Apotex Inc. v. United States of America, ICSID Case No. UNCT/10/2
ICSID · Investment (ICSID and treaty) · United States of America · 14 Jun 2013
Why it matters
This award is significant for its strict interpretation of the 'investment' requirement under NAFTA Chapter 11. The Tribunal held that pre-market activities, such as preparing and filing applications for regulatory approval, do not constitute an 'investment' unless they involve the commitment of capital or other resources with an expectation of profit. The decision clarifies that mere preparatory steps to enter a market are insufficient to establish jurisdiction under NAFTA, and it underscores the importance of the 'enterprise' requirement in the definition of investment.
Summary
Apotex Inc., a Canadian generic drug manufacturer, brought two claims against the United States under NAFTA Chapter 11, alleging that U.S. court decisions and FDA actions breached NAFTA's national treatment, minimum standard of treatment, and expropriation provisions. The claims arose from Apotex's efforts to obtain FDA approval for generic versions of Zoloft (sertraline) and Pravachol (pravastatin). The United States raised three preliminary objections: (1) Apotex had no 'investment' and was not an 'investor' under NAFTA; (2) the judicial acts complained of were not final; and (3) the Pravastatin claim was time-barred. The Tribunal upheld all objections. On the first objection, it found that Apotex's activities, such as preparing FDA applications, conducting bioequivalence studies, and manufacturing test batches, did not constitute an 'investment' under NAFTA Article 1139 because they did not involve the commitment of capital or other resources in the territory of the United States with an expectation of profit. The Tribunal emphasized that the definition of 'investment' requires an 'enterprise' or other tangible asset, and that pre-market activities alone are insufficient. Consequently, the Tribunal lacked jurisdiction over both claims. The award also addressed the judicial finality and time bar objections, but these were not necessary for the decision. The Tribunal ordered Apotex to bear the costs of the arbitration, including the Respondent's legal fees.
The detail
Parties: Apotex Inc. v. United States of America, ICSID Case No. UNCT/10/2
Case number: italaw/cases/87
Outcome: The Tribunal dismissed both claims in their entirety for lack of jurisdiction, finding that Apotex did not qualify as an 'investor' who had made an 'investment' in the U.S. under NAFTA. Apotex was ordered to pay the Respondent's costs of legal representation and assistance (US$ 525,814) and half of the Tribunal's and ICSID's fees.
Applicable law: NAFTA Chapter 11, UNCITRAL Arbitration Rules (1976)
Issues in play: The case involved the definition of 'investment' and 'investor' under NAFTA Articles 1116 and 1139, and whether pre-market activities (such as preparing FDA applications) constituted an investment. Also at issue were the requirements of judicial finality and the NAFTA three-year time bar.
Read the full decision at italaw ↗
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