'Investment' Narrowly Construed Under NAFTA In 'Apotex v. United States'
A recent decision provides a narrow interpretation of "investment" under NAFTA Chapter Eleven.
In a recent NAFTA Investor-State claim brought against the United States by Apotex Inc., Canada's largest producer of generic drugs, the Tribunal upheld the United States' preliminary objections to jurisdiction on the grounds, inter alia, that the company's efforts to win approval for generic drugs in the United States market did not make it an "investor" under Article 1139 of NAFTA Chapter Eleven. In Apotex Inc. v. The Government of the United States of America, Award on Jurisdiction and Admissibility (14 June 2013), the Tribunal held that significant expenses incurred in: (i) seeking Food and Drug Administration ("FDA") approval; (ii) purchasing materials and ingredients in the United States intended for the manufacture of products abroad (in this case in Canada); and (iii) conducting litigation and establishing an agent in the United States for the purpose of corresponding with and making submissions to the FDA, were all insufficient to qualify as an "investment" under the treaty. This award sheds further light on the precise meaning of the term "investment" under NAFTA and confirms that, as with other provisions of NAFTA Chapter Eleven, investors must surmount a high jurisdictional threshold in order to bring claims before a NAFTA tribunal.
Apotex alleged in the arbitration that its rights were violated by the United States in breach of NAFTA Articles 1102 (obligation to accord national treatment to foreign investments), 1105 (obligation to accord fair and equitable treatment to foreign investments) and 1110 (obligation not to expropriate without payment of fair compensation). Apotex claimed that it was subject to mistreatment by the United States, its agencies (in particular the FDA) and its Federal Courts in the course of the company's efforts to bring generic versions of the anti-depressant drug Zoloft (to be marketed as Sertraline by Apotex) and the anti-cholesterol drug Pravachol (to be marketed as Pravastatin by Apotex) to market in that country. In particular, the Sertraline claim arose out of three United States Federal Court decisions pertaining to Apotex's application for FDA approval of its generic drug. The Pravastatin claim arose out of a decision by the FDA and three decisions of the United States Federal Courts, pertaining to Apotex's application for FDA approval of its generic drug.
The United States objected to the...
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