The Trans-Pacific Partnership

As is usual in IIAs, the definition of investment in the TPP is broad, encompassing assets taking forms such as enterprises, shares and intellectual property.⁽²⁸⁾ However, the definition is limited to those assets that have “the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.”⁽²⁹⁾ These named characteristics bring within the treaty text two of the elements of an investment identified by the investment treaty tribunal in Salini v. Morocco, referring to the meaning of investment in the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention):⁽³⁰⁾ “contributions … and a participation in the risks of the transaction.”⁽³¹⁾ The tribunal also included two other criteria, which do not appear in the TPP definition: “a certain duration of performance of the contract” and (more controversially) a “contribution to the economic development of the host State.”⁽³²⁾ As an example of the potential significance of this fourth criterion, in recent years Uruguay unsuccessfully argued that the tobacco company Philip Morris had not made an investment in Uruguay because its activities impose “huge costs” on Uruguay.⁽³³⁾

In addition to the country-specific exceptions and inclusions contained in side letters and annexes,⁽³⁴⁾ the investment chapter contains many general clarifications and exceptions to its core obligations, in order to enhance policy space. For example, the non-discrimination obligations of national treatment and most-favored-nation (MFN) treatment are subject to footnote 14, which specifies that whether treatment is accorded in “like circumstances” for the purpose of those provisions “depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives.” A “Drafters’ Note” adds that these provisions “seek to ensure that foreign investors or their investments are not treated less favorably on the basis of their nationality” and “do not prohibit all measures that result in differential treatment.”⁽³⁵⁾ The MFN provision is also explicitly restricted to prevent a state or investor from using it to invoke more favorable dispute settlement provisions from other treaties, such as more favorable ISDS provisions.⁽³⁶⁾ Specific provisions prevent a successful claim of unlawful expropriation⁽³⁷⁾ or breach of fair and equitable treatment⁽³⁸⁾ on the sole basis of a host state’s decision to modify or reduce a subsidy or grant.

Nevertheless, some of these provisions designed to preserve TPP countries’ policy space have only limited impact. For example, the clarifications applicable to the key obligations concerning fair and equitable treatment (FET) and expropriation, while welcome, do not provide as much protection as some other recent treaties. Significantly, under the TPP a FET breach does not arise merely from a breach of another TPP provision, a breach of another international agreement, or a failure to fulfil an investor’s expectations.⁽³⁹⁾ In addition, the FET standard is restricted to the “customary international law minimum standard of treatment.”⁽⁴⁰⁾ However, this restriction still allows arbitrators to interpret the customary standard as having evolved to preclude, for example, violations of due process or of domestic law, rather than only egregious or outrageous conduct.⁽⁴¹⁾ In contrast, the Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA)⁽⁴²⁾specifies that a breach of domestic law does not establish a breach of the FET standard.⁽⁴³⁾ CETA also contains an apparently exhaustive list of the kinds of conduct that will breach the FET standard (e.g. denial of justice, targeted discrimination, or abusive treatment),⁽⁴⁴⁾ whereas the TPP contains an inclusive list of such conduct,⁽⁴⁵⁾ leaving more scope for other conduct to amount to a breach as well.

The narrowing of the expropriation obligation in the TPP is also significant but limited. The issuance of a compulsory license pursuant to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) and consistent with the intellectual property chapter of the TPP does not constitute expropriation.⁽⁴⁶⁾An action “cannot constitute an expropriation unless it interferes with a tangible or intangible property right or property interest in an investment.”⁽⁴⁷⁾ In addition:

Non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations, except in rare circumstances.⁽⁴⁸⁾

Similarly, Article 9.16 provides:

Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives.⁽⁴⁹⁾

These provisions in the TPP investment chapter appear to reflect an attempt by the drafters to clarify and narrow the scope of investment obligations, in view of the incursion on policy space witnessed in some investment treaty awards.⁽⁵²⁾ The limits to these clarifications may reflect difficulties in agreeing on the requisite language, both among a relatively large number of negotiating parties, and within each country given the varied interests of industry, inward and outward investors, and other stakeholders. Although the results may be seen as an advancement in comparison to the older-style bilateral investment treaties, which tend to lack nuance and have no explicit exceptions, they also leave much to the discretion of arbitrators, which is itself a cause for some concern. That fact lends greater significance to the inclusion of ISDS in the TPP.

ISDS in the TPP was of central concern to many community groups in different TPP countries. For Australia, in particular, a government policy of April 2011 moved away from pursuing ISDS where such a mechanism would provide greater protections to foreign than domestic investors.⁽⁵³⁾ A footnote in a leaked version of the TPP investment chapter in June 2012 confirmed (in square brackets) that the ISDS mechanism would not apply to Australia or Australian investors.⁽⁵⁴⁾ A subsequent leak in 2015 added to that footnote: “deletion of footnote is subject to certain conditions.”⁽⁵⁵⁾ The textual change in those years corresponds with the change of Australian government, leading to a return to an ad hoc approach to ISDS since 2013.⁽⁵⁶⁾ Reflecting that case by case approach, in 2014-2015, ISDS was included in Australia’s preferential trade agreements (PTAs) with Korea⁽⁵⁷⁾ and China⁽⁵⁸⁾ but not Japan.⁽⁵⁹⁾ The ISDS mechanism in the final TPP text applies to all TPP countries,⁽⁶⁰⁾ although Australia and New Zealand have excluded ISDS as between themselves pursuant to a side letter.⁽⁶¹⁾ That exclusion is consistent with the approach of the two countries under the investment protocol to their PTA with each other,⁽⁶²⁾ their PTA with the Association of Southeast Asian Nations in 2009,⁽⁶³⁾and their treaty recognizing each other’s court proceedings.⁽⁶⁴⁾ However, in contrast, ISDS applies between all other TPP countries, including between Australia and the United States, despite the exclusion of ISDS from the PTA between those two countries.⁽⁶⁵⁾

A number of procedural reforms apply to the ISDS mechanism in the TPP. For example, a specific provision provides for the acceptance of submissions from amicus curiae (friends of the court),⁽⁶⁶⁾ and hearings are to be open to the public, with non-confidential documentation also to be made public.⁽⁶⁷⁾ These provisions are relatively unusual in IIAs and should help enhance the transparency and thus legitimacy of the ISDS process under the TPP.

More unusually, the TPP also includes a tobacco-specific “carve-out”, allowing TPP countries to elect to deny the benefits of the ISDS mechanism in respect of claims against tobacco control measures.⁽⁶⁸⁾ Australia and New Zealand have already indicated their intention to make such an election on an across the board basis.⁽⁶⁹⁾The provision is written in such a way that a TPP country could also elect to deny the benefits of ISDS in respect of a specific claim, even after the proceedings have commenced. In the United States, the carve-out has raised concerns for TPP ratification, for example among members of Congress “from tobacco-producing states.”⁽⁷⁰⁾ In contrast, the carve-out has also been heralded as an important public health precedent for other treaties.⁽⁷¹⁾ Other commentators have made the point that the carve-out may help tobacco control but that reforms to ISDS are needed beyond tobacco control.⁽⁷²⁾

This brings us to the limits of ISDS reform in the TPP. Beyond the procedural reforms and the tobacco carve-out, the TPP could have included more fundamental reforms to the ISDS system. For example, the European Commission has proposed a new international investment court, including an appellate court, in connection with its negotiation of the Transatlantic Trade and Investment Partnership (TTIP) with the United States.⁽⁷³⁾ The Commission is also pushing this kind of approach in its agreements with other countries such as Vietnam and Canada.⁽⁷⁴⁾ The TPP merely acknowledges that an appellate court might arise in future and should then be considered by TPP parties.⁽⁷⁵⁾The Commission’s proposal may not be accepted by the United States, and might not in any case ultimately develop into the multilateral system that the Commission envisages. However, this kind of ambitious reform proposal may be needed to address the underlying legitimacy problems with ISDS,⁽⁷⁶⁾ such as conflicts of interest with arbitrators acting as counsel, unpredictability, and excessive awards.

The TPP contains important disciplines on services, which account for an increasing portion of global GDP (13.2 percent in 2014).⁽⁷⁷⁾ As with the WTO’s General Agreement on Trade in Services (GATS),⁽⁷⁸⁾ the TPP chapter on Cross-Border Trade in Services (Chapter 10) applies to services supplied in GATS terms via modes 1 (cross-border supply), 2 (consumption abroad), or 4 (presence of natural persons):⁽⁷⁹⁾

from the territory of a Party into the territory of another Party;

Like the GATS, Chapter 10 does not apply to “government procurement”⁽⁸⁴⁾or “services supplied in the exercise of governmental authority.”⁽⁸⁵⁾ Chapter 10 also explicitly excludes “subsidies or grants provided by a Party, including government-supported loans, guarantees and insurance”⁽⁸⁶⁾ and (largely) financial services,⁽⁸⁷⁾which are covered by a separate chapter (Chapter 11).

The U.S. Trade Representative explains that Chapter 10 “includes four core obligations … subject to country-specific exceptions that must be negotiated and agreed.”⁽⁸⁸⁾ Three of these core obligations are familiar from the GATS: market access (precluding restrictions such as numerical limits on the number of service suppliers)⁽⁸⁹⁾ and the twin non-discrimination obligations of national treatment⁽⁹⁰⁾and MFN treatment⁽⁹¹⁾ (both subject to a clarification regarding the meaning of “like circumstances” similar to that in footnote 14 of the investment chapter).⁽⁹²⁾(Another important obligation common to GATS and Chapter 10 of the TPP relates to domestic regulation: “Each Party shall ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.”)⁽⁹³⁾ The TPP services chapter is also subject to general exceptions contained in Article XIV(a)-(c) of GATS.⁽⁹⁴⁾

The fourth core obligation is of perhaps greater significance, prohibiting requirements of “local presence” in the following terms (not found in GATS):

No Party shall require a service supplier of another Party to establish or maintain a representative office or any form of enterprise, or to be resident, in its territory as a condition for the cross-border supply of a service.⁽⁹⁵⁾

In the following sections we examine as examples three areas governed by the TPP services chapter: professional services, telecommunications and electronic commerce.

A dedicated annex to Chapter 10 (Annex 10-A) covers “Professional Services.” The annex includes general provisions regarding recognition of professional qualifications,⁽⁹⁹⁾ licensing or registration, as well as specific provisions on (i) engineering and architectural services,⁽¹⁰⁰⁾ (ii) temporary licensing or registration of engineers,⁽¹⁰¹⁾ and (iii) legal services.⁽¹⁰²⁾ The annex also establishes a Professional Services Working Group⁽¹⁰³⁾ “to support the Parties”⁽¹⁰⁴⁾ relevant professional and regulatory bodies” in relation to professional recognition activities. The annex recognizes external developments such as the Asia-Pacific Economic Cooperation (APEC) Engineer and APEC Architect frameworks.⁽¹⁰⁵⁾ The provisions on legal services are relatively limited, while “recogniz[ing] that transnational legal services that cover the laws of multiple jurisdictions play an essential role in facilitating trade and investment and in promoting economic growth and business confidence.”⁽¹⁰⁶⁾If regulating foreign lawyers and transnational legal practice, each TPP country is merely to “encourage its relevant bodies to consider, subject to its laws and regulations,” a number of matters such as “whether or in what manner: (a) foreign lawyers may practice foreign law on the basis of their right to practice that law in their home jurisdiction”; and (e) different modes of providing transnational legal services are accommodated, such as “on a temporary fly-in, fly-out basis” and “through the use of web-based or telecommunications technology.”⁽¹⁰⁷⁾

Against these rather limited provisions applicable to all TPP countries, the specific commitments of each country must be examined. In the case of legal services, for example, the commitments made and restrictions maintained do not appear to depart significantly from the degree of liberalization under GATS and existing PTAs.⁽¹⁰⁸⁾ Singapore, for instance, in Annex II (not subject to the ratchet mechanism) “reserves the right to maintain or adopt any measure affecting the supply of legal services in the practice of Singapore law.”⁽¹⁰⁹⁾ Malaysia - also in Annex 11 - “reserves the right to adopt or maintain any measures relating to mediation and Shari’a law”,⁽¹¹⁰⁾ and - under Annex I (subject to the ratchet mechanism) - specifies that foreign law firms and foreign lawyers may practice Malaysian law only to the extent provided under existing Malaysian laws and regulations.⁽¹¹¹⁾ Similarly, under the GATS, Malaysia makes market access and national treatment commitments regarding legal services “relating only to home country laws, international law and offshore corporation laws of Malaysia.”⁽¹¹²⁾ In other words, Malaysia does not commit to allow foreign lawyers to practice general local law in Malaysia.

A separate TPP chapter also applies to “Temporary entry for business persons”, highlighting the importance placed by TPP parties on the ability of suppliers to provide services on a “fly-in, fly-out” basis. That short chapter (Chapter 12) also applies to business people engaged in trade in goods or the conduct of investment activities.⁽¹¹³⁾ Like the GATS, TPP Chapter 12 does not “apply to measures regarding citizenship, nationality, residence or employment on a permanent basis.”⁽¹¹⁴⁾ Chapter 12 contains provisions regarding the procedures for application for a visa⁽¹¹⁵⁾ and transparency⁽¹¹⁶⁾ and establishes a Committee on Temporary Entry for Business Persons.⁽¹¹⁷⁾ The chapter also requires TPP countries to set out in Annex 12-A (on a positive list basis) the commitments made with respect to temporary entry of business persons.⁽¹¹⁸⁾ A refusal to grant temporary entry can provide the basis for state-state dispute settlement under the TPP in particular circumstances.⁽¹¹⁹⁾

Dedicated TPP chapters apply to telecommunications (Chapter 13) and Electronic Commerce (Chapter 14). The telecommunications-specific provisions go beyond the general obligations regarding telecommunications services under GATS⁽¹²⁰⁾ and also contain some improvements on the more detailed commitments regarding telecommunications services that some WTO members included in their GATS schedules pursuant to the “Reference Paper.”⁽¹²¹⁾ Many of the provisions are familiar from more modern PTAs, but their inclusion will also harmonize and enhance the patchwork obligations applicable under TPP countries’ various PTAs. The obligations include, for example: ensuring the availability of interconnection⁽¹²²⁾and number portability;⁽¹²³⁾ maintaining measures to prevent major suppliers from engaging in anti-competitive practices;⁽¹²⁴⁾ not prohibiting resale of any public telecommunications service;⁽¹²⁵⁾ separating the telecommunications regulatory body from suppliers of public telecommunications services;⁽¹²⁶⁾ and not according more favorable treatment to telecommunications suppliers owned by the national government.⁽¹²⁷⁾

The TPP telecommunications chapter also includes some rather unusual provisions reflecting the United States’ approach to regulation (or non-regulation) of telecommunications services. Article 13.3 recognizes the “value of competitive markets”⁽¹²⁸⁾ and the “role of market forces”⁽¹²⁹⁾ in telecommunications, allowing parties to “forbear” from applying particular regulations where not necessary “to prevent unreasonable or discriminatory practices” or “for the protection of consumers” and where “consistent with the public interest.”⁽¹³⁰⁾ Footnote 2 to the telecommunications chapter is also explicitly directed to the mobile telecommunications market in the United States:

[T]he United States, based on its evaluation of the state of competition in the U.S. commercial mobile market, has not applied major supplier-related measures … to the commercial mobile market.

As might be expected, TPP countries tend to list significant non-conforming measures in relation to the sensitive sector of telecommunications. In Malaysia, foreign companies are not eligible for individual or class licenses to supply telecommunications services in the absence of ministerial permission.⁽¹³⁷⁾ For Vietnam, while no foreign equity limitation or joint venture requirement can be maintained after the TPP has been in force for five years in connection with non-facilities-based telecommunications services (i.e. services supplied without network infrastructure, e.g. on the basis of resale), after that period foreign equity will be permitted for basic facilities-based services only up to 49 percent and through a joint venture or the purchase of shares in a Vietnamese enterprise.⁽¹³⁸⁾For Australia, foreign investments in Australian businesses with assets exceeding AUD252 million in the telecommunications sector will be subject to notification and approval from the Australian government.⁽¹³⁹⁾ Australia also reserves the right to adopt or maintain any measure with respect to local content quotas for television and radio broadcasting and preferential co-production arrangements for film and television productions.⁽¹⁴⁰⁾

The dedicated electronic commerce chapter (Chapter 14) contains important disciplines such as: prohibitions on customs duties on electronic transmissions⁽¹⁴¹⁾ and on requirements to use or locate computing facilities in the territory as a condition for conducting business⁽¹⁴²⁾ or to transfer software source code as a condition for import, distribution or sale of that software in the territory;⁽¹⁴³⁾ and obligations of non-discriminatory treatment of digital products⁽¹⁴⁴⁾ and the allowance of crossborder transfer of information by electronic means for business purposes.⁽¹⁴⁵⁾ Some exceptions apply to some of these requirements, for example to achieve a legitimate public policy objective.⁽¹⁴⁶⁾ Their interpretation and application, for example in a state-state TPP dispute, may be significant in determining the practical force of some of these provisions.

As with the investment chapter, the services-related chapters of the TPP demonstrate the limited advances that may be made in an agreement of this kind, bringing together like-minded countries in a less expansive setting than the WTO, yet still subject to a whole range of country-specific interests and imperatives that lead inevitably to different non-conforming measures and textual compromises. The outcomes and techniques used in the TPP may have significant implications for a more ambitious ongoing project: the negotiations towards a Trade in Services Agreement (TiSA) among (at the time of writing) 23 WTO members, including the European Union (representing its 28 member states), being jointly led by Australia, the European Union, and the United States.⁽¹⁴⁷⁾ Those negotiations are already demonstrating innovation in the architecture of commitments (with market access commitments subject to a positive list approach as under GATS and national treatment commitments subject to a negative list approach as under the TPP).⁽¹⁴⁸⁾Making up 71 per cent of world services trade,⁽¹⁴⁹⁾ these parties face a challenge in achieving greater levels of services liberalization than have already been achieved in the WTO, TPP and existing PTAs.

The United States has long been a strong proponent of TRIPS-Plus standards in PTAs.⁽¹⁶⁰⁾ This negotiating stance is mandated by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (Trade Promotion Authority)⁽¹⁶¹⁾ - the law that provided the executive branch of government with the authority to negotiate the TPP and then present it for Congressional approval using a special “fast-track” procedure.⁽¹⁶²⁾ The Trade Promotion Authority sets out the objectives that must guide U.S. negotiators, which include, inter alia,

- ensuring that the provisions of any trade agreement governing intellectual property rights that is entered into by the United States reflect a standard of protection similar to that found in United States law;⁽¹⁶³⁾

The United States’ strongly pro-intellectual property stance left it relatively isolated among the TPP parties.⁽¹⁶⁹⁾ Although some other TPP parties already had domestic systems reflecting the most protective international standards,⁽¹⁷⁰⁾ these countries were generally not supportive of enshrining even higher standards in the TPP, with the exception of Japan.⁽¹⁷¹⁾ Other TPP parties came to the negotiating table with comparatively weak domestic intellectual property regimes. In fact, five of the eleven other TPP parties featured on the United States’ intellectual property “Watch List” or “Priority Watch List” in 2015.⁽¹⁷²⁾ In Australia - whose intellectual property regime had already been heavily influenced by its bilateral PTA with the United States⁽¹⁷³⁾ - the government expressed strong resistance to any provisions that would require a change in domestic laws.⁽¹⁷⁴⁾ Based on leaked negotiating documents, New Zealand and Chile both proposed versions of an intellectual property chapter simply affirming the TRIPS Agreement standards with few additions.⁽¹⁷⁵⁾ Interestingly, several parties who otherwise opposed high intellectual property standards in the TPP wanted to see stronger levels of protection in relation to traditional knowledge and genetic resources.⁽¹⁷⁶⁾ The provisions on traditional knowledge and genetic resources included in the final TPP text are only aspirational, stating that the parties will “endeavor” to foster cooperation to “enhance the understanding of the issues”⁽¹⁷⁷⁾ and that “quality patent examination” may include the inclusion of relevant traditional knowledge in the prior art.⁽¹⁷⁸⁾

This snapshot of the parties’ different starting points for the negotiations demonstrates the extent of compromise that was necessary in order to conclude the intellectual property chapter. Although the final agreement contains a range of significant TRIPS-Plus provisions, the United States was unable to obtain several items on its wish-list.⁽¹⁷⁹⁾ For example, the United States had initially sought the inclusion in the TPP of limits on parallel importation, and an extension of the copyright term for films and sound recordings to 95 years.⁽¹⁸⁰⁾ In addition to compromise on these substantive points, the TPP provides transitional periods to facilitate some parties’ compliance with new obligations.⁽¹⁸¹⁾ Such periods are commonly included in intellectual property agreements for the benefit of developing nations, but the TPP also provides grace periods for some of its developed country parties. For instance, New Zealand has eight years to increase its term of copyright protection.⁽¹⁸²⁾

As noted above, the United States’ negotiating objectives for the TPP included ensuring both strong protection for intellectual property (including for new and emerging technologies)⁽¹⁸³⁾ and that trade agreements provide access to medicines.⁽¹⁸⁴⁾These competing goals reflect pressure from two different advocacy groups: on the one hand, the pharmaceutical companies that produce innovative drugs, and on the other hand, public health advocates seeking quick and affordable access to new medicines for all countries.⁽¹⁸⁵⁾ The final outcomes reached in the TPP reflect a compromise between these two positions, but arguably “satisfied neither side.”⁽¹⁸⁶⁾One of the most controversial aspects of the negotiation of the TPP in relation to access to medicines was the protection of biologics.⁽¹⁸⁷⁾ The term “biologics” is not exhaustively defined in the TPP, but countries must extend the protection to any:

product that is, or, alternatively, contains, a protein produced using biotechnology processes, for use in human beings for the prevention, treatment or cure of a disease or condition.⁽¹⁸⁸⁾

In comparison to traditional pharmaceuticals, which are typically small molecule medicines produced through chemical synthesis, biologics are expensive to develop.⁽¹⁹⁶⁾ For this reason, producers of biologics successfully sought a longer period of data protection for their products in the United States, and a twelve year data protection period was introduced in 2010 as part of the legislative package negotiated to pass the “Obamacare” reform of the domestic health system.⁽¹⁹⁷⁾ Industry lobbied the United States to push for a similarly long data protection period for biologics to be included in the TPP,⁽¹⁹⁸⁾ but other negotiating parties - particularly Australia - refused to agree.⁽¹⁹⁹⁾ During the last days of the negotiation, a compromise was reached,⁽²⁰⁰⁾ which requires TPP parties to provide either: (a) eight years of data protection;⁽²⁰¹⁾ or (b) five years of formal data protection, as long “other measures” provide “effective market protection” that delivers a “comparable outcome in the market.”⁽²⁰²⁾

The language of this provision appears deliberately vague, with no further definition of these “other measures” or what they might include, aside from a recognition that “market circumstances also contribute to effective market protection.”⁽²⁰³⁾ In Australia’s view, its current system of protection for biologics fulfils these requirements because, even though it offers only five years of data protection, other features of its patent system and regulatory environment for pharmaceuticals effectively extend the monopoly period granted to the originators of biologics.⁽²⁰⁴⁾ The ambiguous drafting of the provision on biologics, and ongoing debate regarding its interpretation,⁽²⁰⁵⁾ demonstrate the difficulties that can arise as a result of having to compromise between staunchly divided countries.

The longer period of data protection offered for biologics was a novel inclusion in the TPP, but it is not the only provision that may impact on access to medicines.⁽²⁰⁶⁾Other relevant provisions include obligations to allow for extension of patents in the face of unreasonable regulatory delay,⁽²⁰⁷⁾ and requirements to link marketing approval for generic drugs with notification to the holder of the patent for the relevant originator drug, to allow them an opportunity to seek remedies for patent infringement (known as “patent linkage").⁽²⁰⁸⁾ Beyond the intellectual property chapter, other elements of the TPP may also impact upon access to medicines, including an annex to the transparency chapter relating to the marketing and regulatory review of pharmaceutical products and medical devices.⁽²⁰⁹⁾ Although the combined impact of these provisions has given rise to considerable concern among public health advocates,⁽²¹⁰⁾ the TPP also provides some limited flexibilities that allow parties to derogate from their obligations to promote access to medicines.⁽²¹¹⁾ In particular, nothing in the intellectual property chapter should prevent a party from taking measures consistent with the WTO’s Declaration on TRIPS and Public Health.⁽²¹²⁾ That Declaration affirms the right of WTO Members to grant compulsory licenses of patents for the production of generic medicines,⁽²¹³⁾ and to determine what constitutes a national emergency for the purposes of exceptions provisions in the TRIPS Agreement.⁽²¹⁴⁾

Another aspect of the TPP intellectual property chapter that has been highly controversial is its provisions relating to the enforcement of intellectual property rights, particularly copyright. Two major efforts made prior to the TPP to strengthen mechanisms of enforcement for intellectual property rights faced significant public resistance, beyond anything seen in previous controversies related to intellectual property.⁽²¹⁵⁾ The first of these was the Stop Online Piracy Act (SOPA),⁽²¹⁶⁾ a bill introduced in the United States Congress to target websites that engage in, enable or facilitate copyright infringement.⁽²¹⁷⁾ It would also have imposed obligations on internet intermediaries, including internet service providers (ISPs), payment networks and search engines, to block access to foreign websites that facilitate online piracy.⁽²¹⁸⁾ This bill was met with massive protests from technology companies, including Google and Wikipedia, which included thousands of websites participating in a shut down on 18 January 2012.⁽²¹⁹⁾

Shortly after the SOPA controversy, another flashpoint for opposition to increased copyright enforcement emerged: the Anti-Counterfeiting Trade Agreement (ACTA).⁽²²⁰⁾ ACTA is an international treaty requiring parties to provide criminal penalties for a range of activities related to copyright infringement, including aiding and abetting (terms that are undefined in the treaty).⁽²²¹⁾ ACTA was negotiated in 2010 and opened for signature in 2011, but consideration of its ratification in Europe in early 2012 led to significant public opposition and protest.⁽²²²⁾ Five of the eight original signatories of ACTA are TPP parties: Australia, Canada, Japan, Singapore, and the United States.⁽²²³⁾ In spite of these countries demonstrating an appetite for higher international standards for copyright enforcement, the public reaction to SOPA and ACTA influenced and shaped debate regarding the TPP’s intellectual property provisions.⁽²²⁴⁾

The TPP intellectual property chapter includes several important obligations relating to the enforcement of intellectual property rights. One provision found in some previous United States PTAs⁽²²⁵⁾ is a requirement to provide both civil and administrative penalties for circumventing technological protection measures (TPMs) employed by copyright holders to control access to their work.⁽²²⁶⁾ Criminal penalties must be provided for any person “found to have engaged willfully and for the purposes of commercial advantage or financial gain” in the circumvention of TPMs.⁽²²⁷⁾ To address online piracy and copyright violations, each TPP party must establish a “framework of legal remedies and safe harbors” that includes “legal incentives” for ISPs to cooperate with copyright owners to deter the unauthorized storage and transmission of copyrighted works.⁽²²⁸⁾ Upon obtaining knowledge of the copyright infringement, ISPs must “expeditiously remove or disable access” to the material.⁽²²⁹⁾ To counterbalance this obligation, ISPs are provided with a safe harbor from monetary damages for copyright infringement on their network that they do not “control, initiate or direct.”⁽²³⁰⁾

While these provisions are certainly significant, the United States had proposed more extensive enforcement obligations that did not make it into the final agreement. These included criminal penalties for “significant willful” copyright violation, even with “no direct or indirect motivation of financial gain.”⁽²³¹⁾ Further demonstrating the effort to balance increased enforcement with the public interest in accessing copyright material, the TPP includes an article requiring each party to “endeavor to achieve an appropriate balance in its copyright and related rights system”, including by allowing the use of copyrighted material for legitimate purposes such as criticism or teaching.⁽²³²⁾ Many previous international treaties, such as the TRIPS Agreement, allow the parties to grant exceptions to intellectual property rights.⁽²³³⁾ However, the TPP is novel in actively suggesting that parties employ such exceptions.

The issues of access to medicines and the protection of biologics, as well as enforcement of copyright, demonstrate the negotiating dynamic that drove the intellectual property chapter of the TPP. Although the United States pushed for some of the highest standards ever seen in a PTA, in a number of important areas other TPP parties resisted, forcing compromise. Overall, however, the TPP provides for a relatively high standard of intellectual property protection. This may be an important factor in the future of the agreement, and whether or not it becomes the basis for a more comprehensive Asia-Pacific regional trade agreement.⁽²³⁴⁾ In particular, it remains to be seen how the presence of these stringent disciplines on intellectual property will impact the likelihood of major players in the region that are not yet in the TPP - particularly China - seeking to join the agreement in the future.⁽²³⁵⁾The extent of intellectual property protection required by the TPP is likely to be one of the points that clearly distinguishes it from the other major plurilateral trade agreement currently being negotiated in the region: the Regional Comprehensive Economic Partnership (RCEP).⁽²³⁶⁾ RCEP is likely to cover intellectual property,⁽²³⁷⁾but its provisions are unlikely to go far beyond the requirements of the TRIPS Agreement.⁽²³⁸⁾

Under the TPP, each party must “endeavor to ensure that it has processes or mechanisms to facilitate the effective interagency coordination and review of proposed covered regulatory measures”, and “shall consider” establishing and maintaining a national coordinating body.⁽²⁴⁷⁾ Although this provision does not prescribe the form that this body should take, the United States’ proposal to include this provision was based on its desire that other parties create an agency or mechanism with a function similar to its Office of Information and Regulatory Affairs (OIRA).⁽²⁴⁸⁾ The purpose of this coordination mechanism is to ensure that the development of measures adheres to “good regulatory practices”, while minimizing overlap or duplication between agencies and advising on systemic regulatory improvements.⁽²⁴⁹⁾

The good regulatory practices encouraged by the TPP centre around the conduct of RIA, “to assist in designing a measure to best achieve the Party’s [regulatory] objective.”⁽²⁵⁰⁾ The TPP allows some flexibility by acknowledging “differences in the Parties’ institutional, social, cultural, legal and developmental circumstances.”⁽²⁵¹⁾Nevertheless, it states that RIA should “rely on the best reasonably obtainable existing information”⁽²⁵²⁾ and include the following elements: (a) an assessment of the need for a regulatory proposal;⁽²⁵³⁾ (b) an examination of the costs, benefits and risks of feasible alternatives;⁽²⁵⁴⁾ and (c) an explanation of why the selected regulatory approach was chosen.⁽²⁵⁵⁾

These provisions of the TPP go further in prescribing general standards for the development of regulatory measures than any previous PTA. The good regulatory practices it requires are focused on improving domestic governance, and nothing in their text is explicitly linked to international trade or investment. In contrast, the European Union’s proposal for the regulatory coherence chapter of its TTIP with the United States contains far narrower obligations relating to impact assessment.⁽²⁵⁶⁾Under the proposal, the European Union and United States would affirm their intention to carry out RIA in accordance with their respective domestic rules and procedures, but with the added requirement that the parties examine “relevant international instruments”, the “regulatory approaches of the other Party”, and the “impact on international trade and investment” when evaluating options under consideration.⁽²⁵⁷⁾

Given the diverse economic and political systems of the TPP parties, it may seem surprising that they were able to reach common ground on how regulatory measures should be developed. All TPP parties are members of APEC and, in that context, had already expressed their support for regulatory reform along these lines. In their 2011 Leaders’ Declaration, the APEC nations committed to ensuring transparency, implementing internal coordination mechanisms, and developing or strengthening domestic RIA procedures.⁽²⁵⁸⁾ Thus, while the TPP sets an important new precedent for the treatment of regulatory measures in PTAs, the mechanisms and processes it endorses have been the subject of considerable discussion and agreement in other fora.

The literature on the inclusion of regulatory coherence or cooperation requirements in PTAs has generally focused on the integration of parties’ domestic regulatory systems through institutional cooperation, harmonization of standards, or mutual recognition arrangements.⁽²⁵⁹⁾ Although these aspects of regulatory coherence are the key elements of other mega-regional PTAs - such as CETA and the TTIP⁽²⁶⁰⁾ - the extent of the cooperation provisions that would be included in the TPP was always somewhat doubtful.⁽²⁶¹⁾ While harmonization of regulatory standards would be the most effective means of eliminating the harm of regulatory barriers to trade, this goal is politically unrealistic in most circumstances.⁽²⁶²⁾ Substantive harmonization or mutual recognition of each party’s domestic standards is rare, and generally limited to situations involving a high degree of political, economic and/or cultural similarity between the parties. For example, within the cooperative framework established by the 1983 Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA),⁽²⁶³⁾ Australia and New Zealand have achieved mutual recognition of certain product standards and professional qualifications,⁽²⁶⁴⁾ as well as a joint food standards code.⁽²⁶⁵⁾ Given the range of parties involved in the TPP, deep integration or harmonization provisions were never likely to have been included in the regulatory coherence chapter.

The institutional mechanisms created in the TPP do have the potential to provide significant avenues for integration of the parties in the future, although the depth of integration or harmonization that they will achieve is uncertain. Article 25.6 of the TPP establishes a Committee on Regulatory Coherence⁽²⁶⁶⁾ to consider the implementation and operation of the chapter, as well as “identifying future priorities, including potential sectoral initiatives and cooperative activities.”⁽²⁶⁷⁾ Apart from a direction that it coordinate with other TPP bodies and relevant forums to avoid duplication of work,⁽²⁶⁸⁾ the text provides no guidance about the sectoral activities or other cooperation initiatives that the Committee might pursue. At least once every five years, the Committee must review the good regulatory practices espoused by the TPP and consider whether the chapter could be improved.⁽²⁶⁹⁾ Another clear directive to the Committee is that it “establish appropriate mechanisms to provide continuing opportunities for interested persons of the Parties to provide input on matters relevant to enhancing regulatory coherence.”⁽²⁷⁰⁾

In addition to work through the formal committee process, the TPP encourages parties to cooperate through mechanisms such as information exchanges and dialogues.⁽²⁷¹⁾ The language of this requirement provides a nonexhaustive list of examples of regulatory cooperation, suggesting that the choice of cooperation activities “take into consideration each Party’s needs.”⁽²⁷²⁾ The use of these sorts of cooperation mechanisms, while not usually required by PTAs, is often already occurring.⁽²⁷³⁾ The TPP has formalized these processes to some extent by including them in treaty text. However, the flexible and open-ended nature of these obligations means that, in practice, the efficacy of these mechanisms is not guaranteed and will be determined by the political will of the parties. Despite their limitations, including these provisions in a plurilateral treaty with a diverse range of members sets an important precedent that is likely to influence many future PTAs.