4 Challenges Ahead: Legal and Practical Prerequisites for the Development of a Certificate of Source, Origin or Legal Provenance for the CBD

Tomme Rosanne Young1

Executive summary

Discussions regarding the role, nature and features of a certificate of source, origin or legal provenance (CSOLP), in the context of the Convention on Biological Diversity (CBD) and other international forums (including the World Intellectual Property Organization and the World Trade Organization) have intensified over the last few years.

A degree of consensus exists in relation to the fact that one of the areas (if not the most important area) where less progress has been made is in compliance, enforcement and oversight as part of the overall access to genetic resources and benefit-sharing regime (ABS). This has been linked to a traditional distinction made between users and providers of genetic resources and their different responsibilities with regard to ensuring benefits derived from the use of genetic resources are equitably shared.

And although some research has been undertaken and recommendations have been made as to how to make best use of the CSOLP (proof of compliance with ABS legislation; tracking of resources; verifying uses under national jurisdiction), these have not always been based on well founded data and analysis, and so there are still fundamental questions to address especially with regard to the specific purpose and objective a CSOLP would have and its overall implications.

This chapter offers a detailed analysis of the rationale and justification behind a CSOLP regime and addresses fundamental questions regarding its objectives, advantages and disadvantages and practicalities it will have to consider in order to become operational. It also analyzes the situation of similar certificate-based regimes (property, car licenses, etc.) in order to understand why these are functional and serve a purpose. Based on this, it is argued that to date, most CSOLP proposals seem to rely on a certification of authenticity or product certification scheme which may not be the ideal approach in the context of international genetic resources exchange. The chapter also argues that to create an appropriate incentive for a user of the CSOLP, the challenge lies in tying the CSOLP to clear commercial benefits. The incentives to use a CSOLP should be of such nature, that the CSOLP becomes an unavoidable option for users. To date in any case, given the existing problems of identifying and proving cases of misappropriation of genetic resources or non-compliance with ABS legislation, proponents of the CSOLP seem to be focusing on achieving more ideal objectives (or objectives which are mostly based on anecdotal evidence) rather than linking it to disincentives generated by the deterrent effect caused by (non-existent) ABS-derived sanction regimes (at the national or international levels).

At base, all legal, regulatory, and market systems operate through a combination of four factors – objectives, rules, compliance mechanisms, and enforcement/oversight. In developing an international system of ABS, each of these factors presents a matrix of legal and practical challenges. The last element (enforcement/oversight), however, is currently viewed as both the most difficult and the most important. Until a set of strong and durable incentives can be created (to encourage users to seek ABS agreements and to value their reputation for compliance with them), the most important issues to address will be those relating to finding and addressing instances in which genetic resources are used without permission.

Up to now, although several mechanisms have been sketched out as possible means for compelling ABS compliance,2 all of them depend on the ability to know when genetic resources have been accessed and used, and whether benefits have arisen. As noted below, however, this determination is very difficult to make, both practically and legally. As a practical matter, however, there are significant difficulties in identifying uses of genetic resources, and even in knowing when such resources have been accessed. From a legal perspective, it is very difficult to find an “objective standard” that can be used to clarify the difference between a legal collection of biological specimens, and the unauthorized access to the specimen's genetic resources.

For the present, it is essential to develop some kind of mechanism to enable this kind of oversight. This objective has evolved into the quest to develop a certificate of source, origin or legal provenance (CSOLP). The exact nature of this tool, however, has still not been agreed as yet, nor have detailed practical proposals regarding the contents and mechanisms of the CSOLP been outlined. This chapter examines the challenges of the CSOLP in the ABS regime, considering its role in ABS processes, as well as some specific questions of contents, harmonization, and enforcement/implementation. While it raises problems and concerns, this chapter's intent is to promote the development of the tool, and to maximize its “value added” in the international ABS regime.

4.1 The challenges posed by a CSOLP

For purposes of this chapter, there are two kinds of challenge to be described – the first are the design challenges (the expected role and purpose of the CSOLP), and the second are the practical challenges (on-the-ground issues of how a CSOLP will function effectively).

4.1.1 The “design” challenge: Expectations relating to the CSOLP

There are several primary theoretical questions that must be answered at the outset, before any serious effort can be made to design a CSOLP and formally introduce it into ABS markets and practices. In essence, it is critical to determine first, what role the CSOLP will play in the implementation of ABS, and second, how this specific object can be supported by a certification/registration (CSOLP) mechanism.

Before beginning this inquiry, it is important to raise an even more basic question – the purpose and scope of ABS itself.3 One of the most difficult problems underlying efforts to create and implement ABS is the lack of motivation for the primary actors. Of all the specific groups directly involved in ABS:

only one group (provider countries) is strongly motivated in favor of the development of a functional ABS regime.4 For both user countries and users, compliance with ABS requirements can be costly and difficult, even when those requirements are legally unambiguous and operationally feasible. For many users, in fact, compliance can actually increase the possibility that they will be the target of negative publicity, lawsuits and other claims of “biopiracy.”5 Thus some users feel that the current ABS systems actually punish companies that comply. At the same time, non-compliant companies may be untouched, owing to the technical inability of provider countries and NGOs to detect use of GR, and their legal inability to know what is happening in private laboratories and factories, especially when those facilities operate in another country – beyond the jurisdiction of the source country.

Hence, while a voluntary CSOLP may be made possible by providing incentives for ABS-compliant companies to obtain certificates, the larger question is “what motivates companies to comply with ABS in the first place?” It is appropriate throughout this chapter and this book to keep this question in mind, and to consider how a CSOLP can be part of a larger commercial incentive for ABS itself – an incentive that is sufficiently strong that it can outweigh both the costs and publicity risks of ABS compliance.

4.1.1.1 Role of CSOLP in the ABS regime – needs to be addressed

The single most important question about the CSOLP is one that has not been comprehensively examined, including the primary question: What heretofore unaddressed systemic purpose will be served by the certificate? Generally, the certificate is spoken of as a tool to provide documentation of ABS compliance and/or a listing of persons who have “accessed” certain genetic resources. Before considering the practical challenge (how this system can work), it is important to ask why such documentation is needed. In answer to this, three justifications are usually given for the CSOLP:

In addressing these, there are two factors to consider – how a certificate system can accomplish these objectives, and what benefit will be obtained when they are fulfilled.

[a.] Simplification of documentation for the user

The simplification of documentation can be very important, where clear uses of that documentation exist. As everyone knows who has ever applied for social security benefits, the collection of relevant documentation in forms that are officially recognized by a government agency can be extremely difficult. In order for standard certificates and registries to be useful, their processes must be rigorously overseen so that information collected is exactly comparable across all forms.

It can be even more difficult to obtain documentation of compliance with a permit once it is obtained. In most cases, unless the law clearly authorizes the government to confirm compliance, it is almost impossible to get such official confirmation. Consider for example, the environmental licensing of industrial facilities. A facility must usually get a permit to discharge “process water” into a river, or even onto land (where it will seep into groundwater). That permit will contain certain conditions regarding the treatment of water before discharge. Thereafter, the holder of a permit may wish to sell the facility, and may seek a statement from government that his facility is in compliance with the conditions of his water discharge permit. Such a statement may be almost impossible to obtain, since government officials fear that such a statement could prevent them from demanding compliance if a problem is later discovered. Even when the facility meets all relevant standards, it is difficult (and sometimes impossible) to obtain documentation, signed by an appropriate official, proving this fact.7

Where documentation requirements exist, they may vary greatly, even within the same country. If two different agencies (or two different units within a single agency) both require documentation of an event, it is possible that each will focus on a different aspect of that event, each requiring a different kind of documentation. For this reason, most standard documentation systems are developed after the laws requiring documentation are already in place – to ease the burden of both applicant and agency, by ensuring that the standard document is appropriate for all relevant uses.

The current CSOLP proposals are innovative in their attempt to develop the documentation before the reporting requirement is developed, and even before the system in which it will be used is outlined. The assumption is that a CSOLP will be created by international negotiation, in a way that will satisfy all relevant needs that may arise in the future, including those that are included in the results of the international negotiations, those that are developed or applied at regional or national levels, those that are required by “biodiversity cartels,”8 and those required under national legislation of the user and provider countries.

Assuming that they are able to devise a certificate to fulfill all of these needs, the first objective (simplification of the ABS project for the user) will be accomplished only where the CSOLP

The first two factors can be found where the issuer country's legislation provides a clear objective standard guiding the issuing agency regarding the conditions that must exist in order to issue a certificate. Each country must specify a “checklist” of the objective factors that must be met by an applicant, to qualify for a certificate. The checklist regularizes the process and, to some extent, protects the government official who issues the certificate.11 Of course, the standard also ensures that certificates are only issued when the necessary conditions have all been met. As long as such legislation is complete, and in place, the issuer can give an official certificate, for whatever purposes are described in the law. It will be important, however, to specify those purposes, to avoid the abuse of ABS certificates.

The third factor is both the most important and the most difficult. Users frequently complain that due to the uncertainties of national ABS negotiation and permit systems, they do not have a commercially acceptable level of certainty about their rights, even after the ABS arrangement has been signed. The primary source of this lack of “user certainty” is the fact that formally signed ABS arrangements can later be challenged, under a variety of theories, such as insufficient PIC and MAT compliance, as well as equity and traditional knowledge.12 While the goal of promoting user certainty must be reviewed in context, the fact remains that users are frequently dissuaded from attempting to obtain ABS permission by the fear that such permission will later be challenged or rescinded. Such challenges may be against either the user directly or the national agency. Depending on its specified scope and purposes, a CSOLP may partially insulate the user against such claims.

[b.] Tracking the movement and use of genetic resources

Concerning the second reason cited for creating a CSOLP system (facilitating tracking by source countries), it is less clear how the CSOLP can achieve this. The practical concerns about tracking are dealt with in Part 4.1.2 of this chapter. From a design standpoint, however, the critical question is whether and how a certificate will add value to the ABS system. Existing ABS arrangements typically include provisions calling on the user to notify the provider country in the event of a transfer of the genetic resources/rights to any other person or individual.13 As presently envisioned, the CSOLP will be part of the ABS negotiation requirements (i.e. the CSOLP is not a tool for locating users who are not voluntarily participating in ABS negotiations). In essence, this provision will be a second requirement imposed on those who voluntarily comply with source country ABS legislation. There is no indication of any element of this provision that would force or encourage persons who are not complying with the general ABS provisions to obtain a certificate. Arguably, then, the certificate will obtain data which the source country would already know.

This third objective (increasing user countries' knowledge about the use of their genetic resources) suggests a particular challenge for the CSOLP – to link the certificate requirement to some kind of incentive that will encourage all users of genetic resources (even those who do not know about, or do not bother with, the more general ABS requirements of the user country) to obtain certificates. As discussed below, through such an incentive, the CSOLP could become a major force in the implementation of the international ABS regime.

[c.] Informing the source country regarding ongoing GR uses

The single most significant obstacle to the goal of a functional ABS regime has been the fact that user countries (the only legal entities capable of regulating users after the genetic resources leave the source country) have not generally adopted any of the measures required under Article 15 (and elsewhere in the convention) relating to regulation of users. ABS obligations have been largely ignored by “user countries,” which have mostly not attempted to:

take legislative, administrative or policy measures ... with the aim of sharing in a fair and equitable way the results of research and development and the benefits arising from the commercial and other utilization of genetic resources with the Contracting Party providing such resources14

and

take legislative, administrative or policy measures ... with the aim that ... developing countries, which provide genetic resources, are provided access to and transfer of technology which makes use of those resources ... including technology protected by patents and other intellectual property rights.15

Currently, the positions of many developed countries16 continue to be based on the presumption that because the ABS system focuses on contractual documents, there is no need for legislative measures at all to meet the first requirement quoted above, and that the second above-quoted requirement is subsumed by the first. Consequently, as further discussed in the second book in this series, countries with “users of genetic resources of other countries” under their jurisdiction have generally not adopted legislation to require or encourage such users to comply with benefit-sharing obligations, nor legislation enabling or facilitating oversight by or on behalf of providers. While a few have proposed “voluntary disclosure of source/origin” of genetic resources in patent applications, those proposals (and other discussion of “mandatory disclosure of source/origin”) do not include any ability to use the disclosure as a basis of an action to compel the companies to share benefits, nor do they provide the necessary legal basis that would enable the country's courts to develop a consistent body of decisions regarding the meaning and interpretation of basic concepts in ABS contracts – concepts which do not exist in any country's national law or case law.17

The few countries that have stepped up to consider and develop actual “user measures” (aimed at enabling/promoting benefit sharing), have focused on the concept of patent law, and the possibility of including a “voluntary disclosure of origin” within the national and international regime governing recognition of intellectual property rights. The “user measures” required in the CBD, however, are based on objectives that extend well beyond disclosure-of-origin in patent applications (the primary user measure taken and proposed by user countries to date).18 While some of the needs relate to direct legislative requirements, as mentioned above, others could be aimed at enabling developing countries to take action in legal systems that are expensive and technically inaccessible from their perspectives. For example, in order to meet the spirit of Article 15.7, user country legislation may need to consider practical concerns that prevent developing countries from seeking access to their courts (whether through legislation or by creating special administrative systems).

Regarding notice to user countries about known users and uses under their jurisdiction, it is true that a CSOLP, as a formal and official document (see above), might be relatively easy to use in this way. This role, however, may conflict with the expressed objective of promoting the certificate through voluntary mechanisms and incentives, given that most private organizations and persons might be uncomfortable at the thought that a foreign government was sending communications about them to their own government. The potential for the user government to use this information in other official ways (under tax and customs law, for example) might constitute further disincentives for companies contemplating ABS compliance.19

4.1.1.2 Motivations for CSOLP compliance

From a theoretical or design perspective, the most important question is how the CSOLP will be implemented and/or enforced. Genetic information can be distilled and studied from virtually any specimen of any life form on the planet. At a minimum, this means that it is impossible to control the use of genetic resources by placing firm controls on sources of physical material, because it will be impossible to oversee all such sources. It is also not possible to identify or restrict all movements of biological material, or to maintain awareness of the location of all such physical resources (on the chance that their genetic resources might be utilized). Most important, the majority of the activities relevant to ABS occur in private areas (laboratories, testing facilities, multiplication facilities, factories, etc.) – areas which are usually outside of the source country. Even the user country government will often need a specific legal justification (and formal documents) in order to enter and search such facilities.

[a.] The need for legal mandates

It is important to consider the former paragraph from the perspective of the development of a “legal regime” – that is a formal replicable system for implementation of the benefit-sharing requirement. To some, the legal focus on the prospect of physical controls and enforcement actions may sound cynical, implying that all users are unprincipled. In fact, however, it is just the opposite. The creation of a legally clear and mandatory system protects the law-abiding users, more than any other single group.

Consider this – already, the conscientious user of genetic resources incurs not only the costs of gaining permission for that use, but also the future obligation to share some portion of the financial or commercially valuable proceeds of his work. By contrast, a non-principled user will have neither expense. In light of current technological limitations, if he exercises a relatively low level of care to prevent others from knowing the source of his material,20 he can avoid any serious possibility that his utilization of a particular species or variety (or the source/origin of that species) will be discovered. By avoiding the ABS negotiation process he can ensure that his name is not known on the country's list of “bioprospectors” and further lessen the chances that any agency, NGO, indigenous or other group will target him as a potential misappropriater.21

As a result, the less-principled user will have at least three substantial advantages over the conscientious user. First, his efforts will not be delayed by the sometimes lengthy processes of negotiating an ABS agreement. Second, he will not incur the costs and additional delays involved in full compliance with the country's “access” laws – because his collecting activities, if not labeled “collection of genetic resources” will probably be entirely legal. Finally, of course, he will not have the additional costs of benefit sharing to restrict or affect his determination of whether the new product will be profitable on the market. If the CSOLP is required, it is relatively certain that the unprincipled user will not obtain that either, thereby saving any additional costs and time involved in obtaining the certificate, and the possible additional delays that the patent agency or other user-country agency may incur in acting on applications that are known to involve genetic resources from a source country. Even if ABS compliance is fully and formally mandatory, and clear penalties are stated, an unprincipled user may simply include the possible penalties in his financial planning as a “cost of doing business.”22

This situation becomes problematic for the principled user because he is in business. Commercial enterprises operate on the basis of a key financial “truth” – that companies that do not operate profitably will fail, and that companies whose products and activities are significantly more expensive than the similar activities of their competitors cannot in the long run operate profitably.23 Where the unprincipled user does not feel compelled to comply, the inevitable consequence is that conscientious users will have to make a choice between two options – (1) fall behind their unprincipled competitors until they either go out of business or are forced to cease any work involving genetic resource utilization, or (2) succumb to business forces, and begin to engage in conduct similar to less-principled users. (As a result, some (perhaps many) conscientious users engage in a third, interim option – since they have doubts about the legal issues and applicability of ABS, they assume that they have a “legitimate legal basis for non-compliance” in each particular case, accepting the risk of penalty if it is later found to be wrong.24)

For these reasons, the call for clear legislation does not indicate a belief that there are no principled companies, but only a concern that these companies will be seriously jeopardized if their compliance with ABS principles operates as an anti-competitive force.

[b.] Voluntary provisions (incentive-based compliance)

The business need for enforcing or overseeing compliance with ABS, however, must be viewed in conjunction with the significant (perhaps insurmountable) lack of technical solutions that will determine compliance and identify instances of non-compliance. Typically, countries can address non-compliance trends of this type by taking one or more of the following actions:

These solutions do not appear to be options when applied to ABS, however, because on one hand, the possibility of apprehending a violator of ABS requirements is extremely low; and on the other, the payment of fees and benefits to the source country is the primary reason for the existence of the ABS system (so that lowering these amounts seems an inappropriate solution). Hence, unless the penalty for violation is extremely high, the basic mathematics will not provide an incentive for compliance. This suggests that there is little difference between mandatory and voluntary legislation in the ABS context.

This does not spell the imminent end for ABS, however, only for a shift in emphasis.25 Legislatively, it is almost certainly preferable to create a voluntary system that works utilizing other forces, than to create a mandatory system that cannot be effectively enforced. At the same time, however, this statement requires some explanation. The term “voluntary” does not imply that the user can choose not to take the “voluntary” action and still receive the same benefits as one who does. Nor is it synonymous with “charitable.” Rather, “voluntary” refers to a chain of events. One who voluntarily chooses to take the “voluntary action” commences a chain of events that leads to a certain result. One who does not take the voluntary action, cannot achieve that result.

Paradoxically, the primary difference between voluntary and mandatory are that voluntary systems, if well designed, may be better mechanisms for enforcing ABS. This is shown in Figure 1:

Figure 1:

If the CSOLP system (and/or ABS itself) are to add something to the ABS framework, they must find a way to provide a recognized benefit, or avoid an otherwise unavoidable cost or other disadvantage. Given the evidentiary problems facing ABS enforcement, it is probably not enough to say that complying users will avoid violating the law. Although this may be sufficient for the most principled users, those users are already in the fold.

Rather, the objective of creating an additional process requirement (which will add to the costs of both users and governments) will be to bring other users into compliance. This means that the benefit provided through CSOLP compliance must be recognized by companies and entities who do not currently see a reason to comply with ABS requirements, including:

Incentives for CSOLP compliance must be sufficiently valuable that (at minimum) they outweigh the cost of obtaining a CSOLP. The nature of the benefit may differ depending on whether the user is already compliant with ABS or not.

Thus, for companies already planning to obtain an ABS arrangement, one incentive might be “streamlining,” if the CSOLP process operates as a way of shortening and simplifying ABS compliance while still appropriately protecting the provider. However, such an incentive might not encourage a non-compliant user to obtain a CSOLP, since streamlining can probably not make the process take less time than it takes to ignore the process entirely.

It is important to note that there are two ways to approach the incentive issue. One is to consider the incentives to participate in the ABS system, and the other is to separately consider the incentives that can be linked to the CSOLP itself. As a concrete, objectively verifiable item, the CSOLP may be easily linked to governmental benefits beyond the ABS structure itself, including those managed by completely different governmental sectors, including, for example, providing evidence for a tax deduction, providing a streamlined process for other permits (such as permission to introduce GMOs into a country) or providing evidence for other requirements (such as serving as an indicator of “corporate social responsibility” in countries that impose CSR requirements on foreign companies seeking to permission to operate within their jurisdiction).

4.1.2 The practical challenges: How a CSOLP will function effectively

The design analysis clearly indicates that simple command and control (“comply with ABS or you will be penalized”) approaches may not be effective. Instead, development of a CSOLP must begin with determinations about how the certificate process can add enough value to the ABS process to be worth the cost of design and implementation of the system.

This determination must be based on the ability of the CSOLP to increase certainty and compliance, and/or to enable enforcement and oversight, not only with regard to compliant users, but also with regard to those who are currently non-compliant. This ability must be based on solid operational matters, rather than questions of good faith or public relations. The parties will have to consider not only the objectives they wish the CSOLP to achieve, but also come to some decision about whether and how it can do so.26

These questions (whether and how the system can achieve its objectives) call upon the Parties to take two initial actions regarding the CSOLP:

Once the legal mechanism and unavoidable linkage have been agreed, then, as noted in other chapters of this book, the technical questions of what the certificate should certify and how (practically and scientifically) it can be validated and tracked, can be formally considered.

Many assumptions have been made about the impact of creating a CSOLP. These assumptions are based on the expectation that once a CSOLP has been created, users will comply with it. Up to this writing, there has been little or no analysis of whether such assumptions are valid,27 or what factors will increase the likelihood that the CSOLP will be effective once it is in place. Since the CSOLP proposals are all theoretical, there is no direct experience with them to provide some indications of the practical issues affecting their validity and functionality.

However, sources of guidance and experience do exist in other sectors, where an astounding variety of important governmental objectives are successfully imposed on both principled and unprincipled individuals and other entities without primary reliance on direct oversight by governmental prosecutors. These provisions rely on other reasons (incentives) which encourage, sometimes virtually mandate, compliance. To address practical challenges of the CSOLP, it is essential to begin with an examination of these laws, to determine how existing certificate-based systems and registries operate as controls on commercial activity.

This section seeks to provide a clearer understanding of the underlying reasons why certificate systems can function effectively in some contexts and not in others. That knowledge may enable the Parties to make a workable decision about how a CSOLP system can be used. These examples demonstrate that the key to success is not in the design of the certificate (a relatively simple question), but in the more complex issue – design of the system so that the permit requirement is integrally linked to a desirable commercial or individual result (or to the avoidance of an undesirable result).

The following discussion considers several kinds of governmentally established uses of certificate systems and registries, including so-called “voluntary certification systems.” It considers a number of different types of systems, looking for each at its objective, its specific mechanism, and the incentives and benefits that motivate users to comply.

4.1.2.1 Certifying ownership of intangible and other property

One of the earliest certificate/registry systems was created to prevent commercial abuses and unfair practices in commercial and investment transactions. The desired objective in setting up these registries was to curb abuses that often occurred where the property being sold was either intangible or immovable. Lacking any official protection for buyers, unprincipled “sellers” might easily convince an unsophisticated person to buy an interest in a company, a piece of land, or some other commodity, that the purported seller did not own. All one had to do was print a few official-looking documents.

Several kinds of registry and regulatory systems were created to address this kind of concern. For example, most countries have created official land registries to prevent this kind of abuse in the real property industry. These registries include all owners of any interest in property including easements, mortgages, and in some cases tenancies. Many countries have similar registries for cars and types of other large moveable property. IPR laws address a different side of this issue, focusing on protecting the owner of intangible property (protectable ideas) from those who would effectively take a part of his interest without his consent. A related concept, stock exchanges, and other registries of stocks, bonds and investment certificates were formed to give the purchaser an official resource which can confirm that the “stock certificates” or other documents evidencing ownership of intangible property are genuine.

All of these (and many other) systems provide two kinds of protections. First, they allow the purchaser to confirm, before closing the deal, that the seller has a valid interest in the property being sold. So long as he has taken this step, the buyer is both practically and legally protected against claims that the purchase was fraudulent, and the property not owned by him or her. After the purchase, of course, the buyer promptly registers his ownership in the same system. This protects both seller and buyer. The buyer then knows that no other person can sell or place encumbrances on the property without his consent.28 For the seller, there are very different, but equally compelling benefits. For example, if the transaction is not recorded, the seller will be liable for all property tax, even though he no longer actually owns the property. Usually this factor alone would be sufficient to prioritize the official recording of any property transfer. The seller also knows that he will not be liable for actions taken or damage caused by the property, once it has formally left his ownership.

In financial terms, the registry's method of distributing costs of oversight and management is different from that of a standard command and control regime. After the initial costs of equipping and setting up the system (including database system development and entry of pre-existing records), the cost analysis of such a registry focuses on the cost of the clerical and administrative staff. The basic governmental costs of enforcement of the registry system are relatively small, because the benefits to the parties make it self-enforcing. On the strength of these incentives, the government has no need or interest in enforcing the registry as a requirement. In the interests of promoting and protecting the national commercial system, however, the government has a compelling duty to ensure that the registry is complete, accurate, up-to-date, accessible and tamper-proof. Hence, it is not enough to simply open an office and input the parties' records into the electronic or paper filing system. Each record must be checked for accuracy (so that it is comparable to all other records); the officials must confirm that it contains all appropriate seals and stamps (to verify that the documents are not fraudulent) and continuing efforts will be necessary to ensure that the registry is safe from outside manipulation.

In addition to accurately entering this material into the property database, they must provide or enable the provision of an access system by which property owners, prospective purchasers and lenders, and others may obtain complete and verified records from the system. The access system is not inexpensive, but it is possible for it to be provided by private companies, which provide not only a clear and accurate report of all existing documents and conditions affecting the title to the property, but also insure the accuracy of this “title search.”29 The fees paid by such title-search companies for access to public records can provide a large share of the total governmental cost of maintaining the registry. These costs, plus the costs and profits of the title-search company, are in turn paid by the buyers, sellers and lenders who need dependable, insured title information.

This is an important aspect of the title registry system – the ultimate (quite large) cost of using the system is borne by the person who needs system information. In the case of the ABS system as currently perceived, such searches will most frequently be sought by providers, to verify compliance. Hence, the costs of the system will fall squarely on countries, communities, and individuals – primarily from developing countries.30

4.1.2.2 Protection from market abuses

In some conventional markets, a single entity or a small group of entities may constitute all of the primary buyers (or the primary sources) of a commodity. If the entire group joins forces, it may be possible for them to control the price for the commodity through concerted action. In addition to being anticompetitive, this can result in serious oppression of those on the other side of the transactions.

Examples of this situation include the market in precious gems. At the time of extraction, there is a relatively small group of buyers, who purchase (to cut and/or resell) all such gems. If they worked in collaboration (and outside of public scrutiny) these companies could artificially set the price for their commodity. With no other option, sellers would be forced to accept lower prices and inappropriate limitations of their rights, in order to sell their production. Another example is the relatively small group of countries which have crude oil resources to sell on world markets. They, too, have the ability to control availability of this resource, and thus cause worldwide price increase or decrease. In many countries, however, these same concerns have led to the regulation of most kinds of larger commercial entities, as a means of protecting their shareholders who (without such protection) may be similarly at the mercy of decisions by major shareholders and directors.

National and international registries and certification, coupled with market transparency regulations, help assure that these markets are transparent, and that market manipulations are subject to government or international scrutiny. Thus, for example, gemclass cut diamonds may be traded only in one of the 24 “diamond bourses” in the world through which the trade in these stones is tightly controlled, but subject to strict commercial standards.31

As trade in other products has become increasingly specialized by commodity, commodity exchanges have formed, to provide the same level of transparency and market control, protecting suppliers, traders and ultimately consumers.32 Currently, a great many entrepreneurs and governments are attempting to develop similar institutions to regulate the use of the “carbon trading” mechanisms created under the Kyoto Protocol.33 In some cases, members of the limited group of purchasers may be required to register and accede to specific standards regarding how their prices and conditions are set and disclosed, and to register and document the number and volume of transactions.

Participation in these markets is basically voluntary, and may sometimes be costly in terms of permit and reporting requirements. A variety of incentives encourage participation in exchanges of this type, affecting different types of participants. Sellers, for example, find access to a wider variety of buyers and a transparent market so that they can be assured of getting a fair market rate for their produce. Buyers find a single source for their purchasing activities. Most important to both, the system encourages investors, whose objectives are speculation and market-based profit. Through commodities exchanges, investors have access to the regulated “futures market” through which they trade in options (a kind of investment in future production). For the investor, the futures market offers the chance to speculate (invest based on the possibility of larger profits that would be available through normal interest and development), while for the underlying parties it operates to increase the availability of funds throughout the growing or production period.

4.1.2.3 Certifying a specific item – “passports,” verifications and assays

A third type of registration/certificate system focuses on providing more permanent identification (a “passport,” in a way) for a particular item or commodity. This type of system generally has one of two objectives, either

[a.] “Passports” for the movement of goods or individual items

A government may have many different reasons for creating a documentary tracking mechanism for moveable items. Where the goods are dangerous in some way, for example, the government may need to control the manner in which they are transported, stored, or managed; or may simply need to know where they are located (for purposes of updating area emergency plans). Some other goods are not harmful in themselves, but have been identified as the most concrete element of an industry or activity that must be controlled. In essence, the law has determined that stricter control of the goods will cause stricter control on the industry or activity underlying those goods.

Hazardous material permits:

The most common “passport” system is used for harmful items that may be transferred or used only with permission. For example, businesses that generate hazardous wastes are often required to label those materials, and create (and register) a permanent certificate that follows the waste from the moment of its creation (the moment it becomes a waste) until its final disposal. This record will be required in order for the business to use or dispose of these materials, and it provides a basis for financial responsibility even after the wastes have been disposed of in an appropriate way, in the event that the materials harm anyone or the waste disposal is ultimately breached or otherwise violated. These systems are found in a great many countries,34 and are also mandated in international law, with regard to the transboundary movement of hazardous wastes.35

These systems can be very detailed, because their primary purpose is to make it impossible (hopefully) for one to transport or dispose of hazardous substances without complying with both the certificate process and with the underlying rules for ensuring that transport and disposal of hazardous wastes are safe, and protect people and the environment. As a consequence, these systems are typically set up so that the generator of the waste is responsible for packaging and labeling it for transport, and for creating the certificate that travels with the waste. Copies of the certificate are filed with relevant agencies, both by the generator and by the transporter or disposer of the waste. In addition, the contents of barrels, tanks and other packages in transit or after disposal may be inspected and tested at any time. If they are not covered by a certificate, or if the certificate is erroneous, the generator and others in the transport and disposal chain may be penalized. Even if there is no error in the documentation, however, where the waste is extremely hazardous, the generator, transporters and disposal facilities may continue to be liable, in case the disposal containment is breached or insufficient and the waste causes harm.

Hazardous materials transport and disposal systems are usually mandated by very stringent laws, so that the failure to comply with permit requirements is a criminal act, punishable by fines and even imprisonment. The system's design, however, can make it largely self-enforcing. Very often, the permit system imposes the same level of criminal penalty on all persons in the chain of waste disposal, from the original facility that created the waste through all transporters and storage facility to the ultimate disposer. If any of these parties has accepted waste without appropriate documentation, they may be civilly and criminally liable. Waste disposal and storage facilities, for example, face a relatively high risk of future detailed scrutiny by government, “watchdog” NGOs and other individuals. All companies that transport hazardous materials and companies that operate hazardous waste disposal sites may be liable to pay extremely large judgments, fines and penalties unless they can prove that they have complied with hazardous waste management laws. In many cases, this potential liability is not limited by normal statutes of limitations. Hence, they (and all entities in the chain) have a strong incentive to make certain that they can document compliance with hazardous waste laws (and certificate requirements). The companies become the primary mechanism for overseeing the general use of certificates.

Permits for international movement of endangered species (CITES):

As another relevant example, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)36 creates the framework for an integrated network of national laws requiring a similar kind of passport for the movement of specimens of endangered species.37 The objective behind CITES is not to protect the public from the species, but rather to control commercial trade that is endangering species survival. In essence, the CITES Parties concluded that the cross-border movement of specimens is an appropriate “choke point” through which commercial trade activities that are endangering species can be controlled. Through CITES controls, countries can alter the market structure of such trade, because the CITES permit system is integrated into the national system that controls natural resource uses in the source country (scientific and management authorities), the systems that control international trade more generally (customs), as well as market systems in recipient countries.

The CITES system requires a person internationally moving specimens of a listed species to get separate permits for each specimen (or group of specimens of the same species).38 It actually requires a “double permit” process, in which the person moving a specimen must usually get a permit from both the country of export and the country of import.39 In general, CITES primary problems at present are consequences of its success. Gaps in border control are one such problem (given that the CITES controls have successfully limited or curtailed trade, creating a stronger impetus for involvement of the criminal element). Another is the problem of identification of controlled specimens and their parts and derivatives. With thousands of species currently listed for control under CITES, and given that border control officers have other tasks in addition to controlling movement of illegal species, customs and other officials may not be able to address the full range of these responsibilities.

As further discussed below, the CITES system is heavily dependent on the permit itself (the paper copy) in order for goods to pass national boundaries in most countries. CITES is still grappling with the possibility that formal documents will be issued on the basis of falsified verifications, as well as the possibility that the formal documents themselves will be counterfeited or altered.40 Similar problems may also arise in hazardous waste control systems, although in countries with broadly accessible high-speed internet access (North America, Western Europe and some parts of Asia), many of these problems can be addressed by maintaining a secure electronic registry of the permits, which can be accessed by officials and members of the public to determine if the permit is valid.

CITES has frequently been cited as a possible example of a system on which the ABS framework can be modeled. There are, however, a great many essential differences between the CITES system and the particular needs of the ABS framework.41 For example, CITES involves a one-time action (import of a particular item across a national border), after which the permit terminates.42 If it is later necessary to export/move the item out of the country, new permits will have to be obtained to address the new movement. Consequently, CITES does not include any control on post-transfer use of the specimen. Although in some cases the importer may be asked his reasons for importing the specimen, there is nothing in the CITES or most countries' implementing laws that limits the importer's actions after the specimen has been legally imported, including selling or transferring it to others.43

Even if not a prototype for the CSOLP system, CITES does offer an example of the level of specificity needed in developing a standardized control mechanism that is to be applied on a rigorously consistent basis by all countries. It specifies in detail the characteristics that all countries' laws must embody, such as the existence of one or more scientific authorities and a “management authority” and the basic standard on which decisions must be based. It leaves to the Parties the task of choosing the authorities and making the scientific, technical and administrative choices regarding the manner in which the basic standards are reflected in (and proven under) national law. Although the scope of the CITES decision is much narrower than the ABS decision (whether the import or expert could be detrimental to the species, how to certify that the capture/collection of the specimen occurred in compliance with applicable national laws and regulations) and involves a more limited regulatory time period (the one-time import/export of that specimen), CITES provisions about the national implementation framework are more than ten times as long as the CBD provisions addressing its ABS framework.44 COP decisions, guidance documents and other officially recognized analyses directly deciding on elements of necessary implementation number hundreds of pages.

[b.] Certifying the content and/or purity of particular items

Another “passport” type of certificate focuses more on the transmission of information than on enabling movement in trade. “Certificates of authenticity” and assay reports may be used, for example, where one owns an item whose value depends on whether it is “genuine” (an antique, for example), or on its composition (e.g., whether it is made of gold or some other substance and how “pure” the gold is).45 One might take the item to a qualified expert or an “assay” office, where its validity or the contents/purity can be verified. An assay may also be sought where an individual has found valuable metals (or other commodities of interest) on his property.

After the official evaluation, the item may be certified. In some cases, this certification is in the form of a letter from the expert regarding the item. Where called upon to confirm the purity of an item made of precious metal, the assayer may stamp the item with a “hallmark” or other identification of its contents. The owner of property containing precious metal deposits may also get an “assay certificate” to demonstrate the percentage of precious metals found in his samples and/or an inspector's/engineer's certificate that the ores have come from the property.

Both of these certificates have two components – the registration of the individual (assayer or engineer) giving the certificate and the certificate of the item inspected. The verification of the former is through the agency or organization performing the certification, and its strength will depend on what level of information and evaluation was applied before granting or denying the certificate. If registration can be obtained solely by the payment of fees, without any check of the individual's qualifications, then the credibility of the second certificate (the assay certificate or mine inspection) will be compromised.

The incentives to participate in this system are relatively obvious. One who owns or seeks to purchase a particular item or commodity may need some assurance of its authenticity. He will be willing to pay for this, where there is a sizeable difference in value between an authentic product and a fake (or a product that has not been tested and later proves to be different than advertised). The seller will get a better price for a genuine item than one which “might be genuine,” and the assayer receives a fee for providing this service. Nearly all authentication and assay contracts, however, note that the work of the assayer depends on the cooperation of the owner of the samples, to provide true samples, and correct information about their origin. It is generally impossible to provide a usable authentication or assayer's certificate where the owner of the property, or the product developer, does not provide full information about the material.

Governmentally, the system's needs are relatively simple. It must be based on a uniform set of standards by which all assay results can be comparable to one another, and usually also a system for the qualification of assayers or other experts (as discussed in a later section of this chapter). In a few cases, such as hallmarking of precious metals, the desire for transboundary comparability has led to the development of international rules, systems and standards.46

The primary limitation of this system, however, is in its legal effectiveness. In general, these systems depend on expert verification (as discussed below) regarding a specific item. When the expert is not present, it might be possible to alter that verification or simply to change items and claim that the new item is the one that was verified. Usually, for legal purposes, authentications and assays constitute a short-term contract between the expert and the individual(s) asking for the authentication. They apply only at the time they are undertaken, and cannot be used later for a subsequent sale of the same property.

One critical problem with this kind of system is the lack of an integrated self-correcting/self-policing mechanism. Assayers and other commodity certifiers are individual experts, providing an analysis of a particular item. The only guarantee of the veracity of the assayer's certificate is to take the material to a second assayer. In most cases, assays are not registered (there is no central database of assays) because the contents of the assay is thought to be confidential – between the assayer and his client.47 Consequently, there is little opportunity for oversight. If an assay certificate or other certificate of authenticity is given falsely, its inaccuracy may not be discovered. When/if it is discovered, the “victim” of the misrepresentation may not feel any incentive to report this fact to the proper authorities, and financial or time constraints may prevent him from taking other action (seeking damages from the assayer).

[c.] Bioassays

Although at first glance the concept of authentication and assay certificates seems very different from anything being considered for the CSOLP, the technical mechanism discussed in connection with the oversight objective of the CSOLP is essentially a kind of “bioassay.” In this connection, however, bioassay information is to be used for oversight or enforcement purposes. Hence, the person obtaining the assay would not be seeking to value a specific item, but rather to confirm very specific information regarding the product. In addition, because they need to be used in courts, the bioassay must verify information normally provided by the owner or developer of the item to be assayed. The court would expect the assay to identify the specific species/subspecies/varieties used in the development or production of a particular product, and presumably to confirm their source or possible sources.

As noted in other chapters of this book, the capacity of bioassays to provide enforcement evidence is improving. New and developing techniques may help the CSOLP get past the current impossibility of determining source by examining the final product.

4.1.2.4 Registration for governmental controls and assessments

A very common kind of registry involves requiring registration as a means of imposing specific kinds of government requirements. Examples of this kind of certificate system are numerous. For purposes of discussion, this chapter will consider three: the registration of motor vehicles, the control of the traffic in goods at national borders (customs controls), and the national registries of taxpayers and voters.

Registration of motor vehicles:

Vehicle registration systems enable government to track motor vehicles – increasingly a primary identifier of human actors in many modern societies.48 Where effectively enforced, these systems enable government officials to regularly ensure that motor vehicles are safe and within operating requirements, to keep control on drivers, to impose taxes and other fees for highway maintenance and other costs, and to keep records of changes in ownership of property of significant value.

Incentives for registration include, for example, the desire to protect oneself from temporary loss of the vehicle, which may be impounded by any public officer, if it is driven on public roads without proper registration, and the fines and impound fees that might be charged. More important, this registration system also provides the vehicle owner with legal protection. By recording changes of registration, buyers and sellers can protect themselves from legal claims and liabilities. In addition, the motor vehicle registry is closely linked to a related certificate system for the registration of persons licensed to drive. An unlicensed driver may also face impoundment of the vehicle (no matter who actually owns it) at the time he is discovered to be driving without a license, and any person driving an unregistered vehicle may face penalties that could include suspension or revocation of his driving license.

Customs:

Customs certificates and declarations (some of which must be prepared long before the actual movement of property) are designed to serve a variety of government objectives.49 Customs filing and approval systems create a record of the transportation of goods across national borders. As such they provide a basis for imposing customs duties and other taxes, and can sometimes provide formal confirmation that goods have been legally imported. They also regulate the entry of controlled substances and give border authorities a very broad mandate for regular and random searches of luggage and containers crossing borders. The incentive for participating in customs systems is primarily legal mandate. Where customs controls are effective,50 two factors are commonly found, which can be presumed to have a significant impact on that effectiveness.

First, there are particular, unavoidable “choke points” at which most cross-border movement can be specifically overseen. Since the law regulates the moment of border crossing (rather than creating an ongoing requirement), where choke points are controlled (and constitute the primary or only opportunities for entry into a country) it is possible to control virtually all cross-border traffic with a relatively small number of officials.

Second, there is a substantial fine that can be easily assessed against any person who fails to report or disclose any goods that must be reported at customs. Even though customs officials open only a small percentage of baggage or cargo, the random nature of customs searches coupled with the high levels of penalty cause most persons to comply with disclosure.

Tax, voter and draft registration:

In most countries, one or more carefully developed and implemented registries exists for the purposes of assessing and collecting taxes, verifying each voter's qualification, and (often) registering young adults for military service. The objective of this type of registration, from the governmental perspective, is information – it is essential for taxing agencies, election overseers, and the military to have complete and up-to-date information about the country's citizens and taxpayers.

The mechanism of these registration systems is relatively simple. Usually, everyone above a certain age is required to register. In some cases (tax registration), this requirement applies regardless of one's citizenship or residency status. In many countries, however, enforcement of these requirements does not occur through regular screening, but through other incentives to comply.

While similar in many ways, these systems are very different with regard to incentives for participation. In the case of voter registration, the primary incentive is direct – one cannot vote without registration, and unregistered persons may be unable to participate in civic meetings, hold local offices, or exercise other civil rights. Hence, the incentive of voter registration is that the individual wants to be a registered voter. Because this status is desirable, many countries have grafted other requirements into voting registration. For example, the registration form may ask for additional information which the government is interested in, to be included in governmental databases.51

Registration for purposes of taxation and military service, however, is quite different. Given a choice, many people would prefer not to pay taxes or engage in mandatory military service. For this reason, where possible, governments attempt to make this kind of registration automatic, although this is not always possible.52 Persons who obtain work permits or register in the social security system may be automatically added to the list of registered voters, for example. Young adults may be automatically registered for the draft through their schools.

Even for these omnibus systems, however, some other factors may provide an incentive for people who have been left outside of the system to register. The tax rolls are frequently integrated into a complex web of business relationships. One must register in order to be employed in many countries, and usually this registration is directly recorded in the tax roles. However, it is also usually integrated into the employee benefits system, so that an employer may not obtain tax credits for payment of employment benefits such as sick leave, health insurance or social security, unless the employee is registered as a taxpayer.

4.1.2.5 Registration of specialized experts

Yet another kind of certificate system relates to the provision of expert services. In many cases, the person who requires such services is not technically qualified to evaluate the competence of the expert. A mis-step (hiring an expert based on his demeanor or verbal skills) may mean that the purchased advice will be deficient (incorrect, low quality, unhelpful or un-credible). Often, the end result is simply less value for money, but in some cases, the expert's qualifications can be more essential. One urgently needing the services of a heart surgeon, a defense attorney, a property assessor, a toxicologist or even an auto mechanic, for example, will typically not want to obtain substandard services. In fact, he will usually want the very best possible assistance or advice. However, unless he is also fully qualified in the experts' field and speciality, he will not have the relevant technical knowledge to enable him to competently evaluate the qualifications and performance of those experts.

Official registries of qualified experts may serve many purposes and operate in many different ways. In many instances, they may serve simply as a record of basic qualification (a list of certified experts with no evaluative element). Expert registries can go far beyond these basic “listing” systems, however. For example, some kinds of services are limited by law, and may only be provided by licensed professionals. The range of such services is very broad, running from medical doctors to court recorders.

One type of certified professional services which is particularly relevant to the ABS situation is the system that controls the authentication or notarization of official documents and contracts. Many transactions and government filings require “contractual formalities,” including the verification of the identity of the persons signing the document. A special legally authorized person (sometimes called a “notary public”) must provide this verification. In most countries, the law requires that these designated service providers must be specially trained, authorized and even bonded, to ensure that they properly verify and confirm the identity or other issues that they attest to. A notary is bound by a formal oath and may be criminally liable if he files an “acknowledgement” falsely or without the requisite care.53 It is reasonable to expect that the CSOLP may have elements that must be officially verified in some fashion.

Although many expert systems are backed up by criminal law (penalties for providing services without a license), only limited governmental resources at most are available for “spot checking” and other direct enforcement. Consequently, the discovery of unlicensed service providers almost always occurs as a result of malpractice. If the unlicensed professional provides high-quality un-challengeable service, his work is not likely to be investigated, and his lack of a license may never be punished. This means that the system waits until someone is injured or some violation has occurred, before finding and punishing the unqualified service provider. And most important, at this point, it is often too late to prevent harm or to find a financially solvent party to pay the costs of damages.

4.1.2.6 “Voluntary” and non-governmental certification of products and processes

Another more recently developed kind of certificate/registry system is found in programs for the certification of products or companies relating to issues of “social responsibility” and other issues of consumer concern. Voluntary standards and certification systems are gaining increasing attention as possible tools for achieving a variety of objectives, including responsible hiring and employment practices; cultural protection; social welfare; biodiversity conservation; protection of species and ecosystems; equity and livelihood improvement; and sustainability.54

Historically, voluntary product certification has developed organically, as needed to serve many needs. For example, initial product certification was created to ensure that physical standards (precision in size, shape and composition of produced goods) were complied with. This kind of certification supported the growth of industrial processes based on the manufacture of “interchangeable parts.” Later, standards for certification were developed to address other needs, including safety certification of electrical and other consumer goods, content certification of vitamins and other kinds of products, and quality certification of products and services. All of these kinds of certification are based on standards and testing – an entity seeking certification either provides samples for testing, or provides test results demonstrating compliance. These certification systems have generally been self-generating and self-supporting. If certified products are later shown not to meet the standards (i.e., do not fit the uses they are certified for) the users will know this and can bring suit or take action based on false certification.55 All other producers that use the same certification standards have an interest in making sure that the standard and certificate are respected. Hence, oversight bodies (standards boards) are typically either government agencies, or broadly funded by the industries served.

Another traditional kind of certification relates to the composition and production of food products – particularly foods meeting religious standards (e.g., kosher, and halal). Many products certified through this kind of system may not be objectively confirmable through testing of the product itself. However, many people rely on this kind of certification as a critical element of their religious and cultural observances. These certification systems necessarily require regular inspection and oversight of the processes of production. This kind of system has more recently been adapted to the concepts of “organic” or “eco” foods.

More recently, registry systems are increasingly considered to be a possible way of linking social objectives to business markets. Paragraph 17 of the WSSD Plan of Implementation calls on governments to “enhance corporate environmental and social responsibility and accountability” by, inter alia “encourag[ing] industry to improve social and environmental performance through voluntary initiatives, including environmental management systems, codes of conduct, certification and public reporting on environmental and social issues.” This clarion call reflects an enormous groundswell of recognition of the potential effectiveness of “soft law” processes through non-governmental organizations (NGOs and commercial entities) to achieve social and environmentally desired objectives where governments and more formal systems cannot (whether due to legal limitations on governmental activity, shortages of capacity or funding, or other factors).56

To date, however, such systems have shown only limited results. Some of the most effective systems are those relating to the certification of forest and marine products – both of which ultimately result in consumer products that are easily identified. If forest-product certification (or marine-product certification) is generally accepted and supported by consumers, it will be relatively easy for each consumer to know in general whether each product he purchases contains wood or other forest products (or fish or other marine products) and to look for a certificate or labeling.57

In general, systems for certification of social responsibility and sustainable development can function effectively only where three factors work in combination:

Some of the most recent situations in which voluntary certification has been applied in social responsibility contexts involve a different combination of governmental and private action. For example, the Republic of South Africa has enacted a number of laws that require rather high levels of positive social action by companies.59 Companies have discretion regarding the specific nature of such actions, on which their business or operational licenses depend.

4.1.2.7 Certificate systems that create valuable rights

One final type of certificate system that must be considered is the creation of valuable or tradable rights on the basis of a closed permit system. This concept is already functional in some countries in the form of “tradable development rights” and tradable air emissions credits.60 In addition, conservation economics theorists are discussing its possible use in contexts such as protected areas, and wetlands.61

To provide just one example, in some countries, a company seeking permission to operate must meet air pollution standards, and in this process receives a specific permit specifying the annual volume of air emissions that can be allowed from its facilities. If the company later finds ways of reducing those emissions, it can receive a certificate that allows them to obtain value from the reduction, either by using the “saved” emission rights in another facility (making that facility larger than its existing air rights would allow), or by trading (selling) those rights to another company. In the latter instance, the government still maintains oversight, since emission rights transaction must be recorded in order for the buyer to be able to utilize the acquired credits. The system supports air pollution goals by providing that any use of credits will include a percentage reduction in the total amount of emissions involved, so that if for example a company cuts emissions at facility 1 to 200 tons below the permitted level, it will be allowed to develop additional operations that emit not more than 150 tons of the same pollutants within the same air quality region.62

While not precisely relevant to ABS, this system is important in its design element – the certificate system actually created a valuable and tradable commodity, literally “out of thin air.” Arguably, to the extent that these credits have value, it is because (1) the permit system is fully enforced by governmental agencies and inspections; and (2) it is virtually impossible to evade such inspections (an operating facility is difficult to hide) so that the system is also completely pervasive. In such a case, commercial entities take advantage of any opportunity to lower their costs of compliance with air requirements.

4.2 Applying the lessons from other certificate and registry systems to CSOLP development

The lessons from these various types of certificate and registry systems can be very important for the process of developing a CSOLP. Of course, until the specific contents and mechanisms of the international regime on ABS have been decided, it would be impossible to choose any particular example as an obvious basis or specific roadmap for a CSOLP. However, these systems demonstrate that it will not be sufficient to simply list the information that should be included in the certificate or the processes for which the certificate would be required. Rather, it is necessary to consider the entire framework of information, action and oversight of which the CSOLP will be a part – a system which includes commercial and other actions and laws, far beyond the confines of ABS and IPR laws and institutions. The following discussion briefly applies some of the basic lessons learned in Part I to some facets of the ABS regime, depending on how that regime is conceived and implemented. It focuses on current proposals for CSOLP use, but also offers some additional ideas about how a CSOLP might be used.

4.2.1 Registry of genetic resource rights and transfers

To many people discussing the CSOLP idea, ABS certificate systems are expected to serve as basic registries of ownership of a new kind of property interest – genetic resources.63 In this case, the grant of such a certificate would confirm two things: First, that the agency owns or is authorized to transfer the specified rights to use the particular genetic resources (and has complied with all requirements related to that transfer); and second, that the recipient has done or committed to do all other acts necessary to acquire such rights. In this case, the certificate system must be directed at clarifying the nature of the property right involved (what is a “genetic resource” and how is it owned?) as well as specifying the actions needed to qualify an applicant for a certificate of the right to use GR.

Basic components of a registry system:

In this aspect, the CSOLP will be similar to national property registries and the process of recording property transactions, as discussed. Applying the lessons of these registry systems to the CSOLP proposals as a registry of GR transactions, the challenges are:

Enforcing registration mandates:

The registry approach to CSOLP may also utilize elements of the mandatory registration systems (vehicle registration, customs control and tax/draft registries) which operate primarily through legal mandates. Here the primary question is one of the costs and opportunities for enforcement. In all such systems, two obvious systemic factors are necessary:

Thus, for example, an observable fact (the possession of controlled substances, driving a vehicle on public streets, or being above the legal age) can be linked to the presence or absence of the relevant document or registration. Lacking the documents, the individual is cited. If he has some explanation or justification, he must “save it for the court.”

However, there is another, less obvious requirement that is critical to the success of mandatory permit or registration systems – the choke points and mandatory enforcement must be directly and irrevocably linked to the violation itself. For example, in most countries (except perhaps small islands), it is not appropriate to rely on customs controls as the primary or only method of policing vehicle registration requirements. One may violate that law (drive an unlicensed vehicle) for his entire life without ever passing customs controls. People passing through customs may not be driving any vehicle or may simply avoid driving an unlicensed one. Even if bringing such a vehicle into the country, they may claim that they do not intend to drive it on public roads, so that no registration may be needed. While it is easy to identify choke points at random, it will be important in creating the CSOLP that both the choke point and the facts of the violation are not directly relevant to ABS compliance.64

Verification elements of a registry:

Finally, a registry of genetic resource transactions will have to be based on validated data, because it will require the provision of two kinds of information – scientific information regarding the genetic materials and their source, and non-scientific information regarding the status of government approvals and contractual rights granted in another country. Without these, the certificate will provide no assurance to the parties (whoever draws the certificate can say whatever he wants), or in the alternative, it will require any agency or individual relying on the CSOLP to verify the statements in the certificate. Lessons from verification systems suggest that if the certificate calls for external verification, it will be necessary to

As noted above, even in more conventional transactions and certification, the notarization and verification of documents, and possibilities of falsification are typically seen as the primary weakness in transactional and property registries, including international systems such as the CITES register of permits. Authorization and registration of experts and professional service providers are not self-enforcing systems, and must be addressed.

4.2.2 Integration of the CSOLP into the genetic resource market

The primary group of suggestions for the CSOLP envisions it as a tool within the more general commercial markets involving products of the utilization of genetic resources. These proposals (including the proposals for patent-application disclosures and other kinds of “disclosure of origin”) recognize that commercial entities are more attuned to commercial requirements and laws, and that environmental laws are most effective when they are directly integrated into laws governing commercial operations.

Environmental requirements can be integrated into markets in many ways. For example, the air emissions permit system's effectiveness is not a function of the contents or testability of the certificate (although these factors are important), or of the requirement that all facilities obtain a permit. Rather it depends on the integration of the permit into the body of commercial law affecting industrial facilities. It is not possible to operate a facility without a permit, nor to hide a facility from normal view. No rational purchaser of an industrial facility (or of shares in a company that owns a facility) would agree to the purchase unless he is certain that the relevant permit exists in good standing. The system of permits/documentation for the movement and disposal of hazardous materials operates in the same way – it is in the best interests of all persons along the chain to require proof that documentation has been prepared and is correct and official.

“Optional” provisions, too, can be effective if they are integrated into markets. Stock and commodity markets and other protections from market abuses are often completely optional, in the sense that the parties may still engage in essentially similar kinds of commerce, even if they choose not to participate in the formal market. However, the protections and access provided by the formal market are commercially attractive to the parties. Markets that flourish outside of formally controlled systems usually do so either (i) through the mutual consent of both buyer and seller, or (ii) due to pressure from one side of the transaction, where that party is so strongly in control of the transaction that persons on the other side have no choice. It is generally felt that governmental intervention (by creating a formal and transparent market and protecting those who prefer to utilize it from undue pressure) is a duty owed by the sovereign to its citizens.65

A CSOLP could be developed in a manner of a closed-market regulatory system. With fewer than 250 countries in the world, and a relatively small number of companies working commercially in some key genetic resource fields, a separate formal market could be developed, offering certainty and security for all parties to the ABS arrangement. This approach might offer ways to address the need for transparency, standards of valuation, and a registry providing open information regarding each participant's record of compliance with their respective responsibilities under ABS arrangements. Market regulation systems often focus on the parties themselves, certifying them to participate in the regulated transactions (membership serving as certification), and requiring various disclosures and reports as conditions of such certification. Both the membership roles (including the public components of the reports and disclosures), as well as documentation of the regulated transactions, may be retained in accessible/searchable registries. These provisions can be integrated with other systems, similar to the general regulatory certificate systems currently used for dangerous goods or other governmental assessments.

4.3 Mechanics of developing a certificate system

A systematic consideration of certificate and registry systems indicates that they share some very specific characteristics, at the level of agreed policy and legal implementation. Whichever type of system is used, these characteristics are the factors that determine whether and to what extent a certificate system can be functional and valuable:

The following discussion considers these factors, in terms of the needs of the ABS system and proposals for a CSOLP.

4.3.1 Exact rights that are to be covered by the certificate

Prior to 1992, the words “genetic resources” did not have any legal meaning, nor did they describe any legally recognized property interest. Given the minimalist approach of the CBD in using, discussing and defining this term, the exact nature of “genetic resources” is still not entirely clear. Hence, clarifying this concept, and also developing practical concepts for its implementation remain the primary threshold needs of the international negotiations. This decision will be a critical prerequisite to any decision regarding the coverage of the certificate as well,66 since the validity and effectiveness of a CSOLP system will turn on how it addresses the particular property or right which is defined by the international regime. In particular, the challenge of this element will be to determine how these particular items or rights can be consistently identified, and how any tracing or registry can effectively control regulated actions involving them.

Even after the meaning of “genetic resources” is agreed, however, the exact nature of the certificate – e.g., “What (specifically) will be certified?” – will remain as the primary question to be decided by the CSOLP. Numerous CSOLP discussions already have begun, based on particular assumptions about the nature of the right to be described in the certificate. In some proposals, the certificate is to address the “genetic resources” themselves. These approaches generally assume that the CSOLP will apply to physical samples collected and taken from the source country.67 In other analyses, the certificate will be proof of a right to use particular resources and information (e.g., the genetic information and biochemical formulas of the species or variety).68

To a large extent, the selection of what to certify depends on the role that certification serves in the ABS regime. Obviously, the certificate will not be a complete answer to the complex problem of regulating ABS, but must be a tool for accomplishing, documenting or permitting key activities at a key point or points in the process.

For example, certifying the provenance of collected material would be an appropriate approach to the objective of regularizing actions of bioprospectors. One key reason to create a certificate that focused on collection in the source country would be to give the certified collector a basis for defending himself against lawsuits by NGOs, traditional communities and others who claim that the bioprospector violated the source country's laws. Issuance of the certificate may also cut off the source country's future ability to claim that the bioprospector's actions were illegal and to use that illegality as a basis for invalidating the user's rights in the genetic resources of the collected material.

Notably, however, a certificate that focuses on in-country collected material would be difficult to apply to users who obtain extracts, progeny or other products of multiplication of the original sample, nor would it be useful in addressing resources that were not collected using ABS permissions. For this purpose, a certificate that addresses the user's right to use genetic resources might be preferred.

4.3.2 Purpose and use: What the certificate can prove

No matter how it is configured, the certificate cannot be a complete shield for or against its holder. Like any other kind of property, genetic resources may spawn a variety of legal claims. The certificate can only be a protection against a few types of claims. Hence, a key factor in the CSOLP will be its selection of the kinds of protection it does and does not offer to both the issuer and the applicant. For example, it may be necessary to provide options regarding the scope of each certificate, similar to the different types of property interests (full ownership, leases, easements, loan security interests, rights of entry) certified by national property registries. In addition, in practice different kinds of genetic resource utilization may require different types or levels of certificates, and may apply those certificates in different ways.

This issue, too, depends on the objectives that the CSOLP is designed to fulfill, and the specific mechanisms chosen by the regime negotiations to address this objective, and the particular points at which the certificate will be used. As shown by other certificate systems, certificates can be used at many different points in the regulated stream of activity – to validate and oversee transaction participants, document compliance with standards, verify the contents or authenticity of an item, provide a permission for an action that would otherwise be illegal and restrained, provide proof of compliance with legal requirements, certify special qualities, or qualify for a particular benefit. The CSOLP could be designed to serve any (or more than one) of these qualities.

Selection among these options depends to a large extent on the nature of right that the CSOLP holder can claim. Specifically:

Each of these options may limit various uses of the CSOLP, as well as its value to user, to source country or community, and to user country.

4.3.3 Compliance issues – what motivates a user to obtain a CSOLP?

As demonstrated by Part I of this Chapter, the most critical factor governing success or failure of the CSOLP (and the ABS regime entirely) relates to motivation of compliance. Even if the certificate focuses only on specimens collected within the source country, it will be nearly impossible to enforce solely through legal mandates. Beyond this, however, many users do not collect specimens in developing countries, preferring to obtain their resources in ways that are both safer and less public.69 Moreover, there are indications that companies may be able to utilize genetic resources without having access to the specimen itself – that is, the sole inputs from the species consist of genetic sequences or biochemical formulas which can be expressed in writing or diagrams, and transferred on paper or electronically.

As a consequence, the CSOLP development process must at least consider that it may not be possible to compel users to comply with the certificate requirements or any other component of ABS regulation. (As any traffic control official knows, where the law mandates an action (staying under the speed limit) that many people do not want to comply with, it is very difficult and expensive to police everyone or to prevent all or even most violations.70)

For this reason, this chapter has earlier concluded that it will be necessary to design the system so that the user has a compelling reason to comply. Such reasons must be credible. This means, for example, that the designers should not presume that the avoidance of violation provides a reason for compliance, given that there is no clear record of any post-access apprehension of a user who has successfully been either penalized or forced to share benefits. Instead, it will be necessary to design the system to create positive benefits which are inexorably linked to compliance. A variety of such benefits have been suggested, however, at present, there is no experience which indicates a way to bind these benefits to compliance or to obtaining the CSOLP. The author is aware of four possible linkages, including two which have been regularly suggested for several years:

Requirements at the time of patenting

For purposes of this chapter, however, the author notes that such a disclosure, even if mandatory, can be easily avoided at present, with little or no risk to the user. Patent authorities do not (cannot) routinely check all patented products to see if they appear to be based on natural biological material. This means that the only way a patent will be known to contain such material is if the applicant says so. Moreover, the question of source remains unclear. Until the international regime makes a clear decision regarding the basic concepts of “genetic resources” and origin,75 the applicant can avoid any mention of foreign origin of the specimen or its immediate ancestors, simply saying that original biological samples were acquired from a collection, garden or other location within the user country, or that they were collected before the commencement of the convention.76 Lacking scientific capability to verify the geographic origin of any specimen or genetic sequence, the patenting system again must rest on the applicant's willingness voluntarily to disclose origin.

As yet, none of these options have been thoroughly canvassed or developed. In all of these cases, the system will function effectively if the user is willing to disclose, regardless of whether the legal provision is “mandatory” or voluntary. Given that profit-making entities may be discouraged from taking unnecessary actions that decrease their profits, and have many potential justifications for choosing not to make disclosures under the ABS system as it currently appears, it will be necessary to find ways to tie the acquisition of a CSOLP to serious functional incentives – benefits that derive from compliance with the CSOLP requirements, that are sufficient in value and relevance that they will counterbalance the costs of ABS compliance, thereby encouraging users to seek a valid CSOLP.

4.3.4 Verification problems: Asssuring the currency and accuracy of the CSOLP

One of the assumptions underlying many of the CSOLP proposals is the idea that the certificate itself will constitute proof of the facts stated in it. Even where the proposal merely calls for a “disclosure” by the user, it is expected that some verification will occur (either by the patent officer or by forwarding the application to the relevant country to confirm its contents). It is relatively easy to see many potential challenges arising from the need for verification:

These verification requirements are not indications that government distrusts either its officials, its experts or the users. Rather, they are ways of protecting users from later claims of violation or “biopiracy” by proving the effectiveness and security of the certificate system. Each of these requirements presents a significant challenge, but generally they should not be insurmountable once other questions regarding the objectives, nature and scope of the CSOLP have been agreed.

There is, however, one other, more difficult, verification challenge for the CSOLP, arising from the longevity of the certificate. Once the certificate is granted, it would appear to be permanent, unless some cause for revocation is given. However, many things might change in the future, including matters as basic as the transfer of the material, a move of the user's operation to a different “user country,” a change in the proposed use, or some change in the source's ABS law which alters the user's rights and with which the user refuses to comply. The certificate verification system (particularly any system for reconfirming certificate validity each time the certificate is presented by the user) cannot ignore this possibility, but at the same time must protect the user from random revocations.

4.3.5 When is the certificate “final” (unchallengeable)?

The right granted by a certificate can only be valuable only after it is clear that the decision to grant the certificate and the statements made in it are final and cannot be changed by claims or appeals of third parties. This issue arises in a variety of ways. It is useful to begin by remembering the processes of conventional property law. Once the basic formalities and searches are completed, the transaction is final, unless there is a later proof of criminal behavior (fraud or an attempt to use the transaction as a way of hiding illegally obtained money). This is possible because of the extremely objective nature of the sale process. If the seller's identity is proven, and his title to the property is unblemished, then his signature on the deed automatically transfers the property.

In transfers of GR, however, there are difficulties that must be clarified in order to enable the CSOLP to function in this way. Often, constitutional or other law gives citizens rights to challenge or overturn governmental decisions – rights that could be applied to the decision to approve an ABS transaction or to grant a CSOLP. It may be difficult for a certificate to be “final” unless the system addresses these rights of third party challenge. At the national level, this difficulty is exacerbated by the relationship between genetic resource utilization and the utilization of genetic-resource-related traditional knowledge. Until the rights of local residents and traditional knowledge holders are concretely specified (including some clear delineation of the nature and time limitations on their right to challenge a permit issuance decision), it will be difficult to verify that a permit creates a final legally certain right, in which time, money and other investment can be made.80

4.3.6 Balancing the needs of users, providers and regulators

The need for both sides of the ABS transaction to have appropriate legal protection and legal certainty suggest that it will be very important to carefully and clearly identify the outside limits of the scope of the CSOLP. The objective of giving legal certainty to the user of genetic resources must be balanced against the need to ensure that the source country's rights are appropriately protected and exercisable.81 To this end, one of the most significant challenges will be to create mechanisms that can substitute for specific property identification (given that it is not possible to independently determine the source of particular specimens, genetic sequences or biochemical formulas by testing the specimens or products).

It is also notable that other parties also have an interest in (and needs regarding) the CSOLP system. One group of interested parties will be the other countries that also are countries of origin of the species covered by the permit. Although ABS provisions in the CBD are specifically limited to the “source country,” there are many possible scenarios in which the exact source country cannot be discerned. Other countries of origin may wish to have access to CSOLP records to confirm that they are accurate regarding source. Similarly, holders of traditional knowledge, members of the public and NGOs may also call for transparency in these matters.

4.4 Conclusions: Developing and exploiting user motivations

In sum, the greatest challenge in integrating a tracking mechanism or CSOLP into the ABS regime will be the need to integrate clear commercial benefits and tie the system in with existing commercial systems in a way that creates a clear incentive for users to comply with the system requirements. Once those relationships have been created, the CSOLP can finally be configured as the tool that ties them all together.

In both the regime negotiation and national implementation, however, it will be important to avoid self-deception. Many of the supposed “benefits and incentives” that have been identified in the past as reasons to expect compliance with a CSOLP requirement have been the result of a high level of wishful thinking. Claims that a CSOLP will operate to provide a premium for holders or source countries, or legal certainty for users, or that it will facilitate trade or provide a public relations advantage in the marketing of the ultimate product are generally not supportable through logical analysis. Some of these benefits seem unlikely to exist, while the rest cannot be inexorably tied to the CSOLP.

The design challenge for proponents of the CSOLP is to create such inexorable ties, comparable to the factors that motivate compliance under other kinds of certificate, passport, or registration systems operating nationally and internationally in other sectors. Thus, an individual obtains a passport because he cannot cross national borders without one. Landowners register their purchase of land because the registration system protects them against false claims on their title. Automobile owners file a certificate when they sell their car because they will thereafter be protected if the new owner causes damage or injury with the car. A patent is filed to give the innovator affirmative protection for the value of the innovation – a protectable legal right that is useful or necessary in most negotiations for commercialization of the innovation. Customs declarations are filed without direct compulsion because the traveler knows that a certain percentage of random searches are carried out, leading to fines and jail sentences if undeclared goods or contraband are found.

In each of these instances, the protection is directly tied to the acquisition and use of the certificate or registry. One cannot obtain these benefits in any certain, legal way unless he registers, acquires the necessary certificate, or otherwise complies. Given the difficulty or impossibility of proving ABS non-compliance with scientific or analytical evidence, it appears that the motivations integrated into the ABS system will have to be oriented around the provision of benefits or desirable objectives, rather than the fear of apprehension and punishment.


1 At the time of writing this chapter: the author is the Senior Legal Officer of IUCN and the Series Editor for the ABS Series, in which this book is included. Prior to her current position, she worked in over 35 countries as a legislative draftsman addressing environmental and conservation laws, and the legal means for ensuring their effective implementation. She came to that work from an earlier life in the private practice of commercial law, corporate finance, and industrial law, and believes that the intersection of environmental and commercial specializations is essential to the achievement of conservation objectives. This essay represents some of the results of several months of the author's focused legal and factual research into ABS implementation, supported by more than ten years of in-depth research into the policy, legal and practical implementation of ABS and the obstacles that have interfered with its effectiveness. It does not necessarily represent the views or positions of IUCN or any of the sponsoring organizations that have contributed funding to this series.

2 Discussed in UNEP/CBD/ABS/3/7.

3 As of this writing, the scope of the international ABS regime appears to be entirely open for negotiation (see Report of the Ad Hoc Open-Ended Working Group on Access and Benefit Sharing on the Work of its Fourth Meeting, UNEP/CBD/COP/8/6, 15 February 2006; and CBD COP Decision VIII-4 (Kuala Lumpur). While it is hoped that some direction for the negotiations will be forthcoming soon, this chapter is written with the intent that its contents will be useful in designing the CSOLP for international purposes, and in adapting it for use in each country as they adopt legislation under the new regime as eventually developed.

4 Although not further discussed in this essay, this fact suggests that the basic premise of this essay – the need for incentives and motivations for user compliance with ABS regimes – is also applicable at the “meta” level, where there is a need to integrate incentives and motivations into the international regime that will encourage and induce user countries to comply with their obligations to adopt measures with the aim of sharing the benefits from the utilization of genetic resources, as called for in Article 15.7 of the CBD. This issue is further examined in another book in this Series, Tvedt, M.W. and T. Young, Beyond Access: Exploring Implementation of the Fair and Equitable Sharing Commitment in the CBD (IUCN, ABS Series.)

5 See IUCN Canada, “Analysis of Claims of ‘Unauthorised Access and Misappropriation of Genetic Resources and Associated Traditional Knowledge’”, (Information Paper in the 4th Meeting of the Ad-hoc Working Group on ABS, UNEP/CBD/WG-ABS/4/INF/6; a later version of which will be reprinted in Book 5 of this Series.)

6 A great many objectives have been cited for the CSOLP, including (i) to promote the ABS objectives of the CBD; (ii) to secure recognition of sovereign rights over genetic resources; (iii) to empower indigenous and local communities; (iv) to facilitate continuing open flow of resources; (v) to reduce the need for strict ABS laws; and (vi) to reduce pressure for development of a sui generis regime for TK. (Reports and Presentations, especially presentation of B. Tobin and I. Calle, “Taller Sobre Certificados de Origen y CITES” (IUCN, INRENA, INE, SPDA – Lima, Nov. 2003) to be posted at www.iucn.org/themes/law/abs01 (site under reconstruction at time of writing)). Of these, only the three mentioned in the text appear to be directly affected/affectable through the use and recognition of a CSOLP.

7 In some countries, buyers and sellers are now called upon to consider actions and conditions that may have happened in the past. For example, in the U.S., the owner of property that has been contaminated by unpermitted discharges of hazardous waste must pay the price of cleaning up that waste, even if he did not place it there, and did not know about it when he purchased the property. UNITED STATES Comprehensive Response Compensation and Liability Act, 42 United States Code 9501 et seq. A consequence of this liability is that buyers seek assurance that the property has operated in compliance with its environmental permits – a statement that virtually no government official would be willing to make, because it exceeds his authority and might make him or the agency liable, if contamination is later found on site.

8 Discussed in Chapter 3 of this book.

9 The need to have evidence of official decision-making is the most critical evidentiary requirement in most permit systems. In a recent innovation, the Cartagena Protocol on Biosafety proposes the use of the web-based Biosafety Clearing-house (BCH) as a method for satisfying this need. Cartagena Protocol on Biosafety to the Convention on Biological Diversity (Nairobi, 2000), Article 20 and elsewhere.

10 Unfortunately, even where general authority is specified in statutes, the issuance of permits to use national or sovereign resources is often challenged under claims that the issuing agency's authority did not extend to the matters covered by the permit. (These matters are discussed in two forthcoming INF documents (one to be submitted at AHWG-ABS 4, and the other at CBD COP-8) setting forth the results of detailed research into the issue of “unauthorised use of genetic resources” in the CBD system. Both are being written by the author of this essay and will be submitted by IUCN Canada and the CBD Secretariat. Examples and statistics supporting this statement will be provided therein.)

11 A recent study notes that the majority of claims against users of genetic resources or traditional knowledge have been brought by NGOs, indigenous groups and other non-governmental groups. IUCN Canada, cited in footnote 5. If the certificate or other government approval insulates the user from such claims, there remains a possibility that the claimants will turn their wrath against the official or agency granting the certificate.

12 One of the most common explanations for the failure of ABS comes from the industrial and research communities, which have strongly stated that the primary impediment to ABS function is the complexity of national regulation, which increases the transaction costs and engenders a lack of legal certainty for users regarding the value of the ABS arrangements, once granted. Recognized by many experts, and adopted into key provisions of the Bonn Guidelines, these claims do not always stand up to scrutiny. See, Cabrera, J., A Comparative Analysis on the Legislation and Practices on Access to Genetic Resources and Benefit Sharing (ABS): Critical Aspects for Implementation and Interpretation (IUCN/BMZ, 2004); and Young, T., Summary Analysis: Legal Certainty for Users of Genetic Resources under Existing Access and Benefit-sharing (ABS) Legislation and Policy, published as UNEP/CBD/ABS/3/INF/10 (3rd Ad-hoc Working Group on ABS, Bangkok, 2005). As a practical matter, national ABS measures cannot give absolute or near-absolute certainty to users because governments have sovereign and fiduciary obligations to protect their rights and interests and those of their citizens.

13 As discussed in Book 5 of this Series, a database of contracts for genetic resource use, or other sophisticated use or patenting of biological and agricultural resources and products, is being developed through the World Intellectual Property Organization. When available, it will enable comparisons among a variety of different existing contracts and approaches. In draft form, it and some instruments contributed to it, form the basis of this statement.

14 CBD, Article 15.7.

15 CBD, Article 16.3.

16 Although not all developed countries have provided publicly accessible statements reflecting their position, a few have. See, e.g., Oxley, A. and B. Bowen, undated (pamphlet circulated at CBD COP-8, 2006), “Developing an Effective International Regime for Access and Benefit Sharing for Genetic Resources Using Market-based Instruments.” Australian APEC Study Centre, Monash University.

17 The 4th book in this Series: Shakeel Bhatti, et al., Contracting for ABS: The Legal and Scientific Implications of Bioprospecting Contracts is generally focused on this point.

18 For a particularly well-focused examination of these issues, see Tvedt, M.W. Intellectual Property Right Law in the Context of Bioprospecting and Genetic Resources. Proceedings from the Norway-United Nations Conference on Technology Transfer and Capacity Building, Trondheim, FNI 2003.

19 It is notable that the opposite objective (providing notice to the named source country that a user has listed it on a patent application) is sometimes given for the patent disclosure proposals.

20 Nearly all existing claims of misappropriation of genetic resources (i.e., cases that involved an actual utilization of genetic material, as opposed to attempts to patent existing varieties) arose because the user made public statements regarding the source of genetic material used in the product. Thus, for example, the Kenya Thermophiles claim arose because a multinational company mentioned that one of its products was based on microorganisms from the Soda Lakes in Kenya, and the Tricolor Frog claim arose because the inventors of a new drug named it “epibatidine” after the Tricolor Frog (Epibatides tricolor), because an article describing the frog's unique poisons gave the developers an idea about how to create a pharmaceutical. See, Mgbeoji, I., 2006, Analysis of Four Claims of “Unauthorised Access and Misappropriation of Genetic Resources and Associated Traditional Knowledge.” IUCN-Environmental Law Programme, The ABS Project, Bonn Germany, which will be reprinted in Book 5 of this Series.

21 Research indicates that the companies which are known to be involved in ABS negotiations at the national level are among the most likely to be the targets of claims of “biopiracy” and misappropriation. See IUCN Canada, “Analysis of Claims of ‘Unauthorised Access and Misappropriation of Genetic Resources and Associated Traditional Knowledge’” (Information Paper in the 4th Meeting of the Ad-hoc Working Group on ABS, UNEP/CBD/WG-ABS/4/INF/6; a later version of which will be reprinted in Book 5 of this Series.)

22 See, generally, Anton, M. et al., “Proceedings of the International Expert Workshop on the Enforcement of Wildlife Trade Controls in the EU, 5–6 November 2001, Frankfurt, Germany,” (IUCN, TRAFFIC). In practice, such companies make compliance decisions based on a balancing test, comparing the costs of compliance against a combination of the likelihood of being caught and the financial and other consequences that would then arise.

23 For this reason, it is often stated as axiomatic that no commercial entity will undertake any activity that costs money (or time) unless there is a financially reasonable objective to be served. This is not saying that commercial entities wantonly break the law, but only that they cannot stay in business if they expend money and time in a way that makes their products more expensive than their competition, or makes their production systems lose money.

24 This approach is the basis for the entire branch of tax law in developed countries. It is against the law and potentially criminal to “evade” taxes (that is, to fail to pay a tax that is known to apply). One who does this may end in jail or at least have to pay very large “criminal fines,” and be held to other strict penalty provisions. By contrast, however, it is generally known that each taxpayer's tax situation is unique, and it is sometimes difficult to be absolutely certain how the tax law will apply to your own situation. Hence, a taxpayer who takes a “reasonable position” but is later found to be in error, must pay only the normal penalty assessed to those who miscalculate their tax liability. See, e.g., AUSTRALIA: AAT Case 9768, 29 ATR 1040, 94 ATC 461 (Administrative Appeals Tribunal of Australia, 1994); UNITED STATES: West Custom Digest 220K5263.15 (“Attempts to Defeat Tax; Evasion”); 90, Am. Law Rev. 1280 (“Wilfulness or intent as an element of offenses denounced by Federal Income Tax Law”); 85 Am. Law Rev. 880 (“... prosecution for attempted evasion of taxes”); US Tax Code (26 U.S. Code) § 6531.

25 See Tobin, B. 1995. “Putting the commercial cart before the cultural horse: a study of the International Cooperative Biodiversity Group (ICBG) Program in Peru.” In: Zerner, C. (ed.), People, Plants and Justice, Colombia University Press. 2000.

26 In this connection, the difference between the objectives stated by the Parties in the ABS regime negotiations, and the objectives addressed by tracking and tracing proposals are sometimes very different. Although the Parties' objective is to find a way of overseeing transactions and ensuring/enforcing ABS requirements on users after they have obtained samples, most proposals give as much or more weight to the objective of evaluating the process – that is, determining whether the ABS system is functioning efficiently. Although the true efficiency of the process can only be determined by knowing whether in fact it is leading to compliance, most process evaluation proposals focus instead on the time and cost to the user in seeking a certificate, and do not consider questions such as the user's compliance or the possibility that some users are ignoring the entire ABS issue with impunity.

27 This gap is particularly notable, when considered next to the assumptions made about ABS at the time the Convention was adopted. It was expected, for example, to provide an incentive and funding for conservation of biodiversity and to be implemented through a mix of user-country and provider-country measures. Its unexplained elements were expected to be resolved through the application of national property and contract law. See Glowka, L., F. Burhenne and R.H. Synge, A Guide to the Convention on Biological Diversity, IUCN Environmental Policy and Law Paper No. 30 (IUCN, 1994) at 5. None of these expectations has proven to be correct.

28 There are exceptions to this, particularly with regard to government tax liens and encumbrances placed by a court, based on the owner's failure to meet his financial obligations.

29 In North America and Europe, a specialized industry has developed which utilizes these public records to provide insurance to buyers, sellers, lenders and others regarding the exact status of title to property. See, e.g., Machlin, J. and T. Young, 1988 (updated annually) Managing Environmental Risk (Thompson-West, Eagan, MN) at §§ 11.19 et seq.

30 At present, all but two of the countries that have adopted a broad range of access-oriented ABS legislation are developing countries.

31 Although these markets do not eliminate abuses, they provide a level of transparency that may help. The production and distribution of diamonds is largely consolidated in the hands of a few key players, and concentrated in traditional diamond trading centers. At one time, it was thought that over 80% of the world's rough diamonds passed through a single company (the DTC, a subsidiary of De Beers.) See http://en.wikipedia.org/wiki/Diamond

32 Examples of commodity exchanges include the Commodity Exchange Hannover, Chicago Board of Trade, Euronext.liffe (Europe), Intercontinental Exchange (Atlanta), London Metal Exchange, Shanghai Metal Exchange, The National Commodities and Derivatives Exchange (Mumbai), Tokyo Commodity Exchange, Winnipeg Commodity Exchange and the Bolsa Nacional Agropecuaria (Colombia).

33 See, e.g., the Chicago Climate Exchange and the European Climate Exchange, described in websites at https://www.theice.com/about_futures.jhtml. This is only one example in an explosively burgeoning market. This mention is simply by example, and should not be taken as a recommendation of this system.

34 For a detailed discussion of the certificate system applicable to hazardous wastes in the U.S., see Machlin, J. and T. Young, 1988 (updated annually), Managing Environmental Risk (Thompson-West, Eagan MN) at Chapter 4 (“The Resource Conservation and Responsibility Act”). The act discussed therein is part of the Solid Waste Disposal Act, located at 42 US Code §§ 6400 et seq. Other examples of similar systems exist in many countries. See, e.g., BRAZIL, CONAMA Resolution No. 23 (in translation), 12 December 1996 (referring to national and subnational laws controlling hazardous waste and its disposal); CHILE: “Ley de Bases del Medio Ambiente” (Law on Environmental Requirements), tit. II, para. 2, art. 10(ñ) (1994); MEXICO, “Reglamento de la Ley General de Equilibrio Ecológico y Protección al Medio Ambiente en Materia de Residuos Peligrosos” (Regulations to the General Law of Ecological Equilibrium and Environmental Protection on the Matter of Hazardous Wastes), 25 Nov 1988; NETHERLANDS, Disposal of White and Brown Goods Decree (in translation), 1999; EU Council Directive 75/442/EEC, on waste 15 July 1975, articles 9–11.

35 National permit requirements are generally recognized (and some elements required) in international law in the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (Basel, 1989); and in regional implementing instruments such as the Bamako Convention on the Ban of the Import Into Africa and the Control of Transboundary Movement and Management of Hazardous Wastes Within Africa (OAU, 1991).

36 Washington, D.C. (1973).

37 The basic CITES permit framework is detailed in the Convention at Articles III through X.

38 Recently, some countries (especially the United States) are allowing multiple species to be listed on the same permit. This shorthand approach is not actually authorized under CITES; however, no challenges have been made in COP or other formal processes.

39 In some situations (movement of specimens of species on Appendix III, as set forth in Article V) only the export permit is required.

40 In COPs 11, 12 and 13, CITES Parties formally discussed the growing problem of falsified documentation.

41 A detailed list of these differences was provided by José Carlos Fernández Ugalde in his 2004 presentation entitled “El papel de los Certificados de Legal Procedencia en la política global de recursos genéticos: Consideraciones prácticas y económicas” (The Certificate of Legal Provenance in Global Genetic Resources Policy: Practical and Economic Considerations) in the SPDA Workshop on Certificates of Origin and CITES. (“Taller Sobre Certificados de Origen y CITES” (IUCN, INRENA, INE, SPDA – Lima, Nov. 2003), to be posted online at http://www.iucn.org/themes/law/abs01.html (site being revised at time of writing)).

42 It has been stated that Canadian law requires the importer to retain the permit and use it to document the legal ownership of the specimen throughout its later life. However, for all CITES purposes, the permit ceases upon use or within six months of issuance (whichever happens first). The author has been unable to obtain copies of any Canadian law as so described. It would be interesting to review it to see how this law addresses difficult questions such as the offspring of the controlled specimen, etc.

43 One other important distinction between the CITES system and the ABS regime relates to the pre-existing legal situation. Nearly every Party to CITES had already enacted substantial laws and administrative systems dealing with wildlife protection, market control, and international movement of goods and persons. The challenge for CITES Parties was simply to add or adjust these laws to take into account more specific CITES requirements. By contrast, virtually no country controlled or recognized any controllable interest in genetic resources prior to the CBD, and that is essentially true to this day (with fewer than two dozen countries that have adopted substantive laws on ABS.

44 The CITES regulation of transboundary movement is 2800 words long, contained in 70+ sentences, comprising eight full articles of the convention; CBD ABS (including every provision that discusses access or benefit sharing or their component parts) consists of 275 words, in seven sentences, scattered throughout the convention.

45 The term “assay” simply means “a procedure through which the concentration (contents, quantity, purity or potency) of a component part of a mixture is determined.” (Webster's New Collegiate Dictionary 1980, G&C Merriam, Springfield, MA). Hence, a system that creates and uses an assay certificate may apply to any item or substance for which one needs to obtain external verification of its composition and purity.

46 See, e.g., Convention on the Control and Marking of Articles of Precious Metals, Vienna, 1972, amended 1988 (additional amendments currently under discussion).

47 In some cases, assayers are (practically and legally) required to maintain a personal registry of the certificates they have given.

48 Virtually all countries require vehicle registration, hence this article will not attempt to provide a list of vehicle registration statutes or examples.

49 Owing to the intensive global meeting schedule, participants in ABS discussions and development are becoming all too familiar with the operation of national customs legislation (controlling the transboundary movement of property and goods), which exists in every country. At the international level, conservation regimes have used customs-based systems (i) to control the movement of endangered species and thereby help to curtail the loss of species caused by commercial trade in wildlife and wildlife products (described above); and (ii) to control and track international movement in substances of environmental concern, including genetically modified organisms (Cartagena Protocol to the CBD, Nairobi, 2000) and hazardous wastes (Basel Convention, cited above at note 33).

50 Customs controls are at their most effective in developed countries. They can also be particularly useful and effective in the control of specific kinds of trade from developing countries – that is, control of the “casual” movement (smuggling) of goods that are illegal or subject to high fees or duties, for which there is a large market in developing countries. Many proposed customs and border controls in developing countries have proven difficult or impossible, where national borders are frequently crossed on foot or by many less controlled roads. Often these controls are developed in an effort to utilize existing customs networks to serve environmental and conservation purposes. See discussions in EAC Secretariat, 2002, Freeing Cross-border Trade in Agricultural Products (EAC, Arusha); and see Schei, P.J., 1996, Proceedings of/Conclusions and Recommendations from the UN/Norway Conference on Alien Species, Trondheim, Norway; and GEF Evaluation Office, 2005, Evaluation of GEF Support for Biosafety Implementation, (GEF, Washington, DC), at chapter 8 and elsewhere (considering difficulties in controlling casual transboundary movement of GMO products).

51 In some countries the reverse process is happening. Where voters are losing interest in participating in democratic governance (and the number of voter registrations or renewals is declining), governments have chosen to link voting registration to other activities. In California, for example, one may register to vote on the same form that one uses to obtain or renew a driver's license. Since this practice began there has been an increase in the rate of voter registration or renewals.

52 Various kinds of tax registration or certificates may be required before a person can become employed, transfer property, undertake business operations, or engage in market transactions. In some cases, such as inheritance tax, registration occurs when the heirs begin the legal process of transferring the deceased person's property.

53 The system for providing “documentary formalities” to ensure the validity of documents varies among countries. Although in many countries a “notary public” is a low-level functionary, as described in the text, in others the term “notary” may to refer to a different type of professional with much broader responsibilities. For a larger discussion of the various kinds of formal attestation used in international transactions, see Nanda, V.P. et al., (treatise now a database, updated July 2006), The Law of Transnational Business Transactions at Chapter 4. (Transnational Contract Law II.); Schlesinger, R., 1968, 2 Formation of Contracts: A Study of the Common Core of Legal Systems 1652 (New York).

54 For a general discussion of these tools and the manner in which they have been applied to environmental and sustainability issues, see Young, T., 2004, An Examination of Environmental Uses of Certification Systems and Standards Development. (IUCN PPG, publication forthcoming).

55 Recently, however, examples of the non-self-policing conformity standards (and the problems arising from the lack of oversight) have become more prominent, for example, where it is found that an airline crash was caused by faulty parts or the use of less durable materials. Inspection of the parts by the airplane manufacturer or re-conditioner has not proven sufficient to identify these deficiencies. In such cases, the only remedy is to sue the parts manufacturer for damages – cold comfort to the families who have lost relatives in such incidents.

56 ISO SAG, 2004, and see, e.g., the (ISO) Stockholm Conference on Social Responsibility (sponsored by ISO and the Swedish Institute for Standards, 20–23 June 2004). Discussed in detail in Young, T. An Examination of Environmental Uses of Certification Systems and Standards Development (2004, publication forthcoming).

57 Unfortunately, at present consumer acceptance of forest and marine product certification is stymied by the plethora of different certification systems governing these products. One can clearly recognize that a product is made of wood, but upon turning it over, might see any one of dozens of different certification labels. Consumers who care must undertake additional research to find out which labels are based on the kinds of standards the consumer wishes to support. See UNECE, “Forest Certification Updated for the UNECE Region,” (2002) available online at http://www.unece.org/trade/timber/Welcome.html; FAO, Proceedings of FAO/GTZ/ITTO seminar “Building Confidence among Forest Certification Supporters” (2001); and Gunneberg, B., “Current Status and Experience of Co-operation and Efforts toward Mutual Recognition” (FAO 2001) both available online at http://www.fao.org/forestry/foris/webview/forestry2/

58 These market factors may be of many kinds. Some key targets of certification might be bilateral environmental donor agencies, lenders and investors, as well as the ultimate purchasers of consumer products. See “An Examination of Environmental Certification...” (note 54) at page 17.

59 See, generally, Rockey, V., 2001, The CSI Handbook (2001. Trialogue.) Confirmed through personal communication, Paul Kapelus, African Institute for Corporate Citizenship, May 2004.

60 A variety of such systems exist. See, for example, Johl, C., 1997, “Designing Environmental Policies for India: The Use of Market Incentives to Combat Pollution” 9 Geo. Int'l Envtl. L. Rev. at page 707; Johnson, S. and D.M. Pekelney, “Economic Assessment of the Regional Clean Air Incentives Market” 72 Land Econ. 281 (1996). The most developed example is found in the U.S. Clean Air Act, 42 US Code §§ 7401, et seq., variously implemented by separate administrative structures at the state level in all 50 states.

61 This kind of “environmental trading” system is currently receiving much attention as a possible mechanism for conservation. See Bishop, J. et al., 2005, Biodiversity Offsets: Views, Experience and the Business Case (IUCN Economics, Gland/Cambridge). Although the economic and practical benefits of offsets are currently heavily skewed toward business participants, discussions in forums like the CBD suggest that significant changes and development will occur relating to this issue in the future, after which it may have a major positive impact on conservation. Without waiting to resolve the underlying conundrums (such as whether offsets result in set-asides of only the least accessible, attractive or threatened lands), offset systems are already in existence in some developed countries, and under the Kyoto Protocol.

62 The figures are simply provided for ease of understanding. The actual system is relatively complex, well beyond anything that should be discussed in the chapter.

63 The impact of this heretofore undiscussed fact is further examined in Book 5 in this Series – Young, T., Covering ABS: Addressing the Need for Sectoral, Geographical, Legal and International Integration in Implementing the ABS Regime (IUCN, ABS Series).

64 Of course, it is common for customs officers to confirm the registration status of all vehicles that are brought into or taken out of the country. However, this is not the primary mechanism for enforcing vehicle ID requirements.

65 Uncontrolled and abusive markets still exist, even in the most developed and intensively regulated commercial systems. Market abuses in the agricultural sector of the United States, for example, are documented in Schlosser, E., Fast Food Nation, at chapters 5 and 7 (Penguin, 2002).

66 As further discussed in Books 2 and 5 of this Series, clarification of the exact nature of “genetic resources” will in turn enable agreement on consistent understandings of “access to genetic resources” and “utilization of genetic resources,” as well as determining if there is a need for a term such as “derivative” or whether any use of the genetic information (including in the development of synthetic copies and products) is included within the notion of “utilization of genetic resources.”

67 Various presentations and discussions on this issue were offered in a “Roundtable on the Practicality, Feasibility and Costs of a Certificate of Origin” (9–10 November 2004), however, no record of the proceedings, discussions or presentations in this meeting is available online.

68 This approach has been discussed in a variety of papers, as summarized in Book 2 of this Series, Tvedt, M.W. and T. Young, Beyond Access (full citation in endnote 4).

69 In some cases, the decision to stop engaging in direct on-site bioprospecting was based on concerns about potentially becoming embroiled in a claim of biopiracy or misappropriation. Companies noted that their field work was, to some extent, offered as a “reward” for laboratory researchers in their facilities, and have discontinued this practice, in favor of safer methods of obtaining genetic material – through researchers and other collections. Although it is not clear that this method avoids ABS responsibilities from a legal perspective, it clearly avoids exposure to potential claims (because the claimants will probably not know about these post-access transactions). See IUCN Canada, “Analysis of Claims...” (full citation in footnote 5).

70 Similar experiences are found in natural resources management, where the law frequently prohibits activities such as unpermitted felling of valuable trees. As noted by forest officials in Trinidad and Tobago, the problem with such laws is that “it is not possible to post a guard around every tree.” See, e.g., TRINIDAD AND TOBAGO, Report of the Advisory team, 1994, Evaluation and Institutional Development: Management of Commercial Forest Plantation Resources and Management in Trinidad and Tobago (FAO, Rome and Port of Spain).

71 CBD COP Decision VI/24, UNEP/CBD/COP/6/24, para. C.1 and see Bonn Guidelines Art. 16(d)(ii). In para C.2, Parties were similarly urged to “encourage the disclosure of origin of relevant traditional knowledge, innovations and practices ... in applications for intellectual property rights, where the subject matter of the application concerns or makes use of such knowledge.”

72 Registries have been suggested as a means to facilitate patent-based disclosure of source of traditional knowledge. This approach is examined in more detail in Mgbeoji, I. Pre-emptive Defensive Patents, Indigenous Knowledge and Biological Diversity: Expanding the Frontiers of the International Patent System for a Sustainable Environment (loose-leaf, 2001); and Patents and Plants: Rethinking the Role of International Law in Relation to the Appropriation of Traditional Knowledge of the Uses of Plants. (Dalhousie University, 2001); Lesser, W., Sustainable Use of Genetic Resources Under the Convention on Biological Diversity: Exploring Access and Benefit-sharing Issues (CAB Intl, Oxford, 1997) at p.129.

73 See, e.g. the Report of the 2nd Meeting of the Ad-hoc Open-ended Working Group on ABS (UNEP CBD/COP/7/6 (2003) Recommendation, para g (page 26).

74 European Commission, Directive 98/44 [on the legal protection of biotechnological inventions], Recital 27 (“if an invention is based on biological material of plant or animal origin or if it uses such material, the patent application should, where appropriate, include information on the geographic origin of such material if known.”) This non-binding provision underscores its completely optional nature by specifically stating that it is “without prejudice to the processing of patent applications or the validity of rights arising from granted patents.” A few other countries (Sweden, Norway, Romania) have indicated that they have adopted or are in process of adopting similar voluntary disclosure provisions.

75 Questions to be addressed should include, for example, whether the person utilizing the genetic resources must list as his source the individual/institution/location from which he acquired the specific samples used, or must trace back to a “country of origin” from which someone in the chain of acquisition and regeneration acquired the initial biological specimens. Another such question is when the biological sample is deemed “accessed” for these purposes. If biological specimens may be collected without triggering ABS requirements, it will be necessary to define a particular time at which those specimens convert (by virtue of use or intent) from being biological specimens to being “genetic resources.” A third such point is the question of when and how the property interest in “genetic resources” came into being. As noted, there was no legal statement of this concept until 1992 when it was included in the CBD. This leaves open the question of whether and how any entity that acquired a biological sample prior to 1992 could be thought to have also acquired the right to utilize its genetic resources. It is at least arguable that material collected prior to the Convention was a “biological resource” only – and that no “genetic resource” was thereby acquired.

76 The CBD seems to exclude situations in which genetic resources were acquired prior to 1992, however, since there was no legal process for acquiring natural resources prior to the adoption of Article 15, most persons who took biological material across boundaries before 1992 would probably be considered to have a right to possess the “biological specimen,” but not a right to its “genetic resources.” Presumably, however, the pre-1992 exclusion would apply where one utilized genetic resources prior to that date. (This issue is discussed in greater detail in Book 5 of this Series.)

77 The author notes that such a requirement will need to be carefully created and applied to avoid conflict with restrictions imposed on governments under international trade agreements. These matters have not been comprehensively examined, as yet, however they are treated in Book 2 in this Series – Tvedt, M.W. and T. Young, Beyond Access (in endnote 4).

78 This proposal of Dr Morten Walløe-Tvedt was originally presented in the Norway-South Africa ABS International Expert Workshop on Access to Genetic Resources and Benefit Sharing (20–23 September 2005, Cape Town, South Africa). It has since been refined and included as part of the proposals and conclusions in Book 2 in this Series – Tvedt, M.W. and T. Young, Beyond Access (endnote 4).

79 See, for example, UNITED STATES, Comprehensive Response Compensation and Liability Act, 42 United States Code § 9611(a), creating a fund (the “Superfund”) to pay for hazardous waste cleanup when the companies or individuals responsible for the original contamination are no longer available to bear this responsibility. The Superfund is capitalized by a tax on all businesses within certain operational categories (those categories which use and have used significant amounts of hazardous materials, or generated significant amounts of hazardous wastes).

80 Another side of this issue, of great concern in the negotiations, is the need to know how long the certificate (and the ABS process) continues to apply. Currently, it is still not clear whether a person who obtains a user's GR-related product, and then uses that product in the development of another innovation will be required to share benefits with the source country.

81 “Summary Analysis: Legal Certainty for Users of Genetic Resources under Existing Access and Benefit-sharing (ABS) Legislation and Policy,” published as UNEP/CBD/ABS/3/INF/10 (3rd Ad-hoc Working Group on ABS, Bangkok, 2005) (reprinted in Book 5 in this Series – Young, T., Covering ABS: Addressing the Need for Sectoral, Geographical, Legal and International Integration in the ABS Regime, (IUCN, ABS Series)).

< previous section  < index >  next section >