Between:
(1) APOTEX HOLDINGS INC.
(2) APOTEX INC.
First and Second Claimantsand
UNITED STATES OFAMERICA
RespondentAWARD
The Arbitration Tribunal:V.V. Veeder, President
J. William Rowley, Arbitrator
John R. Crook, Arbitrator
The Tribunal’s Secretary:Monty Taylor
Date of dispatch to the Parties: 25 August 2014
[...]
Part VII - Page 3 of 22
7.10. The Parties agree that the Tribunal, under NAFTA Article 1131, “shall decide the
issues in dispute in accordance with this Agreement [NAFTA] and applicable rules
of international law.”
7.11. In the Tribunal’s view, the doctrine of res judicata is a general principle of law and
is thus an applicable rule of international law within the meaning of NAFTA Article
1131. In its Advisory Opinion of 13 July 1954, the ICJ affirmed that “[a]ccording to
a well-established and generally recognized principle of law, a judgment rendered
by ... a judicial body [such as the U.N. Administrative Tribunal] is res judicata and
has binding force between the parties to the dispute.” Accordingly, Professor Bin
Cheng writes, “[t]here seems little, if indeed any, question as to res judicata being a
general principle of law or as to its applicability in international judicialPart VII - Page 4 of 22proceedings.” As later confirmed in the Amco award, “The principle of res judicata
is a general principle of law.”7.12. The doctrine of res judicata defines the binding effect of a prior final determination
made by a competent tribunal. In Amco, the tribunal decided: “The general
principle, announced in numerous cases is that a right, question, or fact distinctly
put in issue and distinctly determined by a court of competent jurisdiction as a
ground of recovery, cannot be disputed.” Thus, according to Professor Bin Cheng,
“[o]nce a case has been decided by a valid and final judgment, the same issue may
not be disputed again between the same parties, as long as that judgment stands.”7.13. The doctrine of res judicata is often described as operating in international
proceedings where three conditions establish the congruence of the matters
previously determined and those currently at issue. Legal scholars often refer to
Judge Anzilotti’s formulation of this triple identity test in his dissent in the PCIJ
case of Chorzów Factory (Interpretation). Judge Anzilotti there referred to: “the
three traditional elements for identification, persona, petitum, causa petendi, for it is
clear that ‘that particular case’ (le cas qui a été décidé) covers both the object and
the grounds of the claim.”The judgment of the majority had there accorded res
judicata to the passage in the Court’s earlier declaratory judgment setting out the
grounds or ‘essential conditions’ on which that decision was based.7.14. No issue arises in the present case regarding
persona: Apotex Inc. and the
Respondent are named parties to the Apotex I & II Award (the position of Apotex-
Holdings as a privy, albeit not a named party, is considered separately below).
Professors Schreuer and Reinisch explain the Latin legal terms
petitum and
causapetendi, as follows: “[i]dentical ‘object’ (
petitum) means that the same type of relief
Part VII - Page 5 of 22is sought in different proceedings. Identical ‘ground’ (
causa petendi) means that the
same legal arguments are relied upon in different proceedings.”
7.15. Whilst the triple identity test is often referred to in describing the requirements for
res judicata to operate, certain international tribunals and scholars have
questioned its division between
petitum and
causa petendi; and many cases have
used a simpler analysis. The British-U.S. Claims Arbitral Tribunal saw the
doctrine as involving only two elements: “res judicata applies only where there is
identity of the parties and of the question at issue.” The
Pious Fund tribunal
(applying
res judicata in the Permanent Court of Arbitration’s first case and viewed
as “[t]he leading early case”) also applied a two-part test, emphasising that “there
are not only the same parties to the suit, but also the same subject-matter that was
judged” in a prior arbitral award.
7.16. Professor Cheng questions the division between
petitum and
causa petendi,
observing that “an examination of international decisions ... throws some doubt
about the accuracy of this sub-division, especially in border-line cases.”
Professors Schreuer and Reinisch point out that “[i]international tribunals have ...
been aware of the risk that if they use too restrictive criteria of ‘object’ and
‘grounds’, the doctrine of
res judicata would rarely apply: if only an exactly
identical relief sought (object) based on exactly the same legal arguments (grounds)
in a second case would be precluded as a result of
res judicata, then litigants could
easily evade this by slightly modifying either the relief requested or the grounds
Part VII - Page 6 of 22relied upon.” Professor Dodge voices a similar concern, although he indicates (as
do Professors Schreuer and Reinisch) that tribunals have not allowed “claim
splitting” by claimants seeking to avoid the preclusive effects of prior awards.
7.17. The Claimants and the Respondent disagree on the scope of
res judicata’s effect in
international law. The Parties agree that the provisions of the
dispositif, or operative
part, of a prior judgment or award have
res judicata effect. They disagree whether
res judicata in international law includes the broader concept of or akin to issue
estoppel, the principle that a party in subsequent proceedings cannot contradict an
issue of fact or law not reflected in the dispositif if it has already been distinctly
raised and finally decided in earlier proceedings between the same parties (or their
privies). The Claimants submit it does not; whereas the Respondent says it does.
7.18. It is clear that past international tribunals have applied forms of issue estoppel,
without necessarily using the term. Umpire Plumley’s award in
Orinoco Steamshipfound that “every matter and point distinctly in issue ... and which was directly
passed upon and determined in said decree, and which was its ground and basis, is
confirmed by said judgment, and the claimants ... are forever estopped from
asserting any right or claim based in any part upon any fact actually and directly
involved in the said decree.”In Professor Lowe’s opinion, the tribunal in the
resubmitted
Amco case “clearly applied the principle of issue estoppel to the
determination of specific facts and of the legal characterisations of facts by the
previous tribunal.”Most recently, the ICSID tribunal in
Grynberg v. Grenadaapplied issue estoppel (albeit describing it as “collateral estoppel”) to foreclose the
Part VII - Page 7 of 22claimants’ efforts to re-open issues decided in an award made in a prior ICSID
arbitration.
7.19. In
Grynberg v. Grenada, the award in the first ICSID arbitration had dismissed the
claims against Grenada as the respondent made by a Texan company (RSM)
alleging contractual breaches of a concession agreement. In the second ICSID
arbitration, RSM and its three shareholders alleged breaches by the same respondent
of the bilateral investment treaty between the USA and Grenada. On the face of it,
the triple identity test was not satisfied as regards these three shareholders as
persona, nor the
petitum or
causa petendi as regards both RSM and the
shareholders. Yet, the second arbitration tribunal summarily dismissed all claims
made by these four claimants as being “manifestly without legal merit” under
ICSID Arbitration Rule 41(5), together with costs orders adverse to the claimants.
7.20. In so doing, the second tribunal accepted the respondent’s submission of issue
estoppel arising from the first award, to the effect that the legal and factual
contentions on which the new claims depended had already been fully litigated in
the first ICSID arbitration. Applying the doctrine to all four claimants as “privies”
as a general principle of law recognised in
Amco v Indonesia and the
Orinococase, the second ICSID tribunal accepted that “a finding concerning a right,
question or fact may not be re-litigated (and, thus, is binding on a subsequent
tribunal), if, in a prior proceeding: (a) it was distinctly put in issue; (b) the court or
tribunal actually decided it; and (c) the resolution of the question was necessary to
resolving the claims before that court or tribunal.” Applying these principles, the
tribunal concluded: “that an essential predicate to the success of each of Claimants’
claims is an ability for the Tribunal to re-litigate and decide in Claimants’ favour
conclusions of fact or law concerning the parties’ contractual rights that have
already distinctly been put in issue and distinctly determined by the Prior Tribunal”;
Part VII - Page 8 of 22and having determined that ability adversely to the claimants, the tribunal decided
that each of their claims was manifestly without legal merit.
7.21. The Claimants denied the relevance of the
Grynberg award to the present case,
contending that the parties there had agreed to the application of collateral estoppel
(issue estoppel) under the governing law.In the Tribunal’s view, this submission
is incorrect.The parties strongly disputed its application to their case; but,
significantly, there was no dispute as its requirements as a general principle of
international law.
7.22. The Claimants also contend that
Orinoco Steamship (and presumably other like
authorities) do not correctly reflect
res judicata under international law. In their
submission, the case reflected Umpire Plumley’s common law orientation, as
evidenced by his reliance on a decision of the US Supreme Court decision as legal
authority for the cited principle.The Claimants contend that notions of issue
estoppel found in common law systems are not found in civil law systems, which
typically (so the Claimants submit) limit
res judicata effects to matters addressed in
the dispositif of an award or judgment.Given this significant difference in
approach between two major systems of law, the Claimants contend that issue
estoppel cannot be said to be an aspect of
res judicata as a general principle of law
“recognised by civilized nations.”
7.23. The Tribunal recognises that historical differences as to issue estoppel have existed
and, to a lesser extent, still exist in national laws between certain common law and
certain civil law systems. As the ILA Interim Report makes clear, however, there is
no sharp divide between these two legal systems.It is also clear that international
courts and tribunals have regularly examined under international law a prior
tribunal’s reasoning, and the arguments it considered, in determining the scope, and
thus the preclusive effect, of the prior award’s operative part. The first international
Part VII - Page 9 of 22tribunal’s analysis and reasoning thus often play a significant role before the second
international tribunal in determining the
res judicata effect of the earlier award.
7.24. This is illustrated in the
Pious Fund arbitration, where the tribunal held that an
umpire’s award in a prior mixed claims commission proceeding had
res judicataeffect, and obliged Mexico to pay certain annuities to the USA on behalf of the
Archbishop of San Francisco and the Bishop of Monterey. The tribunal rejected
Mexico’s contention that only the amount specified in the prior award had res
judicata effect, instead considering that it must consider the earlier award in its
entirety to determine the
res judicata effect of its dispositif: “Considering that all the
parts of a judgment or a decree concerning the points debated in the dispute
enlighten and mutually supplement each other, and that they all serve to render
precise the meaning and bearing of the
dispositif (the decisory part of the judgment),
to determine the points upon which there is
res judicata and which therefore cannot
be put in question.”
7.25. The Permanent Court of International Justice was of like mind in
Advisory OpinionNo. 11: “It is perfectly true that all the parts of a judgment concerning the points in
dispute explain and complete each other and are to be taken into account in order to
determine the precise meaning and scope of the operative portion. This is clearly
stated in the award of the Permanent Court of Arbitration of October 14th, 1902,
concerning the Pious Fund of the Californias ... The Court agrees with this
statement.”
7.26. In his dissent in
Chorzów Factory, Judge Anzilotti was of the view that “the binding
effect attaches only to the operative part of the judgment and not to the statement of
reasons.” However, he added: “[w]hen I say that only the terms of a judgment are
binding, I do not mean that only what is actually written in the operative part
constitutes the Court’s decision. On the contrary, it is certain that it is almost always
necessary to refer to the statement of reasons to understand clearly the operative part
and above all to ascertain the
causa petendi.”
Part VII - Page 10 of 227.27. The Channel Arbitration tribunal similarly observed that while res judicata
“attaches in principle only to the provisions of” the
dispositif, “it is equally clear
that, having regard to the close links that exist between the reasoning of a decision
and the provisions of its
dispositif, recourse may in principle be had to the reasoning
in order to elucidate the meaning and scope of the
dispositif.”
7.28. The International Court of Justice also looks to the parties’ arguments and
submissions to determine the legal effect of prior judgments. As Professor Rosenne
observes, “[t]he relevance of whether a question was argued between the parties
might arise ... if it is necessary to determine the scope of the
res judicata ... In the
Asylum case ... the problem was ... of the scope of the binding force of the decision.
The
res judicata does not derive from the operative clause of the judgment, which
confined itself to stating which submissions of the parties were rejected or accepted
and to what extent, but from the reasons in point of law given by the Court.”
Accordingly, cases such as
Asylum and
Corfu Channel “bring into sharp relief
the delayed-action effect attaching to the written and oral pleadings. In the last
analysis the scope of
res judicata can only be determined by reference to the
pleadings in general, and to the parties’ submissions in particular.”
7.29. The jurisprudence of the European Court of Justice (ECJ) is to like effect. For the
ECJ (applying the laws of the European Union and international law), the legal
effect of a decision by the ECJ and other EU institutions is not to be limited to the
wording of the operative part. In
Asteris & Greece v. Commission, the ECJ noted
that the EU institution was required to have regard not only to the operative part of
the decision but also to the
motifs which led to that decision in order to determine
the former’s exact meaning. In
Commission v. BASF, the ECJ noted that: “the
operative part of such a decision can be understood, and its full effect ascertained,
only in the light of the statement of reasons”; and that a decision’s
dispositif and
Part VII - Page 11 of 22motifs constituted “an indivisible whole.” In
Deggendorf v. Commission, the ECJ
held that: “the operative part of an act is indissociably linked to the statement of
reasons for it, so that, when it has to be interpreted, account must be taken of the
reasons which led to its adoption.”
7.30. Thus, where there is a question regarding the extent of a prior decision or award’s
res judicata effect, international tribunals regularly look to the prior tribunal’s
reasons and indeed also to the parties’ arguments, in order to determine the scope of
what was finally decided in that earlier proceeding.
7.31. In Professor Rosenne’s opinion, in examining a prior tribunal’s reasoning and the
arguments it considered, international tribunals have not drawn the distinctions
between
ratio decidendi and
obiter dicta “which is an essential element of the
common-law rule of the binding force of judicial precedents (
stare decisis).”For
the International Court of Justice, Professor Rosenne observes, “ [t]he reasons in
point of law of Article 95 ... of the Rules of Court do not contemplate such a finely
drawn distinction.”As in the
Pious Fund arbitration, tribunals have considered
that “all the parts of the judgment or the decree concerning the points debated in the
litigation enlighten and mutually supplement each other.”
7.32. It would be possible to cite many further legal materials in support of the legal
analysis made above; but it would serve no purpose here to prolong what is already
a lengthy analysis. However, the Tribunal is comforted to see its approach above
confirmed by the ICJ’s recent Judgment of 11 November 2013 in
Cambodia vThailand.In that Judgment, albeit not directly concerned with the doctrine of res
judicata, the ICJ considered in regard to an earlier judgment of 1962 the scope of
Article 60 of the ICJ’s Statute, which provides: “The judgment is final and without
appeal. In the event of dispute as to the meaning or scope of the judgment, the Court
shall construe it upon the request of any party.” In accordance with the ICJ’s
jurisprudence, a dispute under Article 60 must relate to the operative part of the
Part VII - Page 12 of 22judgment in question and cannot concern the reasons for the judgment except in so
far as these are inseparable from the operative part.The ICJ nonetheless held
under Article 60 that the “scope of the operative part of a judgment of the Court is
necessarily bound up with the scope of the dispute before the Court.”The
Tribunal concludes from this Judgment that even with the restrictive language of
Article 60, the ICJ is not barred from interpreting the operative part of a judgment
by reference to its reasons for that judgment.
7.33. The Apotex I & II Award was made under the UNCITRAL Arbitration Rules 1976
forming part of the arbitration agreement between the parties to that arbitration.
Under Article 32(2) of the UNCITRAL Rules, an award “shall be final and binding
on the parties”, including an award made in the exercise of the tribunal’s power to
decide upon its own jurisdiction. Under Article 32(3) of the UNCITRAL Rules, an
award “shall state the reasons upon which the award is based.” Accordingly, as an
award containing reasons under Article 32 of the UNCITRAL Rules, the Apotex I
& II Award (with its reasons) was and remains final and binding upon Apotex Inc.
and the Respondent, as agreed by those Parties.
7.34. The Respondent submitted at the Hearing that the combined effect of Articles 32(2)
and 32(3) means that the reasons in the Apotex I and II Award have effect as res
judicata as between the Parties to this arbitration, just as much as its operative part:
“… This is because the purpose of an Award is to decide the Parties’ dispute for all
time, both as to the whole and as to its constituent parts.”
7.35. The Tribunal is minded to accept this submission as a matter of legal logic; but, for
the purpose of deciding this issue, it is unnecessary to apply it here in full. Given the
status of both the operative part and the reasons in the Apotex I & II Award under
Article 32 of the UNCITRAL Arbitration Rules, the Tribunal concludes that those
relevant reasons can be read together with the operative part for the purpose of
applying the doctrine of res judicata in this arbitration, similarly to the position
under international law. It is not necessary in this case to read the reasons
Part VII - Page 13 of 22independently from the operative part (as the Respondent submits); but it would
clearly be impermissible for this Tribunal to read the operative part independently in
isolation from its relevant reasons under the UNCITRAL Arbitration Rules.
7.36. The Tribunal has not addressed separately the legal status under New York law (as
the
lex loci arbitri) of the reasons or the operative part of the Apotex I & II Award.
In the Tribunal’s view, if and to the extent relevant, the effect of New York law
does not materially change or add to the analysis made above. It is not disputed that
the Apotex I & II Award (with its reasons) is final and binding under New York
law; nor has Apotex Inc. sought to challenge that Award before the New York
courts (or elsewhere).
7.37. Applying NAFTA Article 1131(1), the rules of international law and the
UNCITRAL Arbitration Rules, the Tribunal concludes that the Apotex I & II
Award, with its relevant reasons, operates in this arbitration as
res judicata as
regards both named parties to that arbitration, namely Apotex Inc. and the
Respondent. It remains to be considered in what manner it operates in regard to the
specific claims made by Apotex Inc. in this arbitration.
7.38. As regards Apotex-Holdings, the Claimants agreed at the Hearing that Apotex-
Holdings, for the purpose of
res judicata, should be identified as a “privy” to the
Apotex I and II Award: “… having reviewed the RSM versus Grenada decision, the
second one, Apotex would agree that privies are bound to the same extent as the
Party with which they stand in privity. So we would accept that Apotex Holdings
could not bring the claim asserted and decided in the Apotex [I and ] II case …”
In other words, the two named Claimants in this arbitration stand in similar shoes,
as regards the effect of
res judicata resulting from the Apotex I and II Award,
notwithstanding the fact that only one of them was a named party to the Apotex I
and II Award.
7.39. However, Apotex-Holding’s shoes are only similar and not the same. As the
Claimants made clear towards the end of the Hearing, in answer to the Tribunal’s
Question A2: “… there is a distinction between derivative claims made on behalf of
Part VII - Page 14 of 22a company and claims made directly by a shareholder on its own behalf. In this
arbitration, Apotex Holdings brings a claim in its own right and in its own name. It
is different from the claim made by Apotex-Canada [Apotex Inc.]. Apotex Holdings
is bound by the Apotex I and II Award only to the extent that it addresses Apotex-
Canada as the investor and holder of the two tentatively approved ANDAs at
issue.”
7.40. In the Tribunal’s view, independently from the concession (rightly) made by
Apotex-Holdings at the Hearing, Apotex-Holdings is a “privy” with Apotex-US,
albeit not a named party in the Apotex I & II arbitration. Its relevant claims in this
arbitration, albeit made in its own right and in its own name, depend upon Apotex
Inc.’s ANDAs as investments under NAFTA Articles 1116 and 1139; and if these
are not investments, Apotex-Holdings cannot bring such claims before this Tribunal
as a matter of jurisdiction.
7.41. It is self-evident that the “Operative Order” in Paragraph 358 of the Apotex I & II
Award (pages 118-119) does not, read strictly in isolation by itself, address the
Claimants’ specific claims in this arbitration. That operative part merely records, in
Paragraph 358(a), that Apotex Inc. “does not qualify as an ‘investor’, who has made
an ‘investment’ in the U.S., for the purposes of NAFTA Articles 1116 and 1139,
and accordingly both the Sertraline and Pravastatin Claims are hereby dismissed in
their entirety, on the basis that the Tribunal lacks jurisdiction in relation thereto.”
The Claimants in this arbitration make no similar claims regarding Sertraline and
Pravastatin.
7.42. However, in this Tribunal’s view, that operative part as a “
dispositif” can and
should be read with the relevant “
motifs” or reasons for that operative part, as
decided above. Hence, the Tribunal concludes, for the purpose of
res judicata, that
Paragraph 358(a) of the operative part is to be applied together with the reasons
applicable to that paragraph, namely the relevant passages in Paragraphs 177 to 246
of the Apotex I & II Award (pages 55 to 78). As indicated above, for ease of
reference and given their significance, these paragraphs are reproduced in full from
Part VII - Page 15 of 22the redacted public version of the Apotex I & II Award in the Annex to this Part
VII. It is nonetheless useful briefly to summarise the tribunal’s approach in these
parts of the Apotex I & II Award.
7.43. First, the tribunal addresses the issue whether activities surrounding ANDAs qualify
as ‘investments’ under NAFTA Article 1139, as there submitted by Apotex Inc. and
there disputed by the Respondent: see Paragraphs 177ff. For several reasons, the
tribunal rejects Apotex Inc.’s submissions: see Paragraphs 178, 186ff & 225.
7.44. Second, the tribunal addresses the issue whether ANDAs qualify as ‘intangible
property’ under NAFTA Article 1139(g) in Paragraphs 196ff. For several reasons,
the tribunal rejects Apotex Inc.’s submissions: see Paragraphs 178, 206ff & 225. In
Paragraphs 206 and 208, the tribunal equates Apotex Inc. to “a mere exporter of
goods into the United States” and decides that “ … property is not an ‘investment’
if, as here, it merely supports cross-border sales.” In Paragraph 217, the tribunal
states (
inter alia): “… The ANDA was thus a requirement in order to conduct an
export business. If there had been no ANDA process, the underlying business could
not be said to be an ‘investment’ in the U.S. The fact that an ANDA was required
does not change the nature of the business.” The tribunal concludes, in Paragraph
225: “Thus, neither Apotex’s ANDAs, nor its activities in Canada, nor the costs
incurred there in meeting the requirements of the U.S. regulatory regime for
exporting its goods, are ‘investments’ in the United States.”
7.45. Third, the tribunal addresses the issue whether Apotex Inc.’s commitment of capital
and resources towards ANDAs could constitute an ‘investment’ under NAFTA
Article 1139(h) in Paragraphs 226ff. The tribunal notes that Apotex Inc. “made
clear that its submissions under NAFTA Article 1139(h) were to be treated as part
of its submissions under NAFTA Article 1139(g), and not as independent grounds”:
see Paragraph 229. The tribunal rejects Apotex Inc.’s submissions under Article
1139(h): see paragraph 230ff. In Paragraph 233, the tribunal decides that NAFTA
Article 1139(h) “ … excludes simple cross-border trade interests. Something more
permanent is necessary”; and, in Paragraph 235, that “each of the specific activities
and expenses relied upon by Apotex [i.e. Apotex Inc.] simply supported and
facilitated its Canadian-based manufacturing and export operations.”
Part VII - Page 16 of 227.46. In Paragraphs 241-246, the tribunal concludes overall that Apotex Inc. had made no
“investment” in the territory of the USA within the meaning of NAFTA Article
1139; that, as a necessary consequence, Apotex Inc. does not qualify as an
“investor” under NAFTA Article 1116; and that, accordingly, the tribunal has no
jurisdiction over the claims there made by Apotex Inc. as the claimant.
7.47. Lastly, in the first part of the operative part, in Paragraph 358(a), the Tribunal
unanimously orders and awards: “[Lines 1-2] Apotex does not qualify as an
‘
investor’, who has made an ‘
investment’ in the U.S., for the purposes of NAFTA
Articles 1116 and 1139, [Lines 2-4] and accordingly both the Sertraline and
Pravastatin Claims are hereby dismissed in their entirety, on the basis that the
Tribunal lacks jurisdiction in relation thereto.”
7.48. This Tribunal accepts that there are several factors in the Apotex I & II Award
which qualify the application of its passages for the purpose of res judicata in this
arbitration.
7.49. The specific claims pleaded by Apotex-Canada in the Apotex I & II arbitration, as
recited and decided in the Apotex I & II Award, are different from the specific
claims made by the Claimants in this arbitration. The former claims related to
“tentatively approved” ANDAs. This is not the specific case pleaded by the
Claimants in this arbitration where the ANDAs were “finally approved” and where
no claim as to “tentatively approved” ANDAs is advanced by the Claimants.
Hence, the operative part, read by itself and in strict isolation from the preceding
reasons, could not form the basis of
res judicata in this arbitration.
7.50. However, as decided above, it is necessary to read the first two lines of Paragraph
358(a) of the operative part in the Apotex I & II Award with the tribunal’s earlier
relevant reasons for this part of the paragraph. It is clear from those reasons that the
parties put distinctively in issue ANDAs generally, not limited to tentatively
approved ANDAs but also including finally approved ANDAs; that the tribunal
actually decided that issue; and that, as that tribunal saw it, that decision, amongst
others, was necessary to resolve the parties’ dispute before it. In the Tribunal’s
Part VII - Page 17 of 22view, it is not required for the application of the
res judicata doctrine that there
should be a single reason necessary for the tribunal’s decision: there can be two or
more reasons of equal relevance for the application of the doctrine, particularly
when the parties advance more than one argument in support of their respective
cases (as the parties clearly did in the Apotex I & II arbitration).
7.51. Nevertheless, several reasons in the Apotex I & II Award are inapplicable to this
arbitration for the purpose of
res judicata, being expressly limited to tentatively
approved ANDAs.Accordingly, the Tribunal here takes no account of these
reasons in applying
res judicata in this case. On the other hand, other passages
clearly do refer to or necessarily include finally approved ANDAs.It is therefore
not possible to conclude that the tribunal’s reasons are limited to tentatively
approved ANDAs.
7.52. Whilst addressing whether ANDAs were “property” under NAFTA Article 1139(g),
the tribunal did not independently address ANDAs as “interests” under NAFTA
Article 1139(h). In Paragraph 229 of the Apotex I and II Award, as noted above, the
tribunal records Apotex Inc.’s confirmation that its submissions under NAFTA
Article 1139(h) “were to be treated as part of its submissions under NAFTA Article
1139(g), and not as independent grounds.” It is not entirely clear what these
“submissions” were as part of Apotex Inc.’s submissions under Article 1139(g); but
it is any event clear that both parties made submissions regarding Article 1139(h)
and that the tribunal did address and decide upon ANDAs as investments under
Article 1139(h).
7.53. Lastly, it is necessary to record that this is not a case which raises any issue of bad
faith or abuse of process by the Claimants. Indeed, the contrary was not suggested
by the Respondent; and, although the Claimants’ Request in this arbitration
originally included a claim relating to non-approved ANDAs, that claim was
Part VII - Page 18 of 22abandoned before the publication of the Apotex I & II Award, as already indicated
above.
7.54. For the reasons set out below, as regards the claims made by Apotex Inc. in this
arbitration, the Tribunal decides that the Apotex I & II Award, applying the doctrine
of
res judicata, precludes Apotex Inc. from contending that its finally approved
ANDAs, within the meaning of NAFTA Article 1139(g), are “property, tangible or
intangible, acquired in the expectation or used for the purpose of economic benefit
or other business purposes.”
7.55. In the Tribunal’s view, the operative part (first two lines) and its relevant reasons in
the Apotex I & II Award apply equally to all ANDAs, whether tentatively approved
or finally approved. As part of their essential character, as distinctly decided in the
Apotex I & II Award, Apotex Inc.’s ANDAs are no more than applications
operating as quasi-import licences which support cross-border sales by Apotex Inc.
to its consignees in the USA of products manufactured at its Canadian facilities. The
possibilities of Apotex Inc. selling or transferring ANDAs (albeit revocable and
remaining site-specific to the designated manufacturing facility) do not change the
inherent nature of these ANDAs, as decided in the Apotex I & II Award. ANDAs
are not commodities in the territory of the USA.
7.56. As regards Apotex Inc., the Tribunal comes to the same conclusion in regard to
NAFTA Article 1139(h). Applying the doctrine of
res judicata, the Tribunal decides
that Apotex Inc. is precluded from contending that its finally approved ANDAs,
within the meaning of NAFTA Article 1139(h), are “interests arising from the
capital or other resources in the territory of a Party [the USA] to economic activity
in such territory …” As decided in the Apotex I & II Award, an ANDA operates
only as a quasi-import licence supporting cross-border trade interests falling outside
the definition of this provision. Whilst the tribunal in the Apotex I & II Award did
not independently apply NAFTA Article 1139(h), as noted above, the tribunal
nonetheless distinctly addressed this provision. The tribunal rejected the case
advanced by Apotex Inc.
Part VII - Page 19 of 227.57. Shorn of all semantic technicalities, it is worth asking the simple question after
reading the relevant passages from the Apotex I & II Award in the Annex to this
Part VII: how would that tribunal respond to the specific claims made by Apotex
Inc. in this arbitration under NAFTA Article 1139? In this Tribunal’s view, that
question admits of only one answer: the Apotex I & II tribunal would say that it had
already decided the essential issues relating to these claims in its award; and,
applying the same two lines of its operative part with its same supporting reasons,
that these claims failed to meet the requirements of NAFTA Article 1139 for
jurisdiction under NAFTA’s Chapter Eleven.
7.58. In the Tribunal’s view, it is impossible to dismiss those reasons as mere ‘obiter
dicta’ or to read one passage in isolation from those reasons as a whole. Those
reasons under both NAFTA Articles 1139(g) and 1139(h) were essential to the
operative part and thereby distinctly determined matters distinctly in issue in the
Apotex I & II arbitration. It is also impermissible to parse the two sets of claims in
the two arbitrations, so as artificially to distinguish one case from the other. The
purpose of the res judicata doctrine under international law is to put an end to
litigation; and it would thwart that purpose if a party could so easily escape the
doctrine by ‘claim-splitting’ in successive proceedings.
7.59. Thus, the Claimants did not argue (nor could they) that simply because the Apotex I
& II Award addressed specific claims relating to Sertraline and Pravastatin, the
Claimants could still bring the same claims relating to other drug products.
Similarly, in the Tribunal’s view, the Claimants cannot now distinguish tentatively
approved ANDAs from finally approved ANDAs so as to frustrate the application
of
res judicata to issues decided in the Apotex I & II Award. That is an
impermissible attempt to re-argue and overturn the final and binding decisions in
the Apotex I & II Award. The Tribunal notes that, in Grynberg v. Grenada, that
tribunal likewise rejected an analogous attempt based upon a new allegation of
corruption.Indeed, were it so easy to side-step the application of
res judicata, the
doctrine would be largely meaningless under international law, a risk recognised by
Part VII - Page 20 of 22several scholars, including Professors Dodge, Schreuer and Reinisch in the works
cited earlier in this Part. The costs and time required for investor-state arbitrations,
already not inconsiderable, would be multiplied several times over if unsuccessful
claimants could persuade later tribunals to restrict the effect of earlier awards by
simply reformulating their claims and arguments. As already described, there is a
strong interest, both public and private, in bringing an end to a dispute by one final
and binding arbitration award.
7.60. In regard to Apotex-Holdings, the Tribunal decides that same result must follow,
albeit for additional reasons. Given that Apotex Inc.’s ANDAs are not
“investments” under NAFTA Article 1139, it follows that Apotex-Holdings cannot
make any claim in respect of its indirect interest in such ANDAs because Apotex-
Holdings is not, for that purpose, an investor with a relevant “investment” under
NAFTA Article 1139.
7.61. Accordingly, for these reasons, the Tribunal (by a majority) decides this second
issue in favour of the Respondent and against Apotex Inc. and Apotex-Holdings.
Thus, the Tribunal (by a majority) upholds the Respondent’s jurisdictional
objections to the claims made by the Claimants in regard to the ANDAs under
NAFTA Articles 1101(1), 1116 and 1139. (This decision does not apply, of course,
to the other claims made by Apotex-Holdings for itself and for Apotex-US which
are considered in the Parts which follow).
7.62. Whilst this conclusion disposes of the Claimants’ claims under the doctrine of
resjudicata, it should not be assumed that the Tribunal (by a majority) would have
reached any different decision on the Claimants’ other submissions under NAFTA
Article 1139. Notwithstanding a well-researched argument by Counsel for the
Claimants as regards the correct interpretation of Article 1139 (to which the
Tribunal here pays tribute), the Tribunal remains attracted to the succinct
submissions of the Respondent and Mexico to the effect that the definition of an
“investment” under both Article 1139(g) and 1139(h) must be read with Article
NAFTA 1101(1), collectively requiring such investment to be “in the territory” of
the host State. Although Apotex Inc.’s ANDAs were originally submitted and
approved in the USA, this Tribunal (by a majority) considers that such ANDAs
Part VII - Page 21 of 22cannot meet that particular requirement, particularly when Apotex Inc. has never
had any presence, activity or other investment in the territory of the USA, including
the non-payment of any relevant US taxes. (This is not inconsistent with the
approach taken in the Apotex I & II Award.)
7.63. Dissent: As noted above, the decision on this issue is not made by the Tribunal
unanimously. What follows in the next three paragraphs is the dissent on this issue
by Mr. Rowley.
7.64. Had he been sitting alone, Mr. Rowley would have reached a different conclusion
on this issue. For him, the essence of
res judicata is that a right, question or fact has
distinctly been put in issue and distinctly determined by a court or tribunal of
competent jurisdiction in an earlier proceeding between the same parties. He
considers that the Apotex I & II tribunal neither decided, nor needed to decide the
question which is now before the Tribunal, i.e., whether Apotex Inc.’s finally
approved ANDAs plus associated products are to be characterised as “property” for
the purposes of NAFTA Article 1139(g). The Apotex I & II tribunal stated clearly
that: “
The jurisdictional issue here turns upon the inherent nature of
the relevantANDAs …” (Paragraph 224, emphasis added). The relevant ANDAs were
understood to be Apotex Inc.’s Sertraline and Pravastatin ANDA filings which had
only been tentatively approved by the FDA. The Apotex I & II tribunal well
understood the difference between tentatively approved and finally approved
ANDAs, and made the point that “ … it remains entirely unclear whether a
tentatively-approved ANDA (i.e.
as distinct from (i)
a finally-approved ANDA, and
(ii)
a finally-approved ANDA plus associated products) has value.” (Paragraph 220,
emphasis added). Because the ANDAs before the Apotex I & II tribunal had only
been tentatively approved, the tribunal reasoned that “ … at the relevant time, (a)
Apotex’s [i.e. Apotex Inc.’s] ANDAs could not (yet) be characterised as ‘property’
for the purposes of NAFTA Article 1139(g), and (b), even if they did constitute
“property”, Apotex’s [i.e. Apotex Inc.’s] ANDAs were not yet ‘
acquired in the
expectation or used for the purpose of economic benefit or other business purposes’…” (Paragraph 209, emphasis added/italics in the original).
Part VII - Page 22 of 227.65. For Mr. Rowley, it was plain that the Apotex I & II tribunal simply did not
determine whether the relevant ANDAs here in issue (i.e. finally approved ANDAs
plus associated products) constitute an “investment” under the terms of NAFTA
Article 1139(g). Indeed, as it addressed the character of tentatively approved
ANDAs, it was at pains to point out how they differed from finally approved
ANDAs. How the Apotex I & II tribunal would have decided the claims made by
Apotex in this proceeding is not relevant to the question as to what was “distinctly
in issue” before it, and what it “distinctly determined”, except to the extent that if
the question needs to be asked, it points strongly to the conclusion that the Apotex I
& II tribunal did not decide the question here in issue.
7.66. As to whether Apotex Inc.’s finally approved ANDAs are properly characterised as
an “investment” for the purposes of NAFTA Article 1139(g), Mr. Rowley considers
the uncontroverted evidence that: (i) Apotex’s finally approved ANDAs were being
used for the purposes of economic benefit at the time of the Import Alert; (ii) such
ANDAs are regularly bought and sold in the US (often for substantial amounts); (iii)
FDA regulations explicitly recognise that ANDAs are “owned” by the applicant;
and (iv) US tax law treats ANDAs as franchises or intangibles for the purposes of
the US tax code, is sufficient proof that Apotex’s ANDAs here in issue constitute
intangible property for the purposes of NAFTA Article 1139(g).