Eli Lilly and Company v The Government of Canada and the Perils of Investor-State Arbitration

• Author: James Billingsley
• Position: Received his JD from the University of Victoria in 2014
• Pages: 27-41

APPEAL VOLUME 20

n

27

ARTICLE

ELI LILLY AND COMPANY V THE

GOVERNMENT OF CANADA AND THE PERILS

OF INVESTOR-STATE ARBITRATION

James Billingsley*

CITED: (2015) 20 Appeal 27

INTRODUCTION

We live in a world today where it is routine for foreign private companies to sue sovereign

countries, claiming that domestic laws interfere with foreign investment ac tivities. Take

the case of Eli Lilly v the Gov ernment of Canada . Eli Lilly and C ompany (“Eli Lilly”), a

multinational phar maceutical corporation, is presently sui ng the Government of Canada

(“Canada”), alleging t hat the invalidat ion of two patents amounts to an un lawful

expropriation of Eli Lilly’s intellectu al property. e company claims Canada’s patent

laws are arbitrar y, discriminatory, and in breach of the minimum sta ndard of treatment

owed to foreign investors under the North American Free Trade Agreement (“NAFTA ”).

e company is seeking d amages in excess of half a bil lion dollars.1

e two patents—for the d rugs Strattera a nd Zyprexa—were found inva lid in separate

judgments of the federal cour ts, and both decisions were upheld on appea l. Despite the

ndings of Cana dian courts, Eli Lil ly relies upon its right under NAF TA to haul Can ada

before an ad hoc tribuna l and have the country defend the laws and proce sses of its legal

system. Canad a must answer to E li Lilly’s argument of what Canadian law oug ht to be.

Eli Lilly’s claim against Canada raises t he question of whether and under what

circumstanc es a foreign investor can circumvent domestic judicial outcomes through

international arbitration.  is article ta kes the position that the role of investor-state

arbitration should not be expanded to provide a foru m of de facto appeal. E li Lilly’s

claim chal lenges Canad a’s regulatory sovereignty, undermining the c ountry’s right to

determine its own substa ntive patentability stand ards and govern intellec tual property

within its borders. e al legation that Canada interfered with Eli Lilly’s expectation of

monopoly prots may have a chilling ee ct on the willingness of courts a nd lawmakers

to regulate the brand-na me pharmaceutica l industry, and may ultim ately impact the

accessibility a nd aordability of medicines in Canad a’s healthcare system.

is article is structured in t hree parts. Part I outlines the natu re of investor-state

arbitration and briey introduces Canada’s international trade polic y and investment

* James Billingsley received hi s JD from the University of Vic toria in 2014. He would like to thank

Professor Chin Leng Lim at the Univer sity of Hong Kong, Faculty of Law for h is insight and

instruction on the subj ect of investment treaty arbitr ation.

1 Eli Lilly and Company v The Government of Canada, Notice of Intent to Subm it a Claim to

Arbitration under NAFTA (12 September 2013) UNCT-14-2 (NAFTA/UNCITRAL) at para 4 [Notice

of Arbitration]; North American Free Trade Agreeme nt Between the Government of Canada, th e

Government of Mexico and the Governm ent of the United States, 17 December 1992, Can TS 1994

No 2, 32 ILM 289 (entered into force 1 January 1994) [NA FTA ].