Constitution enables the President to legislate when Parliament (either House or both Houses) is not in session and the President "is satisfied that circumstances exist which render it necessary for him to take immediate action".
- Article 73 of the Indian Constitution confers upon the Government of India executive power over all subjects in which Parliament has legislative competence. Article 73(1) reads as follows:
"Extent of executive power of the Union. (1) Subject to the provisions of this Constitution, the executive power of the Union shall extend
(a) to the matters with respect to which Parliament has power to make laws; and
(b) to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any treaty or agreement:
Provided that the executive power referred to in sub-clause (a) shall not, save as expressly provided in this Constitution or in any law made by Parliament, extend in any State to matters with respect to which the Legislature of the State has also power to make laws."
The executive powers of the Union and State Governments are co-extensive with their respective legislative powers (Articles 73 and 162 of the Indian Constitution). The executive power of the Government extends to matters with regard to which Parliament can make laws. The executive power of the Centre extends also to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of a treaty or agreement (Article 73(1)(b) of the Indian Constitution). If the statutory provisions are silent on a point, the executive can fill up the gaps or supplement the rules or implement the policy by issuing administrative instructions not inconsistent with the rules already framed.
- Under Article 226 of the Indian Constitution, the High Court2 has the power of "judicial legislative and administrative action", which includes the power to review administrative regulations or instructions on the ground that they violate statutory provisions. In exercising this authority, the main principles guiding the High Court are:
- According to a well-established principle of Indian administrative law, administrative instructions cannot be issued on any matter which is the subject of legislation. Wherever there is no statutory provision or where there are gaps in any enactment, the same can be provided or bridged by issue of necessary administrative instructions. The only rider on the authority to issue such administrative instructions is that there should be no statutory provision either expressly or by necessary implications to the contrary.
- Administrative acts done in the purported exercise of a statutory power can be invalidated by the Court, if constitutional limits or statutory powers have been transgressed. However, where an administrative act is done, not in the purported exercise of a statutory power, but in the exercise of the executive power of a State, the doctrine of ultra vires is inapplicable to it, and courts have no supervision and control over such instructions, though they may be binding on the subordinate officials departmentally.
- Judicial review in respect of administrative acts not done in the purported exercise of a statutory power, but in the exercise of the executive power, is directed towards its manner and mode, and not the administrative decision taken on merits. The standard for this review is whether the exercise of the discretionary power has been "unfair", "arbitrary" or "malafide".
- Neither will the Supreme Court or High Courts interfere or adjudicate upon government policy matters, unless fundamental principles of law have been violated.
The Patents (Amendment) Ordinance 1994 and the Patents (Amendment) Bill 1995
Article 70.8 of the TRIPS Agreement
- Chapter III (Sections 6 through 11) deals with applications for patents. These provisions do not require that applications for patents must be limited to patentable subject‑matter. In respect of the subject‑matter of the claims, they only require that such applications should be for inventions.
- Inventions are defined in Section 2(1)(j) as, inter alia, any new and useful substance produced by manufacture, including any new and useful improvement of such a substance.
- Section 5 makes it clear that inventions claiming substances intended for use, or capable of being used, as a food, medicine or drug or relating to substances prepared or produced by chemical processes are not in themselves patentable, but methods or processes for their manufacture are. Under Section 2(1)(l)(iv) the term "medicine or drug" includes insecticides, germicides, fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants.
- Chapter IV of the Patents Act concerns the examination of applications. Section 12 requires that, when the complete specification has been filed7 in respect of an application for a patent, the application shall be referred by the Controller General of Patents, Designs and Trademarks to an examiner. The examiner shall ordinarily report to the Controller within a period of 18 months on, inter alia, whether the application and the specification are in accordance with the requirements of the Act and whether there is any lawful ground for objecting to the grant of the patent under the Act.
- Paragraph 2 of Section 15 states that, if it appears to the Controller that the invention claimed in the specification is not patentable under the Act, he shall refuse the application.
Article 70.9 of the TRIPS Agreement
Article 70.8 of the TRIPS Agreement
(a) That India had not complied with its obligations under Article 70.8(a) of the TRIPS Agreement to establish "a means" that adequately preserved novelty and priority in respect of applications for product patents in respect of pharmaceutical and agricultural chemical inventions during the transitional period provided for in Article 65 of the TRIPS Agreement.
Article 70.9 of the TRIPS Agreement
(b) That India had not complied with its obligations under Article 70.9 of the TRIPS Agreement.
Article 70.8 and 70.9 of the TRIPS Agreement
(c) That the DSB request India to bring its legal régime for patent protection of pharmaceutical and agricultural chemical products into conformity with India's obligations under Article 70.8 and 70.9 of the TRIPS Agreement.
I. That the complaints are not admissible
Articles 9.1 and 10.4 of the DSU
(a) The complaints of the European Communities and their member States are inconsistent with the rules of the DSU on multiple complainants, in particular Articles 9.1 and 10.4, according to which multiple complaints should be submitted to a single panel "whenever feasible" or "whenever possible", because the same matter has already been the subject of a panel procedure (WT/DS50) and there were neither legal, procedural nor factual reasons that had prevented the European Communities and their member States from bringing their complaint jointly with the earlier case initiated by the United States, or at least at the same time as the United States.
II. That, if the Panel were to find the complaints admissible
Article 70.8 of the TRIPS Agreement
(a) The evidence adduced in the present proceeding does not demonstrate that "mailbox" applications can be challenged in India's courts and that India's "mailbox" system9 fails to provide a sound legal basis to preserve the novelty of the inventions and the priority of the date of the applications.
Article 70.9 of the TRIPS Agreement
(b) Article 70.9, interpreted in accordance with Article 31 of the Vienna Convention on the Law of Treaties and the principles of interpretation enunciated by the Appellate Body in the earlier case (WT/DS50), does not require the establishment of a mechanism to provide for the grant of exclusive marketing rights before such rights are due.
Article 70.8 and 70.9 of the TRIPS Agreement
(c) India has not acted inconsistently with Article 70.8(a) and 70.9.
- Since the DSB had adopted the Panel report and the Appellate Body report in the earlier dispute10 dealing with the same measures at its meeting of 16 January 1998 no change in factual circumstances had occurred. The domestic legal situation in India had not changed and, in particular, no amendment to the Patents Act of 1970 had been enacted in India in order to provide for an appropriate means to file applications for patents for inventions of pharmaceutical and agricultural chemical products pursuant to Article 70.8 of the TRIPS Agreement; nor had the same Act been amended in order to provide for the possibility to grant exclusive marketing rights pursuant to Article 70.9 of the TRIPS Agreement.
- It was neither necessary nor appropriate to repeat all the legal arguments that had already been put before this Panel when it dealt with the United States' complaint. Article 10.4 of the DSU specifically provided that a third party considering that a measure already the subject of a panel proceeding nullified or impaired benefits accruing to it under a covered agreement was entitled to bring its complaint on that measure before the original panel. This provision was designed to serve continuity, consistency and procedural economy in the WTO dispute settlement system. Therefore, a re‑examination of the elements of the complaint in all legal detail would go against the very purpose of Article 10.4 of the DSU.
- The present complaint was in all aspects identical, from a legal point of view, with the earlier complaint submitted by the United States. It would entail a repetitive exercise of formalistic exchanges of views, which would be entirely futile given that the legal situation had already been clarified by the adoption of the earlier Panel and Appellate Body reports. It would also amount to a re‑hearing of the case and would thus give the parties to the dispute the opportunity of having the equivalent of a further appeal not foreseen in any provision of the DSU.
- In view of the fact that the Panel and the Appellate Body had already found in the earlier dispute that the present Indian domestic régime concerning the patent protection of pharmaceutical and agricultural chemical products was inconsistent with India's obligations under Article 70.8 and 70.9 of the TRIPS Agreement, it followed pursuant to Article 3.8 of the DSU that there was a presumption according to which this breach of the relevant WTO rules by India had an adverse affect on the European Communities and their member States as the other party to this dispute. In these circumstances, the burden was on India to rebut the presumption according to which India’s present domestic régime for the patent protection of pharmaceutical and agricultural chemical products nullified or impaired benefits accruing to the European Communities and their member States under Article 70.8 and 70.9 of the TRIPS Agreement.
Successive complaints based on the same facts and legal claims were unprecedented
- It had been the consistent practice of both the Contracting Parties to GATT 1947 and the Members of the WTO to bring complaints based on the same facts, claims and arguments either jointly before the same panel or at least concurrently for examination by panels composed of the same persons. About one third of the panels established to date by the DSB had examined complaints submitted by two or more WTO Members jointly or concurrently. Seven WTO panels had examined joint or concurrent complaints, altogether representing 22 complaints. If each of these 22 complaints had instead been examined individually, the amount of resources spent by the WTO and its Members on settling these disputes would have tripled.
- The United States and the EC had reacted in the past with hostility to attempts by other Contracting Parties to GATT 1947 or Members of the WTO to re‑litigate a matter, even when the subsequent complaint was justified. The United States had thus objected at the March 1991 meeting of the GATT 1947 Council to the establishment of a panel on Denial of Most‑favoured‑nation Treatment as to Imports of Non‑rubber Footwear from Brazil because "this matter had already been adjudicated" by a panel established under the Tokyo Round Subsidies Agreement, even though Brazil had made legal claims in the second proceeding under the GATT that it could not have made under the Subsidies Agreement.11 Equally hostile had been the EC’s reaction to the request for consultations on its régime for the importation, sale and distribution of bananas by Panama in October 1997. The EC had described Panama's initiation of the dispute settlement procedures on a matter on which a panel had already ruled as an abuse of the dispute settlement procedures, even though Panama had not been a WTO Member when the original panel had been established and could therefore not have joined the earlier complaint.12
An unmitigated right to bring successive complaints by different parties based on the same facts and legal claims would entail serious risks for the multilateral trade order
- In the WTO, the danger of unnecessary re‑litigation of the same matter arose mainly from the multilateral nature of the obligations at issue. In principle, each Member had the same obligations towards each of the other Members. The WTO presently had 132 Members. In theory, an allegation of non-compliance against one Member could therefore give rise to 131 different complaints by all the other Members. If multiple complaints were submitted to the same panel few problems arose; if they were brought successively before different panels, the confusion and waste of resources were great.
- The objective of the proceedings under the DSU, just as those of any other system of legal adjudication, was to settle disputes by giving panels and the Appellate Body the authority to determine facts, to find the applicable law and to apply the law to the facts. Legal proceedings were troublesome and costly, not only for the parties to the dispute but to society in general. Henry M. Herman had written in 1886:
"Interest republicae ut sit finis litium, is an old maxim deeply fixed in the law of fundamentals; that it concerns the state that there be an end to litigation. This maxim has wide application; it... is obviously based on common sense and sound policy. For if matters which have been solemnly decided are to be drawn again into controversy; if facts, once solemnly affirmed, are to be again denied whenever the affirmant sees his opportunity, there can never be an end to litigation and confusion."
For these reasons, all legal systems had developed principles to ensure that the same matter was not unnecessarily re‑litigated, among which the principles of res judicata and stare decisis.
- However, since the principle of res judicata did not apply if the parties to the dispute were different and the principle of stare decisis did not apply in the WTO to the interpretations of a panel or the Appellate Body, if successive multiple complaints by different Members on the same matter were to be admitted and examined as separate new cases, it would engender the danger of contradictory decisions and the waste of resources would be tremendous.13 If a panel ruled in one case in favour of the defendant, other complainants could bring the same case again and again before different panels with a different composition until a complainant "scored a hit".
(i) The principle of res judicata applied only when the parties to the dispute were the same14 and could therefore not prevent repeated disputes between different WTO Members on the same matter. In fact, the DSU explicitly recognized in Articles 9 and 10 the right of each Member to assert its rights individually. The principle of stare decisis also did not prevent multiple complaints on the same matter because this principle had not been applied in GATT/WTO jurisprudence. Thus, the 1989 GATT panel on EEC ‑ Restrictions on Imports of Dessert Apples (Complaint by Chile) had noted that a previous panel, in 1980, had reported on a complaint involving a similar set of GATT issues but that it "did not feel it was legally bound by all the details and legal reasoning of the 1980 Panel report".15
(ii) The issue of the binding nature of panel decisions had arisen in the WTO for the first time in the complaint on Japan ‑ Taxes on Alcoholic Beverages. The panel had decided this issue in the light of Article 31.3(b) of the Vienna Convention on the Law of Treaties, according to which there shall be taken into account in the interpretation of a treaty "any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation". The panel had concluded that "... panel reports adopted by the GATT CONTRACTING PARTIES and the WTO Dispute Settlement Body constitute subsequent practice in a specific case by virtue of the decision to adopt them". The Appellate Body had reversed this finding and pointed out that "an isolated act is generally not sufficient to establish subsequent practice; it is a sequence of acts establishing the agreement of the practice that is relevant". It had further noted that "the generally‑accepted view under GATT 1947 was that the conclusions and recommendations in an adopted panel report bound the parties in that particular case, but subsequent panels did not feel legally bound by the details and reasoning of a previous panel report". The Appellate Body had further pointed out that Article IX:2 of the WTO Agreement provided that "The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements". In the view of the Appellate Body, this clause provided the only possibility to adopt definitive interpretations. According to the Appellate Body, "The fact that such an 'exclusive authority' in interpreting the treaty has been established so specifically in the WTO Agreement is reason enough to conclude that such authority does not exist by implication or by inadvertence elsewhere".16
Articles 9 and 10 of the DSU required multiple complainants to submit their case to the same panel whenever feasible
- The drafters of the DSU had addressed the problem of multiple complaints on the same matter in Article 9.1 of the DSU, which provided:
"Where more than one Member requests the establishment of a panel related to the same matter, a single panel may be established to examine these complaints taking into account the rights of all Members concerned. A single panel should be established to examine such complaints whenever feasible."
The issue was also addressed in Article 10.4, which stated:
"If a third party considers that a measure already the subject of a panel proceeding nullifies or impairs benefits accruing to it under any covered agreement, that Member may have recourse to normal dispute settlement procedures under this Understanding. Such a dispute shall be referred to the original panel wherever possible."
These provisions made clear that another Member's complaint, by itself, did not foreclose a new complaint. Both joint and successive complaints by different Members, before the same panel or different panels, were therefore in principle allowed. However, Articles 9 and 10 also attached an important condition to the right to resubmit the same matter to a panel, by stipulating that "a single panel shall be established whenever feasible". The same proviso was contained in Article 10.4, according to which a dispute on a measure already under litigation must be referred to the same panel "wherever possible". Articles 9 and 10 therefore balance two conflicting objectives: on the one hand, each complainant must have the right to bring its own case, make its own claims and develop its own arguments; on the other hand, each defendant and the WTO must be protected against completely unnecessary re‑litigation. The compromise the drafters had found was logical and based on common sense: when complaints could be joined, they must be joined; when a third party could submit its complaint about a measure to a panel that examined the same measure, it must do so.
- The obligations under Articles 9.1 and 10.4 were expressed in the passive voice ("A single panel shall be established..."; "Such a dispute shall be referred to..."). The Articles therefore did not make clear to whom they were addressed: were the obligations established for the organs and officers of the WTO ‑ in particular, the DSB and the Director‑General ‑ or for the Members of the WTO, or for both? This interpretative issue must be resolved in the light of the purpose of these provisions, which was to avoid unnecessary re‑litigation. This purpose could not be achieved if the responsibility to ensure the joint or concurrent examination of multiple complaints fell exclusively on the organs and officers of the WTO. The DSB must establish a panel "if the complaining party so requests" whether or not that request was justified, and the DSB could therefore not effectively prevent unnecessary re‑litigation. Equally, the Director‑General was obliged under Article 8.7 to determine the composition of a panel "at the request of either party" irrespective of the nature of the complaint.
- The Panel had the responsability to determine the admissability of the EC complaints in the light of the provisions of Articles 9.1 and 10.4 of the DSU. In this regard, it should be recalled that the WTO panel on European Communities ‑ Regime for the Importation, Sale and Distribution of Bananas had examined whether the authority to determine whether a request for the establishment of a panel met the requirements of Article 6.2 of the DSU rested with the DSB or with the panel. The panel had ruled that it had the authority:
"Because of the application of the 'reverse' consensus decision‑making applicable in the case of panel establishment in the DSB, the DSB is not likely to be an effective body for resolving disputes over whether a request for the establishment of a panel meets the requirements of Article 6.2 of the DSU. Therefore, as a practical matter only the panel established on the basis of the request (and thereafter the Appellate Body) can perform that function."17
The reasoning of that panel applied equally to the question of whether a complaint met the requirements of Articles 9.1 and 10.4 of the DSU.
- It might therefore be concluded that Articles 9.1 and 10.4 could achieve their purpose only if the duty to submit multiple complaints to a single panel whenever possible was interpreted as a duty falling on both the WTO and its membership, and panels declared complaints that did not meet the requirements of these provisions as inadmissible. The present Panel was the first to address this issue and therefore had the important task of resolving it in the light of its broad systemic implications.
- It should be noted that India was not arguing against the submission of successive complaints on the same matter by different WTO Members in all cases. Successive complaints might be unavoidable and therefore legitimate for a variety of reasons. There might be legal reasons. For instance, the complainant might wish to make claims that went further than those made in the earlier proceeding. There might be procedural reasons. Thus, the complainant might not have been a WTO Member when the original complaint had been brought, as noted above for Panama in the Bananas case. There might be factual reasons. For instance, the parties to the earlier dispute might have reached a settlement. The interpretation of Articles 9 and 10 suggested above would not curtail the legitimate exercise of the fundamental right of a WTO Member to a new and separate examination of its complaint when the need arose but would prevent only the needless, and therefore abusive, delay in the exercise of this right.
- The EC's exercise of the right to bring a new complaint on the same matter that had already been the subject of an earlier proceeding was abusive. As the EC itself admitted, its complaint was "in all aspects identical, from a legal point of view, with the earlier complaint submitted by the United States". Not a single new fact, claim or argument was presented by the EC. India had obligations under Article 70.8 and Article 70.9 not only with respect to the United States but with respect to all Members of the WTO, including the EC. Moreover, Article 4 of the TRIPS Agreement obliged India to implement its obligations under these provisions on a most‑favoured‑nation basis. India could therefore have only one "mailbox" system and only one mechanism for the granting of exclusive marketing rights, and these must be equally applicable to all Members of the WTO. Any change that India might make to implement the recommendations of the Panel in the earlier dispute, as modified by the Appellate Body, would therefore necessarily benefit not only the United States but also the European Communities and their member States. The only purpose of the EC's complaint was thus to obtain rights under Article 22.2 of the DSU, which the EC could easily have obtained by submitting its complaint jointly or concurrently with the United States. The EC had presented no reasons of a legal, procedural or factual nature that justified its decision to seek these rights belatedly in a separate proceeding.
- The question before the Panel was essentially the following: do complainants have an unlimited right to delay the initiation of proceedings or do defendants and the WTO have the right to be protected against unnecessary re‑litigation? The EC's complaints amounted to unwarranted harassment, entailing a waste of the WTO's limited human and financial resources, as well as those of India. If the EC's approach to re‑litigation were sanctioned by this Panel, and if Articles 9 and 10 of the DSU provided no point at which judicial proceedings in the WTO must stop, the WTO could easily become one vast scene of litigation, disturbance and ill will.
- The Appellate Body had stated in another context that "The WTO rules are not so rigid or so inflexible as not to leave room for reasoned judgements in confronting the endless and ever‑changing ebb and flow of real facts in real cases in the real world".18 India invited the Panel to approach the novel and important interpretative issue before it in that spirit.
- Article 9 addressed a situation where there was more than one complainant in a dispute settlement procedure. It did not, however, contain any obligation on WTO Members to make a complaint at a given point in time. Nor did it address the situation of a WTO Member that had requested to be a third party in a given dispute settlement procedure. This situation was addressed exclusively in Article 10. Article 10.4, which was relevant for the present case, specifically provided that a third party might become a complainant on the measure already the subject of a panel proceeding. It was obvious from this language that Article 10.4 addressed a situation with successive panel proceedings, like in the present case, since a WTO Member could not possibly be a complainant and a third party in one and the same procedure. Moreover, there was no provision in Article 10.4, neither explicit nor implied, which would prevent a third party from requesting the establishment of a panel after the conclusion of the earlier panel proceeding.
- There might be good reasons why a WTO Member wished to become a complainant with regard to a measure already the subject of a panel proceeding after having been a third party to that earlier panel.19 The procedural rights of third parties were much more limited than those of complainants. In particular, pursuant to Article 10.3 of the DSU, third parties shall receive the submissions of the (other) parties to the dispute to the first meeting of the panel. This implied that third parties did not have access to any other submission of the parties to the dispute. Pursuant to paragraphs 6 and 12(b) of Appendix 3 to the DSU, third parties were heard in a separate session, but did not participate otherwise in the meetings of the panel with the parties to the dispute. Pursuant to Article 17.4 of the DSU, only parties to the dispute, not third parties, may appeal a panel report. Finally, pursuant to Article 22.2 of the DSU, under the conditions set out in that provision, "any party having invoked the dispute settlement procedures may request authorization from the DSB to suspend the application to the Member concerned of concessions or other obligations under the covered agreements". As was apparent from this provision, the DSB could not grant such authorization to a third party, since it had not "invoked the dispute settlement procedures". If a third party wished to be released from these limitations, its only option was to become a complainant in its own right.
- Moreover, contrary to India's position in the present dispute, the DSU did not contain any obligation for a WTO Member to request dispute settlement procedures at a given point in time, at least as long as the measures at issue giving rise to the dispute continued to apply. Article 3.7 of the DSU specifically provided that "[b]efore bringing a case, Members shall exercise their judgement as to whether action under these procedures would be fruitful". On the basis of this provision, the Appellate Body had found in European Communities ‑ Regime for the Importation, Sale and Distribution of Bananas20 that WTO Members enjoyed broad discretion whether to bring a case against another Member under the DSU. This discretion necessarily also included the choice of the appropriate timing of a complaint. Launching a dispute settlement procedure was an important policy decision that was influenced by a large number of factors. The WTO was a Members‑driven organization where Members enjoyed discretion whether or not to resort to a particular form of action under the covered agreements. Members might follow different strategies concerning the appropriate action in case of violations of WTO obligations by other Members. On this basis, a Member might choose a different timing of a complaint under the DSU for a measure already the subject of an earlier panel proceeding. This possibility was specifically addressed and recognized in Article 10.4 of the DSU, which would be stripped of any useful meaning if India's approach, according to which Members had an obligation to join a complaint under Article 9 if they wanted to bring a dispute on measures on which another Member was already complaining, were correct. As the Appellate Body had found in United States ‑ Standards for Reformulated and Conventional Gasoline21, one of the corollaries of the "general rule of interpretation" contained in Article 31 of the Vienna Convention on the Law of Treaties was that "interpretation must give meaning and effect to all terms of a treaty. An interpreter was not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility".
- Contrary to India's allegations, the present case could not be compared with cases in which other WTO Members had been acting as multiple complainants rather than third parties. Moreover, by contrast to the situation in the Bananas dispute, where Panama had attempted to get involved in the implementation of the DSB recommendations and rulings of a dispute settlement procedure in which it had not participated, the EC did not claim to be entitled to a particular role with regard to the implementation of the recommendations and rulings of the DSB in the earlier dispute launched by the United States in which they were a third party (WT/DS50). The present case was in fact as yet without precedent in WTO practice. However, this situation was specifically addressed and resolved in Article 10.4 of the DSU.
- The first sentence of Article 9.1 of the DSU authorized the DSB to establish a single panel to examine multiple complaints. As far as the present case was concerned, this sentence made clear that the DSB would have had the authority to establish a single panel if the United States and the EC had submitted their requests for the establishment of a panel contemporaneously. The second sentence of Article 9.1 went further and stipulated the referral of multiple complaints to a single panel whenever feasible. Since the DSB could establish a single panel to examine multiple complaints related to the same matter only when these were submitted contemporaneously, the second sentence implied the duty to bring such complaints contemporaneously whenever feasible.
- Articles 9 and 10 balanced two conflicting objectives: on the one hand, each complainant must have the right to bring its own case, make its own claims and develop its own arguments; on the other hand, each defendant and the WTO must be protected against completely unnecessary re‑litigation. The compromise the drafters had found was logical and based on common sense: when complaints could be joined, they must be joined; when a third party could submit its complaint about a measure to a panel that examined the same measure, it must do so.
- India claimed that Article 9.1, second sentence, of the DSU created a duty to submit disputes regarding the same matter by different WTO Members simultaneously to the same panel. This reading of Article 9.1 of the DSU was clearly wrong. Article 9 dealt, in accordance with its title, with a situation in which more than one complainant requested the establishment of a panel on the same matter. Paragraph 1 of that provision was concerned with situations in which such requests were made simultaneously by several complainants. The first sentence of that paragraph allowed several WTO Members to request a single panel in such situations, while the second sentence encouraged the DSB to resort to the establishment of a single panel whenever feasible. Paragraph 3 dealt with a situation in which requests for the establishment of a panel on the same matter were made successively, but at a time when the first panel had not yet completed its work. In such situations, more than one panel would have to be established. This provision clearly demonstrated that there could be no obligation for WTO Members to request the establishment of a single panel on the same matter, since otherwise Article 9.3 would be superfluous. In WTO practice, Article 9.3 had already been used on several occasions, specifically in two disputes concerning the EC.22 These disputes demonstrated that there was no obligation for several Members to submit their requests for the establishment of a panel on the same matter simultaneously.
- In any case, the present dispute was governed by the procedural rule laid down in Article 10.4 of the DSU. That provision explicitly dealt with the situation at hand and required the dispute to be referred to the original panel. The term "original panel" was a term of art used elsewhere in the DSU, namely in Articles 21.5 and 22.6, where it clearly dealt with procedures which by their very nature could not be simultaneous with the procedure which the "original panel" had been handling in the first place. The procedures referred to in these latter provisions only occurred at the implementation stage of a dispute in which the "original panel" by necessity had already circulated its report on the substance of the case. In other words, the term "original panel" was used where the DSU referred to a panel having already dealt with the same issue in an earlier procedure in which it had already completed its work. India submitted that its interpretation of Article 9.1, which created a duty on WTO Members to submit disputes simultaneously to the same panel, applied mutatis mutandis to Article 10.4. The EC did not agree with India's interpretation of Article 9.1. To seek to apply this interpretation in addition to Article 10.4, which had a different purpose, was obviously far-fetched.
- The EC was, for these reasons, of the view that India's reading of Articles 9.1, second sentence, and 10.4, second sentence, of the DSU was wrong and should be rejected by the Panel. In this context, the EC had already drawn the attention of the Panel to the first sentence of Article 3.7 of the DSU which - as had been confirmed by the Appellate Body in the Bananas case23 - gave Members broad discretion whether to launch a dispute settlement case, which necessarily included the discretion to decide on the timing of a dispute settlement procedure.
Normal dispute settlement procedures
- The EC based its right to re‑litigation on the first sentence of Article 10.4 of the DSU, which provided:
"If a third party considers that a measure already the subject of a panel proceeding nullifies or impairs benefits accruing to it under any covered agreement, that Member may have recourse to normal dispute settlement procedures under this Understanding."
The EC was thus requesting this Panel to go through the "normal dispute settlement procedures" under the DSU for a purpose for which these procedures had obviously not been designed. The role of a panel was to determine facts, to find the applicable law and to apply the law to the facts. But the EC was not requesting this Panel to perform these functions. It was merely requesting the Panel to perform the mechanical function of formally extending a ruling made in an earlier panel proceeding to the present complaint.
- The EC had conceded that a re‑litigation of the case would have systemic and practical problems, when stating that "... a re-examination of the elements of the complaint in all legal detail would go against the very purpose of Article 10.4 of the DSU. It would entail a repetitive exercise of formalistic exchanges of views which would be entirely futile given that the legal situation has already been clarified by the adoption of the earlier panel and Appellate Body reports. It would also amount to a re‑hearing of the case and would thus give the parties to the dispute the opportunity of having the equivalent of a further appeal not foreseen in any provision of the DSU..." This statement was contradictory. The EC first claimed that it had the right to resort to the "normal dispute settlement procedures" referred to in Article 10.4, notwithstanding the fact that its complaint was "in all respects identical, from a legal point of view, with the earlier complaint submitted by the United States"; however, it then claimed that the application of the normal dispute settlement procedures "would be entirely futile", "amount to a re‑hearing of the case" and create the opportunity of "having the equivalent of a further appeal". The EC thus interpreted Article 10.4 as conferring upon it a right whose exercise was futile and dangerous for the multilateral trading system.
- The implication of the EC's argumentation was that Article 10.4 should be interpreted as giving the EC the right to bring a new complaint and as barring India from submitting new arguments or new facts. This could not possibly be so. The Panel must either dismiss the complaint "as entirely futile" or re-examine the matter as a new case in accordance with the "normal dispute settlement procedures"; it could not first permit the complaint and then deny the defendant the application of the normal dispute settlement procedures on the ground that this would be entirely futile. The reasons that the EC advanced to deny India the right to normal dispute settlement procedures were the very reasons that called for a dismissal of its complaint. How could the EC reasonably expect any Member of the WTO to cooperate in one‑sided procedures violating the most basic principles of procedural justice?
- The ruling in the previous case on Article 70.8 was based on the findings that the evidence submitted by India had not been sufficient to rebut the presumption created by the evidence adduced by the United States that the Indian mailbox system was inconsistent with Indian law. In the present case, India had submitted evidence on the domestic situation that it had not submitted in the previous case and had requested the Panel to engage in further fact‑finding. The facts before this Panel were therefore different. It was irrelevant whether or not India had changed in patent régime; relevant was only whether the evidence adduced by India in the present proceeding was sufficient to rebut whatever presumption the evidence submitted by the EC had created. As confirmed by the Appellate Body, a panel could not interpret domestic law but must examine the applications of the domestic law. In such an examination an important new element to be considered was the fact that since the initiation of the United States' complaint (WT/DS50) about two years ago not even one attempt had been made to challenge any of the mailbox applications while a total number of over 2,000 applications had been submitted.
- There was a significant difference between being guided "by the Appellate Body’s decision", as the United States suggested in its third party submission in the present dispute, and being guided by the Appellate Body's reasoning in the previous and other cases. If this Panel were to declare that the Appellate Body had already decided the matter and that an independent examination of the facts and arguments in the present case was therefore not necessary, it would effectively declare the matter res judicata and deny India its procedural rights under the normal dispute settlement procedures. The Panel could not logically first admit the complaint and then declare the matter before it to have been decided by the Appellate Body.
- If the Panel were to be guided by the reasoning of the Appellate Body in the previous and other cases, it would proceed as all panels under the normal dispute settlement procedures did, using the reasoning in the previous case as a precedent. India was in fact urging the Panel to use the Appellate Body's reasoning in the previous case as a precedent, in particular as regards the inappropriateness of: (a) using the principle of predictability of conditions of competition as a basis for expanding the scope of Article 70.8 and 70.9; (b) basing a finding of inconsistency with the TRIPS Agreement on an interpretation of Indian law rather than an examination of the application of Indian law; and (c) expanding the obligations under Article 70.9 beyond the terms of this provision.
Article 70.8(a) of the TRIPS Agreement
- The EC was relying on the municipal law of India to prove its claim that a competitor could obtain a judicial order to force the Patent Office to examine and reject a mailbox application and thereby make it ineligible for future patent protection. It was recognized that "'municipal law' has to be proved by the party relying on such a law in an international proceeding".25 It was thus for the EC to demonstrate that the domestic law of India was such as to entail a violation of the obligations under Article 70.8(a). It was also recognized that an international tribunal could not interpret municipal law; it must treat it as a fact to be established by the party relying on it.26
- On this issue the Appellate Body had noted in its report on the previous case27:
"In public international law, an international tribunal may treat municipal law in several ways.28 Municipal law may serve as evidence of facts and may provide evidence of state practice. However, municipal law may also constitute evidence of compliance or non‑compliance with international obligations. For example, in Certain German Interests in Polish Upper Silesia, the Permanent Court of International Justice observed:
"It might be asked whether a difficulty does not arise from the fact that the Court would have to deal with the Polish law of July 14th, 1920. This, however, does not appear to be the case. From the standpoint of International Law and of the Court which is its organ, municipal laws are merely facts which express the will and constitute the activities of States, in the same manner as do legal decisions and administrative measures. The Court is certainly not called upon to interpret the Polish law as such; but there is nothing to prevent the Court's giving judgment on the question whether or not, in applying that law, Poland is acting in conformity with its obligations towards Germany under the Geneva Convention."29 (emphasis by the Appellate Body)
- General international law, GATT 1947 precedents and the above ruling of the Appellate Body all pointed in the same direction: the Panel was not called upon to interpret Indian law; it was to give judgement on the question of whether India, in applying that law, had acted in accordance with Article 70.8(a) of the TRIPS Agreement. India submitted that a distinction must be made between: (i) evaluating the application of an Indian statute or regulations to determine whether it violated WTO provisions; and (ii) deciding the purely municipal law issue of whether a measure applied by India was valid under its domestic law. The first was clearly necessary for the WTO to function effectively; the second was the responsibility of the Government of India, namely, upholding India's Constitution and its laws as a sovereign government. In India's view, in its report the Appellate Body had overlooked this central distinction.
- In the previous case, the United States and India had advanced conflicting views on whether a competitor could obtain a judicial order to force the Patent Office to examine and reject a mailbox application. The United States had claimed that this was possible, while India had pointed out that it was not. Faced with these conflicting claims, the Panel had ruled that "the current administrative practice creates a certain degree of legal insecurity in that it requires Indian officials to ignore certain mandatory provisions of the Patents Act".30 The Panel had also ruled that:
"... even if the Patent Office officials do not examine and reject mailbox applications, a competitor might seek a judicial order to force them to do so in order to obtain rejection of a patent claim. If the competitor successfully establishes the illegality of the separate storage and non‑examination of mailbox applications before a court, the filing of those applications could be rendered meaningless."31
- The Panel had found that the Indian Supreme Court decisions which India had provided to it only established that India's "reliance on an administrative practice regarding the handling of pharmaceutical and chemical product applications is not unconstitutional". However, according to the Panel, this evidence adduced by India did not demonstrate that "a court will uphold the validity of administrative actions which apparently contradict mandatory legislation".32 It had concluded for these reasons that, notwithstanding India's commitment to adapt its legislation on pharmaceutical and agricultural chemical products by the end of the transitional period, "there would remain doubt during the transitional period regarding the eligibility of these products for future patent protection".33
- The Panel thus had not found that the evidence submitted to it demonstrated that mailbox applications would be invalidated under Indian law. However, on the basis of its interpretation of that law, it had found that there was "a certain degree of legal insecurity" and "doubt" because of an "apparent" contradiction with mandatory law. These doubts were in the view of the Panel sufficient to find the Indian mailbox system to be contrary to Article 70.8(a) because that provision required India to "eliminate any reasonable doubts" that the mailbox applications and the patents based on them would not be invalidated. The Panel had thus interpreted into the TRIPS Agreement the requirement that a Member must eliminate any reasonable doubts that it had met the requirements set out in that Agreement.
- By ruling that India ‑ the party subject to Article 70.8(a) ‑ must remove any reasonable doubts regarding its mailbox system, the Panel effectively had relieved the United States ‑ the party claiming a violation of Article 70.8(a) ‑ of the burden of adducing evidence that the violation had occurred. This shift of the burden of proof on to India would imply that the party claiming a violation of Article 70.8(a) must merely prove that there were reasonable doubts suggesting such a violation. It was then for the defending party to dispel those doubts. By proceeding in this manner, the Panel had applied a standard of proof to the evidence to be adduced by the defending party that no State with courts entitled to review administrative actions could meet. India considered for these reasons that the Panel's interpretation of Article 70.8(a) was not only substantively incorrect but also violated established principles governing the burden and standard of proof. India had appealed therefore both from the substantive finding and from its implications for the distribution of the burden of proof and the standard of proof.
- While the Appellate Body had first ruled that Article 70.8(a) did not comprise the obligation to eliminate "reasonable doubts" that mailbox applications would be invalidated, it nonetheless subsequently declared it sufficient for the Panel to have concluded from the evidence that it ‑ the Panel ‑ had "reasonable doubts" that such invalidation could occur.
- The Appellate Body had reversed the substantive finding of the Panel by ruling:
"However, we do not agree with the Panel that Article 70.8(a) requires a Member to establish a means 'so as to eliminate any reasonable doubts regarding whether mailbox applications and eventual patents based on them could be rejected or invalidated because, at the filing or priority date, the matter for which protection was sought was unpatentable in the country in question'.34 India is entitled, by the 'transitional arrangements' in paragraphs 1, 2 and 4 of Article 65, to delay application of Article 27 for patents for pharmaceutical and agricultural chemical products until 1 January 2005. In our view, India is obliged, by Article 70.8(a), to provide a legal mechanism for the filing of mailbox applications that provides a sound legal basis to preserve both the novelty of the inventions and the priority of the applications as of the relevant filing and priority dates. No more."35
To India's great surprise, however, the Appellate Body had upheld the Panel's ruling on the distribution of the burden of proof. It had found:
"... the United States put forward evidence and arguments that India's 'administrative instructions' pertaining to mailbox applications were legally insufficient to prevail over the application of certain mandatory provisions of the Patents Act. India put forward rebuttal evidence and arguments. India misinterprets what the Panel said about 'reasonable doubts'. The Panel did not require the United States merely to raise 'reasonable doubts' before the burden shifted to India. Rather, after properly requiring the United States to establish a prima facie case and after hearing India's rebuttal evidence and arguments, the Panel concluded that it had 'reasonable doubts' that the 'administrative instructions' would prevail over the mandatory provisions of the Patents Act if a challenge were brought in an Indian court."36
It was difficult to reconcile the two statements in the underlined portions of the above extracts from the Appellate Body report. The Appellate Body first ruled that Article 70.8(a) did not comprise the obligation to eliminate "reasonable doubts" that mailbox applications would be invalidated. However, the Appellate Body subsequently declared it sufficient for the Panel to have concluded from the evidence that it ‑ the Panel ‑ had "reasonable doubts" that such invalidation could occur. The findings of the Panel were consistent: it had interpreted Article 70.8(a) to require India to eliminate any reasonable doubts as to the validity of mailbox applications and it had consequently considered a demonstration that there were such doubts to be sufficient. The Appellate Body had ruled that India did not have to eliminate any reasonable doubts but then effectively reversed that ruling by considering a demonstration of doubts to be sufficient.
Whether interpretations of municipal law were correct was to be determined by domestic courts
- India's arguments before the Panel in the present case amounted to the following. The implementation of the TRIPS Agreement would require administrative, regulatory, and legislative actions ‑ or choices amongst them ‑ based on interpretations by the executive authorities of Members of their regulations, statutes and constitution. Whether such interpretations were correct could only be determined by domestic courts. India's position was that panels and the Apellate Body should give a Member the benefit of the doubt on its interpretation of its own law unless there was evidence ‑ such as a court decision ‑ that the Member's interpretation of its own law was manifestly incorrect. Members had the legitimate expectation that the interpretation of their municipal law would be left to their domestic courts.
- As a matter of policy also, this was a wise approach for panels to follow. Panels had special expertise in the area of WTO/GATT law which they did not have in the area of a Member’s domestic law. Accordingly, they should give Members the benefit of the doubt on their determinations under their domestic law. This was not the same as deferring to a Member’s interpretations of WTO provisions or deferring to a Member's determination on whether a particular factual situation met the WTO standard for imposing anti‑dumping duties or for imposing quantitative restrictions under Article 6 of the Agreement on Textiles and Clothing. Thus, the view of the Panel in United States ‑ Restrictions on Imports of Cotton and Man‑Made Fibre Underwear37 ‑ that a "policy of total deference to the findings of national authorities could not ensure an objective assessment as foreseen by Article 11" of the Dispute Settlement Understanding ‑ was clearly distinguishable from the present case. India was not advocating a policy of deference: India recommended merely that not only should the burden of showing that a measure taken by a Member to comply with its WTO obligations was invalid under its domestic law be placed firmly on the Member challenging the validity of such a measure, but Members should also be given the benefit of the doubt on their own interpretations of their municipal law, as previous GATT panels had ruled.
- Otherwise, if panels resorted too quickly to adjudicating upon the validity of a Member's actions under its domestic law, an anomalous situation could result where a particular action of a Member stood invalidated on a panel's interpretation of the Member's domestic law but was upheld by the Member's domestic courts. Also, panels should not permit the WTO to be turned into a forum for adjudicating upon the validity of Members' measures under their domestic law.
The Panel and the Appellate Body had failed to apply the principle that the conformity of the internal law of each State with its treaty obligations must be presumed
- The Appellate Body had found in the previous case that the evidence adduced by the United States had established the "presumption" that India’s "mailbox system" was inconsistent with its Patents Act and that India had not submitted evidence rebutting that presumption. This use of a "presumption" was contrary to established principles of international law.38
- The practice of GATT 1947 panels had been consistent with the principle for the settlement of disputes by international tribunals according to which the conformity of the internal law of each state with its treaty obligations must be presumed and a party whose internal law was claimed to be inconsistent with its treaty obligations must therefore be given the benefit of the doubt regarding the interpretation of its internal law.39
- In the previous case, these principles had not been observed. Before the previous Panel, the United States had pointed to certain provisions of the Patents Act that were capable of different interpretations. The Panel and the Appellate Body had considered that the United States had, by adducing this evidence, created a "presumption" that India's mailbox system was inconsistent with its Patents Act. After an "examination" of the Patents Act, the Appellate Body had concluded that India's "explanations" had not persuaded it that mailbox applications would survive legal challenge under the Patents Act.
- It was an established principle of law, confirmed repeatedly by the Appellate Body, that a party claiming a violation of a provision of the WTO Agreement by another Member must assert and prove its claim and that the defendant enjoyed the benefit of the doubt when the interpretation of its domestic law was at issue. The task of the EC was consequently to prove that India's mailbox system was inconsistent with Indian law and that a mailbox application could therefore be successfully challenged in an Indian court. It was not sufficient for it to submit evidence merely casting doubt on that consistency in the minds of the Panelists. The Appellate Body had failed to apply that principle of law in the previous case. India suggested that the Panel be guided by the principles enunciated by the Appellate Body and not by the failure to apply them in a single instance.
- In the previous case, the Panel had ruled, on the basis of its own interpretation of the provisions of the Patents Act, that the mailbox system was inconsistent with mandatory requirements of the Patents Act40 or "apparently" inconsistent.41 It did not examine whether India, in applying its Patents Act, had established a mailbox system, but whether the Patents Act permitted it to do so. And the Panel did not determine whether a competitor had, in fact, obtained a judicial order to reject a mailbox application but concluded on the basis of its own assessment of Indian law that an Indian court hypothetically might do so, assuming that a competitor mounted a legal challenge to India’s mailbox in a competent Indian court. However, the Panel failed to note that basic principles of standing and ripeness42 applicable in Indian law stood in the way of such a court order.43
- The Appellate Body had not acted in accordance with the principle it had itself enunciated. Rather than examining how India had applied its law on the basis of the interpretation of that law by the Indian authorities, the Appellate Body had based its conclusions on its own interpretation of municipal law. It had ruled as follows:
"Section 5(a) of the Patents Act provides that substances 'intended for use, or capable of being used, as food or as medicine or drug' are not patentable. 'When the complete specification has been led in respect of an application for a patent', section 12(1) requires the Controller to refer that application and that specification to an examiner. Moreover, section 15(2) of the Patents Act states that the Controller 'shall refuse' an application in respect of a substance that is not patentable. We agree with the Panel that these provisions of the Patents Act are mandatory.44 And, like the Panel, we are not persuaded that India's 'administrative instructions' would prevail over the contradictory mandatory provisions of the Patents Act.45 We note also that, in issuing these 'administrative instructions', the Government of India did not avail itself of the provisions of section 159 of the Patents Act, which allows the Central Government 'to make rules for carrying out the provisions of [the] Act' or section 160 of the Patents Act, which requires that such rules be laid before each House of the Indian Parliament. We are told by India that such rule making was not required for the 'administrative instructions' at issue here. But this, too, seems to be inconsistent with the mandatory provisions of the Patents Act.
"We are not persuaded by India's explanation of these seeming contradictions. Accordingly, we are not persuaded that India's 'administrative instructions' would survive a legal challenge under the Patents Act. And, consequently, we are not persuaded that India's 'administrative instructions' provide a sound legal basis to preserve novelty of inventions and priority of applications as of the relevant filing and priority dates."46
- The rulings of the Appellate Body were contradictory. It first confirmed that an international tribunal could not interpret domestic law but could only examine the application of that law. This should have led the Appellate Body to examine such questions as: has India established a mailbox system; have mailbox applications been challenged in Indian courts; has any Indian court declared a mailbox application invalid? The fact that India had received 1924 mailbox applications between 1 January 1995 and 15 October 1997, not one of which had been rejected or invalidated, should have been central to the Appellate Body's considerations. Instead, the Appellate Body had interpreted Indian law and examined the questions: is the mailbox system consistent with India's Patents Act; can mailbox applications be challenged under Indian law in Indian courts; can mailbox applications be declared invalid under Indian law? The central finding of the Appellate Body on which it based its conclusion was: "we are not persuaded that India's "administrative instructions" would survive a legal challenge under the Patents Act". It was thus on the basis of its own interpretation of the Patents Act, rather than an assessment of the application of that Act, that the Appellate Body had ruled against India.
- The Appellate Body had justified this seeming contradiction as follows:
"It is clear that an examination of the relevant aspects of Indian municipal law and, in particular, the relevant provisions of the Patents Act as they relate to the 'administrative instructions', is essential to determining whether India has complied with its obligations under Article 70.8(a).... To say that the Panel should have done otherwise would be to say that only India can assess whether Indian law is consistent with India's obligations under the WTO Agreement. This, clearly, cannot be so."47
These formulations disguised the Appellate Body's approach to the municipal law of India and misrepresented the issue that had been before the Appellate Body. India had not claimed or implied that only India "can assess whether Indian law is consistent with India's obligations under the WTO Agreement". India did assert, however, that only its courts could determine whether the application of the Patents Act by the Government of India was consistent with Indian law and that the role of WTO panels and the Appellate Body was to judge whether India's application of its law was consistent with its WTO obligations. This did not mean that Members wishing to challenge the implementation of WTO obligations under domestic law were defenseless. It merely meant that it was not sufficient for them to base their claims merely on one possible interpretation of the domestic law, as the EC was doing in this case. If the parties to a dispute advanced different interpretations of domestic law and the interpretation of that law had not been settled by the domestic courts, the party whose law was at issue should be given the benefit of the doubt. It was in the interest of all Members of the WTO that this principle be applied. Each Member's economic interests were adequately protected if panels, whenever the interpretation of the domestic law had not yet been settled by municipal courts, examined how the defendant's domestic authorities actually applied the defendant's domestic law to products, services and service suppliers or holders of intellectual property rights from the complainant. No Member would wish to be told by a panel or the Appellate Body, as India had been told in the previous case, that it was violating its own domestic law.
- The Patents Act required the Controller to refer patent applications to an examiner; it did not, however, specify the time‑frame within which the Controller must do so. The Indian authorities were of the view that, given their broad powers under the Indian Constitution in the field of intellectual property and in the implementation of international treaties, they could use the resulting discretion to postpone the referral of applications for pharmaceutical and agricultural chemical products until 2005 because such products would in any case be patentable only then.
- The Indian authorities were further of the view that the principle of ripeness consistently applied by Indian courts prevented any legal challenge to mailbox applications because these conferred only a potential, future right.48 The Appellate Body, in an incomplete assessment of that legal situation, concluded that it was not convinced that the Indian authorities were acting in accordance with Indian law. The Appellate Body conducted what it called "an examination of the relevant aspects of Indian municipal law" and declared that it was not persuaded by the "explanations" given by India. In fact, the "examination" of Indian law had been an interpretation of that law and the "explanations" rejected had been the interpretations of that law by the Indian authorities.
- Section 6 of the Patents Act permitted the receipt of any application for a patent that related to an "invention". Section 2(1)(j) of the Patents Act defined an invention to include "any new and useful substance produced by manufacture" and "any new and useful improvement of them". This definition was broad enough to include new pharmaceutical and agricultural chemical products.
- Section 3 of the Patents Act set forth certain categories of inventions or alleged inventions which were not considered inventions within the meaning of the Act. Since pharmaceutical and agricultural chemical products per se were not excluded under Section 3, they were "inventions" in respect of which applications might be received under Section 6 of the Act.
- Section 5 of the Act recognized that there might be an invention in relation to a pharmaceutical or agricultural chemical product, but provided that such an invention was patentable only with respect to the process by which it was made and not with respect to the product itself. Therefore, Section 5 of the Patents Act only prohibited the grant of a patent for such a product, not the receipt of an application for a patent for such a product.
- Accordingly, Section 6 of the Patents Act as interpreted and applied administratively did provide a "means" for the receipt of applications for product patents for pharmaceuticals and agricultural chemicals. These applications were being identified and placed in a separate category by the Patent Offices and were not being examined. They were also being allotted a filing date, a serial number and a title, which would entitle them to priority when pharmaceutical and agricultural chemical product patents were finally granted. Further, they were not being rejected because they were not being referred by the Controller of Patents to examiners for examination under Section 12(1) of the Patents Act. This was because, following interdepartmental consultations, the Indian executive authorities had issued administrative instructions to the Controller of Patents not to refer mailbox applications for examination by an examiner until the Patents Act was amended to provide for product patents for pharmaceutical and agricultural chemical products.
- Contrary to the assertions of the Panel and the Appellate Body in the previous case, there was no conflict between the above exercise of executive power under Article 73 of India's Constitution and Section 12(1) of the Patents Act. Although Section 12(1) mandated that the Controller must refer all applications to an examiner, it did not specify any time for doing so. In light of this statutory silence, the executive power of the Government of India extended to specifying a reasonable time for referring applications for examination in order to fulfil India's obligations under Article 70.8(a). Therefore, there was no conflict between the administrative instructions in question and Section 12(1) of the Patents Act. This followed from the fundamental principle of statutory interpretation in Indian domestic law that a statutory provision must be interpreted consistently with India’s international obligations, whether under customary international law or an international treaty or convention. In this context, Justice G.P. Singh, one of the leading authorities on the principles of statutory interpretation in India and a former Chief Justice of the High Court of the State of Madhya Pradesh, had stated as follows49:
"If the terms of the legislation are not clear... and are reasonably capable of more than one meaning, the treaty itself becomes relevant, for there is a prima facie presumption that Parliament does not intend to act in breach of international law, including therein a specific treaty obligation; and if one of the meanings which can reasonably be ascribed to the legislation is consonant with the treaty obligations and another or others are not, the meaning which is consonant is to be preferred.50 Article 19 of the Universal Declaration of Human Rights which declares that everyone has a right to freedom of opinion and expression 'regardless of frontiers' was referred to in holding that the right of freedom of speech and expression guaranteed by Article 19(1)(a) of the Constitution is not restricted to the territory of India.51 And, Article 11 of the International Covenant on Civil and Political Rights, which provides that no one shall be imprisoned merely on the ground of inability to fulfil a contractual obligation has greatly influenced the court in giving a limited meaning to section 51 and order 21 Rule 37 of the Code of Civil Procedure.52 If States are parties to a convention which permits a foreigner when sentenced to imprisonment for a crime to be transferred to the State of which he is the citizen for serving out the sentence on humanitarian grounds, it may not be proper to detain him under a preventive detention law instead of prosecuting him for a criminal offence as that will deprive him of the beneficial provisions of the convention of being transferred to his home State."53
This principle of statutory interpretation held good even if the statute in question pre‑existed the treaty obligation.54
- Under Indian law, there was also another independent principle of statutory interpretation, namely that, even where a statutory provision specified a time for performing a statutory duty, the time specified was only directory and not mandatory. Thus, Justice Singh noted that:
"... [W]here a public officer is directed by a statute to perform a duty within a specified time, the cases establish that provisions as to time are only directory... A provision fixing a time, within which a public officer or authority has to act in performance of a duty, generally means that the statute considers it reasonable for the officer or authority to act within the said period."55
Therefore, India submitted that the time within which the Controller of Patents had been instructed to refer the mailbox applications to an examiner ‑ i.e., only after amendment of the Patents Act to provide for product patents for pharmaceutical and agricultural chemicals ‑ was reasonable in light of India's obligation under Article 70.8(a) to establish a mailbox pending the introduction of patent protection for these products.
- Further, Article 73 of India's Constitution conferred upon the Government of India executive power of the widest latitude over all subjects in which Parliament had legislative competence. This power extended to filling lacuna administratively in statutes, rules or regulations.56 The executive power of the Government of India to enter into, and implement treaties, was derived from the legislative power of the Union of India incorporated in Articles 246 and 253 read with Entry 14 of List I of the Seventh Schedule of the Indian Constitution.57 The Government of India also had executive power over "patents, inventions and designs", which fell under Entry 49 of List I. Based on these powers, the Government of India had decided to store applications for pharmaceutical and agricultural chemical products separately for future action under Article 70.8 and 70.9 of the TRIPS Agreement and to instruct the Controller of Patents not to refer them to an examiner until 2005.
- In addition, the Government of India had also bound itself to observe its obligations under Article 70.8 by virtue of a statement in Parliament. On 2 August 1996, the Government had stated in Parliament as follows:
"The Patent Offices have received 893 patent applications in the field of drug or medicine from Indian or foreign companies/institutions until 15 July 1996. The applications for patents will be taken up for examination after 1 January 2005, as per the World Trade Organization (WTO) Agreement which came into force on 1 January 1995."
Such statements were considered binding upon the Government under the Indian Constitution.
- Contrary to what the Panel had found in the earlier dispute (WT/DS50) on the basis of the limited evidence submitted to it, an Indian court would never examine a request by a competitor to force the Controller of Patents to refer a mailbox application to an examiner for examination. In fact, such a request could not be entertained because basic principles of standing and ripeness dictated the rejection of challenges to contingent, future rights such as those of mailbox applicants to receive patents in the year 2005.59 A mailbox application gave an applicant only a right to receive a patent for a pharmaceutical or agricultural chemical product in the future when India would provide for the grant of such patents under its Patents Act. Further, the applicant must satisfy the Patent Office that the applicable criteria for the grant of a patent under the Patents Act were met. Thus, a mailbox application gave an applicant at best a contingent, future right, which ‑ under the principles of standing and ripeness applied in India as in other common law countries ‑ could never be successfully challenged in court. This was confirmed by the fact that none of the mailbox applications which India had received and published in the Gazette of India had been challenged in court.
- The EC had not demonstrated that mailbox applications would not survive legal challenge under the Patents Act.
- Interpretation of domestic laws would inevitably be uncertain until a competent court had spoken. How could a Member in the meantime demonstrate that its authorities were acting on the basis of the correct interpretation? Since mailbox applications could not be challenged in Indian courts, how could India under these circumstances ever rebut a presumption that mailbox applications would not survive challenge in Indian courts?
- Between 1 January 1995 and 31 January 1998, India had received 2,212mailbox applications, not one of which had been rejected or invalidated. All mailbox applications ‑ including their serial numbers, dates, name of applicant and the titles ‑ were advertised in the Gazette of India. This advertisement was made irrespective of whether the product for which the patent was sought was patentable. There was nothing in Indian law that prevented the Patent Office from receiving and storing the applications for future action under Article 70.8 of the TRIPS Agreement, and the record of the applications advertised in the Gazette of India could obviously not be erased. The registration, dating, storage and publication of these applications could therefore not be litigated out of existence. There was consequently nothing that could possibly prevent India, when patents were due in accordance with subparagraphs (b) and (c) of Article 70.8, from deciding to grant such patents on the basis of the applications currently submitted and determine the novelty and priority of the inventions in accordance with the date of these applications.
- India basically claimed that Section 5 of its Patents Act prohibited the grant of a patent for pharmaceutical or agricultural chemical products without however prohibiting the filing of an application for such products. India furthermore claimed that, therefore, the filing of an application for such products was possible under Section 6 and, thus, constituted a sufficient "means" for the filing of an application under Article 70.8(a) of the TRIPS Agreement. These arguments were not new, since these provisions of the Indian Patents Act had been submitted to the Panel in the earlier dispute and had not been amended since. They were not relevant, because Section 15(2) of the Indian Patents Act, which was of mandatory nature, instructed the Controller to refuse an application for an invention that was not patentable under the Act. The possibility of the filing of an application that must be refused under a mandatory provision of the domestic legislation of a WTO Member did not constitute an adequate "means" for the filing of an application under Article 70.8(a) of the TRIPS Agreement.
- India moreover claimed that under Section 12(1) of the Indian Patents Act, no time was specified for the referral of an application to an examiner. Therefore, in India's view, there was no conflict between the administrative instructions of the Indian executive authorities to the Controller of Patents and Section 12(1) of the Patents Act. This question had been extensively discussed in the earlier dispute, in particular in paragraph 7.35 of the Panel report in the earlier dispute and in paragraph 69 of the Appellate Body report in that dispute. The EC believed that everything necessary had already been said with regard to this question. Given this discussion, the EC could not agree with India that the terms of its Patents Act were unclear as to the action to be taken by the Controller once an application had been filed or with regard to the timing of such action. Under these circumstances, the EC could not see the relevance of the statement of Justice G.P. Singh quoted by India in the context of the present dispute. The same went with regard to the argument that statutory time‑limits were not mandatory since it was in apparent contradiction with the terms of the Indian Patents Act, which did not allow any delay in the referral of an application to an examiner. In other words, Section 12(1) of the Indian Patents Act simply did not contain a time‑limit, since it provided for immediate action; the section started with the word "when", which did not provide for any delay. Again, the EC failed to see a lacuna that could be filled in by administrative instructions.
- The statement made by the Indian Government before the Indian Parliament on 2 August 1996 had already been mentioned in the earlier dispute. Whatever declarations the Indian Government might have made before the Parliament or elsewhere, they did not change the fact that the Indian Patents Act contained in Section 12(1) a mandatory provision requiring the Controller to refer any application to an examiner "[w]hen the complete specification has been filed in respect of an application for a patent". Moreover, as already stated before, Section 15(2) of the Indian Patents Act required the Controller to refuse an application if it appeared to him that the invention claimed in the specification was not patentable under the Act. Both provisions contained the auxiliary "shall", which did not allow the exercise of any discretion by the Controller.
- It was obvious that the Indian authorities themselves had come to the conclusion that the existing Patents Act of 1970 did not suffice to bring India's domestic legislation into conformity with its obligations under Article 70.8(a) of the TRIPS Agreement when they had decided at the end of 1994 to promulgate the Patents (Amendment) Ordinance, 1994, in order to remedy the apparent shortcomings of the existing Patents Act of 1970. For the same reason, India had submitted a Bill to its Parliament aiming at an amendment of the Patents Act of 1970. India’s assertion in the present dispute that the Patents Act of 1970 was in compliance with its obligations under Article 70.8 of the TRIPS Agreement, although the proposed amendment had never been enacted, was simply not credible.
- India had also referred to the principles of standing and ripeness which would prevent a challenge in India's courts with a view to force the Controller of Patents to refer a mailbox application to an examiner for examination. Even if this were correct, this did not exclude the possibility of other forms of private disputes concerning the novelty and the priority of a mailbox filing. In particular, the EC could not see any reason why litigation between two or more applicants about the time or the formalities of a filing under Article 70.8(a) of the TRIPS Agreement could not lead to litigation before an Indian court at any time before the year 2005. A dispute on the relevant filing date could, in particular, arise before the year 2005 as a preliminary issue in the context of a court procedure regarding the granting of an exclusive marketing right under Article 70.9 of the TRIPS Agreement. In such court procedures, the fact that there was presently no legal basis in India for the filing of a mailbox application made it impossible, or at least unnecessarily difficult, for an applicant to defend his position in the Indian courts. The fact that so far no mailbox application had been challenged in the Indian courts was in this context irrelevant, since it might be based precisely on the fragile status of such applications in India. Moreover, India did not even contest that such disputes could arise after the year 2005 and would then have to be judged under the law applicable at the time of filing. In other words, the legal uncertainty created by the present Indian legal situation would be carried forward into the future.
- According to the consistent jurisprudence of international tribunals, including the Appellate Body, Indian law could not be interpreted by this Panel, but must be treated as a fact. It was therefore not relevant for this Panel whether India had acted consistently with its own laws. The Panel was bound to presume that this was so because only Indian courts could decide that question. What was relevant for this Panel was whether the measures which India had taken were consistent with the TRIPS Agreement, i.e. whether India had applied its laws in such a manner as to provide a means of filing mailbox applications.
- The EC did not contest that India received, published and stored mailbox applications and that all such applications had remained unchallenged. Moreover, the EC confirmed that about one thousand EC companies had made use of India's mailbox system. The EC thus did not deny that India had in fact provided a means of filing patent applications for pharmaceutical and agricultural chemical products.
- The EC's only claim was that this means of filing was inconsistent with Indian law and that, because of the resulting legal uncertainty, the means of filing was also inconsistent with India's obligation under Article 70.8 of the TRIPS Agreement. It was thus perfectly clear from the EC's argumentation that the Panel could make the requested ruling on the alleged inconsistency with the TRIPS Agreement only if it first found the mailbox system to be inconsistent with Indian law. That finding, however, this Panel was not authorized to make.
Article 70.9 of the TRIPS Agreement
The terms of Article 70.9
- According to Article 70.9, exclusive marketing rights must be granted by India to a pharmaceutical or agricultural chemical product for which a patent application had been made in accordance with Article 70.8(a) only after the following events had occurred:
(a) a patent application had been filed in respect of that product in another Member of the WTO after 1 January 1995;
(b) the other Member of the WTO had granted the patent;
(c) the other Member had approved the marketing of the product;
(d) India had approved the marketing of the product.
- There was nothing in the text of Article 70.9 that set out the obligation to make a "system" for the grant of exclusive marketing rights generally available in the domestic law before the events listed in this provision had occurred. The terms of Article 70.9 stipulated that exclusive marketing rights "shall be granted" to specified products. The Panel, however, had interpreted this provision as if it read: "the competent authorities of the Members shall have the authority to grant exclusive marketing rights", i.e. whether or not such rights had to be granted.
- India had not denied the grant of exclusive marketing rights to any product meeting the above conditions. The Panel had faced the same fact in the earlier dispute but had nevertheless concluded that India did not comply with its obligations under Article 70.9 of the TRIPS Agreement because it had failed to establish under its domestic law "a system" that enabled the executive branch of India to grant exclusive marketing rights as of the entry into force of the WTO Agreement.60
- That the previous panel had expanded the meaning of Article 70.9 beyond its terms became obvious when the text of Article 70.9 was read in its context. There were many provisions in the TRIPS Agreement which explicitly obliged Members to change their domestic law to permit their authorities to take certain action in favour of interested parties. Thus, according to Articles 42‑48 of the TRIPS Agreement, the judicial authorities of Members "shall have the authority" to grant certain rights. Article 51 obliged Members to "adopt procedures" to enable right holders to prevent the release of counterfeited or pirated products from customs. Article 39.2 required Members to give natural and legal persons "the possibility of preventing" the disclosure of information. According to Article 25.1, "Members shall provide for the protection" of certain industrial designs and Article 22.2 obliged Members to "provide the legal means for interested parties to prevent" certain misuses of geographical indications. The terms of all these provisions of the TRIPS Agreement clearly created an obligation to empower the executive authorities to take specified actions before the need to take such actions actually arose. The question for the Panel therefore was: if the drafters had intended Article 70.9 to entail the obligation to create in the domestic law the legal authority for the grant of exclusive marketing rights, why had they not repeated the wording used in one of the numerous provisions that explicitly provided for the creation of the authority to grant rights to interested parties?
- A comparison of the terms of Article 70.9 with those of Article 27 according to which "patents shall be available" for inventions was also revealing. The ordinary meaning of "available" was "obtainable". Article 27 thus clearly created the obligation to make patents obtainable under domestic law before any application for a patent must be accepted. Article 70.9, by contrast, merely stipulated that "exclusive marketing rights shall be granted" to specific products after the occurrence of specified events. There was nothing in these terms that suggested that such rights must be obtainable in the domestic law.
- The Panel had examined Article 70.9 only in the context of Article 27, not any of the other provisions cited above. The relevance of the distinction between "shall be available" and "shall be granted" in the wording of these related provisions was tersely dismissed by the Panel as follows: "The implementation of Article 70.9 requires a system under which applications for exclusive marketing rights can be made"61 because "an exclusive marketing right cannot be 'granted' in a specific case unless it is 'available' in the first place".62
- The Panel was of course factually correct when pointing out that, after the events set out in Article 70.9 had occurred with respect to a particular product, the distinction between "shall be available" and "shall be granted" lost its practical relevance because a change in domestic law might then in any case be required. However, this begged the question that was before the Panel, namely: does a Member have to make exclusive marketing rights available in its domestic legislation before these events have occurred? It was simply not logical to conclude that exclusive marketing rights must be made available in the domestic legislation before these events because such availability was in any case necessary once the events had occurred.
- There were numerous transitional provisions throughout the various WTO agreements that required action at some point in the future, either when a date had arrived or an event had occurred. Tariff concessions must be reduced in stages.63 Import restrictions on textiles must be removed after a ten‑year transitional period.64 Developing countries must phase out export subsidies for any product that had reached a certain share of world trade.65 These were all obligations that were, just like those under Article 70.8 and 70.9 of the TRIPS Agreement, contingent upon a date or event. If the logic applied by the Panel to Article 70.9 was correct, then all the transitional provisions under the WTO Agreement imposing an obligation as from a future date or event would have to be interpreted to comprise the additional obligation to change the domestic law in anticipation of the future date or event. This was, however, obviously not intended by any of these transitional provisions.
- The Panel, though repeatedly urged to do so by India, had not examined the context of Article 70.9 fully. No reference was made in the Panel's findings to, for instance, Articles 42‑48 of the TRIPS Agreement, according to which the judicial authorities of Members "shall have the authority" to grant certain rights and which thus clearly expressed the notion that the Panel had discovered in Article 70.9. The Panel's failure to examine this central interpretative issue was impermissible. The question therefore remained: if the drafters had intended Article 70.9 to entail the obligation to create in the domestic law the legal authority for the grant of exclusive marketing rights, why had they not repeated the wording used in one of the numerous provisions that explicitly provided for the creation of authority to grant rights?
Object and Purpose
- The Panel was of the view that the purpose of Article 70.9 was to oblige the developing countries concerned to establish as of the entry into force of the WTO Agreement in their domestic law the authority to grant exclusive marketing rights. However, this had not been, and could not possibly have been, the intention of the drafters. The products covered by Article 70.9 of the TRIPS Agreement were mainly pharmaceutical and agricultural chemical products. It took considerable time ‑ often more than ten years ‑ to obtain a patent for such products and the necessary marketing approvals, first in the country of origin and then in the country in which an exclusive marketing right was sought. There was therefore no need to require immediate legislative action and there could therefore not have been cause for urgency in the minds of the developed countries.
- Moreover, Article 70.9 was part of the transitional arrangements of the TRIPS Agreement whose very function was to enable developing countries to postpone legislative changes. Patent protection for pharmaceutical and agricultural chemical products was the most sensitive TRIPS issue in many developing countries. The Panel's interpretation of Article 70.9 had the absurd consequence that the transitional arrangements would allow developing countries to postpone legislative changes in all fields of technology except in the most sensitive ones. Neither developed countries nor developing countries could, therefore, realistically be presumed to have sought an immediate change of domestic law to provide for exclusive marketing rights when negotiating the text of Article 70.9. When the drafters had agreed to stipulate that exclusive marketing rights "shall be granted" after certain events had occurred rather than stipulating that they "shall be made available" immediately, they had clearly meant that legal action ensuring the grant of such rights would be required only in respect of products that had completed the five time‑consuming procedural steps listed in Article 70.9.
The concept of predictability of conditions of competition did not justify an interpretation of Article 70.9 according to which there must be a mechanism in place to provide for the grant of exclusive marketing rights before such rights were due
- The Panel claimed that it had interpreted the TRIPS Agreement in accordance with the customary rules of treaty interpretation.66 In fact, however, the Panel had neither based its interpretation on the terms of Article 70.9, nor had it taken into account the context and the transitional nature andpurpose of this provision. Instead, it had based its expansive approach essentially on the idea that the function of Article 70.9 was to create predictability as to the future conditions of competition. The Panel had expressed this idea as follows:
"The protection of legitimate expectations is central to creating security and predictability in the multilateral trading system... When interpreting the TRIPS Agreement, the legitimate expectations of WTO Members concerning the TRIPS Agreement must be taken into account, as well as standards of interpretation developed in past panel reports in the GATT framework... laying down the principle of the protection of conditions of competition from multilateral trade agreements."67
- In justifying its broad interpretation of Article 70.9, the Panel had referred to its findings on Article 70.8(a) where it had found that the achievement of "security and predictability... is one of the central goals of the dispute settlement mechanism" and that the function of the TRIPS Agreement was to create "the predictability needed to plan future trade". If a system for the grant of exclusive marketing rights was non-existent, so the Panel had argued, there was a lack of legal security that was likely to discourage applications for exclusive marketing rights.68 The notion of predictability of conditions of competition had thus been the logical foundation of the Panel's decision to turn an obligation which, by its terms, only required actions after certain events had occurred into an obligation to take action immediately.
- In examining India's appeal from the report of the Panel, the Appellate Body had rejected the Panel's reliance on the notion of conditions of competition as a means to expand the obligations under the TRIPS Agreement.69 It had ruled:
"In the context of violation complaints made under Article XXIII:1(a), it is true that panels examining claims under Articles III and XI of the GATT have frequently stated that the purpose of these articles is to protect the expectations of Members concerning the competitive relationship between imported and domestic products, as opposed to expectations concerning trade volumes. However, this statement is often made after a panel has found a violation of, for example, Article III or Article XI that establishes a prima facie case of nullification or impairment.70 At that point in its reasoning, the panel is examining whether the defending party has been able to rebut the charge of nullification or impairment. It is in this context that panels have referred to the expectations of Members concerning the conditions of competition.
"In addition to relying on the GATT acquis, the Panel relies also on the customary rules of interpretation of public international law as a basis for the interpretative principle it offers for the TRIPS Agreement. Specifically, the Panel relies on Article 31 of the Vienna Convention, which provides in part:
""1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."
"With this customary rule of interpretation in mind, the Panel stated that:
""In our view, good faith interpretation requires the protection of legitimate expectations derived from the protection of intellectual property rights provided for in the Agreement."71
"The Panel misapplies Article 31 of the Vienna Convention. The Panel misunderstands the concept of legitimate expectations in the context of the customary rules of interpretation of public international law. The legitimate expectations of the parties to a treaty are reflected in the language of the treaty itself. The duty of a treaty interpreter is to examine the words of the treaty to determine the intentions of the parties. This should be done in accordance with the principles of treaty interpretation set out in Article 31 of the Vienna Convention. But these principles of interpretation neither require nor condone the imputation into a treaty of words that are not there or the importation into a treaty of concepts that were not intended.
"In United States ‑ Standards for Reformulated and Conventional Gasoline72, we set out the proper approach to be applied in interpreting the WTO Agreement in accordance with the rules in Article 31 of the Vienna Convention. These rules must be respected and applied in interpreting the TRIPS Agreement or any other covered agreement. The Panel in this case has created its own interpretative principle, which is consistent with neither the customary rules of interpretation of public international law nor established GATT/WTO practice. Both panels and the Appellate Body must be guided by the rules of treaty interpretation set out in the Vienna Convention, and must not add to or diminish rights and obligations provided in the WTO Agreement."73
The Appellate Body had failed to reverse the interpretation of Article 70.9 by the Panel even though that interpretation had been based on the notion of predictability of conditions of competition which the Appellate Body had rejected as a basis for interpreting the TRIPS Agreement
- As to Article 70.9 of the TRIPS Agreement, India had submitted the following legal issues to the Appellate Body in accordance with Article 17.6 of the DSU:
"India respectfully requests the Appellate Body to address the following issues:
"‑ Is the interpretation of Article 70.9 made by the Panel consistent with the ordinary meaning to be given to the terms of Article 70.9 in their context, in particular the context of other provisions which ‑ unlike Article 70.9 ‑ explicitly provide for the creation of the authority to grant rights, such as Articles 42‑48?
"‑ If so, can it be reasonably assumed that the object and purpose of Article 70.9 was the creation of an obligation to provide for the availability of exclusive marketing rights in the domestic law as from the date of entry into force of the WTO Agreement given the fact that it can take ten years or more to complete the procedural steps required to obtain an exclusive marketing right and that Article 70.9 forms part of a series of transitional provisions designed to enable developing countries to postpone legislative actions?
"‑ If not, does the principle of predictability of competitive relationships justify the Panel’s interpretation of Article 70.9?
"‑ If so, does the principle of predictability of competitive relationships imply that all transitional obligations applicable as from a future date or event entail the immediate obligation to empower the executive authority to meet those obligations? If not, what justifies the creation of this obligation only in respect of Article 70.9?"
- Article 17.12 of the DSU stipulated that "the Appellate Body shall address each of the issues raised in accordance with paragraph 6 during the appellate proceeding". The Appellate Body had carried out this task by making the following findings:
"India's arguments must be examined in the light of Article XVI:4 of the WTO Agreement, which requires that:
""Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements."
"Moreover, India acknowledged before the Panel and in this appeal that, under Indian law, it is necessary to enact legislation in order to grant exclusive marketing rights in compliance with the provisions of Article 70.9.
"Given India's admissions that legislation is necessary in order to grant exclusive marketing rights in compliance with Article 70.9 and that it does not currently have such legislation, the issue for us to consider in this appeal is whether a failure to have in place a mechanism ready for the grant of exclusive marketing rights, effective as from the date of entry into force of the WTO Agreement, constitutes a violation of India's obligations under Article 70.9 of the TRIPS Agreement.
"By its terms, Article 70.9 applies only in situations where a product patent application is filed under Article 70.8(a). Like Article 70.8(a), Article 70.9 applies 'notwithstanding the provisions of Part VI'. Article 70.9 specifically refers to Article 70.8(a), and they operate in tandem to provide a package of rights and obligations that apply during the transitional periods contemplated in Article 65. It is obvious, therefore, that both Article 70.8(a) and Article 70.9 are intended to apply as from the date of entry into force of the WTO Agreement.
"India has an obligation to implement the provisions of Article 70.9 of the TRIPS Agreement effective as from the date of entry into force of the WTO Agreement, that is, 1 January 1995. India concedes that legislation is needed to implement this obligation. India has not enacted such legislation. To give meaning and effect to the rights and obligations under Article 70.9 of the TRIPS Agreement, such legislation should have been in effect since 1 January 1995."
- The Appellate Body's ruling did not contain a single reference to India's extensive argumentation based on the text, context and objective of Article 70.9. Having rejected the notion of predictability of conditions of competition as a basis for expanding the obligations under the TRIPS Agreement beyond its terms, it would have been logical for the Appellate Body to reverse the Panel's ruling on Article 70.9 of the TRIPS Agreement in the previous case because it was founded on that very notion. Instead, the Appellate Body had made findings that were either unexplained or concerned matters which were not in dispute, thereby denying India its procedural rights under Article 17.12 of the DSU.
- The Appellate Body did not explain how Article XVI:4 of the WTO Agreement could determine the scope of the obligations under Article 70.9 of the TRIPS Agreement. Article XVI:4 merely stated how the obligations under the WTO agreements were to be implemented and was therefore relevant only once it had been determined that there was an obligation under one of the WTO agreements that required implementation. The issue before the Appellate Body had been whether there was such an obligation. India had pointed out that there were numerous transitional provisions throughout the various WTO agreements that required action at some point in the future, either when a date had arrived or an event had occurred. If Article XVI:4 of the WTO Agreement was relevant for the interpretation of Article 70.9 of the TRIPS Agreement, then all transitional provisions under the WTO Agreement imposing an obligation as from a future date or event would have to be interpreted to comprise the additional obligation to change the domestic law in anticipation of the future date or event. This was however obviously not intended by any of these transitional provisions. India had specifically requested the Appellate Body to address this issue but the Appellate Body had failed to do so.
- Contrary to what the Appellate Body suggested, the parties to the previous dispute agreed that Article 70.9 entered into effect on the date of entry into force of the WTO Agreement. However, India had claimed that Article 70.9 set out an obligation to accord exclusive marketing rights that was triggered by events which had not yet occurred. At issue before the Appellate Body had thus been the content of Article 70.9, not the date of its entry into force. When the Appellate Body wrote that "India has an obligation to implement the provisions of Article 70.9 of the TRIPS Agreement effective as from the date of entry into force of the WTO Agreement, that is, 1 January 1995" it turned the issue of content (on which the parties disagreed) into a question of entry into force (on which they agreed).
- From the standpoint of developing country Members, it was distressing that the Appellate Body had not considered it necessary to deal with India's argument that the Panel's interpretation of Article 70.9 had the consequence that the transitional arrangements would allow developing countries to postpone legislative changes in all fields of technology except in the most sensitive ones. It was also regrettable that the Appellate Body had not taken into account that the Panel's ruling ignored the implicit option available in the TRIPS Agreement to developing countries to cut short the transitional period, if they so chose, and provide for product patents even before the end of the transitional period instead of having to accept the obligation of providing exclusive marketing rights.
"Both panels and the Appellate Body must be guided by the rules of treaty interpretation set out in the Vienna Convention, and must not add to or diminish rights and obligations provided in the WTO Agreement.
"This conclusion is dictated by two separate and very specific provisions of the DSU. Article 3.2 of the DSU provides that the dispute settlement system of the WTO:
""... serves to preserve the rights and obligations of the Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements."
"Furthermore, Article 19.2 of the DSU provides:
""In accordance with paragraph 2 of Article 3, in their findings and recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided in the covered agreements."
"These provisions speak for themselves. Unquestionably, both panels and the Appellate Body are bound by them."74
The second ruling of the Appellate Body that the Panel should take into account was the following:
"We do not believe that the CONTRACTING PARTIES, in deciding to adopt a panel report, intended that their decision would constitute a definitive interpretation of the relevant provisions of the GATT 1947. Nor do we believe that this is contemplated under GATT 1994. There is a specific cause for this conclusion in the WTO Agreement. Article IX:2 of the WTO Agreement provides: "The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements".... The fact that such an "exclusive" authority in interpreting the treaty has been established so specifically in the WTO Agreement is reason enough to conclude that such authority does not exist by implication or by inadvertence elsewhere."75
It followed from the above that the Panel was strictly bound by the principles of interpretation referred to in Article 3.2 of the DSU, but not by the rulings of panels and the Appellate Body in a single instance and therefore had no option but to base its interpretation of Article 70.9 of the TRIPS Agreement exclusively on Article 31 of the Vienna Convention.
- India's debate on the implementation of Article 70.9 of the TRIPS Agreement was a replica of its arguments before the Panel and the Appellate Body in the earlier dispute (WT/DS50), as was apparent from the extensive quotations of portions of the Panel and Appellate Body reports in that dispute. The EC was unable to discover any new arguments in India’s discussion and therefore referred the Panel to its report and that of the Appellate Body in the earlier dispute. The EC did not believe that the arguments that India was submitting in this context added anything to the debate that had already taken place in the earlier dispute which was equally relevant for the present dispute. Furthermore, no reasonable doubt could exist that the filing date and the validity of the filing could be fundamental issues in the context of exclusive marketing rights granted under Article 70.9 of the TRIPS Agreement in a litigation before an Indian court at any time prior to the year 2005.
- As regards EC companies which were ready to apply for exclusive marketing rights in India, the EC provided to the Panel a copy of a fax, dated 28 April 1998, which it had received from Dr. Alan Hesketh, Manager, Global Intellectual Property, Glaxo Wellcome.76
Under Article 10.4 of the DSU, WTO Members were entitled to bring complaints regarding matters that had been the subject of a previous panel proceeding
- The text of Article 10.4 did not support India's argument that third parties must join an initial panel proceeding whenever possible. Article 10.4 specifically provided for the possibility of a second panel being established to examine a complaint based on a measure already examined by a previous panel. Article 10.4 referred to "third parties". By definition, a dispute involving a complaint by a third party would be a successive dispute. Under this provision, successive disputes should proceed in accordance with "normal dispute settlement procedures". Nothing in Article 10.4 implied that recourse to normal dispute settlement procedures was limited to third parties that had not been able to present their complaint jointly with the initial complainant.
- As India acknowledged in its first written submission, there might be many reasons why a WTO Member might not initially join a particular dispute settlement proceeding. Regardless of the reason, however, Article 10.4 of the DSU did not deny such a Member the right to resort to the dispute settlement process. In fact, the drafters of Article 10.4 had anticipated situations such as this - where a violation of a WTO agreement had already been established, but nullification or impairment of benefits accruing to a third party had not yet been established - and Article 10.4 was intended to address them. This was the sole purpose of this panel proceeding: to establish the nullification or impairment of benefits accruing to the EC.
- Article 9 of the DSU was entitled "Procedures for Multiple Complainants". Like Article 10.4, the text of Article 9 did not support the mandatory joinder rule suggested by India. Article 9 did not address potential complainants or whether there were any circumstances in which Members must join a dispute as a complainant. It only assumed that there would be situations with multiple complainants and provided procedures to govern such situations.
- There was no support in either the text or negotiating history of the DSU for India's argument that the EC's complaint should be dismissed because it had not been brought at the same time as the United States' complaint. India's interpretation had far-reaching consequences and could result in the denial to a WTO Member of its rights under Articles 10.4 and 22.2 of the DSU. Such a result must be avoided, in accordance with Articles 3.2 and 19.2 of the DSU, which provided that the recommendations or rulings of panels and the Appellate Body could not diminish the rights of WTO Members.
- For the purpose of clarifying the status of the present dispute, the Panel should issue a preliminary ruling rejecting India's request that the complaint of the European Communities and their member States be dismissed as untimely. The Panel should examine the pending complaint under normal dispute settlement procedures.
In examining the complaint brought by the EC, the Panel should apply the interpretation of Article 70.8 and 70.9 of the TRIPS Agreement of the Panel and the Appellate Body in the earlier case
- Under Article 10.4 of the DSU, the Panel should proceed in accordance with "normal dispute settlement procedures". Under normal procedures, it was not necessary for the Panel to approach the legal issues in this case without reference to the work in the earlier dispute. WTO panels could and should be guided by the legal interpretations developed in the context of previous panel proceedings. This was particularly important in a case such as the present one, in which precisely the same measures had recently been the subject of a separate panel proceeding. The relevance of this fact was supported by Article 10.4 of the DSU, which provided that a subsequent dispute regarding a measure should be referred to the "original panel" that had examined the measure. If the original panel proceedings had been essentially irrelevant to the subsequent panel proceedings, there would have been no reason to refer the successive dispute back to the original panel.
- India appeared to seek an entirely redundant proceeding. Despite India's obligation under Article 17.14 of the DSU to accept the Appellate Body's report in the earlier case unconditionally, India's submission gratuitously disparaged the work of the Appellate Body, calling the report "internally inconsistent", "contradictory", "distressing" and "regrettable". In its first written submission, India proceeded to re-argue many of the same points which it had made in the prior appellate proceeding and which the Appellate Body had rejected. India had reiterated these arguments in its criticism of the Appellate Body's report during the DSB meeting on 16 January 1998, when the report had been adopted. These same arguments had now reappeared again.
- India represented in its first written submission that it was presenting "new arguments and new facts" to the Panel and that it was not seeking "a further appeal" from the findings of the Appellate Body or "a rehearing of the previous case". These statements were refuted by the text of India's own submission. The basic arguments presented in the submission were not new and, indeed, much of the submission reiterated in hac verba the arguments that India had presented to the Appellate Body in the earlier case. For example, with respect to Article 70.8, pages 23-24 and 28-29 of India's first written submission to this Panel repeated, word-for-word, arguments set out in pages 10-12 and 13-14 of India's submission to the Appellate Body in the earlier case. Regarding Article 70.9, pages 36-39 also appeared to have been copied verbatim from India's appellate submission, pages 18-22. At the third party meeting, the United States added that, moreover, India did not argue that it had modified its patent régime since the Appellate Body's ruling and that, in that situation, the Panel should be guided by the Appellate Body's decision, not by allegedly new arguments about the same patent régime.
- India should not be permitted to reopen legal issues that had been conclusively determined by a panel and the Appellate Body. Such a result would invite repetitive litigation. Defendants that prevailed on some or all of the issues in a case could find themselves compelled to re-litigate those issues over and over again until they lost. Article 10.4 had been intended to prevent this scenario and reflected the desire of the drafters for finality in dispute settlement proceedings. The drafters had wanted to avoid giving complainants or defendants an incentive to re-litigate disputes to see if different panels would produce different results. If such "panel shopping" did produce different results, the effect on the dispute settlement system would be profoundly destabilizing.
- An important function of the WTO dispute settlement system was "to clarify the existing provisions of [covered] agreements in accordance with customary rules of interpretation of public international law".83 The Appellate Body had recently clarified the obligations of Article 70.8 and 70.9 of the TRIPS Agreement. It had not found India's arguments convincing the first time and the Panel should be guided by its conclusions.
- The WTO dispute settlement system could not function effectively without consistent panel judgments. The United States had a strong interest in ensuring that these panel proceedings did not prejudice its rights as determined by the Appellate Body. Inconsistent interpretations of India's TRIPS obligations would also prejudice the rights of other WTO Members and make it impossible to apply the most-favoured-nation obligation in a meaningful way. Without consistent judgments, WTO Members would find little guidance in the legal interpretations developed by dispute settlement panels and the Appellate Body. The role of the dispute settlement system was greatly diminished and the system could not fulfill its purpose: to serve as a "central element in providing security and predictability to the multilateral trading system".84
Article 3.8 of the DSU
"However, in the course of "normal dispute settlement procedures" required under Article 10.4 of the DSU, we will take into account the conclusions and reasoning in the Panel and Appellate Body reports in WT/DS50. Moreover, in our examination, we believe that we should give significant weight to both Article 3.2 of the DSU, which stresses the rôle of the WTO dispute settlement system in providing security and predictability to the multilateral trading system, and to the need to avoid inconsistent rulings (which concern has been referred to by both parties). In our view, these considerations form the basis of the requirement of the referral to the 'original panel' wherever possible under Article 10.4 of the DSU.";
and paragraph 7.33, where the Panel stated:
"We note that India has not introduced any changes to its patent régime since the adoption of the Panel and Appellate Body reports in dispute WT/DS50. However, we also note that the Appellate Body modified the reasoning in the Panel report in dispute WT/DS50 and that India has provided certain additional information regarding its mailbox system to us. In the following analysis, we will take account of these new elements as necessary."
Moreover, the paragraphs to which India had referred, i.e. what are now paragraphs 7.55 and 7.73, not only stated that the Panel was of the view that it was not for it to review questions regarding how the Appellate Body had arrived at its conclusions, but also that the Panel did "not consider it necessary in the light of the foregoing".
Claims of the Complainant
Claims of the Respondent
Article 9 of the DSU
"1. Where more than one Member requests the establishment of a panel related to the same matter, a single panel may be established to examine these complaints taking into account the rights of all Members concerned. A single panel should be established to examine such complaints whenever feasible.
"2. The single panel shall organize its examination and present its findings to the DSB in such a manner that the rights which the parties to the dispute would have enjoyed had separate panels examined the complaints are in no way impaired. If one of the parties to the dispute so requests, the panel shall submit separate reports on the dispute concerned. The written submissions by each of the complainants shall be made available to the other complainants, and each complainant shall have the right to be present when any one of the other complainants presents its views to the panel.
"3. If more than one panel is established to examine the complaints related to the same matter, to the greatest extent possible the same persons shall serve as panelists on each of the separate panels and the timetable for the panel process in such disputes shall be harmonized."
"1. The interests of the parties to a dispute and those of other Members under a covered agreement at issue in the dispute shall be fully taken into account during the panel process.
"2. Any Member having a substantial interest in a matter before a panel and having notified its interest to the DSB (referred to in this Understanding as a "third party") shall have an opportunity to be heard by the panel and to make written submissions to the panel. These submissions shall also be given to the parties to the dispute and shall be reflected in the panel report.
"3. Third parties shall receive the submissions of the parties to the dispute to the first meeting of the panel.
"4. If a third party considers that a measure already the subject of a panel proceeding nullifies or impairs benefits accruing to it under any covered agreement, that Member may have recourse to normal dispute settlement procedures under this Understanding. Such a dispute shall be referred to the original panel wherever possible."
"In the view of the EEC and the Netherlands, the United States interpretation of the term 'necessary' as meaning 'needed' amounted to a rejection of adopted panel reports, which constituted agreed interpretations of the General Agreement. The EEC recognized that there was no stare decisis in the GATT, if only because there was no hierarchy between courts or arbitral bodies in the GATT. This was also the case for most international courts or tribunals. Nevertheless, such international courts and tribunals were always very careful about maintaining their own precedents and a certain coherence in their decisions. The GATT required such coherence in panel interpretations in order to provide stability within the international trading system".105
It should be noted that in the Tuna case, the EEC did not rely on the notion of stare decisis and rather advocated a softer approach of "coherence". It should also be noted that this argument was about the interpretation of Article XX in general and that the EEC did not ask the panel simply to extend the findings of the earlier Tuna panel.
"Adopted panel reports are an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute. However, they are not binding, except with respect to resolving the particular dispute between the parties to that dispute".106
"The Panel first examined the EEC's system of restrictive licensing applied to imports of apples from April through August 1988 under Article XI, as consistency with this Article was the primary determinant of the conformity of the EEC's system with the General Agreement, before proceeding to consider the measures under Articles XIII and X and Part IV of the Agreement. In considering the facts and arguments relating to Article XI in particular, the Panel took note of the fact that a previous Panel, in 1980107, had reported on a complaint involving the same product and the same parties as the present matter and a similar set of GATT issues. The Panel noted carefully the arguments of the parties concerning the precedent value of this Panel's and other previous panels' recommendations, and the arguments on the legitimate expectations of contracting parties arising out of the adoption of panel reports. The Panel construed its terms of reference to mean that it was authorized to examine the matter referred to it by Chile in the light of all relevant provisions of the General Agreement and those related to its interpretation and implementation. It would take into account the 1980 Panel report and the legitimate expectations created by the adoption of this report, but also other GATT practices and panel reports adopted by the CONTRACTING PARTIES and the particular circumstances of this complaint. The Panel, therefore, did not feel it was legally bound by all the details and legal reasoning of the 1980 Panel report...."108
"Where a Member does not make available as of the date of entry into force of the WTO Agreement patent protection for pharmaceutical and agricultural chemical products commensurate with its obligations under Article 27, that Member shall:
(a) notwithstanding the provisions of Part VI, provide as from the date of entry into force of the WTO Agreement a means by which applications for patents for such inventions can be filed;
(b) apply to these applications, as of the date of application of this Agreement, the criteria for patentability as laid down in this Agreement as if those criteria were being applied on the date of filing in that Member or, where priority is available and claimed, the priority date of the application; and
(c) provide patent protection in accordance with this Agreement as from the grant of the patent and for the remainder of the patent term, counted from the filing date in accordance with Article 33 of this Agreement, for those of these applications that meet the criteria for protection referred to in subparagraph (b)."
The EC claims, largely relying on the results of the previous case (dispute WT/DS50), that India has failed to fulfil its obligation under this paragraph by not establishing a valid system for receiving "mailbox" applications. In particular, it notes that there has been no legislative change in the Indian patent system after the adoption of the Panel and the Appellate Body reports in dispute WT/DS50, in which it was found that India had failed to fulfil such obligation.
Nature of the Obligations
Mechanism for Implementing the Obligations
"[L]ike the Panel, we are not persuaded that India's 'administrative instructions' would prevail over the contradictory mandatory provisions of the Patents Act.117 We note also that, in issuing these 'administrative instructions', the Government of India did not avail itself of the provisions of section 159 of the Patents Act, which allows the Central Government 'to make rules for carrying out the provisions of [the] Act' or section 160 of the Patents Act, which requires that such rules be laid before each House of the Indian Parliament. We are told by India that such rulemaking was not required for the 'administrative instructions' at issue here. But this, too, seems to be inconsistent with the mandatory provisions of the Patents Act."118
"Where a product is the subject of a patent application in a Member in accordance with paragraph 8(a), exclusive marketing rights shall be granted, notwithstanding the provisions of Part VI, for a period of five years after obtaining marketing approval in that Member or until a product patent is granted or rejected in that Member, whichever period is shorter, provided that, subsequent to the entry into force of the WTO Agreement, a patent application has been filed and a patent granted for that product in another Member and marketing approval obtained in such other Member."
It is not contested that currently there is neither legislation nor administrative practice in place in India regarding the grant of exclusive marketing rights on those products that satisfy the conditions of Article 70.9. The situation has remained unchanged since the adoption of the Panel and Appellate Body reports in dispute WT/DS50. India also admits that legislation is needed to effect a system of granting exclusive marketing rights. As noted above, the Patents (Amendment) Ordinance 1994 had provisions to establish such a system as of 1 January 1995, but the system lapsed with the expiry of the Ordinance.
Object and Purpose
(a) a mailbox application has been filed in India in respect of a pharmaceutical or agricultural chemical product;
(b) a patent application has been filed in respect of that product in another WTO Member after 1 January 1995;
(c) the other Member has granted the patent;
(d) the other Member has approved the marketing of the product; and
(e) India has approved the marketing of the product.
As pointed out in the previous case, what really matters is when it would be possible for one product to meet the terms of Article 70.9. While one could generally argue that these events take some time to materialize, one can never indicate exactly how long they will take. Indeed, according to the EC, there is at least one pharmaceutical company based in the EC that has applied for marketing approval in India for a product regarding which a mailbox application has been filed.134