The EU General Court has recently rejected two challenges by Dutch and German plant breeders to the validity of EU Regulation (EU) No 511/2014 of the European Parliament and of the Council of 16 April 2014 on compliance measures for users from the Nagoya Protocol (the “Regulation”).
Background – Nagoya comes to Europe
The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilisation (the “Nagoya Protocol”) is an international treaty which supplements the 1992 Convention on Biological Diversity (“CBD”), signed at the Earth Summit in Rio de Janeiro, Brazil in 1992. The CBD acknowledged the principle that countries have sovereign rights over their natural resources, and are permitted to control access to the genetic resources in their territories, and to share in benefits deriving from their utilisation. However, the CBD contained no enforcement mechanism or sanctions to give it legal effect. The Nagoya Protocol was adopted on 29 October 2010 to address this problem.
Due to EU rules on allocation of competence between the EU and the EU Member States regarding entry into international treaties, the Nagoya Protocol was signed by both the EU itself and the EU Member States. Implementation of the Nagoya obligations has similarly been shared between the EU itself and the EU Member States. The EU adopted the Regulation on 16 April 2014 in order to implement its Nagoya obligations.
The Regulation places significant duties on researchers in the EU who conduct research using “genetic resources”. It came into force on 12 October 2014. However, the most onerous obligations do not come into force until 12 October 2015. These include:
- Article 4 (obligation to exercise due diligence to ascertain that genetic resources and traditional knowledge associated with genetic resources which they utilise have been accessed in accordance with applicable access and benefit-sharing legislation or regulatory requirements, to enter into “access and benefit sharing agreements” with donor countries where this is required, and to keep records for 20 years following the end of such utilisation);
- Article 7 (obligation to declare compliance with due diligence obligation on receipt of public or private funding and provide evidence of compliance at the final stages of development of a product); and
- Article 9 (checks on user compliance).
"Genetic resources" cover any material of plant, animal, microbial or other original containing functional units of heredity, including cells, seeds and whole organisms. Human generic resources are however excluded from the scope of the Regulation (Recital 19 of the Regulation).
The annulment action by Dutch and German plant breeders
In July 2014, Ackermann Saatzucht GmbH & Co KG along with 16 other persons from Germany, and ABZ Aardbeien Uit Zaad Holding BV along with 15 other persons from the Netherlands (“the Applicants”) lodged claims for annulment of the Regulation at the General Court.
The Applicants (who are Dutch and German plant breeders or trade associations) claimed that the Regulation was incompatible with the general accepted principle of “open access” in the plant breeder sector, which is enshrined in the so-called “breeder’s exemption” in Article 15(1)(iii) of the International Convention for the Protection of New Varieties of Plants of 2 December 1961 and Article 15 of Council Regulation (EC) No 2100/94 of 27 July 1994 on Community plant variety rights. This exemption provides that, for the purpose of discovering and developing new plant varieties, plant breeders can freely make amendments to protected varieties and breed new varieties with novel gene combinations without any requirement to notify or share commercially-sensitive information.
The ‘due diligence’ requirements in Article 4(3) of the Regulation require a plant breeder who wishes to use material from another protected variety to notify its intention to the breeder of that protected variety, and for that breeder to disclose the source of that material.
The Applicants complained that this requirement is extremely onerous, and imposes an impossible administrative burden on plant breeders (many of whom are SMEs). For example, the CIMMYT wheat variety ‘Veery’ is a product of 3,170 crossings between 51 different parental lines originating from 26 different countries. It was developed over many generations by many different plant breeders. Documenting the development process would be a huge job for any plant breeder.
The Council and Parliament raised objections of inadmissibility, arguing that the Applicants had no standing under Article 263(4) of the Treaty on the Functioning of the European Union (“TFEU”) to challenge the validity of the Regulation.
As the Regulation was held to be a legislative rather than regulatory act, the Court’s decisions turned on whether the applicants had standing to challenge the validity of the Regulation. This in turn depended on whether the Regulation was of “direct and individual concern” to the Applicants.
The Court held that the Applicants were affected by the Regulation “only in their objective capacity as users of genetic resources or traditional knowledge associated with genetic resources … in the same manner as any other user coming within the scope of [the Regulation].” The Court said that there was no particular quality or fact which differentiated the Applicants as compared with any other person coming within the scope of the Regulation. As such, the Applicants had no standing and the claims were dismissed without any consideration of the merits of the applications to annul.
With the failure of the challenges at the General Court, and pending the outcome of the appeals, the potentially onerous obligations in the Regulation will come into force in their current form on 12 October 2015.
From that date, all users and suppliers of genetic resources in the EU will have to comply. They will face some difficult issues, including:
- compliance with legislation in countries of origin related to the access to genetic resources and/or traditional knowledge associated with genetic resources;
- the difficulty of tracing the country of origin of genetic resources and conditions attached to their utilisation when resources are accessed through intermediaries;
- increased development costs and related issues of benefit sharing and good governance.
Public bodies which will be affected include universities or higher education institutions, public research institutes, botanic gardens and culture collection/cell banks.
Industry sectors which rely on wild genetic resources include plant breeders/seed companies, horticulture and animal breeding, cosmetics, food and beverage, biocontrol and pharmaceuticals. Whilst only four large pharmaceutical companies maintain natural products programmes of any size, and have the capacity to undertake all facets of natural product drug discovery (Novartis, Pfizer, Merck and Sanofi-Aventis), natural products play a major role in the discovery by biotech companies and universities of lead molecules for drug development and hence affect innovation in the pharmaceutical sector through in-licensing or acquisition.
There is currently significant disquiet in these public sector bodies and industry sectors about the administrative burden that the Regulation will impose on EU researchers.
Further guidance from the Commission and from the national competent authorities designated under the Regulation (including the National Measurement and Regulation Office in the UK) is keenly awaited, as affected parties work out how to comply.
Meanwhile, the USA has not signed up to the Nagoya Protocol. This means that researchers in the USA will be able to ignore its requirements completely (though any EU research facilities of US-based multinationals will still have to comply).