3XEOLF9HUVLRQ In The Matter Of Two Arbitrations Under Chapter 11 Of The NAFTA And The UNCITRAL Arbitration Rules (1976) B e t w e e n: APOTEX INC. Claimant –and – THE GOVERNMENT OF THE UNITED STATES OF AMERICA Respondent AWARD ON JURISDICTION AND ADMISSIBILITY The Arbitral Tribunal: Hon. Fern M. Smith Mr. Clifford M. Davidson Mr. Toby T. Landau QC (Presiding Arbitrator) Secretary to the Tribunal: Ms. Aurélia Antonietti Representation of the Parties Representing the Claimant: Representing the Respondent: Mr. William A. Rakoczy Ms. Mary McLeod Ms. Lara E. FitzSimmons Acting Legal Adviser Mr. Robert M. Teigen Mr. Jeffrey D. Kovar Assistant Legal Adviser (to 1 August 2012) Rakoczy Molino Mazzochi Siwik LLP Ms. Lisa J. Grosh 6 West Hubbard Street, Suite 500 Assistant Legal Adviser (as of 1 August 2012) Chicago, Illinois 60654 Deputy Assistant Legal Adviser (to 1 August 2012) USA Mr. Mark E. Feldman Chief, NAFTA/CAFTA -DR Arbitration (to 6 June 2011) Mr. Jeremy K. Sharpe Chief, Investment Arbitration (as of 6 June 2011) Mr. Neale H. Bergman Mr. David M. Bigge Ms. Alicia L. Cate Mr. Patrick W. Pearsall Attorney-Advisers Office of International Claims and Investment Disputes United States Department of State Washington, D.C. 20520 USA Page 2 of 120 TABLE OF CONTENTS I. INTRODUCTION .. .. .. .. .. .. .. .. 7 (A) THE PARTIES .. .. .. .. .. .. .. .. 7 (B) THE ARBITRATION AGREEMENTS .. .. .. .. .. 8 (C) GENERAL NATURE OF THE DISPUTE .. .. .. .. .. 9 (D) NATURE OF THE PRELIMINARY OBJECTIONS .. .. .. .. 10 (E) STRUCTURE OF THIS AWARD .. .. .. .. .. .. 11 II. PROCEDURAL HISTORY .. .. .. .. .. .. .. 12 III. RELEVANT U.S. STATUTORY BACKGROUND .. .. .. 18 IV. OUTLINE OF APOTEX’S CLAIMS .. .. .. .. .. 28 V. THE JURISDICTION & ADMISSIBILITY OBJECTIONS .. .. 41 (A) INTRODUCTION .. .. .. .. .. .. .. 41 (B) NO “INVESTMENT” OR “INVESTOR” .. .. .. .. .. 42 i. Relevant Provisions of NAFTA .. .. .. .. 42 ii. Respondent’s Position.. .. .. .. .. .. 45 iii. Apotex’s Position .. .. .. .. .. .. 46 iv. The Tribunal’s Analysis .. .. .. .. .. 48 a. “Investment” .. .. .. .. .. .. 48 b. “Investor” .. .. .. .. .. .. 77 v. Conclusion .. .. .. .. .. .. .. 78 Page 3 of 120 (C) JUDICIAL FINALITY WITH RESPECT TO THE PRAVASTATIN CLAIM .. 79 i. Respondent’s Position.. .. .. .. .. .. 79 ii. Apotex’s Position .. .. .. .. .. .. 80 iii. The Tribunal’s Analysis .. .. .. .. .. 81 iv. Conclusion .. .. .. .. .. .. .. 99 (D) THE NAFTA TIME BAR .. .. .. .. .. .. 99 i. Relevant Provisions of NAFTA .. .. .. .. 99 ii. Respondent’s Position.. .. .. .. .. .. 100 iii. Apotex’s Position .. .. .. .. .. .. 102 iv. The Tribunal’s Analysis .. .. .. .. .. 103 v. Conclusion .. .. .. .. .. .. .. 110 (E) OVERALL CONCLUSION ON PRELIMINARY OBJECTIONS .. .. 110 VI. COSTS .. .. .. .. .. .. .. .. .. 112 (A) ALLOCATION OF COSTS .. .. .. .. .. .. 112 (B) ASSESSMENT OF COSTS .. .. .. .. .. .. 113 (C) SUMMARY .. .. .. .. .. .. .. .. 117 VII. OPERATIVE ORDER .. .. .. .. .. .. .. 118 ____________________________ Page 4 of 120 Frequently Used Abbreviations and Acronyms ANDA Abbreviated New Drug Application Counter-Memorial Apotex’s Counter-Memorial On Respondent’s Objections To Jurisdiction, dated 1 August 2011 FDA The U.S. Food and Drug Administration FFDCA Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq. Hatch-Waxman Amendments / Amendments to the FFDCA by the Drug Price Competition and Patent Term Restoration Act Hatch-Waxman of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984) MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108­ 173, 117 Stat. 2066 (2003) (codified as amended in relevant part at 21 U.S.C. § 355 and 35 U.S.C. § 271) NAFTA The North American Free Trade Agreement NDA New Drug Application Page 5 of 120 Orange Book FDA’s publication, Approved Drug Products with Therapeutic Equivalence Evaluations (which contains a “Patent and Exclusivity Information Addendum”, containing patent information submitted by NDA-holders). Reply Respondent’s Reply on Objections to Jurisdiction, dated 17 October 2011 Rejoinder Apotex’s Rejoinder Memorial On Respondent’s Reply On Objections To Jurisdiction, dated 16 December 2011 Statement of Claims Apotex’s Statement of Claims, dated 17 January 2011 Statement of Defense Respondent’s Statement of Defense, dated 15 March 2011 Transcript Day [1 / 2] Condensed version of the transcript of the oral hearing held in Washington, D.C., on 15 & 16 February 2012 UNCITRAL Rules Arbitration Rules of the United Nations Commission on International Trade Law, 1976 U.S. Memorial Respondent’s Memorial on Objections to Jurisdiction, dated 16 May 2011 ____________________________ Page 6 of 120 I. INTRODUCTION 1. This is an Award on Jurisdiction and Admissibility in two arbitrations conducted pursuant to Chapter 11 of the North American Free Trade Agreement (“NAFTA”), and the Arbitration Rules of the United Nations Commission on International Trade Law, 1976 (the “UNCITRAL Rules”). 2. The first arbitration was commenced by a Notice dated 10 December 2008 (the “Sertraline Claim”). 3. The second arbitration was commenced by a Notice dated 4 June 2009 (the “Pravastatin Claim”). 4. By agreement of the Parties, the jurisdiction / admissibility phase in each arbitration has been held concurrently, albeit not consolidated, and determinations on these preliminary issues in both arbitrations are set out in this single Award. (A) THE PARTIES 5. The Claimant: The Claimant in both arbitrations is Apotex, Inc. (“Apotex” or the “Claimant”), a company incorporated and existing under the laws of Canada, with its principal place of business at 150 Signet Drive, Weston, Ontario, Canada M91 1T9. 6. The Respondent: The Respondent in both arbitrations is the Government of the United States of America (the “USA” or the “Respondent”), represented by its Department of State. 7. The Claimant and the Respondent are referred to collectively as “the Parties”. Page 7 of 120 (B) THE ARBITRATION AGREEMENTS 8. Both arbitrations have been conducted pursuant to Section B of Chapter 11 of NAFTA, and specifically Articles 1116, 1120 and 1122, which provide as follows: “Article 1116: Claim by an Investor of a Party on Its Own Behalf 1. An investor of a Party may submit to arbitration under this Section a claim that another Party has breached an obligation under: (a) Section A or Article 1503(2) (State Enterprises), or (b) Article 1502(3)(a) (Monopolies and State Enterprises) where the monopoly has acted in a manner inconsistent with the Party's obligations under Section A, and that the investor has incurred loss or damage by reason of, or arising out of, that breach. 2. An investor may not make a claim if more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the investor has incurred loss or damage.” “Article 1120: Submission of a Claim to Arbitration 1. Except as provided in Annex 1120.1, and provided that six months have elapsed since the events giving rise to a claim, a disputing investor may submit the claim to arbitration under: (a) the ICSID Convention, provided that both the disputing Party and the Party of the investor are parties to the Convention; (b) the Additional Facility Rules of ICSID, provided that either the disputing Party or the Party of the investor, but not both, is a party to the ICSID Convention; or (c) the UNCITRAL Arbitration Rules. 2. The applicable arbitration rules shall govern the arbitration except to the extent modified by this Section.” Page 8 of 120 “Article 1122: Consent to Arbitration 1. Each Party consents to the submission of a claim to arbitration in accordance with the procedures set out in this Agreement. 2. The consent given by paragraph 1 and the submission by a disputing investor of a claim to arbitration shall satisfy the requirement of: (a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties; (b) Article II of the New York Convention for an agreement in writing; and (c) Article I of the Inter-American Convention for an agreement.” 9. Apotex’s consent to arbitration, pursuant to Article 1121 of NAFTA, and in accordance with the procedures set out in NAFTA, is recorded in each of its two Notices of Arbitration. Concurrently with the filing of each of its Notices of Arbitration, Apotex submitted an executed waiver in the form required by NAFTA Article 1121. 10. Subject to its jurisdictional / admissibility objections, the Respondent has consented to arbitration by virtue of Article 1122 of NAFTA. 11. In each arbitration, Apotex has elected to proceed under the UNCITRAL Arbitration Rules (1976), as is its option under NAFTA Article 1120. (C) GENERAL NATURE OF THE DISPUTE 12. Apotex develops and manufactures generic drugs, including solid oral dosage forms such as capsules and tablets. Generic drugs are usually non-patented (and often less expensive) versions of brand-name pioneer drugs that are, may be, or were previously protected by patents. 13. Apotex’s activities in this regard include, in particular, the design and formulation of proposed drug products; the procuring or manufacturing of active pharmaceutical Page 9 of 120 ingredients; the preparation and filing of applications with the U.S. Food and Drug Administration (“FDA”); the seeking of approval to market and sell its drug products in the United States; and the manufacture of the finished drug products. 14. Both of Apotex’s claims relate to the treatment said to have been accorded it by the USA, its agencies and Federal Courts, in the course of its efforts to bring new generic drugs to market in the United States. 15. The Sertraline Claim arises out of three decisions of the US Federal Courts in relation to Apotex’s application seeking FDA approval for a generic version of a drug manufactured by Pfizer Inc., called “Zoloft®”, which is used to treat depression; obsessive-compulsive disorders; panic attacks; and post-traumatic stress disorder. 16. The Pravastatin Claim arises out of a decision of the FDA, and three decisions of the US Federal Courts, in relation to Apotex’s new drug application seeking FDA approval for a generic version of a drug manufactured by Bristol Myers Squibb, called “Pravachol®”, which is commonly used for lowering cholesterol and preventing cardiovascular disease. 17. In each case, Apotex alleges that the USA has breached its obligations under Section A of Chapter 11 of the NAFTA, including: (i) Article 1102 – National Treatment; (ii) Article 1105 – Minimum Standard of Treatment; and (iii) Article 1110 – Expropriation. (D) NATURE OF THE PRELIMINARY OBJECTIONS 18. This Award addresses three preliminary objections that have been raised by the Respondent. The first objection (whether there was an “investment” and an “investor” within the scope of NAFTA Chapter Eleven) applies to both arbitrations. The second objection (whether the judicial acts complained of were “final”) and the third objection (the NAFTA time bar) apply only to the Pravastatin Claim. Page 10 of 120