On August 25, 2014, a three-member arbitral tribunal constituted under Chapter Eleven of the North American Free Trade Agreement rejected all claims brought against the United States by Apotex Holdings Inc. and Apotex Inc. The two Canadian pharmaceutical companies had sought up to $1.5 billion in damages for losses allegedly caused by an “Import Alert” issued in 2009 by the U.S. Food and Drug Administration (FDA). The Department of State’s Office of the Legal Adviser represented the United States in the case, in coordination with FDA and other federal agencies.
In 2008 and 2009, FDA inspected Apotex Inc.’s Etobicoke and Signet manufacturing facilities in Ontario, Canada, in response to complaints about Apotex drugs. The inspections revealed significant deviations from current good manufacturing practice. In August 2009, FDA placed the two facilities on Import Alert, signaling to FDA district offices that drugs offered for import from those facilities were deemed to be adulterated and could be detained at the border without physical examination. The facilities were removed from the Import Alert in 2011.
In February 2012, Apotex Holdings Inc. and Apotex Inc. initiated arbitration against the United States. Apotex claimed that the Import Alert violated the United States’ obligations under NAFTA Chapter Eleven to accord Apotex and its U.S. investments national and most-favored-nation treatment. Apotex also claimed that the United States adopted the Import Alert without due process, in violation of the customary international law minimum standard of treatment.
The tribunal, by a majority, concluded that Apotex was barred from relitigating the issue of whether Apotex Inc.’s “abbreviated new drug applications” constituted “investments” in the United States for purposes of NAFTA Chapter Eleven, given a previous tribunal’s determination of that issue. The tribunal thus concluded that it lacked jurisdiction to decide some of Apotex’s claims.
On the merits, the tribunal unanimously concluded that the Import Alert was a lawful and appropriate exercise of FDA’s regulatory authority. FDA’s issuance of the Import Alert, therefore, did not violate the United States’ obligations under NAFTA Chapter Eleven.
The tribunal ordered Apotex to reimburse 100 percent of the United States’ legal costs and to pay 75 percent of the costs of arbitration.
The tribunal’s award is an important recognition of the NAFTA Parties’ authority to take nondiscriminatory enforcement action to protect public health.
The tribunal members are John R. Crook, J. William Rowley, and V.V. Veeder (presiding).
The State Department will post the award at http://www.state.gov/s/l/c50826.htm following redaction of any confidential or otherwise protected information. Public versions of the parties’ submissions, hearing transcripts, and other arbitration documents also are available at that address.