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Property rights, human rights, and the

new international trade regime
Razeen Sappideen
Law School , University of Western Sydney , Australia

Published online: 06 Aug 2010.
To cite this article: Razeen Sappideen (2011) Property rights, human rights, and the new
international trade regime, The International Journal of Human Rights, 15:7, 1013-1030, DOI:
10.1080/13642981003722293
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The International Journal of Human Rights

Vol. 15, No. 7, October 2011, 10131030
Property rights, human rights, and the new international trade regime
Razeen Sappideen
Downloaded by [Universiti Sains Malaysia] at 20:18 15 August 2015
Law School, University of Western Sydney, Australia

This article examines how the empowering of the multinational corporation (MNC)1
under the World Trade Organization (WTO) agreements affects the human rights of
least developed country citizens (LDC). In addition to limited liability, the MNC
under the WTO agreements now enjoy the benets of ease of entry, exit, repatriation
of prots, freedom of business activity generally, and more importantly, very strong
property rights protection. The article highlights some conicts of interest arising
between MNC and LDC states and its citizens, and the battle between MNC property
rights protection and the observance of fundamental human rights, and looks at ways
of addressing these problems.
Keywords: limited liability; property rights; human rights; World Trade Organization
(WTO); Trade Related Aspects of Intellectual Property Agreement (TRIPS)
The World Trade Organization (WTO) agreements are a watershed in the globalisation of
investment and trade. They enable investment capital to move freely in and out of WTO
member countries and with it the right to buy, sell, invest, and conduct businesses relating
to both goods and services. The vehicle for this has largely been the multinational corporation (MNC),2 operating in its host countries usually through subsidiary entities. Amongst
the main WTO agreements, the General Agreement on Tariffs and Trade (GATT) and the
General Agreement on Trade in Services (GATS) ensure free entry and exit to the multinational corporation (MNC), while the Trade Related Aspects of Intellectual Property Agreement (TRIPS) protects intellectual property rights. Moreover, the WTO provides its own
forum for the resolution of trade disputes between nations through its Dispute Settlement
Understanding (DSU).3 Given this, the underlying purpose of the WTO agreements
appears to have been as much about empowering the MNC to operate free of national
restrictions, as it was with promoting free trade between its member countries. The empowerment of the MNC on this scale, however, has not been without its downside effects, and
this paper examines some of them. Not surprisingly, this tension is felt most acutely by the
states and citizens of least developed countries (LDC).4 Given this, the paper will focus on
problems arising from rst, the extension of limited liability to each member of a Group
corporation, and secondly, from patent monopoly rights granted under the TRIPS agreement and with it the limiting of accessibility to basic essential medicines. Its overall
purpose is to assess ways of empowering LDC states to ensure that MNC provide safe
working conditions and adequate compensation in the event of personal injury to
workers, as well as access to essential medicines (referred to collectively hereafter as
Email: r.sappideen@uws.edu.au
ISSN 1364-2987 print/ISSN 1744-053X online

# 2011 Taylor & Francis
DOI: 10.1080/13642981003722293
http://www.informaworld.com
1014
R. Sappideen
essentials) in the face of the present WTO agreements and a system of international
relations not bound by moral norms. Within this framework the article presents the case
for responsible behaviour toward LDC states which goes beyond concerns of territorial
integrity, and for the institutionalisation of a form of LDC autonomy over property rights
which would enable LDC states to deliver these essentials to its citizens.
The article is divided into ve parts. Part I provides the background to the WTO MNC
relationship, Part II examines the moral hazard problems arising from limited liability being
extended to each of the entities within a group company structure, Part III examines the
notions of property rights (PR) and human rights (HR) and of the uneasy relationship
between them, Part IV explains why an increase in the PR quotient of HR through the statutory extension of PR causes an unfair imbalance in the overall HR equation, and Part V
concludes. The fundamental point about this article is that PR comes at the expense of
HR and that, unless the thrust of the WTO agreements (particularly TRIPS) are reined
in, HR will be reduced to an afuent world concern of property ownership and civil liberties
in the form of free speech and prevention of imprisonment without trial.
I. The WTO agreements and the MNC
The WTO came into existence following the Uruguay Round of 1994, and ushered in a new
international trading regime.5 Its cornerstones are the GATT, GATS, and TRIPS agreements. GATT and GATS open up the markets for goods and services respectively, while
TRIPS gives enhanced protection to intellectual property rights. These agreements, together
with the benet of limited liability, have enabled corporate business entities to engage in
activities that are not only nancially highly risky, but which may also be hazardous to
the health and safety of their employees and the general public of their host country. Moreover, the extension of limited liability to each and every member of a group of companies
serves only to encourage moral hazard6 behaviour in corporate decision making, and treatment of involuntary creditors less favourably than voluntary creditors. To explain, the widespread carrying on of business through especially created subsidiaries7 will result, e.g. in
the treatment of personal injury tort claimants less favourably than contract claimants.8
This has the result of driving a wedge between the property owning and labour employing
MNC on the one hand, and employees and consumers of their host countries on the other;
and between property right claims and their enforcement on the one hand, and the recognition and enforcement of human rights on the other. Some of the resulting tensions
include working conditions, environmental degradation, and personal injury tort liability
following GATT, and the lack of affordability of vitally important drugs following TRIPS.
These tensions have been further exacerbated e.g. by the ability of MNC to invoke the
assistance of their governments to protect themselves against any form of interference by
third world host jurisdictions, as well as to actively push their own agendas and operate
almost totally free of any form of state control over the decisions they make.9 The
powers exercised by the United States Trade Representative (USTR) under section 301
of its Priority Watch List, are prime examples of this. Moreover, production by MNC
focus on satisfying the demands of the high prot yielding markets found in developed
countries, and at times at the expense of the citizens of LDC. Examples of the former
include the concentration on lifestyle drugs needed in developed countries as against essential drugs needed in the developing for tropical borne diseases, and a failure to produce
drugs that are needed across the world at prices affordable to the developing world. Illustrations of activities prejudicial to the interests of developing world citizenry include the
attempted patenting of traditional medicines and strains of grain seeds in use in developing
1015
countries, patenting of existing items with minor improvements, as well as the externalising
of tort liability arising from hazardous activities. Given that the core role of government is
to provide its citizens with the basic necessities of life such as food, clothing, education, and
health services, it is understandable as to why developing countries may view the new international trade regime as being tilted in favour of the developed world and its business entities. As against this, given the strong prot orientation of MNC it is inevitable that their
activities and aspirations may well conict with the wellbeing of LDC employees as
well as the interests of its host nations. At the time of the Universal Declaration of
Human Rights in 1948 following the Second World War it was the state that was seen as
the potential violator of HR. The establishment of the WTO, however, appears to have
changed this. The MNC has now come to be recognised as a violator of HR both on its
own, as well as in cooperation with some state governments.10
II. The problem of MNC limited liability
Personal injury and limited liability
A threshold problem that arises with MNC carrying on business is the potential fallout from
limited liability being extended to every single entity within a group company structure.
The legal means of challenging limited liability amongst group companies is of course
limited to lifting of the corporate veil, which at its broadest is based on notions of
agency based on the entity concept.11 The nexus of contracts theory, which is the generally
accepted theory of the rm (business entity) supported by law and economics scholars and
based on supposed notions of economic efciency, claims that ultimately it is people who
own the rm. In other words, the nexus of contracts concept collapses the rm to a series of
contracts between the various parties both within (directors, managers, shareholders,
employees) and without (creditors and other relationships) the corporation.12
The emergence of the large industrial corporations (referred to by Berle and Means13 as
the modern corporation) in the early part of the twentieth century highlighted, especially
in the US, the existence of two types of corporations small Salomon type family corporations of varying size on the one hand, and larger corporations of varying size on the other.
It soon also became the practice for businesses to operate through numerous independent
subsidiaries, making it possible to shelter gains from losses as well as the ability to streamline losses across various members within the group structure, and more importantly to
externalise losses in the best possible way.14
Common ways of shielding the funds of a rm against claimants include nancing by
way of debt rather than equity through specially created nancing subsidiaries with the debt
ranked in priority over all other claimants. The consequence of this would be to leave the
relevant entity with adequate operational funds but not necessarily sufcient to cover claims
of third party creditors and of tort claimants in the event of insolvency. Corporations law
also permits the further depletion of an entitys funds through its dividend payment rules.
For example, corporations can pay out dividends to their shareholders out of their annual
prots (i.e. prots calculated annually) based on their income statement (US) or the
prot and loss account (UK), after current liabilities have been met, and adequate provision
made to cover longer term liabilities. The important point is that these rules encourage dividend payouts to shareholders (especially in the case of a fully owned subsidiary) to the
maximum extent possible, requiring the entity to borrow from either its parent or fellow
member, or from an outside source to meet its investment needs along with the required
security guarantees. Moreover, the parent as well as other members of the group can
extract funds from each other through high interest bearing loans, excessive charges for
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R. Sappideen
use of intellectual property in the business, as well as through intercompany transfer pricing
schemes. Moreover, the practice of securitisation of receivables enables a subsidiary to have
a clear stream of income sufcient to meet its obligations as needed and if necessary to also
pay out a dividend where appropriate, while leaving the downside risk arising from the
scheme to the purchasers of the securitised debt, again leaving inadequate funds for tort
claimants. The recent Australian case of James Hardie15 shows the extent of asset stripping
an entity can and will engage in, to avoid tort claimants. In this case, the entity had mined
asbestos in the past, and in the face of impending asbestosis and mesothelioma claims by
its former workers, decided to relocate itself in an offshore tax haven through a process of
corporate reconstruction, leaving behind an amount of funds far from adequate to meet the
needs of its claimants in Australia. It was only public outrage and threatened action by the
Unions, as well as in the face of all this outrage threatened action by the legislature, which
forced the company to reach a somewhat adequate settlement with the claimants.
All of the above highlights the fact that contract claimants as voluntary creditors can be
placed well ahead of tort claimants. The inequity arising from this state of affairs is obvious.
Contract claimants by denition are risk takers in relation to the contract they have entered
into in return for reward. Personal injury tort claimants such as in the Bhopal case16 for
example, on the other hand have no such relationship at all with the wrongdoing entity.
They are, to put it another way, innocent bystanders. It is made all the more unfair given
that parent and member corporations of a group are able to extract benets in the ways
described above from an entitys activities, while at the same time hiding behind the
cloak of limited liability. Calculated behaviour of this type is described in the world of
insurance as moral hazard (MH), where the insured are said to take less care than they normally would, had they no insurance cover. It is for this reason that insurers award no-claim
bonuses, charge lower insurance premiums for safety measures taken by the insured (e.g.
installing burglar alarms, re alarms and the like), and at the other extreme require
insured motor car drivers to pay an upfront amount (e.g. the rst $250) to cover repair
costs arising from an accident. As recent experience has shown, the benet of limited
liability to each and every member of a group of companies encourages the MH practice
of carrying out ultra hazardous activities through specically tailored subsidiaries in
developing countries where lax environmental and personal safety laws, as well as weak
human rights are the norm. Thus in the event of an industrial accident as was in Bhopal,
the liability of the culpable entity will only be limited to the extent of its assets with no recourse
possible beyond this unless its activities had been guaranteed in one way or another by its
parent or a member of the group. In fact, as noted earlier, the position of tort claimants
against the offending subsidiary entity is further weakened by nancing arrangements that
grant priority in claims to either the parent or another member of the group.
Law and economics scholars in general see limited liability as leading to economic efciency, and as the most desirable of alternatives even in the personal injury tort context.17
By and large, however, commentators argue for the curtailing of limited liability, proposing
instead that vicarious liability for corporate torts ought to extend to some or all shareholders
in closely held corporations;18 that courts ought to pierce the veil more often especially in
relation to group corporations;19 that shareholder managers should be vicariously liable for
corporate torts;20 that liability for corporate torts be extended to all shareholders;21 that
shareholder liability be pro rata.22 It has also been argued that efciency based justications
of limited liability fail to take account of qualitative differences among shareholders. For
example, Mendelson points out that unlike small shareholders, controlling shareholders
have the potential to cause harm to social utility by dint of their limited liability, and that
the benet be denied to them.23 The end point is that limited liability extended to each
1017
of the entities of a group encourages morally hazardous behaviour which may result in the
externalising of the rms costs to its employees and the LDC state (general public). A way
to contain the resulting inequity would be to provide for a form of statutory lifting of the veil
of all of the entities within the group structure (i.e. the group be treated as one whole for
personal injury tort liability),24 or for the parent entity be required to guarantee cover
against such liability to the extent of all of the groups assets. Such a drastic incursion
into the domain of mighty MNC, however, will not be possible without the active sponsorship and enforcement power of the home jurisdictions of MNC (of the leading capitalist
nations), a surrender of power that will not be readily forthcoming for the simple reason
that even these governments are often hostage to the lobbying power of the MNC.
Added to this is the uneasy relationship between HR and PR, a problem discussed in the
next part.
III.
Human rights and property rights
As legal concepts HR and PR sit uneasily alongside each other. This is because the enjoyment of an entitlement as a HR by one person may be the subject of claim as a PR by
another, as e.g. the case of essential medicines. The difculty is further compounded
where PR are also regarded as HR. While the origins of both PR and HR are traceable
to the writings of John Locke (Two Treatises of Government25) which recognised the importance of PR alongside an overall scheme of human wellbeing, the ambit of PR has been
widened considerably over the last two decades through specic national legislation and
international conventions such as under TRIPS. Such legislative extensions of PR have
made heavy inroads into the traditional domain of HR to the point where PR is often in
competition with, than complementary to HR. In other words, both HR and PR have
become contestable concepts in their own right. The discussion following seeks to
unravel the consequences of these developments and provide for a workable relationship
between the two concepts.
The terms HR and PR are broadly understood, and till recently, undened concepts. The
liberal tradition has of course, always recognised the right to own property as a HR.26 In this
original conception, PR was regarded as being an essential component of the human well
being formed part of the overall HR equation. HR in this sense was generally regarded as
embodying the notion of human dignity and autonomy of the self, the fullment of which
was largely the province of the state and its citizens. In other words, it was the obligation of
each state to ensure that its citizens had access to at least the basic essentials of education
and health amongst other necessities so as to empower and ensure the personal autonomy of
citizens. The existence of such a symbiotic relationship, however, has been shattered with
the emergence of statutory notions of PR, especially intellectual property rights agreements
that are enforceable under the broader rubric of TRIPS. The consequences of the emerging
divide between the two concepts are discussed in the paragraphs following.
Despite the recognition by the liberal tradition of PR as a HR, views have differed on the
scope as well as the relationship between the two concepts. For example, some have
couched HR in broad terms of moral rights27 or universal moral rights,28 while others
have seen it as consisting of a body of rights enforceable by the international community
through external intervention where necessary. As described by Rawls29:
Human Rights are a class of rights that play a special role in a reasonable Law of Peoples: they
restrict the justifying reasons for war and its conduct, and they specify limits to a regimes
internal autonomy.
1018
R. Sappideen
Raz takes this even further. He states30:

I take them [HR] to be rights whose violation can justify any international action against violators: making conformity to rights a condition of aid, calling on states to report on their
conduct re protection of human rights, condemning violation, refusing to provide landing or
over-ight rights, trade boycotts, and others.
Rawls31 denes HR to include:

The right to life (to the means of subsistence and security); to liberty (to freedom from
slavery, serfdom, and forced occupation, and to a sufcient measure of liberty of conscience
to ensure freedom of religion and thought); to property (personal property); and to formal
equality as expressed by the rules of natural justice (that is, that similar cases be treated
similarly).
The Stanford Encyclopaedia of Philosophy classies HR under four general groupings:

civil and political rights, social or welfare rights, minority and group rights, and environmental rights.32 Social or welfare rights are described in the Human Rights Declaration
(HRD) to include such matters as equality and non-discrimination for women and minorities, access to employment opportunities, fair pay, safe and healthy working conditions,
the right to form trade unions and bargain collectively, social security, an adequate standard
of living (meaning adequate food, clothing and housing), health care, and education. These
rights have been incorporated as norms into international law by treaties such as the
International Covenant on Economic, Social, and Cultural Rights (ICESCR), the European
Social Charter, and the Protocol of San Salvador (1988) which amended the American
Convention on Human Rights. The ICESCR sees these social rights as requiring progressive implementation. Together, they set minimum standards for preserving human dignity.
International HR instruments are of course made between states and predominantly
address state conduct based on the assumption of the state being the potential violator
of the underlying social contract between state and citizen. And despite MNC becoming
violators of HR in their own right, except with respect to a few serious crimes, there
exists no body of international regulation governing corporate activities, with redress for
breaches of HR for personal injury tort liability and occupational safety and health being
more or less left to the discretion of host country courts. And it is the latter which hits
hard the power of the MNC vis-a-vis, the frailty and dependency of the LDC state.33
What constitutes PR has likewise been the subject of continuing debate, especially on
whether the enforceability of the right is against the thing (in rem) itself, or the persons
against whom the rights are enforceable (in personam). Early commentators such as
Blackstone,34 Adam Smith,35 and Jeremy Bentham emphasised the in rem aspect,36
whereas later commentators such as Hohfeld37 took the view that in rem rights were
simply aggregations of in personam rights and emphasised the latter. The legal realists
took this a step further by treating property rights as being no more than a bundle of
rights enforceable against individuals. They viewed individuals as having no natural
right to property, and the state therefore as being entitled to intervene so as to regulate
and redistribute property where necessary. Coase (while not subscribing to the redistribution viewpoint), took this even further by deemphasising the rights aspect and emphasising
the negotiation and transaction costs aspect, meaning that parties will negotiate to a point
where they reach a result that is mutually favourable to them absent transaction costs.38
Present day law and economics scholars go even further and regard property as having
no distinctive character at all and regard it simply as entitlements bearing rights.39
1019
While the creation of WIPO and now TRIPS makes the recognition and enforcement of
intellectual property rights (IPR) a matter of fact, the nature and extent of the rights awarded
under TRIPS in particular has been the subject of continuing negotiation and is not without
its dissidents. TRIPS has been criticised on two fronts: on how the agreement came into
being, and how it operates. With respect to the rst, three broad criticisms have been
made. These are rst, that the agreement did not result from a bargain struck between
sovereign equals, but rather by coercion of the LDC by the powerful developed states;40
secondly, that it was part of a hard bargain in which LDC received very few reciprocal
gains;41 and thirdly, the adverse consequences for LDC implementing the agreement.42 It
has also been pointed out that the economic gains of the standards contained in TRIPS
are most likely to be captured by companies committed to radical innovation and with
large economies of scale, meaning the MNC.43
It is in this context that Drahos and Braithwaite44 argue that the system of global
regulation of intellectual property has been transformed to protect corporations rather than
people; that corporate interests have signicantly inuenced numerous bilateral and
multilateral negotiations and actions in relation to intellectual property; that TRIPS was itself
the result of an undemocratic process engaged in during the GATT round and the WTO; and
argue instead that knowledge be released into the public domain than be locked away in
obfuscating patents. Moreover, in tracing the legal concept of piracy, they show that all
nations including the US have opportunistically copied the ideas and images of others to
promote innovation. In doing so they dismantle very effectively the argument that patent
and trade mark regulations encourage innovation, and point out instead that it is increased
patent protection that sets up barriers to innovation.45 Other writers such as Adam Jaffe,46
and Hall and Ham47 have been even less sanguine about the value of IPR. Thus Jaffe
states48 that these results conrm what we thought we already knew which is that patents
are not central to appropriating the return to R&D in most industries. And according to Hall
and Ham, the strengthening of patent laws has only resulted in more aggressive patenting
not for their intellectual property, but for their strategic use as bargaining chips with other
rms to access their technology, a phenomenon they label as the patent paradox.49 Some
regard the inclusion of TRIPS in the WTO to be a colossal mistake50 given that there was
already in WIPO a body charged with the advancement of intellectual property interests.51
The present patent-based system driven by the nance market has been found to have
failed to promote the development of much needed primary care medicines for LDC, the
focus having shifted to the development of lifestyle medicines such as for obesity, erectile
dysfunction and the like.52 The present law relating to patents is said to have also encouraged the further exploitation of LDC through the patenting and attempted patenting of plant
and animal life hitherto regarded as common community property, and in the nonessential
modications of known compounds instead of fundamental breakthroughs.53
On the other hand, many developing countries are said to have found the requirement to
establish administrative systems and effective enforcement procedures for IPR to be costly
relative to any gains they might anticipate, particularly because economic benets will go
largely to foreign rms over the intermediate term.54
The 2006 WHOs, Commission on Innovation, Intellectual Property and Public Health
in its Report (the WHO CIPIH Report 13 [2006]), states:
In the context of our work one of the important points is that, where the market has very limited
purchasing power, as is the case for diseases affecting millions of poor people in developing
countries, patents are not a relevant factor or effective in stimulating R&D and bringing new
products to market.
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R. Sappideen
Not surprisingly, pharmaceutical MNC and the USTR have not been supportive of this view
as seen by the attempt to sue South Africa for its use of unlicensed AIDS drugs in the face of
the epidemic in that country, and were only forced to abandon it by sustained global
pressure.55 In the meantime, the WTO members had unanimously adopted the Doha
Declaration in November 2001, to which the US was the last to assent.56
The Doha Round is recognised as having produced declarations on two issues of great
concern to developing countries. First, members agreed that TRIPS does not prevent
countries from taking measures to protect public health and promote access to medicines
for all,57 and afrmed that members have freedom to determine grounds on which compulsory licences may be granted and to establish exhaustion regimes. Moreover, LDCs were
excused from the obligation to patent pharmaceutical products and to safeguard condential
test data until the year 2016. Secondly, members afrmed that TRIPS Article 66.2 which
requires developed countries to establish incentives for their enterprises to transfer technology to LDC as being mandatory.
Paragraph 6 of the Doha Declaration authorises compulsory licensing for export to
low-income countries, bypassing Art. 31(f) of TRIPS, which restricts compulsory licensing
predominantly for domestic use. This waiver was subsequently adopted as a formal amendment to TRIPS as Article 31bis in December 2005. For example, Canadian law permitting
Para. 6 exports limits compulsory licences to specic listed medicines limited to AIDS, and
to off-patent or competitive generic medications in relation to other epidemics. More
recently, however, MNC and USTR have resisted Thailands efforts to issue compulsory
licenses on patented drugs for heart disease and cancer, placing Thailand on the Special
301 Priority Watch List for alleged violations of IPL, mentioning in particular the compulsory licenses.58
Commentators have advocated the separation of rewarding innovation and the market
for medicines in LDC through a price system and generic licensing.59 In wealthier
countries, access issues arising from the monopoly power of MNC is ameliorated by government subsidies for approved medicines, health insurance schemes, and the provision of
unemployment benets and other social welfare payments. In addition, the MNC itself
receives various subsidies such as depreciation (accelerated depreciation) for plant and
machinery, as well as deductions for R&D activity especially pharmaceuticals. By contrast
in LDC for a start, salaries paid out are very low, and the unemployed (especially the long
term unemployed) are almost entirely dependent on the other members of their family for
their economic wellbeing. More generally, they have neither the high-skilled manpower nor
the resources to engage in patent yielding pharmaceutical research. In the face of this, the
WHO CIPIH Report, and The World Health Assembly Resolution 59.24, Para. 2(4),
support the use of TRIPS exibilities in LDC.60
IV.
On balancing property rights and human rights
The discussion above has highlighted the following: (1) the growth of PR; (2) the corresponding decline of HR; and (3) the forced retreat of the LDC state in LDC. The point
to note is that for LDC citizens, any increase in the share of PR of the HR pie will generally
be at the expense of the LDC state providing other basic essentials needed to ensure the
personal autonomy of the citizens of that state. In other words, an increase in the PR of
MNC will result in a diminution of the HR of access to essential medicines, safe
working conditions, and compensation for personal injury tort liability and result in a
serious imbalance of LDC citizens against the MNC, and in an overall decline in the wellbeing of LDC citizens. The irony is that in this increased state of helplessness, LDC citizens
1021
may well be forced to become even more dependent on the state for their individual welfare,
and lead to an increase in the power of states over the lives of their citizens.
Such a situation presents stark choices for the international community. The rst would
be to treat PR as an absolute value and as an absolute imperative but continue to express
concern at the state level of HR violations such as repression against dissenting voices
and arbitrary incarceration in LDC states, while removing avenues for dissent against
MNC PR through agreements such as TRIPS. This is the present position and reective
of the freedom to sleep under London Bridge or for that matter at the Dorchester. An
alternative approach would be for the international community to adopt a more nuanced
attitude toward PR with responsibility toward LDC States in mind a stance going well
beyond the current concern for respect of territorial integrity and sporadic interventions
into LDC affairs to ensure individual freedoms. Any such approach would require the
international community to engage in a balancing of PR with HR, and in this connection
adoption and enforcement of a code of conduct by the WTO for MNC. MNC, however,
can avoid such a stricture by assigning intellectual PR to offshore subsidiaries in nonWTO member jurisdictions (including the numerous tax havens), which have no reason
whatsoever to become WTO members. To avoid this, it would be necessary to amend
TRIPS to require MNC to sell at a reduced cost (e.g. the cost at which developing countries
such as Brazil, China, and India can produce generic goods of the particular product), or
permit exports of such generic goods from the countries noted given that LDC countries
rarely have the skills or the capacity to produce sophisticated patented medicines. While
evidence of such export practices exist (though it is the subject of litigation before the
WTO Dispute Settlement Panel), the suggestion here is that the practice be formalised
under the aegis of the WTO.61
Both HR and PR derive their legitimacy from theories of the state and the rights of individual citizens under it. Hobbes (Leviathan, 1651), and Locke (Two Treatises for Government, 1689)62 started a discussion which continues to this very day. While these approaches
justify the surrender of power by individuals to the state, they do not adequately explain
how differences on what constitutes the natural rights of life, liberty, and property and
their enjoyment in a pluralistic setting of diverse viewpoints should be resolved, and
more particularly of the role of the state in mediating between competing rights and freedoms. Consequently, the role of individual states, as well as that of the international community, in arbitrating between the rights and freedoms of competing parties and interests
as is with the case of HR and PR discussed here remains a contentious one, especially
where states are implored to act on behalf of citizens of other countries. At one extreme
are those who see the states role as essentially that of a nightwatchman keeping a watchful
eye and ensuring the maximum liberties of individuals in that community. The minimalist
state advocated by Nozick63 is such an example. Against this libertarian view, the liberal
tradition permits the state to ensure the welfare of its citizens provided neutrality is maintained between the different conceptions of the moral good espoused and pursued by its citizens. All of them, however, would agree on the notion of PR as a form of HR, though for
different reasons and with different ends in mind. For example, natural rights theorists
(NRT) such as John Locke in the seventeenth century imagined the existence of a social
compact entered into by all persons living in a state of freedom and equality whereby
they mutually agreed to form a community and set up a body politic, and where citizens
retained the natural rights of life, liberty, and property which government was obliged to
protect. A government that failed to so protect, forfeited its legitimacy to hold ofce.64
NRT is said to have provided the philosophic impetus for revolt against absolutism in
the eighteenth century, and to have helped herald in the French (1789) and American
1022
R. Sappideen
(1776) Revolutions.65 However, the lack of agreement as to the content and interaction
between these rules attracted much criticism, such as the famous nonsense on stilts
remarks of Jeremy Bentham. Instead, utilitarian theory as advanced by Bentham and his
followers argues that actions be judged by the pleasure they brought, as opposed to their
pain. Their focus then was on the end outcome. Thus unlike natural rights theory which
is individual focused, utilitarianism focuses on the maximising of the total net sum of happiness of all citizens. Its failure to recognise individuals as ends in themselves, rather than as
a means to an end has been its Achilles heel. The point to be noted here is that while NRT
holds PR to be more or less sacred, utilitarians would regard such an individual right as
having to yield to the greater good, e.g. the HR need for essential medicines in LDC. At
the same time, however, the utilitarian argument could also be used to condone cheap
and dangerous labour conditions especially in LDC in the sense that, the availability of
even this form of employment is preferable to there being no employment at all. It
should be noted that this essay does not concern itself with whether HR and PR have
their justication in natural law or utilitarianism and variants per se,66 but in justifying
an approach to mollify the harshness of the impact of PR on LDC citizens.
Much of conventional, contemporary liberal political and legal philosophy has sought
to respond to this problem presented by utilitarianism. These rights based arguments
addressing specically the issues of liberty and equality, gure prominently in the works
of Rawls,67 Dworkin,68 and Nozick.69 Rights have been portrayed as having the function
of putting limits on the pursuit of the general welfare of the collective interest. For
example Rawls twin principles, the liberty principle (each individual being entitled to
the most extensive total system of basic liberties compatible with a similar system of
liberty for all), and the difference or distributive justice principle (whereby social and economic differential treatment is tolerable to the extent that they promote the greatest benet of
the least advantaged), is such an attempt. Rawls, however, recognises that some individuals
may be able to take advantage of rights and liberties better than others because of their
wealth and position. In other words, it is equality of opportunity and not equality of
outcome that his theory aspires to. Moreover, he maintains that these factors are not to
be considered as constraints. What is important is that basic liberties are held equally,
with the lesser worth of liberty to some individuals being compensated for by the Difference
principle. It is through this that the gap between liberty and equality is to be bridged. Rawls
then differs from utilitarianism in that although the latter allows for differential earnings and
incentives in order to increase general or overall welfare, he allows the pursuit of such
inequality only where it is necessary to promote the welfare of the least advantaged.
Such interference, however, is criticised by Nozick, who argues that so long as a property
interest has been acquired in a manner recognised as valid by law (e.g. purchase, gift,
inheritance), the individuals right to enjoyment and exploitation of it should be left undisturbed unless through a recognised means of expropriation such as takings (resumption or
expropriation by government) for a public purpose based on the payment of just compensation. Nozick, of course, is famously remembered for his view of taxation (progressive
taxation in particular) as stealth by government.70
Dworkin71 handles the tension between liberty and equality by reconciling natural
rights and utilitarian theories. He does so rst, by appealing to principles of political morality (rights and claims be based on the treatment of all citizens with equal concern and
respect), and next by endorsement of the utilitarian principle that everybody can count
for one, and nobody for more than one (as with participatory democracy).72 The latter principle has been generally relied on by states to exercise wide interventionist functions to
advance social welfare. Dworkin, however, considers a general principle such as the
1023
right to liberty to be too vague as to be meaningful, and argues instead for certain specic
liberties such as freedom of speech and worship, right to association and to personal and
sexual relations as deserving special protection against governmental interference, not
because of their having any special substantive or inherent value, but because they are
easy targets for prejudice and discrimination and invasion by governments in times of
socio-political turmoil, or when seeking to justifying a particular course of action.73 The
thrust of Dworkins argument is of course directed at preserving individual rights against
encroachment by the state.
The above rights based theories of Rawls, Nozick, and Dworkin, however, have as their
underlying premise the precepts of state neutrality (state and law being neutral between differing conceptions of the moral good as espoused and pursued by members of a community), with state intervention being limited to the harm principle74 (i.e. state interference
be limited not by reference to the moral worth of individual actions, but by reference to
discernible harm to other members of the society).75As described by Green:
Liberals are atomists who think that the individual is prior to society. They prize freedom as the
negative virtue of being left to pursue ones own good in ones own way. Their political morality is based on individual rights and equality and has the function of regulating competition
among self-interested atoms. Liberals recognise a narrow role for the state, which may restrict
liberty only to prevent harm to others and must remain neutral among competing conceptions
of the good life.76
However, Raz challenges this view of liberalism in his The Morality of Freedom.77 He
dismisses the ideal of state neutrality as chimerical, his point being that it is not in the
nature of a state to be able to be neutral. Furthermore, he observes that the harm principle
is itself a perfectionist ideal which presupposes specic moral conceptions which are not
in themselves value neutral making it impossible for the state to remain neutral. Most
importantly, he argues against the view that the special role of rights is to protect the
individual interest against the general good or the claims of others generally, and argues
instead for a non-individualistic, pluralist, as well as perfectionist78 (justiable interventionism) form of liberalism where governments play an active role in the provision
and protection of these freedoms.
It must be noted that unlike Rawls and Dworkin who stress the priority of right over the
good, Raz stresses their interdependence. And unlike Bentham, Raz is not sceptical of
moral rights generally, but only of the view that morality is based on rights. For Raz, a
rights based morality explains inadequately the reasons for actions that are not duties, of
supererogation, and of the intrinsic value of virtue.79 Consequently, he downplays the
role of individual rights, seeing it more as an avenue to securing a common political
culture. Liberalism is, therefore, perceived as having its core value in autonomy, and as a
collective good the existence of which does not depend on the interest of any single individual. Razs position is that while liberal rights are based on personal autonomy,80 they are
not based on individualism.81 As Raz states82:
. . . it [personal autonomy] transcends what any individual has a right to. Put it another way: a
person may be denied the chance to have an autonomous life, through the working of social
institutions and by individual action, without any of his rights being overridden or violated.
Razs anti neutralist (choosing) view of the liberal state envisages the state as actively promoting the wellbeing of people by judging between conceptions of the good life, and by
encouraging people to pursue autonomy based conceptions of that life. However, it must
1024
R. Sappideen
be noted that while his perfectionist (justiable interventionism) view of the state requires
the state to neither exclude nor remain neutral toward all ideals, it does not endorse individualistic relativism. In other words, he sees the state as being justied in intervening to
favour some particular conceptions of the good life while disfavouring others. Based
on these, he offers a defence of the value of individual freedom construed as personal
autonomy.83 Raz identies three components to the constitution of autonomy, namely,
appropriate mental abilities, availability of an adequate range of options, and independence
or freedom from coercion and manipulation. These, along with their associated norms and
attitudes represent what Raz calls autonomy supporting environment or autonomy supporting culture.84 It is in this environment that Raz sees governments as having duties
to positively promote the personal autonomy of all its citizens. To quote Raz:
The doctrine of limited government regards governments as a threat to liberty. Its protection is
in keeping governments conned within proper moral bounds. While not denying that governments can and often do pose a threat to individual liberty, there is another conception which
regards them also as a possible source of liberty. They can create conditions which enable
their subjects to enjoy greater liberty than they otherwise would. This second conception
regards liberty as sometimes threatened by individuals and corporations, not only by governments. It goes further and claims that though governments sometimes abuse their powers and
trespass on individual liberty, in situations which are not all that rare they should act to promote
freedom, and not only sit back and avoid interfering with it. They should keep off certain areas
of life, or avoid interfering with them in certain ways, while acting in other areas and in other
ways to promote freedom (emphasis added).85
While both utilitarianism and perhaps Rawlsianism provide a framework to mount the
case for limiting the PR component of HR, it is in the threat posed to individual liberty by
the MNC as recognised by Raz, and Razs prescription of state action to ensure positive
freedom of the individual, that the argument made in this paper primarily rests. The application of Razs theory in the context of an international organisation such as the WTO on
the one hand and the supplicant status of LDC on the other, however, shows that the force to
bring about the needed change rests with the international community itself (members of the
WTO) rather than any individual LDC, especially in relation to TRIPS. This would also be
true of limiting the existing tort liability protection as well as the concerns over occupational
health and safety, despite the two latter concerns having the appearance of being host
country issues. In other words, the proposal requires a voluntary withdrawal by the
WTO of some of the benets currently enjoyed by the MNC which the WTO agreements
have in one way or another endorsed. This has been the underlying argument of this paper.
V. Concluding thoughts
The MNC as propped up by the WTO agreements now enjoys not only voice, but also right
of exit without any loyalty to its host jurisdiction. This structure has made the LDC particularly vulnerable. Drawing on Razs thesis of freedom as a positive right, this concluding
part suggests that a new code of conduct needs to be drawn for the MNC which limits
the colonisation of HR by PR, more specically with respect to pharmaceutical PR, and
the MNC operating in LDC. That it is not possible to achieve this at the individual state
level (especially by a supplicant LDC)86 and needs to be addressed at the WTO negotiation
level has already been noted. In a sense an attempt has already been set in motion in respect
of essential medicines needed by LDC as seen in the Doha Round discussion. But how
much fruit the Doha discussions will actually yield even with respect to the limited
problem of essential problems is yet to be seen.
1025
Employing sweatshop labour and escaping group liability for personal injury torts by
the MNC still remain frontier territory. The justication for extending group liability for
personal injury tort liability along lines similar to that required for equity accounting and
consolidated nancial statements purposes has been canvassed in Part 11 above. The
problem of sweat shop labour and poor occupational safety and health standards is compounded by the practice of MNC outsourcing their various tasks to nominally independent
contractors who in reality are no more than an underclass of workers paid for performing
tasks at the cheapest possible rates as a means of survival. One way to handle the latter
would be to adopt a restrictive denition of independent contractor. But this would be
far from effective given that its enforcement will be almost entirely in the hands of
poorly paid ofcials prone to corruption.
There have been many attempts in the past to raise the awareness of corporations to the
social consequences of their actions. These include The OECD Guidelines for Multinational Enterprises 1976 as amended (which imposed obligations on the host country),
The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and
Social Policy 1977 as amended (between government, workers, MNC, employers and
labour organisations), The UN Global Compact 2000 (which required companies to
commit themselves to universal principles in relation to labour, environment and human
rights), and The UN Sub-commission on the Promotion and Protection of Human Rights
2005 (a think tank established to assist the UN Commission on Human Rights, addressed
to individuals, organisations of society, and governments). They have not had much impact
given their voluntary nature, as well as the absence of any obligations imposed on the MNC
home country jurisdiction. Given the power and inuence MNC wield in their host country,
it is only accountability through the home country jurisdiction and supported by the host
country which can ensure socially responsible behaviour by the MNC. This is especially
so given the constraints of poverty and corrupt ofcialdom endemic to LDC, complemented
by the ability of MNC to command the best legal advice and effectively lobby in their
favour in both host and home jurisdictions.87
Notes
1.
2.
3.
4.
5.
6.
7.
A note on terminology: acronyms used in this paper apply in the singular and plural depending
on their particular context, e.g. LDC (least developed country), and MNC (multinational corporation), etc.
This paper is not a critique of the MNC. Rather it seeks to investigate the balancing of human
rights (HR) and property rights (PR) vis-a-vis the MNC under the WTO agreements. In doing
so, it distinguishes the MNC as a violator of HR from the state as violator of HR.
In a sense, the MNC has appeared to have achieved by stealth rst through GATT and GATS,
and then TRIPS what it had failed to achieve more directly through the aborted Multilateral
Agreement on Investment (MAI) of the 1990s. It is true that while the MAI sought to remove all
disputes against multinationals from state jurisdiction, under the WTO all matters relating to
investment disputes have now been transferred to the WTO Dispute Settlement body.
Least developed countries (LDC) seeking IMF and World Bank (IBRD) assistance have
generally to also agree to apply for WTO membership.
It has its antecedence in the GATT of 1947, which had for various reasons failed to take off.
See the discussion between notes 8 and 9, below.
P. Blumberg, Limited Liability and Corporate Groups, Journal of Corporation Law 11 (1986):
573, points out (p. 575, footnote 1) that in 1982, the 1000 largest American industrial
corporations had an average of 48 subsidiaries each; that Mobil Oil Corporation (though an
extreme example), operated in 62 different countries through 525 subsidiaries: see Mobil Oil
Corporation v. Commissioner of Taxes Vermont 445 US 425, 428 (1980); that British based
multinationals are even more complex, e.g. companies such as BP, Unilever, Bowater, Rank
1026
8.
9.
10.
11.
12.
13.
14.
15.
16.
R. Sappideen
Organisation, and Reckitt & Colman reveal an incredible complexity involving an intricate
network of sub-holding companies, operating subsidiaries, sub-subsidiaries and service
companies. BP has 1200 to 1300 subsidiaries, and Unilever has 800 subsidiaries: see,
T. Hadden, Inside Corporate Groups, International Journal of the Sociology of Law 12
(1984): 271, 273. Another British scholar, R. Tricker, Corporate Governance, Chapter 3,
cited in T. Hadden, R. Forbes and R. Simmonds, Canadian Business Organizations Law
(1984), 618, has estimated that the average number of subsidiaries in the top fty British
companies in 1981 was 230.
For example, the lender to a subsidiary would require a guarantee from the parent which would
ensure the lender priority over any tort claimant. Moreover, claims against the corporation can
be structured such that even shareholders as creditors have priority over tort claimants, as e.g.
where dividends are declared in anticipation of liability arising (given that dividends are payable
out of annual prots as determined for each nancial year), and by the parent obtaining prior
ranking security for funds advanced as loans to subsidiary.
Examples abound of business organisations and MNC pressuring e.g. the United States Trade
Representative (USTR) to act on their behalf by using its trade enforcement mechanisms such as
s301 of its Trade Act 1974, and the Generalised System of Preferences under Title V of that Act
against LDC. For example, the s301 action initiated by the USTR against Brazil in 1987 was in
response to a petition by the Pharmaceutical Manufacturers Association (PMA). The PMA also
led a petition in 1988 against Argentina on the issue of patent protection that triggered a USTR
investigation. See e.g. the USTR website at http://www.ustr.gov. There is also a growing body
of literature that documents the role of private sector actors in the shaping of TRIPS itself,
see the literature cited in Drahos and Braithwaite, Intellectual Property, Corporate Strategy,
Globalisation: TRIPS in context, Wisconsin International Law Journal 20 (2002): 451, 452.
The following general points on the relationship between the WTO and HR law and international law are also worthy of note. First, that as the WTO is itself not a party to the
various HR treaties it is not bound by them. It may, however, be subject to the principles of
general international law including HR law that is part of general international law. Secondly,
given that only states are parties to the WTO, neither individuals nor corporations are directly
subject to WTO law. However, states are entitled to protect individuals from HR violations by
others. Thirdly, the WTO dispute settlement understanding (DSU) cannot be used to enforce HR
treaty law, as its jurisdiction is limited to disputes arising under the WTO agreements. Nonetheless, pursuant to Article 3.2 of the DSU which prescribes the application of customary rules of
interpretation of public international law attracting thereby Article 31(3)(c) of the Vienna
Convention which requires that account be taken of any relevant rules of international law
applicable to the relations between the parties HR as are perceived to be part of general
international law may be read into the DSU.
The attempted lifting of the corporate veil to impose liability on the parent in a LDC host countrys court system is a fruitless endeavour as it is unlikely that it would be given effect to by
home country courts. Conversely, there exists the formidable procedural barrier of forum non
conveniens where an attempt is made to request the home country courts to lift the veil. The
Bhopal case is a classic example of this. See generally, R. Sappideen, Harmonizing International Commercial Law through Codication, Journal of World Trade 40 (2006): 425.
If this be so, however, the benets associated with the separate legal entity concept become
questionable, especially in relation to its extension to members of a group.
A. Berle and G. Means, The Modern Corporation and Private Property (New York: Harcourt
Brace, 1967).
Blumberg sates that in the US, while limited liability had become rmly established by 1830,
the power of a corporation to acquire and own shares of another corporation and form corporate
groups was generally not available until after 1889, and that while subsidiary corporations were
not unknown earlier, they increased in number by dint of express provisions in the special
charters to the parent corporation. Moreover, he observes that the application of applying the
doctrine of limited liability to insulate parent corporations from liability as well as the ultimate
investors had apparently occurred unthinkingly, Blumberg, Limited Liability and Corporate
Groups, 575.
James Hardie Industries NV v. Australian Securities and Investments Commission [2009]
NSWCA 18.
See Sappideen, Harmonizing International Commercial Law through Codication, 425.

17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
1027
See F. Easterbrook and D. Fischel, The Economic Structure of Corporate Law (Cambridge, MA:
Harvard University Press, 1991), 4159.
See P. Halpern, M. Trebilcock and S. Turnbull, An Economic Analysis of Limited Liability in
Corporation Law, University of Toronto Law Journal 30 (1980): 117, 1489.
See P. Blumberg, Limited Liability and Corporate Groups, 573, 630; D. Leebron, Limited
Liability, Tort Victims, and Creditors, Columbia Law Review 91 (1991); 1618 19
See R. Thompson, Unpacking Limited Liability: Direct and Vicarious Liability of Corporate
Participants for Torts of the Enterprise, Vanderbilt Law Review 47 (1994): 1, 46.
See T. Gabaldon, The Lemonade Stand: Feminist and other Reections on the Limited Liability
of Corporate Shareholders, Vanderbilt Law Review 45 (1992): 1387, 1440.
See H. Hansmann and R. Kraakman, Toward Unlimited Shareholder Liability for Corporate
Torts, Yale Law Journal 100 (1991): 1879; or be proportionate: Stone, The Place of Enterprise
Liability in the Control of Corporate Conduct, Yale Law Journal 90 (1980): 1, 74.
N. Mendelson, A Control-based Approach to Shareholder Liability for Corporate Torts,
Columbia Law Review 102 (2002): 1203, 120506.
There exists precedent for such an approach in the current nancial reporting requirements for
group companies with respect to equity accounting (for companies holding more than 10% of
shares in another company) and for provision of consolidated nancial statements by group
companies. The point here is recognition of group accountability extending beyond the
individual company.
J. Locke, Two Treatises of Government.
As evidenced in the writings e.g. of J. Locke, J. Rawls and K. Nozick, as well as Article 27(2) of
the HRD. Art 27 reads as follows:
1. Everyone has the right freely to participate in the cultural life of the community, to enjoy the
arts and to share in scientic advancement and its benets.
2. Everyone has the right to the protection of the moral and material interests resulting from
any scientic, literary or artistic production of which he is the author.
A threshold issue is whether the corporation is entitled to the benet of HR, and whether PR
enhanced by statute (or international agreement such as TRIPS) can amount to HR. The argument can be made that the answer to both would be in the negative under natural law as well as
under utilitarian theory: under the former because natural law is concerned with the rights of
humans as against the articial persona of the corporation, and under the latter because of
the multitude of human individuals who could be affected adversely by a single action of the
prot oriented post-modern corporation. It is unlikely, however, that this argument by itself
will sway the position in favour of LDC.
See Alan Gewirth, Human Rights: Essays on Justications and Applications 41 (Chicago, IL:
University of Chicago Press, 1982). See also James Nickel, Making Sense of Human Rights
(Cambridge: Blackwell, 2006), where at 38 he states: . . .some human rights cannot be universal
in the strong sense of applying to all humans at all times, because they assert that people are
entitled to relatively recent social and political institutions. . ..
See Joseph Raz, Human Rights without Foundations, University of Oxford Faculty of Law
Legal Studies Research Paper Series, Working Paper No 14/2007, March 2007, at 22. Raz
sees HR as being derived from three layers of argument. First, an individual interest which
has come to be recognised as an individual moral right; secondly, its recognition by states as
being duty bound to respect or promote; and thirdly, when states cease to enjoy immunity
from actions of interference by other states. Raz states that if all parts of the argument
succeed then we have established that a human right exists. Raz cites the formation of the
EU and WTO as examples of this process of recognition: at 24. His essential point is the
erosion of a state power in these situations.
See John Rawls, The Law of Peoples 79 (Cambridge, MA: Harvard University Press, 1999).
Raz, Human Rights without Foundations.
Rawls, The Law of Peoples, at 65.
See Human Rights, in Stanford Encyclopaedia of Philosophy (accessed February 28, 2008),
http://plato.stanford.edu.entries/rights_human (accessed 15 July 2010).
See R. Sappideen, Harmonizing International Commercial Law through Codication.
W. Blackstone, Commentaries on the Laws of England (1765 1769), http://www.lonang.com/
exlibras/blackstone (accessed 17 July, 2010).
1028
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
R. Sappideen
A. Smith, Lectures on Jurisprudence (1762), http://loll.libertyfund.org/?optioncom_
staticxt&staticleshow.php%3Ftitle196 (accessed 18 July, 2010).
See Merrill and Smith, What Happened to Property in Law and Economics?, Yale Law Journal
111 (2001): 357 98, at 362 3.
W. Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, Yale Law
Journal 26 (1917): 710.
L. Coase, The Problem of Social Cost, Journal of Law and Economics 3 (1960), 1.
See T. Merrill and H. Smith, What Happened to Property in Law and Economics?, 385.
See P. Gerhart, Reections: Beyond Compliance Theory TRIPS as a Substantive Issue,
Case Western Reserve Journal of International Law 32 (2000): 357, 368 70.
See Krishner Iyer et al., Peoples Commission on GATT (New Delhi: Centre for Study of Global
Trade System and Development, 1996), cited in P. Drahos and J. Braithwaite, Intellectual
Property, Corporate Strategy, Globalisation: TRIPS in Context, Wisconsin International Law
Journal 20 (2002): 451.
See The TRIPS Agreement and Developing Countries, UNCTAD (NY and Geneva: UN, 1996).
See e.g. the estimates of impacts for 1995 in Table 1 of K. Maskus, Intellectual Property Rights
and Economic Development, Case Western Reserve Journal of International Law 32 (2000):
471, 503.
Drahos and Braithwaite, Intellectual Property, 471.
See Drahos and Braithwaite, Information Feudalism: Who Owns the Knowledge Economy?
(New York: New Press 2003).
Adam Jaffe, The US Patent System in Transition: Policy Innovation and the Innovation
Process, NBER Working Papers 7280 (National Bureau of Economic Research, 1999),
http://www.nberorg/papers/w7280 (accessed 15 July, 2010).
B. Hall and R. Ham, The Patent Paradox Revisited: Determinants of Patenting in the US
Semiconductor Industry 19801994, NBER Working Paper 7062 (National Bureau of
Economic Research March 1999).
Jaffe, The US Patent System, 46.
Ibid., 46.
See T.N. Srinivasan, The TRIPS Agreement: A Comment Inspired by Frederick Abbotts Presentation, in Festschcrift to Robert Hudec. Srinivasan states that the conventional argument in
favour of unilateral liberalisation of trade in small open economies in goods is that gains from
liberalisation outweigh losses so that in principle, a transfer scheme within each economy can
be devised that will compensate the losers from liberalisation. Most of the gainers from TRIPS
are in rich developed countries and only a few if any, in poor countries. This being the case,
even if gains outweigh losses, international transfers would be needed to compensate losers.
No such transfers from gainers to losers are envisaged as part of TRIPS. Besides, TRIPS
unlike tariff reductions on products sold in competitive world markets, involves the creation or
strengthening in the monopoly position of developed country producers in the markets of poor
countries. Thus, TRIPS creates a distortion of monopoly in developing countries, the rents
from which accrue to the rich. Besides, any acceleration of innovative activity, which is the
only rationale for granting monopoly rights, if it comes about at all, will take place mostly in
rich countries. Whether some of the benets from any acceleration of innovation in the rest of
the world will accrue to poor countries, is arguable. In any case the benets if any, are uncertain
and in the future, but the costs to developing countries are concrete and in the present. Srinivasans
concern is about the further erosion of state power (LDC in particular) over the MNC by making
applicable the WTO Dispute Settlement Understanding (DSU) with respect to TRIPS, and
secondly by further empowering the MNC by extending it NGO observer status, http://www.
econ.yale.edu/-jsrinivas/TRIPS.pdf (accessed 16 July, 2010), cited hereafter as Srinivas.
Ibid.
For example as concluded in the WHO Commission on Intellectual Property Rights, Innovation
and Public Health (CIPIH) Report, at 172: Too few R&D resources are directed to the health
needs of developing countries. In the private sector, companies do not have the incentive to
devote adequate resources to develop products specically adapted to the needs of developing
countries, because protability is mainly to be found in rich country markets. The great majority
of health research funded by the public sector takes place in developed countries, and its priorities principally reect their own disease burden, resource position and social and economic
circumstances.

53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
1029
See F. Abbott and J. Reichmann, The Doha Rounds Public Health Legacy: Strategies for the
Production and Diffusion of Patented Medicines under the Amended TRIPS Provisions
Journal of International Economic Law 10 (2007), 921.
Maskus, TRIPS: Controversies and Potential Reforms, Draft: 25 February 2002, http://www.
yorku.ca/robarts/archives/doha/pdf_maskus.pdf (accessed March 5, 2008).
Kevin Outterson, Should Access to Medicines and TRIPS Flexibilities be Limited to Specic
Diseases?, Working Paper Series: Public Law and Legal Theory, Working Paper No. 08-06,
Draft 2/4/08, Boston University School of Law, http://ssrn.com/abstract=1090270 (accessed
29 April, 2008).
The Doha Declaration states at para. 4: Accordingly, while reiterating our commitment to the
TRIPS Agreement, we afrm that the Agreement can and should be interpreted and
implemented in a manner supportive of WTOs Members right to protect public health and,
in particular, to promote access to medicines for all.
As per Article 8(1) TRIPS.
See Ofce of the USTR 2007, Special 301 Report 27 (2007), cited in Outterson, Should Access
to Medicines and TRIPS Flexibilities be Limited to Specic Diseases?, at footnote 20.
See J. Love and T. Hubbard, The Big Idea: Prizes to Stimulate R&D for New Medicines,
Chicago Kent Law Review 82, no. 3 (2007): 151954.
Also, the WHO Elements of a Global Strategy (2006) lists the following areas for action: 6(a)
enact legislation in developed and developing countries for application of the exibilities provided for in TRIPS and other international agreements. . .; 6(f) assure that bilateral trade agreements do not seek to incorporate TRIPS-plus protection in ways that might reduce access to
medicines in developing countries. . .; 6(i) focus on specic aspects of the intellectual property
system, such as test data exclusivity, me-too patents, and patent linkages. . .; 7(i) take necessary legislative steps in developed countries, and other countries with manufacturing and export
capacity, to allow compulsory licensing for export consistent with the exibilities provided for
in TRIPS; 7(j) provide in national legislation for measures to encourage generic entry on patent
expiry, such as the early working exception, and more generally policies that support greater
competition between generics, whether branded or not, as an effective way to enhance access by
improving affordability; restrictions should not be placed on the use of generic names. The US
response found at 46, Paras 68 was to request these discussions of TRIPS exibilities be
excluded from the WHO Intergovernmental Working Group in Public Health (IGWG)
process and that the WTO and WIPO as the better for this. See, Outterson, Should Access
to Medicines and TRIPS Flexibilities be Limited to Specic Diseases?.
See discussion in nn. 52 and 53, and text above. A formalisation of the latter practice would also
require segmentation of markets developing country markets, developed country markets, and
LDC markets alongside rigidly enforced prohibitions against parallel imports (i.e. from products manufactured in Brazil, China and India) given that TRIPS makes no provision for
exhaustion of patent rights at the rst sale.
T. Hobbes, Leviathan (1651); and Locke, Two Treatises for Government.
R. Nozick, Anarchy, State and Utopia (New York: Basic Books, 1974).
NRT is said to have its antecedents in natural law, which is identied with Thomas Aquinas,
Summa Theologia (1475). It claims the existence of a divine form of law superior in status to
laws made by the monarch. Following on from this, the claim is made that humans possessed
certain inalienable rights which even the monarch could not deprive them of. However, its
accommodation of slavery and serfdom meant that the central ideas of freedom and equality
were excluded from consideration. See Jerome Shestack, The Philosophic Foundations of
Human Rights, Human Rights Quarterly 20 (1998): 20134, at 206.
Shestack, The Philosophic Foundations of Human Rights, 207.
For example, whether copyright is justied under utilitarianism or natural law theory, and
whether the labour theory or personality theory of natural law theory applies to copyright
have been the subject of much debate.
J. Rawls, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971).
R. Dworkin, Taking Rights Seriously (London: Duckworth, 1977); and Dworkin, Laws Empire
(Cambridge, MA: Harvard University Press, 1986).
R. Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974).
Nozick, Anarchy, State, and Utopia.
See generally, Ronald Dworkin, Taking Rights Seriously.
1030
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
R. Sappideen
Shestack, The Philosophic Foundations of Human Rights, 226.
Ibid., 227.
It must be noted, that while Raz regards the prevention from harm as being the only justiable
reason for any form of coercive interference, he interprets harm very broadly to mean failing to
improve the situation of another, imposing thereby on the state the duty to promote the autonomy of people through coercive measures if necessary not only to prevent interference with
ones freedom, but also force the state to take actions required to improve peoples options
and opportunities: see Raz, Human Rights without Foundations, 41516.
See, J. Chan, Raz on Liberal Rights and Common Goods, Oxford Journal of Legal Studies 15
(1995): 15 31.
See Leslie Green, Un-American Liberalism: Razs Morality of Freedom, University of Toronto
Law Journal 38 (1988): 317 32, at 317.
J. Raz, The Morality of Freedom (Oxford: Clarendon, 1986).
L. Green, Un-American Liberalism, 318. One commentator observes that Razs rejection of
moral individualism and emphasis on collective goods brings his theory close to communitarianism but differs from it in that he does not argue for a strong central government. See, John Fischer,
Review of Raz, The Morality of Freedom, The Philosophical Review 98 (1989): 2547.
Raz, The Morality of Freedom, 195 6.
Raz differentiates between moral autonomy and personal autonomy. He describes the latter,
which is the subject of discussion in this paper, as follows (Raz, The Morality of Freedom,
204): An autonomous person is part author of his own life. His life is in part his own
making. The autonomous persons life is marked not only by what it is but also by what it
might have been and by the way it became what it is. A person is autonomous only if he has
a variety of acceptable options available to him to choose from, and his life became as it is
through his choice of some of these options. A person who has never had any signicant
choice, or was not aware of it, or never exercised choice in signicant matters but simply
drifted through life is not an autonomous person.
And at 373 4 he gives the following two illustrations where autonomy is absent: The man
in the pit. A person falls down a pit and remains there for the rest of his life, unable to climb out
or to summon help. There is just enough ready food to keep him alive without (after he gets used
to it) any suffering. He can do nothing much, not even move much. His choices are conned to
whether to eat now or a little later, whether to sleep now or a little later, whether to scratch his
left ear or not. The hounded woman. A person nds herself on a small desert island. She shares
the island with a erce carnivorous animal which perpetually hunts for her. Her mental stamina,
her intellectual ingenuity, her willpower and her physical resources are taxed to their limits by
her struggle to remain alive. She never has a chance to do or even think of anything other than
how to escape from the beast.
See J. Fischer, The Philosophical Review (1989): 2547.
Raz, The Morality of Freedom, 247.
See Green, Un-American Liberalism.
While LDC states may satisfy some requirements of the Westphalian state such as territorial
integrity, reasonable control of its population and the like, and thus are formally independent,
often they are economically (and perhaps politically) dependent and referred to pejoratively
as client states or basket cases.
See Thomas Biersteker, The Illusion of State Power: Transnational Corporations and the
Neutralization of Host-country Legislation, Journal of Peace Research 17, no. 3 (1980):
207 21.
Notes on contributor
Razeen Sappideen is a professor at the Law School, University of Western Sydney.

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