Skip to content

Eli Lilly’s investor-state challenge against Canada

Mary Bottari of the US-based Center for Media and Democracy writes, “Investor protections were originally created early in the 20th century, purportedly to help foreign investors obtain compensation for direct expropriation of private property by national governments in developing nations with poorly functioning domestic court systems. But the notion has been perverted through trade agreements to apply to ‘indirect’ expropriation and it has been used in recent years not only to attack consumer laws, but to re-litigate issues already decided by domestic courts in developed nations. Thus, we have the U.S. pharmaceutical giant Eli Lilly demanding $500 million from Canada in a NAFTA trade tribunal because the (courts) failed to give them monopoly patent rights over two drugs.”

What are the basics of this challenge?

In mid-September US-based Eli Lilly filed a Chapter 11 North American Free Trade Agreement investor-state complaint against Canada seeking US$500 million in compensation claiming Canada violated its obligations to foreign investors after the Federal Court of Canada and the Federal Court of Appeals invalidated patents for two of its pharmaceutical drugs, Straterra and Zyprexa. In its ‘notice of intent’ filed last June, Eli Lilly asserted that the court decisions (which ended the company’s patents before they expired) represented an expropriation of the company’s ‘exclusive rights’ under the two drug patents.

The Federal Court invalidated the Straterra patent when it ruled the drug did not live up to the ‘inventive promise’ of one of the drug’s compounds promised by the company at the time of filing for patent protection. And Zyprexa lost its patent on the basis of ‘inutility’ since the product again did not live up to Eli Lilly’s promise that it would be markedly superior to existing medication.

CBC reports, “Eli Lilly objects to the way Canadian courts interpret whether a drug has fulfilled its promise of being useful in the treatment of a certain condition. …Lawrence Herman, a former trade official with Canada’s foreign service, (says) that Eli Lilly is less interested in compensation than in changing Canada’s patent law so that judges no longer have the leeway to make the kind of rulings they did in its case. …(And Public Citizen says that) if Eli Lilly is successful in getting the NAFTA tribunal to approve its claim for compensation, it ‘could expose Canada to a slew of investor-state attacks from other drug companies that have had patents invalidated because their patent applications failed to show or predict that the medicines would provide the promised benefits’.”

Following the filing of the ‘notice of arbitration’, a three-member tribunal will be chosen to hear the complaint at a to-be-specified date.

Read more in the Huffington Post and Rabble.ca.