The Nagoya Protocol and Upcoming War over Bio-resources

 

Abstract
The Nagoya Protocol which will enter into force on Oct 12th is an international agreement which aims at sharing the benefits arising from the utilization of genetic resources in a fair and equitable way, thereby contributing to the conservation of biological diversity and the sustainable use of its components. The Protocol sets out 3 obligations for its contracting Parties to take measures in relation to Access and Benefit-Sharing including PIC and MAT, and compliance. A conflict of interests has occurred between countries of provider and user of genetic resources on how to interpret clauses related to the obligations. This paper reviews the core issues of Nagoya Protocol, examines the legislative case from Denmark on the basis of the issues about 3 obligations, and then gives suggestions about how to prepare a Bill to implement the Nagoya Protocol successfully.

 

Ⅰ. Introduction
Tamiflu, the only therapeutic agent which is classified by the World Health Organization (WHO) as an essential medicine, is monopolistically produced by Roche, a Swiss pharmaceutical company, that generates an added value of 2~3billion dollars a year. The Roche Company is paying 22% of its sales as a royalty to Gilead Sciences, an American pharmaceutical company, which has extracted an effective substance of Tamiflu from “Star anise”. On the contrary, China, which is actually the origin country of Star anise, has not benefited at all. However it seems that bio-piracy, which developed countries use biological resources of developing countries free of charge, will be soon finished soon thanks to the Nagoya protocol, an annex of the Convention on Biological Diversity, which will enter into force on Oct 12th.
In October 2010, an international treaty about methods and procedures was signed in Japan to divide profit created by the use of and an access to ‘Genetic Resources’, one of three purposes of ‘the Convention on Biological Diversity’, fairly and evenly between providers and users of genetic resources was signed in Japan. It is the “Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from Their Utilization (ABS) to the Convention on Biological Diversity (CBD)”. Hereby, it has become possible to recognize exclusive sovereignty over biological resources that were regarded as the common heritage of human beings and were freely available and accessible.
Although the current situation in Korea is not to ratify the Nagoya Protocol, 90 days later when the date of deposit of the fiftieth instrument of ratification, acceptance, approval or accession by Parties to the Convention, the protocol will automatically enter into force, irrespective of ratification in Korea. This is the reason why many experts worry about Korea to follow the protocol without any preparation. To make matters worse, as of July 14, the effectuation of the protocol turns into a fait accompli because the Nagoya Protocol received its required number to enter into force on 12 October due to Uruguay’s accession.
From 13 to 17 October 2014, the 12th meeting of the Conference of the Parties to the CBD will be held in Pyeongchang, Korea. As well the first meeting of the Conference of the Parties serving as the meeting of the Parties to this Protocol will be held during those days, and negotiations on cooperative procedure and institutional mechanisms to promote compliance of the protocol will be made on the meeting. Since Korea hasn’t ratified the protocol, it may participate not as a Party to this protocol but as an observer.
When the Protocol goes into effect, Korean companies would have to pay the expenses incurred to utilize genetic resources or associated traditional knowledge of other countries. A research from Korea Environment Institute (KEI) shows that the announcement of the protocol causes the country to pay 136 to 639 hundred million won as an extra ABS costs. Thus, we need to handle the Nagoya protocol carefully and quickly due to impending of effectuation and its economic importance.
Inspired by these points, this paper is going to introduce about the Nagoya protocol and see which articles in the Protocol are in opposition to interests, reviewing a Danish example about how the developed country interprets those articles in order to ratify them and deal with some implications. By doing so the reviewing may give us some lessens to learn.

Ⅱ. What is the Nagoya Protocol?
The objective of this Protocol is the fair and equitable sharing of the benefits arising from the utilization of genetic resources, including appropriate access to genetic resources and appropriate transfer of relevant technologies, taking into account all rights over those resources and to technologies, and by appropriate funding, thereby contributing to the conservation of biological diversity and the sustainable use of its components.
The Nagoya Protocol sets out 3 obligations for its contracting Parties to take measures in relation to Access to Genetic Resources, Benefit-sharing and Compliance. Additionally, Prior Informed Consent (PIC) and Mutually Agreed Terms (MAT) have to be made for the access to genetic resources and associated traditional knowledge and sharing of benefits arising from their utilization. The main issues of the core obligations are summarized as follows:
1. Access Obligations
Domestic-level access measures are to create legal certainty, clarity and transparency; Provide fair and non-arbitrary rules and procedures; Establish clear rules and procedures for prior informed consent and mutually agreed terms.
2. Benefit-Sharing Obligations
Domestic-level benefit-sharing measures are to provide for the fair and equitable sharing of benefits arising from the utilization of genetic resources with the contracting party providing genetic resources. Sharing is subject to mutually agreed terms. Benefits may be monetary or non-monetary such as royalties and the sharing of research results.
3. Compliance Obligations
Specific obligations to support compliance with the domestic legislation or regulatory requirements of the contracting party providing genetic resources, and contractual obligations reflected in mutually agreed terms, are a significant innovation of the Protocol. Contracting Parties are to:
– Take measures providing that genetic resources utilized within their jurisdiction have been accessed in accordance with prior informed consent, and that mutually agreed terms have been established, as required by another contracting party
– Cooperate in cases of alleged violation of another contracting party’s requirements
– Take measures regarding access to justice
– Take measures to monitor the utilization of genetic resources after they leave a country including by designating effective checkpoints at any stage of the value-chain: research, development, innovation, pre-commercialization or commercialization

Ⅲ. Core Issues of the Nagoya Protocol
Despite favorable evaluation as “a masterpiece in creative ambiguity”, the Nagoya Protocol can be said to be deficient of legal certainty and clarity especially in terms of its scope of application including temporal issue and benefit-shared country, etc. Thus, the clash of opinions about how to interpret clauses, especially about the three obligations in the Protocol has occurred between providers and users of genetic resources.

1. Application Scope of the Protocol
The scope of application that can be noticed from the article 2 about the use of terms derives the benefits from the utilization of genetic resources and associated traditional knowledge. According to the article 2(c), “Utilization of genetic resources” means to conduct research and development on the genetic and/or biochemical composition of genetic resources, including through the application of biotechnology as defined in article 2 of the CBD.
Depending on the definition of “Utilization of genetic resources”, it is able to decide whether to include products subsequently applied or commercialized in the application scope of the Protocol. In other words, a range of the protocol application can be determined by the fact whether the target of genetic and/or biochemical composition is genetic resources or biological resources. It turns into a great difference. “Genetic resources” only includes materials that have functional inherited properties of organisms; on the other hand, “Bio-resources” may include materials without such properties.
Leaving possibility to interpret in both ways, the Protocol has the definition of “derivative” in article 2(e), which means a naturally occurring biochemical compound resulting from the genetic expression or metabolism of biological or genetic resources, even if it does not contain functional units of heredity. However, there is no use of the term in the Protocol, so it can cause legal disputes in the future.

2. Article 6: Access to Genetic Resources
Article 6.1. in the Protocol states that:
In the exercise of sovereign rights over natural resources, and subject to domestic access and benefit-sharing legislation or regulatory requirements, access to genetic resources for their utilization shall be subject to the prior informed consent of the Party providing such resources that is the country of origin of such resources or a Party that has acquired the genetic resources in accordance with the Convention, unless otherwise determined by that Party.
According to this protocol, it is not necessary to require PIC every time one approaches genetic resources. In other words, it must be a careful job to require PIC only if one accesses the genetic resource in order to utilize it. That is bound by the definition of the article 2 about “Utilization of Genetic Resources”.
Meanwhile, it is not positively necessary for the country of origin of such resources to have legislative form to acquire PIC, and it is possible to determine the acquirement by an administrative measure instead. However, whether it is not subject to PIC may be a problem if the Parties do not legislate for PIC at all. This is because the protocol prescribes that the Parties who require PIC should take steps to get PIC.
There is some wiggle room for interpretations about whether a country which requires PIC needs to state genetic resources which is essential for PIC, as the EU claims, or a country is automatically required for PIC unless it makes a decision not to require PIC as developing countries claim.

3. Article 5: Fair and Equitable Benefit-Sharing
Article 5.1. in the Protocol states that:
In accordance with Article 15, paragraphs 3 and 7 of the Convention, benefits arising from the utilization of genetic resources as well as subsequent applications and commercialization shall be shared in a fair and equitable way with the Party providing such resources that is the country of origin of such resources or a Party that has acquired the genetic resources in accordance with the Convention. Such sharing shall be upon mutually agreed terms.

At this point, developed and developing countries are in confrontation with each other over which country has the right to take the share of benefits from utilization of genetic resources. Whereas developed countries argue that a Contracting Party providing such resources in accordance with Article 15.7. of the Convention has the right to share benefit, developing countries interpret that the Country of origin of such resources according to article 15.3. of the Convention does.
They finally have agreed to a compromise proposed by developing countries: “Party providing genetic resources as a country of origin of the resources or a Party that has acquired the genetic resources in accordance with the Convention”. Accordingly, although it is obvious that countries of origins of genetic resources are to have a share of benefit, a contracting Party providing such resources may have such right as well if it acquires genetic resources satisfying a requirement of the Convention.
On the other hand, it is open to interpretation for the utilization of genetic resources; it becomes a shared object when profits are created by defining the range in the article 2 of the protocol and also by commercializing or applying these studies and developments.

4. Compliance Obligation
(1) Article 15: Compliance with Domestic Legislation or Regulatory Requirements on Access and Benefit-Sharing
Article 15.1. states that:
Each Party shall take appropriate, effective and proportionate legislative, administrative or policy measures to provide that genetic resources utilized within its jurisdiction have been accessed in accordance with prior informed consent and that mutually agreed terms have been established, as required by the domestic access and benefit-sharing legislation or regulatory requirements of the other Party.
However, there is controversy about what the object and the scope of securement of abiding by obligations are. Developing countries have the most interest in these obligations such as the core clause of ABS. Developing countries persistently have demanded that a nation not only confirms approach pursuant to PIC and conclusion of MAT but also takes responsibility for implementation of MAT.
On the contrary, developed countries have contended that a requirement of abiding by implementation reveals a procedural character to check the conclusion of PIC and MAT. Moreover, it is inappropriate for a nation to confirm or guarantee the implementation of contents of commercial contract. Eventually, according to the opinion of developed countries, it is agreed to require confirm to obtain genetic resources in conformity with PIC and to enter into MAT.
Meanwhile, under this article, scope of object of abiding by obligations has been limited to genetic resources except the derivative of genetic resources. Also, legislation or regulatory requirements from the other Party will be applied, and “the other Party” means the country that is the origin of particular genetic resources and, at the same time, the providing country of the resources.

(2) Article 17: Monitoring the Utilization of Genetic Resources
Article 17.1. urges each Party to designate one or more checkpoints to monitor the utilization of genetic resources, but in the article there is no clear-cut definition, no role, nor the scope or the subjects to be monitored of the checkpoint. Thus, there may arouse conflicts between providers and users of genetic resources. However, in other words, it can be understood by that the Protocol leaves this matter to the discretion of the Parties.

(3) Article 18: Compliance with Mutually Agreed Terms.
Article 18.3(a) states that each Party shall take effective measures, as appropriate, regarding access to justice. This clause gives discretionary authority to the Parties on how to interpret the meaning of “Access to justice”. Thus, Article 18.4. leaves a possibility to reexamine on the article 18.3. in case of impunity by reason of ambiguity of the article 18.3. for the next 4 years by stating that “the effectiveness of this article shall be reviewed by the Conference of the Parties serving as the meeting of the Parties to this Protocol in accordance with Article 31 of this Protocol.”

Ⅳ. Danish Policy and Legislative Issues Towards Implementing the Protocol
The dependence rate on overseas bio-resources of Korea is higher than 70%, which contributes medicine production or medical supplies as well as cosmetics made with the raw materials. Thus, the Korean government needs to observe other developed countries’ legislation on the perspective of protecting our bio-industry with the high level of dependence.
However, there are three developed countries that ratify the protocol: Norway, Denmark, and Switzerland. Among them, Denmark is the only country which clearly states itself as a using country of genetic resources. Therefore, to prepare a legislation with success, our country should refer to “Danish Bill on sharing benefits arising from the utilization of genetic resources” on understanding how Denmark understands the core issues of the Protocol and applies those issues to their bill. In this regard, it is necessary to review a former study on Danish policy and legislative issues on the Protocol conducted by Sun young Oh (2102).

1. Access Obligation
(1) Prior Informed Consent
Danish Bill Article 6 states that:
The Danish Minister for the Environment may make regulations requiring reporting of the collection of genetic resources from wild organisms in Denmark, including information on the intended utilization. The Danish Minister for the Environment may specify that this is done electronically.
The Danish government doesn’t require the Prior Informed Consent (PIC) on access to domestic genetic resources, but instead applies a policy of notification system to sampling of the genetic resources. The reason for not requiring PIC is to ensure that anyone may have a free access to the genetic resources existing in Denmark under certain conditions, and it can be considered as a clear expression about the position that the Danish government takes to be a user country of genetic resources.
Meanwhile, as the article only includes genetic resources from wild organisms, the other genetic resources from primary industries using wild organisms through breeding or cultivation are not applied by the Act.
(2) Access to Genetic Resources
The Danish government is open to the access to domestic genetic resources, as PIC is not required on access to domestic genetic resources. On the contrary, it is prohibited to use genetic resources acquired in violation of the legislation on access to genetic resources in other country, according to the Danish Bill article 3(1); and article 3(2) states that it is applicable only to genetic resources from countries that Parties to the Nagoya Protocol have legislated in accordance with Article 6 of the Nagoya Protocol. Danish Bill stipulates same clause with associated traditional knowledge on the same purpose. This is the issue related to the compliance obligations in the Articles 15 and 16 in the Nagoya Protocol.

2. Benefit-Sharing Obligation
Since “the legislation” on ABS in the country providing genetic resources in the Danish Bill Articles 3 and 4 includes not only “access” but also “Mutually Agreed Terms (MAT)”, Articles 3 and 4 in Danish Bill can be related to “Benefit-Sharing Obligation”. Thus, utilizing genetic resources is prohibited by the protocol when a nation does not have a proper PIC required by the providing country but also does not implement MAT as they agreed.
These violations of the legislation incur civil and criminal responsibilities in Denmark, and the Danish government states that, under Danish law, foreign States as well as persons or legal persons have legal standing and full access to justice on the same basis as Danish legal subjects when legal dispute occurs by a default of PIC or MAT.
It is considered that Danish Bill follows the purpose of the Protocol and, at the same time, prevents forthcoming conflicts between countries through enabling itself to protect its own maximum benefit as a user country of genetic resources.

3. Compliance Obligation
(1) Application Scope in Danish Bill
As mentioned above, a controversy whether to include “Derivative” in genetic resources or not is one of the core issues of the Protocol. If “Derivative” is included in, it can be a burden to someone who wants to utilize genetic resource and its derivative, and this is the reason why countries using genetic resources insist not to include “Derivative” in the scope of the Protocol.
The Article 2 of the Danish draft bill defines “Genetic resources” as “the functional inherited properties of organisms and naturally occurring biochemical substances which are a result of genetic expression or metabolism of the organisms”. The use of the word “Derivative” doesn’t appear in the definition, but it can be inferred that “Derivative” is considered to be subject to the Bill, judging by the separate use of “the functional inherited properties of organisms” and “naturally occurring biochemical substances”.
(2) The position of the Danish Government on the Article 15 of the Nagoya Protocol
The Danish government applies a “reporting” system instead of PIC to those who accesses to utilize the domestic genetic resources. The “reporting” system is not to grant permission with examination on the report but to be reported by oneself with the necessary information to the authorities. Furthermore, there is no punishment when users don’t follow the rule. These can be regarded as the efforts of the Danish government, encouraging the use of domestic and foreign genetic resources.
In summary, the Danish government clearly states that Denmark has no duty to ensure compliance of legislation and regulation related to ABS of the provider-country and simply clarifies a position of the country as a user of genetic resources by adopting necessary and proper measures to implement the Protocol.
(3) A Checkpoint in Denmark with relation to the Article 17 of the Protocol.
A Discussion about further checkpoints is in progress in Denmark, but a checkpoint on source or origin is already established in relation to patent applications according to Order No. 92 on Patents and Supplementary Protection Certificate. However, the Order also states that lack of information about the geographical origin of biological material or about the applicant’s non-awareness thereof shall not affect the examination and other processing of the patent application or the validity of the rights conferred by the granted patent.
(4) Competent National Authorities by the Article 13 of the Protocol
The Danish government states that the Danish Minister for the Environment shall carry out supervision to ensure compliance with this Act and regulations issued in accordance with the Act according to the Article 7 in the Bill. This supervision will be allocated to the Danish Nature Agency based on the information and referrals from providing countries which suspect infringement of their regulations on access to genetic resources and to associated traditional knowledge.
Also, in the Article 9 of the Bill, the Minister of the Environment may authorize an agency established as part of the Ministry or, after negotiation with the relevant ministers, other state authorities to exercise the powers conferred on the Minister by the Act.
With the Danish Policy, it is clear that Denmark makes an effort to cooperate with relevant ministers and other authorities by designating one competent national authorities to supervise implementation of the Protocol and the domestic legislation about ABS.

Ⅴ. Conclusion
The importance of maintaining biodiversity has been overlooked so far, and people have believed that bio-resources are always accessible and available without any expense. However, it is time to face the reality. Biodiversity in Korea is under threat. Invasive species have been brought into our environment by people on purpose or by accident and destroyed our ecosystem. Also, a number of indigenous species in Korea have been exploited by other countries. Therefore, the entry into force of the Nagoya Protocol can be recognized as a meaningful event in a sense of conserving bio-resources and restoring its own sovereignty over genetic resources.
In December 2013, the pre-announcement of legislation for the Protocol was submitted, but the conflict of interests between government departments on designation of the Competent National Authorities has delayed the ratification of the Protocol. The more concerned authorities are, the more expenses will be spent. The Danish legislation is full of suggestions with designating one competent authorities to promote cooperation between government ministries. First and foremost, national interest has to be the top priority.
For now, it is hard to predict the specific impacts of the Protocol on our bio-industries. Moreover, details of the obligations from the Protocol will be discussed in the 1st COP-MOP that our country can’t participate. Thus, we need to pay attention to results from the meeting and legislative directions of other countries such as Germany and Japan after the COP-MOP, and prepare a bill which enables Korea and its industries to maximize benefit on the basis of these situation.

 
dahyehan@naver.com

Posted in Autumn 2014.