Originally from World Arbitration and Mediation Review (WAMR) 

I.  INTRODUCTION

Pharmaceutical (“pharma”)  business is more complex than ever before, and many companies have evolved to become multinational corporations (“MNCs”) that routinely perform cross-border, large-scale transactions.   Emerging nations are set for growth in terms of testing, manufacturing and consumption, as well as foreign direct investment (“FDI”) that entails the growth in number and size of cross-border investment flows that commonly lead to public and private disputes.  This means that investment protections offered by international guidelines, instruments, and institutional rules, such as international treaties and agreements, need to be reliable along with the available mechanisms for public and private international dispute settlement.  However, there are difficulties and concerns over national sovereignty, expropriation, public interest, lack of transparency, expertise, and arguably legitimacy.   In order to address these types of international pharma demands, contemporary arbitration has made rapid headway in developed Asia Pacific jurisdictions, where enforcement and validity have become increasingly sophisticated. However, in developing jurisdictions, arbitration has grown from a basic dispute resolution procedure to become a trusted adjudicative process supported by local courts.  Concomitant with industrialization is the increasing international convergence of private international laws encompassing developments in international commercial arbitration as the corpus of law that grows out of international conventions and other instruments of trade harmonization in different jurisdictions; all of which pharmaceutical MNCs have become reliant upon in the Asia Pacific.

This article is a discussion of the various types of modern agreements and international treaties impacting the pharma sector and the different types of available adjudicatory dispute resolution instruments. Recent examples are provided to illustrate how Investor-State Arbitration (“ISA”), also known as Investor-State Dispute Settlement (“ISDS”), can affect state autonomy in making important policy decisions that are intrinsic to the pharmaceutical sector such as intellectual property (“IP”) and patent infringements. The dichotomy of state regulatory measures to regulate IP in the public interest and international investment law highlights that it is necessary to assess the contentions between private and public interests at the international level. With the aim of providing a balanced perspective, an important distinction is made between ISA and international commercial arbitration (“ICA”); over which there has been found to be a misconception, resulting in debate.   This will be discussed with a focus on the importance of patents to the pharma industry, innovation, and economic growth.  By granting inventors exploitation of their inventions, patents encourage investment,  rendering it common practice for investors to seek ideal legal environments that provide contractual stability and security.

With the emergence of globalization, interconnectedness, and the refinement of pharmaceutical strategies tailored to accommodate states’ changing individual needs commensurate with development, is the requirement to facilitate growth, carrying high hopes for investors.   Trade globalization growth has seen the rise in popularity of investment arbitration, instigating conjecture of ISDS provisions in international investment treaties as the rate of claims against states continues to escalate.  This paper explores pro and anti-ISDS dialectics on ISDS provisions contained in international agreements and contends that ISDS bears a direct impact on global pharmaceutical trade-related matters, although it has not impeded the increasing appetite for arbitration in the Asia Pacific.