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Avoiding pesticide data compensation disputes in the EU

Disputes about data protection rights and compensation can be costly and, in many cases, avoidable. Peter L Gray (Partner, Crowell and Moring, LLP) and Jurgen Figys identify best practices for minimising the likelihood of such disputes.

There has been a steady rise in the number of disputes over the years in the EU over data protection rights for studies submitted to regulatory authorities to support approval of active substances in plant protection products as well as biocides. Emblematic of this trend is the decision by the EU's General Court of Justice in Case T-420/05, Vischim SrL v Commission of the European Communities (October 7th 2009). That involved a data submitter who was seeking annulment of a report by the European Commission, which appeared to deny protected status to a group of studies under the Plant Protection Products Directive.

More recently, the judgment of the Commercial Court of Liege (Belgium) in Tagros Chemicals India v Arysta LifeScience Benelux (November 17th 2017). That involved litigants who had entered a cost sharing agreement relating to studies supporting approval of a biocide under the EU biocidal products Regulation (528/2012) disagreed over the meaning of a reimbursement provision of the agreement. In addition to these reported decisions, there are numerous other disputes over data protection, which have been resolved through binding arbitration. 

These disputes can be costly and, in many cases, are avoidable. This article identifies best practices for minimising the likelihood of such disputes.  The focus is on disputes under the 91/414 and 1107/2009, but the recommendations fully apply to a similar regulatory regime established under the Biocidal Products Regulation.

I. Background on the EU regulatory process

In 1991, the EU adopted the agrochemical registration Directive 91/414 to regulate the sale, distribution and use of active substances. Under this regime, an active substance could only be sold or distributed if it had been listed on Annex I to Directive 91/414.

Directive 91/414 established a twelve-year programme for evaluating whether "existing active substances" (those that were on the market as of July 25th 1993, when Directive 91/414 entered into force) qualify for Annex I listing. During this twelve-year review period, the Commission was responsible for determining whether these existing active substances meet the "no harmful effects" standard for Annex I listing.

To initiate the review of an existing active substance, the Commission would designate a Rapporteur Member State (RMS) to evaluate the data required for its approval. Any company wanting to sell the existing active substance had to develop and submit a dossier to the RMS. Where multiple companies sought approval of the same existing active substance, the Directive encouraged them to develop a joint (or "collective") dossier, rather than submitting duplicate sets of the required studies.

The RMS would then review the dossier(s) and prepare a Draft Assessment Report (DAR), which contained, among other things, the RMS's analysis of the submitted studies and its recommendation of whether the existing active substance should be included on Annex I. Following a peer review of the DAR, the Commission would draft a proposal on whether to include the existing active substance on Annex I, on which all member states would vote.

Directive 91/414 established a right to varying periods of "data protection" for studies submitted in support of the Annex I listing of an existing active substance.

During the applicable data protection period, a new applicant who sought authorisation for plant protection products containing an active substance listed on Annex I could not rely on another party's studies supporting Annex I listing. Thus, unless the applicant and study owner had reached an agreement on study access, the applicant would have to submit its own set of supporting studies.  The only exception was for previously submitted vertebrate studies. For those studies, the applicant and the study owner were to "take all reasonable steps to reach agreement of the sharing of information so as to avoid the duplication of vertebrate testing". (Art 13, para. 7, of Directive 91/414). If they failed to reach agreement on cost sharing, member states were authorised to introduce measures for mandatory sharing of vertebrate studies.

In 2009, the Commission adopted EU agrochemical registration Regulation 1107/2009, which came into effect on June 14th 2011. The Regulation repealed and replaced Directive 91/414. Regulation 1107/2009 reshaped many aspects of the regulatory regime established by Directive 91/414. One such change concerned the conditions for data protection to apply to studies supporting the Annex I listing of an active substance. The revised conditions under which a study is eligible for data protection are specified in Article 59, which provides that studies shall receive data protection if, among other things, they were "necessary for the authorisation or an amendment of an authorisation in order to allow the use on another crop" (Vertebrate studies are only eligible for data compensation, not data protection).

Given the relatively short periods of data protection afforded to non-vertebrate studies, and the compulsory sharing of vertebrate studies, many study owners choose to enter into data sharing agreements with applicants. Applicants understandably wish to pay only for those studies that are "necessary for authorisation", but it is not always clear which studies are actually "necessary".  To address the issue, parties must develop contractual language in cost sharing agreements aimed at conditioning payment upon determination that studies are deemed necessary. How does one know if a study is "necessary"?  For even the most knowledgeable practitioner, the answer is not always clear.

The RMS is responsible for preparing a list of studies necessary for approval, amendment or renewal of approval. These lists of necessary data are appended to the RMS's DAR, which serves as the basis for the final recommendation by the Commission. Notably, in addition to the RMS's list of necessary studies, the Commission separately publishes a "list of essential studies". It is not uncommon for there to be differences between the RMS's list of "necessary" studies and the Commissions's list of essential studies. Nor is it unusual for one or both lists to be missing studies that were required by the RMS to establish a complete dossier of studies meeting the data requirements, and which were used by the RMS to evaluate the safety of the active substance.

II. Data submitters should be vigilant in defending the protected status of data

Study owners should carefully review these lists to determine if the RMS or the Commission inadvertently or incorrectly omitted studies. If such omissions are identified, the study owner should seek amendment of the list. Failure to do so can lead to expensive disputes as to whether the omitted studies enjoy data protection.

Consider the plight of the study owner in Vischim SrL v Commission of the European Communities. The pertinent facts are as follows. Vischim and Syngenta had each submitted dossiers to the RMS in support of Annex I listing of the fungicide, chlorothalonil. The RMS concluded that only Syngenta's dossier was complete, and subsequently issued the DAR on chlorothalonil that identified Syngenta as the "main data submitter" and included on Syngenta studies on the "List of Studies for which the main data submitter has claimed data protection and which . . . were considered essential for the evaluation". That list of studies was in turn referenced in the Commission's "Review Report" as a source for identifying chlorothalonil studies entitled to data protection.

Vischim sought to annul the EC's Review Report because Vischim had "requested protection for the data submitted for the assessment of chlorothalonil under Article 13 of Directive 91/414" and the Commission's omitting Vischim’s studies from the Review Report "resulted in breach of [Vischim's] rights arising from Article 13". The Court rejected this argument noting that "data protection provided for in Article 13(3) of Directive 91/414 is not in any way dependent upon the data's inclusion in a list drawn up by the Commission when the measures relating to the inclusion of an active substance are adopted."

This outcome was less than ideal for Vischim. Although it retained the right to argue that its unlisted studies are entitled to data protection notwithstanding their omission from the list of essential studies, Vischim was left to fend for itself in the event disputes over the issue arose with other companies that obtain authorisations for products containing chlorothalonil.

III. Be precise in cost sharing agreements

Because of the ambiguities that can arise over data protection, data submitters should be very precise when entering cost sharing agreements relating to studies they have submitted and to which applicants seek access.

The following dispute, which was resolved through arbitration before the International Chamber of Commerce, illustrates the point. The parties' identities and the active substance at issue have been masked, and the facts somewhat simplified for illustrative purposes.

Company A and Company B both sold an active substance throughout the EU. Although the substance was not listed on Annex I, both parties were permitted to sell up until the Annex I listing process concluded. Thereafter, the continued right to sell would be conditioned on having access to the studies submitted to the Commission that were "necessary for the authorisation" of the active substance. Only Company A submitted studies to support Annex I listing. Thus, without access to Company A's data, Company B would eventually lose its right to sell products containing the active substance throughout the EU. It was unclear, however, if all of the studies that Company A had submitted were "necessary for the authorisation" of the active substance, and thus entitled to data protection under Article 59 of Regulation 1107/2009. Accordingly, the parties entered a data sharing agreement, under which Company B paid Company A half the cost of the studies that Company A had submitted to the RMS, with the proviso that Company B would receive a refund for any studies that had not been "used" by "governmental authorities" to support Annex I listing of the active substance.

Several years later, the Commission listed the active substance on Annex I and published a "list of essential studies", which omitted a number of studies that had been submitted by Company A. Company B demanded a refund for the non-listed studies, but Company A refused, pointing to documentary evidence showing that the RMS had, in fact, "used" the non-listed studies in connection with the Annex I listing of the active substance. The dispute proceeded to arbitration. Ultimately, Company B withdrew its claim. Among the reasons for withdrawing its claims was the ruling in the Vischim decision (supra), namely, that omission of a study from the "list of essential studies" is not definitive proof that the omitted study was "unnecessary" or lacks data protection. Company B had not seen the Vischim decision prior to initiating arbitration, and it ended up paying Company A's legal fees. The entire dispute, however, could have been avoided had the parties discussed the question of whether the "list of essential studies" would be determinative of use, and made this clear – one way or other – in the agreement. The inherent ambiguity of the contractual term "used", however, invited the dispute.

Whether a study is necessary to support Annex I listing or not, is just one of many issues that must be carefully addressed during settlement negotiations. Others include:

• should the party seeking access to a study receive a refund if a second party agrees to pay the study owner for access to the same study?

• if a study for which access has been paid is deemed insufficient by a regulatory authority and a new study must be submitted, should the payment be refunded?

• is access to a study limited to the EU?

Precise contract language is always important when drafting contracts. Precision in contractual language is of heightened importance when dealing with pesticide data because Regulation 1107/2009 is far from a model of clarity.


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