3    Contract Provisions and Experience

Tomme Rosanne Young

This chapter presents an experience-based view of ABS contracts. It's goals are to provide a variety of examples of special provisions used in ABS contracts to address the contractual aspects of key issues of genetic-resource access, use and benefit-sharing, and to provide some assistance (through comparative presentation of existing contracts, models and forms) for users and providers involved in the negotiation of particular ABS contracts. Each type of provision is generally introduced, in terms of its purpose and standard approaches to its function. The author then provides examples of this type of provision from actual contracts. The author does not, however legally analyze any of the contractual excerpts reproduced in this chapter. Many of the contracts examined are currently in force, and the author does not wish to prejudice any future decisions on them, nor is it useful to rate the impact of any contract without knowing the detailed facts about the parties. The needs of a contract are strongly affected by its objectives and expectations and especially the nature of the relationship between or among the parties.

In compiling the examples for this chapter, the author has reviewed more than 75 ABS-related contracts. This number was not a random selection from a larger ‘universe’ of instruments, however. It constitutes all of the contracts, models and forms that could be obtained by the author, or have been formally provided to the author, directly or through authorized research institutions (especially the WIPO database) over a period of approximately 15 years. Many of the parties and other sources who provided these examples asked that the specific parties, locations and other specific data should be kept confidential. To ensure that, this chapter complies with both the letter and the spirit of these requests, the author has removed all specific references to parties, resources, locations, and specific national laws. To this end, all of the contracts, except the SMTA, are referred to only by a ‘contract number’ which can be used to link provisions in one table to other provisions quoted in other tables.

In reprinting specific provisions, some limited changes were made in the text of the provisions themselves, primarily by removing extra details or repetitions that obscure the primary contractual issues, or made them more complicated to read and understand. Many of the provisions are still relatively complex.

Finally, several of the contracts were originally provided in languages other than English. They have been informally translated, to preserve anonymity.

Of the contracts reviewed,

Obviously, it was not necessary or useful to reproduce every provision from all of these contracts. Many of them included provisions that were nearly identical, particularly where they are inter-related forms and models. Several variations were developed by one entity or organization, each designed to address a different type of ABS contract or a different stage in the genetic resources collection, analysis and development process. Many of other contracts, although created by different parties, utilize provisions that are relatively similar to one another. For some issues, only a few of the contracts chose to address the point or issue, whether because it was not relevant to the contract or because the parties could not agree on a provision, but felt that the contract would be valid and complete without addressing the point.

As a consequence, whenever a particular table includes only a few of examples, this small number may indicate one of three things. Either (i) most of the contracts reviewed have not addressed the point under discussion; or (ii) many of the contracts included such provisions, but their provisions were extremely similar to one another or (iii) the parties intentionally chose not to address the point in the contract, due to disagreement or for other reasons.

The tables in this chapter include examples from about 47 contracts, many of which were provided anonymously. To aid the reader in understanding the role and impact of each provision, the following chart provides basic information about each contract, specifying (i) the type of contract, (ii) the nature of its parties, and (iii) general subject matter addressed.

Table 3-1.2 Description of the contracts used in this book

The decision to include a contract in this book was based on the potential lessons that might be learned by examination of its terms. The contract list includes many kinds of instruments that are only distantly related to the original ABS transaction – that is, the agreement by which the user obtained access to genetic resources from the original provider (i.e., person, community or country through whom the resources were originally taken from their in-situ source) and/or agreed to share benefits arising from the use of genetic resources.

By including these provisions, the author does not intend to recommend any of them as being ‘good’, ‘effective’ or even ‘necessary’ in all ABS situations. Similarly, this chapter does not offer any specific advice regarding the use of any or all of these instruments. The negotiation of contracts is a complex and multifaceted process – similar to prescribing medicine or surgery to address or prevent an illness or condition. The use of contractual approaches depend on the ‘diagnosis’ of the needs, issues, conditions, nature and attitudes of the parties and the res – factors which are different from contract to contract. Any provision, model, form or guidance document, while very useful and effective in one set of circumstances, can be a disaster if applied to a different situation.

For this reason, before presenting the excerpted provisions, this chapter opens with a discussion about the best practices in using examples, forms and models. Many of these points may be self-evident, but are thought to be worth repeating.

3.1 Examples, models and forms

The provisions reproduced in the following sections, are taken from three types of instruments: contracts in force; form contracts; and model contracts. As tools for negotiating and drafting a new contract, each type has both strengths and limitations:

Contracts in force: Existing contracts are normally the products of a negotiation process, reflecting compromises between the parties as compared with their various starting positions. In addition, each one has been amended to conform to the law of the source and user countries, as well as any other applicable law and local concerns. Normally, each negotiator should begin from his own starting position, rather than from a compromise position that concluded some other negotiation. Before using an existing contract as a ‘template’ for a new contract, it may be very useful to investigate the negotiations of such a contract, and obtain information about the parties' objectives and strategies, even when the same parties are negotiating the new contract.

Form contracts: For this book, ‘form’ refers to a formally developed instrument that has been adopted by a country, company or other body that has made a firm legal commitment to use the form, in its ABS transactions. Some forms are ‘unchangeable’ – where the adopting party requires that it must be used ‘as-is.’1 Other forms specifically identify particular provisions or points that may be individualized and negotiated, but mandate that others must be included in all contracts.2

Because the adopting entity commits to using the form, the creation of a new form is usually carefully vetted by experienced contract negotiators, lawyers and administrators prior to adoption, to make sure that it is well written and legally protective of that party's interests, including its interest in fair dealing with the other party. Governmentally adopted forms are often developed in public processes and may be more attentive to the interests of other parties.3

Model contracts: Models are essentially ‘hypothetical contracts.’ Models are often written or promoted by academics or by industry associations or other bodies which will not actually become parties to the contracts themselves. Given that no party or entity commits itself to their use, models' development processes are often unilateral or based on limited input from other sectors. While models sometimes offer innovative solutions to contractual development challenges, their primary value is that they provide insight into the objectives or perspective of the sector or entity proposing the model.

Forms and models are most effective when they are (i) focused very narrowly on a specific type of situation between very specific categories of parties; and (ii) negotiated in a process that reflects the interests of all stakeholders that would otherwise negotiate an individual instrument.

In conventional contract law, forms and models are frequently used in many commercial sectors. They serve a variety of purposes that simplify and streamline contract negotiations, drafting and formalities, operating to

Each contractual situation is different, however. Academic and industry-sponsored models can achieve the above objectives only if they are very narrow in subject and are developed on the basis on exhaustive study of relevant law (in all countries in which the instrument is to be used). In many countries, legal disputes over agreements based on ‘model contracts’ are plentiful.

In general, forms and models have been most successful in legal areas that have developed over a long time. For example, the law governing the ownership and transfer or lands and buildings has evolved over many centuries; the particular issues and formalities of this type of transaction are well understood. Consequently, in many countries, a variety of forms and models (e.g., sale contracts, leases, mortgages) are a primary tool of commercial practice. Where the law is unclear, the drafter of a model has no special insight. His model may be useful as a set of ideas, but nothing more.

Many ABS models and standard forms have been created by a variety of industry groups and other advisors. ABS negotiators have sometimes recommended creating mandatory forms which shall apply to all ABS agreements. It is easy to understand why this idea is so appealing. The goal of streamlining the ABS process arises from the presumption that the delay in consummating ABS contracts is usually caused by the difficulty of negotiations. The general belief is that companies, governments and others need longer deliberations and more time for evaluating each particular contract where the terms of that instrument are unique. They assume that the negotiations will be completed more quickly, if there are fewer available contract options to choose from.

Moreover, by adopting one or more standard formats, the regime would make the task of the person signing the contract (agency official, community representative or company representative) very simple: All that person would have to do is confirm that the correct form is used, and that the form has been correctly filled out. In that case, responsibility for negotiating ABS arrangements could be given to lower-level functionaries, who would not need to obtain permission or approval from the legal division or central government, prior to signing the contract. Based on these assumptions and presumptions, the negotiators have not yet fully examined the idea of a ‘standard ABS contract,’ nor identified the institutional factors necessary in order for a model or form to be used and useful.

In ABS, the most important discussions of the use of forms and models are found in the SMTA and the Bonn Guidelines. As discussed in 1.4, the SMTA is the best known form in the ABS system. Provisions from the SMTA are included in the Tables in this chapter, and offer a useful comparison to the contract provisions used in other sectors. Several of the Bonn Guidelines suggest or recommend that form/model contracts4 are a potentially useful tool. They have taken a ‘mix and match’ approach, suggesting the creation of a checklist of ‘model provisions’ to address various challenges in contract negotiations.5 These initial ideas constitute general suggestions about how ABS contracts should be documented, executed, overseen and if necessary enforced.6

The creation of ABS forms has been raised as an important option in the international regime negotiations. The Parties have noted that there are many different types of ABS contracts, and that they would face virtually insurmountable challenges in attempting to create a single form. It would be difficult indeed to find a single unified form/model for ABS, that would be satisfy to all types of users (academic researchers, botanical gardens and conservation biologists and commercial R&D divisions) as well as providers.

As a consequence, many ABS discussions have focused on the development of a series of forms or form provisions. The success of the SMTA provides a useful lesson on this point. It is very narrow in coverage and focus (limited to PGR transfer between collections and agricultural variety developers) and was based on a long history of pre-SMTA transactions that were also narrowly focused.7 The SMTA thus adopted provisions that were already well accepted within that subsector. Some of these would be highly controversial in other ABS sectors. It does support the view that, if well researched, carefully drafted and properly used, the adoption of various forms can resolve many of the contractual challenges encountered in ABS.

3.1.1 Using contracts as examples

An existing contract's usefulness as an example or template for a new contract depends on situational factors – specifically, on whether a particular existing contract is similar to the contract that is being negotiated. The negotiators should compare their own situation to the proposed contract by looking at three contractual factors:

Knowledge of these factors will help the negotiator understand where and why the example contract is relevant, and where it is not, based on awareness of the differences between the exemplar and the current transaction. Nature of the parties

The differences between various groups are not always readily obvious. Some kinds of users (government research agencies and other non-commercial users) place a high priority on transparency, and make a point of publishing their contracts. These organizations usually have multiple social (i.e., non-commercial) objectives, such as

As such, these contracts often include provisions that might not be acceptable in negotiations with commercial users or for commercial purposes.

By contrast, commercial entities often do not make copies of their existing contracts available.8 Commercial entities do not place the same value on transparency of their contracts. In addition, they do not normally give commercial priority to the first two objectives listed above. This is entirely understandable, since a company or commercial venture has a very different mandate. One cannot measure a commercial user by the same yardstick that is used to measure the performance of aid agencies, research agencies, collections or NGOs. For the provider this difference demonstrates the value of all types of contracts. The benefits that a commercial entity may be able to obtain through use of genetic resources, and share under an ABS agreement may be quite different in many ways from those of the non-commercial entity.

Even within the two groups, individual entities have differing overall mandates that may affect the contents of their ABS contracts. Aid agencies, non-commercial researchers and public scientific/research institutions, exemplify a great many different objectives. For example, an agency whose objective is foreign aid may focus more attention on helping the provider community or country to develop its own research capacity and/or ability to develop the results of that research. By contrast, the first objective of a user country's national health agency is the promotion of its own R&D capability, with a secondary desire to achieve social purposes in the provider country. Research agencies and academic institutions may have both individual interests (to ensure that they may later publish or sell their discoveries without limit) and global scientific objectives (to ensure that other researchers, conservation experts and governments have access to information), which are paramount over any particular interest in social welfare or livelihoods within the particular provider country or community. In each case, the user will normally be very sympathetic to the needs of the provider, but will perceive its obligations and trade-offs as a user very differently.

Among commercial entities, differences may be similarly significant. An ABS contract with a commercial entity will normally be much stricter and legally rigorous, but it may be much more desirable to the provider. Benefit-shares under such a contract are potentially more valuable (monetarily, in the nature of information received, and in the development of longer-term commercial relationships) than the benefits under an ABS contract with a non-commercial researcher, agency or NGO.

Although less frequently discussed, there are similar differences on the provider/source side, as well, usually based on the ‘level’ of the entity acting as provider – that is, whether the ‘provider’ side of the contract is negotiated by the (i) central government, (ii) some agency or institution within the government, (iii) a local community, or (iv) an individual.

In many ABS discussions, it is assumed that the source-country's government will conduct or oversee all ABS negotiations. Other negotiators assume that the local or indigenous community will control this process. Neither of these assumptions is applicable in all countries, however. In some countries, the authority to negotiate as ‘provider’ of the country's genetic resources is a duty of the central government. Several others delegate rights and responsibilities of the provider to specific agencies, ministries or to individual protected areas, which operate as separate ‘providers’. Delegation of authority may be made by statute in some countries, or determined on a case-by-case basis, in others. Other countries delegate ‘provider’ authority to individuals and communities – usually those who own or control the land on which specimen-collection activities occur. Most existing ABS laws embody a combination of these approaches, with separate approvals needed from various agencies, individuals and communities.

For contractual purposes it is important to note that the objectives of the various levels of providers are dramatically different, depending on which approach the country has chosen:

None of these options is per se either negative or positive. In each country, the decision to centralize the negotiations or to devolve those rights to other levels may reflect a particular national strategy, indicating that ABS has been integrated into a larger national framework (such as the national strategy for conservation, for rural development, for agriculture, etc.) The specific terms of a contract (as discussed in part 3.2 of this chapter) may be quite different depending on the nature of the provider and the role of ABS in the source country's national policy framework. Equally, the nature and objective of the user will lead to other kinds of variations. Specific activities and rights granted

Another factor affecting the similarity between an example contract and the current negotiations is the scope or inclusiveness of activities and rights addressed in the example contract. In general, the primary differences in ‘scope or inclusiveness’ can be seen by dividing ABS contracts into two categories: (a) contracts for ‘taxonomic’ activities – e.g., collecting, identifying, labeling and pre-serving/conserving samples; or (b) contracts for research and development (which may be either ‘commercial’ or ‘noncommercial’). While it is possible that some ABS contracts will have other objectives, these two categories appear to encompass nearly all ABS contracts. Category (a) will primarily involve noncommercial users; however, taxonomic collections and collected material developed through these contracts may be transferred to commercial R&D departments and other researchers who may use the material for commercial purposes. Category (b) will include most commercial contracts, but may also include noncommercial contracts involving activities that could lead to commercial uses.

Normally, taxonomic contracts will be broader in biological scope, including a wider range of specimens and species than R&D/analysis contracts. In addition, the taxonomy contracts will normally grant the parties broader powers and greater flexibility to choose which specimens to collect or analyze. Contracts aimed at broadening taxonomic knowledge normally focus on four components –

(i) enabling the broadest possible sampling and preservation;

(ii) ensuring that the user shares the samples and information collected with the provider;

(iii) developing a framework through which provider citizens and companies participate and provide assistance in the user's task; and

(iv) discussing the parties' rights in case an opportunity arises for commercial development of the genetic resources (i.e., whether separate permission from the provider or source country is required, and whether any information or research results may be published).

By contrast, where the purpose of the contract is specimen analysis for commercial or noncommercial use and development, the situation may be reversed. Components i and ii (scope and sharing obligations) are often stated very narrowly. Commercial analysis and R&D contracts are often very specific about which genetic resources are granted and to whom. At the same time, component iv (rights granted) may be much more expansive regarding what may be done with the specimens that are obtained or used. The user is often granted a wide latitude to develop products, so long as benefit-sharing will result. In such contracts, the provider may expect or presume a different type or higher levels of benefit-sharing. Sectoral focus

Finally, the difference among sectors is also important in deciding whether a particular contract, form or model is a relevant or useful guide to your own contractual drafting and negotiations. Often, the sectors differ greatly in the way that provisions are phrased, in the performances that are required, in the contract's picture of the ‘benefit’ that will arise and in the type and manner of benefit-sharing to be applied.10

Contracts regarding the genetic-resource activities in the pharmaceutical industry, for example, frequently involve highly technical modes of examination and utilization of complex molecules and sequences of a single variety. Difficulties of reproduction, multiplication and/ or synthesis of these resources often make the need for re-supply from the wild of a species a prime concern. As a consequence, contracts in this sector are generally believed to operate quite differently from agricultural use of genetic resources, and potentially require that ABS contracts address different points of concern.

3.2 Contract provisions

The following discussions and examples do not cover all contract provisions found in ABS contracts. They examine (i) special provisions developed to address ABS issues (such as ‘access’ to genetic resources, identification and tracking of resources and their use, and ‘benefit-sharing’); or (ii) conventional provisions that may give rise to less conventional concerns when applied to ABS contracts.

The idea behind this chapter is only to reflect a variety of different types of approaches and issues of concern in addressing several issues, rather than to analyze or recommend these provisions. Many aspects of ABS law are still unclear – some are being negotiated as part of the international regime, and most legal issues have not yet been examined by courts or national legislatures. It is not appropriate at this point to comment in detail on instruments in force. Once the basic ABS framework has been clarified by the international regime and national implementing law, it will be possible to more effectively apply national contract and property law to various ABS issues. In the meantime, the following sections provide examples of current ABS contracts and their reflection of the way companies are seeking contractual certainty, to deal with the uncertainties of the current legal climate.

In generating the Tables in this chapter, the author has attempted to tread a balance between being complete and being repetitive. No contract reviewed for this book (whether quoted here or not) addresses all points described in this Chapter. For example, many of the contracts do not contain definitions, scope provisions, nor any discussion of intellectual property rights. Many of them do not discuss or specify legal rights in genetic resources. Very few of them discuss compliance with national ABS legislation nor benefit-sharing.

On the other hand, there was a high level of repetition as to some provisions. On some issues, several contracts have used the identical provision. Where provisions in two or more contracts are nearly identical, only one characteristic example is included: slight changes among the provisions are not reproduced unless the wording difference would affect the rights of one of the parties.

Many clauses illustrate more than one point, and may be repeated in more than one table.

In some places, the Bonn Guidelines have been cited in this chapter; however, the chapter does not restate the Guidelines' provisions. Parties negotiating an ABS contract would be well advised to separately examine the Bonn Guidelines, as well as other instruments such as the Japanese Guidelines on ABS – a soft-law document developed by an industry-government cooperation and strongly supported by the Japanese government11 – and Costa Rica's new Code of Conduct on Access to Genetic and Biochemical Resources and Elements of Biodiversity.12

3.2.1 Identifying and binding the parties to an ABS contract

One basic purpose of a written contract is to identify the contract parties and the title of the specific individuals involved in the negotiations. Normally, at a minimum, the contract will name the parties in opening provisions. In other cases, identification provisions can serve additional purposes. The most important roles served by these provisions raise particular concerns in ABS contracts, including the following:

In ABS, both user and provider have to consider the authority of the other negotiator or signatory. Where a person claims to be the ‘owner’ of genetic resources, the other parties need to know that this is true, and that no other person or entity will later claim to own those resources. Where the government holds primary rights to genetic resources, the user needs to be certain that the person signing has governmental authority to grant access to those resources. In some cases, an agency or institution has signed an ABS contract, but the contract was later invalidated by the country which noted that that agency or institution did not have the right to the genetic resources.15

From the provider's perspective, it is often true that an individual researcher or other person is the user's primary contact with the provider country. If that person negotiates or signs the ABS Contract with regard to his own actions, the ultimate user may not be bound by the contract. In addition, confirmation of the identity and authority of the parties may be required under other national law, such as those designed to protect against commercial deceit and misrepresentation. Other elements of the provisions identifying the Parties would consider the following:

Fewer than half of the contracts reviewed for this book include any of these types of provisions. The following discussions and tables provide examples of the primary approaches used in ABS Contracts relevant to some of these issues. Ownership/rights in genetic resources

In ABS contracts, the ‘ownership’ (or the legal right to grant access to) the genetic resources16 can be complicated by several factors. Most countries have not adopted specific laws stating how genetic resources are governed or what category of property law (discussed in 1.1.1) shall apply to them. As a consequence, in nearly all countries there is no external way to determine who has the legal right to own or dispose of those resources. The only way to address this uncertainty is by obtaining a final decision from the government or courts – a process that can be both long and costly. In addition, most species are dispersed very widely. Many different persons, entities or communities may have rights in the same subspecies or variety. Consider, for example, a contract which grants a user the exclusive right to collect or utilize the genetic resources of a particular variety, or the right to obtain such exclusivity by filing an IPR. In that case, principles of equity or legal fairness may apply under which other persons who hold rights in that same variety's genetic resources would have rights under the contract or rights to invalidate it. In many countries, benefit-sharing rights are still controversial, so that challenges of this type may arise in unexpected ways.17

If a party's claim of authority to grant access to genetic resources is untrue or overturned, the other party's only legal right will be to seek redress from the first party. He cannot obtain a clear legal right to the resources, nor any protection against legal action by other persons, without seeking a new contract with the true owner or rightholder. This result does not change if the first party has formally stated in the contract that he is authorized. Consequently, in any contract, it is recommended that the parties take steps to confirm legal authority from official sources or require that the provider obtain such formal documentation.18 As noted above, this issue of legal authority has previously arisen in many ABS situations.

Table provides some examples of the manner in which ABS contracts deal with the ownership or authorization to deal with or contract for genetic resources.

Table Provisions regarding authority over genetic resources Authority of signatory

The authority of the person signing a contract is a highly technical issue, because the contract will be null and void, if that person does not have authority to bind the government, agency, community, company or other party he represents. At most, the contract will only bind the person signing – not the entity. In ABS, this type of concern can be relevant to both the provider and the user or other recipient.

For providers, to the first objective in this area is to protect against intentional or unintentional misrepresentation by the other party.19 In addition, however, the contract will often need to address the means by which one person can be proven to represent an unincorporated rural community or indigenous group that does not have a clear ‘membership’ or established corporate structure. In these cases, the process documenting the representation of traditional or rural communities is nearly always unclear. National law addressing this point may not be recognized by the traditional communities. In some cases, a community association may appoint a particular representative, but that representative's position may still be unclear, where for example some members of that community are not part of the association. While it is difficult to resolve this issue by contractual provisions, it is possible for the parties to assign the risk that a particular representative's authority might not be valid.

Table Provisions regarding the authorization of signatories

The ABS contracts provide few examples of this type of provision. Table includes all such provisions found in any of the 47 quotable contracts included in this study. Ability to complete the contract

In ABS contracts, the parties' capacity and ability to take the required actions is another difficult issue. In conventional contracts, the parties recognize that contractual assurances regarding these issues offer limited protection. It is common to combine these provisions with other research or documentation. In ABS contracts, there is another factor to be considered: A long time may pass between collection of the specimens and the development of a product or invention that can result in benefits. During this time, financial and practical factors relevant to the user may change dramatically.

No provision to address this issue was included in any of the ABS Contracts reviewed, except in contracts provided with the restriction that ‘no language contained in the contract may be publicly quoted.’ A few provisions address other aspects of ability to meet the contract's obligations. These are included in Table

Table Provisions regarding the parties' financial and legal ability Rights of third parties

One of the clearest differences between ABS contracts and more conventional commercial contracts is the extent to which they affect and are affected by third parties. Table includes the contractual provisions about third parties found in some of the ABS contracts reviewed for this book. As noted in 2.6.3, many contracts specifically intend to benefit one or more third parties in some limited way. It is sometimes advantageous to grant ‘third-party beneficiary’ status to other persons and communities, as a way of avoiding more serious challenges or negative judicial decisions.

In a few of the reviewed contracts, the specific rights of some third parties are specifically discussed, whether to grant such rights or to claim that no such rights exist. As noted in part 2.6.3, the fact that a third party is not mentioned in a contract does not mean that the party is not a ‘third-party beneficiary’ to that contract.

Table Rights of third parties

In addition to commercially recognized third-party beneficiaries, genetic resources agreements may have other third-party beneficiaries, since genetic resources are somewhat different from other types of contractual subject matter. As a new kind of legal or property right,20 genetic resources often fall within the property controlled directly through the ‘sovereign rights’ of the country. They are often widely distributed throughout the country, available to all. After the contract, it is possible that some rights in the resources will become at least partially exclusive. Consequently, many other persons, communities, entities, agencies and NGOs, may feel that they have rights under ABS contracts and permits, that they have an interest in ensuring that the country gets correct value for its genetic resources, and that the provisions of the ABS contract are fair, adequately protective and fully complied with.21 These persons may be considered to have a type of third-party rights under the contract.

3.2.2 Core provisions: Objectives and scope

The objective and scope of the contract may provide evidence establishing the legal rights of the parties. Not all contracts include these statements, which are not an essential element of a contract. Normally, when they are included, these provisions are very straightforward, in describing the basic intention underlying the contract. Many contracts and discussions separate the ‘objective’ of the contract from its ‘scope;’ however, for comparative purposes that distinction is often artificial. Accordingly, Table 3.2.2a provides a few examples of how ABS contracts have defined their objectives and scope.

Table 3.2.2a Objectives and scope

In addition to these basic provisions, the objective/scope is often defined in the negative, through provisions that explain the limits of the contract's scope. This approach is demonstrated in Table 3.2.2b

Table 3.2.2b Exclusions from scope

Regarding scope provisions and limitations of scope, the Bonn Guidelines note that the contract should include the following:

3.2.3 Terminology

Terminology issues pose one of the most difficult quandaries for ABS contracts. As noted in 1.2, the basic concepts and terms in ABS have not yet been agreed internationally. Up to now, ABS-related contracts utilize one of two approaches to terminology:

Neither of these options is very satisfactory for the contract lawyer. A contract that uses the existing ambiguous and un-agreed terms will face a legal certainty problem, rendering a court or arbitrator unable to rule on or enforce the contract, which would be deemed ‘unenforceable.’ Legally, it would be unfair to require either party to take actions or incur costs that he did not agree to, and it would be impossible to be absolutely certain what the parties agreed to if the terms are ambiguous. No court or national law has yet clarified the meaning of primary ABS terms, with contractual certainty.

If the Parties do not use ABS terminology, the contract may not meet the country's legal requirements for granting ‘access to genetic resources.’ If so, the parties might then have to negotiate a separate contract.23 To avoid this result, some contracts insert a special (somewhat self-serving) provision stating that the parties have satisfied ABS legal requirements. Unfortunately, unless both the User Country and the Source Country are signatories of the contract, this provision will be of no actual legal effect.

Nearly all ABS contracts include some definitions, both general (regarding the terms and concepts used) and specific to the particular materials and activities of the parties. Table 3.2.3 provides some examples of several relevant definitions that have been used in ABS contracts, including provisions defining the resources being transferred (or retained), the parties involved, the rights undertaken and the resulting products and benefits. (Since the national and CBD definitions are well known, they are not reproduced, below, nor are conventional contractual definitions that do not have potential relevance that is unique to ABS issues.)

Table 3.2.3 Terminology; definitions of key terms most relevant to ABS issues

As Table 3.2.3 shows, very few contracts have attempted definitions that would address the most significant conceptual difficulties in ABS situations. In particular, no contract has defined ‘research results’ although some appear to call for the parties to share them.

The Bonn Guidelines do not specifically include any new definitions, but do suggest that some will be needed. The only specific terminology discussion in the Bonn Guidelines calls for the contract to include specific description of ‘the type and quantity of genetic resources, and the geographical/ecological area of activity.’24

3.2.4 Basic ABS rights and duties

For ABS purposes, the most critical provisions of any ABS contract are those that specify rights and duties relevant to (i) facilitation of access to genetic resources; and (ii) equitable sharing of research results and of the benefits arising from their use. Access and use of genetic resources

ABS Contracts generally do not directly name themselves as ‘ABS Contracts.’ Similarly, they do not specifically label their access provisions as ‘access.’ In most of the contracts reviewed, including those that cannot be reproduced in this book, access provisions are primarily descriptive.

[a] Access: Resources and rights granted and retained

Table sets out examples of provisions describing primary access and rights to utilize the genetic resources, as well as the primary restrictions on access – i.e., whether the rights granted are ‘exclusive’ (granted only to the particular recipient in the contract) or whether the provider may grant similar rights to others.

Table Access, resources and rights granted / Exclusivity or non-exclusivity

[b] Provider's Duties: Rights granted and retained

Table provides examples of the specific responsibilities of the provider, including the rights, powers and resources that are reserved or withheld by provider and/or that are or may be re-granted to the provider.

Table Provider's duties

In addition to these basic provisions, a number of contracts have addressed a specific question – the possible need to resupply the recipient with additional samples of some species or variety. These provisions have been identified as very important in some case studies.25 As a consequence, a number of contracts have specifically addressed resupply questions. A sampling of these provisions is found in Table

Table Re-supply

[c] Recipient's duties (beyond payment/sharing)

Finally, Table contains some examples of the ‘access side’ of the recipient's obligations (apart from any payment or direct sharing requirements).

Table Recipient's non-payment duties

The Bonn Guidelines specify relevant elements of MAT, which should include the ‘obligation to comply with the material transfer agreement’; and a ‘duty to minimize environmental impacts of collecting activities.’26 Monetary provisions and other benefits

Few contracts discuss the equitable-sharing aspects of ABS; and where the issue is mentioned or addressed, those discussions are not complete. A few contracts (fewer than 20% of all contracts reviewed) mention non-monetary benefits. Those provisions, however, are relatively nonspecific. For example, such provisions note that research results shall be shared, call for capacity-building or mention other non-monetary benefits of the contracts. Only about 15% of contracts reviewed specifically discussed benefit-sharing mechanisms, payments or activities, and most of these provisions are contained in contracts that are subject to complete confidentially (not quoted in this book.)

The lack of benefit-sharing provisions is not unexpected, given that many of the contracts reviewed in this book are between downstream-users, and do not mention any obligation to the original Source Country. The tables in the following sections present a selection of the benefit-sharing and other payment provisions in the contracts reviewed, divided into three categories:

[a] Payments for access

Table contains examples of provisions through which the user or recipient pays for access to genetic resources. These are payments not based on benefits received by the user. They generally include payments based on the particular specimens collected, the right to enter property to collect specimens, and other payments to Source Countries. ‘Payments for access’ exclude royalties and other percentage payments.

Table Payments for access

[b] Benefit-sharing

Up to now, available information regarding benefits has been relatively limited, and primarily based on contracts involving non-commercial users. The author has had an opportunity to review a number of contracts, which are not publicly available, in which benefit-sharing provisions were included.

The author's general survey of all contracts (quotable and confidential) has discerned a number of trends, based on whether the contract is primarily research/taxonomic in nature or commercial/R&D oriented. First, in contracts granting a user a broad right to bioprospect (to collect and remove a large or unspecified number of species or varieties), the source country central government usually expects to receive a high volume of data and samples (often, the user is asked to provide a sample of everything taken) and a share of analytical data when it becomes available.

Under these contracts, future rights may be addressed in several ways. Either (i) the provider specifically retains the right to develop these resources independently (ii) the user specifically obtains the right to share data by transfer to other researchers or by publication; or (iii) the contract is silent on future development options. In these contracts, where the bioprospector receives post collection rights to transfer the resources to others or to publish them, the contract's benefit-sharing provisions are normally more expansive, calling on the user to provide in-kind services, equipment and capacity-building, in addition to the initial obligation to provide samples and analytical data.

By contrast, in contracts for R&D (whether non-commercial or commercial), the key factor appears to be the extent of the user's rights. If the user obtains an exclusive right to utilize genetic resources, or the power to take an action that converts his rights to exclusivity (i.e. by filing and IPR on the naturally occurring genes, rather than on his innovations), then provisions addressing the provider's interests will often be more directly focused on financial benefits. Where the user does not receive exclusive rights, or commits not to patent the genetic information (or synthesis) he obtains in a way that would prevent the provider from obtaining his own patent for synthesis of the genetic or biochemical characteristics of the specimen, the benefit-sharing provisions are usually very similar to those applicable to ‘taxonomic’ ABS contracts, as described above.

Table includes all quotable benefit-sharing provisions contained in contracts reviewed. Many of the contracts involving Source Countries do not contain any benefit-sharing provisions.

Table Benefit-sharing provisions

The Bonn Guidelines state that

Mutually agreed terms could cover the conditions, obligations, procedures, types, timing, distribution and mechanisms of benefits to be shared. These will vary depending on what is regarded as fair and equitable in light of the circumstances.27

The Guidelines also state that the contract should specify the timing of and mechanisms for benefits. Both of these provisions are relatively unspecific. Rather more detail is provided regarding the forms that benefit-sharing may take, listing both monetary and non-monetary payments, and including business opportunities (the right to enter into joint ventures with the user, for example) as a monetary benefit.28 The Guidelines' ‘indicative list of typical mutually agreed terms’ include: ‘Provisions regarding the sharing of benefits arising from the commercial and other utilization of genetic resources and their derivatives and products’.29

In addition, the Guidelines suggest that the distribution of benefits is also an essential point for ABS contracts, suggesting that the user will make this distribution directly to communities or individuals, rather than leaving the distribution of those benefits to the discretion of the Source Country's government or designated officials.30

[c] Downstream payments

Table provides financial provisions from the ‘downstream’ agreements relevant to ABS – that is, the agreements between (i) a user or collection or bioprospector, and (ii) other researchers and assignees who have received genetic resources or research rights through the user. These examples describe a few of the various ways that these parties are paid in downstream contracts under licenses of genetic resources and of innovations based on genetic resources. This table is limited to the provisions in the ABS contracts reviewed for this book, and does not consider the numerous other options for such payments.

Table Downstream payments between original collector and their assignees and other downstream users

It should be noted that Table offers only a sampling of these provisions, which were numerous, and far more detailed and extensive than any of the provisions reviewed regarding payments for access and benefit-sharing between user and provider.

[d] Distribution and use of benefits

Finally, some contracts specify how the benefits will be distributed, sometimes allocating distribution responsibilities, or specifying that distribution is a joint activity, to be undertaken by the parties to the ABS contract. In some, the provisions are more conventional – payments are made by one party to the other party, and their further use and further distribution is left to that party. The relevant Bonn Guidelines provision on ‘distribution and mechanisms of benefits to be shared’ notes that these mechanisms ‘will vary depending on what is regarded as fair and equitable in light of the circumstances.’31A sampling of provisions for distribution is included in Table

Table Distribution of benefits National procedures: PIC, MAT and other processes

Although most ABS contracts are the product of PIC and MAT and other processes required under national law, a few include specific requirements relating to government permit, consent and negotiation processes. The Bonn Guidelines provide a great deal of detailed suggestions relating to PIC and MAT,32 generally, but very little regarding how those responsibilities or compliance with them should be identified in the ABS contracts themselves.33 At Guideline 28-31, they note only that:

Prior informed consent for access to in situ genetic resources shall be obtained from the Contracting Party providing such resources, through its competent national authority(ies), unless otherwise determined by that Party... In accordance with national legislation, prior informed consent may be required from different levels of Government. Requirements for obtaining prior informed consent (national / provincial / local) in the provider country should therefore be specified... Respecting established legal rights of indigenous and local communities associated with the genetic resources being accessed or where traditional knowledge associated with these genetic resources is being accessed, the prior informed consent of indigenous and local communities and the approval and involvement of the holders of traditional knowledge, innovations and practices should be obtained, in accordance with their traditional practices, national access policies and subject to domestic laws... For ex-situ collections, prior informed consent should be obtained from the competent national authority(ies) and/or the body governing the ex-situ collection concerned as appropriate.

In general, a contract will specifically discuss the PIC process only where that process is external to the contract – i.e., where national law requires both PIC and an ABS contract. Not all contracts that have been received include PIC provisions, however, even where the law includes PIC as a separate step. PIC provisions from the contracts reviewed are reproduced in Table

Table Provisions for PIC

3.2.5 Assignment, change of use, tracking and the conclusion of the ABS relationship

The question of whether the recipient of the genetic resources may assign or transfer them (whether physical samples or genetic/biochemical information and research results) to another party has been a very difficult problem for ABS, both in regime negotiations and in the contracts themselves. It is integrally linked to other questions, such as tracking of genetic resources (sometimes proposed as a way to determined whether genetic resources have changed hands) and derivatives – a concept that addresses how far into the use/production process the ABS responsibilities extend.

In international and national law development, assignment-related concerns have centered on how to define the rights of provider, user and their respective countries. Another issue which has raised controversy is whether exceptions should be granted for particular transfers or particular users. In contracts, the problem to be faced is how to clarify exactly what kinds of transfers are permissible and exactly what the parties must do in the event of transfer.

Regarding these linked issues (assignment, change of use and derivatives) the Bonn Guidelines give relatively limited guidance, noting that ABS contracts or MAT should include:

  1. a ‘statement that any change of use would require new prior informed consent and material transfer agreement;’34

  2. clarification regarding ‘whether the genetic resources and/or accompanying information may be transferred to third parties and if so conditions that should apply;’35

  3. legal provisions regarding ‘assignment or transfer of rights;’36 and

  4. legal provisions regarding assignment, transfer or exclusion of the right to claim any property rights, including intellectual property rights, over the genetic resources received through the material transfer agreement.’37

It is not entirely clear what the difference between these provisions might be, if any.

In addition to these, the Guidelines' ‘indicative list of typical mutually agreed terms’ includes the following:

The following sections separately discuss and provide tables of provisions for assignment/transfer, change of use and derivatives. Assignment and transfer provisions

Table provides examples of direct provisions discussing the transfer or assignment.

Table Assignment and/or transfer Change of use

Regarding change of use issues, the Bonn Guidelines are uncharacteristically specific, stating that

Prior informed consent should be based on the specific uses for which consent has been granted. While prior informed consent may be granted initially for specific use(s), any change of use, including transfer to third parties may require a new application for prior informed consent. Permitted uses should be clearly stipulated and further prior informed consent for changes or unforeseen uses should be required.39

Table includes direct provisions regarding change of use. As shown by these provisions, the strong language of the Bonn Guidelines on this issue has not been taken to heart in all contracts.

Table Change of use Derivatives

Table includes a few provisions regarding derivatives and derivative products, given that the transfer of these may or may not (depending on definitions and other factors) constitute either an assignment or change of use under the ABS contract.

Table Derivatives

3.2.6 Tracking

Fewer than 5% of the contracts reviewed made any reference to the post-contract tracking or specific oversight regarding the movement of the genetic resources that have been transferred. The only reproducible provisions regarding this point are set out in Table 3.2.6.

Table 3.2.6 Tracking

It would not be fair to castigate other contracts for their failure to address tracking/tracing issues. In fact, this is not an omission but an alternative approach, used in instruments in which contract parties presume that all movement of genetic resources can be tracked or overseen, and/or that it may be legally and physically impossible to verify or confirm that a party who is required to track genetic resources is complying as required.40

3.2.7 Intellectual property and other intangible properties

The controversial issue of IPRs in biologically derived innovations and discoveries has become intrinsically intertwined in the ABS discussions. It has been the subject of intensive research, analysis and international discussions.41In contracts, however, these matters are relatively clear. IPRs and other intangible rights are not, per se, inconsistent with ABS, given that they are a primary method by which genetic resources are converted to ‘benefits’ – and the sharing of benefits is a primary objective of ABS. Consequently, the contractual provisions regarding the parties' rights in the event that an IPR is sought or obtained, the transfer of those rights, and the maintenance of confidentiality are relatively straightforward.

IPR issues in contracts are somewhat complex – frequently the most complex provisions in the contract. For this reason, and because the uncertainties generally present in ABS are also relevant to IPR and intangible rights, this book includes examples of a number of the different ways that ABS contracts address IPR and other intangible rights.

The Bonn Guidelines include a number of other intellectual-property related provisions and recommendations, including, for example, statements that

Contracting Parties which are countries of origin of genetic resources, or other Parties which have acquired the genetic resources in accordance with the Convention should... Seek to ensure that the commercialization and any other use of genetic resources should not prevent traditional use of genetic resources;42

Mutually Agreed Terms should address... whether intellectual property rights may be sought and if so under what conditions.43

They also suggest that MAT could include

Provision for the use of intellectual property rights include joint research, obligation to implement rights on inventions obtained and to provide licences by common consent; and the possibility of joint ownership of intellectual property rights according to the degree of contribution.44

Fortunately, IPR law has existed for approximately 150 years, and is very detailed in addressing a great many different contractual options. Thus, it provides useful examples and applications. IPRs

Normally, when a contract specifically discusses IPR issues, it will do so in a series of linked provisions. Table includes the parties' rights to the ‘information’ that is inherent in genetic resources and their use.

Table General provisions regarding genetic resources as information

A second set of provisions discuss the particular rights of one or both parties with regard to IPRs. A variety of examples of this type of provision can be found in Table

Table Rights to apply for hold and license IPRs in the genetic resources

Finally, it is common to specify in some detail which rights are not granted, as well as noting which are granted. Table includes a selection of this kind of provisions.

Table IPR-related rights that are retained or not granted Licensing of existing rights in genetic resources and products

ABS contracts generally do not make a clear delineation between licensing provisions and other types of provisions discussed in this chapter (assignment, transfer, patent rights, etc.), owing to the fact that various countries' national commercial laws deal with these issues and use these terms in very diverse ways. In Table, several provisions license parties to use patented innovations and other intangible property that is held by one of the parties.

Table Licensing the use the genetic resources and their products Confidential information

Provisions for confidentiality are very important in all contracts involving access to, use of or creation of information. There are four very different types of confidentiality in commercial contracts, however. One is the confidentiality of the commercial information – the terms and contents of the contract itself. This type of provision is very common in commercial ABS contracts.

A second type of confidentiality relates to the party's agreement to maintain trade secrecy regarding the specimens obtained, where they were obtained, the analytical results, and any other results and development involving or relating to the genetic resources.

The third type of confidentiality relates to research in progress. From the perspective of the noncommercial researcher, the information and other noncommercial results obtained are of great personal value, particularly if this information can be published quickly. Such information may also have longer-term value to the source country, as it may ultimately be the basis for commercial development from which the source country may obtain a benefit share. This value to the source country can disappear, however, if the information becomes generally known.

The final type of confidentiality issue has sometimes arisen arising from the fact that some Source Countries are not believed to be able to protect user confidentiality. For example, there are reports that user companies have refused to provide required information to developing country officials regarding the genetic resources being used, because those users felt that the government officials could not ensure that these ‘trade secrets’ would not be leaked or disclosed to others.45

The first type of confidentiality provisions mentioned above are reproduced in Table, (as noted, many of these provisions could not be reproduced owing to restrictions imposed on the author by the person providing the contract for review.)

Table Confidentiality regarding the contract and its terms

Clauses of this type constitute the main reason that copies of ABS contracts between providers and commercial users were mostly unavailable.

The second type of confidentiality provisions (the promise to maintain confidentiality regarding the resources, research and other technical information) is exemplified by the provisions in Table (Given the close relationship between these provisions and trade secret provisions, trade secret provisions are also included below.)

Table Confidentiality regarding the genetic resources, research and other technical matters

Regarding the third and fourth types of confidentiality described the opening of this section, the contracts reviewed provide few examples, none of which may be published. The Bonn Guidelines say only that a ‘Confidentiality clause’ is recommended, and include the ‘treatment of confidential information’ in its indicative list of typical mutually agreed terms.46 Publication

Even where full confidentiality is not required, the question of publication of genetic resource information and resource results is sometimes controversial. In some recent cases, claims of biopiracy have arisen out of the non-commercial publication of genetic/biochemical information from a developing country. After the publication, the information, no longer confidential, was also no longer valuable to the source country, since it could not be sold again.47As a consequence the question of whether the user or recipient of genetic resources can publish research results may be critical to future rights of the source country. Table provides a number of examples from contracts which granted complete or limited rights to publish those results.

Table Publication and ownership of research results

These provisions do not discuss all aspects of the publication issue, nor address or prevent the primary conflicts that have arisen in the context of ABS Contracts and post-CBD genetic research.

3.2.8 Management of termination and change

The ways that Parties address time, termination, amendment, rescission and other operational matters, while often very standardized, are also very important. The standardization of these provisions arises out of the fact that they are critical components of legal certainty for the parties in all contracts. In ABS contracts, these issues have not yet been practically tested by courts or legislative bodies, so provisions addressing them may not, as yet, cover all ways in which an ABS contract's provisions should differ from more conventional contracts. Time issues and Termination of the Contract

Provisions for timing, termination and revision are very standard elements of any contract. For ABS, questions of time may be particularly important, given the extremely long period between bio-collection and any research results, products or other benefits for sharing. The Bonn Guidelines specifically mention timing provisions as potential elements of MAT, but do not identify what those provisions should say. To date, the few examples of time provisions in ABS contracts (Table do not provide many clear suggestions of how to deal with these special concerns.

Table Timing

Similarly, in ABS situations, it is nearly impossible to ‘unwind’ the transaction, in the event of termination (for breach of contract or other reasons). Once the contract has begun, the possession of genetic resources and the information from them may be very difficult to‘take back.’ Consequently, the use of conventional provisions for termination and/or amendment of contracts may have very different impacts in ABS situations. Here also, a number of examples of termination provisions exist (Table, which offer some limited guidance about how these concerns have been addressed (or not addressed) in ABS contracts.

Table Termination clauses

The primary tool for addressing the problems of termination in ABS contracts is a ‘survivability’ provision, which states that some provisions will ‘survive’ beyond the termination of the contract. These provisions (examples in Table run a gamut from very simple to relatively detailed.

Table Provisions that survive termination Revision, rescission and amendment

A number of provisions address the post-contract alteration of the contract. Normally, the contract's clauses regarding revisions, rescissions and amendments of contracts are designed to enable the parties to come to new agreements, where circumstances change, such as when unexpected conditions or new opportunities arise. These provisions often enable contract parties to resolve potential and real problems by negotiation rather than confrontation. In general, such provisions are so standardized that they are often found in the final ‘boilerplate’ provisions (see Table and accompanying text).

In ABS, however, there is an additional complicating factor – the primary information about circumstances and situations is entirely within the knowledge of only one of the parties. Consequently, it may be more difficult to engage in a fair ‘arm's-length’ negotiation to revise the Agreement.

As shown in Table, relatively few ABS contracts reviewed contain any provisions discussing future amendment or alteration, apart from the conventional boilerplate statement that the contract may only be amended in writing. Even where non-standard alteration-related provisions are included, they have not so far focused primary attention on the unique aspects of ABS in this context.

Table Revision, rescission and amendment

3.2.9 Contractual technical provisions

A few key contractual provisions that are found in nearly every contract present particular issues or concerns when used in ABS contracts. The tables in this section examine only a few of these – (i) the provisions selecting law to apply to a particular contract; (ii) the provisions under which the parties report and inform the others about their activities, and (iii) a sampling of ‘boilerplate’ provisions, to give some indication of the range of other issues that are sometimes of concern in a contract. Governing law and other choice of law provisions

There are three types of conventional provisions regarding applicable law and its interpretation:

(i) ‘governing law’ provisions, which choose which country's national law will determine whether the contract is valid and binding;

(ii) specific provisions under which particular national laws of one country or another are incorporated as requirements under the contract; and

(iii) provisions which attempt to pre-decide the question of ‘choice of law’ a complex legal issue which helps determine how a court will interpret and enforce a bi- or multi-national contract.

The complexities of these issues are well beyond the scope of this book, however they are briefly discussed in section 2.3, especially 2.3.4, above. Normally contracts only address these issues briefly. Table provides a selection of all three types of provisions.

Table Governing law, choice of law and incorporation of national law

The ‘choice of law’ issue is very complicated. As a legal matter, it is not clear whether the provisions listed in Table under the heading ‘Provisions affecting choice of law’ will have any legal effect in a court. In essence, these provisions are the contract's attempts to pre-decide judicial matters, as discussed in 2.3.4, above.48 They will probably only be binding if the court which is hearing the case is a party to the contract. Consequently, the general rule is that the application of national choice of law systems cannot be finally decided before the case is filed. Reporting and contract-related inspection

The informational side of a contract is very important in ABS. These provisions have been very detailed in many of the ABS contracts reported in this book. A selection of them is found in Table

Table Data-sharing procedures, and other reports, consultation and inspection regarding activities under the contract

In this connection, it may be useful to recall the Bonn Guidelines, which note the following, in relation to reporting:

Parties should endeavour to establish mechanisms to promote accountability by all stakeholders involved in access and benefit-sharing arrangements.... To promote accountability, Parties may consider establishing requirements regarding: (a) reporting; and (b) disclosure of information. ... The individual collector or institution on whose behalf the collector is operating should, where appropriate, be responsible and accountable for the compliance of the collector.49 ‘Boilerplate’ and contract formalities

Finally, it is notable that many provisions are so common in contracts that they are commonly called ‘boilerplate’ meaning that Parties do not read them, and may include them without seriously considering their content. Despite their frequent appearance, however, ‘boilerplate’ provisions are included for very serious legal purposes, and the Parties are strongly encouraged to determine their legal and practical meaning, and to carefully analyze how they might be different in ABS situations from their normal use in more conventional contracts.50

Table offers a relatively broad sampling of ‘boilerplate provisions’ found in the contracts reviewed for this book. The author has not reproduced all such measures, leaving out for example those that state the processes of payment and other matters which can be easily understood and negotiated.

Table A few examples of ‘boilerplate’

In addition to these, as noted in 2.3, the ‘formalities’ by which the contract is signed and the Parties commitment is otherwise documented may also be very important. The SMTA, at article 10 provide a number of different approaches to documentation of the contract.

3.2.10 Compliance provisions: Addressing enforcement of the legal rights of the parties

The last category of provisions presented in this Part address compliance issues – specifically, dispute resolution and enforcement. These are highly ‘legal’ issues, which are found in all contracts but may be specially affected by the nature of ABS. Some factors that may make ABS compliance difficult under contracts include the collaborative nature of the ABS process (the fact that contracts are negotiated by consensus between a commercially sophisticated user and a less commercially experienced provider), the fact that government and third-parties may have other legally protected interests in the subject matter that are not addressed by the contract, and the internationality of ABS contracts. As a result, compliance provisions and their enforcement are very difficult in ABS situations, where only one party has continuing control over information, while other parties may have specific expectations regarding what should be happening, and what benefits should be expected. The clarification of enforcement, responsibility and legal rights issues is thus a very important element of legal certainty for both parties. Dispute resolution

Contracts reviewed for this book contain numerous types of provisions relating to dispute resolution. As shown in the examples in Table, these provisions come in four types: (i) contractual resolution provisions (liquidated damages clauses), (ii) informal resolution (attempts to seek consensus through negotiation, including facilitated negotiation); (iii) alternative resolution (arbitration, mediation and similar processes), and (iv) judicial process. Although many contracts do not discuss all four types of dispute resolution, all four may be applicable to any contract, even one which says otherwise. (For example, a contract that says that formal judicial process may not be used, may still be reviewed by a court.)51

Table Levels of dispute resolution

In this connection, it is critical to note again the points made in Chapter 1, regarding the current level of uncertainty of ABS issues in law, which may make it difficult or impossible for judges and arbitrators in most countries to apply formal dispute resolution mechanisms (arbitration, mediation and judicial action). Liability discussion

Finally, a number of contracts include provisions relating to the parties liability to one another or to third parties. Table presents a variety of such provisions, including those that address (i) direct liability protection (including insurance and escrow arrangements); (ii) warrantees; (iii) indemnifications; (iv) releases, waivers and disclaimers. In addition, it includes provisions that clarify specific remedies, liability issues, and the duty to take action against third parties whose actions endanger rights or returns under the contract.

Table Liability-related provisions

The liability-related provisions in Table, although extremely common in most commercial contracts, are completely absent from more than 70% of the contracts reviewed for this book. This finding may arise from the uncertainty of current national and international law regarding ABS and the rights of holders of genetic resources.

The Bonn Guidelines contain relatively few discussions of liability issues, however Article 61's provision regarding Remedies appear to be very important:

Parties may take appropriate effective and proportionate measures for violations of national legislative, administrative or policy measures implementing the access and benefit-sharing provisions of the Convention on Biological Diversity, including requirements related to prior informed consent and mutually agreed terms.

In addition, Appendix 1 to the Guidelines, at C.7, recommends that contracts contain ‘dispute settlement arrangements,’ and, at C.5, advocates the adoption of ‘independent enforceability of individual clauses’.

3.3 Aligning ‘contractual risk’ with ‘actual risk’

Once the various provisions above (and others) have been selected, the ABS contract process has only begun. Each party or negotiator must then consider the document as a whole, and evaluate both parties' status, duties and rights overall. At this point the primary role of contracts (in all commercial law) is to address ‘risk’ – the known and unknown costs and potential impacts of the transaction on the parties. All contracts involve risks, and not all risks can be prevented or even assessed.

Contracts are only one part of the risk matrix – other parts include safety and health protections, legal filings, confirmation of facts, and development of other formal and informal relationships among the parties. Within this matrix, the contract serves two purposes. First, it ensures that the parties have the same ideas and expectations regarding what will happen under the contract (this element is directed toward the risk of misunderstanding and the related possibility of law suits and other conflicts between them.) The second and more challenging task is to align the actual risk of the contract with the contractual/legal risks, to maximize the value of contract law in protecting against the actual risks of the contract. In other words, the contract must be designed to ensure that there will be a legal avenue for addressing the actual risks of the transaction. For example, consider the risk that the parties will not meet their payment obligations. It is addressed by contract provision that requires payment in exchange for samples. By formally memorializing this obligation, the contract maximizes the ability of the sample collector to use legal avenues to obtain payment. The sample collector will not have to take the law into his own hands and directly take the money from the payer's hands.

Normally, a contract lists the required performances of both parties in detail. This formally agreed listing enhances the ability of the law to determine whether a violation has occurred, in case one of the parties does not perform, and to determine how to redress that violation. Legal redress in these cases will usually be either invalidation of the contract (forcing the parties to unwind their agreement, and give back property or money already received) or equitable reimbursement (the violator must make civil payment to reimburse the injured party for losses and costs incurred.) (Contract law has developed a full ‘toolbox’ of various remedies and other methods of redress, based on these two ideas.52) These provisions often work indirectly – parties comply in part because the contractual system serves them best if they comply. Only rarely is it necessary to take the dispute to court, because the contractual remedy system for addressing risk parallels the actual risks that exist in conventional contracts – that is, the party who affects and is affected by the risk is the same as the party who has the contractual obligation to address it.

In ABS contracts, there are some risks which are not parallel to the existing contractual risk-protection system. The two most important of these relate to contractual redress. In many cases, contractual invalidation will not be effective as a means of balancing risks. Where a user has already obtained samples, genetic information or other reproducible resources, it may be difficult for the law to unwind that contract in future. Even if the material and information is returned, the provider can have no immediate way of ensuring that the user has not kept copies or progeny of the original genetic resources. It may be technically possible for a provider with sufficient resources to inspect the user's operations, or to determine what genetic resources were used in the development of a particular product.53Most providers, however, do not have the resources and technical capacity to do this. Normally, however, national contract law is driven by private action. A required basis for bringing the legal action is that a plaintiff must obtain sufficient evidence of a type to satisfy a court. The government will normally not take action to develop this evidence. The cost of preparing a legal action, particularly regarding technical contracts, must be paid by the person bringing the action. That cost is often enormous.

As a result, it is important for the parties to ABS contract to carefully examine each provision of the contract, asking what risks it is intended to address, how it protects against that risk, and what will happen if that risk arises. For example, as discussed in 3.2.1, above, one way of protecting against risk is to ensure that the signatories are authorized to enter into the contract and are able to perform all duties stated in the contract. The contract can do this in two ways. First, it obtains statements from the parties, guaranteeing that they are authorized and capable. Second, it will sometimes require the parties to provide official proof of these matters. In normal contracts, the first approach may be sufficient. If the party's statements and guarantees are incorrect, then the contract will simply be invalidated and unwound. In ABS, however, it may not be possible to unwind the contract. If either party's assurance of authority is incorrect, then there may be no effective legal redress. If the user's assurance is incorrect, the provider has effectively given away the genetic resources to a stranger. If the provider's assurance is incorrect, the user may have paid money for property that it will have to buy again from another party. Hence, it is normally essential to use other measures to validate the bona-fides of the parties in an ABS contract.

Many ABS contracts are circumscribed by law – valid only if the parties have complied with this law and are authorized to grant access to or use genetic resources. The CBD specifically recognizes that genetic resources are governed by national sovereign rights. These rights exist regardless of whether the country has adopted any specific law on this issue. At present, only about 10% of the countries on the planet have adopted such laws. This means that all of those other countries are uncertain legally. Hence, one of the most important questions in ABS contracts is ‘What national law applies?’ This question is answered in some contracts by apportioning the risk of violation of law. One party or signatory may be formally required to certify that the law has been complied with, and that he has obtained all necessary permits or to address any violations of national ABS law.

The problem with this approach is that it assigns the legal risk without assigning the actual risk. If the contract says that the provider has authority or that he will obtain the necessary permits, this means that the user can bring suit against that provider, in the event of a violation. In bringing that lawsuit, however, the user will not gain a valid right to the genetic resources or other rights transferred by the contract. No matter what the user has paid to the unauthorized person, he has not obtained any rights against the true owner of the resources. To gain the rights to the resources, he will have to renegotiate a new contract with the true authorized provider, and pay again.

Normally, the actual risks to providers in ABS transactions have not been addressed by lengthy and detailed ABS legislative and administrative requirements. In some cases, national requirements achieve other critical objectives (e.g., public participation), but they have rarely improved the countries' commercial risk situation under the ABS contracts and licenses that they issue.

3.4 A few final observations

The law is an evolving process. National legislation arises out of need. Until the time that national legislation answers key questions, contracts operate as a form of ‘private legislation, enabling parties to go forward only after their particular concerns, issues and fears have been addressed by a binding agreement among the parties. The strength of contracts to fill this role relies on some legal factors that must be understood or presumed, such as the ownership of the subject matter and the extent of any person's rights to take actions that affect other persons in a given sector.

In 1992, many observers and participants assumed that the ambiguities of the ABS provisions of the CBD would be resolved in the same way that the ambiguities in the Convention on Trade in Endangered Species of Fauna and Flora (CITES) had been answered 19 years earlier. That is, they assumed that each country, especially the developed countries with greatest experience in crafting new and complex legal structures,54would immediately begin to investigate pathways to implementation of Article 15. Once the primary countries had found systems for addressing their needs as both providers and users – and addressed the complex question of how rights in genetic resources could be identified and protected across national boundaries, it was expected that other countries would be able to develop their own laws which integrated with these pioneer laws, eventually weaving into an agreed international regime. Contracts for ABS were expected to play a detailed part in this process.

Over the ensuing 17 years, these initial expectations have not been met. Only a few countries have adopted ABS legislation and that legislation has not addressed the countries' responsibilities as potential users of genetic resources. Without the leadership of the major user-side countries, and other regulatory-system developers, the ABS system remains one-sided and ineffective. Contracts, rather than filling their primary role of helping to evolve the details of the ABS system have been forced to try to fill the gaps in primary legislation, including even key issues such as resource ownership, the nature of access, and the meaning of benefit-sharing.

Until the international regime negotiations are able to answer the primary questions of ABS, it appears that contracts will have to continue to try to fill this gap, to the extent that they can. The contracts examined for this Part have done this in a variety of ways, using everything from the simplest provisions to the most complex. To date, however, the legal impact of these contracts remains untested, and the legal effectiveness of many critical innovations remain unproven.

Within this uncertainty, the work of the ITPGRFA in adopting and implementing the SMTA is of great interest. It has provided a governmentally agreed instrument which uses, to the greatest extent possible, existing concepts, including the ‘material transfer’ approach (viewing the term ‘genetic resources’ to refer to physical samples), the adoption and expansion of principles for streamlined contractual formalities (shrink-wrap and click-wrap) and most important, the recognition that a legal system in which ‘standard practice’ grows out of multiple use and experience will ultimately be as strong as any statutorily crafted system.

This suggests a great value in maximizing the transparency of ABS contracts and promoting their public availability. The development of contract law has taken many hundreds of years. It is possible that the process would have been swifter if more contracts had been available to officials making key decisions. In practice, however, judges, regulators and legislators had official access only to contracts that had entered the public domain, in whole or in part, through lawsuits. In order to short-cut this development process for ABS, countries will need to increase their level of awareness of the precise terms and operations of a large variety of actual ABS contracts. As demonstrated by this book, only a small percentage of ABS-related contracts are available for examination.

The precise boundaries between the ITPGRFA/ SMTA and the other sectors of ABS are still not clarified. Over time, the SMTA example may be followed by other sectors, with regard to particular users, types of uses and materials outside of the ITPGRFA's multilateral system. This is not likely in all sectors however. Each sector's own experience should be the primary means by which ABS contracts become understood, interpreted and/or enforced. Hence, the creation of a large and transparent body of contractual experience may be the most important determinant of the legal rules governing both users and providers. Accordingly, the current book's first effort to provide a review of ABS contracts that are publicly available may presage the informal development process by which public contracts become the primary template for all ABS. It may be advantageous to all ABS Parties and stakeholders to ensure that their contracts, forms and models become generally known and available.

1 The most explicit example of this approach is the SMTA, which insists that no changes may be made in the use of the form. The parties may only fill in the blanks (name, institution, resources changing hands, etc.) See discussion in 1.4.

2 An excellent example of this approach is found in the form instrument adopted in Costa Rica, which allows variability in special provisions:

The Agreement can contain additional dispositions [not included in the form itself] on the following aspects: a. Guarantee by supplier regarding the identity and/or quality of the material provided. b. Definitions. c. Obligation to minimize the environmental impacts of harvesting activities. d. Events that limit civil responsibility of either party to the other (e.g., natural catastrophes, fires, floods, etc.). e. Confidentiality clauses. f. Other guarantee. g. Other clauses, as permitted under the law [of the country adopting this form]
The Parties are allowed to adopt other clauses that they consider advisable, but the form identifies a large selection of specific matters whose content must be addressed, and must comply with legislative schedules and requirements. These include specifically, the provisions for ‘Payment of Administrative Costs and other Expenses’, ‘Final Results’ (focused on the sharing of research results and crediting the source in publications) ‘Respect for Traditional Knowledge’ and ‘Verification and Control’.

3 Form contracts must that their form may be, take special measure to ensure that they are not considered ‘contract of adhesion’, as described in and elsewhere.

4 Bonn Guidelines § 42.d, suggesting the ‘[d]evelopment of different contractual arrangements for different resources and for different uses and development of model agreements’.

5 The Bonn Guidelines provide three lists of possible terms that could be included in model provisions at § 43 (‘guiding parameters’ of MAT), § 44 (‘indicative list of typical mutually agreed terms’); and § 45 (MAT on benefit-sharing).

6 Documentation of compliance: ‘Parties should endeavor to establish mechanisms to promote accountability ... in access and benefit-sharing arrangements... [and] may consider establishing requirements regarding: a. reporting; and b. disclosure of information.’ Bonn Guidelines §§ 52–3. ‘The individual collector or institution on whose behalf the collector is operating should, where appropriate, be responsible and accountable for the compliance of the collector.’ Id. § 54. Remedies: ‘Parties may take appropriate effective and proportionate measures for violations of national legislative, administrative or policy measures implementing the ABS provisions of the CBD.’ Bonn Guidelines § 61. Verification: ‘Voluntary verification mechanisms could be developed at the national level to ensure compliance with the ABS provisions of the CBD and national legal instruments of the country of origin.’ In addition, it states that ‘a system of voluntary certification could serve as a means to verify the transparency of the process of ABS [including]... that the ABS provisions of the CBD have been complied with. Bonn Guidelines §§ 57–8.

7 Formerly, the CGIAR provided a database of transactions showing that virtually all countries use genetic resources from the international agricultural collections. It documented tens of thousands of such transactions per year. A primary objective behind creation of the ITPGRFA was the goal of ensuring that this vital exchange of resources – a critical element in the development of new varieties and promotion of food security – would not be obstructed by the imposition of the ABS process. Fowler et al., 2001.

8 In seeking contracts for this book, for example, a number of commercial ABS contracts were obtained, under the specific restriction that they must be kept confidential. Often, this is a requirement of the contract. A few such contracts were obtained without restriction, usually from sources other than the parties to that instrument. Contracts between large commercial entities and providers are nearly always subject to restrictions that make it impossible to reproduce their provisions in this book.

9 In most countries, equipment, facilities, training and other in-kind benefits may be retained by the sectoral agency. In many countries, however, payments of money (a share in proceeds from resource use) must be paid into central government accounts, which may be earmarked for special distribution, in some countries. (See Table

10 For example, commercial needs in agricultural breeding contracts reportedly differ markedly between the plant sector and the animals sector. The development of a new plant variety amalgamates dozens or hundreds of crosses. These practices are much more inclusive than other commercial uses of genetic resources or biochemical properties of wild or traditionally derived species. This has been one justification given for the creation of the ITPGRFA – the impossibility of tracking all genetic contributors to each new variety. Lesser, 1992. Fowler et al., 2001. By contrast, animal-breeding has been a subject of contracts and legal rights for many centuries. For more than two millennia, the law has recognized the legal authority of the owner of one animal to grant rights in that animal's inherited characteristics, through traditional and legal practices for animal breeding. Animal breeding records date back many centuries, and have been formally recognized and enforced by courts and other governmental processes. See, Hiemstra et al., 2006 and Tvedt et al., 2007. And see, e.g., Bennet, D., 2004, ‘The Origin and Relationships of the Mustang, Barb, and Arabian Horse’ The Spanish Mustang, introduction.; and Lewis, B. ‘Egyptian Arabians, The Mystique Unfolded’ in Arabian Horses of the Pyramids (http://www.pyramidarabians.com/news/articles/arabianmystique.html), both of which document evidence of controlled animal pedigrees dating back more than 2 millennia, and formal written records as early as 1300 AD.

11 JAPAN: METI/KBA. 2006. Guidelines for Access to Genetic Resources for Users in Japan, Ministry of Economy, Trade & Industry (adopted March 2005, (published in English, 2006)). See http://www.mabs.jp/information/oshirase/pdf/iden_tebiki_e.pdf.

12 Código de conducta para el acceso a elementos y recursos genéticos y bioquímicos de la biodiversidad, Ministro del Ambiente y Energía, 18 April 2007.

13 In normal commercial contracts, authority questions arise in many ways. For example, an individual handing negotiations on behalf of a company, agency, government, etc. must prove that he has been authorised to make commitments on behalf of that company, agency, government or community. If not, the contract may not be binding on that entity.

14 As noted in, legal capacity arises in many ways. Another relevant issue is the duty to provide information, sometimes called the requirement of ‘fair disclosure’ of essential facts relevant to the contract. This duty is complicated. Parties are not required to disclose their negotiating strategies or other internal matters. Often, the difference between ‘internal matters’ and ‘essential facts’ is unclear.

15 Laird and Lisinge, 1998.

16 This issue is discussed in the Bonn Guidelines at App. I. Para. A.2, which notes that the ABS contract may state inter alia, ‘the legal status of the provider and user of genetic resources’. In general, the ‘legal status’ does not have a single established meaning, but may refer to the ownership or other rights over the genetic resources.

17 Young, 2006a.

18 Uncertainties regarding the legal authority of the provider have been the impetus behind the Bonn Guidelines’ call for each country to designate a national focal point as a coordinating centre of these questions. In order to resolve this question, however, the country must not only designate a competent authority, but also specify in its law or policy exactly who ‘has the legal power to grant prior informed consent may delegate this power to other entities, as appropriate’. Bonn Guidelines, at clause 15.

19 Discussed in, above.

20 Tvedt and Young, 2007, at Chapters 1 and 4.

21 Young 2006a.

22 Bonn Guidelines, Appendix 1, clauses B-9 and C-1.

23 A real-life example of this situation is found in a case study described in Laird, 1998.

24 Bonn Guidelines, Art 44.a.

25 Laird and Lisinge, 1998.

26 Bonn Guidelines, Appendix 1, clauses B-1. See also Articles 45–50.

27 Bonn Guidelines at Art. 45.

28 Bonn Guidelines, Appendix II.

29 Bonn Guidelines, Art. 44.

30 There is no clear legal indication in the CBD that the CBD Parties intended to give this sovereign decision into the hands of private parties. However, many countries have reportedly done so by law or other action. See Swiderska, 2001.

31 Bonn Guidelines at Art. 45.

32 See, e.g., Bonn Guideline at Arts. 16.b i., v., 28, 34 and 35

33 See, e.g., Bonn Guideline at Arts. 27, 37. Regarding public participation in these process generally, eBGs 17–21; See also 28 and 36. Note this is not required by the Convention, and only a ‘guideline’.

34 Bonn Guidelines, Appendix I, clause B.3.

35 Bonn Guidelines, Appendix I, clause B.7.

36 Bonn Guidelines, Appendix I, clause C.8

37 Bonn Guidelines, Appendix I, clause C.9

38 Bonn Guidelines, Arts. 44e, f and i.

39 Bonn Guidelines, Art. 34. It goes further in noting that ‘Specific needs of taxonomic and systematic research as specified by the Global Taxonomy Initiative should be taken into consideration.’

40 See, Ruiz and Lapeña, 2007.

41 Among this plethora of material, some of the most useful in depth studies on IPRs and ABS include WIPO, 2004 (and several others); Dutfield, 2002; Oldham, 2004; and Tvedt 2005.

42 Bonn Guidelines, Art. 16.iii.

43 Bonn Guidelines, Appendix I, clause B. 4.

44 Bonn Guidelines, Arts. 43.c and d.

45 Personal communication, M.A. Galvez, September 2006. The country in question felt it needed this information in order to determine what level of control should be imposed on field trials of new species and other uses of the information which might have an impact on species in some locations. In response to this problem, the authors suggest that it may be useful to reorganize the contract placing confidentiality responsibilities with those best able to perform them. Regarding trade secrets, it might be possible to add the user company's government as a party or participant in the transaction. Then, if the user company and the provider country both trust the user government, it would simplify the situation to call on the user to provide the ‘secret’ information to the an agency of the user government, which would agree to hold them as trade secrets, and to serve as a fiduciary in the transaction in responding to questions regarding particular species issues.

46 Bonn Guidelines, Appendix I, Art.C.11

47 Mgbeoji, 2006.

48 Briefly discussed in 2.3.4, these matters, both in private contracts and other commercial laws and instruments are highly complex and relatively far beyond the scope of this book.

49 Bonn Guidelines at Arts. 52–54.

50 The authors do not wish to imply that there is any ‘standard’ for any of these provisions. Contractual lawyers will negotiate and revise them in every transaction, to suit the legal need and negotiated rights of the parties.

51 Klimas, 2006; Lord 1997; Marsh, 1994.

52 CBD Secretariat, 2007a.

53 The author is not certain that external testing can fully determine this for legal purposes.

54 For example, it was through the action of developed countries that complex functional legal regimes for intellectual property, antitrust, security interests in property and bankruptcy have become common systems.

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