European Union: ECJ Prolongs Market Access For "Free Riders"

Overview

On 22 May 2008, the European Court of Justice ("ECJ") delivered its judgment in case C-361/06, Feinchemie Schwebda and Bayer CropScience v College voor detoelating van bestrijdingsmiddelen. This important decision concerns the circumstances under which companies who have not supported an active chemical substance ("free riders") contained in their Plant Protection Products ("PPPs") must withdraw those PPPs from national markets following the active substance's EU authorisation. Authorisation occurs by inclusion in Annex I to Directive 91/414/EEC ("the PPP Directive") following submission of a complete dossier.

Given the substantial investment made by those companies who do support active substances through the submission of a dossier ("notifiers"), the period during which competitors who have not made the same investment can remain on the market is of considerable commercial importance.

The ECJ ruling is likely to undermine the value of that investment, at least for those active substances authorised before 2005. The ruling also presents challenges in other commercial fields where a similar regulatory framework exists, such as under the Biocidal Products Directive 98/8/EC ("the BPD").

Facts of the case

The case arises from a reference to the ECJ from the Dutch Administrative Court. Following the authorisation of the active substance ethofumesate by Directive 2002/37/EC (an amendment to Annex I of the PPP Directive), the Dutch Board for the authorisation of pesticides ("the CTB") withdrew a national authorisation held by Agrichem ("the company") to place on the market PPPs containing ethofumesate.

The company was not considered to have had ownership of or access to an Annex II (PPP Directive) dossier for ethofumesate containing the data necessary for evaluating foreseeable risks to humans, animals and the environment. The CTB concluded that it was required to order market withdrawal in such circumstances. Those companies who had supported ethofumesate intervened in litigation before the Dutch Administrative Court claiming, amongst other things, that:

• the data protection provisions of the PPP Directive indicate that the holder of an authorisation for a PPP who is not at the same time a notifier of the active substance, must hold or have access to an Annex II dossier; and

• the data protection provisions of the PPP Directive indicate that the holder of an authorisation for a PPP who is not at the same time a notifier of the active substance, must hold or have access to an Annex II dossier; anddata submitted by notifiers could not, without their consent, be used by third parties or for the benefit of third parties during the 5 year period set out in the PPP Directive.

ECJ judgment

The ECJ concluded, relying largely upon the general principle of legal certainty, that in absence of clear and unambiguous wording (in either the PPP Directive or Directive 2002/37/EC) there was no requirement to terminate an existing national authorisation of a PPP containing ethofumesate (following inclusion in Annex I) on the sole ground that the holder of that authorisation did not hold or have access to an Annex II dossier.

Impact on the commercial sector

Since 2005, Directives including active substances in Annex I to the PPP Directive specify, amongst other things, an obligation that existing national authorisation holders must either hold or have access to an Annex II dossier in order to remain on the market following an Annex I inclusion of that active substance. This data access obligation is missing from those authorisation Directives adopted prior to 2005, including that at issue in this case. Hence, the judgment of the ECJ.

This suggests that holders of existing national authorisations would be able to challenge market bans, imposed for reason of lack of access to Annex II data, prior to 2005. Only an amendment to the pre-2005 inclusion Directives would provide the required level of legal certainty and precision sufficient in order to justify market withdrawal. It remains to be seen whether the Commission is willing to launch such a revision exercise.

The European Commission's post-2005 standard wording in Annex I inclusion Directives appears to have plugged the loophole exploited in this case. In effectively reducing the case to one about legal certainty, the ECJ avoids a lengthy debate on applicable data protection rules under the PPP Directive - a contentious topic in the PPP and biocides sectors.

Similar practical problems may arise not only in the PPP Directive but also within the framework of the BPD. Although the data protection provisions of the BPD are differently worded, the regulatory architecture is the same. An examination of the early active substances inclusion Directives for biocidal active substances suggests that they may not have the necessary level of legal certainty necessary in order to ensure that "free-riders" are excluded. In other words, an application of the approach established by the ECJ might lead to the same conclusion under the PPP Directive. Under the BPD, national authorisations of a biocidal product may only be withdrawn on grounds of a lack of data after the re-evaluation of the biocidal product in accordance with Annex VI to BPD (Article 16(3) BPD), i.e. several years after the inclusion of the active substance into the list of authorised active substances.

There are currently no biocidal products authorised in accordance with the provisions of BPD and only very few active substances have been included into Annex I/IA to the Directive. In order to avoid a further erosion of data protection, the European Commission would be well advised to amend the adopted implementing Directives in order to ensure legal certainty for all stakeholders.

The Commission is in the process of revising both the PPP Directive and the BPD. The judgment clearly identifies a gap in current data protection provisions. The current revision of the legislation could ensure that this gap is appropriately addressed.

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