13 January 2025
- Unpacking the key novelties of the EU-Mercosur Partnership Agreement: A blueprint for bridging trade and sustainability?
- Insights into Indonesia’s amended Patent Law: Implications for innovation and patent protection
- The European Commission prohibits Bisphenol A and other bisphenols in food contact materials
- Recently adopted EU legislation
Unpacking the key novelties of the EU-Mercosur Partnership Agreement: A blueprint for bridging trade and sustainability
By Stella Nalwoga and Paolo R. Vergano
On 6 December 2024, after 24 years of negotiations, the European Commission (hereinafter, Commission) and the Mercosur countries, namely Argentina, Brazil, Paraguay, and Uruguay, announced the conclusion of the negotiations for the EU-Mercosur Partnership Agreement. The Agreement, which is currently still in draft form, contains several noteworthy novelties, particularly on how the Parties agreed to address concerns related to climate change and deforestation, potentially setting a precedent for the EU’s other ongoing and future trade negotiations. This article provides insights into those novelties and discusses their implications.
The long and protracted negotiations between the EU and Mercosur
In 2000, the EU and the Mercosur countries had launched negotiations for a comprehensive Agreement, culminating in 2024 in the EU-Mercosur Partnership Agreement that comprises political and cooperation components, as well as trade components. In June 2019, the EU and the Mercosur countries had concluded negotiations for the trade components of the Agreement and, in July 2020, both Parties concluded negotiations for the political and cooperation components. However, due to strong opposition in various EU Member States over potential impacts of the Agreement on the environment, particularly regarding deforestation in Brazil’s Amazon region, the conclusion and ratification of the Agreement was delayed. In March 2023, the Commission proposed the negotiation of an “additional instrument” to address a number of environmental and climate change concerns.
Making the Paris Agreement an “essential element” of the Agreement
One of the distinctive and innovative features of the new Agreement is the reference to the Paris Agreement as an “essential element” of the EU-Mercosur Partnership Agreement. The second sentence of Article XX(2) of the EU-Mercosur Partnership Agreement, in the new Chapter on the Paris Agreement as an essential element, provides that “recognizing the role of trade in contributing to the response to the urgent threat of climate change, each Party shall remain a party, in good faith, of the [UN Framework Convention on Climate Change] UNFCCC and its Paris Agreement”. Under Article XX(3), the Parties “agree that the second sentence of paragraph 2 constitutes an essential element” of the Agreement.
The significance of making the Paris Agreement an “essential element” of the Agreement is evident in Article XY(3) of the same Chapter, which states that, if either Party were to consider, “on the basis of the factual situation, that the other Party has committed a violation of the obligations” under Article XX, the Party “may take appropriate measures”, which “may include the suspension, in part or in full, of this Agreement”. Article XY(3) emphasises that the suspension of the Agreement would be “a measure of last resort” and that it could “be imposed only in the event of particularly serious and substantial violations of the essential elements” provided in Article XX. As a consequence of the suspension of the Agreement, “the Parties shall be released from the obligation to perform this Agreement, in full or in part, in their mutual relations during the period of the suspension”. However, “such suspension shall apply for the minimum period necessary to resolve the issue in a manner acceptable to the Parties”.
By providing for the possibility to suspend the Agreement, whether in part or in full, in order to compel compliance with international climate change obligations, the EU and the Mercosur countries appear to implicitly recognise that ‘external’ commitments undertaken outside the scope of the Agreement, hold economic and trade value within its framework. This is arguably an important negotiating shift, in that the same ‘economic value’ given to the sanctions (i.e., the “appropriate measures”), possibly adopted to counter a violation of an “essential element” of the Agreement (within its Trade and Sustainable Development Chapter), should be given to the commitments that Parties to Preferential Trade Agreements make within the respective Chapters on Trade and Sustainable Development.
In other words, developed and advanced trading partners like the EU, should encourage parties to Preferential Trade Agreements to negotiate and commit to ambitious obligations in the respective Chapters on Trade and Sustainable Development by means of offering (in exchange) trade and economic concessions (i.e., preferential market access). ‘Carrots’ work wonders in trade negotiations, much more than just providing for potential ‘sticks’.
A specific commitment to stop deforestation
The EU and the Mercosur countries also negotiated a new Annex to the Chapter on Trade and Sustainable Development (hereinafter, TSD). Under Article 16 of the new Annex, each Party “shall implement measures, in accordance with its national laws and regulations, to prevent further deforestation and enhance efforts to stabilize or increase forest cover from 2030” and, in that context, the Parties “should not weaken the levels of protection afforded in their environmental law”. Despite its relevance for alleviating concerns over the impact of the Agreement on deforestation, the provision appears vague and non-binding due to the use of “should” instead of “shall” or “must”, which makes the commitment aspirational rather than binding, arguably creating no legal obligation on the Parties to maintain or strengthen environmental protection laws.
Articles 54, 55, 56, and 57 of the new Annex to the TSD Chapter, concerning “Sustainability measures affecting trade”, appear to be aimed at balancing the implementation of unilateral sustainability measures poised to significantly affect trade with the EU. Notably, Article 54 requires that, when a Party implements “sustainability measures that affect trade”, it must give “full consideration to scientific or technical information submitted by the other Party”. Additionally, Article 56(a) categorically states that, “with regard to the implementation of sustainability measures affecting trade and the placement on the market related to the protection of wooded ecosystems and where EU law so allows”, the EU “recognises that this Agreement and actions taken to implement commitments thereunder shall be favorably considered, among other criteria, in the risk classification of countries”. These commitments appear particularly relevant within the context of the EU’s Deforestation-Free Products Regulation (hereinafter, EUDR) and appear to aim at providing Mercosur countries a certain degree of preferential treatment in light of the upcoming EU’s risk benchmarking exercise (regarding the EUDR, see Trade Perspectives, Issue No. 19 of 21 October 2024).
A new rebalancing mechanism
In general terms, trade disputes typically involve allegations that a Party’s measure(s) violate specific commitment(s) under a preferential trade agreement. Article XX.4(b) of the Chapter on Dispute Settlement of the new EU-Mercosur Partnership Agreement contains a novel feature known as “rebalancing mechanism”, which would allow a Party recourse to dispute settlement if it considers that “a measure applied by the other party nullifies or substantially impairs any benefit accruing to it under the covered provisions in a manner adversely affecting trade between the parties, whether or not such measure conflicts with the provisions of Part X of the Agreement, except if otherwise expressly provided”. In simple terms, a Party could contest a measure that it considers to nullify or substantially impair market access for its products, even if that measure does not formally violate the terms of the Agreement. Following an arbitral award in favour of a complaining Party, Article XX.17(2) requires the Parties to “endeavor to privilege a solution which effectively expands market access by means of measures including the reduction of tariffs and the elimination of non-tariff barriers”.
In a factsheet explaining the Agreement, Brazil appears to consider the rebalancing mechanism as intended to “prevent unilateral measures from jeopardizing negotiated trade concessions”. Notably, the Agreement contains a newly added definition of measures, which includes in its scope “omissions and legislation that has not been fully implemented at the conclusions of the negotiations of this Agreement as well as its implementing acts”. It remains to be seen whether the rebalancing mechanism may be used by Mercosur countries to challenge certain unilateral EU measures, such as the EU’s Carbon Border Adjustment Mechanism and/or the EUDR, which have not been fully implemented and where significant pieces of implementing legislation still have to be even adopted.
In the context of the World Trade Organisation, the “rebalancing mechanism”, is referred to as a “non-violation complaint” and is provided for under Article XXIII:1(b) of the General Agreement on Tariffs and Trade, 1994. Notably, the Appellate Body in the EC – Asbestos case stated that Article XXIII:1(b) “should be approached with caution and should remain an exceptional remedy” considering that WTO Members “negotiate the rules that they agree to follow and only exceptionally would expect to be challenged for actions not in contravention of those rules”. That being said, the novel “rebalancing mechanism” under the the EU-Mercosur Partnership Agreement is an interesting tool within a preferential trade agreement and could prove useful in instances where Parties feel that market access opportunities are effectively nullified or impaired despite a lack of violation of specific commitments. Future negotiations could and should develop such tool even further.
Towards an expedited ratification process?
The finalisation of the negotiations of the EU-Mercosur Partnership Agreement marks the initial step towards the Agreement’s conclusion. As a next step, the text will be translated into all official EU languages. The Agreement will then be submitted to the Council of the EU and the European Parliament for approval. The Commission is yet to indicate the legal basis it intends to propose for the Agreement, which contains both trade and political components and, therefore, mixing EU-exclusive competences and competences shared between the EU and EU Member States. Presenting the Agreement as a ‘mixed’ Agreement falling under both EU and EU Member States’ competences could lead to a lengthy ratification process involving the Council of the EU, the European Parliament, all EU Member States (with their national Parliaments).
The process could be expedited by separating the Agreement into the trade component, falling under EU-exclusive competence under Article 207 of the Treaty on the Functioning of the European Union, to be ratified by the Council of the EU and the European Parliament, and a political component also requiring ratification by all EU Member States. This approach, exemplified by other EU agreements, such as the EU-Chile Interim Trade Agreement and the EU-Chile Advanced Framework Agreement, could ensure that businesses benefit from the trade component without further delays. This is particularly relevant for the EU-Mercosur Partnership Agreement, given the lengthy negotiation process and the potential for further ‘pushback’ in some EU Member States.
For any additional information or legal advice on this matter, please contact Paolo R. Vergano
Insights into Indonesia’s amended Patent Law: Implications for innovation and patent protection
By Alya Mahira, Caitlynn Nadya, and Paolo R. Vergano
On 28 October 2024, the Government of Indonesia enacted Law No. 65 of 2024, which serves as the third amendment to Law No. 13 of 2016 concerning Patents (hereinafter, the amended Patent Law). This amendment is part of Indonesia’s broader aim to strengthen its patent protection system, aligning it with international standards and adapting it to the changing technological landscape. Most notably, the amended Patent Law broadens the scope of patentable inventions, extends the grace period for patent applications, and introduces enhanced provisions for compulsory licensing. This article discusses the key elements of the amended Patent Law, its impact on patent protection and innovation, as well as the associated commercial implications.
Scope of patentable inventions and extension of grace period
Article 1(2) of the amended Patent Law broadens the scope of the “inventions” that may be patented, which were previously limited to products and processes, to include “systems, methods, and uses”. The amended Patent Law expressly recognises problem-solving systems, methods, and applications as patentable subjects, including software algorithms and cybersecurity applications. While computer programs have always been unpatentable, Article 4(d) of the amended Patent Law allows an exception for computer-implemented inventions, such as global positioning system (GPS) in vehicles and adaptive cruise control to adjust vehicle speed and ensure safe distance between vehicles. This amendment is in line with the patent regulation in other ASEAN Member States, notably in Malaysia, Singapore, Thailand, the Philippines and Viet Nam, as well as in Australia, the EU, and the UK.
The amended Patent Law also introduces formal definitions of “traditional knowledge” and “genetic resources”, and shifts the authority to provide information in the application process for these inventions. Previously, the authority to issue a declaration of origin for such inventions rested with the Government of Indonesia. In accordance with Article 26(2) of the amended Patent Law, this process now relies on a self-declaration, transferring the responsibility for issuing the declaration of origin to the applicant.
Article 6(1) of the amended Patent Law extends the grace period for the novelty exemption period to 12 months (vis-à-vis the previous 6 months) prior to the registration date. During such period, the invention is not deemed disclosed if, within 12 months prior to the filing date, it has been displayed at official exhibitions, used for research and development purposes, or published by the inventor in scientific proceedings or for a, both in Indonesia or abroad. This extension is intended to accommodate the needs of inventors by securing adequate funding prior to patent application.
Streamlined patent application process
To address concerns about the time-consuming nature of the patent registration process, Articles 35, 46, and 55 of the amended Patent Law introduce significant procedural changes. The timeframe for completing a patent application remains 3 months, but the allowable extension is reduced from 3 to 2 months. Once the application is completed, applicants may request an early substantive examination before the application is published in the database of Indonesia’s Directorate General of Intellectual Property, which is made, at the latest, 7 days after 18 months from the filing date. Under Article 63A of the amended Patent Law, applicants may request a re-examination of the substantive examination in instances of application rejection, the need for corrections following the grant of a patent, a decision to grant a patent, or when the application is deemed withdrawn. This re-examination provision aligns with the post-grant opposition mechanism under Article 62.4 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (hereinafter, TRIPs), thereby providing a cost-effective alternative to litigation for reconsidering the validity of a granted patent and allowing corrections to patents issued in error.
Compulsory licensing and the impact on Indonesia’s pharmaceutical industry
The amended Patent Law has significant implications for the pharmaceutical industry, notably through the amendments to the compulsory licensing and Bolar provisions. Compulsory licensing is one of the flexibilities in the field of patent protection included in the TRIPs Agreement, allowing a third party to produce a patented product or process without the patent owner’s consent. Article 111A of the amended Patent Law allows the Government of Indonesia to grant a compulsory license to address public health emergencies under two circumstances: 1) The importation of drugs that are patented, but not locally produced in Indonesia; and 2) The exportation of drugs patented and produced in Indonesia, upon the request for treatment of diseases in other countries. Notably, if a patent remains unused within 36 months of the date of granting the patent, the Government of Indonesia may issue a compulsory license to a third party. This aims at ensuring that patents are not left dormant, but are effectively utilised for commercial (and public health) purposes. A licence may be revoked if the patent leads to monopolistic practices or unfair competition.
The amended Patent Law removes Article 4(f), which previously exempted “new uses of an existing substance” and “new forms from existing compounds” as patentable, thereby allowing patents for “second medical use”. For instance, Aspirin, originally for pain relief, can now be patented for its use in preventing heart attacks. In cases where a compulsory license is granted for second-use patents, Article 82A requires patent holders to prove significant technical and economic improvements. The broader recognition of second use patents has raised concerns among civil society organisations, which argue that the provision could enable pharmaceutical companies to exploit the patent system by claiming exclusive rights over new uses or slight variations of existing medicines. At the same time, this approach may contradict Article 27(3)(a) of the TRIPs Agreement, which provides that WTO Members may exclude “new therapeutic methods for the treatment of humans” from patentability.
Additionally, the changes concern the Bolar provision in Article 167(b), which refers to a policy designed to facilitate the entry and regulatory approval of generic drugs into the market immediately after a patent’s expiration by permitting third parties to use, test and manufacture patented drugs. The timeframe has been expanded, removing the previous five-year limitation and allowing the manufacture, research, and testing on patented drugs without time restrictions prior to patent expiration. From the perspective of the Government of Indonesia, this change may encourage innovation among generic and biosimilar drug producers by incentivising the companies to conduct research and earlier development on important new uses of existing medicines.
Commercial implications
The amended Patent Law is poised to bring notable benefits to investors and pharmaceutical companies operating in Indonesia. For instance, by allowing innovators to protect computer-implemented inventions, the amended Patent Law appears to be better able to keep pace with technological advancements. By removing barriers to second-use patents, which used to be a challenge in the chemical and pharmaceuticals fields in Indonesia, the amended Patent Law can potentially attract more foreign investment. Relevant businesses should thoroughly review their intellectual property assets to identify new patent opportunities. Pharmaceutical companies should assess the changes to compulsory licensing and the new Bolar provisions, which may affect their research and development timelines and benefit generic manufacturers.
For any additional information or legal advice on this matter, please contact Paolo R. Vergano
The European Commission prohibits Bisphenol A and other bisphenols in food contact materials
By Ignacio Carreño García and Tobias Dolle
On 19 December 2024, the European Commission (hereinafter, Commission) adopted Commission Regulation (EU) 2024/3190 2024 on the use of bisphenol A (BPA) and other bisphenols and bisphenol derivatives with harmonised classification for specific hazardous properties in certain materials and articles intended to come into contact with food, amending Regulation (EU) No 10/2011 and repealing Regulation (EU) 2018/213. Regulation (EU) 2024/3190, which entered into force on 8 January 2025, prohibits the use of Bisphenol A (hereinafter, BPA) and other bisphenols, which are chemical substances used in the manufacture of certain plastics and resins, in food contact materials, due to their potentially harmful health impacts. This article provides an overview of the regulatory and scientific path towards the prohibition of BPA. The article also reviews the few exceptions, but rather long transition periods, for certain instances of continued use of BPA in food contact materials.
The use of Bisphenol A in food contact materials
The substance BPA is used in the manufacture of certain food contact materials and articles. Primarily, it is used as a monomer or starting substance in the manufacture of epoxy resins that form the basis of varnishes and coatings, including those applied to the internal and external surfaces of metal food packaging, such as cans, tins, and jar lids, as well as large tanks and vessels used in food production. BPA is also used in the manufacture of certain types of plastic food contact materials and articles, including those made from polycarbonate and polysulfone. Due to its diverse chemical properties, BPA may also be used in printing inks, adhesives, and other materials that form part of finished food contact articles. BPA can migrate into food from the material or article with which such food is in contact, resulting in exposure to BPA for consumers of those foods.
The regulatory and scientific path towards the prohibition of Bisphenol A
The use of BPA as a monomer in the manufacture of plastic food contact materials and articles is authorised by Commission Regulation (EU) No 10/2011 on plastic materials and articles intended to come into contact with food. This use, as well as its presence in food contact varnishes and coatings, is subject to a specific migration limit (SML) of 0,05 mg of BPA per kg of food (mg/kg), as set in Commission Regulation (EU) 2018/213 on the use of bisphenol A in varnishes and coatings intended to come into contact with food and amending Regulation (EU) No 10/2011 as regards the use of that substance in plastic food contact materials, on the basis of an opinion of the European Food Safety Authority (hereinafter, EFSA), published in 2015.
Commission Regulation (EU) 2018/213 also introduced a prohibition on the use of BPA in polycarbonate drinking cups and bottles for infants and young children, and for the migration from varnishes or coatings applied to food contact materials and articles specifically intended to come into contact with certain foods intended for infants and young children. This prohibition was introduced in addition to the prohibition of its use in the manufacture of polycarbonate infant feeding bottles and cups for young children laid down in Commission Implementing Regulation (EU) No 321/2011 amending Regulation (EU) No 10/2011 as regards the restriction of use of Bisphenol A in plastic infant feeding bottles.
The European Food Safety Authority’s updated opinion on Bisphenol A
Following a mandate by the Commission in 2016 to undertake a re-evaluation of BPA, so as to take into account the results of new studies and scientific data to address remaining uncertainties, including the output from a two-year chronic study from the United States’ National Toxicology Program, the EFSA published an updated opinion on BPA in 2023 on the Re?evaluation of the risks to public health related to the presence of bisphenol A (BPA) in foodstuffs.
In this opinion, the EFSA concluded that BPA exerts a number of adverse effects, including on the immune system. On that basis, the EFSA established a tolerable daily intake (TDI) of 0,2 nanograms per kilogram (ng/kg) bodyweight, which is 20,000 times lower than the temporary TDI of 4 micrograms per kilogram (μg/kg) (or 4,000 ng/kg) bodyweight that it had established in its 2015 opinion. A comparison of the TDI of 0,2 ng/kg bodyweight with the dietary exposure estimates from the EFSA’s 2015 opinion indicates that the exposure for all age groups exceeds the TDI by two to three orders of magnitude. Therefore, the EFSA concluded that there is a health concern related to dietary BPA exposure for all population groups (see Trade Perspectives, Issue No. 4 of 26 February 2024).
Regulation (EU) 2024/3190 prohibiting Bisphenol A in food contact materials
In July 2023, in response to the EFSA’s opinion, the Commission proposed a prohibition of BPA in food contact materials. The Commission published and consulted on a draft Regulation between February and March 2024. The feedback period generated more than 200 comments from stakeholders, which, according to the Commission, have been taken into consideration. EU Member States gave their favourable opinion to the prohibition on 12 June 2024 in the EU’s Standing Committee on Plants, Animals, Food and Feed, although some EU Member States disagreed with the rather long transitional periods, and France and Sweden published dedicated statements in the meeting’s summary report with points of divergence raised by France and a call for a review of the regulation in a near future by Sweden. Finally, following the scrutiny period, the Council of the EU and the European Parliament agreed to adopt the prohibition.
The Commission notes that the “prohibition on the use of BPA presents a significant shift away from the use of specifically formulated food contact materials and articles, on which business operators have relied for several decades”. At the same time, the Commission considers that the “continued use of BPA to manufacture a very limited number of food contact materials and articles for specific applications is currently justified and does not present an unacceptable risk, the aim in the long term should be to replace BPA altogether”.
Few exceptions, but rather long transition periods
Under Article 3 of Commission Regulation (EU) 2024/3190, the use of BPA and its salts is prohibited in the manufacture of food-contact plastics, varnishes and coatings, printing inks, adhesives, ion-exchange resins, silicones, and rubber. For cases where there are no available safe alternatives, some very limited exceptions to the prohibition are listed in Annex II to Commission Regulation (EU) 2024/3190. Permitted uses of BPA include the use of BPA (and its salts) as a monomer or starting substance in the manufacture of: 1) “Liquid epoxy resins to be applied on self-supporting food contact materials or articles with a capacity greater than 1 000 litres”; and 2) “Polysulfone filtration membrane assemblies”. Both exempted uses are subject to strict migration limits. Article 6(4) of Commission Regulation (EU) 2024/3190 requires the EFSA to publish guidelines prior to 20 January 2027, with respect to the information needed in an application to request the authorisation of hazardous bisphenols other than BPA, or hazardous bisphenol derivatives.
Article 11 of Regulation (EU) 2024/3190 provides for transition periods to allow the food industry to adjust and avoid potential disruptions to the food chain. In order to allow time for business operators to comply with Commission Regulation (EU) 2024/3190, the final food contact articles complying with the existing rules, as applicable before the date of the entry into of the Regulation, rather than the rules applicable in the Regulation, are allowed to be placed on the EU market for the first time during a transition period of 18 months until 20 July 2026. Also, in order to allow for sufficient time to bring the applications for certain types of packaging to commercial scale and to avoid food waste, the final food contact articles using varnishes and coatings manufactured with BPA, specifically for the packaging used to preserve fruit, vegetables, and processed fish products, are allowed to be placed on the EU market during a period of 36 months until 20 January 2028. Article 7 of Regulation (EU) 2024/3190 includes reporting obligations for business operators using BPA, hazardous bisphenols, and hazardous bisphenol derivatives, with respect to the status of development of the alternative substances.
Outlook
Further to prohibiting BPA, Regulation (EU) 2024/3190 allows the continued use of BPA in certain applications, ensuring that food and beverage manufacturers can continue to provide safe food products to consumers. The research for safe alternatives to BPA must be continued and the industry must be prepared for the Commission’s policy “aim in the long term (…) to replace BPA altogether”.
For any additional information or legal advice on this matter, please contact Ignacio Carreño Garcia
Recently adopted EU legislation
Trade Law
- Notice concerning the entry into force of the Strategic Partnership Agreement between the European Union and its Member States, of the one part, and Japan, of the other part
- Council Decision (EU) 2024/3208 of 5 December 2024 on the position to be adopted on behalf of the European Union within the Association Council set up by the Agreement establishing an Association between the European Economic Community and Turkey as regards the amendment of Decision No 1/98 of the EC-Turkey Association Council on the trade regime for agricultural products by replacing Protocol 3 thereto concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation
Customs Law
- Council Regulation (EU) 2024/3211 of 16 December 2024 amending Regulation (EU) 2021/2278 suspending the Common Customs Tariff duties referred to in Article 56(2), point (c), of Regulation (EU) No 952/2013 of the European Parliament and of the Council on certain agricultural and industrial products
- Commission Implementing Regulation (EU) 2025/45 of 8 January 2025 imposing a definitive anti-dumping duty and definitely collecting the provisional duty imposed on imports of mobile access equipment originating in the People’s Republic of China
Food Law
- Commission Delegated Regulation (EU) 2024/3199 of 15 October 2024 amending Regulation (EU) No 649/2012 of the European Parliament and of the Council as regards the listing of pesticides and industrial chemicals
- Commission Delegated Regulation (EU) 2024/3204 of 11 October 2024 amending Regulation (EU) 2019/1241 of the European Parliament and of the Council as regards short-necked clam and red seabream
- Commission Implementing Regulation (EU) 2024/3245 of 19 December 2024 amending Annexes I and II to Implementing Regulation (EU) 2023/594 laying down special control measures for African swine fever and repealing Implementing Decision (EU) 2024/2976 concerning certain interim emergency measures relating to African swine fever in Germany
Ignacio Carreño García, Tobias Dolle, Alya Mahira, Caitlynn Nadya, Stella Nalwoga, and Paolo R. Vergano contributed to this issue.
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