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# 52012SC0292

**COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization in the Union /\* SWD/2012/0292 final \*/**

  

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a Regulation of the
European Parliament and of the Council on Access to Genetic Resources and the
Fair and Equitable Sharing of Benefits Arising from their Utilization in the
Union
Part 1

This report commits only the
Commission's services involved in its preparation and does not prejudge the
final form of any decision to be taken by the Commission.

TABLE OF CONTENT

1............ Introduction. 4

2............ Procedural Issues and Consultation of Interested Parties. 5

2.1......... Inter-service
group. 5

2.2......... Consultations. 6

2.3......... Impact
Assessment Board. 7

3............ The results of the public consultation were summarised in much greater
detail. Problem definition  8

3.1......... Implementing
the Nagoya Protocol: is the EU legal framework fit for the purpose?. 9

3.2......... Current
practices of access to and utilization of genetic resources and associated
traditional knowledge (the "EU baseline") 12

3.3......... The
EU's right to act and justification. 19

4............ Objectives. 20

4.1......... General
objective. 20

4.2......... Specific
objectives. 20

4.3......... Operational
objectives. 21

5............ Policy Options. 21

5.1......... The
Business as Usual (BAU) 22

5.2......... Options
for addressing the Access pillar of the Protocol 23

5.3......... Options
for addressing the User-Compliance pillar of the Protocol 23

5.4......... Options
on the Temporal Application of binding EU-level measures. 26

5.5......... Options
for Complementary measures in support of the Protocol implementation. 27

6............ Analysis of Impacts. 29

6.1......... General
remarks. 29

6.2......... Access
Pillar 33

6.3......... User-Compliance
Pillar 36

6.4......... Temporal
Application of Binding EU-level measures. 43

6.5......... Hypothetical
scenarios. 44

6.6......... Complementary
Measures. 45

6.7......... Overview
of the analysis results. 48

7............ Monitoring and Evaluation. 51

Glossary of key terms used in the context of "Access and
Benefit-sharing" 54

Overview of Tables and Boxes. 58

1.           Introduction

Genetic resources - the gene pool in both
natural and cultivated stocks - play a significant and growing role in many
economic sectors: food, the development of medicines, development of bio-based
sources of renewable energy,
etc. 26% of all new approved drugs over the last 30
years are either natural products or have been derived from a natural product.[1]

The European Union and all of its 27 Member States are Parties to
the Convention on Biological Diversity[2] (CBD). The CBD recognizes
that states have sovereign rights over genetic resources found within their
jurisdiction and the authority to determine access to
such resources. The Convention obliges all Parties to facilitate access to
genetic resources over which they hold sovereign rights. It also obliges all
Parties to share in a fair and equitable way the results of research and
development and the benefits arising from the commercial and other utilization
of genetic resources with the Party providing these resources.

The CBD also addresses the rights of
indigenous and local communities that hold traditional knowledge associated
with genetic resources, and which may provide important lead information for
the scientific discovery of interesting genetic or biochemical properties.

However, the CBD currently provides little
detail on how access and benefit-sharing (ABS) for the use of genetic resources
and associated traditional knowledge should be done in practice. Particularly
industrialized country Parties have been very reluctant to adopt measures
supporting effective benefit-sharing of their researchers and companies. As one
consequence, some countries have established increasingly restrictive
conditions for access to genetic resources or associated traditional knowledge.
At the same time and in the absence of clear rules, European researchers and
companies have been accused of 'biopiracy' by countries claiming a violation of
their sovereign rights. These problems have seriously undermined global
progress to conserve and sustainably use biological diversity; not least since states
that are considered as 'biodiversity-hotspots' stand to gain the most from an
effective ABS framework.

The issue of ABS is also relevant in international fora outside the
Biodiversity Convention. Most prominently, the International Treaty on Plant
Genetic Resources for Food and Agriculture was negotiated and in November 2001
adopted in the framework of the UN Food and Agriculture Organization as a
specialised ABS instrument. The FAO Commission on Genetic Resources for Food
and Agriculture has embarked on a multi-year programme of work on the relevance
of ABS to different types of genetic resources used for food or agriculture
purposes. More recently, members of the World Health Organization have adopted
a Pandemic Influenza Preparedness Framework that balances interests in the
rapid sharing of virus samples with the interest in sharing related benefits. The
issue of ABS is also being discussed under the UN General Assembly in the
context of a broader framework of measures to protect biological diversity in
the high seas. In addition, intellectual property rights aspects of protecting
innovations based on the utilisation of genetic resources and traditional
knowledge associated with such resources are discussed in both the World
Intellectual Property Organization and in the WTO Agreement on Trade Related
Aspects of Intellectual Property Rights.

The "Nagoya
Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of
Benefits Arising from Their Utilization to the Convention on Biological Diversity"
(hereinafter: Nagoya Protocol) is a new international
treaty adopted on 29 October 2010 by the 193 Parties to the CBD by consensus.
It is a treaty with legally binding effects that significantly expands the
general ABS framework of the CBD. The Nagoya Protocol is expected to enter into
force in 2014. Once operational, the Nagoya Protocol
will generate significant benefits for biodiversity conservation in states that
make available the genetic resources over which they hold sovereign rights. It
will in particular:

-
Establish more predictable conditions for access
to genetic resources.

-
Ensure benefit-sharing between users and
providers of genetic resources.

-
Ensure that only legally acquired genetic
resources are used.

The EU and its Member States are politically
committed to become Parties to the Protocol to secure access of EU researchers
and companies to quality samples of genetic resources, based on reliable access
decisions at low transaction costs.[3] This will create new
opportunities for nature-based research, and contribute to the development of a
bio-based economy.[4]

This report presents the assessment of the
impacts of EU implementation of the Nagoya Protocol. Starting from the main obligations
of Parties to the Nagoya Protocol, particularly those on access and on
user-compliance, it identifies different options for meeting these obligations
(as there is still flexibility on key issues), and it analyses for each option
how it would impact on the EU acquis and on existing practices of providing and
utilizing genetic resources and associated traditional knowledge in the EU, and
on our relationship with major international partners. In particular, it
examines the value-added of EU action in the form of coordinating and setting
common rules compared to a baseline where Member States decide to implement the
Nagoya Protocol in their own way.

2.           Procedural
Issues and Consultation of Interested Parties

The CWP 2012 foresees the adoption of an
"ABS package" implementing the Nagoya Protocol for the third quarter
of 2012 (2012/ENV/002).

2.1.        Inter-service
group

A Commission Impact
Assessment Steering Group was established in February 2012. The group was led
by DG Environment. The following Commission services indicated their interest
to follow the work: SG, AGRI, DEVCO, EEAS, ENTR, JUST, LS, MARE, MARKT, RTD,
SANCO, TAXUD, TRADE. The group met 3 times to discuss drafts of the consultant study,
and 2 times to discuss this IA study. All members of the group were regularly
informed and consulted by email.

2.2.        Consultations

Consultations with the EU Member States

The Commission regularly informed Member States in meetings at
Council Working Party level on the state of play in the development of EU
implementing measures without prejudging in any shape or form the necessary
discussion between Commission services. Regular informal meetings with ABS
experts of Member States confirmed that the two Member States (ES, DK) that
initially indicated their intention to unilaterally move ahead to implement and
ratify the Nagoya Protocol, have decided to wait for the presentation of an
eventual EU proposal. The broad majority of Member States, particularly those
with major user interests (DE, UK, FR), have consistently stressed that they
would see the need for an EU-coordinated approach to implementation. The need
for an EU-coordinated approach to implementation and ratification was also
stressed in an opinion of the Council Legal Service.

Public Consultation

The Commission held a web-based public
consultation from 24 October to 30 December 2011 to seek feedback on a list of
questions that addressed key aspects of Nagoya Protocol implementation. 43
replies were received that represented a much broader number of respondents,
since the majority of replies came from European or international associations
with hundreds or thousands of members each. The respondents covered most sectors
potentially affected by implement measures under the Nagoya Protocol. All
respondents (except a few neutral replies) pleaded for an EU-harmonised
approach to user-compliance measures, with a clear majority considering an
EU-Regulation as the most appropriate instrument for achieving harmonised
implementation. The majority of respondents considered that implementing
measures could have positive effects on competitiveness and on administrative
burden, but stressed that such effects depend on the specific implementing
measures chosen. Industrial users (e.g. pharmaceutical, biotechnology, seeds,
health&beauty) stressed their lengthy supply chains and that information
about prior informed consent and benefit-sharing arrangements is currently not
available at points in the chain where it may be needed. Research institutions
stressed the importance of clear, simple and transparent rules and the need for
clarifying ABS-related issues at the time of access to avoid difficulties later
on. A summary of the public consultation is included in Annex 3.

Ad hoc consultations

DG Environment organised a technical
meeting with EU stakeholders on 26 January 2012. It invited all respondents to
the public consultation, Brussels-based representatives of stakeholders, and
experts nominated by Member States. At the meeting, the Commission presented
its summary of the public consultation, whereas members of the consultant team
presented tentative findings of their work. Participants used the opportunity
to challenge the consultant team on some of their findings.

DG Environment officials held many meetings
with representatives of botanical gardens, culture collections, industry federations
or individual companies and participated in various expert conferences on the
Nagoya Protocol. The consultant team conducted semi-structured interviews with
representatives of stakeholders and companies.

Consultations with third countries

In 2011, DG Environment asked several EU
delegations in third countries to seek information from major partner countries
on the state of play and their concrete ideas for Nagoya Protocol implementation.
The feedback received was complemented by more detailed bilateral discussions
with Australia, Brazil, India, Japan, Mexico and Switzerland.

Expert study

To support the impact assessment process,
the Commission contracted external consultants to analyse the legal and
economic impacts of implementing the Nagoya Protocol in the European Union. Information from the consultant study was
used as input to this IA. The consultant work included twelve sectoral studies
on different groups and sectors utilising genetic resources in the Union. The
sectoral studies were complemented by interviews with experts from the groups
and sectors studied and overall helped – together with the information already
available to the Commission – to understand the relevance of genetic resources
to EU users, current approaches to ABS by users, existing bottlenecks, as well
as the expectations of stakeholders and their views on main policy options.

2.3.        Impact
Assessment Board

The draft Impact Assessment was submitted
to the Board on 20 June 2012 and discussed at the Board meeting of 18 July 2012.

The key amendments made to the impact
assessment following the issuing of the Board opinion are:

–
A clearer description of the international legal
and political context through amendments to the introduction and the problem
definition of the study.

–
A more elaborate explanation of current
practices of genetic resources utilisation in the Union.

–
A clearer explanation on why a unilateral
implementation of the user-compliance pillar of the Protocol is likely to
negatively affect the internal market including by providing more specific
examples.

–
Clarification on the appropriate legal basis for
implementing the Nagoya Protocol and more detailed considerations on why
binding EU-level measures on access currently would not seem justified.

–
Development of more elaborate monitoring
indicators linked to the objectives and the proposed implementing measures.

–
A general explanation on the rationale behind
the design of the policy options considered in this study and particularly how
the due diligence option would be implemented, monitored and enforced, and the sanctions
envisaged. These additions are complemented by more detailed considerations on eventual
impacts and costs.

–
More detailed considerations as regards the
creation of a level playing field, and the impacts and benefits of the due
diligence option particularly for SMEs and effects on the use of public funds.

–
A clearer explanation of the rationale for and benefits
of introducing a system of 'trusted sources'.

–
The results of the public consultation were
summarised in much greater detail.

3.           Problem
definition

The EU and most of its Member States[5]
have signed the Nagoya Protocol and thereby committed themselves to work
towards its implementation and ratification. This political commitment is also
expressed in statements by the European Parliament, the Council of the European
Union, and by the Commission.[6]

Other industrialized countries that have
signed are Australia, Japan, Norway, Korea, Switzerland and the Ukraine. The US
cannot ratify the Protocol as it is not a Party to the CBD. Only Norway has so
far put in place implementing legislation. Switzerland is advanced in
developing implementing legislation, but likely to wait with finalization until
there is more clarity on the EU's approach. Other major partners (e.g., Korea,
Japan) have signaled their intention to develop implementing measures in view
of the EU's approach to achieve a level-playing field for their researchers and
companies. Australia arguably has the worlds best functioning domestic access
framework and would thus benefit from ratification and indeed it has expressed
its interest in close collaboration with the EU on user-compliance measures.
Nevertheless, like New Zealand and Canada, Australia is engaged in discussion
with its indigenous communities as regards rights over resources, including
genetic resources. These three countries may not ratify the Protocol before they
have significantly advanced their domestic discussion on this matter.

Many countries from the emerging economies
and developing countries group had put in place domestic access frameworks prior
to the adoption of the Nagoya Protocol. The main political reason for the
launching of the Nagoya Protocol negotiation was a perception by these
countries that their efforts on access would not be supported by complementary
efforts of user countries, such as the EU and its Member States. After the
Protocol's adoption and its signature by many industrialized countries, there
is now a strong expectation that industrialized countries such as the EU and
its Member States will take effective implementing measures, particularly in
the field of user-compliance. Some emerging economies and developing countries
are now revising their access frameworks in light of the Protocol. Most have
little experience with the user-compliance measures required under the Nagoya
Protocol. Particularly emerging economies that need to balance provider with
user interest (e.g., Brazil, India) have expressed their interest in a close
dialogue with the EU particularly on user-compliance measures.

Overall, there is a major expectation that
the EU and its Member States will swiftly ratify and implement the Nagoya
Protocol. This expectation also presents a major opportunity, since the EU's
approach to user-compliance will become a main reference point for
user-compliance measures taken by other industrialized countries and in emerging
economies. It also seems that failure of the EU and its Member States to ratify
and implement the Nagoya Protocol would deepen the frustration of major
provider countries, particularly from the so called "mega-diverse"
group of countries. This would very likely result in increasing restrictions on
EU researchers and companies that wish to access quality samples of genetic
resources from these countries and thereby compromise important EU objectives and
hamper the commercial and non-commercial interests of EU users (see 3.2.1
below).

The problem addressed in this IA is to
identify a legally sound, effective and efficient way of implementing the
Nagoya Protocol in the Union, through measures that satisfy our international
obligations under the Protocol and that create legal certainty and an enabling
context for those involved in research and development on genetic resources in
the EU.[7]

3.1.        Implementing the Nagoya Protocol: is the EU legal framework fit for
the purpose?

Box 1
sets out a hypothetical, best-practice case of access and benefit-sharing that
would be consistent with the basic access and benefit-sharing framework of the
CBD.

Box 1: A hypothetical,
best-practice case of access and benefit-sharing

A French
researcher seeks to collect a little-known marine sponge from the Great Barrier
reef in north-eastern Australia for basic research on its genetic and
biochemical properties. The researcher logs on to the internet and applies
electronically to the Queensland ABS authority for a permit to collect marine
sponges for non-commercial research in a specified area of the reef. He
receives the permit within ten working days after the Queensland ABS authority
has done a basic check on the information provided. The collecting activity takes
place after the french researcher has also (electronically) signed the
standardised benefit-sharing arrangement for non-commercial research, which is a
private law contract under Australian law. The contract allows the french researcher
to do non-commercial research on the collected samples, it excludes any use for
commercial purpose. He must put a reference sample of each collected species in
the collection of Queensland University and also commits to sending them a copy
of publications resulting from research on the collected sponges. Publications
must mention the existence of the benefit-sharing contract and the use
restrictions on the samples. The researcher is allowed to pass on samples to
other researchers provided that these also agree to be bound by the conditions
set out in the benefit-sharing contract.

A
small biotech company in Germany is specialised in developing molecules for use
in cancer medication. One of its scientists reads a paper published by the
above french researcher on molecules from marine sponges from the Great Barrier
reef, and considers that these molecules could help in an ongoing project. He
gets in touch with the reference collection at Queensland University and
applies for access to the samples identified in the publication, he indicates
the commercial interest and accepts paying the standardised small fee for preparation
and shipment of the samples. He also signs a standardised benefit-sharing
contract that allows patenting of discoveries made in return for a commitment
to sharing 2% of economic revenues that may result from an invention. The
german biotech company discovers that one of the samples from Queensland
University contains a molecule that is highly reactive with a specific type of tumor
cells. Through various steps and modifications, company scientists manage to
suppress unwanted properties of the molecule, while maintaining its reactivity.
The company successfully obtains a patent on this discovery.

Practice has shown, however, that effective
ABS transactions may face typical "problem" situations. For example:

–
Genetic resources are collected in violation of
the laws of the country of origin. International law would not support a claim
by a representative of this country in the court of an EU Member State where
the illegally acquired resources are utilised.

–
The responsible authorities of a country grant a
permit for bioprospecting in indigenous territories without prior consultation
with indigenous representatives. Is the European researcher allowed to use the
obtained samples or not?

–
A benefit-sharing contract between a provider
and a research institute in the EU excludes commercial uses, samples are
nevertheless passed on to other users for applied research without mentioning the
ABS-related restrictions. One of these samples is used some years later by a
company for developing a nature-based product. The company that successfully
sells its nature-based product is alleged of "biopiracy". Is the lack
of awareness by that company an acceptable defense? Is the person that broke
the information-chain liable?

Access and Benefit-sharing according to
the Nagoya Protocol

The CBD does not provide clarity how its
Parties must address these and other "problem" situations. The Nagoya
Protocol is much more detailed. It rests on two main pillars.

The access pillar leaves
Parties discretion whether they wish to regulate access, and require prior
informed consent and benefit-sharing for the use of their genetic resources or
not. However, if a Party decides to do so, then it must implement
the fairly detailed "international access standards" set out in the treaty.
The Protocol also clarifies that states must engage
with their indigenous and local communities in case access is sought to
traditional knowledge or to genetic resources held by these communities. Main Protocol
ideas in relation to access include: (i) government authorities or indigenous
representatives must give their prior informed consent before access can take
place, (ii) specific benefit-sharing obligations must be set out in private law
contracts between a provider and a user, and (iii) access frameworks must be
clear and transparent, based on non-arbitrary rules, and result in reliable and
timely decisions, in a cost-effective manner.

The discretion of Parties to require prior
informed consent or not means that states may ratify the Nagoya Protocol
without requiring prior informed consent and benefit-sharing for the use of
genetic resources over which they hold sovereign rights. Nevertheless, Parties
that choose to require prior informed consent must comply with the Protocol
obligations on access; it is not possible to comply with these
access-provisions through voluntary measures.

The user-compliance pillar of
the Protocol obliges all Parties to the Protocol to take measures that
only legally acquired genetic resources and associated traditional knowledge
are utilized within their jurisdiction. Parties must monitor the compliance of
users within their jurisdiction and designate one or more checkpoints for this
task. They must also take appropriate, effective and proportionate measures in
cases where users within their jurisdiction do not comply with their ABS-related
obligations. Parties must also ensure that disputes arising from specific
benefit-sharing contracts can be taken to court.

It is not possible for a Party to comply
with the user compliance obligations of the Protocol without taking legally
binding measures. However, different than in the case of access, the
user-compliance provisions of the Nagoya Protocol leave Parties quite some
discretion on the type and mix of implementing measures chosen.

The Nagoya Protocol does not make an
explicit statement on its temporal application. Academic commentators hold
different views on this issue.[8] Parties must therefore
address the temporal application of their implementing measures: whether
these will apply only to genetic resources and
associated traditional knowledge acquired after the Protocol's entry into force
(expected for 2014) or also to uses of genetic resources and traditional
knowledge that were acquired after the entry into force of the CBD in December
1993.

Further aspects that must be addressed concerns: (a) the obligation of
Parties to respect existing specialized ABS instruments[9]
and to establish a mutually supportive relationship with other relevant
instruments and processes, (b) the obligation to promote and encourage
non-commercial research, (c) the obligation to pay due regard to genetic resources
with pathogenic properties, and (d) to consider the special characteristics of
genetic resources for food and agriculture. Another important issue concerns (e)
the management of relations with non-Parties to the Protocol.

The Protocol also obliges its Parties to
establish a National Focal Point on ABS to liaise with the international
Secretariat and to respond to information requests by stakeholders. Parties
must also designate one or more Competent National Authority responsible
for granting access and advising on applicable procedures for requiring prior
informed consent and entering into mutually agreed terms. Parties may designate
a single entity to fulfill the functions of both focal points and competent
national authority.

Is EU law fit for the purpose?

The Nagoya Protocol is a so called
"mixed agreement". It allows both the Union and the Member States to
become Parties to the treaty at the same time. In this case, the Union and each
of its Member States must be able to demonstrate for itself full compliance with
all Protocol obligations. How this is achieved is an entirely internal matter
to the EU and its Member States. In principle, the spectrum of possibilities
ranges from the adoption of legally binding measures only at the level of the
Member States with supportive, soft measures at Union-level to a full
harmonization of legally binding measures at Union level supported by soft
measures at the level of the Member States. The concrete approach chosen for
implementing the Nagoya Protocol in the EU and its Member States rests on legal
and practical considerations: any EU-level intervention presupposes the
existence of Union competence and the demonstration of added value that will
not be achieved through implementing measures under the sole responsibility of
Member States.

The Protocol's access pillar
is not implemented at the Union-level, as currently no
Union-level law would establish whether access to genetic resources in the EU
requires prior informed consent and benefit-sharing. Some Member States
strongly feel that the decision whether to require prior informed consent and
benefit-sharing or not is an issue of national sovereignty and cannot be
regulated in Union law. Nevertheless, if a Member States chooses to require
prior informed consent and benefit-sharing, its domestic access framework could
become relevant to the acquis: EU nature legislation seems indirectly relevant
for collecting activities in the wild. Other EU laws regulate the exchange of specific
genetic resources used for agriculture or health purposes. It can also not be
excluded that Member State access systems could come in tension with
fundamental principles of non-discrimination, or that widely differing
approaches to access could negatively affect the freedom of researchers or the
free movement of goods.

A survey of ABS laws and policies of
eight EU Member States conducted in preparing this IA[10]
showed that only two Member States (ES, BG) have so far developed access
legislation. Other Member States have explicitly decided not to require prior
informed consent (NL). Upon ratification of the Nagoya Protocol, further Member
States might decide to require prior informed consent in the future. France,
for instance, has indicated that it is working on domestic access legislation
at least for its overseas territories. Member States that decide to move into
this direction must comply with the detailed access-provisions of the Nagoya
Protocol. In doing so, they can also build on experience with domestic access
frameworks in, for example, Australia or Latin America.

The Protocol's user-compliance pillar
is not implemented at Union-level. Nevertheless, the activities
that must be regulated are closely related to the EU internal market. Differing
obligations on users to manage ABS-related information in different Member
States, for example, could create significant costs and barriers for EU
researchers and companies that are active in more than one Member State.
Furthermore, some user measures, particularly where these would require changes
in product approval procedures, cannot be implemented without changes to the
acquis.

The above-mentioned survey of ABS
laws and policies of eight EU Member States showed that none of the
Member States surveyed has so far taken user-compliance measures as required
under the Protocol. Member States legislating on user-compliance would have
significant discretion how to design such measures. Only few examples are in
place worldwide (eg, Norway) or under development (eg, Switzerland), and these are
based on conceptually different intervention logics.

The analysis concludes that:

–
the access pillar of the Nagoya
Protocol establishes detailed obligations on Parties that decide to require
prior informed consent and benefit-sharing for the use of their genetic
resources. A main problem addressed in this study hence is to analyze whether
it seems appropriate to leave this part of the Protocol implementation to the
Member States or whether an EU-level intervention for implementing the access pillar
of the Protocol would create clear added value.

–
The user-compliance pillar requires
legally binding measures but leaves significant discretion on the design and
mix of implementing measures chosen. One main problem addressed in this study
is to analyze whether it seems possible to leave this part of the Protocol
implementation to the Member States or whether an EU-level intervention for
implementing the user-compliance pillar of the Protocol is needed.

3.2.        Current practices of access to and utilization of genetic resources
and associated traditional knowledge (the "EU baseline")

ABS is a new field of policy and activity,
thus data limitations have been encountered in the course of this study.
Gaps exist particularly with respect to the amount of genetic resources utilised
within sectors and the economic relevance of such utilisation within the EU. Nevertheless, the sectoral studies conducted in
support of this IA provide a thorough understanding of the current practices of
access to and utilization of genetic resources and associated traditional
knowledge within the EU. This section highlights important features of these
practices. A much more detailed description is found in Annex 8 to this study
and served as the "EU baseline" for identifying suitable implementing
measures and for understanding their impacts.

3.2.1.     Access and use of genetic
resources and associated traditional knowledge in the EU today

Genetic resources
are utilized for a wide range of purposes, by a wide range of different actors
with different interests. Traditional knowledge associated with genetic
resources is relevant in specific cases but of limited relevance overall.

Multiple actors intervene at different
stages of the genetic resources value chain. This value chain ranges from
collecting, storing, and making available genetic resources for research and
development, over basic and applied research on genetic resources, to the
eventual development and commercialization of products and services.[11]
Box 2 introduces the main actors and their place in the EU genetic resources
value chain and explains how genetic resources and associated traditional
knowledge are important to them (Annex 8 contains more information).

The importance of genetic resources for the
EU varies across sectors. For some EU actors use of genetic resources is their
core-business. This includes collections and some academic researchers.
However, it also includes all commercial uses that by definition innovate and
develop products on the basis of organisms, genes or biochemicals, such as
plant and animal breeding companies, biotechnology companies, or the
bio-control industry. Other actors use material found in nature mainly for its
informational value, when searching for molecules or genes with interesting
properties that might help meeting specific challenges in product development (e.g.
industrial biotechnology or pharmaceutical industries). Other actors again build
products on extracts from material found in nature. This is in particular the
case for some companies in the cosmetics or food and beverage industry. A
disruption of the supply of genetic resources from the wild and from
collections would negatively affect all EU users, although to different
degrees. For plant and animal breeders and the biocontrol industry it would
effectively disrupt their business. For pharmaceutical or industrial
biotechnology companies it would limit the range of available sources of
information and inspiration in R&D activities and thus lower their
innovation potential. Companies in the cosmetics or food and beverage industry
would need to search for different sources for the needed extracts, identify
synthetic substitutes or modify the recipes used. They might also need to stop
the sale of products that are branded as based on specific natural ingredients.[12]

Traditional knowledge about properties and
functions of plants and animals in relation to their environments is generally recognized
as important, particularly as regards adaptation to climate change. Such
knowledge may provide lead information in scientific research for interesting
properties of plants or species. Overall, however, EU users make only limited
use of traditional knowledge associated with genetic resources.[13]

Box 2: Main actors and their placement in the EU genetic resources
value chain

Botanic gardens, hold documented collections of living
plants for scientific research, conservation, display and education. 550
botanic gardens out of 3021 worldwide are within the EU and the EU botanic
gardens are amongst the largest in the world (more than 50% of living plant
accessions are collected in Europe). Botanic gardens collect some of their new
samples in the wild, but also exchange samples with other botanic gardens. They
also provide samples to outside users.

Culture collections acquire, conserve and distribute
microorganisms and information about them to foster research and education. Among
the 601 culture collections worldwide 207 are located in Europe and 161 in the
EU. Culture collections rely heavily on the collecting of new material from the
wild (45% of their acquisitions); since most microbial genetic resources are
still unknown and since material collected must be stored alive.

Gene banks[14] collect, process, store, and distribute biological
specimens and associated information to support scientific research. Plant gene banks ensure that the varieties
and landraces of crops that underpin our food supply are secure and that they
are easily available for use by farmers, plant breeders and researchers. Animal
genebanks mainly fulfill conservation purposes and are less involved in the
exchange of genetic material for breeding purposes. Gene banks in the EU make a major contribution to the
conservation and utilisation of cultivated / domesticated diversity and related
wild species.

Academic research institutions conduct basic research on genetic resources
to identify its taxonomic nature or new properties or ingredients. Academic
researchers frequently collect genetic resources in the wild. Their research on
genetic resources, including through consideration of associated traditional
knowledge, is critical for biodiversity conservation. Some findings of academic
researchers are later used in product development.

The farm animal breeding industry breeds
animals for agriculture production. Its most important species are cattle,
sheep, goats, pigs and chicken. European
breeders are world leaders. They usually source material from within their company
or from connected farmers. The
industry currently makes little use of species found in the wild. Its future demand for wild species is, however,
expected to increase because of climate change.

The plant breeding or seed industry[15]
develops seed grains, cuttings, seedlings, and other plant propagation material
as an essential input for crop production, especially for agricultural,
vegetable and fruit plants. Plant breeders depend on the utilisation of genetic resources. Most
of the genetic resources used
exist in ex-situ collections. Indeed, breeders base their activity on a
fairly small number of species developed over decades (100-200 species in
floriculture and approximately 500 species as house plants). In 2009, the EU
had a global market share of
more than 20%.

The biocontrol industry develops and
sells techniques for crop-protection that uses 'biocontrol agents' (ie select
predatory or parasitic living organisms) to control pests. This industry
entirely relies on the
utilization of genetic resources. They heavily source new material from the
wild, but some also from ex-situ collections. Europe is the largest
market in the world for this industry in constant growth.

The cosmetics industry develops,
manufactures and sells traditional cosmetics products (e.g. perfumes, make-up)
and personal hygiene products (e.g. shampoos, soaps, tooth-care). The overall demand for wild genetic
resources in the sector is limited. However, collecting activities in the wild are very important for a niche market. European cosmetics
companies are among the 10 world leaders of the sector. The EU has a 50% share
of the global market.

The food and beverage industry is one of
the largest industrial sectors in the world and the largest manufacturing
sector in the EU. It covers a wide range of activities from farming to food
processing. However, parts of the industry rely on genetic resources collected
in the wild for developing new products on the basis of new natural ingredients
and extracts.

The horticulture industry includes
activities that range from amateur plant breeding to commercial production for
ornamental purpose. New products
are developed by utilising genetic resources that are mainly taken from ex
situ collections and sometimes collected in the wild. The size of the industry in Europe and
worldwide is relatively small.

Companies in the field of industrial
biotechnology develop, manufacture and sell products and services that
use or contain biological material as catalysts or feedstock to make industrial
products. The industry relies by definition on the use of genetic resources and
heavily invests in R&D. The
EU is one of four established biotechnology centres globally, next to the US, Canada and Australia. 90% of new material in this sector is
taken from the wild.

The pharmaceutical industry engages in
the discovery, development, and manufacture of drugs and medications. It
partially relies on access to genetic resources collected from the 'wild' to
identify promising compounds for product development. Biotechnology-based pharmaceuticals account for an
increasing share of the market
and access to genetic resources is particularly important for segments of the
industry involved in natural products research. In the last 30 years, 26
percent of new approved drugs were either natural products or had been derived
from a natural product. The future trend is unclear. The market for pharmaceuticals
is one of the biggest world-wide, dominated by the US, and followed by the EU
and Japan.

As regards the sourcing of genetic
resources and associated traditional knowledge, EU users may be grouped in two
broad categories. On the one hand side, there are collecting activities in the
wild, on the other hand side, users acquire samples and related information
from ex situ collections (gene banks, seed banks, databases). The discovery of
new or rare genetic diversity in nature is of great interest for scientific
research and some ex situ collections. It is therefore mostly university-based
researchers and scientists affiliated with ex situ collections that engage in
bioprospecting activities, mostly with an explicitly non-commercial purpose.
Commercial users of genetic resources, in contrast, rarely collect genetic
resources in the wild, except in some particular niches of innovation, such as
the biocontrol industry, parts of industrial biotechnology, and some small
pharmaceutical biotechnology companies. Overall, however, it seems that the
interest of commercial users to engage in bioprospecting has declined. In part
this reflects reluctance to directly deal with provider countries, in part
collecting activities in the wild have become less important for some of the
economically important and research-intensive sectors such as the seed industry
and a great proportion of the pharmaceutical and cosmetics industries.[16]

In contrast, the research done for this
study shows that EU ex situ collections play a fundamental role in the EU user
chain, acting as direct providers to both commercial and non-commercial users.
In fact, several commercial sectors including the horticultural and seed
industry source almost all of their genetic resources from ex situ collections.
Private and in-house collections are also important in various sectors
including the horticulture and seed industry, where in-house collections are
integral to the plant breeding process. Non-commercial sectors rely on ex situ
collections even more strongly. This is particularly the case for the academic
research sector, which often owns or is affiliated to particular ex situ
collections for the purposes of scientific research. However, it is also the
case for research done in botanical gardens or culture collections (e.g.
taxonomic work). Such research often relies on genetic material exchanged with
other collections, also to keep their collections and conservation activities
alive.[17]

Box 3: The Korean National Biodiversity
Research Institute (NIBR)

The
NIBR was established in 2007. It is mandated to conserve Korean biological
resources that are considered as national assets and precious source materials
for the country's biotechnology industry. NIBR provides the Korean bio-industry with access to samples
and/or information on wild species for basic and applied research. NIBR has
developed a national biological resources database network. It supports policy
development on biodiversity issues and also serves as an educational centre for the general public
to raise awareness about the importance of conserving and wisely using biological
resources. The Institute collaborates with various international partners such
as botanic gardens, museums or biological institutes to exchange samples and further
enrich its own collections as well as to exchange staff and experience, to
establish educational and training programmes, and to engage in joint research
activities

Source: <http://www.nibr.go.kr/english/main/main.jsp>

3.2.2.     How Demand for genetic
resources and associated traditional knowledge will evolve

The research undertaken for this study
indicates that demand for access to ‘wild’ genetic resources has declined in
most sectors, while interest in research and development on genetic resources
has increased overall. The future demand for genetic resources is therefore
expected to grow or at least to remain stable. Securing
continued and improved access to genetic resources therefore seems a major EU priority.
As explained above, this also suggests that the EU has a genuine interest not
to frustrate important partners particularly from the mega-diverse group of
countries. More restricted access practices in provider countries in the future
could compromise important EU objectives (see Box 4) and also hamper the
commercial and non-commercial interests of EU users.

Overall, the future demand for traditional
knowledge associated with genetic resources is likely to decline even further.
Such knowledge will remain relevant for some niche markets in the cosmetic and food industries. However, advances in scientific
research methods make traditional knowledge less and less relevant as lead
information for discovering interesting properties of genetic resources found
in the wild. This latter finding applies to all research-intensive value
chains, including the pharmaceutical, green, red and white biotechnology[18].

Box 4: Some examples how genetic resources
utilisation contributes to public goods

Future breeding programmes: Conserving and documenting wild relatives of plant
and animal species for future breeding programmes is widely considered as an
insurance against the impacts of climate change on food production systems.

Source: <http://www.fao.org/docrep/meeting/022/mb393e.pdf>

Environmentally sustainable pest control: Pest control with biological agents is an
important component of integrated pest management and reduces the use of plant
protection products such as pesticides.

Source: <http://lamar.colostate.edu/~hufbauer/Pages/biologicalcontrol.html>

Identifying active compounds for medicine
development: In April
2012, the Danish company LEO obtained FDA-approved for a topical gel against a precursor to skin cancer. The main
active ingredient of this gel is derived from the Euphorbia peplus plant
found in Australia, after an extraction, purification and crystallization
process of about five months. LEO will now seek market approval in other major
markets.

Source: <http://www.leo-pharma.us/>

Genetic resources also play a major role in developing
nature-based renewable energy to face the energy challenges of a
growing word population while ensuring biodiversity and environmental
protection and make the transition to a post-petroleum economy.

Source: Commission press
release on the "Bioeconomy for Europe" (Memo/12/97 of 13 February
2012)

3.2.3.     The EU genetic resources
value chain

The beginning of
the EU genetic resources value chain is characterized by long-term
perspectives, low-risks, low-costs, and the predominance of public funding;
while the end of the genetic resources value chain is characterized by high
investments, high costs and high-risks.

Genetic resources, and sometimes also
associated traditional knowledge, are of diverse importance across and within
sectors, be it for commercial or non-commercial activities. Analytically, it is
useful to distinguish between activities and players at the beginning of the
genetic resources value chain ("upstream") and activities and players
at its end ("downstream"). Those involved in "upstream"
activities (collecting in the wild, description of collected material, storing
in collections) face many common challenges in relation to access and
benefit-sharing, the same goes for those involved in "downstream"
activities (basic and applied research, product development and
commercialisation).

Actors at the beginning of the genetic
resources value chain (mostly collections and academic researchers) are in
direct contact with the laws and authorities of provider countries and must play
a key role in establishing ABS-related information and linking it to specific
samples collected or stored. Upstream actors are heavily dependent on public
funding. In itself, their activity is neither costly nor risky. These first
actors pass on samples of genetic resources and first research results to other
users that engage in basic or applied research. Actors situated at the end of
the genetic resources value chain make substantial investments in developing
new products. They often take on huge economic risks. They engage in often
lengthy development activities with uncertain outcomes and work in highly
competitive markets. Many of these downstream actors are strongly interested in collaborating with academic research to reduce risks
and accelerate product development. These downstream
actors largely depend on material and information passed on to them from
earlier users in the chain, including in relation to ABS.

EU users of
genetic resources are world leaders or play important roles globally at the high-value
end of the genetic resources value chain as well as at its beginning

EU collections, particularly culture
collections and botanical gardens, are amongst the largest in the world,
holding millions of samples and undertaking yearly thousands or even millions
of exchange transactions between themselves as well as with collections outside
the EU. Collections are the major supplier of research and development material
and related information for users further down in the chain. As regards the
latter, several EU companies, especially the pharmaceutical, breeding, food or
biotechnology industries are world leaders in their field with substantial
market shares. They contribute substantially to the EU's gross domestic
product.

SMEs are very
important in some sectors using genetic resources (e.g. biocontrol, plant and
animal breeding, horticulture), they are also important in some steps of the
genetic resources value chain (e.g. cosmetics, food, pharmaceuticals) where the
major investments are made by large, multinational corporations. In sectors such as cosmetics or food, SMEs and micro-enterprises are
dominating the market close to some multinational companies that are world
leaders. In other sectors, such as the breeding or biocontrol industries, particularly
the medium-sized companies are themselves international players.

3.2.4.     ABS best practices and
voluntary measures

Since the entry into force of the CBD in
1993, some EU users have engaged in the development of codes of conduct, the
formalization of transactions of genetic resources through material transfer
agreements, and the improvement of documentation systems. Primarily actors in
the up-stream part of the EU user chain (particularly culture collections and
botanic gardens) have taken significant steps to bring their conduct in line
with the ABS requirements of the CBD and to respect the laws of provider
countries. Further advances in this regard have been hampered by the lack of
appropriate financial and human resources of individual collections. As regards
downstream activities, ABS best practices exist but appear to be of less
significance overall. This reflects some variability in the level of awareness
and commitment to ABS-compliance practices in different sectors using genetic
resources as well as the fact that existing voluntary codes have different
levels of ambition and detail. Some examples of ABS best practice codes of
conduct are described in Box 5. Overall, it seems
important to consider existing voluntary initiatives on ABS as stepping stones
for a credible system of EU implementing measures.

Box 5: Examples of ABS best practice codes of conduct

Code of conduct developed by the World
Federation for Culture Collections:
The code of conduct (“MOSAICC”) translates the CBD provisions on ABS into
practical procedures for facilitated access to and transfer of microbial
genetic resources. One important part addresses the collection of new samples
of microorganisms in the wild. The code of conduct further promotes the
systematic use of a Global Unique Identifier to be attached to any item
accessed in situ either at the point of isolation of the microbial
genetic resource or at the point of deposit in the culture collection. MOSAICC also
seeks to achieve full transparency for all transactions from and between culture
collections, ranging from the request of specific ABS-related information, to
the use of model contracts, and standardised procedures for the transfer of
microbial genetic resources. While MOSAICC falls short of measures for
monitoring the user chain but, its implementation helps that members of the
WFCC have readily accessible information on the origin and conditions related
to any microbial genetic resources they hold, receive or transfer. It is
expected that this will greatly facilitate efforts of tracking the use of
microbial genetic resource throughout the value chain.

Source: <http://bccm.belspo.be/projects/mosaicc/#brochure>

The International Plant Exchange Network
(IPEN): IPEN was
initially developed by the association of botanic gardens in german speaking
countries. Since 2002, IPEN is managed by the European Consortium of Botanic
Gardens. Presently, 150 botanic gardens worldwide actively participate in the
network, of which 130 are based in the EU; this is about one-fourth of botanic
gardens in the EU. The network facilitates the exchange of living plant
material between its members, while respecting the ABS requirements of the CBD.
The Code of Conduct addresses four main aspects: 1) ensuring the legality of
living plant material that enters the network, 2) clear terms and conditions
for the circulation of material within IPEN, 3) sharing benefits arising from
non-commercial use with countries of origin, 4) transfers of plant material to users
outside the network.

Source: http://www.bgci.org/resource/ipen/

IFPMA “Guidelines on Access to Genetic
Resources and Equitable Sharing of Benefits Arising out of their Utilization”: The International Federation of Pharmaceutical
Manufacturers and Associations (IFPMA) represents national industry
associations and research-based pharmaceutical, biotechnology and vaccine
companies from both developed and developing countries. It has developed
“Guidelines on Access to Genetic Resources and Equitable Sharing of Benefits
Arising out of their Utilization”. These guidelines set out best practices to
be followed by companies that engage in bioprospecting, they do not take into
consideration sourcing from intermediaries. One recommended best practice is to
obtain prior informed consent for the acquisition and use of genetic resources
controlled by a country or indigenous people. Another is to disclose the
intended nature and field of use of the genetic resources when obtaining prior
informed consent.

Source: <www.ifpma.org>

BIO "Guidelines for Bioprospecting": The Biotechnology Industry Organization (BIO) is the
world's largest biotechnology association. Its "Guidelines for
Bioprospecting" seek to assist BIO members involved in bioprospecting
activities. They envision that
BIO members would enter into a “Bioprospecting Agreement” before collecting
physical samples of genetic resources in situ or accessing such
resources maintained ex situ. Such agreement would address the granting
of prior informed consent and list terms and conditions governing the collection
and use of the genetic resources. The guidelines further stipulate that records
should be maintained on the handling, storage and physical movement of
collected material and that companies should be prepared to share such records
upon request with the country providing the genetic resources. The guidelines
also stipulate that companies should not accept samples of collected genetic
resources from a third party that is not able to provide evidence of compliance
with PIC and established conditions governing the use of a sample.

Source: <http://www.bio.org/articles/bio-bioprospecting-guidelines>

3.3.        The
EU's right to act and justification

The Nagoya Protocol to the Convention on
Biological Diversity is a global environmental agreement that establishes a legally
binding framework for maximising the benefits of genetic resources use in
favour of the conservation and sustainable use of biological diversity
worldwide. The system of EU measures for implementing the Nagoya Protocol can
therefore be based on the Union's environment competence. The creation
of an EU-wide system of user-compliance measures could, in principle, also be
based on the Union's competence for the internal market as it avoids
negative effects on the internal market in nature-based products and services that
would result from a fragmentation of user-compliance systems in the Member
States. Nevertheless, given the context and overarching objective of the system
of measures, a use of the Union's environment competence seems more pertinent.

An EU-harmonised approach to implementing
the user-compliance pillar of the Protocol would provide for legal
certainty and establish a level playing field for all actors in the EU genetic
resources value chain, minimising their risks of operation and maximising
research and development opportunities for researchers and companies. It would
also prevent situations where differences in user-compliance obligations
between different Member States create costs and barriers for researchers and
companies that are active in more than one Member State. Notably, stakeholders
unanimously supported an EU harmonised approach to user-compliance in the
public consultation.[19]

However, the EU competence is not so
evident in addressing the provisions of the access pillar of the Protocol,
Some Member States strongly feel that the Union does not have competence to
decide whether access to genetic resources over which Member States hold
sovereign rights shall in the future be subject to prior informed consent and
benefit-sharing requirements or not. Arguably, Union competence is much clearer
in case where a Member State has decided to require prior informed consent and
benefit-sharing and the specific design of the domestic access framework of
that Member State will need to respect fundamental treaty disciplines on
non-discrimination or sectoral EU laws for instance in the field of the
exchange of agricultural genetic resources. Whatever the case may be, it seems
that there is currently no need for the Union to take binding Union-level measures
on access.  So far, only two Member States have  legislated on access, there is
very limited practical experience with the functioning of their access
frameworks, and no indication that these would raise issues under the acquis. Thus,
in ratifying the Nagoya Protocol the Union may choose to implement measures
that repond to only some of the Protocol's requirements, leaving others to its Member
States.

4.           Objectives

4.1.        General
objective

The general objective of this IA study is to
identify appropriate measures for implementing the Nagoya Protocol in the EU and
to enable the Union to ratify and comply with the Protocol.

4.2.        Specific
objectives

Union ratification of the Nagoya Protocol
and appropriate implementing measures should contribute to the following
specific objectives:

–
Support the conservation and sustainable use of
biological diversity within the EU and worldwide;

–
Provide EU collections, and researchers and
companies in Europe with improved and reliable access to quality samples of
genetic resources at low cost and with high legal certainty for acquired
material;

–
Maximise opportunities for research, development
and innovation in nature-based products and services, while establishing a
level playing field for all EU users of genetic resources, with particular
benefits for SMEs and for publicly funded, non-commercial research;

–
Protect the rights of indigenous and local
communities that grant access to their traditional knowledge associated with
genetic resources in accordance with the domestic laws of Parties to the Nagoya
Protocol;

–
Fully respect other international specialised
access and benefit-sharing instruments and be mutually supportive with other
relevant international instruments and processes.

4.3.        Operational
objectives

The chosen implementing measures should
also support achieving the following operational objectives:

–
Establish a credible system for user-compliance
measures;

–
Improve information on access and utilisation of
genetic resources in the EU;

–
Minimise overall implementation costs and
burdens, particularly for affected SMEs.

5.           Policy
Options

The policy options developed and considered
for the purpose of this study were drawn from a range of sources: the Nagoya
Protocol, existing legislation in third countries, EU experts, academic
literature, etc. The main criteria applied was that an option would need to
implement particular aspects of the Nagoya Protocol and that the totality of
options developed would need to address all aspects of the Protocol
implementation. The main options analysed in this study were also, where
appropriate, discussed with experts and stakeholders to sharpen their focus and
to deepen the understanding of their eventual impacts.

Table 1 summarises all policy options that were
considered in the course of this IA. The table highlights those options that are
described and analysed in detail in the report. More options were identified in
the initial screening of options, however they have been discarded. Annex 4 presents
more information on options that were considered but discarded and explains
clearly the reasons for discarding them. The main motivations related to doubts
about EU competence, no apparent need to intervene at EU-level, or apparent and
major legal and practical difficulties.

Table 1: Overview of all policy options
considered for this IA
(\* identifies discarded
options)

Business as Usual || - No Union ratification\* - Union ratification without implementing measures by Union or Member States (BAU)

Access pillar || Binding measures at MS level || - No EU action (A-1) - EU platform (A-2)

|| Binding measures at EU-level || - EU-wide waiver of PIC requirement\* - EU-wide minimum standards on access to genetic resources\* - EU-wide minimum standards on access to traditional knowledge\*

User-compliance pillar || Binding measures at MS level || Member States take binding measures with soft coordination at EU-level (UC-1)

|| Binding measures at EU-level || - Amending EU legislation on recognition of judgements\* - Broad understanding of traditional knowledge associated with genetic resources\* - Prohibition on EU nationals to collect in violation of third country laws\* - Prohibition on botanical gardens, gene banks and culture collections to include illegally acquired samples into their collection\* - General due diligence obligation on EU users (UC-2) - General due diligence obligation on EU users and system for formal recognition of collections as "trusted sources" (UC-3) - Prohibition to utilise illegally acquired genetic resources and "downstream" monitoring (UC-4)

Temporal application || In case of binding EU-level measures…decision on - Application of binding rules to future acquisitions of genetic resources (T-1) - Application of binding rules as of entry into force of the CBD in 1993 (T-2)

Complementary measures || - Bilateral agreements between EU and major provider countries or regions (C-1) - Sectoral codes of conduct and contractual model clauses (C-2) - Technical tools for tracking and monitoring (C-3) - Awareness raising and training activities (C-4) - Obligation on those collecting genetic resources in Member States with a free access policy to place reference samples in identified collections\*

As regards business as usual, the
study considered two distinct options: first, the Union decides not to ratify
the Protocol and second, the Union ratifies the Protocol but implementing
measures are not taken neither at Member State nor at Union level.

Different options are considered for
implementing the Protocol's access pillar and for implementing its user-compliance
pillar. To fully implement the Protocol, one access-option and one
user-compliance option must be chosen. For both categories of measures, the
study analyses a situation where binding measures are only taken at the level
of the Member States as baseline for identifying the value added of a possible
EU-level intervention.

In the case of support for binding EU-level
rules, a further decision is needed on the temporal application of such
rules.

To complete the picture, the IA also
analyses complementary measures that could be combined with the main
options on access and on user-compliance to enhance their effectiveness and to
lower costs. The value added of selecting one or all of these complementary
measures depends on primary choices on access and on user-compliance.

5.1.        The
Business as Usual (BAU)

Option BAU: Union ratification without
implementing measures at Union or Member State level

As shown in the problem definition, main
obligations of the Nagoya Protocol are currently neither implemented at Union
level nor by the Member States. If the Union ratifies the Protocol without
action at Member State or Union level, it will be in breach of its international
obligations. This would expose the Union to potential challenges under the
Protocol's non-compliance mechanism.[20] As one likely
consequence, European collections, researchers and companies would face more
restrictive access conditions in third countries. The "EU baseline"
shows, however, that EU users depend on reliable conditions for access to
quality samples of genetic resources. Union non-compliance would also have
broader consequences for the EU's credibility in global biodiversity
policy-making and could undermine the effectiveness of the CBD as the main
global framework for addressing the dramatic loss of species and habitats
worldwide.[21] Union ratification of
the Nagoya Protocol requires implementing measures at Member State or Union
level. This option is therefore not further analyzed in this IA.

The EU baseline of current user practices
as described in the problem definition and further detailed in Annex 8
constitutes the main reference point for assessing and comparing all
other options analyzed in this IA.

5.2.        Options
for addressing the Access pillar of the Protocol

Option
A-1: No EU level action

Option A-1 leaves it entirely to the
discretion of Member States whether to require benefit-sharing or not, and if
so, how to comply with the relevant obligations of the Nagoya Protocol. It
reflects that currently no Member State has an operational access framework in
place and that most Member States consider it outside of Union competence to
determine through Union law the legal status of genetic resources under the
sovereignty of Member States.

Option
A-2: EU platform for discussing access to genetic
resources and sharing best practices

The establishment of an EU platform on
access to genetic resources would be a flexible way for discussing access
practices between EU ABS focal points, competent national authorities, and EU
stakeholders. Deliberations would not be legally binding on participants and could
include: access to genetic resources in Member States requiring PIC and MAT;
simplified access for non-commercial research; access practices of EU ex-situ
collections; access of EU stakeholders in non-EU countries; and the sharing of best
practices. The deliberations of this platform would also help in identifying a need
for EU-level measures on access.

5.3.        Options
for addressing the User-Compliance pillar of the Protocol

Each of the four options presented would
apply to the utilisation of genetic resources and to traditional knowledge that
is directly associated with such resources. Each option also addresses relevant
monitoring measures, sanctions, and administrative aspects.

Option
UC-1: Open method of coordination

This option leaves maximum discretion to
Member States on how to implement the user-compliance provisions of the Nagoya
Protocol. Supportive EU-level coordination would aim at harmonising the
approach to implementing measures taken by the Member States. Coordination
could, for instance, include the basic approach to user-compliance taken by
Member States, the choice of checkpoints for monitoring user-compliance, the
type of information that would need to be collected or disclosed, and who would
carry the burden of information.

Option
UC-2: Self-standing general due diligence obligation on
EU users

Under this option EU users would need to
take steps to the best of their ability to ensure that genetic resources and
associated traditional knowledge utilised have been acquired in line with access
laws of provider countries and that resulting benefits are fairly and equitably
shared. This due diligence obligation would apply to all activities that
constitute "utilization of genetic resources" as defined in Article
2(c) Nagoya Protocol. This means to all conducting research and development on
the genetic or biochemical composition of genetic resources within EU
jurisdiction (i.e. basic research, applied research, product development). The
basic due diligence obligation and its core elements would be set out in an EU
Regulation.

An important feature of the due diligence concept
is that it does not establish an absolute obligation of result, but only
requires meeting a reasonable standard of care. For example, it would not
constitute a breach of the obligation if a user has been diligent but it
eventually turns out that a specific genetic resource utilised was illegally
acquired in a provider country by an earlier actor in the chain. The required
standard of care under a due diligence system varies depending on the type of user,
its capacity to take measures, its placement in the genetic resources value
chain, or sectoral characteristics. What is reasonable will also evolve over
time and may, for example, reflect new developments in codes of conduct or best
practices in a sector, or progress in technical tools for tracking and
monitoring genetic resources flow.

Option UC-2 foresees that the
implementation of (existing or future) best practice codes of conduct groups of
users (eg., botanical gardens, cosmetics industry, breeding industries) can be
considered as evidence of compliance with the due diligence obligation. To
support consistent implementation, the Commission would complement the
Regulation with guidance documents for specific groups of EU users. Monitoring
of user compliance with the due diligence obligation could focus on observable
activities within EU jurisdiction. It would be proportionate under this system to
oblige users of genetic resources to declare at identified points that they (have)
exercise(d) due diligence.

Suitable points for such declarations are,
for instance, the receipt of public research funds or when users intent to
market a product. Such declarations would be made upon the occasion of the
marketing of a product but formally independently from eventually needed
product approval permits. The declarations would be made to the competent
national authorities of Member States designated for the purpose of
implementing the EU Regulation, they would not be made to the authorities
eventually involved in granting a permit. Information about user-compliance
could also be included in regular company audit reports. Furthermore, designated
Member State authorities would be empowered to do ad hoc compliance checks
on users. Such compliance check would be undertaken on a risk-based approach.
Competent authorities would check compliance with the obligation of users to
make declarations as well as compliance with the due diligence obligation more
generally. Checks could include the gathering of information on due diligence
measures taken, the check of documentation on how due diligence was exercised
in specific cases as well as the physical inspection of sites. In case of
non-compliance with the Regulation users would be subject to penalties that
should includes administrative fines, but might also include in certain
situations the confiscation of illegally acquired genetic resources. The
competent national authorities of the Member Statess would be obliged to
regularly report in summary form to the Commission on due diligence
declarations received and checks and eventual findings made. and to the EU
competent national authority. The Commission would make  information on the main
features and the performance of the EU's due diligence system available to the
global information sharing portal established by the Nagoya Protocol (the so
called "Access and Benefit-sharing Clearing House Mechanism").

Given the importance of the details for the
reliable functioning of the system and for creating legal certainty to
stakeholders, an EU Regulation would seem appropriate to ensure the highest
level of harmonization and avoid the existence of different approaches to
implementation between Member States.

Option
UC-3: General due diligence obligation on EU users complemented
with a system to formally recognize collections as "trusted sources"
of genetic resources

Option UC-3 has two elements. It combines a
due diligence system as described in Option UC-2 with a system to identify collections
with control measures in place to assure that only well documented samples of
genetic resources are made available for utilisation. The concept of
"trusted sources" reflects that EU ex situ
collections play a fundamental role in the EU user chain, acting as direct
providers to both commercial and non-commercial users. It is assumed that a
system of trusted sources would substantially lower the risk that illegally
acquired genetic resources enter the genetic resources value chain, and that EU
users more easily comply with their due diligence obligation in case they are
sourcing their material from a trusted source.

The contact details of collections identified
as "trusted sources" would be listed in an EU-level register, which
would simply be a web-site.[22] The EU Regulation would
make explicit that users of genetic resources which acquire samples from a
collection listed in the EU-register would comply with a major part of their
due diligence obligation. The substantive criteria for identifying collections
as "trusted source" would build on existing best practice standards,
such as IPEN[23], and be set out in an EU
implementing act. The Option would leave it to Member States to identify
collections under their jurisdiction on the basis of the EU-level criteria and
to enter the contact details of such collections in the EU-level register.

Option
UC-4: Prohibition to utilise illegally acquired genetic
resources or associated traditional knowledge with a "downstream" monitoring
system

Opion UC-4 reflects the preferred
user-compliance approach of developing countries in the Nagoya Protocol
negotiation. The option is based on a general prohibition on users within EU
jurisdiction to utilise genetic resources or associated traditional knowledge
that were illegally acquired in Parties requiring prior informed consent and
the establishment of mutually agreed terms. Compliance with the prohibition is
monitored by obliging users to declare to public authorities at specific points
whether they utilised genetic resources in conformity with applicable ABS
requirements. The focus of the monitoring measures is to establish whether
present uses of genetic resources were/ are consistent with applicable rules of
provider countries and eventual benefit-sharing obligations. The basic
prohibition and the disclosure obligations would be set out in an EU
Regulation.

Collections and those conducting
non-commercial research within the EU would not be affected by disclosure
obligations as they do not aim to create genetic resources based products and
services. Such obligations would be established towards the end of the genetic
resources value chain, when an intellectual property right is applied for or a market
approval is sought. Users would be obliged to disclose at designated points whether
an innovation or a product is directly based on the utilisation of genetic
resources or associated traditional knowledge. In the affirmative case, they
would be further obliged to provide information on the origin or source of
genetic resources or associated traditional knowledge used and whether relevant
ABS requirements were complied with.

To comply with their disclosure obligation,
downstream users would need to determine whether earlier actors in the chain
utilised genetic resources or associated traditional knowledge to an extent
that this use must be disclosed. Disclosed information – for example on the
origin or source of genetic resources utilised, on compliance with provider
country laws at the time of access, or on compliance with eventually applicable
benefit-sharing obligations – would hence often depend and build on information
made available by earlier actors in the chain.

The designated monitoring authorities
(e.g., intellectual property rights offices, product approval authorities) would
channel the information received to the competent authorities of the Member
State or the EU that would have the obligation to check for compliance with applicable
ABS requirements, or to provider Parties or to the global ABS Clearing House Mechanism.
Failure to disclose, disclosure of false information, or a violation of the
prohibition to utilise illegally acquired genetic resources would be subject to
sanctions.

5.4.        Options
on the Temporal Application of binding EU-level measures

Option
T-1: Applying implementing measures to genetic
resources or associated traditional knowledge acquired after entry into force
of the Nagoya Protocol for the EU

It is a legally sound interpretation of the
Protocol's temporal scope to apply implementing measures only to genetic
resources or associated traditional knowledge acquired (and utilized) after the
entry into force of the Nagoya Protocol for a party.[24]
Option T-1 would exclude all material acquired before entry into force of the
Nagoya Protocol from the scope of implementing measures. This includes, for
example, samples held in collections in the EU that were acquired after the
entry into force of the CBD from a country that had established access
legislation. Option T-1 is consistent with the political position of the EU
throughout the Protocol negotiation.

Option
T-2: Applying implementing measures to genetic
resources or associated traditional knowledge acquired since entry into force
of the CBD and utilized after entry into force of the Nagoya Protocol for the
EU

In the view of some legal scholars the
Protocol applies to genetic resources or associated traditional knowledge acquired
in the future but also to new uses of genetic resources that were acquired
after the entry into force of the CBD on 29 December 1993.[25]
Compared with Option T-1, Option T-2 would bring an amount of samples of genes
and naturally occurring biochemicals currently held in EU collections, gene
banks and catalogues into the scope of implementing measures. This would expose
EU researchers and companies to legal and economic risks that are difficult to
reconcile with the principle of legal certainty and might raise constitutional
problems in some Member States. Option T-2 has nevertheless been retained for
transparency purposes as it corresponds with the expectations of some of our
international partners, particularly biodiverse-rich developing countries, and
of civil society groups.

5.5.        Options
for Complementary measures in support of the Protocol implementation

The options in this section could be
combined with the main options on access and on user-compliance described above
to enhance their effectiveness and efficiency, and to lower costs. In part,
they reflect soft obligations of Parties under the Protocol (C2, C3, C4). In
all cases, their specific added value to EU implementation depends on the main choices
made on access and on user-compliance.

Option
C-1: Bilateral cooperation between the EU and provider
countries or regions

Bilateral cooperation between the EU and
major provider countries or regions of genetic resources, particularly with
countries that are recognised as "biodiversity hotspots", could
usefully complement EU measures implementing the Protocol. Bilateral cooperation
could become important for targeted capacity building measures to help partner
countries implement the quite demanding Protocol obligations on access to
genetic resources and associated traditional knowledge. It would also allow for
collaborative projects focussing, for example, on building partnerships between
researchers involved in non-commercial biodiversity research that involves the
documenting and description of genes and naturally occurring biochemicals found
in situ conditions in partner countries. Such cooperation should also include
strenghtening networks of ex situ collections in Parties to the agreement. It would
also provide opportunities for developing a mutual understanding on how access
for non-commercial research is practically facilitated to researchers and
collections from both sides and might also raise the mutual understanding of
user-compliance systems in the Parties involved. Bilateral cooperation might
also allow discussing, in close dialogue with relevant collections on both
sides, potential modalities for applying access and benefit-sharing principles
to pre-Nagoya Protocol acquisitions of genetic resources that originate in Parties
to the agreement.

Bilateral cooperation could take many forms
ranging from regular dialogues over Memoranda of Understanding to formal
bilateral agreements. EU measures implementing the Nagoya Protocol could
include a general reference to the possibility of bilateral cooperation in
support of more effective implementation of the Nagoya Protocol in the Union.
Such cooperation would normally start with dialogues or joint projects, and if
there is mutual interest, eventually move to more formalised cooperation in the
form of a Memorandum of Understanding or even a bilateral agreement. The latter
would require a formal authorisation from the Council of the European Union.

Option
C-2: Supporting the development of sectoral codes of
conduct and model contractual clauses

Parties to the Nagoya Protocol must
encourage the development, updating and use of model contractual clauses and of
voluntary codes of conduct, guidelines and best practices or standards. Model
contractual clauses would facilitate and lower costs for transactions of
genetic resources and ABS-related information, particularly for the benefit of
academic researchers and SMEs with only limited capacity and also for
developing country partners that provide genetic resources. Different models
for material transfer agreements already exist and are widely used,
particularly in basic and applied research in the biosciences to facilitate
exchanging samples between research teams. Although these model agreements were
not developed for the purpose of ABS, they may be expanded to this end.[26]
Parts of the research community and commercial users of genetic resources have
furthermore developed best practice codes of conduct specifically for the
purpose of ABS. The specific contribution of sectoral codes and of model
clauses to ABS compliance will depend on the design of the primary compliance
measures taken for implementing the Nagoya Protocol in the Union. Under Option C-2,
the Commission would work with EU stakeholders to identify the specific
contribution of codes of conduct and of model clause to ABS compliance and for
identifying and further developing codes and clauses considered as best
practice.

Option
C-3: Supporting the development and deployment of
technical tools for tracking and monitoring genetic resources flow

The Nagoya Protocol obliges its Parties to
encourage the use of cost-effective communication tools and systems in support
of monitoring user-compliance. States involved in the Nagoya Protocol
negotiation asked the CBD Secretariat to launch a study on the availability of technical
tools for tracking and monitoring genetic resources flow. This study identifies
a range of relevant tools that would – with some adjustments – be available at
very low or no cost. It also sets out the steps needed for deploying such tools
in practice.[27] Under
option C-3, the Commission would work with information technology experts and ABS
stakeholders to support the rapid testing and more widespread deployment of
technical tools for tracking and monitoring genetic resources flow.

Option
C-4: Awareness raising and training activities

ABS is a new field of activity. Awareness
raising and training activities would help EU stakeholders to understand their
relevant obligations better and achieve more effective implementation at lower
cost. Actors broadly familiar with the concept would benefit from information
about the specificities of EU implementing measures. Under this option, the
Commission and the Member States would support targeted awareness raising and
training activities in collaboration with major stakeholders groups.

6.           Analysis
of Impacts

6.1.        General
remarks

6.1.1.     Methodology for analysing
impacts and data limitations encountered

The analysis proceeds in four steps. Step
1 involves an analysis of the policy options on access followed by an
analysis of the policy options on user-compliance. Each of the options for
implementing the access and the user-compliance pillar of the Protocol are
analysed on the basis of the full set of impact assessment criteria described
below.

To facilitate a comparison between options
from the same pillar, the performance of each option against specific impact
assessment criteria is graded.[28] The specific IA criteria
cover four wider issues and impacts examined, i.e. issues specific to the
Protocol, as well as economic, social and environmental impacts. The IA
criteria are not excluding each other, some are relevant only for analysing options
implementing one of the pillars of the Protocol.

This part of the IA report presents the
main observations from the detailed analysis, illustrative examples supporting
them and a summary table that shows the grading given to this option with
regard to the assessment criteria. The detailed analysis of the options on
access and on user-compliance and the motivation for each grading are included
in Annex 5 (access pillar) and Annex 6 (user-compliance pillar). The analysis
proceeds with a comparison between the identified options for the two pillars
of the Protocol. Step 1 concludes with a tentatively identified best performing
option on access and a tentively identified best performing option on
user-compliance.

Step 2 of the analysis addresses how different choices on the temporal
application of binding EU-level measures would impact on their performance.
Rather than applying again the full set of IA criteria, particular attention is
given to understand the implications for legal certainty and how these would
relate to the overall effectiveness of EU-level measures, and ultimately achieving
the objectives identified. Step 2 concludes by identifying the best performing
option on access and the best peforming option on user-compliance.

Step 3 brings together the preferred options for implementing the access
and the user-compliance pillar of the Protocol. The analysis presents by way of
hypothetical scenarios how the preferred access and the preferred
user-compliance options would work together in practice. These scenarios also
help to analyse the potential added value of the complementary measures set out
in Options C-1 to C-4.

Step 4 analyses for each complementary option if it would create
additional costs but also if there are expected gains in effectiveness,
efficiency and cost-savings for the retained choices on access and on
user-compliance.

ABS is a new field of policy and activity,
thus data limitations have been encountered. There is little
quantitative information available on the use and exchange of genetic
resources at sector level. Gaps exist particularly with respect to the amount
of genetic resources utilised within sectors and the economic relevance of such
utilisation (eg., figures on sales/profits deriving from products based on genetic
resources, importance of genetic resources for the turnover of the sector, jobs).
Available figures are often rough or indirect indicators of what is being
sought, and generally do not allow for comparison within or between sectors. Thus
the IA mostly builds upon qualitative arguments that are developed against
the detailed description of current user practices set out in the EU baseline. To
give one example: an option is considered to be low cost and preferable if it
corresponds with existing practices of genetic resources use as identified in
the EU baseline. An option is considered problematic or costly where it would
necessitate a sigificant change in practices, and generally as unacceptable
where it would run against the basic economic model of a specific sector.

6.1.2.     Criteria stemming from the
specificities of Access and Benefit-sharing and from the Nagoya Protocol

Access and benefit-sharing for genetic
resources and associated traditional knowledge is addressed not only in the CBD
and its Nagoya Protocol, but also in various other international instruments. Attention
is given to analysing how an option would respect existing specialised
international ABS instruments and be mutually supportive with other
relevant international instruments and processes. An option that fully respects
specialised ABS instruments and is fully supportive of other relevant
instruments and processes is preferable over an option that only partially
achieves these aims.

Another important consideration concerns
the legal and practical effects of an option for the relationship between
Parties and non-Parties to the Nagoya Protocol. The Protocol obliges its
Parties to encourage non-Parties to adhere to the Protocol. It does not oblige
them to take special safeguards in the relationship with non-Parties. An option
is considered preferable if it encourages ABS-conformity in the interaction
with ABS stakeholders from non-Parties and does not disrupt existing
collaboration or partnerships simply because they involve partners from
non-Parties.

As regards coherence with existing EU
law, options that would entail a focussed regulatory intervention
consistent with the overall design and approach of the EU acquis are considered
preferable over options that would introduce new legal concepts or require revising
a broad set of existing EU laws.

The analysis also examined issues
specific to the Nagoya Protocol implementation. These relate to:

·
Special considerations: The Nagoya Protocol obliges Parties to give special consideration
to non-commercial research, to eventual threats or danger to human, animal or
plant health, and to the special nature of genetic resources for food and
agriculture. Options that better allow for these special considerations are
considered preferable over others that offer less flexibility.

·
Accomodating for differences between
sectors: The Nagoya Protocol in principle
applies to all uses and all types of genetic resources unless explicitly
excluded from its scope. Since genetic resources are used by a wide range of
different actors for different purposes and with different interests, it seems
important that implementing measures offer some flexibility to accommodate for
differences between different sectors utilising genetic resources. An option is
considered preferable if it better balances the need for clear and certain
rules with flexibility to accommodate for sectoral differences.

·
Flexibility to allow for future
developments: Access and benefit-sharing for
genetic resources is a new field of activity for the EU and its Member States.
Given the discretion of the Parties on how precisely to implement their
obligations under the Nagoya Protocol, it is considered as advantageous if an
option allows for future development and fine-tuning of measures in light of
implementing measures taken by partner countries and in light of future
sectoral initiatives. Conversely, it is considered a disadvantage if the EU
system of implementing measures would "lock-in" one system that might
prove to be disfunctional in the medium or long-term and can only be changed at
high cost.

·
Improving the knowledge base: Given the data limitations
encountered, it is considered as important that an option helps to improve the
information base on how genetic resources are acquired, transferred and
utilised in the Union. This will facilitate future evaluations of the policy.

6.1.3.     Assessing Economic impacts

An EU-level playing field for access
and benefit-sharing activities implies more opportunities for engaging in
research and development on genetic resources, lower transaction costs and
lower risks. An EU-level playing field would be particularly beneficial to SMEs
and also ensure a more efficient use of public funds spent in favour of gene
banks, botanical gardens, academic or applied research. It would also generate
more positive effects for the conservation of biodiversity. Options that create
an EU-level playing field are therefore considered as preferable over options
that would leave significant differences in applicable rules throughout the EU.

An option is generally considered to be
more cost-effective and thus preferable if it provides for user-compliance but
better corresponds with existing practices of genetic resources use as
identified in the EU baseline. It is generally considered problematic if an option
would necessitate a sigificant change in practices, and as unacceptable where
it would run against the basic economic model of a specific sector.

Innovations flowing from research and
development on genetic resources must not be compromised by legal risks. As
evidenced by the stakeholder consultation, legal certainty is a major
priority for all those potentially affected by access and benefit-sharing
requirements. An option is considered preferable if it would provide a greater
level of legal certainty to those involved in ABS activities. Where an option
entails some legal risk, an important consideration is whether such
risks can be controlled by those exposed and if so, at what cost. Options that
allow users to control a risk at reasonable costs are considered preferable
over options that do not offer such possibilities and leave users exposed.
Furthermore, the same type of risk seems generally more preferable at the
beginning of the genetic resources value chain, where activities generally have
low economic value; rather than at the end of the chain, that is characterised
by high investments, high economic value and potentially significant economic
losses.

The analysis also considers the distribution
of impacts along the genetic resources value chain, which stakeholders
would be affected and how. An overburdening of any one activity in the genetic
resources value chain would imply the breaking down of the chain, the
discontinuation of research and development activities and ultimately the loss
of benefits and related conservation gains. An option is considered acceptable
if it is proportional to the respective capacities of all particular actors in
the genetic resources value chain; it is not considered acceptable where it
would clearly overburden a particular player in the chain.

Particular attention is given to analysing
the impacts on SMEs. An option is preferable if it maximises economic
opportunities for SMEs at low cost, if it is compatible with existing business
models and provides for legal certainty and if remaining risks can be
controlled at low costs.

Improved access to quality samples of
genetic resources with high legal certainty and at the lowest possible
transactions costs will maximise research and development opportunities on
genetic resources. Although favourable conditions for research and development
are no guarantee for important scientific discoveries and the development of valuable
products and services, there is nevertheless a clear correlation between
improved conditions for R&D in nature-based industries and an increase in
the likelihood of important discoveries that will result in innovative products
and services. Options that maximise research and development opportunities for
EU users are therefore considered preferable over options that create less
opportunities, while options that could stifle research and development on
genetic resources are considered as prima facie unacceptable.

At last, economic impacts analysed include
also a consideration of the effects of an option on the EU's international
competitiveness.

The Nagoya Protocol requires that
compliance of users with implementing measures is effectively monitored.
It is considered as easier and more effective to monitor an observable activity
within EU jurisdiction rather than to identify the presence or absence of
non-tangible information that relates to facts and findings in a third country,
often many years ago. It is also considered more cost-effective to collect
relevant information as part of already established activities rather than to
establish new monitoring procedures. Furthermore, it is considered more
cost-effective to focus on monitoring activities/ information that is available
without confidentiality concerns involved. At last, monitoring costs can be
reduced, where it is practical and proportional to put the burden of
information on economic operators. Costs for monitoring will vary with the
effectiveness of monitoring and enforcement measures taken. An option is
preferable if it creates the maximum amount of pertinent information at the
lowest possible cost.

As regards additional administrative
costs for implementation, the IA distinguishes between one-off costs and
recurring costs. Generally, low cost options are preferred over high cost
options. And costs that occur only once or over a clear time-frame are
preferred over costs that are of recurring nature.

6.1.4.     Assessing Social impacts

Innovation in nature-based industries is
expected to contribute to the achievement of important social objectives, be it
health, nutrition, food security, or else. Options that maximise research and
development opportunities for EU users are therefore considered preferable over
options that create less such opportunities. More benefit-sharing arrangements
with providers from developing countries would also contribute to the transfer
of knowledge and technology to partners in those countries. Furthemore, it is
expected that jobs in the sectors utilising genetic resources will be
safeguarded and even increased if access to these resources is assisted and if
the user compliace requirements create legal certainty, minimise risks and
generate more opprotunities for a wider use of these resources. Although it is
not possible to quantify this impact, due to the significance of the sectors
utilising genetic resources in the European and global economy, it is expected
that impacts to whichever direction could be of a significant magnitude.

A particular social aspect in this IA is
the contribution of an option to the effective protection of the rights of
indigenous and local communities over their traditional knowledge associated
with genetic resources. Options that effectively protect indigenous rights are
preferable over options that do not achieve this aim.

6.1.5.     Assessing Environmental
impacts

Better conditions for R&D in innovative
nature-based industries, will enhance the knowledge-base for effective biodiversity
conservation and environmentally sound uses of natural resources. It will also
raise the likelihood of important discoveries and developments and related
benefit-sharing in favour of biodiversity conservation. An enabling and
effective access and benefit-sharing system will also raise awareness of the
economic value of genetic diversity found in nature and held in ex situ collections.
Options that maximise research and development opportunities for EU users are therefore
considered preferable from an environmental impact perspective over options
that create less such opportunities. More benefit-sharing arrangements with
providers from developing countries would also contribute to the transfer of
knowledge and technology to partners in those countries.

Conversely, options that create higher
costs or that stifle research and development are considered to generate less
knowledge and less benefits for biodiversity conservation.

6.2.        Access
Pillar

6.2.1.     Option A-1: No EU level
action

Under Option A-1 all Member States and the
Union will have ratified the Nagoya Protocol by the time of its entry into
force in 2014 or 2015. Before ratifying, Member States must decide whether to
require prior informed consent and benefit-sharing or not; and if so, implement
their access-related obligations under the Protocol. The Union will not have to
make any decision of the kind. It seems almost certain that by 2015 Member
States with free access systems will co-exist with other Member States that
require prior informed consent. This situation would be in conformity with the
Nagoya Protocol that recognises the sovereign right of each Party to require
benefit-sharing for the utilisation of its genetic resources or not.

Although the Protocol regulates domestic
access frameworks in quite some detail, it is an apparent shortcoming of Option
A-1 that it would not support a coordinated approach to addressing issues that
will arise. One such issue concerns the choices taken by Member States on how
their domestic access-framework relates to specialised ABS agreements.
The most important example of a specialised agreement is the International
Treaty on Plant Genetic Resources for Food and Agriculture. The Nagoya Protocol
obliges Parties to respect specialised ABS agreements. However, the precise
relationship between Nagoya Protocol implementing measures and the use of
genetic resources in accordance with the FAO International Treaty is not clear.
It could raise questions on the EU's compliance with the Nagoya Protocol if
Member States were to take differing choices on this matter. Similar difficulties
could arise in relation to the obligation to apply special considerations
in relation to research or to public health concerns, if Member States were to implement
these fairly general obligations in different ways.

Another draw-back of Option A-1 is that it
leaves the management of eventual tensions between access frameworks of Member
States and the acquis to ad hoc interventions by the Commission. It seems
much preferable to discuss relevant questions at the time when Member States that
wish to require prior informed consent and benefit-sharing are developing access
frameworks rather than forcing a re-opening of such frameworks once established.

As indicated in the below table, it is
difficult to precisely identify further impacts – whether positive or negative
– of Option A-1. These will depend on future choices taken by the Member
States. Clearly, Option A-1 will not result in an EU-level playing field on
access: Member States with free access systems will co-exist with Member States
that require prior informed consent and benefit-sharing. One general issue of
concern is, however, that it could have negative economic impacts for EU
researchers and also for SMEs if Member States would establish widely differing
substantive access conditions. For example, it is typical for parts of the
biotechnology industry (with a high level of SMEs) to conduct high-throughput
screening of tens of thousands of samples in search for new compounds.
Obviously, such activities benefit from a streamlining of access conditions, as
generally also legal certainty will increase and legal risks will be minimal if
access conditions are harmonised across the EU. While Option A-1 does not
provide a basis for establishing a solid response, at least it would not create
costs at EU-level; costs at Member State-level would depend on the choices taken
by them.

6.2.2.     Option A-2: EU platform for
discussing access to genetic resources and sharing best practices

Under Option A-2, by 2014 or 2015 all
Member States and the Union would have ratified the Nagoya Protocol and Member
States with free access systems will co-exist with other Member States that
require prior informed consent. However, the EU platform for discussing
access-related issues and for sharing best practices would actively engage the
Member States, the Commission and EU stakeholders in a discussion on the design
and the performance of access frameworks in the Member States. It seems
reasonable to assume that the platform would contribute to collective learning
and thus influence choices made by Member States in relation to specialised
ABS systems, on how to apply special considerations, how to deal
with access requests by researchers or companies from non-Parties, etc.
The deliberations of the platform would also be beneficial for any future
consideration of a focussed EU-level policy intervention on access.

The EU platform would have some potential
to streamline access conditions applied by Member States that require prior
informed consent, although this will not result in an EU-level playing field
on access. Nevertheless any narrowing of differences between Member State
access frameworks will lower transaction costs and hence be particularly
beneficial for SMEs and recipients of public funds.

Another effect of the EU platform is that
it would showcase best practices on access. This would not only help Member
States to learn from each other. It would also help potential users to identify
the Member State with the best functioning access frameworks. Both aspects
could positively contribute to research and development opportunities in
the EU.

It is difficult to precisely identify
further impacts of this option – whether positive or negative; this depends on
future choices taken by the Member States. A well-functioning EU platform on
access will likely influence these choices; however, it cannot determine them. The
operation of the EU platform would create limited costs at EU-level.[29]

6.2.3.     Comparison of Options A-1
and A-2

The results of the analysis as summarised
in Table 2 below shows that Option A-2 creates limited costs at EU-level,
whereas Option A-1 would entail no costs. The added value of Option A-2 over
Option A-1 is nevertheless apparent. Option A-2 would create benefits for
Member States, for the Commission, and for EU stakeholders. It would particularly
benefit academic researchers and SMEs or micro-enterprises. Option A-2 is
therefore tentatively identified as the preferable option for implementing the
access-pillar of the Nagoya Protocol.

Table 2: Comparison of Options for the
access pillar of the Protocol

Criteria for analysing impacts || Grading ||

|| Option A-1 || Option A-2

Specific Criteria to Access and Benefit-sharing and to the Nagoya Protocol ||

- Specialised ABS agreements and processes (respect and mutually supportive) || - || +

- Handling of Party-non-Party relationships || Unclear || +

- Coherence with existing EU acquis || - || +

- Support to special considerations || - || +

- Ability to accommodate differences between sectors || n.a. || n.a.

- Flexibility to allow for future development and fine-tuning || + || +

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || 0 || +

Economic impacts ||

- Creation of an EU-level playing field || -/0 || +

- Correspondence with existing utilisation practices || n.a. || n.a.

- Legal certainty and legal risks || -/0 || +

- Distribution of impacts along the value chain || 0 || 0

- SMEs and micro-enterprises || - || 0/+

- Research and development opportunities || 0 || 0/+

- International competitiveness || 0 || 0

- Obligatory monitoring related to user-compliance (effectiveness, efficiency, and costs) || n.a. || n.a.

- Administrative costs (EU-level, MS level, one-off, recurring) || + (Union level) || 0 (Union level)

Social impacts ||

- Potential to contribute to social objectives (health, food security, nutrition etc) || Unclear || Unclear

- Job creation or maintaining existing jobs in the sectors || Unclear || Unclear

- Protection of the rights of indigenous and local communities || Unclear || Unclear

Environmental impacts ||

- Enhancing knowledge base for biodiversity conservation || Unclear || Unclear

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || Unclear || Unclear

Note:
"n.a." identifies criteria that have not been analysed as they are
specific to the user-compliance pillar of the Protocol.

6.3.        User-Compliance
Pillar

6.3.1.     Option UC-1: Open method of
coordination

Under Option UC-1 all Member States and the
Union become Parties to the Nagoya Protocol, and all Member States will adopt
legally binding measures on user-compliance at national level; the Union would
not adopt binding measures in the field.

There is little practical experience with
user-compliance measures, the Protocol leaves significant discretion on how to
design such measures, and different reference points exist.[30]
Despite the soft EU-level coordination, one would expect that Member States
develop user-compliance measures primarily on the basis of their national interests.
For example, the NL would carefully consider the interests of its plant and
animal breeding companies. In DE, FR, UK and IT the interests of the
pharmaceutical and chemical industries might receive particular attention. FR
might also pay special attention to its cosmetics industry as some companies
are world leaders. It is thus assumed that Member States would take differing
choices on the design of user-compliance measures. This may result in conceptually
different user-compliance systems in different Member States. It would
certainly result in differences in the details of applicable
requirements; such details are nonetheless critical for implementation efforts
"on the ground" (e.g. exactly what is considered as "utilisation
of genetic resources", how to manage ABS-related information, rules on
burden of proof, etc.). The need for 27 national legislative proceedings finally
suggests that not all Member States would become Parties to the Nagoya Protocol
at the same time. These basic assumptions translate into mostly negative scores
for Option UC-1.

The analysis of current user practices in
the EU suggests that even small differences in user compliance requirements
between the Member States could create major difficulties and costs for EU
researchers and companies active in more than one Member State. One Member
State might generally require users to manage ABS-related information in the
most suitable form. Another Member State might oblige users to present so
called "internationally recognised certificates of compliance". Both
systems would oblige users to take a different approach to managing ABS-related
information. It is against this background, that respondents in the public
consultation unanimously pleaded for an EU-harmonised approach to
user-compliance measures, preferably on the basis of an EU-Regulation.

The existence of the EU-internal market and
the fundamental freedoms also implies that different Member State approaches
to user-compliance would result in an overall lower performance of national
systems. For example, Member State A might largely exempt basic research
from its user-compliance system, whereas the user-compliance system of Member
State B might oblige those involved in basic research to pass on minimum
information on ABS. Researchers that participate in the European Research Area would
need to manage these differences. In result, costs for ABS compliance in Member
State A would increase, despite the exemption for basic research, and there
would likely be an increase in the non-compliance risks of researchers in
Member State B.

A fragmented approach to user-compliance could
also lower the benefits for Member States of ratifying the Protocol. To
give one hypothetical example: Spain ratifies the Nagoya Protocol before most
other Member States. A Spanish biotechnology company applies for a permit to
collect samples of marine genetic resources in the Exclusive Economic Zone of a
biodiversity-rich island state in the Indian Ocean. The competent authority of
the island state requests that collected samples are only used in Spain, not in
other EU Member States that have not yet ratified the Protocol. Would Spanish
authorities that support the enforcement of such conditions comply with Spain's
obligations under the EU Treaties? The answer is not straightforward and the
island state might refuse granting access if it expects that material collected
may also be used in other EU Member States that are not Parties to the Protocol.

6.3.2.     Option UC-2: Self-standing
general due diligence obligation on EU users

One important positive feature of the due
diligence approach is that it would actively support the functioning of specialised
ABS agreements and systems. By generally obliging EU users to be
diligent, EU users would also be diligent that genetic resources are utilised
in accordance with specialised ABS systems. This would be beneficial for
the ABS system established through the FAO International Treaty on Plant
Genetic Resources for Food and Agriculture, but also for the Pandemic Influenza
Preparedness Framework recently adopted by the World Health Organization. The
due diligence approach would similarly support respect for the special
considerations that are obligatory under the Protocol.

The due diligence obligation would
generally apply to all activities of utilisation within EU jurisdiction. It
would thereby create a common baseline of user-compliance efforts throughout
the EU and establish an EU-level playing field. In effect, all users of
genetic resources in the Union would each at their respective place in the
utilisation chain seek, keep and transfer information relevant to ABS. The
establishment of an EU-level playing field on user compliance measures is
particularly beneficial for SMEs that would face disproportionately higher costs
than larger companies to cope with differing user-compliance standards in
different Member States of the Union. An EU-level playing field of user-compliance
measures also implies a more efficient use of public funds spent in favour of
academic or applied research, as researchers need to spend less of their time
to cope with potentially different user-compliance standards. The positive
aspects of an EU level playing field on user-compliance are particularly
apparent when comparing this Option with the concerns related to the expected
fragmentation of user-compliance measures that would most likely result from
Option UC-1. It must also be stressed in this regard that respondents in the
public consultation unanimously pleaded for an EU-harmonised approach to user
compliance, precisely because of concerns over high costs from fragmentation.
Furthermore, it is noteworthy that the International Chamber of Commerce
explicitly supports a due diligence approach to implementing the
user-compliance pillar of the Nagoya Protocol.[31]

The due diligence approach is also flexible
to accommodate differences between sectors utilising genetic resources and
associated traditional knowledge. Users could identify for themselves a
suitable and cost-effective way of meeting their obligation. Considering current
utilisation practices in the EU, it is assumed that users will take different
measures, reflecting their specific placement in the EU genetic resources value
chain. An SME in the biotechnology sector might decide making use of
standardised contracts when acquiring or passing on research material. Academic
research groups could decide to deploy a low-cost, open source software tool
for tracking and monitoring the use of genetic resources amongst members of the
group. Companies from the biocontrol or cosmetics industries that directly
collect genetic resources in the wild might subscribe to an industry-wide best
practice code of conduct. Users in specific sectors of the EU economy could
further reduce their eventual compliance costs and raise legal certainty by
implementing a recognised best practice. As detailed in Annex 8 to this study,
a range of codes of conduct have already been developed for different sectors
and activities, currently their practical relevance varies. This option would
very likely raise the practical relevance of such existing codes. It would also
reward those users which have already in the past, absent binding rules, made
an effort to comply with the ABS provisions of the CBD.

The ability of users to comply with their
due diligence obligation by implementing best practice codes of conduct would
have further positive effects for the interaction with partners from non-Parties
to the Protocol. Partners in non-Parties are outside the reach of EU
user-compliance rules. Nevertheless, if non-EU partners were to apply the same
or similar best practice standards on ABS, they would effectively also comply
with EU user compliance rules. It seems significant in this context that some
existing best practice codes are indeed of global nature or used well beyond
the EU.[32]

It would largely be in the hands of users
and their professional associations to identify the most cost-effective ways of
implementing the due diligence obligation for their respective utilisation
activities. The flexibility inherent in the due diligence concept will ensure
that users can tailor their due diligence measures as much as possible to their
existing practices, and thereby also reduce eventual costs. In that regard it
seems very significant that not one respondent in the public consultation, no
participant in the many ad hoc meetings, and no person interviewed by
the consultant team indicated that it would, in principle, be impossible or
unworkable to add some basic consideration of ABS issues to its current
utilisation practices.

The monitoring costs for users would be
limited. The declarations would need to be made at points where users would
anyhow already be obliged to summarise and evaluate relevant information on
their research and development activities. As regards declarations in the
context of public research funding, it is already standard practice today that
recipients of EU funds commit themselves to respect applicable laws when using
public funds and later on need to declare their compliance with this general
obligation. As regards declarations on the occasion of a product approval or
the commercialisation of a product, users already today prepare a dossier
describing the product for which a permit is sought or that is put on the
market. The only situations where real costs might arise is indeed in cases
where a user has not been diligent and failed to seek relevant information on ABS
when acquiring a genetic resource, and later on needs to re-establish such
information.

As regards administrative costs, these
would fall primarily fall on the Member States and the competent authorities
designated for receiving due diligence declarations by users and for checking
compliance. Notably, the due declarations could be made to already existing
authorities of the Member States or to the national competent authority(ies)
that each Party to the Nagoya Protocol must establish. The compliance checks
would most likely be done by specialised authorities existing in a given
sector. Importantly, competent authorities of different Member States could
cooperate amongst each other and with the Commission if this would be more
effective. This is one apparent advantage in effectiveness and costs over a
situation where 27 Member States develop 27 distinct user-compliance systems
with distinct monitoring systems and different types of checks.

As regards the distribution of costs, it
appears that the limited costs for making due diligence declarations would
arise for all researchers using public funds, it would not arise for privately
funded research. Furthermore declarations would need to be made by users that
have successfully developed a product on the basis of genetic resources. They
would not need to be made by other users in case their research and development
activities never result in a product. As regards administrative costs, it seems
that costs will be higher in those Member States where more utilisation
activities occur and where more genetic resource based products are
commercialised. This suggests that public costs for monitoring will tend to
correlate with benefits related to the successful marketing of products based
on genetic resources (e.g., additional tax revenues).The main effect of this
option would be that all those utilising genetic resources or traditional
knowledge associated with such resources in the EU will establish and maintain
a baseline of ABS-related information throughout the EU genetic resources value
chain. In some cases, such information would be trivial: for genetic resources
acquired prior to 1993, the CBD and the concept of ABS did not apply. So any
material identified as stemming from before this date could comfortably be utilised.
Nevertheless, it would be important also for subsequent users that this
specific information is actively passed on with the eventual transfer of a
sample. In other cases, information passed on by a previous user might indicate
that a specific set of samples may only be utilised for non-commercial purposes
and convey information about the contact point of the Party holding the
sovereign right for seeking permission to undertake applied research.

6.3.3.     Option UC-3: General due
diligence obligation on EU users complemented by identifying collections that
are "trusted sources" for genetic resources

Option UC-3 combines a due diligence system
as described and analysed in Option UC-2 with a system to identify collections
with control measures in place to assure that only well documented samples of
genetic resources are made available for their utilisation. The EU Regulation
would clarify that users of genetic resources that acquire samples from a "trusted
source" would thereby comply with a major part of their due diligence
obligation. This option scored higher than Option UC-2 in respect to key
implementation aspects (EU-level playing field, legal certainty, impacts on
SMEs) due to two main reasons:

First, the identification of certain
collections as "trusted sources" would add a focus on the quality
of research material utilised to the basic due diligence system; the latter
focuses on the activity of utilisation. To recall: situations might occur where
a user was diligent but it eventually turns out that a concrete genetic
resource used was illegally acquired. This would not constitute a breach of the
due diligence obligation. A system of "trusted sources" would,
however, very significantly reduce the risk that illegally acquired or
incompletely documented genetic resources enter the EU genetic resources value
chain. The analysis of current utilisation practices shows that the very large
majority of commercial EU users acquire new samples of genetic resources from
ex-situ collections; mostly from collections within the EU. A system of
"trusted sources" would hence have further positive effects for establishing
an EU-level playing field of quality samples of genetic resources, it would
improve legal certainty and lowers risks for all users that source from recognised
collections. It would also lower costs for monitoring user compliance, as it
seems reasonable to assume less risk of non-compliance by users sourcing from
recognised collections.

Second, it is apparent that the additional
compliance benefits of Option UC-3 would particularly arise for those EU users
that acquire their research and development material from EU collections. In
the EU this includes academic researchers and several commercial sectors. The
horticultural industry, for example, predominantly relies on ex situ
collections for its research and development. The industrial biotechnology
sector heavily relies on culture collections. Culture collections are also
important sources of material for industries involved in natural products
research as well as for the pharmaceutical and the food and beverage
industries. Private and in-house collections are particularly important in the
seed industry, in addition to public gene banks and the centres of the
Consultative Group on International Agricultural Research. Importantly, actors
from these groups that acquire the material from collections are to a very
significant extent individual academic researchers, SMEs and
micro-enterprises. Particularly this group would benefit from the lower
costs and enhanced legal certainty of Option UC-3.

These particular characteristics of Option
UC-3 also translate into significantly high scores for the expected impact on research
and development opportunities in the EU and will have positive social
and environmental impacts.

6.3.4.     Option UC-4: Prohibition to
utilise illegally acquired genetic resources or associated traditional
knowledge with a "downstream" monitoring system

Particular features of Option UC-4 are a
general prohibition to utilise illegally acquired genetic resources, a focus on
specific uses of specific material, and a monitoring system based on
obligations for users to actively disclose at certain points in the genetic
resources value chain how they comply with eventually applicable ABS
requirements. The negative or very negative grading of this option reflects
fundamental problems that stand in stark contrast to the initial reaction of
many which, when first exposed to the issue of ABS, would support a prohibition
to utilise illegally acquired genetic resources.

The first fundamental problem of Option
UC-4 is that currently EU users do not have sufficient information to
determine where they stand in relation to the prohibition. The prohibition
would initially only be relevant for a small fraction of genetic resources
utilised within the EU: it would not apply to genetic resources acquired prior
to the CBD entry into force, nor to genetic resources collected in countries
that do not require prior informed consent and benefit-sharing, nor to genetic
resources collected in areas beyond national jurisdiction. Nevertheless, to
comply with the prohibition EU users would need to know for each individual
sample utilised where it came from, when it was acquired, and if some
ABS-related obligations apply. To be on the safe side, users would need to
have this information for all genetic resources utilised, not only for those
that actually come within the scope of the Nagoya Protocol. The analysis of
utilisation practices in the EU shows that the necessary information is currently
not available at all places of the EU genetic resources value chain. It seems
that the prohibition would have relatively small negative impacts on
well-staffed and funded botanical gardens where almost all samples held are
fully documented. However, it would most likely create very significant legal
uncertainty for some commercial users of genetic resources. Biochemical
libraries, for example, include molecules isolated from biological material as
well as molecules developed through computerised permutations. Once the
chemical structure of a naturally occurring molecule is known, it can be
re-built and further modified[33], irrespective of where
it originally came from; information on the origin of molecules has often not
been kept. Parties to the Nagoya Protocol must apply their user-compliance
measures to the "utilisation of genetic resources", and this term
explicitly includes research and development on the biochemical
composition of genetic resources.[34] A prohibition to utilise
illegally acquired genetic resources would therefore also become relevant for
research and development on biochemicals already extracted from natural
material and currently held in biochemical libraries used by the
pharmaceutical, chemical and biotechnology industries. It seems unrealistic in
the short- and medium-term to generate ABS-related information for all entries in
such catalogues.[35]

A second fundamental problem of Option UC-4
is one of legal delimitation: it would require very careful
consideration to avoid that a prohibition has potentially disruptive effects on
the functioning of specialised access and benefit-sharing systems. One unresolved
question in this respect is on the legal nature of specialised systems for them
to be excluded from the Nagoya Protocol, and hence from the prohibition. Must a
specialised ABS system in the sense of the Nagoya Protocol necessarily be
established through a binding international agreement, like the FAO International
Treaty on Plant Genetic Resources? Or does it suffice to have an international
framework with only some legally binding elements, such as the recently
established Pandemic Influenza Preparedness Framework in the World Health
Organization? This question is of practical relevance not only in the area of
human, animal and plant health, but also for the ongoing work of the FAO
Commission on Genetic Resources for Food and Agriculture that plays a critical
role in global food security policies.

A third fundamental problem of this Option
is its negative impacts on individual researchers, SMEs and
micro-enterprises. While the prohibition would apply to all utilisation
activities, the system of disclosure obligations would only selectively apply
to some utilisation activities in the downstream part of the utilisation chain.
This would very likely result in an uneven distribution of costs and risks.
Collections and non-commercial researchers would normally not face disclosure
obligations. However, such obligations would be unavoidable for SMEs and
micro-enterprises in the middle part of the genetic resources value chain that
depend on intellectual property protection for creating commercial value and,
where relevant, being able to sell innovations to bigger companies downstream. This
group of actors would be caught between a rock and a hard place. A
non-commercial researcher that has no risk of being checked has no reason to
take on legal responsibility for the good legal status of material passed on
for applied research. Larger companies at the end of the value chain
(particularly in the pharmaceutical and chemical industry), however, would not
be able to accept a legal guarantee from a SME as sufficient assurance that
things are in order, knowing that SMEs regularly have limited means to verify
ABS-compliance. It is thus very likely that Option UC-4 would cause disruptions
in the genetic resources value chain where research material moves from
collections or non-commercial research to SMEs and again, where research and
development activities move from SMEs to larger companies that create the real
economic value. This disruption may also cause negative impacts on jobs, in
particular within SMEs. Thus a prohibition to utilise illegally acquired
genetic resources would stifle innovation in different sectors, and thus
achieve exactly the opposite of what the Nagoya Protocol wants to achieve.

6.3.5.     Comparison of Options UC-1
to UC-4

Table 3: Analysis of
options addressing the User Compliance pillar of the Protocol

Criteria for analysing impacts || Grading

|| Option UC-1 || Option UC-2 || Option UC-3 || Option UC-4

Criteria specific to Access and Benefit-sharing and to the Nagoya Protocol

- Specialised ABS agreements and processes (respect and mutually supportive) || --/- || ++ || ++ || -

- Handling of Party-non-Party relationships || -- || + || ++ || -

- Coherence with existing EU laws || - || + || + || -

- Support to special considerations || -- || ++ || ++ || -

- Ability to accommodate differences between sectors || -- || ++ || ++ || --

- Flexibility to allow for future development and fine-tuning || 0/+ || + || + || -

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || 0 || + || ++ || -

Economic impacts

- Creation of an EU-level playing field || -- || + || ++ || -/0

- Correspondence with existing utilisation practices || -- || +/++ || +/++ || -

- Legal certainty and legal risks || -- || 0/+ || + || --

- Distribution of impacts along the value chain || 0 || 0/+ || + || --

- SMEs and micro-enterprises || -- || 0/+ || + || --

- Research and development opportunities || -- || + || ++ || --

- International competitiveness || - || + || ++ || --

-Obligatory monitoring related to user-compliance (effectiveness, efficiency, and costs) || Unclear || 0/+ || 0/+ || --

- Administrative costs (EU-level, MS level, one-off, recurring) || - || 0 || 0 || -/0

Social impacts

- Potential to contribute to social objectives (health, food security, nutrition etc) || -/0 || + || ++ || --

- Jobs (creation or maintaining) || || + || ++ || --

- Protection of the rights of indigenous and local communities || -/0 || + || ++ || --

Environmental impacts

- Enhancing knowledge base for biodiversity conservation || -/0 || + || ++ || --

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || -/0 || + || ++ || --

As Table 3 suggests, Option UC-1 will
almost certainly result in a fragmentation of user-compliance systems in the EU
with very negative effects on EU stakeholders and partially disruptive effects
in some genetic resources value chains. Option UC-2 and 3C both create workable
systems compatible with the concerns and utilisation practices of EU economic
sectors and other stakeholders. Option UC-3, however, has better scores than
Option UC-2 in respect to key implementation aspects (EU-level playing field,
legal certainty, impacts on SMEs, positive economic impacts). It will
particularly be more beneficial to academic researchers, SMEs and
micro-enterprises. Option 3D combines high legal and economic risks for EU
stakeholders with a low probability that the etablished user-compliance system
will function. Thus Option UC-3 is therefore tentatively identified as
the preferable option for implementing the user-compliance pillar of the
Nagoya Protocol.

6.4.        Temporal
Application of Binding EU-level measures

This part of the study analyses how
different choices on the temporal application of EU-level measures would impact
on their performance. The binding EU-level measures analysed are Options UC-2,
UC-3 and UC-4. Rather than applying again the full set of IA criteria,
particular attention is given to understanding the implications for legal
certainty and how these would relate to the overall effectiveness of measures
on access and on user-compliance, and ultimately on achieving social and
environmental objectives.

6.4.1.     Option T-1: Applying
implementing measures to genetic resources or associated traditional knowledge
acquired after entry into force of the Nagoya Protocol for the EU

The option creates a high level of legal
certainty and clarity for EU users. This is particularly important for
industries where research and development processes typically span many years
(e.g. pharmaceutical industry, plant breeding), and where a new legal regime
that creates doubt on its implications for an activity that started 10 years
ago, could put ongoing research and development activities under threat.

Option T-1 would be consistent with and
support the smooth functioning of Options UC-2 or UC-3. It would also be
consistent with Option UC-4, although it would not be able to soften the
fundamental problems of this option.

6.4.2.     Option T-2: Applying
implementing measures to genetic resources or associated traditional knowledge
acquired since entry into force of the CBD and utilised after entry into force
of the Nagoya Protocol for the EU

The main drawback of Option T-2 is its
effect on legal certainty of EU users. The creation of new obligations
under EU law for "new or continuous" utilisation activities would
raise many legal and practical questions. When would a research and development
activity be considered as sufficiently different to earlier research to be
qualified as "new "? It is typical for research and development
processes, particularly in the early part of the genetic resources value chain,
that discovery processes are "chaotic" in the sense that it is not
clear at the beginning what will come out at the end. Would it, for instance, constitute
a "new utilisation" if the result of an experiment is different from
what was initially expected, but then the course of research is changed to profit
from the unexpected discovery? Legal uncertainty would arise particularly in
industries where research and development processes typically span 5, 10 or
even 20 years (e.g., pharmaceutical industry, plant breeding). It would also
take multiple years and a fairly large number of concrete cases before courts in
the Member States would have established a typology of cases representative for
the different sectors. Option T-2 might also conflict with constitutional
principles on the retroactive application of laws in some of the Member States.

The legal uncertainty associated with Option
T-2 would most likely stifle research and development on material acquired
post-CBD, particularly for actors with little (legal) capacity or where high
economic stakes are involved. This also suggests that the expanded coverage of
material under Option T-2 would most likely not translate into enhanced
benefit-sharing opportunities and conservation gains; but just the opposite. Option
T-2 could also call into question initiatives of collections in the EU that
voluntarily apply ABS principles to all samples held, whenever these were
acquired.

The legal uncertainty associated with Option
T-2 would clearly lower the performance and functioning of Options UC-2 or UC-3.
Option T-2 would add another challenge to the already fundamental problems of
Option UC-4.

6.4.3.     Comparison on Temporal Application
and identification of best performing options on access and on user-compliance

Option T-1 is clearly preferable. It combines legal certainty for EU users with a higher likelihood
to meet important social and environmental objectives. Conversely, Option T-2
would raise many economic and legal, in part constitutional, concerns and also
would be unlikely to contribute to fulfilling the set social and environmental
objectives.

Overall assement for options on Access,
User Compliance and Temporal scope

Against this background, the preferable
option on access is the establishment of an EU platform for discussing access
to genetic resources and sharing best practices (Option A-2), whereas
the preferable option on user-compliance is a due diligence obligation on EU
users complemented by a system to formally recognise collections as
"trusted sources" of genetic resources (Option UC-3). The
measures under Option UC-3 would only apply to genetic resources and associated
traditional knowledge that are acquired and utilised after the entry into force
of the Nagoya Protocol for the EU (Option T-1).

6.5.        Hypothetical
scenarios

Up to this point, the access pillar options
and the user-compliance pillar options were analysed separately. The
hypothetical scenarios in Box 6 seek to illustrate how Options A-2 and UC-3
would work together in practice. The scenarios also facilitate the subsequent
analysis of the complementary measures.

Box 6: Hypothetical scenarios

Scenario 1: By 2020, ES and FR are the only two EU Member States
that require prior informed consent and benefit-sharing for the use of their
genetic resources. Both have put in place transparent, well-functioning access
frameworks and both have decided to establish a national centre of excellence
for biodiversity research similar to the NIBR established in South Korea[36].
Discussions between Member State experts and EU stakeholders in the EU access
platform show that academic researchers and SMEs favour 'regulated' access in
ES and FR over access in Member States that have a 'free access' policy but do
not provide any support in identifying and acquiring quality samples for
research and development.

Scenario 2: In 2021, a small UK company, specialised in
developing ingredients for the food industry, works with the ABS competent
national authority of Kenya and a representative of the Maasai tribe to obtain
access to leafs of a plant traditionally used by the Maasai for its
hunger-suppressant properties. After concluding a benefit-sharing agreement
with the Maasai, the UK company receives the access permit by the Kenyan
authority. Company scientists identify the hunger suppressant ingredients of
the plant and develop a process for extracting and stabilising them. The UK
company sells its innovation to a multinational company specialised in functional
foods that markets its products mainly in Europe and the US. The legal
compliance unit of the multinational company, mindful of the due diligence
obligation, seeks information from the UK company on eventually applicable ABS
requirements. After acquiring the innovation, the multinational company negotiates
a benefit-sharing agreement with the Maasai that includes establishing a fund in
support of education projects in the Maasai community fed by a percentage of
royalties from the sales of functional foods developed on the basis of the
plant.

Scenario 3: A scientific journal publishes an article on marine
sponges from the Great Barrier Reef. The article provides unique identification
numbers of samples held in a collection listed in the EU register of
"trusted sources". A scientist from a small biotech company seeks
access to the samples. The collection website informs that these specific
samples are owned by the University of Queensland in Australia and are
available for non-commercial use based on a standardised contract; however, requests
for commercial use must be directed to the reference collection of Queensland
University.

Scenario 4: Researchers based at the Berlin botanical garden
cooperate with Cuban colleagues to collect particular flowers in Cuba. In a
dinner conversation, team members discover that a flower species held in the
Berlin garden, which was collected by Alexander von Humboldt in Cuba in 1799, is
apparently extinct in the wild. This raises the question of a
"repatriation" of this flower to Cuba.

Scenario 5: The Nagoya Protocol enters into force in 2014. In
early 2015, an expert group set up by the World Federation of Culture
Collections (WFCC)[37] presents a report to the
Executive Board of the WFCC on potential adjustments to the practices of WFCC
members to ensure full compliance with the Nagoya Protocol. The report proposes
developing a standardised Material Transfer Agreement for the supply of samples
to outside users, building on work done by European members of the federation.
It also proposes establishing a fully electronic system for tracking the
exchange of samples within the WFCC network. The group also recommends that all
members of the WFCC that can demonstrate use of the tracking tool and the
standard Material Transfer Agreement should seek registration in the EU
register of "trusted sources".

6.6.        Complementary
Measures

To recall, the analysis of complementary
measures is only undertaken in relation to the identified package of main
measures (Options A-2 and UC-3) to understand how the additional costs incurred
by them would relate to expected gains in effectiveness, efficiency and
cost-savings for these main choice on access and on user-compliance.

6.6.1.     Option C-1: Bilateral cooperation
between the EU and major provider countries or regions

The eventual costs of
bilateral cooperation depend on what is being done, the benefits on what is
being achieved. There is a spectrum of cooperation activities ranging from
bilateral /regional dialogues, project-based cooperation, to more formal
cooperation on the basis of a Memorandum of Understanding or a formal bilateral
agreement. Bilateral dialogues on ABS and the Nagoya Protocol are already
ongoing between the Commission and important partners and managed within
existing resources. Further collaborative projects could be developed,
particularly by using existing Science and Technology Agreements with third
countries.

Given the flexibility
inherent in core obligations of the Nagoya Protocol, particularly in relation
to user-compliance, one major focus of bilateral cooperation would be to
enhance the mutual understanding of implementing measures taken. This will
facilitate access of EU researchers and companies to quality samples of genetic
resources and to associated traditional knowledge in non-EU countries (see scenario
2 in Box 6). Scientific cooperation projects, particularly where it
involves collections recognised as "trusted sources", would also enhance
access of EU researchers to quality samples of genetic resources with positive
effects on research and development opportunities and new discoveries important
for conservation efforts and benefit-sharing (scenario 4). A
particularly sensitive issue, also touched upon in scenario 4, concerns
the issue of "repatriation" of samples held in EU collections
by their countries of origin. Bilateral cooperation seems an appropriate
framework for addressing such issues.[38]

Overall, soft
cooperation under Option C-1 is considered to have a very positive
cost-benefit-ratio, particularly in the early stages of Nagoya Protocol
implementation. More formalised cooperation in the form of bilateral agreements
would require prior formal authorisation by the Council and possibly a
self-standing impact assessment.

6.6.2.     Option C-2: Support
developing sectoral codes of conduct and contractual model clauses

Sectoral codes of conduct and contractual
model clauses have very significant potential for enhancing the effectiveness
of EU implementation measures that are based on a due diligence system. As was
explained earlier, the availability of best practice codes of conduct would
support compliance of EU users with their due diligence obligation. This would
be particularly beneficial to SMEs and non-commercial resarchers with little
capacity. As regards access to genetic resources, model clauses could support a
streamlining of access practices in Member States that do require prior
informed consent and benefit-sharing (scenario 1 in Box 6). Such
streamlining would be particularly beneficial for non-commercial researchers
and SMEs. Model clauses are also useful tools for strengthening collections and
the networks between them (scenario 5). A further aspect that could be
addressed in codes of conduct is how to document acquisitions in states wih a
free access policy (scenario 1).

If the EU implements the Nagoya Protocol
based on a due diligence approach, it seems reasonable to assume that some user
sectors in the EU, possibly also at global level, will take the initiative for
refining or developing sectoral codes and contractual model clauses that work
best for them. Foreseeably, Commission representatives would be invited to
participate in such processes. Initially such participation could be done
within existing resources. However, it might require resources additional to
the competent authority / focal point the Commission must designate if the
Union ratifies the Nagoya Protocol. As part of this option, the Commission
should also undertake an initial stock-taking exercise of existing relevant
codes of conduct and model clauses. This should be supported by an expert
study.

Overall, there appear to be very significant
first-mover advantages on this issue. EU-based researchers and industries
utilising genetic resources constitute a critical mass of ABS stakeholders
globally. Codes and model clauses that support compliance in the EU thus have the
potential for becoming de facto best practice standards at global level.
An early priority to Option C-2 would thus create lasting benefits for EU
stakeholders.

Option C-2 entails some costs at EU-level.
However, an early priority on this option is considered to create lasting benefits
for EU stakeholders that far outweigh initial costs.

6.6.3.     Option C-3: Support
developing and deploying technical tools for tracking and monitoring

A "common thread" of all
considerations on user-compliance in this IA is that without a common baseline
of ABS-related information throughout the EU genetic resources value chain, it
challenging to expect respect by users for applicable ABS requirements set out
in access-permits of provider countries and in benefit-sharing contracts
between the provider and the first recipient of material. The EU due diligence
obligation on user-compliance would create a strong incentive for all EU users
of genetic resources to systematically seek, keep and transmit ABS-related
information (scenarios 2, 3 and 5 in Box 6). The EU baseline of current
practices of genetic resources use suggests that this is a feasible approach
for EU users of genetic resources and associated traditional knowledge. The
costs for meeting this challenge could, however, be minimised by employing low
cost, technical tools for tracking and monitoring genetic resources flow. The expert
study (see Annex 9) underlines that the challenge is not one of availability of
technical tools or potential costs. Tools that could be deployed are readily
available with few adjustments. Some tools are open-source and could be
available at minimal costs to users. What is necessary, however, is to deploy the
available technical tools in a specific regulatory context.

Under this option, the Commission would immediately
after adoption of the EU Regulation work with information technology experts
and EU stakeholders to support the rapid testing and more widespread use of
technical tools for monitoring genetic resources flow. This requires some human
resources (approx. 1/3 desk officer for 2 years) time and the organisastion of
a limited number of meetings (4 per yer for 2 years), while an initial technical
scoping study would be helpful.

Option C-3 has some but limited costs
at EU level. An early priority to this option is, however, assumed to
create lasting benefits for EU stakeholders and for an effective implementation
of the EU Regulation that far outweigh the initial costs.

6.6.4.     Option C-4: Awareness
raising and training activities

Access and benefit-sharing is a new field
of activity. The Nagoya Protocol obliges its Parties to take awareness raising
measures, and gives an indication of suitable measures to this end.[39]

EU-internally, the early and effective implementation of the EU Regulation would strongly
benefit from full awareness of EU stakeholders (scenario 2 in Box 6). As
regards awareness raising activities, the necessary Q&A material accompanying
the EU Regulation will be an important first step. This information will be
prepared by the Commission and made available on the Europa web-site. It is
assumed that this work will be undertaken by the desk officer(s) responsible
for the EU Regulation. As regards training activities, it seems premature
to determine what exactly is required and where the main needs will be. For the
purpose of this study it is assumed, however, that training activities are
primarily undertaken by the Member States and only complemented by Commission
activities (e.g., by "training the trainers").

Internationally, if the EU has ratified the Nagoya Protocol it will be expected to
contribute to awareness raising and training activities also internationally, mostly
in favour of developing country Parties. As regards the CBD, the Commission currently
uses funds from the ENRTP to support internationally agreed activities that it
considers as political priorities. The ability of the Union to contribute to
international awareness raising activities agreed by Parties to the Nagoya
Protocol will in any case depend on the outcome of the ongoing discussion on
the Multiannual Financial Framework 2014-2020, and cannot be prejudged in this
IA study.

Option C-4 has limited EU-level costs
for EU-internal awareness raising and capacity building activities. The
importance and benefits of stakeholder awareness and capacity for an early and
effective implementation of an EU Regulation do, however, seem very significant
and far outweigh the limited costs incurred. Option C-4 does not prejudge eventual
future EU support for international-level awareness raising activities.

              6.7     Overview
of the analysis results

Table 4 below provides a synoptic overview
of the results of the analysis on the policy options.

Table 4: Overview of the results of the analysis on
the policy options

Business as Usual || - Union ratification without implementing measures by Union or Member States (BAU) => The BAU option is clearly not workable. Nevertheless, together with the detailed description of current user practices in the EU in Annex 8, it was used as the main reference point for assessing and comparing all other options.

Access pillar || Binding measures at MS level || - No EU action (A-1) - EU platform (A-2) => Option A-2 is preferable over Option A-1 with only limited additional costs at EU-level

|| Binding measures at EU-level ||

User-compliance pillar || Binding measures at MS level || Member States take binding measures with soft coordination at EU-level (UC-1) => Option UC-1 will almost certainly result in a fragmentation of user-compliance systems in the EU with very significant costs to EU stakeholders and partially disruptive effects in some genetic resources value chains.

|| Binding measures at EU-level || - General due diligence obligation on EU users (UC-2) - General due diligence obligation on EU users and system for formal recognition of collections as "trusted sources" (UC-3) => Option UC-2 and 3C both create workable systems compatible with the concerns and utilisation practices of EU stakeholders. Option UC-3, however, has better gradings than Option UC-2 in respect to key implementation aspects (EU-level playing field, legal certainty, impacts on SMEs). It will be more beneficial to academic research, SMEs and micro-enterprises. - Prohibition to utilise illegally acquired genetic resources and "downstream" monitoring (UC-4) => Option UC-4 combines high legal and economic risks for EU stakeholders with a low probability that the etablished user-compliance system will function.

Temporal application || In case of binding EU-level measures…decision on - Application of binding rules to future acquisitions of genetic resources (T-1) - Application of binding rules as of entry into force of the CBD in 1993 (T-2) => Option T-1 is clearly preferable. It combines legal certainty for EU users with a higher likelihood to meet important social and environmental objectives. Conversely, Option T-2 would raise many economic and legal, in part constitutional, concerns and also would be unlikely to contribute to the identified social and environmental objectives.

Complementary measures || - Bilateral cooperation between EU and major provider countries or regions (C-1) - Sectoral codes of conduct and contractual model clauses (C-2) - Technical tools for tracking and monitoring (C-3) - Awareness raising and training activities (C-4) => Options C-1 to C-4 would all create contribute positively to the functioning of the main measures identified in the study (A-2 and UC-3).

Table 5 indicates how the particular mix of
implementing measures identified as the most preferable support achieving the objectives
of this IA study. The preferable options are a combination of A-2 (EU
platform), UC-3 (General due diligence obligation on EU users and system
for formal recognition of collections as "trusted sources"), T-1
(application of binding rules to future acquisitions of genetic resources) and
the different complementary actions (C-1, C-2, C-3, and C-4).

Table 5: How
the implementing measures identified support achieving the set objectives

General objective || Identified measures supporting the objectives

Identify appropriate measures for implementing the Nagoya Protocol in the EU and to enable the Union to ratify and comply with the Protocol. || - The totality of measures in the package would allow Union ratification and achieve full EU compliance. - Member States would have discretion whether or not to require prior informed consent and benefit-sharing for genetic resources that belong to them. Their decisions on this would not be a precondition for Union ratification.

Specific objectives ||

Support the conservation and sustainable use of biological diversity within the EU and worldwide. || - The combination of a due diligence obligation for all EU users with a system of 'trusted sources' of collections would maximise research and development opportunities on quality samples of genetic resources. The resulting new scientific insights about biodiversity are an important conservation contribution in itself. - The maximising of research and development opportunities would translate into benefit-sharing opportunities in favour of the conservation and sustainable use of biological diversity within the EU and worldwide. - Bilateral agreements with major provider countries would provide opportunities for strengthening commitments to channel benefits to conservation purposes.

Provide EU collections, and researchers and companies in Europe with improved and reliable access to quality samples of genetic resources at low cost and with high legal certainty for acquired material. || - The system of 'trusted sources' would enhance the availability of quality samples at low cost and with high legal certainty. - Bilateral agreements with major provider countries or regions would create further opportunities for accessing quality samples. - The support to model clauses and technical tools for monitoring and tracking would strengthen EU and international networks of collections, including by improving the availability of quality samples and information about their availability.

Maximise opportunities for research, development and innovation in nature-based products and services, while establishing a level playing field for all EU users of genetic resources, with particular benefits for SMEs and for publicly funded, non-commercial research. || - The combination of a due diligence obligation for all EU users with a system of 'trusted sources' of collections would maximise research and development opportunities on quality samples of genetic resources. - The due diligence obligation as such would apply to all EU users and thus establish an EU-level playing field. This would be particularly beneficial to SMEs and publicly funded research. - Publicly funded research and SMEs would also particularly benefit from the establishment of the system of 'trusted sources' of collections. - Support for model contractual clauses would also particularly benefit SMEs and non-commercial research with little capacity.

Protect the rights of indigenous and local communities that grant access to their traditional knowledge associated with genetic resources in accordance with the domestic laws of Parties to the Nagoya Protocol. || - The combination of a due diligence obligation for all EU users with a system of 'trusted sources' of collections will ensure that traditional knowledge associated with genetic resources documented in domestic access permits and in benefit-sharing contracts is only used for the identified purposes and that agreed benefits are shared. - The work on contractual model clauses would help indigenous and local communities achieving fair and equitable terms when giving access to their knowledge

Fully respect other international specialised access and benefit-sharing instruments and be mutually supportive with other relevant international instruments and processes || - The due diligence approach would not only respect but actively support the performance of specialised ABS instruments and other relevant international instruments and processes

Operational objectives ||

Establish a credible system for user-compliance measures. || - The basic due diligence obligation for all EU users would ensure that future utilisation activities in the EU comply with applicable ABS requirements set out in domestic access permits and in benefit-sharing contracts. - The system of 'trusted sources' of collections would step by step increase the share of 'ABS proof' quality samples of genetic resources utilised in the EU and gradually squeeze out the utilisation of genetic resourcse that are not properly documented in relation to ABS. - The due diligence approach also gives a strong incentive to EU users to implement ABS best practice codes of conduct and use contractual model clauses. The early priority on supporting users in developing further such codes and clauses has a strong potential for making the EU approach to user-compliance de facto the global standard.

Improve information on access and utilisation of genetic resources in the EU || - User declarations on their compliance with the due diligence obligation will generate information on activities utilising genetic resources in the EU; - The system of 'trusted sources' of collections will generate information about specific genetic resources accessions; - The increased utilisation of low-cost electronic monitoring and tracking tools by collections and some user groups will further add information about genetic resources flow; - Member States deciding to require prior informed consent will also contribute information about access permits issued.

Minimise overall implementation costs and burdens, particularly for affected SMEs || - The general due diligence approach allows users to identify ways for seeking, keeping and passing on ABS-related information that fits best to their activities, their business model, and their placement in the EU genetic resources value chain. - The system of 'trusted collections' will considerably lower compliance efforts by all those sourcing their research material from registered collections and subsequent users of such material. - Existing best practice policies of collections in the EU mean that these could seek to become 'trusted sources' with minimal further effort, thus rewarding the early measures taken. - Complementary measures on model clauses, codes of conduct, technical tools for tracking and monitoring, or awareness raising all combine to an enabling operating environment for EU users of genetic resources and assoiated traditional knowledge. The ability to build on existing codes of coduct and best practice standars rewards early movers in the field, be it collections.

7.           Monitoring
and Evaluation

Parties to the Nagoya Protocol must
regularly report to the Meeting of the Parties on the implementing measures
undertaken, in a format and at intervals that will be determined by the Meeting
of the Parties.[40] The Protocol also
establishes that Parties will undertake four years after the Protocol's entry
into force (likely in 2018 or 2019) a review of the Protocol's effectiveness.[41]
These obligations will apply equally to the EU and its Member States. Monitoring
and evaluation measures done for the purpose of this EU Regulation should
ideally provide the majority of input for complying with these global level
obligations.

While Member State authorities would be
expected to report to the Commission on the way the EU Regulation is applied by
their designated competent authorities, the Commission will receive, keep and
analyse such information.

The following information will be available
on the basis of the implementing measures and may be used for monitoring and
evalution purposes:

–
Information on Union trusted collections and
eventual difficulties in their operations;

–
Records on genetic resources and related
information that were supplied by Union trusted collections to third persons;

–
Declarations by users of genetic resources on
how they exercised due diligence;

–
Records  on checks of user-compliance conducted
by competent authorities and eventualy remedial actions and measures taken.

–
information obtained through regular meetings of
the EU Platform on access, with the help and participation of the Member States
experts on issues relevant to the access pillar of the Protocol.

The Commission would launch in 2017 or 2018
a technical study documenting practices of EU sectors utilising genetic resources.
This study should take the empirical work underpinning this IA study as
starting point and analyse through appropriate means, also drawing on some of
the information listed above, the effects and effectiveness of the EU
Regulation for implementing the Nagoya Protocol in the EU.

Key indicators for monitoring and
evaluation will be developed together with Member States experts, but could include
1) number of collections identified as Union trusted sources, and relevance of
these collections to EU users of genetic resources; 2) number of declarations
made by users on their compliance with the due diligence obligation, and
relevance of missing, incomplete or false declarations in relation to all
declarations made. 3) Number of checks conducted on users and number of
non-compliance situations identified; 4) Number of non-compliance situations
that occurred where material was sourced from a trusted collection as compared
to the overall number of non-compliance situations; 5) Availability of best
practices to EU users, and relative importance of best practices for
utilisation activities overall; 6) Number of non-compliance situations that
occurred where a user was implementing a best practice as compared to the
overall number of non-compliance situations.

              Glossary
of key terms used in the context of "Access and Benefit-sharing"

ABS: Acronym
for "Access and Benefit-Sharing". It is used to
refer to the way in which genetic resources or traditional knowledge associated
with such resources is accessed and how the benefits that result from uses of
such resources and knowledge are shared with the countries or indigenous and
local communities providing them.

Access to genetic resources: The term is used to describe the acquisition of genetic resources
in line with the access rules of a providing country that requires prior
informed consent and the establishment of a benefit-sharing contract.

Access and Benefit-sharing
Clearing-House Mechanism: The term refers to the
global information portal that is established by the Nagoya Protocol and will
be maintained by its international Secretariat. The Protocol identifies
information that Parties must submit to the Clearing-House as well as
information that they may submit.

Acquisition of genetic resources: The term is used to describe the activity of obtaining physical
possession of samples of genetic resources.

Biodiversity: Is a term defined in the CBD and refers to the variability that
exists among living organisms from all sources including among other things,
terrestrial, marine and other aquatic ecosystems and the ecological complexes
which they are part of. It includes diversity within species, between species
and their ecosystems.

Biological resources: Is a term defined in the CBD and refers to genetic resources,
organisms or parts thereof, populations, or any other biotic component of
ecosystems with actual or potential use or value for humanity.

Bio-piracy:
There is no common understanding of the term ‘bio-piracy’. It is mostly used to
denounce situations in which companies or researchers seek intellectual
property protection over traditional seeds or traditional knowledge on
particular properties of plants or animals without sharing benefits with the
rightful holders. Sometimes the term is used to reject, in principle, the idea
of private property rights in relation to nature.

Bioprospecting: The term refers to the process of looking for potentially valuable
genetic resources and biochemical compounds in nature.

Convention on Biological Diversity (CBD): the CBD is one of the three global environmental agreements adopted
by the 172 states that participated in the 1992 UN Conference on Environment
and Development in Rio de Janeiro. 108 heads of state and government attended
the meeting.

Competent National Authorities (CNAs): Domestic administrations established by governments and responsible
for granting access to their genetic resources. They represent providers on a
local or national level. The Nagoya Protocol obliges its Parties to establish
competent national authorities for ABS.

Compliance:
Compliance is either a state of being in accordance with established
guidelines, specifications, or legislation or the process of becoming so. In
the context of public international law and the Nagoya Protocol it describes
the situation where a state fulfils its obligations as they arise from an
international treaty. The term user-compliance in contrast is used when
referring to the fulfilment of users of genetic resources or associated
traditional knowledge with specific ABS requirements that may be set out in
domestic access frameworks of provider countries, in access permits, in
specific benefit-sharing contracts, or in general user-compliance laws of
countries where genetic resources and associated traditional knowledge are
being utilised.

Genetic material: Is a term identified in the CBD and means any material of plant,
animal, microbial or other origin containing functional units of heredity.

Genetic resources: Is a term identified in the CBD and means all genetic material of
actual or potential value. Essentially, the term encompasses all living
organisms (plants, animals and microbes) that carry genetic material
potentially useful to humans. Genetic resources can be taken from the wild,
domesticated or cultivated. They are sourced from: Natural environments (in
situ) or human-made collections (ex situ) (e.g. botanical gardens,
gene banks, seed banks and microbial culture collections)

Genetic resources value chain: The term is used to describe the totality of
typical steps taken to create environmental, social and economic value on genes
and naturally occurring biochemicals found in nature. The genetic resources
value chain starts with the collection of some material and possibly ends with
the successful commercialization of a final product. Typical steps taken are
the collection of genetic resources, the storage of collected material, basic
research on genetic resources, applied research on genetic resources, the
development of products and eventually the commercialization of products. Not
all these steps will necessarily be taken for each sample collected in the
wild. Not all collected material is stored in collections. In a few cases
material is collected by an agent of a company specifically interested in a
sample of a known organism. Also, most basic research will not result in
concrete applications. And much applied research ends unsuccessfully without
moving to the development of a product. Likewise, many development efforts
never make it to the product approval stage. The genetic resources value chain
is generally explained in Annex 7. The particular characteristics of the
genetic resources value chain in the EU are detailed in Annex 8.

Indigenous and Local Communities (ILCs): The CBD and the Nagoya Protocol do not define this term. It is left
to the Parties of the Protocol to define this term in their implementing
measures. In the context of the Nagoya Protocol the term ILCs is generally
understood to encompass communities living close to nature and holding genetic
resources of traditional knowledge associated to such resources. ILCs play an
important role in achieving the objectives of the Nagoya Protocol.

In-situ & Ex-situ: Genetic resources can be wild, domesticated or cultivated.
"In-situ" genetic resources are those found within ecosystems and
natural habitats. "Ex-situ" genetic resources are those found outside
their normal ecosystem or habitat, such as in botanical gardens or seed banks,
or in commercial or university collections.

Internationally recognised certificate
of compliance: The Nagoya Protocol establishes that
domestic access permits that are made available to the Protocol's Clearing-House
Mechanism shall constitute "internationally recognised certificates of
compliance". All Parties with users in their jurisdiction must recognise
such certificates as evidence of legal acquisition of the genetic resource
covered. The possession of an internationally recognised certificate of
compliance thus shields a user against allegations of "bio-piracy".

Meeting of the Parties: As per usual practice, the Nagoya Protocol identifies that the
regular meetings of the collective of the Parties to the Protocol function as
its supreme decision-making body. These meetings are referred to as
"meeting of the parties" or "meeting of the Parties to the
Protocol". The Protocol establishes that the first meeting of the Parties
to the Nagoya Protocol, after its entry into force must be organised
concurrently with the first meeting of the supreme decision-making body of the
CBD, the "conference of the parties", that is scheduled after the
Protocol's entry into force. This will likely be in 2014.

Mutually Agreed Terms (MAT): Is a term used in Article 15 CBD and establishes that specific
benefit-sharing conditions must be "mutually agreed" between
providers and users of genetic resources. The term is also used in the Nagoya
Protocol. Given their "mutually agreed" nature, MAT are contractual
arrangement and will normally be set out in private law contracts.

National Focal Points (NFPs): Domestic administrations responsible for providing information on
ABS, such as the requirements for gaining access to genetic resources. All
Parties to the Nagoya Protocol must establish a National Focal Point.

Prior Informed Consent (PIC): In the context of ABS and the Nagoya Protocol PIC refers to the administrative
permit given by the competent national authority of a provider country to a
user, prior to accessing genetic resources. However, the term is also used in
relation to the right of indigenous and local communities to take a free and
informed choice on whether they wish to give access to traditional knowledge
associated with genetic resources. Parties to the Nagoya Protocol are obliged
to protect this right of ILCs and to take measures that traditional knowledge
associated with genetic resources is accessed with the "prior informed
consent or the approval and involvement" of ILCs.

Providers of genetic resources: States have sovereign rights over their natural resources. Within
the exercise of this sovereignty, states will determine who holds rights over
genetic resources in their domestic legal order and who has the authority to
grant access to genetic resources and who should be involved in the negotiation
of mutually agreed terms with potential users. The possibilities range from
public ownership over genetic resources, to a system where the rights over
genetic resources follow the private property rights over the land. Even in
case of public ownership over genetic resources, a national government will
typically delegate the authority to grant prior informed consent to a
sub-national (e.g. regional authority) or non-state entity (e.g. a reference
collection).

Traditional knowledge associated with
genetic resources: The CBD and the Nagoya Protocol
do not define this term; it is left to the Parties of the Protocol to define
this term in their implementing measures. Eventually, a definition may result
from ongoing negotiation in the World Intellectual Property Organization. In
the Nagoya Protocol, the term is used in relation to the knowledge, innovations
and practices of indigenous and local communities that result from the close
interaction of such communities with their natural environment, and
specifically to knowledge that may provide lead information for scientific
discoveries on the genetic or biochemical properties of genetic resources. It
is characteristic of traditional knowledge that it is not known outside the
community holding such knowledge. In the context of ABS this means, that
traditional knowledge may easiest be identified if described or referred to in
a specific benefit-sharing contract.

Users of genetic resources: A diverse group, including botanical gardens, industry researchers
such as pharmaceutical, agriculture and cosmetic industries, collectors and
research institutes. They seek access for a wide range of purposes, from basic
research to the development of new products. The main users in the EU genetic
resources value chain are described in Box 2 of the main IA study.

              Overview
of Tables and Boxes

Boxes

Box 1: A hypothetical, best practice
case of access and benefit sharing               p. 6

Box 2: Main
actors and their placement in the EU genetic resources chain                      p.10

Box 3: The
Korean National Biodiversity Research Institute                                            p.12

Box 4: Some
examples how genetic resources utilisation contributes to public goods      p.12

Box 5:
Examples of ABS best practice codes of conduct                                                    p.14

Box 6:
Hypothetical scenarios illustrating the preffered options                                        p.39

Tables

Table 1:
Overview of all policy options considered for the IA                                            p.18

Table 2:
Comparison of options for the Access pilar of the Nagoya Protocol                    p.30

Table 3:
Analysis of options addressing the User Compliance pillar of the Protocol        p.36

Table 4:
Overview of the results of the analysis on the policy options                               p.44

Table 5:
How identified implementing measures support the IA objectives                      p.45

[1]               Newman and Cragg (2012), "Natural
Products as Sources of New Drugs over the 30 Years from 1981 to 2010". Journal
of Natural Products, 75(3), pp 311–335.

[2]               Convention on Biological
Diversity (Rio de Janeiro, 5 June 1992, in force 29 December 1993). The treaty
is available at <http://www.cbd.int/convention/text/>.

[3]               See Council Conclusions of 20 December 2010
(paragraphs 1 and 21), 23 June 2011 (paragraph 14), European Parliament
Resolution of 20 April 2012 (paragraph 101), Commission Communication on an EU
Biodiversity Strategy to 2020 (COM (2011) 244) (Action 20).

[4]               Commission Communication on a Bioeconomy for Europe
(COM (2012) 60 final).

[5]               Except Latvia, Malta and Slovakia.

[6]               See Council Conclusions of 20 December 2010
(paragraphs 1 and 21), 23 June 2011 (paragraph 14), European Parliament
Resolution of 20 April 2012 (paragraph 101), Commission Communication on an EU
Biodiversity Strategy to 2020 (COM (2011) 244) (Action 20).

[7]               A more detailed description of the legal framework
established by the Nagoya Protocol is found in Annex 1. A synoptic
overview of all 36 Articles of the Protocol is included in Annex 2.

[8]               See Annex 1 for a detailed description of the
differing views.

[9]               For example, the International Treaty on Plant
Genetic Resources for Food and Agriculture concluded in 2001 in the context of
the UN Food and Agriculture Organization and to which the EU is a Party. For
details see Annex 1.

[10]             The country studies focussed on BE, BG, DE, ES, FR, NL,
PL, and the UK.

[11]             The typical steps in the genetic resources value chain
are described in Annex 9 to this IA.

[12]             For details see Annex 8, pp. 57-59.

[13]             The contrast between the principled recognition of the
importance of traditional knowledge and its limited use in practice reflects
the practical challenges and often significant costs involved in working with
indigenous and local communities to obtain access to some of their knowledge.

[14]             Botanic gardens, culture collections and other ex situ
collections are very much linked because they are often hosted by the same
institutions, generally universities or public research institutes.

[15]             “Seed”
refers to all planting material used in crop production, including seed grains,
cuttings, seedlings, and other plant propagation materials.

[16]             For details see Annex 8 pp. 77-79.

[17]             For details see Annex 8 pp. 79-81.

[18]             "Green" biotechnology refers to
biotechnological applications in agriculture, "red" to its
application in medical processes, "white" to uses of biotechnology in
industrial processes.

[19]             See summary of the public consultation in Annex 3.

[20]             Article 30 Nagoya Protocol

[21]             It must also be noted that the US, which is not a Party
to the CBD and therefore unlikely to ratify the Nagoya Protocol, has
established domestic legislation (eg, US Lacey Act, specialised legislation for
some US national parks) and guidelines (eg, for the National Institutes of
Health) that at least partially support taking user-compliance measures as
required under the Nagoya Protocol. The US furthermore seeks to minimise
eventual negative impacts from its non-Party status on US researchers,
collections and companies by engaging with major provider countries of genetic
resources through large-scale public-private partnership projects (e.g. US
Panama).

[22]             To indicate the magnitude: there are 550 botanical
gardens in the EU of which 130 participate in IPEN.

[23]             See Box 5 above.

[24]             The different academic views on the Protocol's temporal
application are described in Annex 1.

[25]             The different academic views on the Protocol's temporal
application are described in Annex 1.

[26]             See for example the model agreements made available by
the US National Institutes of Health <http://www.ott.nih.gov/forms\_model\_agreements/>.

[27]             The full reference and executive summary of this study
are included in Annex 9.

[28]             The 5-step grading system applied ranges from
"++" for significant positive impact; over "0" for neutral
impact; to "--" for a significant negative impact; "n.a."
indicates that an assessment criteria is not meaningful for analysing a
specific measure (e.g., a criteria that is relevant only for user-compliance is
not meaningful for analysing the performance of an access-related measure);
"unclear" indicates instances, where an analysis cannot be made
because of date limitations.

[29]             Essentially staff time for organising meetings of the
platform 2-4 times per year and travel costs in case of meetings outside of
Brussels.

[30]             Norway, for example, has adopted user-compliance
measures that are conceptually based on Option UC-4, although it seems unclear
how monitoring and enforcement works (for a critical account see Tvedt and
Fauchald, The Journal of World Intellectual Property (2011), Vol. 14, no. 5,
pp. 383–402). Switzerland opened a public consultation in May 2012 on a
legislative proposal that seems similar to Option UC-2 (see <http://www.sib.admin.ch/?id=756&L=1>).

[31]             See ICC Document "Nagoya Protocol Implementation
in the EU", No. 450/1075 of 18 June 2012.

[32]             See the examples in Box 5.

[33]             This is markedly different from genetic material as
such.

[34]             Article 2c) Nagoya Protocol.

[35]             To show the magnitude of this challenge, one major
company providing biochemical compounds for industrial users offers well over
90 million different molecules in its catalogue (see, for example, www.
http://www.sigmaaldrich.com/).

[36]             See Box 3.

[37]             <http://www.wfcc.info/home/>.

[38]             For an interesting project by Kew botanical garden in
the UK to "repatriate" information on herbarium data for
North-Eastern Brazil see <http://www.kew.org/science/tropamerica/repatriation.htm>.

[39]             Article 21 Nagoya Protocol.

[40]             Article 29 Nagoya Protocol.

[41]             Article 31 Nagoya Protocol.

Commission Staff Working Document

Proposal for a
Regulation of the European Parliament and of the Council

ON ACCESS TO
GENETIC RESOURCES AND THE FAIR AND EQUITABLE SHARING OF BENEFITS ARISING FROM
THEIR UTILISATION IN THE UNION

Part 2 - Annexes

Annex 1: The Legal
Framework established by the Nagoya Protocol 3

Annex 2: Synopsis of all provisions of the
Nagoya Protocol 7

Annex 3: results of the public consultation
conducted in support of the IA.. 16

Annex 4: Policy options considered but
discarded in the IA.. 24

Annex 5: Detailed
analysis of options for implementing the access pillar of the Nagoya Protocol 29

Annex 6: Detailed
analysis of options for implementing the user-compliance pillar of the Nagoya
Protocol 35

Annex 7: The
genetic resources Value Chain. 63

Annex 8:  The
"EU Baseline" - current practices of utilisation of genetic resources
and associated traditional knowledge in the European Union. 65

Annex 9: Tracking and Monitoring Genetic
Resources Flow.. 100

Annex 1: The Legal Framework established by the Nagoya Protocol

Genetic resources are widely used for a broad range of purposes. A
significant part of EU researchers and industries directly or indirectly depend
on reliable conditions for accessing and exchanging high quality samples of
genetic resources. Examples include plant and animal breeding, natural material
as input for modern biotechnology, or the analysis of genes found in nature as
basis for developing new drugs.

States hold sovereign rights over genetic resources that originate
within their jurisdiction (similar to crude oil). The CBD establishes a general
obligation on its Parties to facilitate access to their genetic resources and
to share benefits for resources utilised from other Parties. The general ABS
framework set out by the CBD has not performed well. This has created
frustrations on both sides of the ABS relationship: the technical capability
for nature-based research have increased dramatically, however, EU users often
face restrictions and legal risks when acquiring research material in other
countries. Countries providing genetic resources in contrast, are reluctant to
provide access if there is no commitment that agreed benefit-sharing obligations
will be respected once a resource has left their jurisdiction and is used in
another country.

Access and Benefit-sharing in the CBD/ Nagoya Protocol and other
international instruments

Access and benefit-sharing for genetic resources and for traditional
knowledge associated with such resources is addressed in the framework of the
CBD and its Nagoya Protocol, but also in other international institutions. This
includes the FAO International Treaty on Plant Genetic Resources for Food and
Agriculture, the FAO Commission on Genetic Resources for Food and Agriculture,
the WTO Agreement on Trade Related Aspects of Intellectual Property Rights, the
World Intellectual Property Organization, the World Health Organization, the UN
Convention on the Law of the Sea, and various indigenous and human rights
bodies.

The CBD has the character of a global framework agreement that is
based on principled ideas and obligations. It applies to all genetic resources
over which states hold sovereign rights. The Nagoya Protocol has the same broad
coverage than its "mother instrument". However, its provisions are
much more specific and operational. It is therefore important that the Nagoya
Protocol explicitly clarifies how it relates to activities in other international
fora. The Protocol explicitly does not apply to specialized access and
benefit-sharing instruments. Instruments in this sense are the 2001 FAO
International Treaty on Plant Genetic Resources for Food and Agriculture and
the 2011 WHO Pandemic Influenza Preparedness Framework. Furthermore, Parties to
the Protocol must seek to establish a mutually supportive relationship with
other relevant international instruments and processes.

Another reflection of the Protocol's broad coverage is its explicit
mentioning of some "special considerations": 1) Each Party must
create conditions to promote research that contributes to the conservation of
biological diversity, including through simplified access for non-commercial
research; 2) Each Party must pay due regard to cases of present or imminent
emergencies that threaten or damage human, animal or plant health; and 3) each
Party must give special consideration to the importance of genetic resources
for food and agriculture and their role for food security.

Objective, geographic and temporal scope of the Nagoya Protocol

The fair and equitable sharing of benefits arising from the
utilization of genetic resources is the main objective of the Protocol (Article
1). Effective benefit-sharing is considered as an important incentive for the
conservation and sustainable use of biological diversity. The geographical
scope of the Protocol is on genetic resources over which states hold sovereign
rights (Article 3). The Protocol does not apply to genetic resources that are
found in areas beyond national jurisdiction, such as the high seas or Antarctica. As regards temporal scope, the Protocol applies to all genetic resources and
traditional knowledge associated with such resources that are accessed and
utilized after the entry into force of the Nagoya Protocol for a Party. It does
not apply to genetic resources that were acquired prior to the entry into force
of the CBD, i.e. 29 December 1993. In the view of some legal scholars, the
Protocol also applies to the new or continued utilization of genetic resources
that were acquired after the entry into force of the Convention, but before the
entry into force of the Protocol for a Party. However, this interpretation is
contested by other scholars. Parties must make a choice whether to follow this
interpretation in their implementing measures or not. The Nagoya Protocol also
does not apply to plant genetic resources covered by the FAO International
Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA).

Access to genetic resources and to traditional knowledge associated
with such resources

The Nagoya Protocol establishes detailed obligations how
Parties must regulate access if they decide to require benefit-sharing for the
utilization of their genetic resources (Article 6). Importantly, the Protocol
defines that "utilization of genetic resources" means to conduct
research and development on the genetic or biochemical composition of genetic
resources (Article 2c)). This means the Protocol expects Parties to address in
their domestic access framework not only the use of genes, but also the use of
naturally occurring biochemicals found in acquired genetic material.

The Protocol obliges Parties that require benefit-sharing for the
use of their genetic resources to establish a domestic regulatory framework that
oblige potential users to obtain an access permit (so called prior informed
consent, PIC) and also enter into a contract that sets out specific
benefit-sharing conditions (so called mutually agreed terms, MAT). The Protocol provisions on access
oblige Parties to create clear and transparent access frameworks, based on fair
and non-arbitrary rules, which result in robust and reliable access decisions,
in a cost-effective manner and within a reasonable period of time.

Special access obligations apply in relation to research with
non-commercial purpose (Article 8(a)), in case genetic resources have
pathogenic properties that threaten or damage human, animal or plant health
(Article 8(b)), as well as in relation to genetic resources for food and
agriculture (Article 8(c)).

The Protocol also establishes obligations for Parties on how to
involve indigenous and local communities whenever access is sought to
traditional knowledge associated with genetic resources held by a community or
to genetic resources over which a community holds established rights (Articles
7, 12, 5.2 and 6.2). Effective implementation of these obligations will pose a
challenge to some developing countries with little administrative and
scientific capacity. This underlines the importance of targeted
capacity-building, for example through bilateral partnerships.

EU laws do not regulate access to
genetic resources or to associated traditional knowledge within the Union. EU nature legislation is indirectly relevant for in-situ collecting
activities in EU protected areas. Furthermore, Member States which decide to
require benefit-sharing and to develop an access framework in accordance with
the Protocol, will need to ensure that eventual restrictions on access are
consistent with the fundamental freedoms and with applicable EU legislation on,
for example, plant variety protection, or animal and plant health.

User-compliance

The Nagoya Protocol obliges Parties to take measures to
ensure that only legally acquired genetic resources and associated traditional
knowledge are utilised within their jurisdiction (Articles 15 and 16). Parties
must take measures to monitor compliance of users under their jurisdiction,
including by designating one or more checkpoints for this task (Article 17).
They must take appropriate, effective and proportionate measures to address
situations where users do not comply with their obligations. Parties must also
ensure an opportunity for recourse in case of disputes arising from
benefit-sharing agreements set out in MAT (Article 18). Importantly, the
Protocol leaves Parties some flexibility through which measures to ensure
user-compliance. The main user-compliance obligations of the Protocol are
complemented by provisions on model contractual clauses (Article 19), codes of
conduct (Article 20), or awareness raising activities (Article 21).

EU laws do not specifically address
user-compliance. The only exception is a reference to the eventual utility of
patent disclosure requirements in recital 27 of Directive 98/44/EC on the legal
protection of biotechnological inventions as a means to monitor the use of
genetic resources. User compliance measures have an apparent link to the
functioning of the EU internal market. It depends on the design of EU
implementing measures (point of intervention in value chain, type of measure)
whether existing Union laws on intellectual property rights or product-approval
are affected. As regards disputes arising from benefit-sharing agreements,
Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and
enforcement of judgments in civil and commercial matters seems relevant.

Benefit-sharing

The Nagoya Protocol establishes a general obligation on
Parties to take measures so that benefits arising from the utilization of
genetic resources as well as subsequent applications and commercialization are
shared in a fair and equitable way with the Party providing such resources
(Article 5(1) and (3)). This obligation is closely related to the general
objective of the Protocol (Article 1). Importantly, concrete benefit-sharing
shall be on mutually agreed terms (MAT), that is on the basis of private law
contracts negotiated between providers and users of genetic resources or
associated traditional knowledge (Article 5(1), (2), and (5)). The Protocol
makes conclusion of MAT an integral part of the administrative process of
access-decisions of Parties that require benefit-sharing for the use of their
resources. The content of MAT determines the type, time and amount of benefits
to be shared. Users of genetic resources will need to know the content of
applicable MAT to understand the reach of concrete benefit-sharing obligations
in specific cases. Complementary measures on model contractual clauses or
training in contract negotiations may help users and providers to more
effectively engage in ABS activities.

EU laws do not specifically address
benefit-sharing for genetic resources or associated traditional knowledge, be
it in general terms or in relation to benefit-sharing contracts.

Institutional provisions, capacity-building, technology transfer,
international cooperation

Parties to the Nagoya Protocol must designate a national
focal point on access and benefit-sharing (Article 13(1)) and one or more
competent national authorities responsible for practical decision-making on
access and benefit-sharing (Article 13(2)). Furthermore, the Protocol
establishes an international information-sharing portal, the so called Access
and Benefit-sharing Clearing House Mechanism, through which relevant
information is made available. Parties are obliged to submit minimum
information to the Clearing House on, for instance, domestic ABS measures and
national focal points (Article 14(2)). They may submit further information,
such as on model contractual clauses or codes of conduct (Article 14(3)).

The Nagoya Protocol also obliges Parties to cooperate in
capacity-building (Article 22). It establishes a softly worded obligation on
technology transfer to developing country Parties (Article 23). Various Articles
oblige Parties to cooperate internationally for implementing the Protocol. This
includes, for example, international cooperation in technical and scientific
research and development programmes (Article 23), cooperation in case the same genetic resources are
found in the territory of more than one Party (Article 11(1)), or cooperation
in specific cases of alleged violations of domestic ABS requirements of a Party
(Article 15(3) and 16(3)).

EU laws do not specifically address
these aspects of Nagoya Protocol implementation. The Commission currently
supports an ABS-capacity building initiative in the ACP countries, that aims at
linking ABS policies to the management of protected areas.

ABS laws and policies of EU Member States

A survey of ABS laws and policies of eight EU Member States
conducted in preparing this IA[1] showed that two Member
States (ES, BG) have developed but currently do not apply access legislation,
and none of the Member States surveyed had taken user-compliance measures as
required under the Protocol. Some Member States (DK, NL, DE) have in the past
or currently support ABS-related capacity-building activities, particularly in Africa.

              Annex
2: Synopsis of all provisions of the Nagoya
Protocol

Article of the Nagoya Protocol || Description || Operational contents

1 || This provision presents the general objectives of the Protocol: fair and equitable benefit sharing contributing to the conservation and sustainable use of biological diversity. || Implementing measures must be consistent with the objectives of the Protocol.

2 || The provision defines key terms used in the treaty || Implementing measures must be consistent with the terms defined in the Protocol.

3 || This provision describes the treaty's scope || The scope of implementing measures must be consistent with this Article

4 || This provision explains the relationship of the Nagoya protocol with other international agreements and instruments. || Special agreements must be respected and a mutually supportive relationship to other relevant international agreements and instruments must be established

5(1) and (3) || The provision sets out the basis benefit-sharing obligation of Parties as regards the utilisation of genetic resources || Paragraph 1, first sentence establishes a general obligation to share benefits arising from research and development on the genetic or biochemical composition of genetic resources as well as from subsequent applications and commercialisation. The second sentence clarifies that concrete benefit-sharing commitments must be mutually agreed between provider and user, this means set out in (private law) contracts. Paragraph 3 obliges Parties to take appropriate measures for implementing paragraph 1.

5(2) || The provision addresses benefit-sharing in situations where genetic resources are owned by indigenous and local communities. || Parties with indigenous and local communities must take measures in support of channelling benefit-sharing to communities, wherever the domestic law of that state establishes rights of communities over genetic resources.

5(4) || The provision addresses types of benefits that may be shared. || The paragraph together with the Annex to the Nagoya Protocol provides Parties and stakeholders with an indicative list of benefits that may be considered when establishing concrete benefit-sharing agreements.

5(5) || The provision addresses benefit-sharing for the use of traditional knowledge held by indigenous and local communities. || Parties with indigenous and local communities must take measures that concrete benefit-sharing arrangements are concluded in case use is made of traditional knowledge associated with genetic resources that is held by a community in the jurisdiction of that Party and that the communities are the recipients of eventual benefits.

6(1) and (3) || This is the main Protocol provision on access to genetic resources. || All Parties to the Protocol that decide to require prior informed consent and benefit-sharing for the use of genetic resources over which they hold sovereign rights must establish domestic rules that comply with the "international access standards" in paragraph 3. The international access standards establish basic obligations in relation to legal certainty, clarity and transparency; and non-arbitrary rules. Parties must furthermore set out clear criteria and procedures for obtaining prior informed consent decisions and for the establishment of benefit-sharing contracts.

6(2) and 6(3) f || These are the main Protocol provisions dealing with access to genetic resources that are "owned" by indigenous and local communities || Parties with indigenous and local communities must take measures so that the prior informed consent or approval & involvement of indigenous and local communities is obtained where these have, in accordance with the domestic law of this Party, the established right to grant access to genetic resources.

7 || This is the main Protocol provision on access to traditional knowledge associated with genetic resources that is held by indigenous and local communities. || Parties with indigenous and local communities must take measures with the aim of ensuring that traditional knowledge of their indigenous and local communities is accessed with the prior informed consent or approval and involvement of these communities and that benefit-sharing agreements are established. Parties have some flexibility on how to implement this obligation to accommodate for their specific domestic situations ("in accordance with domestic law").

8 || The Nagoya Protocol, in principle, applies to all genetic resources over which states hold sovereign rights. Article 8 is a reflection of this broad coverage and identifies specific issues Parties must address in their implementing measures. These are non-commercial research, public health emergencies, and the special role of genetic resources for food and agriculture for food security and || In implementing the Protocol Parties must (a) create conditions to promote and encourage biodiversity research, particularly in developing countries, including through simplified access for non-commercial purposes (b) avoid that the Protocol's bilateral approach to access and benefit-sharing stands in the way of access to genetic resources in emergency situations that threaten, human, animal and plant health (c ) reinforce food security through specific treatment and consideration of genetic resources for food and agriculture

9 || The provision establishes that benefits-sharing must contribute to the conservation and sustainable use of biological diversity || Parties shall encourage users and providers to direct benefits arising from utilisation of GR to biodiversity conservation and sustainable use. The Protocol does not set out specific measures to this end.

10 || The provision addresses the so called Global Multilateral Benefit-sharing Mechanism || The Protocol does not establish a Global Multilateral Benefit-sharing Mechanism. However, it obliges the collective of the Parties to consider the need for and modalities of such mechanism. If Parties agree that there is such need, the mechanism could be established at the earliest by a decision of the first meeting of the Parties to the Nagoya Protocol.

11 || The provision deals with transboundary cooperation in situations of shared resources or shared traditional knowledge || The Article sets out a best endeavour obligation on Parties to cooperate with each other (i) where the same genetic resources are found within the territory of more than one Party, and (ii) where the same traditional knowledge associated with genetic resources is shared by one or more indigenous and local communities in several Parties.

12 || This is the main Protocol provision on traditional knowledge associated with genetic resources. || The Article establishes different obligations that are primarily directed at Parties with indigenous and local communities. (1) In implementing the Protocol Parties must take into consideration customary laws, community protocols and procedures of indigenous and local communities (2) Parties must establish mechanisms for informing potential users of traditional knowledge about their obligations. These mechanisms must be developed with the effective participation of the communities concerned. (3) Parties must make a best endeavour effort to support indigenous and local communities in developing community protocols, minimum requirements for benefit-sharing contracts, and model contractual clauses. (4) Parties are obliged not to restrict the customary use and exchange of genetic resources and traditional knowledge within and amongst indigenous and local communities.

13 || The provision sets out the roles of national focal points and competent national authorities that Parties must establish. || The Article obliges each Party must designate an ABS focal point for liasing with the international Secretariat and responding to information requests by stakeholders. Each Party must also designate one or more competent national authority that is responsible for granting access and advising on applicable procedures for requiring prior informed consent and entering into mutually agreed terms.

14 || The provision establishes a global information-sharing portal managed by the international Secretariat, the so called Access and Benefit-sharing Clearing-House and identifies information that must or may be shared by Parties. || Paragraph 1 establishes the ABS Clearing-House. Paragraph 2 lists information that Parties must provide, without prejudice to the protection of confidential information. This includes national ABS laws, information on focal points and competent authorities and information on national access permits. Paragraph 3 lists information that Parties may make available. This includes information on indigenous authorities, on model contractual clauses, on codes of conduct, or technical tools for monitoring genetic resources flow. Paragraph 4 mandates the first meeting of the Parties to the Protocol to decide on the specific operating modalities of the Clearing-House.

15 || This is the main Protocol provision on obligations of Parties in relation to the ABS-compliance of users of genetic resources within their jurisdiction. || Paragraph 1 obliges each Party to take domestic measures with legal effect so that users of genetic resources within its jurisdiction only utilise genetic resources that were legally acquired in provider countries in accordance with applicable requirements of these countries on prior informed consent and the establishment of mutually agreed terms. Paragraph 2 obliges each Party to take measures if users within its jurisdiction do not comply with its domestic measures on user-compliance. Paragraph 3 sets out a best endeavour obligation on Parties to cooperate with each other in case of alleged violations of domestic access frameworks of provider countries.

16 || This is the main Protocol provision on obligations of Parties in relation to the ABS-compliance of users of traditional knowledge associated with genetic resources within their jurisdiction. || Paragraph 1 obliges each Party to take domestic measures with legal effect so that users of traditional knowledge associated with genetic resources within its jurisdiction only utilise knowledge that was legally acquired in accordance with applicable requirements of provider countries on prior informed consent and the establishment of mutually agreed terms. Paragraph 2 obliges each Party to take measures if users within its jurisdiction do not comply with its domestic measures on user-compliance. Paragraph 3 sets out a best endeavour obligation on Parties to cooperate with each other in case of alleged violations of domestic access frameworks of provider countries.

17 || This is the main Protocol provision on monitoring the utilisation of genetic resources || Paragraph 1 first sentence obliges each Party to take appropriate measures for monitoring and enhancing transparency regarding the utilisation of genetic resources within its jurisdiction. The scope of the monitoring obligation is informed by the definition of "utilisation of genetic resources". The second sentence of Article 17.1 introduces a non-exhaustive list of ideas for monitoring and enhancing transparency. Each Party must designate at least one "checkpoint" with generally described functions, each Party must encourage users and providers to make use of contracts as monitoring mechanisms, and each Party must encourage the use of cost effective communication tools and systems for monitoring purposes Paragraph 2 establishes that domestic access permits that are made available to the Clearing-House Mechanism shall constitute internationally recognised certificates of compliance. All Parties must recognise such certificates as evidence of legal acquisition of the genetic resource covered (paragraph 3). Paragraph 4 sets out the minimum content of internationally recognised certificates.

18 || This is the main Protocol provision on measures in support of compliance with benefit-sharing contracts || Paragraph 1 obliges each Party to encourage providers and users of genetic resources to include appropriate dispute resolution clauses in benefit-sharing contracts, as these will per se raise issues on where and how eventual disputes must be settled, and which laws would apply. Paragraph 2 obliges each Party to provide that opportunities for recourse are available under their legal systems in cases of disputes arising from benefit-sharing contracts. Paragraph 3 sets out a general obligation on access to justice and the use of mechanisms regarding mutual recognition of foreign judgments and arbitral awards. Paragraph 4 establishes that the effectiveness of Article 18 will be reviewed in accordance with the general review under Article 31.

19 || The provision deals with model contractual clauses || The Article obliges each Party to encourage the development, update and use of model contractual clauses for benefit-sharing agreements. It also instructs the collective of the Parties to periodically take stock of the use of clauses.

20 || The provision deals with codes of conduct, guidelines and best practices or standards || The Article obliges each Party to encourage the development, update and use of codes of conduct, guidelines and best practices or standards in relation to ABS. It also instructs the collective of the Parties to periodically take stock of the use of such codes, guidelines or practices and standards, and consider recognising some as best practice in the field.

21 || The provision deals with awareness-raising || The Article obliges all Parties to take awareness raising measures, it also sets a non-exhaustive list of measures that may be taken for awareness-raising purposes.

22 || The provision deals with capacity-building activities || The Article in its paragraph 1 sets out a general obligation on Parties to cooperate in capacity-building and capacity development to effectively implement the Protocol. The Article singles out the particular needs of developing country Parties in this regard. It also includes a detailed and non-obligatory list of areas and measures for building capacity.

23 || The provision deals with technology transfer || The Article refers back to the relevant CBD provisions on technology transfer and stipulates in addition that the objective of such transfer is "to enable the development and strengthening of a sound and viable technological and scientific base for attainment of the objectives of the Convention and this Protocol."

24 || The provision addresses the relationship of Parties to the Protocol with non-Parties. || The Article obliges Parties to encourage non-Parties to adhere to the Protocol and to contribute appropriate information to the Access and Benefit-sharing Clearing-House.

25 || The provision deals with the Protocol's Financial Mechanism || The Article establishes that the financial mechanism of the CBD – the Global Environment Facility - shall also be the financial mechanism of the Protocol. The Article also addresses how guidance to the financial mechanism must be developed and that the interests of developing and least developed countries must be considerations in developing such guidance.

26 || The provision deals with Meetings of the Parties to the Nagoya Protocol || The Article establishes the meeting of the Parties to the Protocol as the supreme decision-making authority in Protocol matters. It addresses issues of participation in meetings, identifies a non-exhaustive list of functions of meetings of the parties, it also deals with rules of procedure. Importantly, it is established that the first meeting of the Parties to the Nagoya Protocol must be held concurrently with the first meeting of the Conference of the Parties to the CBD that is scheduled after the Protocol's entry into force.

27 || The provision deals with Subsidiary Bodies || The Article establishes that subsidiary bodies of the CBD may also serve the Nagoya Protocol. It also addresses the participation status of CBD Parties that are not (yet) Parties to the Protocol in meetings of subsidiary bodies that serve the Protocol.

28 || The provisions deals with the international Secretariat || The Article establishes that the Secretariat to the CBD also serves as Secretariat for the Nagoya Protocol and that necessary budgetary arrangements must be decided by the first meeting of the parties.

29 || The provision deals with monitoring and reporting. || Each Party to the Protocol must regularly report on the measures taken for implementing the Protocol. The reporting dates and format are determined by the conference of the Parties.

30 || The provision deals with the Protocol's compliance mechanism || The Nagoya Protocol does not establish a compliance mechanism. However, Article 30 obliges the first meeting of the Parties to "consider and approve cooperative procedures and institutional mechanisms to promote compliance" with the Protocol provisions and to address cases of non-compliance.

31 || The provision deals with the assessment and review || The provision establishes that a first review of the effectiveness of the Protocol shall be undertaken four years after the Protocol's entry into force and at to be determined intervals thereafter.

32 || The provision deals with the Protocol signature || The provision establishes that the Protocol was open for signature from 2 February 2011 to 1 February 2012. During that time it received 92 signatures.

33 || The provision deals with the Nagoya Protocol's entry into force || Paragraph 1 establishes that the Protocol shall enter into force on the ninetieth day after the deposit of the fiftieth instrument of ratification. Paragraph 2 addresses the entry into force of the Nagoya Protocol for a Party. Paragraph 3 establishes that instruments of ratification deposited by regional economic integration organizations (such as the EU) are not counted additional to those deposited by its member states.

34 || The provision addresses the issue of reservations. || The Article establishes that Parties are not allowed to make reservations to the Protocol. This is standard practice in multilateral environmental agreements. The Article is necessary since general rules of international treaty law would enable states to make specific reservations when ratifying the Protocol.

35 || The provision deals with the possibility of a Party to the Protocol to withdraw from being a Party. || Paragraphs 1 and 2 establish set out the substantive and formal conditions for withdrawing from the Protocol.

36 || The provision deals with the authentic texts of the Protocol || The Nagoya Protocol was negotiated in English. The Article establishes that the Arabic, Chinese, English, French, Russian and Spanish language versions of the Protocol are considered as equally authentic. This is important for interpretation purposes.

              Annex
3: results of the public consultation conducted in support of the ia

I. Summary

The list of questions together with the
results of the web-based public consultation have been published in the website
of the European Commission under the following link:

http://ec.europa.eu/environment/consultations/abs\_en.htm

1. Overview of the participants

The Commission
received 42 responses to the questionnaire and one contribution by the
Government of Norway. The relatively small number of replies received actually
represents a much broader number of respondents, since more than 40% of the
replies came from stakeholder associations with hundreds or thousands of
members each. The breakdown of the respondents is as follows:

–
Associations of stakeholders: 17 replies (41% of
the total answers)

–
Universities, collections and Research
Institutions: 17 replies (40% of the total answers)

–
Individual Industries: 4 replies (10% of the
total answers)

–
EU Working Groups on genetic resources: 2
replies (5% of the total answers)

–
NGOs: 1 reply (2% of the total answers)

–
Indigenous and local communities: 1 reply  (2%
of the total answers)

2. Main messages from the consultation

a) The vast majority of respondents pleaded for a harmonised approach at EU level especially on user compliance to effectively implement the NP and its objectives in the EU, while certain of them even pleaded for a harmonised approach worldwide. Respondents judged a harmonised approach at EU level as cost effective, non-discriminatory and supportive of research activities All respondents (except few neutral replies) agreed on the need for a harmonised approach at EU level to effectively implement the NP and its objectives in the EU.             REASONS:     - Avoid increase in administrative burden, time and costs             - Mechanisms to access, transport and control of genetic resources must be international             - Avoid discrimination against holders of traditional knowledge and fail to protect them                                     - Avoid limitation for intra-EU commerce of finished products                                     - Support to research activities                                     - Ensuring common interpretation             Several times it was even emphasized to strive for harmonisation worldwide. Except for CABI (International Non-Profit Organisation occupied with environmental and agricultural issues) and the neutral replies, all respondents strive for a harmonised approach at EU level regarding establishing access legislation in the EU.             CABI's reason not to support the idea of a harmonised approach: Additional legislation is not necessary at the EU-level; controls should be implemented at national level and these may simply be community operational guidance where failure to comply means exclusion from the market.

b) The major part of respondents prefer a Regulation as the most appropriate legislative instrument for guaranteeing harmonised application of ABS rules in the EU, among them most industries and industry associations, gene banks and NGOs. Regulations bring clarity and legal certainty thus facilitating transactions related to genetic resources utilization. 1. The respondents striving for a regulation being the most appropriate legislative instrument for EU legislation on ABS are (24/42 = 57%):             - GROUP I (most industries and associations within pharmaceutical, health&beauty, breeding, seeds, and biotechnology sectors) (19)                         - Genebank (1)                         - NGO supportive of Indigenous and Local Communities (ILCs) (1) REASONS:     - On the issue of respect for ILCs rights, a regulation harmonising obligations of EU MS is more appropriate - A regulation will enforce MS to implement directly into their national legislation and guarantee harmonisation                                     - assures clarity and legal certainty 2. The respondents striving for a directive being the most appropriate legislative instrument for EU legislation on ABS are (5/42 = 12%):    - Botanical Garden (1) - National Museum (1) - University (1) - Industry (herbal medicinal products) (1) REASONS:     - Assures that main goals will be achieved while some adaptation remains possible - Although it will require time for assessment and practices, this is the preferable legislative instrument - For BGs, assures the continuous role of supporting and explaining issues pertaining to the biodiversity crisis 3. Certain respondents do not prefer one or the other, however, they express clearly that any legislative instrument should not impede the good functioning of the organisation (3/42 = 7%). The remaining respondents voted blanco (10/42 = 24%).

c) Regarding the administrative burden, respondents can be divided into two groups, one that expects an increase, another which considers the effects will depend on the way of implementation.

d) With regard to the effects on competitiveness and the economy, respondents generally agree that it will depend on the way the Protocol will be implemented. There will be positive effects if the EU ABS regime promotes wider sustainable use of genetic resources on the basis of clear, transparent and predictable rules.             positive effects when:            - Regime promotes wider sustainable use and confidence - Regime is user-friendly leading to smooth flow in R&D and innovation - Regime is transparent, simple, clear and predictable negative effects when:           - Regime promotes extra administrative burden                                                 - Unclear ABS requirements lead to uncertainties                                                 - Loss of business confidential information (loss of competitive                                       advantage)                                                 - Lack of clearly designated approval authorities - Regime is unclear, creates trade barriers and has lack of uniformity

e) particular categories of users, especially the group of industries and associations found in the health & beauty, seeds, breeding, pharmaceutical and biotechnological sectors expressed certain specific concerns such as :-

– The need to take into consideration the lengthy supply chains and their implications for the burden of compliance;

– Non-existence of information on PIC and MAT does not imply lack of compliance with national rules (bio-piracy);

– Checkpoints should be effective and not be seen as a 'policing' mechanism

f)  Institutions and organisations within the health sector are mainly concerned about the threat on development of new (veterinary) medicinal products, and its consequences on (animal/public) health and the competitiveness of the industry. To avoid complication or delay of both R&D and production, in particular for emerging diseases, within this sector it is stated clearly that pathogens used in the pharmaceutical industry should be excluded from the NP.

g) Botanical Gardens especially emphasized their concern about staff reallocation problems (in particular for the smaller gardens). Furthermore, whatever the legislative instrument will be, it must not impede botanical gardens being facilitators of the 3 objectives of the CBD.

h) Research Institutions mostly communicated the importance of clear, simple, transparent and accessible procedures to avoid missed opportunities for collaborations with providers. Within this sector, the risk of something not fully clarified at the time of access and the possible sanctions later on, often discourages researchers to collaborate. Consequently, benefits from such collaborations will not accrue nor add to the conservation of biodiversity.

i) Many respondents proposed the use of standard clauses or model contracts for MAT, such as found in the ITPGRFA.

II. DETAILS
OF THE RESPONSES TO THE PUBLIC CONSULTATION

1. MAJOR
CHALLENGES ARISING FROM THE ENTRY INTO FORCE OF THE NAGOYA PROTOCOL

Concerns of
stakeholders with respect to the new legal situation that will result from the
entry into force of the Nagoya Protocol

Mechanisms, countries will put in place to implement the Nagoya
Protocol, as well as the multiplication of national legislations and competent
authorities in provider countries, will impact on research activities in the EU
and exchanges of samples. Access to genetic material used for sustainable,
non-profit public activities may be compromised or denied and R&D
discouraged.

The lack of harmonisation between legal frameworks worldwide may
increase administrative burdens and huge upfront costs. For instance, certain
sectors collecting in the wild, like microbial collections, are not in a
position to negotiate in advance individual agreements since the number and
nature of collected microorganisms are at this stage unknown and the isolated
microorganisms are multifunctional and can be utilised in many different
sectors. It will be not envisageable for them to sign agreements for each
individual organism for each use as the number of agreements will be enormous.
A different solution for benefit sharing might be useful in this case such as
an end use triggered sharing of benefits.

Several users also pointed out that insecurity and insufficient
capacity of authorities in provider countries to deliver in conformity with the
Protocol may create disruption even in the existing raw materials supply chain
while others pointed out the risk of competition between users in the case they
request access to the same genetic resource.

There will be a challenge to maintain close relationship between the
3 objectives of the CBD if interpretation/application of the NP is not
consistent i.e. ABS regulatory frameworks focus only on monetary incentives and
do not integrate broader social values associated with the use/exchange of GRs
such as conservation and sustainable use.

Problems
deriving from the absence of a clear legal framework in provider countries

Existing ABS regimes are very different and diverse while the
research activities, especially those based on biotechnology, are global and
located inside and outside the EU. Rules and procedures in existing ABS regimes
are not clear for obtaining PIC and users are facing a series of difficulties
to verify conformity with existing rules. This is worsened by different and
diverse bureaucratic systems which are often ineffective and inefficient.

Since a few years many countries are making the rules for obtaining
GRs more stringent and the process for obtaining PIC seems to become more and
more politicised, including for example a link between obtaining IPRs and ABS,
or introducing retroactive measures, thereby substantially increasing legal
uncertainty.

Rights and obligations as defined in national implementation
regulations are neither clear nor practical; the absence of clear rules creates
legal uncertainty and increases costs. As a consequence users might decide that
obtaining GRs entails too much risk because:

·
Access is time-consuming and burdensome

·
Users might face further requirements or
sanctions later, while further developing or commercialising products, thereby
undermining the value of an eventual commercial product, or even facing a
situation of alleged non-compliance with rules that came into existence years
after work on a specific product began.

·
Users will not be able to obtain PIC and MAT in
case a provider country has unrealistic views on the potential commercial value
of a GR

Expected
positive/negative economic impacts in comparison with current practices

Bring awareness, guidance and legal certainty for ethical sourcing
practices is a positive expectation of most of the users. Clarification of
procedures will help users to secure long-term sourcing while managing
scientific risks.

The entry into force of the ABS Protocol is an opportunity for the
EU to develop an all-encompassing ABS regime providing for clear predictable
rules, guaranteeing access to GRs and providing for a workable and fair benefit
sharing mechanism. Such a regime could be beneficial for users and result in an
ABS regime that promotes wider sustainable use of GRs and increases confidence
in the way ABS is taking place.

The adoption of a user-friendly ABS regime in the EU will encourage
a smooth flow in R&D and innovation involving users. The EU has a wide
range of very reputed and important academia, research institutions and
companies which in addition are working together with stakeholders in developed
and developing countries, thereby enhancing biodiversity on a global scale.

If access rules in provider countries are too restrictive, unclear
or discriminatory users could avoid entire markets as sources for new
innovation and if disparate rules are adopted in the different EU countries,
the legal certainty will decrease and this will have a negative competitive
impact on all EU stakeholders or stakeholders with European interests. Such
negative impacts might include:

·
The need for increased investments of time and
resources due to the potentially unclear, impractical and non-transparent rules
and administrative requirements. Users may have to deploy more financial,
personal and time resources for these activities.

·
A decrease in development and commercialisation
of products based upon or derived from GRs, undermining the promotion of
biodiversity conservation and the use of biodiversity to create benefits and
products for the society as a whole.

·
A decrease of the importance of the EU as a
region for R&D activities in biotechnology and commercialisation of
products developed through it; all sectors might be severely harmed.

2. ADDED
VALUE OF EU IMPLEMENTING MEASURES

Appropriate
level for establishing implementing legislation

Laws and regulations on ABS should seek to inform, facilitate and
promote good practices, encouraging the responsible engagement of users and
take into account the specificities of different sectors. The EU should ensure
that harmonised rules and procedures are applied throughout the EU and avoid
inconsistencies among various national legislations implementing the Nagoya Protocol.
This approach will ensure a common interpretation of the key elements of the
Protocol such as the rules on compliance; it will ensure legal certainty
regarding applicable rules in the EU as a whole and will ensure that the
implementation of the Protocol in the EU provides for a coherent example for
national or regional implementation elsewhere, thereby safeguarding the
interest of the EU user and provider sectors.

Certain users pointed out that national implementing legislation on
individual Member States might be sufficient for implementing the Protocol but
might not be the appropriate direction to take. Access to national resources
should be regulated by national norms but common aspects should be regulated at
EU level. This will ensure one common interpretation of and approach to some
key elements of the Protocol such as compliance, certificates or checkpoints.

Other users put the accent on the need to avoid creating barriers to
collaboration that eventually counteract the objectives of the CBD. A positive
attitude should be adopted allowing the necessary development of research
activities supporting sustainable use of biodiversity. For instance the same
check points at European level could be opportunities to facilitate
relationship between users and between users and providers and serve as
leverage for development activities. National solutions would impose another
layer of administrative burden and barriers of entry as well as limitation for
intra-EU commerce of finished products.

Effects on
the internal market

The application of different ABS rules in different Member States
could have an impeding effect on the free movement of material and goods in the
EU, thereby hindering exchange of material in the framework of R&D
activities and the free movement of commercial products.  Every intended
exchange of material would need extra tie to find out the special conditions of
the particular country and transaction costs will become too high. If the
Protocol is implemented at Member States level without any harmonisation at EU
level, there may be a risk that the different interpretations/application of
key provision will result in obstacles to the internal market. In order to be
sure that the free movement of goods is not hindered in such a way within the
EU, harmonized application at least of key provisions of the Protocol would be
necessary. From a business point of view it would be very useful to have the
same kind of checkpoints in all Member States; it should be also ensured that
once a document is accepted as evidence of PIC and MAT by one Member State, the
movement of material and goods is not blocked in another Member State because
the latter does not accept the same document as evidence or requires further
documents.

Botanical gardens and other scientific institutions with
non-commercial focus pointed out that a harmonised approach would even be
desirable on a global basis. For those institutions an EU harmonised approach
with simplified, legally validated procedures is likely to reduce administrative
burdens. The same approach is also likely to reduce administrative burden at
government level, especially if elements of best practices and simplified
models for material exchange between scientific institutions for scientific
purposes are included.

3. SPECIFIC
IMPLEMENTING ISSUES

Maintaining
current practices

It needs to be
stressed that it is an established practice in certain sectors such as the
biotech sector that all transfers of GRs between users and providers are done
under a material transfer agreement to define terms and conditions of the
transfer, rights and obligations of all parties and secure traceability of GRs.
Respondents to the public consultation indicated that currently used practices
that function well must be maintained.

Certain
user/providers have developed sector specific standard clauses/model contracts
for MAT.  These MAT include the grant of PIC and define the conditions
governing the collection and use of GRs, including benefit sharing. A degree of
flexibility needs also to be acknowledged, taking into account specific and
unique circumstances of each case.

These are
contractual arrangements between provider and user creating MAT and forming a
legal framework within which transfer of material (including GRs) can take
place.  These contractual arrangements are in principle governed by national
contract laws. As to arrangements in relation to benefit sharing, it needs to
be noted that the Protocol recognises that it should be based upon MAT and can
take the form of monetary and non-monetary benefit sharing.

Advantages both
for users and for providers can be derived from such agreements as they provide
the necessary legal certainty for the access and transfer of GRs. While
expectations must be realistic and take into account the potentially high
failure rate of projects, benefits that may become available from such
arrangements include up-front payments, investment in infrastructure,
technology transfer arrangements, and collaboration agreements. In fact,
many of these advantages will be available even in cases where no commercial
product is ever developed. Where new commercial products are developed as
a result of such arrangements, they provide the possibility of including
provisions on royalties derived from future revenue streams, where those may
exist.

Moreover, the
Bonn Guidelines represent until today a useful tool in providing guidance to
providers and users on potential contractual terms for the drafting of ABS
arrangements.  In the seed industry, a relevant example of model agreements are
the “Bioprospecting agreements” which are included in the Guidelines developed
in 2005 by BIO.  These Guidelines also provide for a “Model Material Transfer
Agreement”.

Below are
examples with respect to model clauses/contracts in a few industries:

- Biotechnology:
Relevant examples of model agreements are the “Bioprospecting Agreements” which
are included in the Guidelines developed in 2005 by the Biotechnology Industry
Organization and are therefore implemented by its members. (see http://www.bio.org/articles/bio-bioprospecting-guidelines).
In practice, such agreements, which are concluded between the Transferor and
the Transferee of a GR in the case of collection of the resource, include the
regulation and grant of prior informed consent and set out the conditions
governing the collection and use of regulated genetic resources, including
benefit sharing.  In order to provide greater clarity, the above mentioned
Guidelines also provide for a “Model Material Transfer Agreement” (which can be
incorporated into a Bioprospecting Agreement or even replace one in specific
situations) whose primary purpose is that of transferring possession of GR.

- Plant
genetic resources for plant breeding: The IT PGRFA has, in its Article
10.2, set up a Multilateral System in order to ensure access and
benefit-sharing in respect of PGRFA. Facilitated access to PGRs in the
Multilateral System is realized through a standardised simplified contractual
mechanism.

Costs and Administrative burden

Compliance with
additional rules on ABS will logically impose an additional burden on all
stakeholders and involve the need for more financial, personnel and time
resources into activities which involve genetic resources such as gathering
knowledge on the applicable ABS rules, checkpoints and compliance
requirements, and dealing with the competent authority (ies).

Art 14 of the
Protocol foresees the establishment of an ABS clearing house. Upon the
condition that information provided through the ABS clearing house is always up
to date and legally reliable, this could be a real facilitating mechanism to
enhance transparency and reduce the administrative burden and transaction
costs.

The
administrative burden and transaction costs can also be substantially reduced
in case the reality of lengthy supply chains is acknowledged and the burden of
compliance is traced back to the party originally accessing the GR. To minimise
the administrative burden, the EU should ensure that there is a harmonised
approach, or at a minimum harmonised rules and procedures applicable in each EU
country.

To minimize
administrative burden and costs, respondents suggest:

-  A harmonized
EU implementation of the NP as far as compliance elements are concerned;

- Implementation
of Article 15 (Compliance) in a way that recognizes the reality of lengthy
supply and development chains for many sectors, and places the burden of
compliance on the original party accessing the GR and/or associated TK;

- Preferably an
EU authority on ABS as check point, since it will also be the most familiar
with original accessing parties which obtained PIC and MAT at the point of
access;

- Clarity as to
what the ABS regime will and will not cover with specific regard to the single
industries.

              Annex
4: Policy options considered but discarded in the IA

OPTION ON
BUSINESS AS USUAL

1) No Union
ratification

This business as usual option was considered for the sake of
completeness. It is outside the instruction given to DG Environment to analyse
and develop measures for implementing the Nagoya Protocol in the Union. It also seems inconsistent with the proactive political engagement of the Union in
the Nagoya Protocol negotiation that lasted from 2004 to 2010, and the fact
that the Union joined the consensus of the 194 Parties to the CBD that adopted
the Protocol in October 2010. It furthermore contradicts the formal act of
Union signature of the Protocol in June 2011 and repeated statements on swift
Union implementation and ratification.[2]. By signing the Protocol,
the Union has committed itself under international law to work towards
implementation and ratification, and to abstain from any action that could
undermine the objective or purpose of the Nagoya Protocol.

If the Union would not ratify the Protocol, it seems certain that
some Member States will do so unilaterally to participate at COP/MOP1 in 2014
as a Party and thereby avoid that the interests of their researchers and
companies that are involved in nature-based research and development, or their
interests as provider of genetic resources suffer from the non-Party status.
The governments of ES and DK have – in view of a Commission proposal – so far
delayed presenting legislative proposals for implementing the Nagoya Protocol
to their parliaments. Presumably, these Member States would move swiftly ahead
with legislation and ratification should the Commission indicate that it does
not anymore plan to propose implementing measures at Union-level. BE, DE, FR,
NL and UK have held public consultations or initiated studies that equally
prepare the ground for domestic implementing measures. Of these Member States
at least FR and DE would appear committed to ratify unilaterally in the absence
of Union ratification. Other Member States with little nature-based research
and development activities and low levels of biodiversity might, however,
decide to stay out. If the Union does not ratify the Nagoya Protocol, it seems
almost certain that by 2014 some Member States would be Parties to the Protocol
while others would not.

The expected negative effects of such a situation are of the same
quality as those identified in the analysis of Option UC-1, only of even
greater magnitude.[3] It would certainly have
very negative impacts on researchers and companies within the EU, and
negatively affect the functioning of the EU internal market and the European
Research Area. It would also result in systems of implementing measures at
Member State level that are less effective and efficient than in the case of an
EU-coordinated approach. At last, it would create a politically much more
challenging starting point for any future consideration of EU-level measures
for implementing the Nagoya Protocol. – This option was therefore considered
but discarded.

POLICY OPTION
ON ACCESS TO GENETIC RESOURCES AND ASSOCIATED TRADITIONAL KNOWLEDGE

1) EU-wide
waiver of the PIC requirement

Some Member States explicitly give free access to the genetic
resources over which they hold sovereign rights. The option of an EU-wide
waiver of the PIC requirement was therefore considered. However, this option
was not retained for further analysis. Some Member States have already
developed access legislation, although it is not yet applied in practice (ES,
BG), and others are in the process of doing so (FR).[4]

2) EU-wide
minimum requirements on access-frameworks of Member States deciding to require
PIC

Furthermore, the option of an EU Framework Directive establishing EU-wide
minimum requirements on access-frameworks of Member States deciding to require
prior informed consent was considered. This option would establish an EU-level
playing field in all Member States requiring prior informed consent. In
abstract, this would seem particularly beneficial to researchers and SMEs.
However, this option was not retained for further analysis. No Member State presently requires benefit-sharing for the use of its genetic resources and
only three Member States are likely to do so in the future. So there is simply
no need for EU-wide minimum access requirements. In addition, the choice of
user-compliance Option UC-2, and particularly the choice of the preferred
Option UC-3, would actively encourage EU ex-situ collections to
streamline their practices of making available genetic resources to outside
users. These measures will reduce the eventual need for EU-wide minimum
requirements on access for material held in ex situ collections; which –
as is shown in the EU baseline – are the predominant sources of new material
for EU users.

3) EU-level
regulation of access to traditional knowledge held by indigenous and local
communities

It was furthermore
considered to regulate access to traditional knowledge held by indigenous and
local communities at EU level but regarded as unnecessary. Only few Member
States (for example SE, FI, ES) have ILCs under their jurisdiction. And
although it is possible to argue for the existence of Union competence in the
field, one must note that Member States have throughout the Nagoya Protocol
negotiation stressed that in their view access to traditional knowledge held by
ILCs falls in the exclusive competence of MS.

POLICY OPTIONS
ON USER-COMPLIANCE

1) Amending
EU legislation on the recognition and enforcement of judgements

The option was considered to amend EU legislation on the recognition
and enforcement of judgements[5] in
view of Article 18 Nagoya Protocol. However, this option was discarded.
The Protocol does not oblige its Parties to take such measures. It is
sufficient if Parties provide a general system for the ajudication of
contractual disputes related to ABS. This  corresponds with a major EU demand
in the negotiation. An amendment of the Brussels I and II Regulations is also
not necessary for implementing the soft obligation of Parties as regards access
to justice. This can efficiently be done through soft measures (eg.,
information on applicable rules, financial aid) at Union or Member State levels.

2) General
prohibition on EU nationals to acquire genetic resources and associated
traditional knowledge in a Party to the Protocol in violation of obligations
set out in the domestic access legislation or regulatory requirements of this
Party

It was also considered to establish a general prohibition on EU
nationals to acquire genetic resources and associated traditional knowledge in
a Party to the Protocol in violation of obligations set out in the domestic
access legislation or regulatory requirements of this Party. However, this
option was discarded. First, the Nagoya Protocol does not oblige its Parties to
take such measures. Article 15 and 16 oblige Parties to take measures in view
of the utilisation of genetic resources and associated traditional knowledge within
their jurisdiction; they do not oblige Parties to take measures in view of
activities of their nationals in other jurisdictions. Second, the option is
difficult to reconcile with legal certainty and the principle of
proportionality. If violations of the EU prohibition would be a simple/
automatic reflex of the violation of regulatory requirements in a third
country, then EU authorities would need to establish a breach of EU laws based
on factual and legal considerations established in a non-EU jurisdiction. This
type of recognition of administrative and judicial decisions of foreign
countries is normally only done on the basis of strict reciprocity. Strict
reciprocity helps avoiding difficult situations, such as, for example, that a
behaviour must be sanctioned within the EU, although it would be perfectly
legal if conducted within EU jurisdiction, or that an EU national would need to
be punished under EU law although it only breached an administrative ordinance
in a third country. Establishing a more flexible approach for enforcing such
prohibition would raise political problems - in addition to concerns about the
lack of predictability for EU users – as it would necessarily imply value
judgements by EU officials or EU courts on the credibility and integrity of
findings of administrative and judicial authorities of third countries.

3) General
prohibition on EU collections to hold genetic resources or associated
traditional knowledge in their collection unless there is proper documentation
giving evidence of the legal acquisition

It was also considered to establish a general prohibition on EU
collections to hold genetic resources or associated traditional knowledge in
their collection unless there is proper documentation giving evidence of the
legal acquisition. However, this option was discarded. The apparent benefit of
an early and strong intervention in the genetic resources value chain under EU
jurisdiction is clearly outweighed by the expected difficulties of particularly
smaller EU collections to comply with such norm and also the very significant
costs for monitoring compliance of collections with thousands or even hundreds
of thousands of samples that were collected often long-time ago.

4) Applying
a broad concept of traditional knowledge associated with genetic resources

As regards user-compliance measures in relation to the utilisation traditional
knowledge associated with genetic resources, the option was considered to base
implementing measures on a broad understanding of this concept. However, this
option was discarded. The Protocol does not define the term "traditional
knowledge associated with genetic resources". It leaves Parties a wide
margin of discretion to define in their domestic law what traditional knowledge
means to them and how to engage with indigenous and local communities holding
such knowledge. It would create unacceptable legal uncertainties to base EU
user-compliance measures on something not clearly defined in EU law but varying
with the respective definition of this term found in the domestic laws of
potentially more than 170 countries. For legal certainty, it is imperative that
EU implementing measures have a clear and identifiable scope. Legal certainty
can be achieved, if implementing measures focus only on traditional knowledge
that is directly associated with genetic resources as documented in
domestic access permits and in mutually agreed terms. This excludes all other
types of traditional knowledge that may indirectly become relevant to the
utilisation of genetic resources within the EU.[6] This approach
is also supported by consistency arguments. Applying a broad concept of
traditional knowledge when implementing the Nagoya Protocol would, at this
stage, most likely conflict with ongoing negotiations in the Intergovernmental
Committee on Genetic Resources, Folklore and Traditional Cultural Expressions
of the World Intellectual Property Organization. There, the international
community considers whether international rules on intellectual property rights
will be modified to provide for an effective protection of traditional
knowledge holders under international law. These negotiations have implications
that go much beyond the specific context of traditional knowledge associated
with genetic resources. Indeed, the CBD COP10 decision adopting the Nagoya
Protocol also suggests that implementing measures should be developed in
consideration of the ongoing WIPO negotiations.[7]

POLICY OPTIONS
ON COMPLEMENTARY MEASURES

1) Placing
reference samples collected in free access situations in identified collections

Option C-5 would have multiple benefits. It would facilitate compliance
by all users with their due diligence obligation if reference samples of
genetic resources acquired in free access situations were available in
reference collections, preferably collections enlisted in the EU register of
"trusted sources", with unique identification numbers and
documentation showing that these samples were collected under a free access
policy. It would also significantly contribute to the conservation of genetic
resources. Samples stored in collections are prevented from disappearing and
can be used. A recent study on wild varieties of agricultural crops concluded
that the key reason for the dramatic loss of genetic diversity in this area is
the insufficient availability of quality samples and related information.[8] Another apparent benefit of this
option is that it would create research and development opportunities on
quality samples of genetic resources that may be used without benefit-sharing
obligations attached. This translates into a more enabling context for
achieving the social and conservation objectives.

Despite these benefits, the option was discarded because of unclear
cost-implications. As regards costs for those collecting genetic resources
these were assumed to be minimal. It is routine practice today to include GSP
positioning data into documentation of samples collected in the wild.[9] The only additional costs for
collectors above the baseline of their collecting activity would thus be
eventual costs for shipping reference samples to identified collections. Quite
unclear, though, would be the costs of this Option for the reference
collections where such samples would be deposited. The costs for such
collections depend on the number of samples received and the costs of handling
and storage per sample. Recent studies on ex situ plant conservation, that also
consider new storage technologies such as cryopreservation, suggest that
storage costs per sample could be between 0.20 to 50 € per sample per year[10]. This would need to be multiplied by
the number of samples collected under free access conditions. Depending on the
number of samples, this could be limited or indeed very significant. In that
context, one would also need to consider that the option does not predetermine who
would incur the costs. If the Member State holding the sovereign right decides
that such samples should be included in a public reference collection under its
own jurisdiction, the Member State would presumably also compensate this
collection for the additional costs incurred. If the Member State would identify a private collection or a collection in another country as recipient, the
question of who carries the costs would depend on the specific agreement
reached. Overall, the costs of this option would primarily arise for the Member State holding the sovereign right, although financial contributions from
philanthropic sponsors can also be imagined.[11]

              Annex
5: Detailed analysis of options for implementing the access pillar of the Nagoya
Protocol

Section I presents
a comprehensive analysis of the 2 options considered in detail for implementing
the access pillar of the Nagoya Protocol in the EU. To facilitate comparison,
the substantive arguments are translated into a grading. We apply the following
categories:

“0”  neutral impact

“+” positive impact

“++” significant
positive impact

“-“ negative impact

“--“ significant
negative impacts

“unclear” – not
possible to assess because of data limitations

“n.a.” – the
criteria is not meaningful for analysing the specific measure

Option A-1: No EU level action

Criteria for analysing impacts || Grading || Motivation of the grading against the criteria

Criteria specific to Access and Benefit-sharing and to the Nagoya Protocol

- Specialised ABS agreements and processes (respect and mutually supportive) || - || It is considered a disadvantage that the EU would not be directly involved in choices by Member States on the relationship of their domestic access-measures to specialised ABS systems.

- Handling of Party-non-Party relationships || unclear || It seems unclear and would entirely depend on choices by Member States how to address the relationship with researchers or companies from non-Parties to the Protocol.

- Coherence with existing EU laws || - || Some EU laws (eg, nature legislation, sectoral legislation on agricultural genetic resources and on human, plant or animal health) may be affected by domestic access-frameworks of Member States.  Although the Commission has the authority under the treaties to take action in case a domestic access framework is considered to conflict with the EU treaties or an obligation under the acquis (e.g. if criteria applied are openly discriminatory), it seems preferable to discuss eventual questions at the time when access requirements are developed rather than forcing a re-opening of (access) legislation once it is established. The option does not provide a basis for such discussion.

- Support to special considerations || - || The EU would not be involved the choices of Member States on special considerations in relation to access for non-commercial research, in case of emergency situations that threaten and damage health, and as regards the special role of genetic resources for food and agriculture. If different Member States take diverging decisions on how to address these situations it could raise questions on the Union's compliance with the Protocol.

- Ability to accommodate differences between sectors || n.a. || The criteria is relevant for user compliance measures, not for access

- Flexibility to allow for future development and fine-tuning || + || A positive feature of this option, that it leaves room for future development in the form of a focussed intervention at Union-level, should the need for such intervention become apparent.

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || 0 || The knowledge base might improve at the Member State level, depending on their choices.

Economic impacts

- Creation of an EU-level playing field || -/0 || It seems certain that Option A-1 will not result in an EU-level playing field on access to genetic resources. Member States with free access systems will exist alongside other Member States that require prior informed consent for access to their genetic resources. This will create additional costs, for example if a publicly funded biodiversity research project foresees field research in three Member States with differing access systems.

- Correspondance with existing utilisation practices || n.a. || The criteria is relevant for user compliance measures, not for access

- Legal certainty and legal risks || -/0 || If Member States requiring prior informed consent would establish widely different substantive preconditions for granting access or for sharing of benefits, it will raise transaction costs for users and could create legal risks to them. To give one example: it is typical for SMEs in parts of the biotechnology industry to conduct high-throughput screening of thousands or tens of thousands of samples against a specific target to identify interesting compounds. Obviously, this type of utilisation activity would be facilitated if the specific conditions for utilising genetic resources were streamlined, at least to some extent. Option A-1 does not provide a basis for such streamlining.

- Distribution of impacts along the value chain || 0 || Access conditions are relevant for those actors in the genetic resources value chain that either collect in the wild or that source from existing collections. Differing access conditions create different challenges and costs for the same actors in the chain; those that seek access as part of their activities. Such differences do not appear to result in different distributions of impacts along the value chain.

- SMEs and micro-enterprises || - || Significant differences in the possibility to use samples would create the highest relative costs for SMEs and micro-enterprises with the least capacity to adjust their operations.

- Research and development opportunities || 0 || It is assumed that Member States deciding to require prior informed consent will establish domestic access frameworks that better facilitate access to genetic resources and that create more research and development opportunities than Member States that do not invest in facilitating access to their genetic resources, but simply decide to allow for free access. This said, it seems too far-fetched to draw any conclusions on positive or negative effects on research and development opportunities

- International competitiveness || 0 || Expanding on the above, it equally seems too far-fetched to draw any conclusions on positive or negative effects on the EU's international competitiveness.

- Monitoring (effectiveness, efficiency) and costs) || n.a. || The criteria is relevant for user compliance measures, not for access

- Public costs (EU-level, MS level, one-off, recurring) || + (Union level) unclear (MS) || The Option would not entail any costs at Union level. Costs at Member State level depend on choices taken by them.

Social impacts

- Potential to contribute to social objectives (health, food security, nutrition etc) || unclear || Difficult to identify, it depends on choices taken by the Member States

- Protection of the rights of indigenous and local communities || unclear || Difficult to identify, it depends on choices taken by the Member States

Environmental impacts

- Enhancing knowledge base for biodiversity conservation || unclear || Difficult to identify, it depends on choices taken by the Member States

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || unclear || Difficult to identify, it depends on choices taken by the Member States

Option A-2: EU platform for discussing
access to genetic resources and sharing best practices

Criteria for analysing impacts || Grading || Motivation of the grading against the criteria

Criteria specific to Access and Benefit-sharing and to the Nagoya Protocol

- Specialised ABS agreements and processes (respect and mutually supportive) || + || An EU platform for discussing access to genetic resources and for the sharing of best practices would actively engage the Member States, the Commission and EU stakeholders in a discussion on the design and performance of domestic access frameworks of the Member States. Although shared conclusions by the participants would not be binding, they would nevertheless likely influence considerations made by Member States and reduce eventual frictions with other specialised ABS systems

- Handling of Party-non-Party relationships || + || The EU Platform will likely influence considerations made by Member States in the relationship to non-Parties to the Protocol and help reducing frictions.

- Coherence with existing EU laws || + || The EU platform would facilitate identifying and resolving eventual tensions between domestic access frameworks and the EU acquis.

- Support to special considerations || + || Member State participants to the platform would benefit from the experiences of each other and thus contribute to collective learning. This seems particularly valuable regarding the special considerations on non-commercial research, emergency situation that threaten and damage health, and genetic resources for food and agriculture that Parties to the Protocol must address.

- Ability to accommodate differences between sectors || n.a. || The criteria is relevant for user compliance measures, not for access

- Flexibility to allow for future development and fine-tuning || + || The option leaves scope for future development and fine-tuning of measures.

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || + || The EU platform would improve the knowledge base and also help building the case for an eventual binding EU-level intervention on access.

Economic impacts

- Creation of an EU-level playing field || + || Option A-2 will not result in an EU-level playing field on access to genetic resources. Member States with free access systems will co-exist with other Member States that require prior informed consent for access to their genetic resources. It seems, however, reasonable to assume that the deliberations of the platform would result in some streamlining of access conditions in Member States requiring prior informed consent.

- Correspondance with existing utilisation practices || n.a. || The criteria is relevant for user compliance measures, not for access

- Legal certainty and legal risks || + || It seems reasonable to expect that – compared to Option A-1 – Option A-2 will reduce eventual legal risks associated with highly diverging access conditions.

- Distribution of impacts along the value chain || 0 || Access conditions are relevant for those actors in the genetic resources value chain that either collect in the wild or that source from existing collections. Differing access conditions create different challenges and costs for the same actors in the chain; those that seek access as part of their activities. Such differences do not appear to result in different distributions of impacts along the value chain.

- SMEs and micro-enterprises || 0/+ || It is assumed that the EU platform will contribute to some streamlining of access procedures. This will be beneficial for SMEs and recipients of public funds.

- Research and development opportunities || 0/+ || It is assumed that the EU platform would make a limited but positive contribution to research and development opportunities on genetic resources. Another effect of the EU platform is that it would showcase best practices. This would help Member States to learn from each other and create more favourable conditions for access to their genetic resources. It would also help users in identifying Member States with the most favourable access conditions. It is assumed to make a limited but positive contribution to research and development opportunities on genetic resources.

- International competitiveness || 0 || It seems too far-fetched to relate the assumed moderate increase in research and development opportunities to an increase of the EU's international competitiveness in nature-based products and services.

- Monitoring (effectiveness, efficiency) and costs) || n.a. || The criteria is relevant for user compliance measures, not for access

- Public costs (EU-level, MS level, one-off, recurring) || 0/+ (Union level) Unclear (MS) || The operation of the EU platform would create limited costs. Depending on the number of meetings per year, it would require some staff time for preparing, participating in and following-up to meetings of the platform as well as travel costs to meetings for the Commission participant(s)

Social impacts

- Potential to contribute to social objectives (health, food security, nutrition etc) || unclear || Difficult to identify, it depends on choices taken by the Member States.

- Protection of the rights of indigenous and local communities || unclear || Difficult to identify, it depends on choices taken by the Member States

Environmental impacts

- Enhancing knowledge base for biodiversity conservation || unclear || Difficult to identify, it depends on choices taken by the Member States

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || unclear || Difficult to identify, it depends on choices taken by the Member States

              Annex
6: Detailed analysis of options for implementing the user-compliance pillar of
the Nagoya Protocol

Section I presents a comprehensive analysis
of the 4 options considered in detail for implementing the user-compliance
pillar of the Nagoya Protocol in the EU. To facilitate comparison, the
substantive arguments are translated into a grading. We apply the following
categories:

“0”  neutral
impact

“+” positive
impact

“++” significant
positive impact

“-“ negative
impact

“--“ significant
negative impacts

“unclear” – not
possible to assess because of data limitations

“n.a.” – the
criteria is not meaningful for analysing the specific measure

Option UC-1: Open method of coordination

Under this Option, each Member State would establish legally binding user-compliance measures for itself to implement the
relevant Articles of the Nagoya Protocol and coordinate its own measures with
those taken by other Member States.

Criteria for analysing impacts || Grading || Motivation of the grading against the criteria

Criteria specific to Access and Benefit-sharing and to the Nagoya Protocol

- Specialised ABS agreements and processes (respect and mutually supportive) || --/- || One key legal and practical concern is on the exact scope of application of user-compliance measures of Member States in relation to existing specialised international ABS instruments. For example, it will be important to clarify how material transferred by means of the standardised Material Transfer Agreement adopted under the FAO Treaty on Plant Genetic Resources for Food and Agriculture would be treated by designated monitoring authorities of a Member State . The apparent draw-back of Option UC-1 is that it cannot guarantee finding an EU-harmonised solution to incompatible approaches taken by Member States. This might be damaging to the EU-interest, particularly where, the EU is a Party to a specialised ABS instrument - as is the case of the FAO Treaty.

- Handling of Party-non-Party relationships || -- || Option UC-1 has apparent draw-backs as regards managing the relationship between Parties and non-Parties to the Protocol. First, in the absence of harmonised EU user-compliance measures, and given the very likely situation that not all Member States will ratify at the same time, Party-non-Party situations would arise within the EU itself. This could create very complex situations that conflict with fundamental freedoms under the treaties and negatively affect the performance of user-compliance systems of Member States that are Parties to the Protocol. Would, for example, Spain be allowed to prohibit its nationals to conduct research and development on Spanish genetic resources in other Member States of the Union? Or to restrict the sale of products that have received a market approval in another Member State on the basis that this product was allegedly developed using illegally acquired Spanish genetic resources? Even if one sets aside the possibility that a Member State could adopt user-compliance measures that would discriminate against EU nationals of other Member States or products approved in other Member States that have not yet ratified the Protocol, it seems a real possibility that differences in the approach of Member States to the treatment of researchers and companies from non-Parties would negatively affect the functioning of the European Research Area. For example, EU co-funding under the framework programmes for research promotes collaboration of research institutions from a minimum of 3 EU Member States. Significant differences in user-compliance obligations for research activities that involve the utilisation of genetic resources might mean that some projects, although they would be worthwhile, could not be funded.

- Coherence with existing EU laws || - || It seems an apparent advantage of Option UC-1 that it does not require legislative action at Union level. The Option leaves it entirely to the Member States to take such action. At the same time, though – and given the close relationship of user-compliance measures to internal market rules and relevant EU laws on the approval of products (eg. medicines, cosmestics, food) – Member States may face challenges in developing user-compliance systems that are effective and in full-compliance with the Nagoya Protocol while avoiding interferences with applicable EU law. To give one example: it would likely raise legal concerns if a Member State would wish to make compliance with applicable ABS obligations an additional condition for issuing a  market approval for medicinal or cosmetic products. It would seem equally problematic if a Member State tasks a market approval authority established under EU law with the additional task of monitoring compliance of users with Nagoya Protocol implementing measures of this Member State. Overall, it seems that the apparent benefit of not legislating at EU-level will be outweighed by the constraints on Member States to effectively legislate on user-compliance measures, which could raise non-compliance concerns for them, but in consequence also for the Union.

- Support to special considerations || -- || Option UC-1 has the further disadvantage that it cannot guarantee that Member States take a harmonious approach to the special considerations on non-commercial research, to situations of emergency  health threats or damages, or to the special nature of genetic resources for food and agriculture. One particularly important issue here concerns the treatment of pathogens for the purpose of resistance breeding. This activity clearly does not qualify as an emergency situation addressed in Article 8b) Nagoya Protocol. However, it might be addressed under the special considerations given to genetic resources for food and agriculture. Differences in approach by the Member States on this issue could disrupt activities in the plant and animal breeding industries. However, it could also raise questions on the EU's compliance with the Nagoya Protocol.

- Ability to accommodate differences between sectors || -- || Option UC-1 would not result in an EU-harmonised system of user-compliance measures.  Member States would be free to explore the flexibility in relation to their obligations on user-compliance as they see best fit for their national interest. For example, the NL would carefully consider the interests of its plant and animal breeding companies. In DE, FR, UK and IT the interests of the pharmaceutical and chemical industries might receive particular attention. FR might also pay special attention to its cosmetics industry as some companies are world leaders. It is thus assumed that Member States would take differing choices on the design of user-compliance measures. This may result in conceptually different user-compliance systems in different Member States. It would certainly result in differences in the details of applicable requirements; such details are nonetheless critical for implementation efforts "on the ground" (e.g. exactly what is considered as "utilisation of genetic resources", how to manage ABS-related information, rules on burden of proof, etc.). These basic assumptions suggest that the "flexibility" of Option UC-1 would most likely not translate into advantages of EU user sectors that their respective sectoral interests are adequately addressed. Different approaches in different Member States for accommodating differences between sectors would have clearly negative effects on all users that operate in more than one Member State. For EU stakeholders it is important that the same basic user-compliance rules and the same flexibilities in implementing user-compliance measures apply. It would, for instance, seem quite ineffective if one Member State would recognise participation in a sectoral code of conduct as proof of user-compliance, whereas another Member State would oblige all users to present certificates of compliance or issue statutory declarations that they have fully complied with all relevant ABS requirements. Indeed, the main and unanimous message from the public consultation exercise was that stakeholders prefer an EU-harmonised approach to user-compliance measures as they would expect high costs from a fragmented approach to implementing these parts of the Protocol. The challenges for users seem obvious, if different Member States were to require different approaches to managing ABS-related information, if they would apply different rules on the burden of proof, allow for different exemptions, or apply different understandings of what exactly qualifies as "utilisation of genetic resources", etc.. While Option UC-1 would likely reduce some of these frictions, it would not give any assurance to EU stakeholders that their user-compliance efforts in one Member State would be recognised in another Member State.

- Flexibility to allow for future development and fine-tuning || 0/+ || Option UC-1 would not prejudge future developments at Union level. It would contribute in a limited way to gathering experience and information about user-compliance measures.

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || 0 || It would entirely depend on the user-compliance and monitoring measures adopted by Member States whether these improve the knowledge based.

Economic impacts

- Creation of an EU-level playing field || -- || Despite the open method of coordination at EU-level, it seems that Option UC-1 would almost certainly result in some fragmentation of user-compliance rules throughout the Union. Considering the importance of details for the functioning of a system, an uneven playing field is much more likely to emerge than an EU-level playing field. This very real risk is echoed by the strong concerns from EU-stakeholders about such scenario. Fragmentation, if it occurs, could disrupt the practices of some players in the genetic resources value chain (particularly those of SMEs and micro-enterprises with little capacity) and stifle research and development on genetic resources. There is also the risk of "regulatory lock-in". If significant differences have been established, it is much more difficult to re-open such systems. A fragmentation of user-compliance systems would be particularly challenging in sectors such as plant, animal breeding or green biotech that are heavily populated by SMEs and micro-enterprises and thus face disproportionately higher costs when operating under different legal regimes. A fragmentation of user-compliance measures would also create difficulties for large companies that conduct research and development on genetic resources (pharmaceutical, cosmetics, food and beverage industries). Different user-compliance systems might also apply openly incompatible methods for monitoring user-compliance (e.g., based on the approach analysed in option UC-2 or the approach analysed in option UC-4) which would drastically raise transaction costs of EU users that operate in multiple jurisdictions.

- Correspondance with existing utilisation practices || -- || Some user-compliance systems of Member States will likely correspond better with existing practices of genetic resources use than others. However, as shown in the above analysis on "sectoral flexibilities" it is the difference in user-compliance systems between the Member States that would raise significant costs and risks and will not be avoided under this Option.

- Legal certainty and legal risks || -- || Even when assuming that all Member States would establish user-compliance rules that are clear and transparent, and which – by themselves –provide users with legal certainty, differences between such rules are likely to create legal incompatibilities or risks that are beyond the control of researchers and companies conducting research and development in more than one Member State.

- Distribution of impacts along the value chain || 0 || As regards the distribution of impacts along the EU genetic resources value chain, it seems that all actors in the value chain frequently act in more than one Member State , at least to some extent. It is thus assumed that all actors in the user chain would be equally negatively affected by a fragmentation of user-compliance systems.

- SMEs and micro-enterprises || -- || The previous assumption on distribution of impacts also implies that a fragmentation of user-compliance systems will place a disproportionate burden on SMEs and micro-enterprises with limited capacities to comply. Concretely, this means it would particularly affect the plant and animal breeding industries, the biocontrol industry, and more generally publicly funded research.

- Research and development opportunities || -- || A fragmented system of user-compliance measures could disrupt would very likely disrupt some research and development activities and negatively affect the European Research Area. Considering the particularly negative impacts of this option on SMEs and micro-enterprises, and the particular role of these actors in the early and middle part of the EU genetic resources value chain, it seems that disruptions would most likely arise where research material moves from collections or non-commercial research to SMEs and again, where research and development activities move from SMEs to larger companies that create the real economic value.

- International competitiveness || - || Major provider countries, particularly from the so called mega-diverse group of countries, would certainly consider a fragmented approach to user-compliance systems in the EU as a second-best solution and potentially as ineffective in protecting their sovereign rights over genetic resources or the rights of their indigenous and local communities over traditional knowledge associated with genetic resources. An ambitious user compliance system in one Member State , for example, might be quite ineffective where researchers and companies are free to move in the European Research Area and the EU internal market, and where approval procedures for nature-based products often result in an EU-wide approval. Given the clear political and legal links between provider country decisions on access and the existence of credible user-compliance systems in user countries, it seems that Option UC-1 would result in less secure access to quality samples of genetic resources for European researchers and companies. This would constrain the innovation potential of EU nature-based industries and is thus considered to be negative for the EU's international competitiveness in the field of nature-based research and development..

- Monitoring (effectiveness, efficiency) and costs) || unclear || The impacts entirely depend on user-compliance and monitoring measures adopted by Member States.

- Public costs (EU-level, MS level, one-off, recurring) || - || The initial public costs of Option UC-1 at EU-level would be minimal; Member States would have to bear the costs for administering their user-compliance systems. However, the costs for EU stakeholders would likely be very high. This also suggests that the future public costs for dealing with a fragmented landscape of user-compliance systems would be considerably higher than the costs of establishing a workable EU-level system in the first place. Costs at Member State level would entirely depend on the choices taken by them.

Social impacts

- Potential to contribute to social objectives (health, food security, nutrition etc) || -/0 || Option UC-1 has a significant risk of stifling research, development and innovation in some nature-based industries, with resultant reduction in potential welfare gains.

- Protection of the rights of indigenous and local communities || -/0 || Given the difficulties of EU users to comply with differing user-compliance systems, it seems that this option would not result in an effective protection of the rights of indigenous and local communities over their traditional knowledge associated with genetic resources.

Environmental impacts

- Enhancing knowledge base for biodiversity conservation || -/0 || Taken together, the above consideration suggest that Option UC-1 would make only a limited contribution to generating critical knowledge for biodiversity conservation

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || -/0 || Taken together, the above consideration suggest that Option UC-1 would only generate limited benefits in favour of conservation efforts

Option UC-2: Self-standing general due
diligence obligation on EU users

Criteria for analysing impacts || Grading || Motivation of the grading against the criteria

Criteria specific to Access and Benefit-sharing and to the Nagoya Protocol

- Specialised ABS agreements and processes (respect and mutually supportive) || ++ || The due diligence approach would allow for full recognition of specialised ABS systems. Indeed, it seems to enhance the functionality of such specialised systems, as diligent EU users will also respect the specific rules of specialised ABS systems. A due diligence approach would also provide a good basis for establishing mutual supportiveness between Nagoya Protocol implementing measures and implementing measures under specialised ABS systems. Under this option, the Commission would develop and update EU-level guidance documents articulating how EU users would exercise their due diligence to establish mutual supportiveness in a specific context, for example in relation to the important work done by the FAO Commission on Genetic Resources for Food and Agriculture. It also seems possible to reference internationally agreed guidance documents (such as the FAO Interlaken Global Plan of Action on Animal Genetic Resources and future guidance developed by the FAO Commission on Genetic Resources for Food and Agriculture on invertebrates, trees, aquaculture etc.) for the purpose of the EU due diligence system. One significant advantage of the due diligence approach that can hardly be overstated is that it would side-step the very complex and ongoing international debate on how much legally binding force a specialised ABS system must have to be recognised as "specialised international ABS agreement" under the Nagoya Protocol. The FAO International Treaty on Plant Genetic Resources for Food and Agriculture is so far the only example for a legally binding specialised international treaty. The recently adopted Pandemic Influenza Preparedness Framework in the World Health Organization in contrast, appears to be a hybrid: it uses legally binding standard contracts for the sharing and transfer of virus samples in a non-legally binding framework. The legal status of this specialised ABS framework under the Nagoya Protocol is not entirely clear. Other issues arise in relation to the important work undertaken by the FAO Commission on Genetic Resources for Food and Agriculture, as a contribution to  food security. Nevertheless, under current circumstances it is unclear whether there is a critical mass and sufficient momentum for agreeing on legally binding ABS systems beyond the 2001 International Treaty on Plant Genetic Resources. Certainly, however, the FAO Commission will conclude important guidance documents clarifying the expectations of states on how to apply ABS considerations to the use of animal genetic resources, in aquaculture, in the case of forest genetic resources, invertebrates etc.  The due diligence approach would not only accommodate but actively support the effective implementation of such guidance.

- Handling of Party-non-Party relationships || + || A due diligence approach would facilitate interaction of EU stakeholders with partners from non-Parties to the Protocol. Partners in non-Parties are outside the reach of EU law on user-compliance. However, the possibility of complying with the due diligence obligation by implementing a recognised best practice standards also means that partners employing the same or similar standards, wherever they are located, would effectively also comply with EU user compliance rules. It must be noted in this context, that some existing best practice (BIO biotechnology industry organisation, IFPMA International Federation of Pharmaceutical Manufacturers & Associations) are as such of global nature or are used well beyond the EU (IPEN International plant exchange network, MOSAICC Micro-Organisms Sustainable use and Access regulation International Code of Conduct). Regularly, it is in the best economic interest of all sides to a partnership to employ the same or very similar management standards to reduce transaction costs and raise legal certainty. An EU-level due diligence system would actively encourage such approach.

- Coherence with existing EU laws || + || - Option UC-2 would require a focussed regulatory intervention by establishing a new norm of Union law in a new field of activity. It is considered as an advantage that the option would not require the re-opening of existing EU laws. - EU users, particularly those involved in applied research, product development and commercialisation are familiar with the due diligence concept. On 18 June 2012, the International Chamber of Commerce Task Force on ABS has explicitly identified a due diligence approach as suitable for implementing the Nagoya Protocol in a way that allows industry buy-in.

- Support to special considerations || ++ || Option UC-2 allows establishing special considerations on genetic resources for food and agriculture or on public health concerns and would actively work in support in support of such specialised rules.

- Ability to accommodate differences between sectors || ++ || It is characteristic of the due diligence approach that the required standard of care varies depending on the type of user, its capacity to take measures, its placement in the genetic resources value chain, or sectoral characteristics. Option UC-2 would therefore fully meet the requirements of EU stakeholders for flexibility to accommodate for their widely different situations and capabilities. On 18 June 2012, the International Chamber of Commerce Task Force on ABS explicitly identified a due diligence approach as suitable for implementing the Nagoya Protocol in a way that allows industry buy-in and that accommodates for the widely differing realities in different parts of industry. Under this option, the Commission would, where it seems necessary to support consistent implementation, develop guidance documents that would articulate specific facets of the due diligence obligation for specific groups of users.

- Flexibility to allow for future development and fine-tuning || + || Option UC-2 is also well suited to adjust to future developments, particularly where the EU Regulation only sets out a "headline" due diligence obligation on EU users and leaves the articulation of this obligation in specific contexts to the users themselves, eventually supported by Commission guidance documents. In such setting, the general due diligence obligation set out in the EU Regulation would not need to be changed to account, for instance, to new developments in technical tools for tracking and monitoring genetic resources flow. It would only be necessary to inform users about the availability of such tools and eventually update relevant guidance documents.

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || + || The due diligence approach is focussing on the activity of utilising genetic resources rather than on the tracking of individual transactions of specific genetic resources. All those engaged in utilisation activities would be obliged to seek, keep and pass-on the minimum information required for access and benefit-sharing to work. This suggests that, over a few years of operation, the due diligence system would very significantly improve the information base for assessing genetic resources flow and use in the EU and for evaluating the effectiveness of the policy.

Economic impacts

- Creation of an EU-level playing field || + || The due diligence obligation would generally apply to all activities of utilisation within EU jurisdiction. It would create a common baseline of user-compliance efforts throughout the EU and establish an EU-level playing field. An EU-level playing field is particularly beneficial for SMEs and for the efficient use of public funds spent in favour of gene banks, botanical gardens, academic or applied research.

- Correspondance with existing utilisation practices || +/++ || The due diligence approach would maximize correspondence with existing utilisation practices of genetic resources in the EU. As identified in the EU baseline, these practices are very diverse. Users face different challenges and opportunities in relation to ABS in different industries. Nevertheless, there are some common characteristics and common challenges in the upstream and in the downstream part of the genetic resources value chain in the EU. To comply with their due diligence obligation, EU users would need to add an ABS-specific element to their existing practices. They would need to identify for themselves how best to seek, keep and pass-on the minimum information required for access and benefit-sharing to work. This includes information on the origin or source of genetic material, on the time of acquisition and on eventually applicable benefit-sharing obligations set out in a benefit-sharing contract. It would be left to users to identify the most suitable and cost-effective way for meeting their obligation. Responses found will depend on their specific placement in the genetic resources value chain and on the type of research and development activity conducted. To give some examples: An SME in the biotechnology sector might decide making use of standardised or model material transfer agreements when acquiring or passing on research material. An academic research groups could decide to deploy a low-cost software tool for tracking and monitoring the flow of genetic resources utilised amongst members of the group. Companies from the biocontrol or cosmetics industries that directly collect genetic resources in the wild might subscribe to an industry-wide recognised best practice code of conduct.

- Legal certainty and legal risks || 0/+ || Option UC-2 foresees that the Commission would, where it seems useful to support consistent implementation, develop guidance documents that would articulate specific facets of the due diligence obligation for specific groups of users. The EU Regulation would furthermore establish that implementation of best practice codes of conduct is a way of complying with the due diligence obligation. Users of genetic resources that act in conformity with the guidance documents or that decide to implement a best practice code of conduct would have legal certainty of complying with their due diligence obligation.

- Distribution of impacts along the value chain || 0/+ || As regards the distribution of costs along the genetic resources value chain, it seems that two main factors are at play: First, the due diligence obligation requires all users to seek, keep and pass on minimum information required for access and benefit-sharing to work. Not one of the stakeholders that responded to the public consultation, that participated in ad hoc meetings, or that was interviewed by the external study team has indicated that it would be in principle impossible or unworkable for them to add some basic consideration on ABS issues to their current practices. Many stakeholders have clearly stressed, however, that they would prefer an approach to implementation that provides for flexibility across sectors and that minimizes necessary changes to current practices. On this basis, it seems safe to assume that the due diligence approach would not overburden any of the actors in the genetic resources value chain in the EU. Second, it is characteristic of the due diligence approach that the required standard of care varies depending on the type of user, its capacity to take measures, its placement in the genetic resources value chain, or sectoral characteristics. This means that the approach has flexibility to keep eventual costs proportional to the respective capacities of all particular actors in the value chain. It can, however, not be excluded that individual researchers, SMEs and micro-enterprises would face relatively higher costs for implementing the due diligence obligation than other actors with more capacity.

- SMEs and micro-enterprises || 0/+ || SMEs, micro-enterprises and individuals involved in basic research on genetic resources would particularly benefit from the creation of an EU-level playing field for the utilisation of genetic resources. As is apparent from the EU baseline, SMEs and micro-enterprises play critical roles in different sectors utilising genetic resources in the EU. One example for this is the biocontrol industry where SMEs represent the vast majority of companies in the market. Another example is the research-based pharmaceutical industry, where SMEs play a very important role in developing lead substances or candidate products for the large multinational companies. SMEs also play an important role in the cosmetics industry, where they co-exist with a few major international cosmetics companies. The positive effects on SMEs of creating an EU-level playing field for user-compliance measures might, however, be partially compensated by the relatively higher costs that SMEs would have for implementing their due diligence obligation, when compared with other actors with more capacity.

- Research and development opportunities || + || It is assumed that the legal certainty, low transactions costs and sectoral flexibility associated with Option UC-2 will translate into an enabling context for research on genetic resources or associated traditional knowledge. This will maximise research and development opportunities for EU researchers and EU companies engaged in markets for nature-based products and services.

- International competitiveness || + || Enhanced research and development opportunities are further expected to benefit the EU's international competitiveness. This effect will be particularly nuanced in relation to states with major user interests that have not (yet) ratified the Nagoya Protocol. Researchers and companies from non-Parties with predominant user interests might face increasing difficulties to secure access to quality samples of genetic resources, particularly from the so called mega-diverse group of countries.

- Monitoring (effectiveness, efficiency) and costs) || 0/+ || The compliance of EU users with their due diligence obligation would be monitored by public research funding agencies at EU and Member State levels and other designated authorities of the Member States. Both cases would not require the establishment of new administrative structures. To reduce the administrative burden from monitoring, users would be obliged to declare at designated points that they complied with their due diligence obligation.

- Public costs (EU-level, MS level, one-off, recurring) || 0 || Monitoring under this option would be primarily based on declarations by users at identified points that they have been diligent when utilising genetic resources. Such declarations would be channelled to already existing Member State authorities or to the national competent authority(ies) that each Party to the Nagoya Protocol must establish. In addition, Member State authorities would be empowered to do ad hoc compliance checks. These considerations suggest that the monitoring costs for this option would primarily arise at the level of the Member States, but would not require setting up new institutions or structures beyond those required for becoming a Party to the Protocol in the first place.

Social impacts

- Potential to contribute to social objectives (health, food security, nutrition etc) || + || Option UC-2 would create an enabling context for research, development and innovation in nature-based industries. It would therefore positively contribute to the achievement of important social objectives, be it health, nutrition, food security or else.

- Protection of the rights of indigenous and local communities || + || The general due diligence obligation would also extend to benefit-sharing for the use of traditional knowledge associated associated with genetic resources as documented in domestic access permits and in mutually agreed terms. Option UC-2 would thus contribute to an effective protection of the rights of indigenous and local communities over their traditional knowledge.

Environmental impacts

- Enhancing knowledge base for biodiversity conservation || + || Option UC-2 would maximise the likelihood of important discoveries

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || + || Option UC-2 would maximise the generation of benefits that could flow to conservation purposes.

Option UC-3: General due diligence
obligation on EU users complemented by formally recognising those collections
that are "trusted sources" for genetic resources

Option UC-3 combines a due diligence system
as described and analysed in Option UC-2 with a system to give formal
recognition to collections with control measures in place to assure that only
well documented samples of genetic resources are made available for their
utilisation. Users of genetic resources that acquire sample from a recognised
collection would thereby comply with a major part of their due diligence obligation.
The below analysis repeats the analysis already done for Option UC-2 and
highlights in form of underlined text aspects that are additional or
different from Option UC-2 and where different gradings emerge.

Criteria for analysing impacts || Grading || Motivation of the grading against the criteria

Criteria specific to Access and Benefit-sharing and to the Nagoya Protocol

- Specialised ABS agreements and processes (respect and mutually supportive) || ++ || The due diligence approach would allow for full recognition of specialised ABS systems. Indeed, it could enhance the functionality of such specialised systems, by obliging EU users to be diligent that the specific rules of specialised ABS systems are respected. A due diligence approach would also provide a good basis for establishing mutual supportiveness. The Commission could develop and update EU-level guidance documents that would articulate how EU users would exercise their due diligence to establish mutual supportiveness in a specific context, for example in relation to the important work done by the FAO Commission on Genetic Resources for Food and Agriculture. It would also seem possible to reference internationally agreed guidance documents (such as the FAO Interlaken Plan of Action on Animal Genetic Resources) for the purpose of the EU due diligence system.

- Handling of Party-non-Party relationships || ++ || The due diligence approach would also facilitate interaction of EU stakeholders with partners from non-Parties to the Protocol. Partners in non-Parties are outside the reach of EU law on user-compliance. However, the possibility of complying with the due diligence obligation by implementing a recognised best practice standards also means that partners that employ the same or similar standards, wherever they are located, would effectively also comply with EU user compliance rules. It must be noted in this context, that some existing best practice (BIO, IFPMA) are as such of global nature or are used well beyond the EU (IPEN, MOSAICC). Regularly, it is in the best economic interest of all sides to a partnership to employ the same or very similar management standards to reduce transaction costs and raise legal certainty. An EU-level due diligence system would actively encourage such approach. A system for formally recognising collections as trusted sources would strengthen networks of collections with major partner countries, including with collections from non-Parties to the Protocol. The EU baseline shows that it is a constitutive feature of collections in the EU and beyond to exchange samples between themselves. The system for recognizing collections as "trusted sources" would build on existing best practice codes of conduct such as IPEN or MOSAICC and thus increase their relevance and reach. The formal recognition of a collection under the EU system would thus strengthen its credibility in EU and international networks. One important benefit of this would be a more facilitated exchange with collections in major partner countries, including non-Parties. The recent case of the Svalbard Global Seed Vault shows that some countries are quite hesitant to deposit in permafrost duplicates of their genetic resources over which they hold sovereign rights in collections outside their jurisdiction, even if the depositor remains the owner of the deposit (no transfer of ownership to the seed vault).

- Coherence with existing EU laws || + || The due diligence approach would require a focussed regulatory intervention by establishing a new norm of Union law in a new field of activity. It is considered as an advantage that the option would not require the re-opening of existing EU laws. EU users, particularly those involved in applied research, in product development and commercialisation, are familiar with the due diligence concept. On 18 June 2012, the International Chamber of Commerce Task Force on ABS has explicitly identified a due diligence approach as suitable for implementing the Nagoya Protocol in a way that allows industry buy-in.

- Support to special considerations || ++ || The due diligence approach allows establishing special considerations on genetic resources for food and agriculture or on public health concerns. Indeed, as explained above, the general due diligence obligation could be used to strengthen, for example, the proper use of the WHO system on the rapid sharing of virus samples in case of pandemic threats.

- Ability to accommodate differences between sectors || ++ || It is characteristic of the due diligence approach that the required standard of care varies depending on the type of user, its capacity to take measures, its placement in the genetic resources value chain, or sectoral characteristics. The due diligence approach would therefore fully meet the requirements of EU stakeholders for flexibility to accommodate for their widely different situations and capabilities. Under this option, the Commission would, where it seems necessary to support consistent implementation, develop guidance documents that would articulate specific facets of the due diligence obligation for specific groups of users.

- Flexibility to allow for future development and fine-tuning || + || The general due diligence obligation is well suited to adjust to future developments. The general due diligence obligation would not need to be changed to account, for instance, to new developments in technical tools for tracking and monitoring genetic resources flow. It would only be necessary to inform users about the availability of such tools through an update of relevant guidance documents.

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || ++ || The due diligence approach is focussing on the activity of utilising genetic resources rather than on the tracking of individual transactions of specific genetic resources. All those engaged in utilisation activities would be obliged to seek, keep and pass-on the minimum information required for access and benefit-sharing to work. This focus will, over a few years of operation, very significantly improve the information base for assessing genetic resources flow and use in the EU and for evaluating the effectiveness of the policy. Recognised collections would need to keep records of all genetic resources made available for their utilisation, establish unique identifiers and deploy low costs tracking tools to monitor the exchange of samples with other collections and the transfer of samples to commercial and non-commercial users outside their network. The EU baseline shows that the large majority of EU users acquire their samples for conducting research and development from collections, mostly from collections in the EU. Establishing an EU-system for recognising collections as trusted sources would therefore significantly improve the information base on how genetic resources in the EU are acquired and transferred. This improvement would be additional to the one achieved through Option UC-2 that is focussing more on utilisation activities.

Economic impacts

- Creation of an EU-level playing field || ++ || The due diligence obligation would generally apply to all activities of utilisation within EU jurisdiction. It would create a common baseline of user-compliance efforts throughout the EU and establish an EU-level playing field. This would be particularly beneficial for SMEs and for the efficient use of public funds spent in favour of gene banks, botanical gardens, academic or applied research. Collections formally recognised as "trusted sources" under this option would become highly credible sources of genetic resources and would also be considered as particularly reliable partners in EU and international networks of collections. The existence of these collections would contribute to the establishment of a transparent EU market for quality samples of genetic resources and thus to establishing an EU-level playing field

- Correspondance with existing utilisation practices || +/++ || The due diligence approach would maximize correspondence with existing utilisation practices of genetic resources in the EU. As identified in the EU baseline, these practices are very diverse. Users face different challenges and opportunities in relation to ABS in different industries. Nevertheless, there are some common characteristics and common challenges in the upstream and in the downstream part of the genetic resources value chain in the EU. To comply with their due diligence obligation, EU users would need to add an ABS-specific element to their existing practices. They would need to identify for themselves how best to seek, keep and pass-on the minimum information required for access and benefit-sharing to work. This includes information on the origin or source of genetic material, on the time of acquisition and on eventually applicable benefit-sharing obligations set out in a benefit-sharing contract. It would be left to users to identify the most suitable and cost-effective way for meeting their obligation. Responses found will depend on their specific placement in the genetic resources value chain and on the type of research and development activity conducted. To give some examples: An SME in the biotechnology sector might decide making use of standardised material transfer agreements when acquiring or passing on research material. An academic research groups could decide to deploy a low-cost software tool for tracking and monitoring the flow of genetic resources utilised amongst members of the group. Companies from the biocontrol or cosmetics industries that directly collect genetic resources in the wild might subscribe to an industry-wide recognised best practice code of conduct.

- Legal certainty and legal risks || + || The basic due diligence approach foresees that the Commission would, where useful to support consistent implementation, develop guidance documents articulating specific facets of the due diligence obligation for specific groups of users. The EU Regulation would furthermore establish that implementation of best practice codes of conduct is a way of complying with the due diligence obligation. Users of genetic resources that act in conformity with the guidance documents or that decide to implement a best practice code of conduct would have legal certainty of complying with their due diligence obligation. Users of genetic resources within the EU that acquire samples from recognised collections would have full legal certainty that they comply with their due diligence obligation insofar as it requires users to seek relevant information on eventually applicable ABS requirements. Users that acquire samples from other sources would need to be more diligent that information received with a sample is complete and reliable.

- Distribution of impacts along the value chain || + || As regards the distribution of costs along the genetic resources value chain, two main factors are at play: First, the due diligence obligation requires all users to seek, keep and pass on minimum information required for access and benefit-sharing to work. Not one of the stakeholders that responded to the public consultation, that participated in ad hoc meetings, or that was interviewed by the external study team has indicated that it would be in principle impossible or unworkable for them to add some basic consideration on ABS issues to their current practices. Many stakeholders have clearly stressed, however, that they would prefer an approach to implementation that provides for flexibility across sectors and that minimizes necessary changes to current practices. On this basis, it seems safe to assume that the due diligence approach would not overburden any of the actors in the genetic resources value chain in the EU. Second, it is characteristic of the due diligence approach that the required standard of care varies depending on the type of user, its capacity to take measures, its placement in the genetic resources value chain, or sectoral characteristics. This means that the approach has flexibility to keep eventual costs proportional to the respective capacities of all particular actors in the value chain. It can, however, not be excluded that individual researchers, SMEs and micro-enterprises would face relatively higher costs for implementing the due diligence obligation than other actors with more capacity. The main benefits of recognising collections as "trusted sources" would arise for EU users that typically acquire their research and development material from collections. The EU baseline shows that this includes academic researchers and several commercial sectors utilising genetic resources in Europe. Academic researchers heavily rely on genetic material from public collections, particularly from botanical gardens. Commercial users of genetic resources in contrast source material from public as well as from private collections. The horticultural industry, for example, predominantly relies on ex situ collections for its research and development; this includes in-house collections, commercial collections, or botanical gardens. The industrial biotechnology sector heavily relies on culture collections. Culture collections are also important sources of material for industries involved in natural products research as well as for the pharmaceutical and the food and beverage industries. Private and in-house collections are particularly important in the seed industry, in addition to public gene banks and the centres of the Consultative Group on International Agricultural Research. The benefits of Option UC-3 would particularly arise in the early and middle part of the genetic resources value chain.

- SMEs and micro-enterprises || + || SMEs, micro-enterprises and individuals involved in basic research on genetic resources would particularly benefit from the creation of an EU-level playing field for the utilisation of genetic resources. As is apparent from the EU baseline, SMEs and micro-enterprises play critical roles in different sectors utilising genetic resources in the EU. One example for this is the biocontrol industry where SMEs represent the vast majority of companies in the market. Another example is the research-based pharmaceutical industry, where SMEs play a very important role in developing lead substances or candidate products for the large multinational companies. SMEs also play an important role in the cosmetics industry, where they co-exist with a few major international cosmetics companies. The positive effects on SMEs of creating an EU-level playing field for user-compliance measures might, however, be partially compensated by the relatively higher costs that SMEs would have for implementing their due diligence obligation, when compared with other actors with more capacity. The above identified likely distribution of benefits from establishing recognised collections in the early and middle part of the genetic resources value chain also suggests that Option UC-3 would be particularly beneficial to academic researchers and to SMEs and micro-enterprises. As shown in the EU baseline, SMEs and micro-enterprises are particularly active in the research intensive part of the pharmaceutical industry value chain, in the food and beverage industries, but also in the seed and horticulture industries.

- Research and development opportunities || ++ || It is assumed that the legal certainty, low transactions costs and sectoral flexibility associated with the basic due diligence obligation will translate into an enabling context for research on genetic resources or associated traditional knowledge. This will maximise research and development opportunities for EU researchers and EU companies engaged in markets for nature-based products and services. The particular advantages of Option UC-3 translate into a better operating environment for academic researchers, SMEs and micro-enterprises which are the "powerhouse" for nature-based innovation in the EU. This suggests that Option UC-3 has a higher potential than Option UC-2 to maximise research and development opportunities on genetic resources.

- International competitiveness || ++ || Enhanced research and development opportunities are further expected to benefit the EU's international competitiveness. This effect will be particularly nuanced in relation to states with major user interests that have not (yet) ratified the Nagoya Protocol. Researchers and companies from non-Parties with predominant user interests might face increasing difficulties to secure access to quality samples of genetic resources, particularly from the so called mega-diverse group of countries. The more favourable innovation effects of Option UC-3 translate into a higher potential than Option UC-2 to benefit the EU's international competitiveness.

- Monitoring (effectiveness, efficiency) and costs) || 0/+ || The compliance of EU users with their due diligence obligation would be monitored by public research funding agencies at EU and Member State levels and other designated authorities of the Member States. Both cases would not require the establishment of new administrative structures. To reduce the administrative burden from monitoring, users would be obliged to declare at designated points that they complied with their due diligence obligation.

- Public costs (EU-level, MS level, one-off, recurring) || 0 || Monitoring under this option would be primarily based on declarations by users at identified points that they have been diligent when utilising genetic resources. Such declarations would be channelled to already existing Member State authorities or to the national competent authority(ies) that each Party to the Nagoya Protocol must establish. In addition, Member State authorities would be empowered to do ad hoc compliance checks. These considerations suggest that the monitoring costs for this option would primarily arise at the level of the Member States, but would not require setting up new institutions or structures beyond those required for becoming a Party to the Protocol in the first place. Collections that already implement best practice standards on access and benefit-sharing would incur only very limited costs for being formally recognised as "trusted sources". We do not have information on the costs for collections that do not yet meet these standards but wish to become registered. However, it seems important to recall that not becoming formally recognised as "trusted source" would entail no costs at all for collections. It would clearly be consistent with Option UC-3 if a Member State or the Commission decides to work with specific collections to help them being recognised as "trusted source" for genetic resources and thereby further add to an enabling context for those conducting research and development on genetic resources within the EU. The public costs for this Option would be the same at the EU-level as for Option UC-2. The administrative costs for recognising collections would fall on the Member States, but would be limited; they would not require establishing new administrative structures. The costs of establishing the EU-level register of recognised collections would be minimal. Such register, essentially a web-site, could be administered by the EU focal point for the Nagoya Protocol. The establishment of a focal point is an obligation on all Parties to the Protocol anyhow. Overall, it can be assumed that the limited additional costs for Option UC-3 compared to Option UC-2 would be outweighed by reduced costs for monitoring compliance of users with their due diligence obligation, particularly where monitoring is done on a risk-based approach. It would prima facie seem reasonable to assume that there is less risk of non-compliance by users sourcing from recognised collections, so less compliance checks would be in order for them.

Social impacts

- Potential to contribute to social objectives (health, food security, nutrition etc) || ++ || Option UC-2 would create an enabling context for research, development and innovation in nature-based industries. It would therefore positively contribute to the achievement of important social objectives, be it health, nutrition, food security or else. Option UC-3 would contribute even more than Option UC-2 to an enabling context for research, development and innovation in nature-based industries. It would positively contribute to the achievement of important social objectives, be it health, nutrition, food security or else.

- Protection of the rights of indigenous and local communities || ++ || The general due diligence obligation would also extend to benefit-sharing for the use of traditional knowledge associated associated with genetic resources as documented in domestic access permits and in mutually agreed terms. Option UC-2 would thus contribute to an effective protection of the rights of indigenous and local communities over their traditional knowledge. Option UC-3 seems to have the same effect as Option B as regards protecting the rights of indigenous and local communities over their traditional knowledge.

Environmental impacts

- Enhancing knowledge base for biodiversity conservation || ++ || Option UC-3 would contribute even more than Option UC-2 to raising the likelihood of important discoveries

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || ++ || Option UC-3 would contribute even more than Option UC-2 to generating increased uses of genetic resources and consequently benefits that could benefit to conservation purposes

Option UC-4: Prohibition to utilise
illegally acquired genetic resources or associated traditional knowledge with a
"downstream" monitoring system

The main feature of Option UC-4 is a
prohibition to utilize illegally acquired genetic resources or associated
traditional knowledge in combination with a monitoring system that is based on
an obligation of users to declare to public authorities at specific points in
the value chain that genetic resources were utilised in conformity with
applicable access and benefit-sharing requirements.

Criteria for analysing impacts || Grading || Motivation of the grading against the criteria

Criteria specific to Access and Benefit-sharing and to the Nagoya Protocol

- Specialised ABS agreements and processes (respect and mutually supportive) || - || It would require very careful consideration to avoid that the prohibition has potentially disruptive effects on specialised access and benefit-sharing systems. One key question in this respect is on the nature of such systems to be excluded from the prohibition. Would a specialised ABS system necessarily be established through a binding international agreement, like the FAO Treaty on Plant Genetic Resources for Food and Agriculture? Would it suffice to have an international framework with some binding elements, such as the Pandemic Influenza Preparedness Framework recently agreed in the World Health Organization? Or would even genetic resource exchange in accordance with soft law instruments like the FAO Action Plan on Animal Genetic Resources for Food and Agriculture be excluded? And how to account for the fact that the standardised Material Transfer Agreement of the FAO Treaty is used for transactions of genetic resources that are not part of the multilateral system of this treaty? All of this is not clear. In part, it depends on global level considerations by the collective of the Parties to the Nagoya Protocol, in part on considerations and decisions taken by state representatives in the World Health Organization or in the UN Food and Agriculture Organization. This also means that the EU proposal would take a particular position on an issue that may well be decided in a different direction at global level a few years later, which would require a modification of the acquis and potentially significant adjustments to the practices of EU users of genetic resources.

- Handling of Party-non-Party relationships || - || In relation to non-Parties, it seems that a prohibition to utilise illegally acquired genetic resources could result in legal problems for maintaining collaborative partnerships and eventually also put EU users into a competitive disadvantage.

- Coherence with existing EU laws || - || A prohibition in an EU Regulation to utilise illegally acquired genetic resources is a new concept in Union law particularly in relation to the suggested system of disclosure obligations for monitoring compliance of users with the prohibition. Normally, the obligation of applicants to disclose information in intellectual property rights or product approval proceedings is balanced by legal protection received in form of an intellectual property right or a product approval. Option UC-4, however, suggests that disclosed information would potentially serve as basis for sanctions. This raises important questions on how to treat inadvertent disclosure of false or incomplete information, particularly considering the major challenge to users to obtain reliable information (see below). Option UC-4 would require the opening of a broad set of EU laws related to the marketing of products. This is a challenge in itself, as it might be difficult to limit the legislative discussion to only the issue of introducing a disclosure requirement. The alternative approach, waiting for a review of sectoral legislation, would not seem satisfactory for swift implementation and compliance with the Nagoya Protocol.

- Support to special considerations || - || It also seems unclear how the prohibition to utilise would relate to the special considerations required under the Protocol; particularly the link to genetic resources for food and agriculture would require clarification. One particularly important example concerns the treatment of pathogenic strains that are used for the purpose of plant resistance breeding. This activity clearly does not qualify as an emergency situation addressed in Article 8b) Nagoya Protocol. However, it might be addressed under the special considerations given to genetic resources for food and agriculture, or Parties may make it subject to their general ABS user-compliance system. The situation is not clear, but must be addressed and clarified by the collective of the Parties to the Nagoya Protocol to achieve a harmonious approach to implementation in an essentially global industry where the international exchange of breeding material and pathogenic strains for resistance breeding purposes is common day practice. It thus seems important not to pre-judge the basic approach taken to this matter. However, Option UC-4 would not give this flexibility.

- Ability to accommodate differences between sectors || -- || It would seem equally unclear whether it is possible to craft the prohibition so that it works satisfactorily in all different sectors utilising genetic resources in the EU. The EU baseline shows different EU sectors utilise genetic resources in widely different ways and for different purposes. However, if the same prohibition applies to widely different research and development activities, EU users that wish to be on the right side of the law will need to determine very precisely for themselves when genetic resources were used to an extent that the prohibition applies and a utilisation activity must be disclosed. The definition of "utilisation of genetic resources" in Article 2(c) Nagoya Protocol provides a helpful starting point in this regard. However, it does not provide a clear conclusion in each and every case. It does not address, for instance, how to address situations where a genetic resource is used as a tool for facilitating other research and development projects (e.g. the use of laboratory animals in pharmaceutical research); it also does not give an indication whether an insight drawn from earlier research on genetic resources with ABS requirements attached that causally influences other research on genetic resources unrelated to ABS would still trigger the prohibition and disclosure obligations or not. These questions are anything but trivial. Absent full legal certainty on this point, some users – particularly those with limited profit margins (e.g. in the biocontrol industry) or limited means to obtain legal advice (e.g SMEs), or where very significant investments are made (e.g. pharmaceutical industry) - will rather discontinue the use of specific genetic resources than risking potentially heavy sanctions or losing an investment made.

- Flexibility to allow for future development and fine-tuning || - || Another downside of Option UC-4 is its limited flexibility for future development. There is no stricter measure than a prohibition to utilise. This means that any future adjustments to the Option could only go into the direction of softening the effects of the prohibition, by establishing specific exclusions or grace periods. This would be politically challenging.

- Improving the knowledge base about acquisitions, transfer and use of genetic resources in the EU || - || Option UC-4 would furthermore make only a limited contribution to improving the knowledge base. As it is designed, the system of prohibition and disclosure obligations would primarily generate information in cases where users have all necessary information at hand to proof their own compliance. It seems quite unlikely, however, that a user would voluntarily provide a public authority with information on its own non-compliance, with potential legal and economic consequences. The information generated under this Option would thus be largely irrelevant for understanding real flows of genetic resources throughout the EU economy or for analysing bottlenecks.

Economic impacts

- Creation of an EU-level playing field || -/0 || Although the prohibition to utilise illegally acquired genetic resources would apply to all EU users, it is quite certain not to result in an EU-level playing field. The main reason for this is the monitoring system that goes with the prohibition. Disclosure obligations would only selectively apply to some utilisation activities and thus result in a very uneven distribution of costs and risks. Collections and non-commercial researchers would normally not face disclosure obligations. However, such obligations would be unavoidable particularly for SMEs and micro-enterprises in the middle part of the genetic resources value chain that depend on intellectual property protection for creating commercial value and, where relevant, being able to sell innovations to bigger companies downstream. This group of actors would be caught between a rock and a hard place. A non-commercial researcher that has no risk of being checked has no reason to take on legal responsibility for the good legal status of material passed on for applied research. Larger companies at the end of the value chain (particularly in the pharmaceutical sector), however, would not be able to accept a legal guarantee from a SME as sufficient assurance that things are in order, knowing that SMEs regularly have limited means to verify ABS-compliance.

- Correspondance with existing utilisation practices || - || A prohibition to utilise illegally acquired genetic resources would apply to all activities defined as "utilisation" and all users that undertake such activities. In some case, such as collections (botanical gardens, culture collections, gene banks), a prohibition to utilise seems a manageable task. However, it would certainly create very significant if not insurmountable challenges where large sets of genetic resources are utilised. For example, it is typical for the applied research step in the pharmaceutical value chain to do high-throughput screening of tens of thousands of samples of a particular category in search of active compounds that react to a specified target. The screening activity as such qualifies as "utilisation of genetic resources" in the sense of the Nagoya Protocol. However, it would seem very unclear how, for example, a SME that is specialised on identifying and selling active compounds to the big pharmaceutical companies, could oversee or even verify at reasonable efforts or costs the good legal status of each of the tens of thousands of samples ordered from the catalogue of molecules of another company. This seems an unrealistic task. It is an entirely realistic task though, as would be the result of Option UC-2 or Option UC-3, to oblige the same company to actively seek information on the good legal status of a sample in relation to ABS if this sample has produced a "hit" in the screening exercise and now the SME wishes to research its properties in more detail with a view to identifying and isolating the active compound.

- Legal certainty and legal risks || -- || A prohibition to utilise illegally acquired seems a clear obligation at face value. However, the EU baseline developed for the purpose of this IA shows that there is a real risk that establishing such prohibition would create legal uncertainty and legal risks for different EU users of genetic resources, particularly for SMEs and micro-enterprises. Two aspects appear particularly problematic: (i) knowing exactly when in legal terms the prohibition applies and disclosure must happen (see above) and (ii) the availability of critical information that allows users to determine where they factually stand in relation to the prohibition. This is a major challenge, particularly since the prohibition to utilise illegally acquired genetic resources would initially only be relevant for a fraction of genetic resources utilised in the EU; it would not apply to genetic resources acquired prior to the Convention's entry into force, nor to genetic resources collected in areas beyond national jurisdiction or to resources from free access jurisdictions. The EU baseline clearly shows that currently critical information about the origin or source of genetic resources and eventually applicable ABS requirements is not readily available to users. Worse, as shown above, the incentives created through this option would rather work against creating more transparency and information if early users in the chain have little incentive to provide all relevant information to subsequent users and indeed will regularly not be willing nor capable of issuing a legal guarantee for the good status of research material in relation to ABS. This means that users that must disclose would be left with a legal risk of disclosing false or incomplete information; a risk they could not manage themselves, if only through disrupting certain activities. Notably, the decision to disrupt an activity or not would be unrelated to the actual problematic character of material. In fact, it would be more likely on the expense of utilising genetic resources that are legitimately outside of the scope of ABS obligations, as it is easier for user to document compliance with ABS obligations where these exist (eg by presenting an internationally recognised certificate of compliance) rather than documenting the absence of such obligations. Users that are under the obligation to disclose will intend to negotiate with upstream user access conditions and guarantees that create legal certainty for them. To the extent the latter refuse, the user chain will be seriously disrupted.

- Distribution of impacts along the value chain || -- || Option UC-4 would selectively apply to only some utilisation activities and thus result in a very uneven distribution of costs and risks. Collections and non-commercial researchers would normally not face disclosure obligations. However, such obligations would be unavoidable particularly for SMEs and micro-enterprises in the middle part of the genetic resources value chain that depend on intellectual property protection for creating commercial value and, where relevant, being able to sell innovations to bigger companies downstream. This group of actors would be caught between a rock and a hard place. A non-commercial researcher that has no risk of being checked has no reason to take on legal responsibility for the good legal status of material passed on for applied research. Larger companies at the end of the value chain (particularly in the pharmaceutical sector), however, would not be able to accept a legal guarantee from a SME as sufficient assurance that things are in order, knowing that SMEs regularly have limited means to verify ABS-compliance. As a result, one would need to expect disruptions in the genetic resources value chain where research material moves from collections or non-commercial research to SMEs and again, where research and development activities move from SMEs to larger companies that create the real economic value. This suggests that the prohibition to utilise illegally acquired genetic resources could stifle innovation in different sectors, and thus achieve exactly the opposite of what the Nagoya Protocol wants to achieve.

- SMEs and micro-enterprises || -- || The costs of compliance under this option would fall on those involved in applied research and product development, be it public or private research institutes, SMEs or large companies. So a part of the user chain that is heavily populated by SMEs or micro-enterprises. Some of these players might decide to discontinue an utilisation activity rather than risking non-compliance with the prohibition. This also means that disruptive effects would likely affect the plant breeding and biocontrol sectors and also occur in the pharmaceutical value chain.

- Research and development opportunities || -- || As regards research and development opportunities, one could argue that Option 3D essentially meet the demands of our international partners and will thus facilitate access to genetic resources for the benefit of EU users. However, this line of argument is not convincing. The EU-approach to user-compliance measures is unrelated to the capacity challenges of provider Parties, particularly those that are developing countries. Indeed, the more rigorous and inflexible the EU approach to user-compliance, the more difficult it would be to accept any but perfect implementation of the access provisions of the Protocol by provider countries. Second, the argument ignores that initially most genetic resources utilised in the EU will be legitimately outside of ABS requirements. It does not seem acceptable to make research and development on these genetic resources more difficult and reduce innovation potential by establishing a system that only works for genetic resources that have been acquired in third countries and that come with ABS requirements attached. Taken together, Option UC-4 as a real potential for stifling research and development, and innovation in different sectors. It would thus achieve exactly the opposite of what the Nagoya Protocol is supposed to achieve.

- International competitiveness || -- || It is assumed that the negative impacts of this option on research and development and on innovation would translate into negatively effects for the EU's international competitiveness.

- Monitoring (effectiveness, efficiency) and costs) || -- || As regards monitoring user compliance, it has already been observed that a prohibition that is linked to a system of disclosure obligations would systematically favour collecting information about compliant behaviour, but be unlikely to result in pertinent information on situations of non-compliance or reasons for non-compliance. - Another challenge, particularly for user sectors with long and complex innovation chains, is the focus of the disclosure obligation on facts and activities that happened in the past, often many years ago; when relevant information about legal access was generated or when such information should have been generated but actually was not. As shown above, under current circumstances it seems that users will face real difficulties in disclosing relevant information, when this is required. - It is even clearer though, that it is mostly beyond the means of public authorities of the Member States or the EU to identify situations where genetic resources were utilised in a relevant way and access and benefit-sharing obligations apply. - Indeed, the only way to establish this information with some certainty is if one knows the benefit-sharing contract concluded between the provider of a genetic resource and the first user. And this might be a document considered as partially confidential by providers and users. This suggests that the probation to utilise illegally acquired genetic resources cannot be effectively monitored unless there is an obligation on users to disclose relevant information and thereby self-identify as compliant with applicable ABS requirements or not. However, would it be consistent with notions of legal proportionality if a monitoring system only works if users are obliged to self-identify as potentially non-compliant and eventually face sanctions for utilising an illegally acquired genetic resource? In most situations, the burden of proof for illegal conduct rests on public authorities. Obligation on operators to document legal compliance before engaging in an activity is normally done for dangerous or inherently risky activities. Or it is done in situations where illegal behaviour would otherwise be the norm rather than the exception. Both aspects are not characteristic of the activity of utilising genetic resources. So Option UC-4 might raise concerns about being disproportionate as regards ends and means.

- Public costs (EU-level, MS level, one-off, recurring) || -/0 || - A monitoring system based on an obligation on users to disclose relevant information would as such have limited costs. - However, as explained above, the proposed system is unlikely to be effective, except for identifying situations where users do comply with their obligations. The system would be largely ineffective in identifying situations of non-compliance. Obviously, monitoring authorities could put significant efforts into researching potential ABS-related problems of claims for intellectual property rights or product approvals. This might improve the effectiveness of this option, but would of course be quite costly and time-consuming.

Social impacts

- Potential to contribute to social objectives (health, food security, nutrition etc) || -- || Option UC-4 would very likely be damaging to research and development opportunities on genetic resources in the EU and thus not contribute to achieving important EU objectives on health, nutrition, or food security.

- Protection of the rights of indigenous and local communities || -- || It would also not effectively support the protection of the rights of indigenous and local communities over their traditional knowledge that is associated with genetic resources.

Environmental impacts

- Enhancing knowledge base for biodiversity conservation || -- || Option UC-4 would very likely be damaging to research and development opportunities on genetic resources in the EU. It is thus assumed to negatively affect the enhancement of the knowledge base for biodiversity conservation.

- Potential for generating non-monetary and monetary benefits in favour of conservation and sustainable use of biological diversity || -- || Given its overall difficulties, Option UC-4 would be unlikely to generate benefits in favour of the conservation and use of biological diversity.

              Annex
7: The genetic resources Value Chain

The Nagoya Protocol establishes a framework for acquiring and
utilizing genetic resources over which states hold sovereign rights and
primarily addresses the two sides of the ABS-relationship (providers and
users). To better understand the implications of this framework, it is helpful
to distinguish the typical steps taken in the genetic resources value chain.
The value chain starts with the collection of some material and possibly ends
with the successful commercialization of a final product.[12]

Step 1: Collecting genetic resources: Samples
of genetic resources are collected from nature in a country. In-situ
collecting activities are often complex endeavors, particularly where they
require access to remote or sensitive areas, or engaging with indigenous and
local communities. Foreign collectors will often collaborate with
in-country-partners, such as local university institutes that participate in
expeditions, help with identification of collected material, and keep
reference-samples for inclusion in domestic collections.

Parties to the Nagoya Protocol that decide to require
benefit-sharing for the use of their genetic resources must comply with the
detailed access-related obligation of the Protocol. If implemented properly,
these will result in transparent and enabling access frameworks with
non-discriminatory, reliable, cost-effective and timely decisions.

Step 2: Storing samples of genetic resources in ex-situ collections: Samples of genetic resources, once identified and documented, are
typically stored and maintained in ex-situ collections (botanical
gardens, culture collections, gene banks). Collections in the countries where
genetic resources were collected but also in third countries. Collections will
keep relevant documentation on samples (scientific description, time and place
of acquisition; collecting expedition, permits etc). They also exchange between
each other information about samples or physically exchange samples through
established (international) networks or cooperations. Collections also make
samples available for R&D purposes. Very often, ex-situ collections in
countries of origin will function as 'intermediaries' between those collecting samples
in the wild and those conducting research on genetic resources.

The Nagoya Protocol does not explicitly mention ex-situ
collections. However, Parties will work with ex-situ collections in the
Protocol implementation. Collections in the countries where genetic resources
were collected seem well placed to grant prior informed consent for access to
genetic resources over which this Party holds sovereign rights. Ex-situ collections
also hold critical information that helps assessing whether specific samples
come with ABS-related rights and obligations.

Step 3: Basic research on genetic resources: Basic research does not pursue an economic purpose. Basic research
on the genetic or biochemical properties of genetic resources is done within ex-situ
collections and by researchers from universities or other research institutes.
Such research generates critical knowledge important for biodiversity
conservation and characterisation. It is thus directly linked to the ability of
Parties to meet their conservation obligations under the Convention. Typically,
the results of basic research are published. They are also used as basis for
further applied research. However, researchers involved in basic research will
normally not be aware at this stage of an eventual commercial relevance of
their findings.

The Nagoya Protocol considers basic research as "utilization of
genetic resources". This reflects that basic research is normally the
basis and starting point for further, applied and commercially oriented uses.
The Protocol obliges its Parties to give consideration to the important role of
non-commercial research, including through simplified access measures. Other
important considerations include focusing on non-monetary benefit-sharing
during this phase of utilization. The effective implementation of these
obligations by provider Parties rest in part on credible user-compliance measures
taken in 'user jurisdictions' to avoid that privileges given to non-commercial
research create loopholes for benefit-sharing. Indeed, a key challenge for
credible user compliance systems is to ensure that those engaged in
non-commercial research maintain the link to eventual ABS-obligations,
especially in case of change in intent.

Step 4: Applied research on genetic resources: Applied research seeks to identify specific value of genetic
resources in a specific context. Interesting discoveries will normally be
protected through available forms of intellectual property rights before
publishing important findings in specialized journals. Applied research on
genetic resources is done by a broad set of actors that includes publicly
funded research institutes and many SMEs, particularly in the biotechnology
sector. Applied research also happens in R&D departments of large companies
that develop and sell products.

The Nagoya Protocol considers applied research as "utilization
of genetic resources". Specific benefit-sharing obligations during this
phase must be established in MAT. The key challenge for credible user
compliance systems is to ensure that those engaged in applied research maintain
the link to eventual ABS-obligations. This is also important for legal
certainty. No responsible company will move from applied research to product
development, and decide on the necessary investments, unless it can oversee the
legal and economic risks involved.

Step 5: Developing products involving R&D on genetic resources: Genetic resources play a direct or indirect role in the
development of a broad range of products in a wide range of industries. The EU
situation in this regard is detailed in Annex 8.

The Nagoya Protocol considers the development of products that
involve R&D on the genetic and/ or biochemical composition of genetic
resources as "utilization" of such resources". Specific
benefit-sharing obligations are established in MAT. They will constitute part
of the economic calculation of the company developing a product.

Step 5: Commercializing products that are based on genetic resources: Genetic resources play a direct or indirect role in the
development of products put on the market. In some sectors of activity,
companies will need to obtain a permit or approval prior to the marketing of a
product.

The Nagoya Protocol establishes that benefit-sharing claims for
"subsequent applications or commercialization" of R&D on genetic
resources must be pursued on the basis of MAT. Indeed, the scope and form of
eventual benefit-sharing obligations can only be determined on the basis of a
concrete benefit-sharing arrangement.

              Annex
8:  The "EU Baseline" - current practices of utilisation of genetic
resources and associated traditional knowledge in the European Union

Introduction

The information presented here provides an overview of the use and
exchange of genetic resources and traditional knowledge associated with such
resources as addressed in the Nagoya Protocol, for both commercial and
non-commercial sectors affected by ABS issues in the EU. The information
presented builds on 12 sectoral studies done by the external consultant team
that are included in Annex 3 to the final report of the study[13].

Sectors analyzed were academic research, botanic gardens, culture
collections, pharmaceutical industry, cosmetics industry, food and beverage
industry, seed and propagating sector and horticulture, cultivated forest, animal
breeding sector, biological control (“biocontrol”) and industrial
biotechnology. The baseline summarizes the findings of the sectoral studies and
deals with issues such as the relevance of genetic resources and access and
benefit sharing for each of these sectors, the different activities involved in
the genetic resource user chain, the size and characteristics of the sectors,
the types and role of genetic resources in the sectors, the relevance of
research and development on genetic resources for innovation in the sectors,
the sourcing of genetic resources and the sectoral approaches and practices
regarding ABS.

As highlighted in the IA study proper, it must be noted that
relatively little quantitative information is available on the use and exchange
of genetic resources at sector level. Information gaps especially exist with
respect to the amount of genetic resources (and ‘wild’ genetic resources in
particular) utilised within most of the sectors; the sourcing of genetic
resources (e.g. figures on the extent to which genetic resources are obtained
from each type of source); and the economic relevance of the utilization of
genetic resources (e.g. figures on revenues and profits from the sale of
genetic resource based products). Available figures are often rough or indirect
indicators of what is being sought. Therefore the analysis below is mainly
qualitative rather than quantitative.

EU sectors involved in or affected by
ABS activities

EU sectors “utilizing” genetic resources and/or traditional
knowledge associated with genetic resources and commercializing products
developed on the basis of such utilization are very diverse. The purpose and
patterns of use and exchange of genetic resources as well as the structure of
the sectors differ widely.

The following “sectors” were analyzed in developing the EU baseline:

·
Botanic gardens, defined as “institutions
holding documented collections of living plants for the purposes of scientific
research, conservation, display and education”;

·
Culture collections, defined as “organizations
established to acquire, conserve and distribute microorganisms and information
about them to foster research and education”;[14]

·
Academic research (universities and research
institutes);

·
The biocontrol sector, which mainly develops
techniques for crop protection whereby predatory or parasitic living organisms
(so-called “biocontrol agents”) are being used to control pests;

·
The industrial biotechnology sector, where
companies develop, manufacture and sell products and services that “use or
contain biological material as catalysts or feedstock to make industrial
products”, some of which develop enzymes, apply enzymes in biotransformation,
develop whole cell catalysts and apply these in fermentation systems (HM
Government, 2010);

·
The plant breeding or seed industry, which
engages in developing seeds and propagating material which are an essential
input in crop production;[15]

·
The horticulture sector, which includes a range
of activities from plant breeding for ornamental purposes or amateurs (e.g.
hobby gardening) to commercial production. The distinction between
horticultural and agricultural production is difficult to make, but can be
judged based on the scale of production;

·
The cosmetics industry, which develops,
manufactures and sells a range of products that include “traditional” cosmetics
products, such as make-up and perfumes, as well as personal hygiene products
such as tooth-care products, shampoos and soaps;

·
The pharmaceutical industry, which engages in
the discovery, development, and manufacture of drugs and medications;

·
The farm animal breeding sector, which engages
in the breeding and reproduction of farmed and companion animals. The five most
important species for global agriculture are cattle, sheep, goats, pigs and
chickens;

·
The food and beverage industry;

·
The Forestry and cultivated
forest-based and related industries.

Relevance of
genetic resources and ABS for the sectors

Issues related to access and benefit-sharing to genetic resources
affect many activities and sectors of the EU economy. While demand for access
to ‘wild’ genetic resources has declined in most sectors, interest in research
and development on genetic resources has increased overall (Laird and Wynberg,
2012). While some sectors, such as the biocontrol sector, rely heavily on
genetic resources sourced from the wild, other sectors build most of their
innovation on genetic resources that have already been subjected to
improvements. Nevertheless there are common issues facing this wide range of
sectors. These include: compliance with legislation in countries of origin
related to the access to genetic resources and/or traditional knowledge
associated with genetic resources, the difficulty of tracing the country of
origin of genetic resources and conditions attached to their utilisation when
resources are accessed through intermediaries, the issue of development costs
and related issues of benefit sharing and good governance.

According to Laird and Wynberg (2012), demand for access to wild
genetic resources has declined in most sectors, though interest in genetic
resources overall has increased. The importance of ABS may vary amongst (and within) these sectors, as some sectors rely
more on wild genetic resources than others.

The pharmaceutical industry relies partially on wild genetic
resources: 26% of all new approved drugs over the last 30 years are either
natural products or have been derived from a natural product (Newman and Cragg,
2012). ABS is particularly important for those pharmaceutical companies that
are involved in natural products research, which only represents one segment of
pharmaceutical R&D.

In the plant breeding or seed sector conventional
breeders rely on modern varieties, though old varieties, landraces and crop
wild relatives are still used to introduce specific features such as insect and
disease resistance into breeding populations (Schloen et al, 2011).
Therefore demand continues to be low for wild genetic resources. In fact demand
for wild genetic resources in this sector has reduced in recent years to be
replaced by sourcing from ex situ and private collections (Laird and
Wynberg, 2012).

In the horticulture and animal breeding sectors,
demand for wild genetic resources is also limited. In the horticulture sector,
some companies continue to search for wild genetic resources with the aim to
introduce novel ornamental species or to provide new variations of colour or
other traits (Laird and Wynberg, 2012). In the animal breeding sector, demand
for wild resources might increase somewhat in the future because of climate
change. Many of the traits necessary to adapt to
climate change may be found in locally adapted breeds (Hiemstra et al,
2010).

Overall the demand for wild genetic resources in the cosmetics
sector is limited, as most cosmetics are reformulations of existing products.
However, there is a niche market in cosmetics for which wild genetic resources
are very important.

The food and beverage industries, on the other hand, rely
significantly on wild genetic resources for their product development and
marketing. In recent years interest in wild novel species and associated
traditional knowledge has even increased. Demand for access to wild resources
from these sectors is likely to be maintained as these help companies to market
their products in competitive markets (Laird and Wynberg, 2012).

The biocontrol sector relies most heavily on wild
genetic resources. The genetic resources used in
biocontrol include plants, viruses, bacteria, fungi, insects, nematodes and
invertebrates and are very often collected in situ as living organisms.
Furthermore, EU in situ collections are as important as non-EU in
situ collections (FAO, 2009).

For the forestry sector (Ad
Hoc Working Group III on Climate Change and Forestry, November 2010), forest
ecosystems play an important role in the global biochemical cycles. Forests act
both as sources and sinks of greenhouse gases (GHG), through which they have
significant influence on the climate. EU forests cover
very varied environments, ranging from sub-arctic to Mediterranean and from
alpine to lowland, including flood plains and deltas. Forests are home to the
largest number of species on the continent (the Mediterranean region alone has
30,000 vascular plants), compared with other habitats, and provide important
environmental functions.

For the non-commercial sectors, genetic resources originating from
the wild are also very important. Botanic gardens, in fact, still
substantially engage in bioprospecting activities, identification and
documentation of new plant varieties, storage, basic research and, in
particular, exchanges of plant genetic resources (mostly in the form of seeds)
with other ex situ collections. Bioprospecting and basic research on
microbial genetic resources also remains an essential activity for culture
collections and microbiologists, due to the fact that most microbial
genetic resources are still unknown.

Steps involved
in the use and exchange of genetic resources – a general introduction

Figures 1 and 2 give a general cross-sectoral overview of the use
and exchange of genetic resources in the EU. For the purpose of this study, a
distinction has been made between “upstream” and “downstream” activities in the
genetic resources user chain. "Upstream" activities are those at the
beginning of the user chain and include collecting in
situ genetic resources, importing genetic resources into the EU, storing
genetic resources in ex situ collections (including identifying and
documenting them for this purpose) and handing out genetic resources (see Figure )."Downstream"
activities usually follow the upstream activities and include research (basic
and applied) and development on genetic resources for both commercial and
non-commercial purposes – i.e. activities that fall within the Protocol’s
definition of “utilization” of genetic resources – and commercialization of
genetic resource based products (see Figure 2). Figures 1 and 2 indicate that some
players in the genetic resources user chain are typically involved in upstream
activities, whereas others are typically involved in downstream activities. Actors typically involved in upstream activities include botanic
gardens, culture collections, seed banks and other public or private ex situ
collections. They are mainly involved in bioprospecting, collecting,
identifying and storing genetic resources for public good purposes. These
activities are also often linked because different collection types are often
hosted by the same institutions, generally universities or public research
institutes. A wide range of industries such as the biotechnology industry, the
pharmaceutical industry, the plant breeding industry, the horticultural
industry, the biocontrol industry, the cosmetic industry and the food &
beverage industry are involved in downstream uses of genetic resources.

The distinction between upstream and downstream activities is useful
for analytical purposes and for effectively implementing the Protocol in the
EU. Firstly, actors engaged in the upstream part of the genetic resources user
chain typically supply downstream users with genetic resource samples or
valuable data related to genetic resources that may subsequently be used for
commercial R&D and eventually become the basis for a product. Secondly, the
Protocol as it stands does not distinguish between upstream and downstream; it
simply establishes a general obligation on Parties to ensure that genetic
resources utilised in their jurisdiction were legally acquired in the country
of origin. In the EU, it seems that upstream users, such as culture collections
or botanic gardens, assume a major role as intermediaries in that they
constitute the link between concrete access activities in source countries and
subsequent utilization activities within the EU.

The upstream/downstream distinction applies to “types of activity”
in the genetic resources user chain. While some sectors only engage in upstream
or in downstream activities, other sectors (e.g. horticulture and academic
research) are both involved in the upstream and downstream activities. Figures
1 and 2 below indicate the typical “placement” of sectors upstream and
downstream.

In the following sections, we explain in more detail the upstream
and downstream parts of the EU genetic resource user chain on the basis of the
flowcharts in Figures 1 and.2.

Figure 1: EU upstream activities and
actors involved

EU upstream
activities and actors concerned

The first flow chart (Figure1) focuses on the upstream activities
within the EU user chain. "Upstream" activities include collecting in
situ genetic resources, importing genetic resources into the EU, storing
genetic resources in ex situ collections (including identifying and
documenting them for this purpose) and handing out genetic resources to
downstream users or other ex situ collections. Actors typically involved
in upstream activities include botanic gardens, culture collections, seed banks
and other public or private ex situ collections. They are mainly
involved in bioprospecting, collecting, identifying and storing genetic
resources for public good purposes, except for private collections held by companies
to support their commercial R&D. Ex situ collections (at least the
public ones) are very much linked because they are often hosted by the same
institutions, generally universities or public research institutes.

The flow chart shows that the bioprospecting or collecting of
genetic resources in situ (either within or outside the EU) is mainly
undertaken by botanic gardens, culture collections, universities and research
institutes (referred to as “research collections” in the flow chart) and other ex
situ collections (e.g. genebanks).[16] However,
actors which engage more in commercial downstream activities (e.g. R&D) may
also undertake bioprospecting; these include biocontrol companies and
healthcare biotech companies. Bioprospecting can be done either directly or
indirectly through partnerships with local universities and research
institutes.

The indirect bioprospecting option is generally favoured as it
provides for technical, scientific and administrative support. Local partners,
for instance, can be helpful in dealing with the domestic procedures to obtain
authorization for access to genetic resources. Where ABS procedures exist,
authorities in the provider countries may require those who seek access to
obtain “prior informed consent” (PIC) from the right holder – this right holder
can be a private party (landowner), a national or regional authority or an
indigenous or local community. Provider countries with authorization/ABS
procedures in place usually also require those who seek access to negotiate
mutually agreed terms (MAT) with the right holder on the further utilization of
the genetic resources and the sharing of benefits arising from their
utilisation. The PIC and MAT documents specify whether they cover utilisation
for commercial or non-commercial purposes.

It should also be noted that EU actors (whether mostly active at the
upstream or downstream level) might also source genetic resources from third
country ex situ collections.

Major exchanges of genetic resources occur among the various ex
situ collections both among EU ex situ collections and between EU
and non-EU ex situ collections. This results inter alia from the
need for identification of genetic resources by the collections. As this
requires the scarce expertise of highly specialised taxonomists, international
transfers of genetic resources are indispensable.

As Figure 1 shows, the actors that engage primarily in downstream
activities (such as research and development on genetic resources) either
obtain their genetic material directly from provider countries (through
bioprospecting or third country ex situ collections) or indirectly
through the EU ex situ collections.

When genetic material is transferred from ex situ collections
(such as culture collections and botanic gardens) to commercial sectors active
at the downstream level of the user chain, it must be checked whether the PIC
and MAT documents that accompany the genetic resources coming from these ex
situ collections allow for utilization with a commercial intent. This is
often not the case. Hence, in many cases the downstream user or the ex situ
collection will have to go back to the original provider country to obtain new
prior informed consent from the right holder and to negotiate new mutually
agreed terms in order to allow the genetic resources to be utilised for
commercial purposes.

Figure 2: EU downstream activities and
actors involved

EU
downstream activities and actors concerned

The second flow chart (Figure 2) focuses on the downstream
activities within the EU user chain. "Downstream" activities include research (basic and applied) and
development on genetic resources for both commercial and non-commercial
purposes – i.e. activities that fall within the Protocol’s definition of
“utilization” of genetic resources – and commercialization of genetic resource
based products which falls under the Protocol's provision for a fair and
equitable benefit sharing. A wide range of industries
such as the biotechnology industry, the pharmaceutical industry, the plant
breeding industry, the biocontrol industry, the cosmetics industry and the food
& beverage industry are involved in the downstream part of the genetic
resources value chain.

In addition to the commercial sectors, the academic research sector
is a major user of genetic resources, as it undertakes a lot of (primarily
basic but also applied) research on genetic resources.Basic
research on genetic resources is a fundamental starting point for further
utilization of genetic resources. The academic sector is typically non-commercial;
however, it maintains connections with commercial utilization of genetic
resources. Academic publications, for instance, are freely used by economic
sectors as inputs for commercial research and development. Furthermore, active
collaboration with companies, including biotechnology firms, may result in
applied research conducted within the academic sector contributing directly to
commercial R&D. Finally, the academic sector undertaking applied research
may seek intellectual property protection on innovations where industrial
applications are possible and then negotiate license agreements with other
downstream commercial users.

Another noteworthy sector in the downstream part of the user chain
is the biotechnology sector. The sector is very much linked with agricultural
input industries (such as the seed and animal breeding industry), the
pharmaceutical industry and others, such as manufacturing industries, the
“bioenergy” industry and the biomaterials industry, as it contributes directly
to their research and development. Biotechnology can be subdivided as green,
red and white biotechnology: green biotechnology refers to agricultural
biotechnology; red biotechnology refers to pharmaceutical and medical
biotechnology; and white biotechnology refers to industrial biotechnology. In
reality, these subsectors may overlap. White biotechnology firms are separate
in the flow chart as they are less dependent of the more downstream industries
for the completion of a marketable product. This is different for instance from
the red biotechnology companies which usually take care of the first stages of
pharmaceutical research[17] and subsequently pass on – through outlicensing or acquisition –
their products to the big pharmaceutical companies for further R&D and
other subsequent stages in the value chain such as marketing (see also Figure
3).

At the most downstream part of the user chain one finds industries
which undertake more downstream R&D and commercialize products; in terms of
size the pharmaceutical industry and the food and beverage industries are the
most significant, and the biocontrol industry is the smallest (see section 1.3
for more details). As far as the sourcing of genetic material is concerned, the
industrial biotechnology sector differs from the agriculture and pharmaceutical
biotechnology sectors. Industry biotechnology researchers regularly collect
their own samples of materials, contrary to the case in the agricultural and
pharmaceutical sectors (ten Kate & Laird, 1999). The biocontrol sector is
also a special case as it relies heavily on its own bioprospecting activities.

Size and characteristics of relevant sectors

Global
market/size and development prospects

Sectors primarily operating upstream include academic research,
botanic gardens and culture collections. They often engage in
non-commercial/not-for-profit activities, their main source of funding is
public bodies and their activities are of important public, scientific and
(downstream) commercial interest (biodiversity conservation, public education,
storage and provision of genetic resources for downstream scientific research
and product development).

Conversely, downstream users of genetic resources generally operate
in larger markets. For instance, the global food and beverage industry was
valued at $5.7 trillion in 2008, the global pharmaceutical market at $808
billion in 2009 (IMAP, 2011), the cosmetics market at $136 billion in 2006
(Global Insight, 2007), the global biotechnology industry revenues at $84.6
billion in 2010 (Ernst & Young, 2011) and the commercial seed market at $42
billion (ISF, 2011d). The global market for augmentative biocontrol was
estimated at US$100-135 million in 2008 (FAO, 2009).

In summary, it can be concluded that
economically very important activities take place downstream, whereas upstream
activities are often non-commercial in nature, and often supported by public
funds.

EU Market
(size of market/sector and importance for EU economy)

Non-commercial sectors in the EU are quite important in terms of
their share in their sectors’ activities globally. For botanic gardens, of
3,021 botanic gardens worldwide, around 550 are based in the EU (van den Wollenberg et al, interview 2012).[18] In 2001, moreover, it was estimated that 50% of all living plant
accessions in the world were collected in Europe (Wyse Jackson, 2001). Kew Gardens in the UK holds the largest living plant collection and one of the largest herbaria
in the world.[19] As far as culture collections are
concerned, of 593 worldwide, 158 collections are based in the EU, holding 33%
of the global collection of strains. Japan follows with 13% and the US with 12% of the global share of strains collected.[20]

The commercial sectors in the EU utilizing
genetic resources also tend to have significant shares in their respective global
markets, with the highest shares in the animal breeding, cosmetics and
biocontrol sectors[21]:

·
Pharmaceutical industry: size of the global market was $808 billion in 2009 with global
market share for the EU of nearly 15% (IMAP, 2011);[22]

·
Food and beverage industry: size of the EU market was €954 billion in 2009 with a share of
global exports of 18.6% in 2009 (CIAA, 2010);

·
Cosmetics industry: size of the EU market was $63.5 billion in 2006 with a global
market share of 46.6% (Global Insight, 2007);[23]

·
Biotechnology industry: revenues of the EU biotechnology industry amounted to $13 billion
in 2010 with a share in global revenues of 15% and a share of 34.5% of global
biotechnology patent applications at the European Patent Office
(Ernst&Young, 2011; EC, 2007);

·
Seed industry:
size of the EU market was $6.8 billion in 2009 with a global market share of
more than 20% (www.esa.org); the Netherlands was the global leader in vegetable crop seed
exports in 2010 ($1 billion) and was second to the US in flower seed exports
(US exports were $72 million, and Dutch exports were $57 million) (ISF, 2010c
and 2010d). The top ten exporters of vegetable crops seeds also include France, Italy, Germany and Denmark; the top ten exporters of flower seeds include Germany, France and the UK. For agricultural crops, France is the largest agricultural crop seed
exporter.

·
Biocontrol industry: the EU is the largest market in the world for beneficial insects and the second largest
for microbial biopesticides (FAO, 2009);

·
Animal breeding industry: the economic gain (or added value) of animal breeding in Europe
amounts to €1.89 billion per year, with global market shares of 90% for ducks,
100% for turkeys, 72% for broilers (poultry), 95% for layers (poultry) and
28.5% for pigs (figures from 2007) (FARBE-TP, 2008).

·
Forestry: 2
million jobs in the forest sector in EU.

Economic
relevance of “utilization” of genetic resources for the sector in Europe

The Nagoya Protocol defines “utilization of genetic resources"
as “the conduct of research and development on the genetic or biochemical
composition of genetic resources”. While there is virtually no data
specifically on the economic relevance of the utilisation of genetic resources,
figures on R&D expenditure that are provided below, when combined with the
qualitative information on the relevance of genetic resources for each sector
under section 0, provide an indicative picture on the economic importance of
the utilisation of genetic resources. A more qualitative assessment of the role
of research and development on genetic resources for innovation in the sectors
is provided in section 0.

As far as the pharmaceutical industry is concerned, it is
estimated that it takes 10-15 years and costs $1.3 billion to develop a new
drug (Laird and Wynberg, 2012; PhRMA, 2009). The
research-based pharmaceutical industry amounts to 18.9% of total worldwide
business R&D expenditure. In 2010 an estimated €27 million was invested in
pharmaceutical R&D in Europe (EFPIA, 2011). Nevertheless, R&D
productivity of the big pharmaceutical companies declined by 20% in the
2001-2007 period (IMAP, 2011). It should be noted however that natural products
research is only one segment of pharmaceutical R&D. In addition, the
probability that any genetic resource sample will lead to a commercial product
is very low. It is estimated that one in 10,000 samples makes it into a
commercial pharmaceutical product (PhRMA, 2005; Laird and Wynberg, 2008).

The seed and horticulture industries are also very
research intensive. It can take for instance 5 to 10 years to identify and
evaluate agronomically important traits from exotic germplasm and it might take
another 10 years to develop a new improved crop variety that is acceptable to
the farmer (Smith and Grace, 2007). The development of one wheat variety for
instance may involve “thousands of plant breeding crosses and dozens of
different individual lines, including wild ones” (Schloen
et al, 2011). It is estimated that 10-14% of
turnover in the seed industry is spent on R&D (ESA, 2012). Given that the
size of the EU market was $6.8 billion in 2009, R&D spending in the
European seed industry was probably between $680 million and $950 million.

In the cosmetics industry R&D investments are much lower
than in the pharmaceutical and biotechnology sectors, though investments have
increased in recent years. Time horizons for developing new products vary
considerably. In some cases time horizons are very short and R&D is
minimal. In other cases time horizons may be considerably longer, e.g. when cosmetics
companies run screens involving as many as 100 substances to identify active
compounds and undertake clinical trials. In those cases it may take 6 to 8
years to bring a product to market (EC public consultation, 2012).

Development cycles
in the industrial biotechnology sector and food sector are much
shorter. The development of food products generally does not take more than
three years, whereas the development of an industrial biotechnology product –
e.g. enzymes for biofuels or detergents – usually takes no more than one to two
years from the moment a lead enzyme is identified (Laird and Wynberg, 2012;
sCBD, 2008).

In the global animal
breeding industry R&D investments are significantly lower than in the
crop seed industry. R&D intensity (i.e. R&D spending as a percentage of
sales) in 2006-2007 for the (global) animal breeding sector represented 7.3%
across species, compared to 10-15% for the crop seed industry (15% in 2000 and
10.5% in 2009). Private R&D into animal breeding and genetics grew from
$253 million in 1994 to $316 million in 2010. In nominal US dollars, private
R&D spending in 2010 reached $339 million for animal breeding and genetics,
whereas R&D spending in 2010 was $3,726 million for crop seed and
biotechnology (Fuglie et al, 2011).

The activities of ex situ collections such as botanic
gardens or culture collections are primarily non-commercial and
relate to the collection (in situ or ex situ), storage, and
further transfer of genetic resources to downstream users. Genetic resources
are “utilised” by those actors as far as the majority of ex situ
collections engage in basic research on the genetic or biochemical composition
of the material collected inter alia to identify and cataloguing new
genetic material (Wyse Jackson et al, 2001). Ex situ collections further engage in utilization through
scientific collaborations with academic institutions and downstream industrial
users. For culture collections in particular, moreover, basic research activities consist not only of identifying the taxonomic
nature of microbial strains, but also characterising their biological function
and sequencing them to identify the genetic code (Stromberg et al.,
2012). Thus, they clearly engage in the utilization of genetic resources in the
sense of the Protocol. Apart from public funding, well
organized culture collections generate additional income through the sale of
microbial genetic resource samples and the provision of scientific services to
customers (identification, characterization of strains, creation of databases
with information on the genetic and biochemical composition of microbial
genetic resources held in the collection) (Stromberg et
al, 2012).

Are EU
companies market leaders? Are EU organisations leaders in the sector?

EU companies are market leaders in a few sectors, such as the
biocontrol and animal breeding sectors. The Dutch company Koppert for instance
is a world market leader in biological crop protection. Examples of European
world market leaders in animal breeding are Aviagen (Wesjohann GE Europe), with
a global market share in the poultry sector (broliers) of 50% in 2007, and
Hendrix (NL) with a share of 50% in the poultry sector (layers). The EU company
PIC (= Genus) leads the global pig breeding market with a 10% share (FARBE-TP,
2008).

EU companies also play major roles in other economic sectors,
despite not necessarily being world market leaders. Of
the top 15 global pharmaceutical companies (2004-2008), seven companies have
their headquarters in Europe: Novartis AG (Switzerland), Roche Holding AG (Switzerland), Bayer AG (Germany), GlaxoSmithKline PLC (UK), Sanofi-Aventis SA (France), AstraZeneca
PLC (UK) and Boehringer Ingelheim Gmbh (Germany) (IMAP, 2011).

Of the 20 global companies that exceeded $100 million in total seed
sales in 2009, 13 were based in Europe. Limagrain, KWS AG and Bayer ranked
respectively fourth, fifth and sixth in 2009.

A significant number of major international cosmetics companies are
based in Europe, primarily in France and Germany (Global Insight, 2007).

With regard to botanic gardens, the Royal Botanic Gardens Kew (UK)
hold the largest living plant collection in the world and one of the largest
herbaria. It also significantly engages in scientific
research on plant material, producing around 350 publications per year. The
garden employs 744 staff and has an annual income of €55.7 million (year
2010/2011), more than half of which originates from public funding with the
rest mostly coming from private grants and fees charged for visiting the
gardens (1.6 million visitors in 2010-11).[24]

Relevance of
SMEs

The role of SMEs in the sectors varies. While some EU sectors such
as the green biotechnology sector are dominated by big multinational
enterprises, others such as the biocontrol sector are dominated by SMEs. SMEs also
play different roles in relation to utilisation of genetic resources for
innovation. While the field of pharmaceutical biotechnology, for example, is
dominated by research-intensive SMEs, research on genetic resources for
innovation in the horticulture industry is mostly carried out by large
multinationals.

The pharmaceutical industry is dominated by large multinational
companies, though SMEs (especially biotechnology companies) do also play a
major role, especially in the early stages of the user chain (see Figure 3). On the one hand there are large pharmaceutical
companies which need to be big because of uncertainties in the drug development
process. On the other hand, there are smaller biotechnology companies, most of
which do not have the capital or market access to commercialize a product
(IMAP, 2011). A large proportion of companies working in healthcare
biotechnology are research-intensive SMEs (Degen et al, 2011;Croplife,
interview., 2012). Many of these SMEs are micro-enterprises consisting of 10 or
fewer employees (Degen et al, 2011). Currently, some very large
companies with big sales/marketing organizations and the capital and knowledge
for late-stage clinical developments are systematically acquiring small
biotechnology companies with interesting candidate products. Licensing deals
with small biotech companies are also becoming increasingly important (IMAP,
2011).

The seed industry includes a significant number of SMEs, although
the general trend is towards convergence and consolidation. There are many
breeding companies in Europe with five or fewer employees (Plantum, interview,
2012). The green biotech sector, however, mainly comprises big multinational
companies (Croplife, interview, 2012). There is however a small number of small
and medium-sized green biotechnology companies, that generally do not sell seed
but rather seek to commercialize a new genetic trait or biotechnology service
or tool to other companies (Heisey and Fuglie, 2011).

The horticulture sector includes a small number of large
multinational companies that represent most of the worldwide sales, and
hundreds of SMEs (ten Kate, 1999). Nevertheless, it is the first group of large
multinationals that deals the most with genetic resources by investing
significant resources into the development of new products (ten Kate, 1999).

SMEs employing an average of 2-10 people represent the vast majority
of biocontrol companies (FAO, 2009).

The cosmetics market is composed of hundreds of SMEs spread across
the EU27, though a significant number of major international cosmetics
companies are based in Europe, primarily in France and Germany (Global Insight, 2007).

A large number of SMEs dominate the food industry: 99% of the
enterprises are SMEs, which employ 61% of the workers in the industry and
account for 49% of the industry’s total turnover. More specifically,
micro-enterprises (1-9 employees) represent 79% of all companies. Small (10-49
employees) and medium-sized (50-249 employees) companies account for 17% and 4%
respectively, while large companies (250+ employees) account for close to 1%
percent of all European food industry companies (EMCC).

The animal breeding sector includes many SMEs, as well as several
medium-sized and large international players. However, differences exist among
the various animal breeding subsectors. For instance, most European beef cattle
breeders are individual farmers who are members of farmer’s cooperatives or
breed societies, whereas dairy cattle breeders are mostly dairy farmer
cooperatives. In the poultry sector, however, just a few large-scale but still
relatively small (max €500-700 million annual turnover) private companies
supply breeding stocks. European pig breeding organizations (only 14 in 2007)
are half organized into cooperatives and half privately owned companies
(FARBE-TP, 2008).

The forestry sector: In the EU, 60% of
forests are private and 40% public; private forest holdings are managed by an
estimated 16 million forest owners, being in most cases small-scale private
forest owners. In 2005,
forest-based industries in the EU employed about 3 million people in 350,000
enterprises, with a turnover of about EUR 380 billion, producing added value of
around EUR 116 billion (Source: Eurostat, Statistics in focus 74/2008).

Types and role of genetic resources
used in sectors in the EU / particular characteristics of some user chains

Types and
role of genetic resources used in the various sectors

Diverse types of genetic resources are utilised within the various economic
sectors in the EU. The pharmaceutical industry uses natural products or
genetic resources from animal, plant and microbial origin (and their
derivatives) from both terrestrial and marine environments as a starting point
in developing active compounds for medicines, as inactive elements of final
products, and as tools in the research and production processes (EFPIA, 2007).

The cosmetics industry uses harvested
or cultivated products in many of its products. The raw materials used are
typically bulk sourced and consist mainly of dried plant products and oils from
a variety of organisms (Laird and Wynberg, 2012; Beattie, 2005). This includes
a large number of derivatives, such as saponins, flavonoids, amino acids,
anti-oxidants, and vitamins (Beattie, 2005).

The biological pest control sector uses a very broad range of
genetic resources, including plants, viruses, bacteria, fungi, insects,
nematodes and invertebrates. They are almost always collected directly in
situ as living organisms (FAO, 2009).

Conventional and biotech seed companies
rely on different types of plant genetic resources for use in breeding and
variety development. The development of new varieties is usually based on the
use of advanced genetic material, as it takes time and effort to bring
less-advanced genetic material to the same performance levels (Schloen et al,
2011). The main source for genetic material for conventional breeders is modern
varieties, though old varieties, landraces and crop wild relatives may be used
to introduce specific features into breeding populations which allow for the
development of varieties adapted to less favourable environmental conditions
and low-input production systems (Schloen et al, 2011).

The industrial biotechnology sector
uses microorganisms as the primary genetic resource. Companies are interested
in genetic resources found in “areas with high species diversity, as well as in
extreme or unique environments”, including salt lakes, deserts, caves and
hydrothermal vents (CBD, 2011).

In the animal breeding sector, exchange
of (animal) genetic material between owners is crucial for the development of
livestock breeds and the livestock sector in many parts of the world. Genetic
variation within lines or breeds is the main source for genetic improvement.
Although (new) breeds and lines are being developed continuously in commercial
breeding programmes, the introduction of “foreign” genetic material or “wild
relatives” is much less relevant in animal breeding than in plant breeding
(Kaal-Lansbergen and Hiemstra, 2003). For many domesticated livestock species
no wild relatives exist, as they have become extinct, and for others wild
relatives are very rare (Schloen et al, 2011). Furthermore, little or no
demand exists in developed countries for breeding animals or specific
(adaptive) traits from developing countries. This situation could however
change as a result of climate change. Many of the traits necessary to adapt to
climate change may be found in locally adapted breeds. Climate change is
therefore likely to increase the exchange of genetic material across the board,
but might also lead to a bigger flow of genetic material from the South to the
North (FAO, 2009; Schloen et al, 2011).

Relevance of
research and development on genetic resources for (innovation in) the sectors

Research and development of commercial products from genetic
resources is important for a wide range of sectors. However, the ways in which
and the extent to which the sectors undertake research and development vary.

The pharmaceutical industry, for instance, is very R&D
intensive. Drug development relies on the collaboration
and effort of highly trained scientists at universities and private companies
(see also Figure 10.1 which shows how the value chain in the sector might
look). It takes about 10 to 15 years for a compound to make its way through
R&D into commercialization. Only one in approximately 10,000 compounds
screened is commercialized (PhRMA, 2005; Laird and Wynberg, 2008). According to
EFPIA (2007), many thousands or even hundreds of thousands of samples must be
screened to identify potential leads for investigation. Identified leads rarely
generate compounds that merit serious research. Even fewer generate compounds
that possess properties that merit the filing of a patent application; from
these, only some are commercialized. As noted before,
the research-based pharmaceutical industry amounts to 18.9% of the total
worldwide business R&D expenditure. In 2010 an estimated €27 million was
invested in pharmaceutical R&D in Europe (EFPIA, 2011). Nevertheless,
R&D productivity of the big pharmaceutical companies declined by 20% in the
2001-2007 period (IMAP, 2011).

R&D on genetic resources, in casu natural products
research, receives inconsistent support and is only one of many segments of
pharmaceutical R&D (Laird and Wynberg, 2012). Currently
only four large pharmaceutical companies maintain natural products programmes
of any size, and have the capacity to undertake all facets of natural product
drug discovery (Novartis, Wyeth, Merck and Sanofi-Aventis). Nevertheless,
natural products research plays a major role in the discovery of leads for drug
development and hence in innovation in the pharmaceutical sector. Most natural
products research (especially research that involves bioprospecting) is done in
academic and government research institutes or smaller discovery (biotech)
companies (sCBD, 2008). Large pharmaceutical companies which engage in natural
products research usually collaborate with this type of player, e.g. through in-licensing
deals or acquisitions.

Figure 3: Value chain in the
pharmaceutical industry

Source: Advances in Strategic Management

The seed or plant breeding industry, which relies entirely on
genetic resources, is characterised by important R&D investments. It
is estimated that 10-14% of turnover is spent on R&D (ESA, 2012). Research
intensity (R&D spending as a percentage of sales) for seed increased during
the 1990s (related to the increasing dominance of modern biotechnology or
genetic engineering) and has fallen since 2000, though it is still higher than
for other “agricultural input industries” with high research intensities such
as animal genetics and animal health. R&D
investment varies by crop (Smolders, 2005). R&D investments in the European
seed and biotechnology sector are both focused on biotechnology and
conventional breeding. Plant breeding is traditionally characterised by long
time horizons over which research and development of new products evolves from
the original point of access to genetic resources. Often multiple plant genetic
resources are used in species improvement (see Figure 4): the development of
one wheat variety may involve “thousands of plant breeding crosses and dozens
of different individual lines, including wild ones, from many countries and
over many centuries” (Beattie et al, 2005; Schloen et al, 2011). In
other words, plant breeding is a global activity in which many breeders from
many different countries are involved.

The relevance of public R&D on unimproved material (landraces,
crop wild relatives, etc) is rather high. Characterization, evaluation and
pre-breeding largely take place in the public sector, with the product freely
available to all breeders on a non-exclusive basis. The private sector is
rather reluctant to work with unimproved material (Smolders, 2005).

Figure 4: pedigree picture of a
particular wheat line

Source: CIMMYT

In the horticulture sector the relevance of R&D on
genetic resources varies among the subsectors. There
are many companies involved in the horticulture industry growing, distributing
and selling ornamental plant varieties; few of these work directly with genetic
resources (ten Kate, 1999). Those that do work with genetic resources include a
small number of large companies that represent most of the worldwide sales in
this industry, a larger number of national companies and hundreds of SMEs. It
is the first group of large multinationals that invest significant resources
into developing new products. Some breeding programmes use advanced
technological approaches to plant breeding, which can cost several million
dollars (e.g. for vegetables), while ornamental plants can be introduced with
little selection or breeding in a relatively short period of time (ten Kate,
1999). It can be concluded that some segments of the horticulture sector are
characterised by long time horizons over which R&D of new products evolves
from the original point of access to genetic resources, whereas other segments
have relatively short time horizons for R&D on genetic resources (i.e.
selection and breeding of genetic material).

In the biocontrol sector the relevance of research and
development on genetic resources is very high. At the planning stage, surveys
about the pest and its natural enemies need to be undertaken to obtain
information about the area of origin of the pest and the best places to look
for natural enemies. Subsequently, natural enemies are identified and detailed
studies undertaken to assess their potential use as biocontrol agents. This
includes developing breeding methods for use in the laboratory and conducting
impact studies in the field or in the laboratory (FAO, 2009). The last step
consists of an evaluation by the target country authority of the risks and potential
benefits of the introduction of the relevant pest. Permission for release may
or may not be given. When permission is granted, release strategies and
protocols will be developed together with monitoring and evaluation procedures
(FAO, 2009).

In the cosmetics and food and beverage industries,
R&D investments are much lower than in the pharmaceutical and biotechnology
sectors. However, investments in R&D have increased in recent years as a
result of rising demand for proven, effective and safe products. Research and
development of new products, however, varies significantly. In some cases time
horizons are very short and the input of science and technology is minimal
(e.g. when companies sell bulk unprocessed herbs and as such may or may not
“utilise” genetic resources, or when companies process plants into extracts).
In other cases time horizons may be considerably longer, e.g. when cosmetics
companies run screens involving as many as 100 substances to identify active
compounds and undertake clinical trials. In those cases it may take 6 to 8
years to bring a product to market (EC public consultation, 2012; Laird and
Wynberg, 2012).

In the global animal breeding industry R&D investments
are significantly lower than in the crop seed industry. R&D intensity in
2006-2007 for the (global) animal breeding sector accounted for 7.3% across
species, compared to 10-15% for the crop seed industry (15% in 2000 and 10.5%
in 2009) (Fuglie et al, 2011). In the animal breeding sector basic
scientific research is mostly conducted in the public domain, whereas companies
protect their knowledge generated in more applied research and breeding
(Hiemstra et al, 2010). Like in the crop seed industry, the emergence of
biotechnology has been very relevant for the animal breeding industry.

The forestry sector: (1) natural regeneration with the
existing genetic resources at the stand is used as an important source for
regeneration of the forests. Due to climate change, research is done on the
genetic variation of natural regeneration and on possible reactions on the
impact of climate change. The percentages of afforested and reforested forests
vary between the Member states. (2) The genetic resources used for cultivated forest
planting are usually seeds from identified stands or naturally regenerated
trees. The source of breeding material is usually known. Genetic material is
sometimes acquired from ex situ collections. In few cases, propagated material
could be used for regeneration (e.g. poplar, willow). Due to climatic changes genetic
resources are looked e.g. in the Mediterranean Region for a useful application
in future climatic conditions in the European Union. At the moment the interest
is mainly on a scientific level (research). Today, except for the overseas
regions, the genetic resources coming from mega diverse countries are not of
relevance for cultivated forests within the EU. The questions concern access to
forest diversity for food, feed, renewable resources and energy. Plant genetic
resources are located in situ and ex situ and are maintained by public and
private forest owners as well as private or public forest companies.

Relevance of
basic/academic research 'utilizing genetic resources' (for innovation) in
sectors

Though it is hard to determine the exact relevance of basic/academic
research for innovation in the sectors, one can state that in general basic
academic research plays a major role for innovation in various economic
sectors, though the relevance might vary across and within sectors.

Basic/academic research may indirectly contribute to a commercial
innovation through publicly available publications/data (see box below).
Published research results may be used by players with commercial interests as
input for product development. Depending on the field of academic research, the
likelihood of research results contributing to the development of new
commercial products may vary. Academic disciplines such as taxonomy or ecology
are less likely to contribute directly to commercial innovation, at least in
the short term, than those such as clinical pharmacology or genomics.

Academic research institutes can also be actively involved in
commercial R&D through partnerships with the private sector. The business
sector indeed finances up to 6.6% of higher education R&D in the EU (EC,
2005). For instance, to improve
knowledge sharing and to cut costs, pharmaceutical companies are highly
interested in collaborating with academic laboratories. Partly funded by the
government, academia invests effort in basic research to identify potential new
targets for drugs (e.g. membrane or intracellular receptors and their signaling
pathways) and biomarkers to monitor the effect of a drug. Furthermore, academia
can contribute by optimizing technology to accelerate drug development. In addition, academic laboratories are
highly stimulated to collaborate with pharmaceutical companies. In the EU FP7
Health program for instance, projects are only selected for funding if a
certain percentage of the EU budget goes to SMEs. Furthermore,
in project application forms from national governmental agencies, academic
researchers have to describe how they will valorise the results of the project.
Other initiatives to stimulate interaction between academia and industry
include platforms such as the Innovative Medicines Initiative (IMI), a European public-private initiative that supports collaborative research projects and builds networks of
industrial and academic experts to boost pharmaceutical innovation in Europe (Smits, interview, 2012).

Role of academic publications used by the pharmaceutical industry for the development of a medicine (utilizing genetic resources/natural products) An example is green fluorescent protein. This bioluminescent protein was extracted and purified from the hydromedusan Aequorea victoria by Osamu Shimomura (Shimomura, 1962). Later, the primary structure of the protein was revealed and published, also at an academic lab (Prasher et al, 1992). Now, it is widely used as a marker for gene expression, and also by pharmaceutical companies in order to study drug effects (Chalfie et al, 1994).

Basic research utilizing genetic resources is integral to the
activity of culture collections and botanic gardens.
For culture collections, for example, the key process of isolation and profiling
of strains involves the basic study of biochemical and genetic properties of
the strain. The added value of basic research consists not only of identifying
the taxonomic nature of microbes, but also characterizing their biological
function and sequencing them to identify the genetic code. Such information is
organized in databases with molecular and physiological information diffused on
collections’ electronic databases, which may be used by downstream commercial
and non-commercial users (Stromberg et al, 2012). Scientific or
technical (basic) research on plant genetic resources is also a core activity
of botanic gardens. Basic research on the properties of plant genetic resources
may be undertaken by the garden on its own, e.g. taxonomic research for the
purpose of identification and cataloguing of new species or varieties. Because
of the specific expertise of the scientists working in those sectors, further
basic research utilizing genetic resources is also undertaken through
collaborations between those institutions and universities/research institutes
or the private sector (Wyse Jackson, 2001; van den Wollenberg et al,
interview, 2012).

As botanic gardens and culture collections also provide economic
sectors with their genetic resources, the basic research carried out by them in
terms of identification, documentation, profiling and further scientific
research on the properties of genetic resources held in their collections is
definitely relevant for some sectors. In a survey carried out in 2005, it was found
that 23% of the genetic material provided by culture collections went directly
to private sector users, whereas the other 77% went to universities, research
institutes and other culture collections (Stromberg et al, 2006). The
relevance of microbial genetic resources held in culture collections for
commercial sectors is likely to be higher when one considers the further
linkages down the utilisation chain between academic research institutes and
private companies. The microbial genetic resources and information on their
properties and genetic profiles held by culture collections are mostly used for
the biological control of pests and diseases in agriculture and horticulture,
the production of natural products (e.g. valuable drugs, enzymes, and metabolites)
for pharmaceutical, food and other applications, as well as the production of
biofuels and bioplastics (agricultural and industrial biotechnology) (WFCC,
2008). Botanic gardens are mostly providers of genetic resources and related
taxonomic information to universities and public research institutes, though
they might also less frequently supply other downstream sectors such as green
biotechnology, plant breeders, horticulture and the pharmaceutical sector (Wyse
Jackson, 2001; van den Wollenberg et al, 2012).

Relevance of
applied research 'utilising genetic resources' (for innovation) in the sector

Applied research is understood here as research with the objective
of adding value to genetic resources to enable the potential development and
commercialization of genetic resource based products. This stage of the
innovation process involves the academic sector, but to a larger extent the
biotechnology sector, which is engaged in a number of fields such as
pharmaceuticals, agriculture and industry. This is an important stage of the
value chain and it explains, for instance, the targeted acquisition within the
pharmaceutical industry of small biotechnology firms to gain access to specific
products or technologies (sCBD, 2008). The further development of products is
generally undertaken by the downstream companies’ own R&D departments.

Protection
of innovations in the sectors (e.g. patents, plant variety rights and trade
secrets)

Legal protection of innovations becomes particularly important in
the 'downstream' part of the genetic resources user chain. However, currently
the conditions for granting legal protection for an innovation are independent
from the specific role the utilization of genetic resources or traditional
knowledge has played in the creation of an innovation. A unique genetic
resource may have been the decisive input enabling innovation. Conversely, a
genetic resource with related ABS-obligations may have been only one of tens of
thousands of reference samples used in the screening for an active ingredient.
Furthermore, intellectual property rights such as patents or plant variety
protection only cover the part of innovations involving the utilisation of
genetic resources. Innovations of major economic importance may often fall
outside the scope of intellectual property protection and kept as trade secret.
The distribution of the different practices is explained below.

·
Plant variety rights: Innovations in the conventional plant breeding industries are
mostly protected through the plant variety protection system. As mentioned
above, however, the development of a new wheat variety
may involve thousands of plant breeding crosses and dozens of different
individual lines (Schloen et al, 2011). EU legislation authorises only the
protection of a new plant variety by means of the Community Plant Variety Right
system (CPVR – Regulation (EC) No 2100/94) or national plant variety protection
systems; those systems are conform to the UPOV convention (Union pour la
Protection des Obtentions Végétales); the CPVR system protects mainly
ornamental species (60%), agricultural crops (25%), vegetable crops (12%) and
fruit species. Currently, less than 14% of registered varieties on the EU
Common Catalogues (agricultural and vegetable crops) are protected within the
CPVR. More than 18,000 protection titles are in force at EU level. The CPVR and
UPOV systems are open systems because the variety, even protected for
commercial use, remains free for research and breeding (compulsory breeder
exemption) and for private use.

·
Patents: Among
the sectors covered by the present study, one of the most reliant on patents
for protecting innovations is the pharmaceutical industry. In 2011,
pharmaceuticals operators based in Europe filed 5,759 applications before the
European Patent Office (EPO), representing 4% of the overall number of European
patent applications before the EPO. Those figures represent a strong decline
compared to the previous year (6,879 applications, representing 4.5% of the
overall number of European patent applications).[25] In this sector, while only a small number of new chemical entities
are approved annually, thousands of patents are applied for to protect variants
of existing products and manufacturing processes. Patents are usually obtained
by the time lead compounds have entered the stage of lead optimisation, even
though many uncertainties with respect to commercial return remain (EFPIA,
2007).

The number of patent protection applications has grown significantly
in recent years in the field of biotechnology (Ugalde, 2007), which is
now among the 10 most active fields for applications before the EPO. In 2011,
biotechnology operators based in Europe filed 5,865 applications before the
EPO, representing 4.1% of the overall number of European patent applications
before the EPO.[26] While a number of innovations in the academic research
sector are not protected because the main aim of academic research is to
increase scientific knowledge by disseminating research results through
publications, patenting has increased in this sector since the 1990s in the
field of biotechnology, where basic research is often likely to lead to
industrial applicability (van Zeebroeck et al, 2008). In 2005, patent
applications before the EPO from the government and higher education sectors
amounted to merely 3.2%, whereas business enterprise sectors were responsible
for 85.7% of the overall number of patent applications (Eurostat, 2010). In the
field of biotechnology in 2002 university patent filings before the EPO
accounted for 13% of the overall number of applications (van Zeebroeck, 2008).

To a smaller extent the cosmetics, food & beverage
and farm animal breeding industries are also increasingly making use of
patents to protect their inventions (ETB, 2010; Schloen et al., 2011).

Figure 5: Overall number of new
applications received at the EPO in the field of Biotechnology

Source: S. Yeats EPO, 2011

·
Trade secret:
Protection of inventions through trade secrets is carried out by a number of
sectors including the cosmetics, food & beverages, animal breeding, plant
breeding and biocontrol industries. Information covered by trade secrets may
range from production know-how in the biocontrol industry (i.e. the rearing
methods used in the laboratory) to genetic information (Krattiger, 2007).

·
Geographical indications: They are forms of identification which identify a product as
originating in a region or locality in a particular country. For a GI product,
its reputation for quality or authenticity is intimately linked to its
geographical origin. Geographical Indications are usually geographical names.
But non-geographical names can also be protected if they are linked to a
particular place. There are three major conditions for the recognition of a
sign as a geographical indication: it relates to a good although, in some
countries, services are also included; these goods must originate from a
defined area; the goods must have qualities, reputations or other
characteristics which are clearly linked to the geographical origin of goods

Relevance of
traditional knowledge associated with genetic resources for innovation in the
sectors

The relevance of traditional knowledge varies by sector. The role of
traditional knowledge in pharmaceutical discovery has been relatively small in
recent decades and is likely to become even smaller. Several reasons are put
forward for this trend: the emphasis of pharmaceutical drug development on
disease categories that do not feature prominently in traditional medicine; the
decreased role of plants in discovery; the increasing role of micro-organisms
in discovery; and the fact that new research approaches do not easily integrate
the type of information available through traditional knowledge (sCBD, 2008;
Laird and Wynberg, 2012).

In the seed sector, companies rely on their own private collection or
prefer to work with material characterized through joined research projects
with public institutions. The plant biotechnology avoids collecting
traditional/farmer knowledge as far as possible because of legal and ethical
implications. Most prefer to pass the responsibility of resolving these
difficult benefit-sharing issues on to the gene banks, governments or
intermediary institutions with whom they work (Laird and Wynberg, 2012).

The cosmetic and food and beverage industries, however, rely much
more on traditional knowledge as the starting point for new product
development. Novel species have become increasingly important in this sector,
as well as the traditional knowledge associated with these species. In some
countries, traditional knowledge is used as a marketing tool to demonstrate
product efficacy and safety. These industries, however, are the least informed
about CBD, the Protocol and their ABS requirements (Ibid).

As for the upstream sectors, it should be noted that a survey showed
that 20% of academic research projects linked with genetic resources worked
with traditional knowledge associated to these resources (WG-ABS, 2006).
Botanic gardens often keep, alongside the plant material itself, related
objects and information of ethno-botanical nature, e.g. information about use
by indigenous and local communities of the relevant plant materials (botanic
gardens, pers. comm. 2012). Furthermore, traditional knowledge often figures in
scientific publications on the properties and uses of certain plant varieties (van den Wollenberg et al, interview, 2012).

In conclusion, with the exception of the
cosmetic and food industries the use of traditional knowledge associated with
genetic resources is relatively small in most commercial sectors in the EU.
Traditional knowledge associated with genetic resources nevertheless still
plays a relatively important role in the basic research activities of
non-commercial sectors, as it may provide valuable insights into the properties
and functions of certain genetic resources.

Sourcing of genetic resources (genes
or naturally occurring biochemicals)

Relevance of
bioprospecting

Bioprospecting involves searching for, collecting, and deriving
genetic material from samples of biodiversity (plants, animals, microorganisms)
for scientific research or commercial development. As Figure 1 shows, EU users
engage either in direct or indirect bioprospecting. The
reliance on ‘wild’ genetic resources and hence the relevance of bioprospecting
varies across sectors (see also section 0).

For most botanic gardens and culture collections, bioprospecting
remains a fundamental activity. For botanic gardens the collection and
discovery of new species is an integral part of their conservation, educational
and scientific activities: 42% of European threatened taxa, for example, is
accessible in ex situ collections within their region of origin
(Sharrock and Jones, 2009). According to a study based on data provided from 84
botanical gardens in Germany, Austria, Switzerland and Luxembourg, 12% of the
plant material acquired by the botanic gardens every year was directly
collected from the wild (Krebs et al, 2003).

For culture collections, in situ collection of
microbial samples is also fundamental due to the fact that more than 99% of
existing microbial genetic resources are still unknown.[27]45% of genetic resources deposited every year come from the direct
bioprospecting efforts of the collection itself (Stromberg et al.,
2006). As micro-organisms easily develop novel properties in response to
different environmental stresses, collection from industrial regions may often
be as important as collection from gene-rich countries (Fritze, 2010).

Bioprospecting is very relevant in the biocontrol sector,
which relies the most on wild genetic resources among the commercial sectors
studied. The genetic resources used in biocontrol
include plants, viruses, bacteria, fungi, insects, nematodes and invertebrates
and are very often collected in situ as living organisms. EU in situ
collections are as important as non-EU in situ collections
(FAO, 2009).

The food and beverage industries also rely significantly on
wild genetic resources for their product development and marketing. Materials are often bioprospected and bioprospecting activities are
expected to continue to grow, as they help companies to
market their products in competitive markets. New
ingredients are regularly sought in nature, and identified through traditional
knowledge.

The same conclusions hold for one particular segment in the cosmetics
sector for which wild genetic resources are very important. However, the demand
for wild genetic resources and the relevance of bioprospecting for the sector
as a whole is limited.

Industrial biotechnology researchers
regularly collect their own samples of materials, contrary to the case in the
agricultural and pharmaceutical sectors (ten Kate & Laird, 1999). Ten Kate
& Laird (1999) found that of the companies and organisations surveyed for
their study, this collecting activity was a relatively unimportant method of
acquisition for half of the respondents. For the other half, however, staff
collecting activities represented more than 90% of their acquisitions. Many of
these collectors come from universities, or from small companies spun off from
universities.

In the pharmaceutical industry, which only relies partially
on ‘wild’ genetic resources, bioprospecting is directly relevant for companies
that are involved in natural products research. Many
small (biotechnology) companies increasingly carry out (specific aspects of)
research on natural products such as biosynthetic engineering and other genomic
research. These smaller biotechnology companies develop hits and leads and form
alliances with big pharmaceutical companies for the development of pharmaceuticals.
This implies smaller companies are more likely than the largest companies to
seek access to wild genetic resources (sCBD, 2008). These companies (and the
few big pharmaceutical companies which still engage in natural products
research, such as Novartis) usually work together with worldwide local partners
such as universities, research institutions, botanic gardens and culture
collections to undertake bioprospecting, as the
practice of bioprospecting generally requires specific taxonomic expertise. Some bioprospecting might also be done by in-house scientists
(such as marine biologists) (EFPIA, 2007; sCBD, 2008).

In the plant breeding or seed sector bioprospecting is very
limited. Though a small demand continues to exist for old varieties, landraces
and crop wild relatives to introduce specific features such as insect and
disease resistance into breeding populations (Schloen et al, 2011), the
demand for wild genetic resources has been replaced in recent years by ex
situ and private collections (Laird and Wynberg, 2012). In the plant
biotechnology sector, direct in situ bioprospecting activities are
virtually non-existent (Europabio, interview, 2012).

In the horticulture sector bioprospecting is also very
limited. In the animal breeding sector the introduction of “foreign”
genetic material or “wild relatives” and hence bioprospecting is even less
relevant than in the plant breeding sector.

In conclusion, the relevance of bioprospecting is highly variable
across different sectors in the EU. Bioprospecting remains an important
activity in non-commercial sectors. The discovery of new or rare genetic
diversity in nature, in fact, is still of great interest for both scientific
research and the conservation activities of some ex situ collections. In
the commercial sectors, while bioprospecting remains important for some
particular niches of innovation, such as biocontrol, industrial biotechnology
and some small pharmaceutical biotechnology industries, the activity has
declined or is no longer relevant for economically important research-intensive
sectors such as the seed industry and a great proportion of the pharmaceutical
and cosmetics industries.

Relevance of
ex situ collections, gene banks, seed banks, databases

Culture collections are specialised
deposits of microbial genetic resources which function as providers of
microbial genetic resources to a wide range of downstream sectors. Generally,
the addressees of 77% of the material provided by culture collections are
public sector institutions, in particular research institutes, universities and
other culture collections, while 23% goes to private sector users (Stromberg et
al, 2006). The uses of microbial genetic resources stored in culture
collections include the biological control of pests and diseases in agriculture
and horticulture (biocontrol sector), the production of natural products (e.g.
valuable drugs, enzymes, and metabolites) for pharmaceutical, food and other
applications, and the production of biofuels and bioplastics (agricultural and
industrial biotechnology). They also play a major role in soil fertility and
plant and animal health and are employed in diagnostics, efficacy testing of
drugs, biocides, vaccine production and disinfectants (WFCC, 2008).

Botanic gardens are mostly providers to
universities and public research institutes. This does not exclude the
possibility of other private downstream sectors utilizing genetic resources
(e.g. green biotechnology, plant breeders, horticulture and pharmaceutical
sector) sourcing from those institutions (van den
Wollenberg et al, interview, 2012). This is particularly the case for
well-established botanic gardens and others associated with or owned by the
private sector, such as horticultural, agro-botanical and germplasm gardens,
functioning as ex situ collections for plants of economic value (Wyse Jackson,
2001).

In the seed sector, conventional breeders usually source
their material (mostly modern varieties) from private collections (i.e.
breeding collections of private companies) and from other breeding companies
(i.e. from their varieties available on the market in which case the breeder’s
exemption applies). Genebanks – such as national public genebanks and the
centres of the Consultative Group on International Agricultural Research
(CGIAR) – are also sources, but these are mainly used by universities, small
companies and national agricultural research systems in developing countries
(Fowler et al, 2001; sCBD, 2008). Most green biotechnology companies
mainly source their material from their own collections, followed by national
genebanks, ‘in trust’ collections maintained by CGIAR centres, and university
collections (ten Kate & Laird, 1999). They only rarely source from botanic
gardens. Many green biotech companies leverage investment in smaller companies
and track exploratory work done in universities and small companies. Green
biotech companies might enter into an in-licensing agreement with universities
or small companies. Conventional breeding companies and green biotech companies
source from both within and outside the EU. Green biotech companies source the
majority of genetic resources from outside the EU (Croplife, interview, 2012).

It is difficult to get a clear picture of
the exact significance of ex situ collections for pharmaceutical
companies. The value creation chain in the sector is complex and continuously
reshaped: many different steps need to be taken and many intermediaries are
involved. A pharmaceutical company might outsource several activities or buy
and/or sell certain intermediate products (IMAP, 2012). The following
information might give some indication as to where companies source their
genetic R&D material and the role of ex situ collections within the sector.
Aside from direct bioprospecting, pharmaceutical companies that intend to
develop drugs on the basis of natural products may source the required genetic
resources from: academic and government research institutes engaged in natural
products research; the collections of smaller discovery/biotech companies (such
as Pharmamar); culture collections (see above); or private suppliers of
chemical compounds whose libraries/collections may include natural products or
their derivatives and from in-house collections. As pharmaceutical companies
are global players they source from both EU and non-EU ex situ collections.

The horticultural industry predominantly relies on genetic
resources in ex situ collections, which represent the core of the industry.
Most genetic resources, therefore, are sourced from in-house collections,
commercial collections, national collections and botanic gardens (ten Kate,
1999).

The biocontrol sector almost always collects its genetic
material in situ. From time to time, however, material is sourced from ex situ
collections, such as microbial culture collections (FAO,
2009).

Next to bioprospecting, the industrial biotechnology sector
relies heavily on culture collections to obtain genetic resources. Most of the
cultures held in these collections predate the CBD (CABI, interview 2012).
Samples are also obtained by companies and organisations from intermediaries
including universities or from external collectors based in the country that
provides the resources. Companies also maintain their own collections of
genetic resources and their derivatives. For some of these, building and
improving their collections is their primary activity, in order to license
these to other users for research and product development (i.e. culture
collections). For others, their collections form the basis for in-house product development (ten Kate & Laird, 1999).

European animal breeders usually source their material from
within the company or from farmers, from both within and outside Europe. The majority of AnGR are kept in the form of live animals in situ (in their
production environments). Only a limited amount of AnGR is stored ex situ for
conservation purposes or for breeding activities such as artificial
insemination and embryo transfer breeding. Relatively
few AnGR are held in the public domain. Public ex situ collections and genebanks
mainly fulfill conservation purposes and are less involved in the exchange of
genetic material and its provision for breeding purposes (FAO, 2009; Schloen et
al, 2011).

EU ex situ collections are not only relevant with regard to the
provision of genetic resources to downstream users, but also for supplying
genetic resources to other ex situ collections around the world. For example,
it was estimated in 2003 that 58% of the plant material entering botanic
gardens in the EU every year comes from other gardens through international
exchange networks (Krebs et al, 2003). These benefit all members as they have
the primary aim of keeping the collections around the world alive (Van den Wollenberg et al, interview 2012.
The number of non-commercial transactions in plant material between botanic
gardens in the EU is estimated to fluctuate around two million per year (Van den Wollenberg et al, interview, 2012; see also Krebs et al,
2003). Transactions with botanic gardens outside the EU
are considerably lower but on the increase, with limitations imposed by legal
uncertainties and low scientific standards in some collections and countries (Van den Wollenberg et al, interview, 2012).
For culture collections the proportion of material coming from other service
collections is lower (20%); a further estimated 30% however is actively
deposited from research collections and individual scientists to maintain a
safe backup copy of important reference material (Stromberg et al, 2006).[28] The majority of
the latter transactions are carried out nationally. However, a substantial
number of depositors from India, the Philippines, China, Brazil, Columbia and Uruguay directly deposit strains from their countries in OECD collections,
including EU collections (FAO, 2009).

In summary, EU ex situ collections play a fundamental role in the
user chain acting as direct providers to both commercial and non-commercial
users. In fact, several commercial sectors including the horticultural and seed
industry source almost all their genetic resources from ex situ collections.
The role of private and in-house ex situ collections is also important in
various sectors including the horticulture and seed industry, where in-house
collections are integral to the plant breeding process. Non-commercial sectors
rely on ex situ collections even more strongly. This is particularly the case
for botanic gardens, which rely on genetic material from other botanic gardens
to keep their collections and conservation activities alive, but also for the
academic research sector, which often owns or is affiliated to particular ex
situ collections for the purposes of scientific research.

Existing approaches to ABS in each sector

Since the coming into force of the CBD in 1993 the general trend for
EU sectors with regard to ABS has been towards the development of codes of
conduct to ensure compliance with local ABS legislation, the formalization of
transactions in genetic resources through Material Transfer Agreements (MTAs)
and the improvement of documentation systems. Generally, sectors primarily
operating upstream in the EU such as culture collections and botanic gardens
have taken significant steps to bring their conduct into line with the ABS
requirements of the CBD. Despite the general willingness to comply with the CBD
by those sectors, however, the level of awareness of ABS legislation,
formalisation of transactions and documentation of collections is often
hampered by the lack of appropriate financial and human resources of the
individual collections. Codes of conduct and other voluntary measures have also
been developed by sectors primarily operating downstream. The level of
awareness and commitment to ABS-compliant practices is however variable across
those sectors.

As regards sectors primarily operating upstream, since the CBD, botanic
gardens and culture collections have taken substantial steps towards
the establishment of codes of conduct for bioprospecting and the formalization
of transactions through the use of formal networks and MTAs to ensure
compliance of users with local PIC and MAT requirements and ensure a climate of
confidence in provider countries with regard to their practices. However,
smaller gardens and collections lacking the necessary financial and human
resources still engage in a high number of informal transactions (i.e.
transactions of genetic material that are not subject to any written contract
or agreement) (van den Wollenberg et al,
interview, 2012; FAO, 2009; Stromberg et al, 2006). In 2005 it was found
that only 13% of culture collections had a written policy for complying with
the CBD and only 40% of the strains received were estimated to be accompanied
by a formal MTA (Stromberg et al, 2006). With regard to botanic gardens,
around 10 years since the development of the IPEN network only 130 out of 550
gardens in the EU are taking part in its code of conduct and formalised
transactions.[29]The aim of this network
is to facilitate the exchange of living plant material between members while
respecting the ABS requirements of the CBD.

Other significant codes of conduct developed by those sectors
include the OECD Guidelines for Biological Research Centres (BRCs), which apply
to a wide range of ex situ collections that intend to be part of the
Biological Resource Centre Network. Practices of disclosure of information on the country of origin, documentation and respect of MAT when
further transferring a certain material are requirements with which an ex
situ collection will have to comply in order to be accredited as a BRC.
Specific to culture collections is the MOSAICC code of conduct, which sets
minimum standards for bioprospecting, promotes the use of the World Data Centre
for Microorganisms tagging systems as a way to attach to new strains a global
unique identifier as tracking device and the use of standard contracts such as
the European Culture Collections Organisation core MTA for the further
distribution of microbial genetic resources to other users in the chain.

With regard to the state of documentation systems in ex situ collections,
in 2009 it was estimated that around 90% of all living plant collections of
botanic gardens around the world pre-dated the entry into force of the CBD (Wyse
Jackson, 2001). While it is common practice for botanic gardens to hold
information on the year of access and country of origin of plant material,
there is no consistent practice and much data has been lost through the
widespread informal transfers of plant material that have taken place both
before and after the CBD (van den Wollenberg et al, interview, 2012). For
culture collections, it is estimated that 50% of the strains held worldwide
were acquired before the CBD (FAO, 2009). In light of the well-developed
electronic documentation systems of culture collections it would not be
problematic to distinguish pre- and post-CBD material, although information on
the country of origin has started to be systematically documented by culture
collections only since the coming into force of the CBD (Fritze, 2010; Desmeth,
interview, 2012).

The approach to ABS of universities and research institutes
in the EU is generally characterised by informal transactions and relationships
based on mutual trust, except when collaborating with other entities with
well-established ABS practices (e.g. botanic gardens, culture collections, pharmaceutical
firms etc) (Desmeth, interview, 2012). Microbial research collections, for
example, are estimated to contain a much higher quantity of microbial strains
than culture collections, which is nevertheless often not thoroughly documented
and exchanged with other research institutes on an informal basis (FAO, 2009).[30] That said, sector
specific voluntary instruments have recently been developed, including the
“Guidelines on the Access to Genetic Resources and their Transfer” (2011)
developed by CIRAD, INRAD and IRND (three major French public research
institutes engaging with genetic resources) and the “Agreement on ABS for
Non-Commercial Research” (2012), a standard contract developed by the Swiss
Academy of Sciences to guide researchers in the negotiation of MAT.

As regards sectors primarily operating downstream, the approaches
towards ABS and the level of awareness of ABS rules are highly variable across
sectors.

In the pharmaceutical industry, the level of awareness and
compliance with ABS requirements is high only for large pharmaceutical and
pharmaceutical biotechnology companies that still substantially engage in
natural products research (e.g. Novartis, Merck & Co.) (EFPIA et al,
interview, 2012). For pharmaceutical companies in general, while the IFPMA (the
International Federation for Pharmaceutical Manufacturers and Associations) has
developed “Guidelines on Access to Genetic resources and Equitable Sharing of
Benefits Arising out of their Utilisation”, these are purely voluntary and were
mostly conceived to respond to external political pressures rather than a
reflection of common practice. The exercise of due diligence when sourcing
genetic resources from intermediaries, for example, is not covered by the
guidelines and is outside the practice of most pharmaceutical companies.
Exercising due diligence over the origin of genetic resources sourced from
intermediaries is considered impractical by most pharmaceutical companies due
to the complexity of the utilisation chain (EFPIA et al, interview,
2012). The “Guidelines for Bioprospecting for BIO Members” are relevant for
pharmaceutical biotechnology companies. Those guidelines are more far reaching
than the ones developed by the IFPMA, establishing best practices for
documentation and prohibiting the acquisition of genetic resources from
intermediaries when unable to provide evidence on PIC and MAT. Regarding the
general state of documentation systems in chemical libraries of pharmaceutical
companies, apart from the specialised internal collections of companies
systematically engaging in natural product research, it is estimated that the
origin of collected compounds is often not documented. (EFPIA et al,
interview, 2012).

In the plant breeding sector, while many exchanges between breeders,
scientists, private people take place informally because of the breeder’s
exemption, scientific and private exemptions under the CPVR and UPOV plant
variety protection systems, there is a general trend towards formalization of
transactions (MTAs) in transfers from genebanks and other ex situ collections
(Scholen et al, 2011). As far as PGRFA listed under Annex I of the
ITPGRFA are concerned, exchange of plant genetic resources within the plant
breeding sector (seed industries and research institutes) are carried out under
the standard Material Transfer Agreement (sMTA) established under the
multilateral system, covering around 440,000 transfers of genetic material per
year (ITPGRFA, 2012). The same sMTA is also used by several genebanks for
transfers of plant genetic resources falling outside the scope of Annex I.
SMTAs are used inter alia because standard contracts keep transaction
costs low compared to ad hoc bilateral agreements (Scholen et al,
2011). The ornamental sector, on the other hand, is considered to have low
levels of awareness concerning ABS requirements. This may be partially due to
the sector’s low overall reliance on wild genetic resources (Laird and Wynberg,
2012). As a result, no specific sectoral code of conduct with regard to ABS has
yet been developed, although there is ample evidence of ABS agreements being
concluded in provider countries in partnerships with botanic gardens and local
organisations.

For the biotechnology industry generally, the “Guidelines for
Bioprospecting for BIO Members” issued by BIO, the world’s largest
biotechnology association, is the most important code of conduct regarding ABS
(see above). For the green biotechnology sector, for example, it was maintained
that the exercise of due diligence to ensure that genetic material has been
properly sourced is a key practice of companies, which generally will only work
with material acquired through MTAs. Because of the remaining legal
uncertainties in the use of the IT-PGRFA sMTA, only 1 to 5% of PGRFA are
accessed under such standard contracts. (CropLife International, interview,
2012).

In the biocontrol sector, genetic resources are often
exchanged through free multilateral exchanges of biocontrol agents that take
place through informal networks of practitioners or the International
Organisation of Biological Control (FAO, 2009). The utilization of MTAs is
common as far as sourcing from culture collections is concerned. As regards
bioprospecting, no code of conduct has been developed but ABS agreements are
often concluded with local research institutes. Because of the low profit
margin of this sector, benefit sharing is generally non-monetary, taking the
form of capacity building, training and joint research projects (FAO, 2009).

The cosmetics industry, while increasingly developing
industry-wide as well as internal voluntary ABS due diligence systems, has
historically been characterized by a general lack of awareness regarding ABS
obligations (Laird and Wynberg, 2012). From 2007 onwards this sector has
started participating in several initiatives aimed at improving awareness and
compliance with ABS standards. This includes participation in the Union for Ethical Biotrade (2007), which provides for annual progress reports and external
audits on companies’ performance with regards to CBD objectives and the
National Resources Stewardship Council guidelines (2010).

Access to and exchanges of genetic material and benefit sharing in
the animal breeding industry are primarily regulated by private law
agreements and a common understanding among breeders/providers on the rights
over the material. As a result no ABS code of conduct has been developed by
this sector. In fact, AnGR are generally protected by physical ownership, i.e.
the owner of the farm animal determines to what extent and under which
conditions their germplasm may be made available to prospective users
(Kaal-Lansbergen and Hiemstra, 2003). Pig and poultry breeding companies, for
example, use contracts forbidding the buyer from selling breeding material from
the purchased animals or requiring the payment of a royalty on future profits
(Hiemstra et al., 2006; FAO, 2009).

In the cultivated
forestry sector existing approaches as regards ABS are not known. Such
approaches may exist in the forest research sector.

Conclusion

The above description
underlines that:

·
Genetic resources and issues relating to ABS
affect many activities and sectors of the EU economy - from botanic gardens,
culture collections and research collections, to biocontrol, seed banks,
agriculture/green biotech, to pharmaceuticals and industrial biotech, to
cosmetics, horticulture, and the food and beverage sector (see also sectoral
sheets in Annex 3).

·
There are common issues facing this wide range
of sectors. These include: compliance with legislation in countries of origin
related to the access to genetic resources and/or traditional knowledge
associated with genetic resources; the difficulty of tracing the country of
origin of genetic resources and conditions attached to their utilisation when
resources are accessed through intermediaries; the issue of development costs
and related issues of benefit sharing and good governance.

·
There is a diversity both across and within
sectors (e.g. across large and small players and across subsectors) of the role
and importance of genetic resources and traditional knowledge, used both for
commercial and non-commercial activities.

·
It is possible to differentiate between upstream
players/activities (botanical gardens, cultural collections and research
collections & private collectors) and downstream sectors/players
(biocontrol, seed banks, agriculture/green biotech, pharmaceuticals and
industrial biotech, cosmetics, horticulture, and the food and beverage sector)
as they face many common challenges as regards the Protocol and have some
common or at least inter-related activities.

·
Some sectors have undertaken activities related
to ABS issues of the Protocol – these are generally voluntary sector measures
(e.g. codes of conduct and some ad hoc ABS agreements) in response to
growing PIC/MAT requirements by providers in third countries.

·
There is a significant gap between current
practices and the requirements of the Nagoya Protocol.

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PUBLIC
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              Annex
9: Tracking and Monitoring Genetic Resources Flow

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Available at: www.cbd.int/doc/meetings/abs/abswg-07/information/abswg-07-inf-02-en.doc

Executive
Summary

Introduction

Technological innovations, in areas such as DNA sequencing and
information technology are characterized by exponential development rates and
lead to results that are typically unanticipated when first introduced. Three
examples demonstrate this clearly. In 1995 it took Fleischmann et al.
thirteen months to sequence the complete genome of the bacterium, Haemophilus.
influenzae at a cost of approximately fifty cents per base pair. Today a
bacterial genome can be sequenced in less than a day for pennies per base pair
and the possibility of sequencing a complete bacterial genome in a few hours
for under $1000 looms in the near future. In
1983 TCP/IP, the underlying protocol of the internet became operational
(Internet, 2009). As of June 30, 2008, 1.463 billion people use the Internet
according to Internet World Stats (2009) with the greatest growth in usage
between 2000-2008 occurring in Africa (1,031.2 %), Latin America/Caribbean
(669.3 %) and Asia (406.1 %). On August 6, 1991, the European Organization for
Nuclear Research (CERN) publicly announced the new World Wide Web project.
Eighteen years later the Indexed Web contains at least 25.9 billion pages
(worldwidewebsize, 2009). According to the UN (2007), 64% of all mobile phone
users can now be found in the developing world. With a compound annual growth
rate of 49.3% over the last seven years Africa has become a key market for
global telecom operators; and it is expected that this market will continue to
grow faster than any other region over the next three to five years (Bachelerle
et al, 2009) In parts of Africa, health teams are synchronizing their
mobile devices and collecting data from rural clinics to provide better health
care (Vital Wave, 2009). Clearly the digital divide that once existed is
closing rapidly and databases and other digital resources are accessible to
anyone anywhere today with an internet connection and a browser on a computer
or handheld device, which may be a cell phone.

It is in this environment of rapid technological innovations and
global information access in which the Convention on Biological Diversity (CBD)
must work to ensure the sustainable use of biodiversity as a
means to justify and underwrite its preservation. As part of this effort an
international regime (IR) on accessing genetic resources and sharing benefits
derived from their utilization (Article 15 of the CBD, Access and Benefit
Sharing, ABS) is currently being negotiated by the Conference of Parties (COP)
of the CBD. The purpose of this paper is to assist the COP in these
negotiations by providing a detailed examination of the following technical
issues:

(a) Recent developments in methods to identify
genetic resources directly based on DNA sequences;

(b) Identification of different possible ways of
tracking and monitoring genetic resources through the use of persistent global
unique identifiers (GUIDs), including the practicality, feasibility, costs and
benefits of the different options.

Genetic resources

Genetic resources are used worldwide by
many different industries, academic institutions and environmental
organizations to achieve various goals, ranging from developing new commercial
products and processes to exploring new research avenues for cataloging and
preserving biotic specimens arising from biodiversity inventories. In Article 2
of the CBD, genetic resources are defined as “genetic material of actual or
potential value” and are further defined as “any material of plant, animal,
microbial or other origin containing functional units of heredity.” The value
of these resources need not be exclusively genetic material. It may also be
derived information, such as functional or regulatory pathways, structural
polymers or biological functions of an organism that are encoded for by the
genetic material, including metabolic products that have some practical
applications (e.g., low molecular weight organic acids; anti-microbial
agents, such as antibiotics, and other biopharmaceuticals, flavors and
fragrances, enzymes for industrial applications).

Establishing provenance of genetic resources and
tracking their movements and defining the terms of use

Currently, the use of, and access to, specified genetic resources
are governed by contractual agreements between the providers and users of those
resources. For the purpose of this study it is assumed that such agreements are
in compliance with all the relevant existing legal and other instruments at
national, regional and international levels relating to ABS.[31] 
Contractual negotiations that follow the voluntary Bonn Guidelines result in a
set of accompanying documents that explicitly detail the terms of any agreement
including prior informed consent (PIC) and material transfer agreements (MTAs)
and possibly Mutually Agreed Terms (MATs) and Certificates of Origin (CoO).
Such documents by themselves do not provide a means by which a specified
genetic resource(s) can be singled out and tracked, but do establish an
important part of the baseline information that must be collected and made
accessible to various parties to the agreement. These agreements also establish
the conditions for access to both the resources and information over time and should
also specify what types of information are required to follow along with any
genetic resource and any real or abstract derived products, either for fixed
periods of time or in perpetuity. With this minimal information in hand, it
becomes possible to devise reasonable and extensible models to track each
genetic resource as it moves from its point of origin through one or more user
organizations for a variety of purposes.

It should be understood that a large-scale tracking system that
meets the needs of the IR does not yet exist. Smaller-scale implementations do,
however; and have features that are desirable in the anticipated tracking
system for genetic resources. These are discussed in detail in Part II:
Genetic Resources: Use of identifiers in tracking genetic resources. We
have drawn from prior experience with those smaller scale systems to gain
useful insights into the requirements of a robust, reliable and trustworthy tracking
system that could accommodate the needs of a diverse end-user community working
in pure and applied research, international trade, regulation and enforcement.
It is important to stress that development of a complete tracking system for
genetic resources must consider non-technical issues as well, including
realistic policies that address complex social, business, and scientific
requirements. This will ensure widespread acceptance and usage. It is not
uncommon for technically sound information systems to fail because user needs
were not met or the system rigidly modelled practices that became obsolete
because of changes in technologies external to the system, but critical to the
organizational goals, that were not anticipated or could not be incorporated
into the system. This is particularly true in the life sciences and is
discussed in Part III: Advances in genetic identification.

Redefinition of genetic resources and consequences
for tracking

Whereas whole organisms or parts of
organisms were once the subject of study and trade, contemporary biology has
expanded its focus to incorporate molecular and informatics methods (in
silico). These newer methods allow us to describe living systems not only
on the basis of readily observable traits, but also upon their genetic
potential based on a direct analysis of selected portions of the genome or the
entire genome. As a result, genetic resources are now being used in various
forms ranging from extracted DNA (including from mixed populations in
metagenomic studies) to various types of sequence data that are stored in
public and private databases. These derived genetic resources are readily
copied, mobile and readily accessible to a global audience and can be used for
a variety of purposes (e.g., expression in heterologous hosts,
engineered chimeric pathways, synthetic life forms) that may have not been intended
or anticipated in original agreements.

Therefore, it can be argued that rights and obligations under the IR
may extend to the exploitation of genetic resources, regardless of how those
resources are constituted. Although a discussion of the merits of such thinking
is beyond the scope of our charge, we believe it prudent to consider the
consequences. Under such an interpretation, a system for tracking genetic
resources would have to provide a means for providers to track the uses of the
data and information derived from their genetic resources. The task of tracking
successive uses of such information, although complex, is theoretically
feasible and would require the crafting of appropriate metadata, careful
utilization and implementation of a persistent identifier (PID) system and
development of custom tracking applications. However, it should also be
understood that such a system would have to accurately reflect our current and
future knowledge of biology. The vast majority of gene sequences is ubiquitous
in nature and oftentimes occurs in distribution patterns that do not
necessarily conform to national boundaries. It should also be understood that
current technology allows the rapid synthesis and evolution of genes and
pathways in vitro and in silico. Therefore, apparent misuse of a
resource by a user or third party may not be actual misuse. Rather, it may be
an instance of coincidental use of a like resource obtained independently. It
is with these points in mind, that we offer the Secretariat and the COP our
observations and recommendations on the agreed upon topics.

Single gene based identification methods

The
rapid development of molecular technologies that enables characterization of
organisms at a genetic level has opened new possibilities in species
identification. In 1977 Woese and Fox produced the first phylogenetic
classification of prokaryotes[32] based on the comparison
of the nucleotide sequence of the 16S rRNA gene. This gene is universally
distributed, highly conserved, evolves very slowly, and plays a key structural
role in the ribosome, which in turn is part of the cellular machinery involved
in protein synthesis. All life forms, as we know them, possess ribosomes, so
according to the early proposals of Pauling and Zukerkandel, the sequence of
this molecule could serve as a molecular chronometer, by which the evolution of
different species could be traced.

Woese's
work revealed that bacteria and archaea formed two deep and very distinct
evolutionary lineages. The third lineage, based on this model of evolution,
encompasses the eukaryotes (the plants and animals), which characteristically
posses a membrane enclosed nucleus and organalles (including the mitochondria
and chloroplasts). Eukaryotes possess ribosomes, which in turn contain an 18S rRNA.
The eukaryotic 18S rRNA gene shares many homologous regions with the
prokaryotic 16S rRNA gene. Thus,
it is possible to make meaningful comparisons of all species based on the
sequence of this gene. Since the sequence of the 16S rRNA gene is approximately
1540 nucleotides in length, there is sufficent information content to allow for
very far reaching comparisons.

Woese's
discovery has led to a radically different understanding of the evolutionary
history of all life, which is generally well accepted and has led to the
abandonment of alternative models of classification (e.g., Whittaker's five
kingdoms). 16S rRNA Sequence analysis has become the principal method by which
bacteria and archeae are now classified. In the past two decades, thousands of
new taxa have been described based on this method, along with numerous
taxonomic rearrangements. Concurrent improvements in sequenceing methodologies
of have greatly accelerated this process. Today, 16S rRNA sequence data is
routinely used to presumptively identify bacteria and archaea to the genus
level and to deduce community composition in environmental surveys and in
metagenomic analyses.  These efforts are well supported by publicly available
tools and highly curated data sets of aligned 16S rRNA (e.g., the Ribosomal II
Database, ARB/Sylva  project, GreenGenes).

But it is now well understood that a single gene
may not be adequate to yield an accurate identification to the species or
subspecies level and additional gene sequences along with other data may be
required. Confounding issues include non-uniform distribution of sequence
dissimilarity among different taxa and instances in which multiple copies of
the 16S rRNA gene may be present in the same organism that differ by more that
5% sequence dissimilarity. This can lead to different presumptive
identifications for the same individual, depending on which 16S rRNA gene is
analyzed. We also understand that numerous instances of misidentification and
taxonomic synonomies have accumulated prior to the widespread adoption of these
methods and that discrepancies between names and correct classification remain
to be resolve. In such instances, molecular evidence needs to be used to
support taxonomic revision rather than attempting to force-fit earlier concepts
into a classification based on reproducible molecular and genomic evidence.

These observations are relevant to the development
of a tracking system for genetic resources because taxonomic names are commonly
used in the scientific, technical and medical literature as well as in numerous
laws and regulations governing commerce, agriculture, public safety and public
health. But taxonomic names are not suitable for use as they are not unique,
not persistent and do not exist in a one-to-one relationship with the abstract
or concrete objects they identify.

Analogous developments are currently underway in
the fields of botany and zoology. Sequence based methods have been applied on a
limited basis to various species of eukaryotes for many years. However, it was
not until recently that the community began to accept the possibility that a
single gene could be used for identification of eukaryotes. This approach is
now being applied in a highly coordinated fashion to build useful resources to
identify plants, animals, fungi, protists and other distinct eukaryotic
lineages. Consensus is beginning to emerge on a small number of preferred
target genes, of which a partial sequence of the mitochondrial cytochrome c oxidase subunit I gene is preferred. This highly coordinated effort
is much more recent than the corresponding activities in microbiology, and
championed by the Consortium for the BarCode of Life (CBoL) program.

Whole genome sequencing and its
impact on tracking genetic resources

In Part III: Advances in genetic identification this paper
provides an in-depth review of next generation sequencing (NGS) technologies.
Because of the rapid pace at which these technologies are evolving this section
should be viewed as a set of “snapshots” of the current state of the art, and a
harbinger of the future of DNA based identification methods. We discuss methods
that are currently in use; those that have just recently become available on
the market, (near-future NGS methods); and those that are still under
development. These NGS sequencing technologies enable the rapid evaluation of specific regions of the genome of a biological entity to determine to
which genus, species, or strain it belongs. (e.g., the 16S rRNA gene for taxonomic purposes for bacteria;
the use of cytochrome c-oxidase subunit I (cox1) for eukaryotes).

Fuelled by innovations in
high-throughput DNA sequencing, high-performance computing and bioinformatics,
the rate of genomic discovery has grown exponentially. To date, there are more
than 500 complete genome sequences and more than 4000 ongoing genome and
metagenome sequencing projects covering species ranging from bacteria to yeast
to higher eukaryotes. The results that stream forth from these studies are
constantly refining and reshaping our understanding of biological systems. As
part of the funding requirement of various governmental and non-governmental
agencies, the vast majority of these sequences are made publicly available from
the INSDC databases (GenBank, DDBJ and EMBL) after brief embargo periods during
which time the funding recipients may publish their results. Typically, after
one year, the sequence data is open to anyone wanting to publish their own
findings or mine those data for other purposes.

All indications
are that future genome-based technologies will be “smaller, cheaper, faster”.
This will make genome-enabled detection tools available to a wide audience in
both developed and developing nations. Clearly, very low cost sequencing
technology along with sophisticated bioinformatics tools will soon be available
to presumptively identify a genetic resource, with a high degree of accuracy
and reliability, at the point of need.

Tracking genetic resources

The concept of identification is central to the goals of the CBD ABS
regime, which rests on the fundamental principle that a user is legally obliged
to share in the benefits obtained through the use of a particular genetic
resource with the provider. Identification is one of the first steps in
tracking an item over time. Under some circumstances, identification to the
family, genus or species level may be adequate and identification methods based
on a single gene may be appropriate (e.g., biotic inventories, wild-life
management, ecological studies). However, there is ample evidence based on over
half a century of natural product screening and supporting genomic data that
such approaches may be inadequate if the trait of interest occurs in
subpopulations within a species or is widely distributed across taxonomic
boundaries as a result of horizontal gene exchange.  A useful tracking system
must accurately reflect current knowledge and readily incorporate new knowledge
via continuous feedback over a long time frame as transactions involving
genetic resources may be long lived (>20 yrs).

The number of items to be identified
and tracked within the anticipated system is a challenge and the extent of the
task will depend largely on the legally required “granularity” of the
identification. Although there is a tendency to view this as a taxonomic
problem and the anticipated tracking system as a taxonomic resource, it is
decidedly distinct. What is required is a mechanism to track the fate of
multiple genetic resources as each is transferred from one party to another and
various abstract and concrete products are generated along the way. In some
cases the product may be useful for taxonomic purposes and in other cases
taxonomic information may be useful for predictive purposes, but in most cases
taxonomic information would be ancillary. Systems of such design are challenging
as they are open-ended and must work with data of varying granularity. The
point is not to define all the types of data a priori, but to define
lightweight metadata models that define genetic resources and allow them to be
permanently bound other to varying amounts and types of information that
accumulate about that genetic resource over time. Inherent in such designs are
links established through aggregates of foreign keys that may exist within a
single system or on a remote systems accessible via the internet.

Persistent identifiers

In their simplest form, persistent identifiers are nothing more than
unique labels that are assigned to objects in a one-to-one relationship. Such
identifiers are well understood in computing systems and we present examples of
identifiers as used in a large-scale laboratory information management system
(LIMS) in Part II: Genetic Resources: Use of identifiers in tracking genetic
resources. When used in the context of the internet, the concept of
persistent identification is frequently coupled with the concept of "actionability",
implying that the PID is persistently linked to a specific object and when
actuated, will always return the same response to the end-user (typically a
hyperlink to a specific web page or other form of digital content). In this
context PIDs differ from URLs, which are used to create hyperlinks and provide
the internet address of where a given object is stored. As the storage location
is not persistent, some "behind-the-scenes" mapping of object identifiers
to object locations is required (resolution). This topic is covered in more
detail in Part IV: Persistent identifiers.

Persistent identifiers are a powerful
enabling technology that
provides a way to efficiently cope with chronic problems such as broken links
and the general difficulty of reliable and reproducible information retrieval
on the Internet. For
example, PIDs associated with published articles allows rapid and accurate
tracking of written works.
 PIDs are also in use within the life sciences such as the INSDC identifiers (e.g.,
sequence accession numbers used at GenBank, EMBL, and DNA Database of Japan).
However, these are largely institution specific, i.e., used only within
the institutions for which they were created, or are controlled by those
organizations, such as the PubMed ID, issued by the National Library of
Medicine.

Six PID schemes currently used across different domains and by a
number of different organizations are reviewed and include: Uniform Resource
Name (URN); Persistent Uniform Resource Locator (PURL); Archival Resource Key
(ARK); Life Science Identifiers (LSID); Handle System (Handle); Digital Object
Identifier System (DOI). This review also addresses the questions that need to
be answered when an organization is assessing the need to incorporate a PID
scheme into its data management plan.

Each of these identifiers is used in well-defined settings in which
the data and metadata models of the underlying repositories were established a
priori. The identifiers serve as a means of directly accessing a specific
record or other form of digital content or the associated metadata. If the
identifier is actionable, then it is possible to retrieve the linked object
using the familiar interface of a web-browser. However, with the use of web
services that provide structured access to the content of interest
automatically (e.g. from a database or application on a handheld device
using embedded PIDs), similar results can be achieved where an interactive
interface is not suitable.

An effective and durable
PID scheme requires ongoing maintenance and therefore ongoing resources. While
some tasks can be automated, responsibility for this ongoing task must be
assigned to an agency, program or office or to a trusted third-party who can
guarantee reliability and virtually constant up-time to meet the needs of
various end-user communities. In the case of integrating a persistent
identifier scheme within the ABS process, the use of a trusted third party with
the appropriate expertise and resources is probably the best option, especially
if that third party is already engaged in such activity for other purposes.

The selection of an
appropriate PID for the CBD ABS and related activities will be critical for its
broad utility and community acceptance. However, it does not obviate the
importance of carefully defining precisely what the identifiers refer to, and
what will be returned by queries of various types. It is possible to develop a
range of PID services that could, for instance, provide a direct link to
digital and paper copies of entire documents, such as PICs, MTAs, CoOs and
other relevant agreements or permit tracking of genetic resources or parts of
genetic resources in a future proof method, or do so on-the-fly. It could also
be possible to track the transfer of materials and the corresponding agreements
to third parties in a manner that is consistent with the rights and obligations
of all parties to the initial agreement or to subsequent agreements. Similarly,
the ability to track these genetic resources into the STM, general interest and
patent literature is technically feasible.

Services such as these could be
facilitated through the use of a trusted third party acting as a clearinghouse for registering ABS-related events (e.g., PIC,
MTAs, CoO and other relevant agreements) according to a set of well-understood
business rules. With such a clearinghouse in place, it becomes possible to
traverse a series of transactions backward and forward in time, even in
instances where some ambiguity may exist. By drawing on highly interconnected
information, it is possible to follow events, and to accurately recreate those
events, when adequate documentation is available. Such a system would be useful
for monitoring the use of genetic resources, especially since there will be
instances in which long periods of time may exist between the time PICs, MTAs,
and CoO are executed and some commercial or non-commercial product results.
With the selection of the appropriate PID system a system
of this design could support human and machine queries and facilitates the
retrieval of all relevant documents from public and private databases,
including the STM literature, patent and regulatory databases. This is discussed in more depth in Part
IV: Persistent Identifiers: Discussion (CBD/ABS services)

Conclusion and Recommendations

Reduction to practice will require a
commitment of interested parties from different sectors (e.g.,
government, industries, botanical gardens, museums, academia, etc) to define
standards for the key documents that are instrumental to implementing the ABS.
Business rules and policies also need to be established in concrete terms so
that useful prototypes can be built and assumptions (technical, legal and
social) tested and refined.  In Part V:  Conclusions and Recommendations we offer the Secretariat and COP five broad
recommendations along with our reasoning. In summary, these are:

1.
Promptly establish
the minimum information that must be contained in all relevant documents that
are required for compliance with the IR (PIC, MTA, MAT, CoO). Stipulate which
documents are mandatory and which are optional.

2.
Adopt a
well-developed and widely used Persistent Identifier PID system (e.g.
DOI) that leverages an existing infrastructure and derives support from multiple
sources rather than developing a new system or adopting one that is untested in
commercial applications.

3.
Carefully consider
the current and future needs of genetic resource providers and users as the
concept of resource tracking is deliberated. Biological and functional
diversity of genetic resources are decidedly distinct. The system, including
its human resource component, must be able to accommodate both with priority
given to the latter as functional diversity is what leads to practical utility.

4.
Deploy light-weight
applications that use browser technology for interactive use and publish well
documented application program interfaces to support other web service. Develop
strong policies governing access and use of the resource to avoid data abuse

5.
Deploy one or
several prototype tracking systems to validate underlying concepts and refine
critical elements that will be needed in a fully operational system. During the
developmental phase address erroneous preconceptions and focus on making the
system as transparent as possible.

[1]               See Chapter 5 and the country case-studies on BE, BG,
DE, ES, FR, NL, PL, UK found in Annex 1 of the IEEP/ECOLOGIC/GHK final report.

[2]               Council Conclusions of December
2010, of June 2011, of June 2012,

[3]               For an overview see table XX in the main part of the study.

[4]               For details see expert study pp. XX

[5]               Regulations XXXX Brussels I and II Regulations

[6]               For example, if information about TKaGR is published
in a scientific journal that is read by a university-based researcher and inspires
this person to look into a specific direction in an ongoing research project.

[7]               CBD decision X/1 adopting the Nagoya Protocol decided
in paragraph 6 that the first review of the effectiveness of the Protocol under Article 31 of the Protocol shall assess the implementation of
Article 16 in light of developments in other relevant international
organizations, including, inter alia, the World Intellectual Property
Organization.

[8]               See the study contracted by DG AGRI "Independent
Expert Valuation of Council Regulation (EC) No. 870/2004 of 1 June 2012.

[9]               See, for instance, element 3.A. of the data standard
for barcode records (standard v.2.4 of 28 February 2012) used by the Global
Barcoding of Life consortium (http://www.barcodeoflife.org/).

[10]             See Li and Pritchard (2009) The
science and economics of ex situ plant conservation. Trends in Plant Science
14:614-621. The range reflects that different types of
plants require different storage techniques. Costs at the higher end of this
range seem, however, less likely for Option C-5 since the figures are based on
average maintenance costs of collections of different sizes, whereas it must be
assumed that reference collections identified by a Member State will be amongst
the larger collections in the field. Larger collections have significantly
lower costs per sample stored.

[11]             See for instance, the list of contributors to the
Global Crop Diversity Trust (<http://www.croptrust.org/content/donors>).

[12]             It must be noted that these
steps will not necessarily be taken for each sample of genetic material
collected in the wild. Not all collected material is stored in collections. In
a few cases material is collected by an agent of a company specifically
interested in a sample of a known organism. Also, most basic research will not
result in concrete applications. And much applied research ends unsuccessfully
without moving to the development of a product. Likewise, many development
efforts never make it to the product approval stage.

[13] All bibliographic references have been taken
from the contractors sectoral studies. Data collection methods for the sectoral studies
involved a review of published and ‘grey’ literature, a review of the replies
of stakeholders to the European Commission’s public consultation on the
implementation of the Nagoya Protocol and semi-structured interviews, phone
calls and e-mail correspondence with stakeholders from each of the sectors
(industry, government, NGOs and research institutions).

[14]Botanic gardens and culture collections (and other ex situ collections)
are very much linked because they are often hosted by the same institutions,
generally universities or public research institutes. In 2001, for example, 30%
of the world’s botanic gardens belonged to universities or higher education
research institutes (Wyse Jackson et al, 2001). As for culture
collections, 75% are estimated to belong to public sector entities (FAO, 2009).

[15]“Seed” refers to all planting material used in crop production,
including seed grains, cuttings, seedlings, and other plant propagation
materials.

[16]Plant genebanks provide safe storage to ensure that the varieties
and landraces of crops that underpin our food supply are secure and that they
are easily available for use by farmers, plant breeders and researchers. Though
genebanks are mainly used by universities, small companies and national
agricultural research systems in developing countries, they are also sources of
genetic material for plant breeding companies (Fowler et al, 2001; sCBD,
2008). Animal genebanks mainly fulfill conservation purposes and are less
involved in the exchange of genetic material and its provision for breeding
purposes (FAO, 2009; Schloen et al, 2011).

[17]Biotechnology companies are active across
the user chain in the pharmaceutical industry, but their primary area of
expertise is in the gene identification and target identification and
validation stages upstream of product development and commercialisation.

[18] For details
on numbers of botanic gardens worldwide and in the EU seehttp://www.bgci.org/garden\_search.php

[19]http://www.kew.org/collections/index.htm

[20] WFCC website (http://wdcm.nig.ac.jp/statistics.html#1)

[21] Note that figures/numbers and percentages in relation to EU markets
do not necessarily match the figures on global markets. For some sectors the
sources for global and EU figures differ (and hence the methods for generating
these figures), for others the reference years differ. Only for some sectors
have figures been found that entirely match. Also note that the percentages
usually refer to the EU’s share in the global market in terms of sales, but in
some cases might refer to other types of shares such as the share in global
number of patents or the share in global exports.

[22] Note that the IMAP report does not provide a figure for the size of
the EU market. It only provides a figure for the global market and the EU’s
global market share as a percentage. On the basis of these data, the size of
the EU market can be calculated (about $121 billion).

[23]The “global” market in casu refers to the whole of the
markets of the US, the EU27, Norway, Switzerland, Japan and China (Global Insight, 2007).

[24]Kew Annual
Report and Accounts 2010/11, Available at: http://www.kew.org/ucm/groups/public/documents/document/kppcont\_038136.pdf

[25]http://www.epo.org/about-us/statistics/patent-applications.html

[26]Ibid.

[27]http://www.mirri.org/background.html

[28]The number of deposits in 119 WFCC culture collections in 2005 was
approximately 10,000 overall.

[29]http://www.bgci.org/resources/ipen/

[30]http://www.mirri.org/background.html

[31] An in-depth overview of recent developments at national and
regional levels relating to ABS can be found in UNEP/CBD/WG-ABS/5/4 (Ad Hoc
Group ABS, 2007).

[32] The term prokaryote is a contentious but
commonly used name to group bacteria and archaea together based on their
absence of a nucleus; a feature found in all eukaryotes

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