ABS Contracts and Contract Law

The Convention on Biological Diversity (CBD)1 has been described as everything from ‘the key document regarding sustainable development’ to ‘a display of all the reasons why UN effort to conserve the environment rarely succeed.’2 This divergence seems relatively minor when compared to the level of divergence displayed in CBD discussions of Article 15 and the other concepts linked together under the sobriquet ‘access to genetic resources and equitable sharing of the benefits arising from their use’ (usually shortened to ‘access and benefit-sharing’ or ‘ABS.’)

From the earliest negotiations, the ABS issue engendered controversy. While the negotiations for the CBD began from a conservation objective, the third objective of equitable benefit-sharing was added as an integral part of the Convention. This basic objective focuses on equity and the need to address the possibility that the relationship between developed and developing countries might be inequitable, rather than on ‘strict’ conservation and environmental concerns. In addition, it uses commercial concepts as its tool for achieving equity. Specifically, it directly focuses on the companies, researchers, and industries that are increasingly applying technologies that use the unique properties of biological resources, but do not need to purchase bulk quantities of specimens from the source country in order to do so.3 As a result of this technological evolution, developing countries' ability to directly reap benefits from those that use their ‘biological resources’ (i.e., to sell those resources in bulk) is diminishing. A commercial developer or researcher might obtain immense value by utilizing the unique properties of a particular species, subspecies, or variety, having only taken (either with or without payment) a very small number or volume of samples or extracts of the species. The resulting new commercial paradigm would separate the developing country from obtaining value from the species, without enabling them to share in the new market, whether financially, technologically, or developmentally.

While the existence of these activities and commercial evolutions was undisputed, there was dispute from the beginning of the CBD negotiations as to whether they create inequity. One of the roots of this controversy lies in a very simple question – why is ABS created under the CBD, rather than a trade or commercial regime? The answer to this question helps to clarify the equity question. The CBD was intended to address the growing difficulties with preservation of the ‘green web’ of life on Planet Earth. Its first goal (both in time and as expressed in the final instrument) was and is conservation of biological resources and especially of the diversity among them – a quality that is essential for the continued health and existence of life on earth.

Second, it sought/seeks to ensure that human utilisation of the world's biological resources is ‘sustainable.’ This second objective is essential both for conservation and for the creation of resource-dependent enterprises and societies. Communities and countries that develop on the basis of their biological wealth risk catastrophe if that wealth should disappear. Hence, it is essential to them, as well as to planetary conservation principles that biological resources should be used sustainably.

Consequently, the justification of the CBD's benefit-sharing provision was not solely based on commercial equity. Negotiators and other commentators assumed that ABS would operate as an incentive to conservation. Since the opening of negotiations, the scope and effectiveness of ABS to realistically address these inequities and to provide a functional incentive to conserve biodiversity and to use it sustainably has often been questioned.

The third objective was both last to be developed and most controversial. It was intended to recognise two critical facts: First, that conservation is a difficult burden when it prevents the conserver from obtaining reasonable value and return on the resource being conserved. Second, that the above-described evolution in the use of biological resource has resulted in a diminishing incentive (or even a disincentive) for developing countries (stewards of a large share of the world's biodiversity) to grant access to their biological largesse.

Stated directly, ABS was expected to be a quid pro quo of the Convention. Developing countries were generally unwilling to make another international commitment to conservation at the request of more developed countries, without some reciprocal benefit to them. Ultimately, the bargain was successful – ABS was adopted as part of the CBD and the overwhelming majority of developing countries signed and later ratified it.

The contractual challenge

Unfortunately, the initial quid pro quo was only part of the ABS challenge. Developed countries, already burdened with significant international financial obligations, were beginning to express an unwillingness to increase those burdens, even where issues of environment were at stake. In particular, they were not willing to commit to resolve these inequities through direct assistance and other intergovernmental mechanisms, or to assume financial responsibility for the equitable sharing. Hence, another important compromise was also built into the ABS process, and continues to be important today. Specifically, the ABS concept was based on strongly stated assumptions that the private sector – the ‘users of genetic resources’ (a term that is often used but as yet ambiguously defined) – would bear the primary burden of benefit sharing. Most important, although not expressed in documents, it was broadly assumed and stated that contractual mechanisms would be the vehicle for this sharing.4 Given this historical genealogy and these tacit assumptions, the law of contract assumes a role which is central to the implementation of ABS under the CBD, but which has not been explicitly stated in the Convention.

Starting from these statements and assumptions, some companies, countries, communities, and individuals took the initiative of attempting to negotiate ABS contracts and to adopt basic legislation and other practices regarding ‘access to genetic resources.’ These early ABS systems were based on the assumption that each country can control all ‘access’ to its own genetic resources, and that it can require ‘benefit-sharing’ as a prerequisite to release of that control. In other words, they assumed that one could not gain access to or ‘utilize’ genetic resources without first obtaining an ABS contract. Over the years, many deficiencies have been found in this ABS paradigm – particularly the idea that existing contractual practices, coupled with ‘source country’ legislation would be a sufficient functional basis for ‘control’ of access to genetic resources and traditional knowledge.

The ‘contractual side’ of the international ABS negotiations and implementation

At this writing, negotiations are ongoing to clarify and improve the functionality of the international regime on ABS.5 While some participants are proposing that sectoral Material Transfer Agreements (MTAs) would bring an increased use of contract mechanism, others are recognizing that new legislation and practices are needed to enable all ABS contracts (standard or non-standard) to function effectively and to ensure that the regime equitably addresses the needs of both the provider and the user.

For a variety of reasons, the application of contract law and practice to ABS has not yet been the subject of in-depth legal analysis or commentary. Most authors who have considered the legislative and commercial law aspects of ABS have been writing at the theoretical level rather than on the basis of practical legal research into commercial law issues. For example, early national ABS legislation was later in some cases described as ‘an experiment in ABS implementation.’6 Such legislation often did not address or coordinate with national contractual principles, much less the more difficult problems of international contractual law described in this book.

In this legal ambience, many existing legal works on ABS address the relevance of contract law often with only a few sentences, indicating three key perceptions:

In fact, however, the law of contracts is complex and highly relevant to ABS. Many factors relating to ABS make it very difficult to apply contract law easily or simply. Attempts to determine and apply contract law to ABS have long been recognized as quite complex by experts working in natural resource industries and related commercial sectors, such as forestry, agriculture, and fisheries.7 Consequently, the government officials and legal experts who have actually applied relevant commercial law to ABS contracts in non-theoretical situations (i.e., ‘in real life’) generally disagree with the ‘ABS expert’ view that the contractual and legal concerns of ABS are relatively simple and few.

Organisation of Part I

In Part I, this book attempts to provide some insight into the application of contractual and commercial law to ABS. Part I begins with a discussion of some of the

Following this background, Chapter 3 focuses on particular examples, providing

Part I is intended to assist negotiators in preparing and discussing ABS contracts and related instruments affecting those relationships.

Contents, methodology and sources used in Part I

In undertaking this task, the authors have drawn on a wide range of sources of contracts and other legal instruments, studies, and databases, including the WIPO Contracts Database, as a source of real-life contracts and other ABS instruments. The authors' interpretation of contractual issues has been based on a number of general sources discussing contractual law under various legal systems, supported by the authors' own experience with contractual negotiations and the application of contractual and commercial law, both in the ABS context and more generally.

The compilation and completion of the chapters was aided by the existence of the WIPO Contracts Database,8 compiled by the Genetic Resources, Biotechnology, and Traditional Knowledge Section of WIPO. The Database contains over 30 contracts and other legal instruments, both models and examples, whose authors or parties have allowed these instruments to be made publicly available. As noted in chapter 3, only a portion of these instruments are actually ‘ABS Contracts’ – that is, contracts between users from one country and a provider from a different source country (or the source country itself ). The remainder consist primarily of ‘post-access’ contracts, transferring rights and resources between the user and other researchers, distributors, or licensees/developers. Although this latter group of contracts are not specifically examples of user-provider relationships in the narrow sense of the term as defined in an ABS context, they provide important examples which can enlighten contractual practices and terminology in the primary negotiations between users and providers as well.

The WIPO Contracts Database represents only a part of the collection of contracts used in this Part. Other contract examples which have not been redacted and/or approved for public release were also used. Specific elements have been excerpted from both public and non-public contracts within that collection and provided here as tables showing a variety of actual current approaches to particular issues or contractual requirements. In addition, the book utilizes other examples and information, obtained through interviews and other personal communications, regarding which they are similarly bound by commitments of confidentiality, although permitted to publish redacted excerpts. In order to ensure protection of the various parties who have submitted confidential information to the authors, no information about the parties or sources of any of the contracts discussed are provided. Consequently, these tables do not include the names of particular parties or other details that would allow the reader to identify a provision as being part of a particular contract. Where possible, the actual wording and material from actual contracts has been used, with indications to note where the instrument being used is a ‘model’ or ‘form’.9

The authors are happy to note that the WIPO Contracts Database will continue to be updated, and to provide parties with a basis for analyses of current practices and provisions in ABS agreements and contracts for the use of traditional knowledge. Further information is available by contacting the Genetic Resources, Biotechnology, and Traditional Knowledge Section of WIPO directly at the contact address given in the WIPO Contracts Database.

Most importantly, the Database is an important contribution to promoting the functionality of ABS, and its transparency, and might over time become a reflection of the evolution of ABS practices. ABS has existed for a very short time relative to most legal concepts, and in many ways it is not parallel to any other existing legal or commercial system. Consequently, it is important to build a body of practical experience and knowledge of the provisions and practices being used to apply the ABS concept. This will enable both sides of an ABS transaction to know better what to expect and what their rights are within those relationships. In addition, transparency provides a useful base of information for those trying to produce legislation and/or to negotiate a future instrument addressing the utilisation of genetic resources and traditional knowledge. Finally, a broader understanding of how actual ABS contracts function is critical to the system, enabling all stakeholders to evaluate the success of ABS in achieving the objectives and of the CBD. Consequently, parties to ABS agreements and related instruments are encouraged to continue providing copies of those documents to the WIPO Contracts Database and similar initiatives.

Other examples

In addition, many specific issues or experiences are discussed in detail in Part II of this book. Those examples are provided with all respect and gratitude to the countries and projects described in those chapters and case studies.

Other sources of relevant law

To achieve its purposes, this Part cannot focus solely on this small range of existing ABS contracts, none of which have been legally interpreted by a court or governmental body. It must look to the elements of law that are both primary and essential. In the commercial world, very few contractual fields are governed entirely by specialized law of their particular type of contract. Even concepts such as intellectual property rights (IPRs), although governed by a large body of detailed and specialized statutes and regulations, are also directly subject to contract law and to laws that govern the legal and commercial rights of the parties (property ownership, anti-trust, unjust enrichment, national ‘organic’ instruments, sovereign rights and many other matters). In addition, the body of practical knowledge and analysis of ABS extends well beyond the few available contracts.

Commercial law and analysis

A critical source of this work is the long-established law and analysis of the law of contract formation, implementation and enforcement, which is heavily linked to commercial, procedural and organic laws, including legal systems governing intellectual property rights, trade, anti-trust and other commercial issues. The complexity of this body of law is significantly increased in trans-border contracts where any contract question may be governed by the laws of two or more countries in various situations.

In any country, the law libraries will contain thousands of books addressing contracts and commercial law, including both those which provide the specific elements and decisions of the country's own law and those which describe these issues in comparison with other countries and systems. Analytical works on any sub-area of contract law, limited to any one country or legal system will, in that country, be many times the length of the current book. Beyond this, one must also consider the nascent body of private and public international law addressing these issues. Once a contract is ‘international’, the amount of relevant legal material that must be examined increases. In the words of one of the most respected legal compendiums:

Of all areas of law, perhaps none has been subjected to comparative study as consistently, frequently and intensely as contract law. The International Encyclopaedia of Comparative Law devotes two out of seventeen volumes to the subject of contract law, and contract law takes up more than half of the subject matter in [another basic compendium]. It is by far the most prominent topic in international debates about private law.10

International principles generally rely on national law of one or more countries, so that they may be understood only by considering national contract law in detail.

Two other critical sources of research data and analytical material are case law (judicial decisions) and case studies (analyses of how a particular contract worked in real life). Both are essential elements of any legitimate advice or analysis in contract law and practice. In many countries, the past decisions by judges regarding a particular law or legal principle have a defining role, with prior court decisions becoming part of the legal requirements imposed on each party to a new or ongoing contract. This approach, incorporating ‘judicial law’ or ‘precedent’ into a single seamless body of national law of contracts, is normally associated with ‘common law’ legal systems. However, companies in nearly all countries study how judges and other decision-makers are applying contract law and terms of specific contracts. It is the basis on which they build their expectations, and negotiate contracts that are commercially reasonable and enforceable.11 The cumulative impact of business practices within a given sector or industry may eventually come to be accepted as de facto legal standards.12 Especially in the years before such standards are recognized, it is important to be broadly aware of provisions that are being negotiated and how they are applied and implemented.

ABS law and analysis

A second basis for this Part is found in legal and policy work under the CBD and ITPGRFA. The authors note the existence of literally hundreds (at least) of different articles, books, and discussions on ABS, ABS transactions, and related matters such as IPRs in GR and TK. While some of these specifically address some contract law matters, most do not, although they may raise issues, objectives, and concerns of great relevance to the contents, interpretation, implementation, and enforcement of ABS Contracts.

Merging commercial and ABS legal concepts

Obviously, all of the data in the two fields cannot be amalgamated in this section. Instead, the intent is to provide a basis for integrating these two large bodies of legal literature (‘contract law’ and ‘ABS legal issues’), which differ in one very serious respect. Contract law is long-established and based on a process of development, scholarship, detail, and accuracy. It addresses known relationships and has evolved out of practical application through many centuries. By contrast, ABS consists primarily of policy-type documents and a very limited body of relatively new and untested legal instruments – the CBD, ITPGRFA, Bonn Guidelines, and a small number of national ABS laws and policy documents. ABS legal work has focused on an entirely different set of legal issues and principles, relating to national implementation, policy- and equity-based objectives and the practical questions of how a new international system can be created.

To date, there has been relatively little crossover between contractual and ABS expertises even when writing about the intersection of these two specialties. This lack of integration has proven problematic where companies and source countries attempt to apply ABS principles to create legally certain and enforceable contracts.

Although Part I is an attempt to inform contractual/commercial specialists about ABS and the ABS specialist about contracts, it is not intended as a treatise on either issue. Its more modest expectation is simply to provide a unifying summary, at a level that will be useful to both lawyers and non-lawyers. It is designed to be used in practice, rather than studied by legal theorists. To this end, the authors have attempted to avoid legalese and tried to keep discussions of difficult issues of law relatively short and focused. In some cases, references to sources of more detailed discussion have been provided or particular legal issues that might be studied to shed more light on the legal details of the concept have been identified.

Generalising about national laws

In discussing these complexities, one must be careful because many points which are considered ‘obvious’ or ‘unchallengeable’ in one country's contract law will not exist in another country's system. Unfortunately, it was not possible, within the time available for researching and writing this book, to deeply research all of the contractual issues, questions, problems and situations that arise in the ABS context in all legal systems. In the end, some of the issues were difficult to analyse in even one system.13 While recognizing that there are numerous differences among national legal systems and international codes, as well as many points of similarity, this book does not (cannot) inquire in detail into the underlying legal issues in any single country. When used in any transaction, this book should probably be supplemented by speaking with legal experts with substantial contract law experience and knowledge of legal issues and practices in the countries involved in that transaction.

Integrating cultural factors

Finally (and perhaps most important), throughout Part I, it will be most important to remember that contracts are one of the key areas in which the law interfaces with cultural factors in determining how commercial and regulatory systems actually function.

Every legal system needs to be understood in its own cultural, economic and political context. Even if black-letter law14 as expressed in legislation and caselaw may turn out to be quite similar (between various countries' legal systems), the political and cultural context of the law, such as the provisions for dispute resolution and people's attitudes to the law, may lead to a divergence rather than a convergence of actual living law. 15

This statement is equally true between countries within the same region or sharing a common type of legal system (i.e., between two common law countries or between two civil law countries, for example) as between those with completely divergent systems. In fact, countries with the most in common, legally, will often be so different, in cultural and geographic terms, that their practical needs and implementation of ABS will be entirely different in some ways.16

Part I is backed by extensive research in international/comparative law and in national law to the extent available to us. It was not possible in the space available to provide a detailed account of all relevant research. The authors hope and believe that the most immediate need in ABS contracts is not for a detailed legal tome, but for an analysis that can help guide parties negotiating ABS Contracts and those advising them.

1 Rio, 1992, entry into force, 1993.

2 First quote from Report of the fifth Norway-UN Conference on Biodiversity, (Trondheim, 2007); second from Oxley, A., ‘Green Gold and Cargo Cults’, TCS Daily, 29 March 2006.

3 In general, these activities are thought of as ‘utilization of genetic resources,’ however, it is not clear what specific role ‘genes’ must play in the utilisation. Many activities that have been assailed or announced as the ‘utilisation of genetic resources’ have involved a range of different types of activities that are not specifically utilizing genetic research (such as the synthetic replication of biochemical formulas for use in further research and development). Similarly a number of conventional agricultural development activities (such as seed propagation and new variety development), and even activities that do not involve any replication at all (such as the direct use of naturally collected essences that have been purchased in bulk in the source country) have sometimes been considered to be ‘utilization of genetic resources’. See, e.g., Mgbeoji, 2006b; and Laird and Ten Kate, et al., 1998 (and other case studies posted on the CBD website at http://www.cbd.int/abs/cs.shtml).

4 See, e.g., Report of the International Negotiating Committee, and International Committee for the CBD (ICCBD), as well as Glowka, 1998 at 80, and Ten Kate and Laird, et al., 1999, throughout.

5 The current status of the ‘international ABS regime’ negotiations is reported in the (regularly updated) ABS pages of the CBD's website at http://www.cbd.int/

6 This comment was most often made by technical assistance providers involved in the negotiations of the Philippines' Executive Order 247, which continues to have functional problems arising from the original system design. Benevidez, 2004.

7 Young, 1994.

8 Available online at http://www.wipo.int/tk/en/databases/contracts/index.html

9 Where only an excerpt of a provision has been used, we have endeavoured to provide sufficient information to enable the reader to understand the context of the excerpt.

10 Reinmann and Zimmermann, 2006, at 900.

11 See, e.g., Visser ‘t Hooft, 2002, at 25, citing recent studies in Japan, considering the disposition of 114 court cases on commercial contract disputes.

12 See Visser ‘t Hooft, 2002, noting that Japanese law specifically authorizes or requires the recognition of customs within the relevant industry, as a means of determining the meaning and validity of contracts.

13 It is notable that the authors come from different legal backgrounds. Both have worked extensively with many different legal systems, writing and advising on legislation, contractual negotiations, and legal advocacy, in over 100 countries, as well as facilitating or participating in international tribunals and arbitration. This experience has colored their understandings of the issues described in this Part.

14 A legal colloquialism, referring to written law as distinguished from the way that the law works.

15 Visser ’t Hooft, W., 2002, at 15.

16 Id., identifying significant similarities between the legal systems of Japan and the Netherlands with regard to contracts.

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