Discriminatory practices require foreign manufacturers of pharmaceutical products to transfer their production to Turkey in order for the pharmaceutical products in question to be eligible for reimbursement under the Turkish social security systems. Therefore, they are inconsistent with Turkey’s WTO commitments.
THE EU welcomes today’s appellate arbitration decision World Trade Organization (WTO) in the appeal brought by the EU against Turkey for pharmaceutical products. This appellate decision affirms the panel’s decision and points out that the local production measure discriminates against foreign pharmaceuticals because it is not a form of public procurement for pharmaceuticals and is not designed to achieve public health objectives or to ensure compliance with legislation requiring Turkey to ensure accessible, effective and economically viable health care for its population.
In particular, the discriminatory practices impose on foreign producers of pharmaceutical products the requirement to transfer their production to Turkey, so that the said pharmaceutical products are eligible for reimbursement under the Turkish social security systems. Therefore, they are inconsistent with Turkey’s WTO commitments.
Commission Executive Vice-President and Trade Commissioner Valdis Dombrovskis said: “Today’s decision is a clear victory for the EU as all its demands have been met. This is important not only from an economic point of view for European companies, but also sends a strong message that discourages other countries from continuing or adopting similar discriminatory policies of forced local production, which are inconsistent with WTO rules.”
This decision is the WTO’s first appellate arbitral award under Article 25 of the WTO’s Dispute Settlement Understanding (DSU), and its first appellate decision in more than two years, due to the paralysis of the appellate judicial body. This second-instance appeal was made possible by the appellate arbitration procedures agreed between the EU and Turkey and notified to WTO members on 25 March 2022.
By reaching an agreement on these arbitration procedures, the EU and Turkey ensured that a fully functional WTO dispute settlement of this case could continue, including second instance review, despite the paralysis of the appellate jurisdiction. organ. Although this is an ad hoc agreement between the EU and Turkey, its rules and procedures are largely similar to the Multilateral Interim Arbitration Appellate Arrangement (MPIA). Therefore, the significance of this appellate arbitration proceeding goes far beyond this particular case.
The EU particularly welcomes the efforts of the arbitrators to implement the procedures in an efficient manner, allowing for a duly reasoned report to be issued within a shorter period of time than the 90-day deadline provided for in the agreement.
The panel also concluded that Turkey cannot prioritize domestic product reimbursement reviews and marketing authorization applications over foreign ones. Turkey did not appeal these panel findings regarding the priority measure and, therefore, the findings remain valid and enforceable.
Next steps
Turkey must remove the local production and preference measures either immediately or within a time period negotiated with the EU or determined by a WTO arbitrator.
Record
The EU filed this dispute (DS583) against Turkey in April 2019. The panel’s report was made public on 28 April 2022, along with Turkey’s appeal against that report.
George Fellidis
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