The European Chemicals Agency (ECHA) recently released 25 decisions on data sharing disputes under the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) program and two decisions on data sharing disputes under the Biocides Product Regulation (BPR). Compensation for data sharing is to be determined under REACH and BPR by the same standard, that is, in a "fair, transparent and non-discriminatory manner," and as such there are similar issues in the ECHA decisions under REACH and BPR. The decisions are available online. Bergeson & Campbell, P.C.'s (B&C®) memorandum discussing data compensation and sharing under the BPR can be found online and an article is available online.
In each decision it released, ECHA makes some or all of the following "general observations" regarding data sharing disputes to facilitate future negotiations and agreements:
Making every effort in reaching an agreement requires both the prospective applicant(s) and the data owner(s) to find alternative solutions to unblock the negotiations and to be open and proactive in their communications with the other party. In case a party receives an unsatisfactory reply, which it considers unclear, invalid or incomplete, it is the responsibility of the recipient to challenge that answer by addressing constructive, clear and precise questions or arguments to the sender;
Each party shall give reasonable time to the other for providing appropriate answers to its questions;
Making every effort to find an agreement also means that the parties exhaust their means to find an agreement. When negotiations are substantively progressing and no regulatory deadline is imminent, it is preferable to continue the negotiations;
Both parties still share the obligation to make every effort to find an agreement on data sharing after this decision, and are encouraged to take the present decision into account in their further negotiations;
If the future data sharing negotiation would fail again, the claimant is free to submit another claim, covering the efforts subsequent to the present decision. ECHA reminds both parties that the outcome of a data sharing dispute procedure can never satisfy any party in the way a voluntary agreement would. Accordingly, ECHA strongly encourages the parties to continue their efforts to reach an agreement that would be satisfactory for both parties; and
ECHA is never a party in the negotiations. Therefore, all arguments have to be communicated between both parties directly.
Heretofore, the data sharing and negotiation process under REACH and BPR have suffered from a lack of transparency and observable guidance from ECHA, much to the programs' detriment. These cases provide significant insight into the data sharing negotiation process under REACH and BPR, and offer meaningful guidance on when parties should consider filing a dispute claim, and the likelihood of success of such claims.
REACH Article 30(1) requires Substance Information Exchange Forum (SIEF) participants and data owners to "make every effort to ensure that the costs of sharing the information are determined in a fair, transparent and non discriminatory way." Cases submitted to ECHA for disputes on the sharing of studies involving vertebrate animal testing require ECHA under REACH Article 30(3) to determine whether to grant permission to refer to the information contained in the registration dossier. ECHA states the following regarding its procedure under Article 30(3):
ECHA can assist in the resolution of data sharing disputes between existing and potential registrants. A claim must only be initiated as a last resort after all possible avenues have been explored between the parties.
Any potential registrant who lodges a data sharing dispute with ECHA must always obtain a decision from ECHA before submitting the registration dossier.
If there is a dispute, ECHA's decision will be based on an assessment of the parties' respective efforts to reach an agreement on the sharing of the data and its costs in a fair, transparent and non-discriminatory way.
A potential registrant initiating a data sharing dispute procedure with ECHA must demonstrate the efforts made by all the parties to reach an agreement and must provide appropriate documentary evidence.
Of the 25 REACH decisions released by ECHA, 15 of those decisions resolved outcomes unfavorable to the claimant, nine decisions resolved outcomes favorable to the claimant, and in one case, ECHA found that the dispute was inadmissible because the evidence submitted with the claim related to one substance, while the substance registered by the data owner was another substance. In most cases where ECHA did not grant permission to the applicant to refer to the information requested, ECHA determined that the applicant had not "made every effort to reach an agreement." Factors that seem to influence ECHA's determination that a party did not "make every effort" include: when ample time for negotiations has not been provided; when all avenues to reach an agreement had not been exhausted or when the submission of the dispute to ECHA is premature; and when negotiations were not handled competently so that negotiations advance.
Recognizing the complications involved in data sharing negotiations, ECHA states in one decision that negotiations should be initiated six to 12 months prior to a particular REACH deadline. In other decisions, however, ECHA states it was "sufficiently early" to start negotiations four months before a registration deadline. ECHA ruled in one case that an applicant filed its dispute claim prematurely because only 12 days had passed between the applicant's first request for a cost breakdown for a Letter of Access (LoA) to filing the claim to ECHA. In other cases, several months passed between the commencement of negotiations and the filing of a dispute claim, but ECHA still found that negotiations had not been exhausted when responses were provided by data owners within a reasonable time and/or when no justification was provided for why an applicant wanted to complete negotiations within a certain timeframe that was not related to relevant registration deadlines under REACH. In one case, ECHA states:
Indeed, the speed of the negotiations has to be considered in proportion with the necessity to submit a registration. In the present case, a year and a half remained before the registration deadline applicable to the potential registrant. As there is still ample time for the parties to reach an agreement before the relevant registration deadline, ECHA cannot consider that the information of the failure to reach an agreement was submitted as a measure of last resort.
In addition to their timing, ECHA also focused on the nature of the negotiations and the steps the parties made towards resolution. In particular, ECHA ruled against applicants that did not substantiate claims (e.g., complaint that a LoA cost was "high" without specifically challenging the cost breakdown) or applicants that did not provide reasons for disagreeing with the proposed conditions for data sharing. ECHA found in these cases that the absence of arguments, questions, or challenges by the applicants to the information provided by the data owners meant that the applicants "did not contribute effectively to the data sharing negotiations."
When ECHA found in favor of a claimant, the cases indicate that ECHA generally determined that the existing registrant did not disclose adequately the calculations behind the proposed LoA cost sharing mechanism, and thus did not make every effort to ensure the cost of sharing the information is determined in a "fair, transparent, and non-discriminatory way." In addition, in cases where ECHA found the registrant did not reply to claimant's requests, or did not communicate timely (e.g., in one case ECHA noted a registrant was not responsive when it took two months to reply), ECHA generally found in favor of the claimant and granted data citation rights.
In one case where ECHA ruled in favor of the claimant, the registrant did not respond to claimants' repeated specific questions for how certain costs (e.g., strategy costs, administration costs) had been determined, whether future tests had been paid, whether there were any costs not yet included, and how costs were split between registrants at different tonnage bands. ECHA states:
Considering that the Existing Registrants' had already summed up the various costs that were the subject of these questions, the necessary information to reply to the questions should have been readily available to them. If they were not, they should have replied to the Claimants and told them when they are able to reply.
In another case, the claimant sent three requests asking for further information on the costs to be shared, explaining why the price quoted by the registrant was high, and including an alternative proposal. ECHA found the claimant had made every effort to reach an agreement and applauded the efforts to find alternative solutions by proposing an alternative, and that the registrant did not make every effort since it did not respond to any of the claimant's requests.
ECHA also states that registrants must take the concerns of potential registrants seriously, and "where appropriate, remove studies from the data package." It is not sufficient, ECHA states, for an existing registrant to refer to a dossier already assembled for registrants at a higher tonnage band and refuse to modify the dossier, as this can be discriminatory to those registrants at a lower tonnage band. Importantly, ECHA identifies in one case what appears to be a per se discriminatory action, that being a consortium's failure to vary the LoA costs to reflect certain tonnage bands, declaring such behavior as "obviously discriminatory." Specifically, ECHA also found it a discriminatory practice for an existing registrant to impose a ten percent (10%) LoA price increase for registrants registering after 2010, in an attempt to incentivize parties to purchase LoA access earlier than they may need, stating: "[B]y forcing all registrants, who register after 2010, to pay the LoA in 2010, or otherwise to increase the price of the LoA, they have counteracted the explicit intention of the REACH Regulation and discriminated against the subsequent registrants."
Under BPR Article 63(1), the applicant and data owner are required to "make every effort to reach an agreement on the sharing of the results or studies requested." When negotiating, the standard for compensation as set forth in Article 63(4) is that it be "determined in a fair, transparent and non-discriminatory manner." Under BPR Article 63(3), ECHA must "give the prospective applicant permission to refer to the requested tests or studies, provided that the prospective applicant demonstrates that every effort has been made to reach an agreement and that the prospective applicant has paid the data owner a share of the costs incurred."
ECHA released two decisions related to data disputes under BPR. In both cases, ECHA disallowed the claimants permission to refer to the information requested from the data owner.
In one decision, even though the negotiations had taken place approximately five months before the applicant submitted its data dispute to ECHA, ECHA found that the applicant had not made every effort to reach agreement when it filed its dispute claim three working days after providing the data owner with comments on a draft secrecy agreement. Filing the case was premature since the applicant had not provided the data owner reasonable time to respond to applicant's comments on the draft secrecy agreement. The fact that comments were being exchanged also indicated to ECHA that "negotiations were progressing and had not reached a standstill," and thus "there was no reason to attempt to shortcut the negotiations by submitting a data sharing dispute."
In the second case, the fact that the applicant filed its dispute claim four days before a scheduled meeting with the data owner to discuss the pending issues was reason for ECHA to conclude that the applicant had not fulfilled its obligation to make every effort to reach an agreement. ECHA states: "Lodging a data sharing dispute claim with ECHA can only be a measure of last resort in case the negotiations have failed and every effort to reach an agreement has been exhausted." The filing of the dispute was also premature because the deadline at issue -- to be listed on the Article 95 approved supplier list by September 1, 2015 -- provided time for the parties to continue negotiations and did not "require these negotiations to be completed in a faster time."
Thus, factors that ECHA found indicating that an applicant was not making every effort to move negotiations forward and timely under BPR are similar to those factors considered under REACH, including whether the prospective applicant commenced negotiations timely, whether the applicant has explained adequately why negotiations must be conducted swiftly, and whether the applicant has exhausted negotiations and attempts to reach an agreement.
It is clear from these cases that ECHA recognizes that data sharing negotiations can be a complicated process, but also that the process is serious, cannot be pursued gratuitously, or terminated prematurely before all options have been exhausted. Companies that are data owners and applicants can learn from these decisions regarding the steps they can take to help achieve a favorable outcome.
Of particular note, these cases highlight the importance for companies to maintain a proper paper trail of all the negotiations and to convey specifically what issues may exist with the other party's proposal. An applicant that believes, for example, that a data owner's responses are too slow must document its efforts to explain why it needs resolution within a particular time. An applicant that believes the cost of a LoA is too high must set forth its reasons and explanation to support its position. Registrants must also ensure that they can document how they communicated timely and effectively, which requires providing a breakdown of costs and other explanations or justifications for reasonable requests about study costs.
With regard to the BPR and the impending September 1, 2015, deadline for companies to be listed on the Article 95 approved supplier list, it is important for companies that wish to be listed to consider commencing negotiations as soon as possible if they have not already done so. It is apparent from the decisions that ECHA recognizes it can take months to negotiate an agreement and ECHA may not rule favorably for an applicant that does not initiate negotiations with sufficient time to exhaust all reasonable remedies. It also appears from these decisions that a company should not submit a dispute claim to ECHA when there is still sufficient time to negotiate before the applicable registration deadline, as ECHA may determine that the submission is premature and the parties did not exhaust all efforts to reach a settlement. ECHA appears to impose a high standard for demonstrating clearly that the other party will not move from its position. This can be a particularly troubling issue for companies needing access to studies or to be listed under Article 95, that must balance ECHA's interest in having parties "make all efforts" with a company's interest in avoiding impending time constraints and meeting legal deadlines.