India Ratifies United Nations Convention Against Corruption

On May 12, 2011, India became the 152nd country to ratify the United Nations Convention against Corruption (“UNCAC”). The UNCAC which was originally adopted by the UN General Assembly on October 31, 2003, and entered into force on December 14, 2005.

India is the fourth country to ratify the UNCAC this year, following ratification by Iceland, Thailand, and Nepal in March. According to press reports, India’s Prime Minister characterized the ratification as a reaffirmation of India’s commitment “to fight corruption and to undertake vigorously administrative legal reforms to enable our law enforcement agencies to recover the illicit assets stolen by corrupt practices.”

The UNCAC contains mandatory and non-mandatory provisions related to five principal topics: (1) prevention of corruption; (2) criminalization and law enforcement measures; (3) international cooperation; (4) asset recovery; and (5) technical assistance and information exchange.

US law on biotech drugs could hit Indian generics
Source: Soma Das, Financial Express
New Delhi A missing link in the biosimilar regulatory framework of US could delay and wipe off potential earnings worth billions of dollars from the kitty of India’s generic drugs industry. The US subsidiaries of Ranbaxy, Sun Pharma, Dr Reddy’s, Glenmark, Strides, Cadila Healthcare and Ind Swift Labs have lodged a protest with the US Food and Drug Administration (USFDA) opposing a clause that would prevent pharma firms from filing new drug applications for the generic versions of biological drugs with the US drug regulator in the 12 years after an original branded drug is first approved for marketing.

In a letter to FDA commissioner Margaret Hamburg, the generic pharma association, of which these Indian drugmakers are members, has pleaded: “If the legislation is interpreted to prevent biosimilar filings for 12 years, consumers will have to endure an unknown period of delay of FDA review and approval that could stretch far beyond the 12-year total that was set in the legislation.”

The US Congress finalised a law last year to put in place the regulatory framework for biogenerics. However, there is an ambiguity over whether the data exclusivity is just 4 years or 12 years. During the period of data exclusivity, the regulator is not supposed to disclose or rely on the originator data for clearing generic applications.

While it is amply clear that of the 12 years of exclusivity allowed to the innovator company for an original biological drug, market as well as data exclusivity would be granted for the first four years, it is not very clear whether the subsequent eight years of exclusivity refers to market exclusivity or data exclusivity.

How the US FDA finally interprets the matter will have an enduring impact on how the biological drug market shapes up in the world’s largest drug market. If the FDA concludes that the debated eight-year period is only ‘market exclusivity’ for the innovator company, the data on drug would be available to generic firms enabling them to file new drug applications during that period, which could translate into faster launch of cheaper generic version of original biological drugs. However, if the FDA concludes that the debated period pertains to ‘data exclusivity’, it would be practically unworkable for the generic firms to file a new drug application for biosimilars during the period, substantially delaying launch of generic versions.

“We support the objections that have been raised by the generic companies in this regard. From the consumer perspective, these drugs are very expensive compared to conventional chemical drugs and by delaying the launch of generics, a large section of the world population would be deprived of these new medicines for a long period,” said Kamal Sharma, managing director, Lupin. The US Federal Trade Commission calculated in 2009 that a year’s worth of a popular biological treatment for breast cancer can cost upwards of $48,000.

Biological drugs are expected to make up for half of the top 100 drugs by 2014 with a projected market size of $170 billion. Till 2007, the US prescription drug market was valued at over $286 billion, of which around $40 billion was estimated to be spent on biologicals.

Senator groups in US are divided over whether the debated eight years indicate data or market exclusivity with the generic firms finding support from a group headed by US Republican presidential candidate of 2008 John McCain.

The innovator drug firms and their supporters argue that for generic players to copy biologic drugs, there must be an innovator drug and by killing incentives to develop new biological drugs, we would be depriving the future of many original biological drugs and in the absence of these drugs there is no evidence that biogeneric drug makers will become innovators.

BBC News

10 December 2010

A row between the EU and India over the transit of generic drugs through Europe has been resolved, negotiators told Reuters news agency.

As a result of the deal at an India-EU summit in Brussels, an Indian complaint to the World Trade Organization will be suspended, India’s trade minister said.

But some fear the free trade agreement (FTA) at the core of the summit will hurt generic drug production.

The FTA, one of the biggest of its kind, is due to be ready by the spring.

‘Great breakthrough’

India and Brazil brought a case to the WTO in 2009, accusing the EU of wrongly stopping and inspecting shipments of generic drugs in transit.

Both Indian Trade and Industry Minister Anand Sharma and EU trade chief Karel De Gucht confirmed to Reuters on Friday that the transit dispute had been resolved.

“This is a great breakthrough which will of course lead to a suspension of WTO proceedings, so the dispute is over,” said Mr Sharma.

Mr De Gucht said: “I reconfirmed we are going to amend present regulation so as to put into practice what has been agreed.

“[Generic drug] transports in transit will no longer be checked, except for counterfeiting.”

The EU has still to negotiate with Brazil, Reuters adds.

Generic drug giant

But medical charity Medecins Sans Frontieres (MSF) said the future of cheap Indian generic drugs for HIV/Aids and other conditions was at stake.

Suggesting the transit issue was being used as a “smokescreen”, MSF press officer Jean-Marc Jacobs told the BBC News website that: “The issue of drug seizures was only one part of the problem and many other issues remain.”

The most worrying issue, he argued, was “data exclusivity”, by which monopolies on medicines could be extended and production of affordable, quality generic versions could be delayed for years.

The UN HIV/Aids programme (UNAids) expressed concern on the eve of the summit about “trade agreements that place additional burdens on the manufacture, import or export of lifesaving medicines”.

It stressed that Indian manufacturers accounted for more than 80% of generic antiretroviral medicines, and supplied most developing countries.

EU officials insist the FTA will not limit India’s right to produce generic drugs and dismissed such concerns as scare-mongering.

“We have no interest in preventing assistance to people who need drugs,” said John Clancy, spokesman for Mr De Gucht.

It would be inappropriate to discuss specific measures in the treaty before it was finalised, he was quoted as saying by the Associated Press news agency.

‘Global openness’

In a joint statement, Indian Prime Minister Manmohan Singh, European Council President Herman Van Rompuy and EU Commission chief Jose Manuel Barroso said they looked forward to a FTA being concluded in the spring.

In a separate statement, Mr Barroso said “very important progress” had been made towards a broad-based FTA.

Having agreed on its basic contours, the parties would work on “the final political push”, he said.

“This free trade zone will bring together markets of 1.5 billion people,” he said.

“It will be a key contribution to the global recovery and a signal for global openness and also a signal against protectionism,” Mr Barroso added.

Source: Anthony Lin
The American Lawyer
July 21, 2010

Tax troubles are rearing their head again for international law firms in India, following a Mumbai tax tribunal’s ruling Friday that British legal giant Linklaters owes taxes on fees earned on work that was referred from India but was not necessarily performed in the country. Here’s an analysis by Kian Ganz of Mumbai-based legal blog Legally India.

Linklaters, like other foreign firms, is barred from having offices in India, but the Mumbai Income Tax Appellate Tribunal (ITAT) applied a retrospective 2010 amendment to Indian tax laws deeming foreign service providers to have a “permanent establishment” or “fixed base” if their employees — like many international lawyers — spend more than 90 days a year in India. Work by such providers on behalf of Indian clients is considered taxable, even if performed outside of India.

Indian tax authorities claim Linklaters owes taxes at rates of up to 40 percent on some £3.32 million ($5.06 million) of India-related revenue from 1995 and 1996. Revenue from other years was not at issue in the case before the tribunal but could presumably be targeted under the 2010 amendment as well.

The tribunal reached an opposite conclusion to the Bombay High Court, which last year decided a similar case against another Magic Circle firm, Clifford Chance. In that January 2009 ruling, the court said the firm could only be taxed on work physically performed in India.

A ruling by the Mumbai ITAT is appealable to the Bombay High Court, but the tribunal said in its Friday ruling that the retrospective amendment to the tax code meant the Clifford Chance decision was “no longer good law.” Indian tax authorities have appealed the Clifford Chance case, and it is now pending before the Supreme Court of India.

The ruling raises the prospect that international law firms and other professional service providers will face higher costs in servicing Indian clients. But the matter is far from settled.

Top Indian tax lawyer Nishith Desai of Nishith Desai Associates, who is not involved in either case, told Ganz the retrospective tax code amendment could be vulnerable to appeal on constitutional as well as international law grounds.

“We have certainly not seen the end of the story in this regard, and this matter would definitely be the subject matter of further litigation,” Desai said.

The Government of India has eased the existing rules for payment of royalties under foreign technology collaboration. The existing policy providedfor automatic approval for foreign technology transfers involving payment of lumpsum of US $2 million and payment of royalty of 5% on domestic sales and 8% on exports. In addition, where there was no technology transfer involved, royalty of upto 2% for exports and 1% for domestic sales was allowed under automatic route on use of trademarks and brand names of the foreign collaborator. Payments above this required regulatory approval.

The new policy removes all such restrictions on payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name and puts it on the automatic route i.e. without any approval of the Government of India. However all such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000, (FEMA) as amended from time to time.

Such a move is expected to increase the foreign investment and transfer of technology to India.

Source: Press Information Bureau, Ministry of Corporate Affairs

The Indian Parliament has passed the Limited Liability Partnership (LLP) Bill, 2008.  LLP, as a corporate entity is similiar in concept to the Limited Liability Company (LLC), available in the United States.  The LLP format provides the benefits of limited liability of a corporation but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as in a partnership firm.

The salient features of the LLP Bill, 2008 are as under:-

(i) The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.

(ii) The proposed Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

(iii) While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

(iv) LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs and there shall not be any upper limit on number of partners in an LLP unlike a ordinary partnership firm where the maximum number of partners can not exceed 20.

(v) An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. Since tax matters of all entities in India are addressed in the Income Tax Act, 1961, the taxation of LLPs shall be addressed in that Act.

(vi) Provisions have been made in the Bill for corporate actions like mergers, amalgamations etc.
(vii) While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.

Source: Business Standard