Legal Implications of GM Crop Regulatory Lags

Presentation to the 19th ICABR ConferenceRavello, ItalyJune 16-19, 2015

Martin Phillipson &Stuart SmythUniversity of Saskatchewan

Challenge:Trade disruptions cost grain industry over $1B/yr

International regulatory lags disrupt trade

Introduction

• Approval times for GM crop varieties are continually increasing

• Average number of months for regulatory approval in the US from 1994-99 was 6 months

• From 2000-2004 this rose to 13.6 months

• Europabio (2011) estimates this had increased to 25 months in the US

• Phillips McDougall (2011) identify this rising to a global average of 65 months

Regulatory cultivation approval times

Source: Dewar, 2014.

Regulatory import approval times

Source: Dewar, 2014.

What is driving this?

• The EU is in regulatory gridlock with nothing likely to be ever approved there again

• There are presently 74 GM varieties submission packages awaiting EU approval

• Lags of this nature are putting tremendous pressure on international commodity trade due to the low level presence of unapproved events

• Estimated cost to the grain handling industry is increasing every year, now in excess of $1 billion annually

Case study of Syngenta’s Viptera corn

• Viptera is an insect resistant variety

• Released to address insect losses of over $1 billion in lost yield and reduced grain quality annually

• Approved in the US in 2010, for planting in 2011

• Received approval in 9 export markets

• Did not receive approval for import into China until end of 2014 (anticipated in early 2012)

• US corn exports to China dropped by 85%

Syngenta v Bunge lawsuit

• Bunge is a large American grain handling firm

• Longstanding policy of not accepting GM varieties for export to markets that have not approved the specific event

• In 2011, Bunge began refusing to accept Viptera corn due to China’s lack of acceptance

• Syngenta then sued Bunge for lost profits, reputation damages and to remove the policy

• Settled out of court after China approved Viptera corn for import, in Dec. 2014

Cargill v Syngenta lawsuit

• In Sept. 2014, Cargill filed a claim against Syngenta claiming losses of $90M from comingling of Viptera corn into Chinese exports

• Releasing Viptera corn without Chinese approval involved a calculated risk that approval would occur prior to corn shipments being rejected

• The US grain industry sought assurances from Syngenta that it would not release further varieties without Chinese approval

Viptera related class action lawsuits

• In Oct. 2014, 4 different farmer class action lawsuits began seeking damages from Syngenta

• Claims of $1B involving over 300 farmers filed

• The claims argue that corn prices in the US have been adversely affected due to China’s rejection of American corn shipments

• Syngenta is defending itself by stating that American farmers have the right to timely access of new technologies

Patent Cooperation Treaty (PTC)

• With a synchronous global approval system very unlikely, an alternative is urgently needed to the costly trade losses and lawsuits

• An April 2014 report estimated total grain industry trade disruption costs/losses of between $1B and $2.9B

• Status quo can’t continue

• There is no international patent approval agency capable of granting multiple country approvals

• The PTC came into force in 1978 and has 148 member countries

• The PTC makes it possible to receive international patent protection in all 148 countries simultaneously

PTC continued

• Applicant has up to 18 months to receive patent approval in the identified PTC countries

• During this period, it cannot be rejected by any country, allowing the applicant to provide additional information if required

• All 148 member country patent offices have access to documents filed with the patent in making their own decision

• In 2013, over 200,000 patent applications were received by the PTC

Challenges of applying the PTC

• We identify 3 major challenges to adapting the PTC to manage regulatory lags in the approval process of GM crop varieties:

1. Identifying a global champion to lead the effort

Several years of effort will be required to develop and structure such an agreement

2. Lack of incentives for non-GM nations to participate

3. Monitoring and enforcing such an agreement would be daunting, to say the least

Conclusions

• Regulatory approval of GM crop varieties has become a political process over the past 5 years

• Various national governments now directly interfering with the regulatory approval systems (ex. EU, India)

• The status quo is no longer an option given the billions of dollars of trade disruptions

• Ultimately, any such global agreement may involve ‘fencing-out’ non-GM crop adopting nations or regions

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