World Environment Day: Fair and Equitable Sharing of Benefits under the Biological Diversity (Amendment) Bill, 2021

The Biological Diversity (Amendment) Bill, 2021 aims to change several aspects of the Biological Diversity Act, 2002, which was passed to implement the 1993 Convention on Biological Diversity (CBD), ratified by over 196 nations.

The Convention seeks to broadly ensure the sustainable use of biological resources, on which human beings are so dependent on. As a result, it is critical for everyone to have access to such natural resources. A popular term for this notion, Access and Benefit Sharing (ABS) encourages the fair and equitable sharing of biological resources - particularly genetic resources - between innovators, users and creators, conservators and providers, allowing for innovation and biodiversity conservation incentives.

ABS is clearly addressed in the Biodiversity Convention's regulations, and as India is a signatory, it follows the concepts and foundations of ABS. It also commits towards ensuring fair and equitable sharing of benefits (or FEBS) arising from the exploitation of such resources of indigenous communities. The strategic practice of FEBS was further formalized in the year 2010 through the Nagoya Protocol, which contained the legal mandate (pursuant to Article 15 of CBD) to the ratifying countries to amend their domestic laws and inculcate the practice of FEBS in accordance with a uniform framework.

India has been at the helm of the development of biodiversity laws during the two decades, culminating into the Nagoya Protocol and the period marking United Nations’ Decade on Biodiversity. We were one of the earliest countries to promulgate comprehensive legislation on regulating access to biodiversity in the year 2002. We effectively negotiated the development of the Kyoto Protocol, and were the first country in the year 2015 post enforcement of the Protocol to issue an Internationally Recognized Certificate of Compliance (IRCC) permitting access to our biological resources pursuant to Article 17 of the Protocol.

As our Parliament deliberates on the Biodiversity (Amendment) Bill, 2021, it is critical for us to determine whether the Bill is setting an appropriate precedent. Our history of diligent compliance with biodiversity laws has propelled us to a crucial position in the International community, where our legislative developments are meticulously observed.

The Biodiversity Act of 2002 (the Principal Act), the Regulations of 2004 and the Access to Benefit Sharing Regulations of 2014 make up the present regulatory system controlling access to biological resources. The 2021 Bill proposes to change the Principal Act through 43 sections: the details of the relevant clauses, as well as their impact on biodiversity and FEBS, are discussed below.

Under the present regime, the National Biodiversity Authority (NBA) can consider fair benefit sharing while providing clearance for an Intellectual Property Rights (IPR) application or a transfer of biological resources or knowledge by using any of the following measures:

- granting the NBA or the benefit claimants joint ownership of IPR, technology transfer, locating production or research and development facilities;

- improving living conditions for the benefit claimants, associating Indian scientists, benefit claimants, and local residents for biodiversity research and development;

- establishing a venture capital fund to help, guide and compensate the benefit claimers;

- awarding monetary compensation and other non-monetary benefits to the benefit claimants.

The Principal Act stipulates a differential treatment for foreign citizens, NRIs, and other entities (companies/associations/organizations, etc) incorporated or registered outside India or with participation of a foreign citizen in its shareholding or management as one class enunciated under Section 3(2) of the Principal Act, and Indian citizens or companies incorporated in India as another class enunciated under Section 7 of the Act. The Principal Act guarantees this differentiated treatment by requiring Section 3(2) companies to comply with the Act's numerous requirements in a more stringent manner.

The Bill proposes to change the definition of "body corporate/associations/organizations" under Section 3(2)(c)(ii) by reducing them to entities that are registered or incorporated in India and are a 'foreign controlled corporation'. A 'foreign controlled firm,' according to the explanation to revised Section 3(2)(c)(ii), is a 'foreign company,' as defined by Section 2(42) of the Companies Act, 2013.

The uncertainty that has arisen as a result of this modification concerns the definition of a "foreign company" under the Companies Act, 2013, which requires such a firm to be formed outside of India. The Bill fails to clarify how a business formed in India (rather than elsewhere) might qualify as a "foreign company" under the Companies Act in order to be classified as a "foreign controlled company" for the purposes of Section 3(2)(c) (ii). Furthermore, for the purposes of its applicability, Section 3(2)(c)(ii) defines other organizational forms other than a corporation, which may include NGOs or other associations that are not companies.

The scope of the above-mentioned sub-section has been restricted by Clause 5 changes, which require 'an organization/association' to be a foreign controlled 'business' in order to be subject to the provision. The Principal Act's Section 3(2)(c)(ii) has the main consequence of ensuring tougher compliance by multinational companies (MNCs) when accessing biological resources, whether for research, IPR, registration or commercialization. However, in light of these difficulties, identifying businesses that may require compliance will be challenging. The Bill's stated objectives include encouraging more foreign investment. Therefore, it is likely that the legislature will give clarifications on these uncertainties shortly.

Nonetheless, a more pressing concern at this point is whether our national laws may mandate such unequal compliance for national and foreign organizations seeking access to our biological resources, especially when such compliance is required to secure FEBS?

The Principal Act requires Section 7 entities to notify the State Biodiversity Authority (SBA) whenever they exploit biological resources for commercial purposes. The SBA is empowered to approve such use, while Regulations 2 and 3 of the ABS Regulations, 2014, read with Rule 14 of the Biological Diversity Rules, 2004, imposes FEBS obligations. The Amendment Bill clarified that the word "intimation" in Section 7 shall mean "subject to the approval of SBA" under Sections 24 and 23 as understood above. The Amendment also sanctioned explicit powers for the SBA to impose FEBS obligations while granting such approvals via Section 23. This is a positive change effected by the Bill, since it clarifies the requirement for section 7 companies to obtain clearance. The Bill, however, has limited the extent of the SBA's jurisdiction over such companies to solely commercial usage, and has removed the requirement to obtain clearance in situations of bio-survey or bio utilization, which was present in the Principal Act.

The NBA is empowered by the Principal Act to impose FEBS obligations on any person (including Section 7 entities) when granting approvals to such entities under Section 6(2) for obtaining IPR based on biological resource research. Now, Section 7 entities will no longer be required to register with the NBA prior to the grant of IPR, and will only be required to seek 'permission' from the NBA at the time of commercial use of such IPR.

While the Bill does not expressly state that 'registration' with NBA will be deemed to be 'subject to approval' by NBA (as it is in the case of approval under section 7), NBA will not intervene when granting IPRs to any Section 7 entity, as it does under the Principal Act, Regulation 8 of the ABS Regulations, and Rule 18. A benefit sharing agreement, which is now formed with an IPR holder at the time of approval prior to the grant of IPR, will now be postponed until the stage where a commercial usage is done.

The Uttarakhand State Bank Board (SBB) had imposed a monetary amount towards FEBS on Divya Pharmacy for its use of local biological resources. Divya Pharmacy is part of the Divya Yog Mandir group, which includes Patanjali Ayurveda. The company uses biological resources to manufacture and sell Ayurvedic and nutraceutical products. The company filed a case against the decision, arguing that Indian entities such as itself were not required to pay FEBS. The Divya Pharmacy judgment of 2018 categorically stated that communities that grow biological resources or have important traditional knowledge of these resources are "beneficiaries under the Act". Certain benefits fall to these communities in return for them parting with their traditional resources, and these benefits are "over and above the market price of the biological resources", the Court ruled.

The ruling notes the struggle of indigenous populations to maintain and safeguard the biodiversity of the lands and waterscapes they call home, particularly in developing nations. Furthermore, international legislation, dating back to the Stockholm Declaration of 1972, the Convention on Biological Diversity of 1993, and the Nagoya Protocol of 2014, recognize and advance this movement through FEBS principles. Importantly, the Court determined that, because international law on biological diversity made no distinction between "domestic" and "foreign" organizations when it came to FEBS, there was no need to do so when reading the Act of 2002.

Conversely, the Bill explicitly states that FEBS is only required at the commercialization stage. This looks to be a handy, but needless step. As explained in the annex to the Nagoya Protocol, monetary and non-monetary benefits may arise from the use of biological resources, with non-monetary benefits including exchanging research and development results, education and training, and so on, which may be shared with indigenous and local communities even before they are used. Section 21 of the Principal Act also allows the NBA to give comparable advantages. Where such non-monetary advantages are granted at a previous stage, such as during research or patent application, provisions must be made.

The Bill has not stipulated any specific penalty for violations of FEBS obligations by the users of biological resources. The Amendment Bill lacks specific measures to protect, conserve, or strengthen local communities' stake in biodiversity conservation and sustainable use. Out of various provisions, the ones dealing with FEBS under the new Bill require a closer scrutiny and revisiting.

At a time when we are celebrating Stockholm+50, the Bill must speak of visionary leadership and sustainability.

-Tarun Tripathi, Student, BBA.LL.B (Hons), Fourth Year, CHRIST (Deemed to be University) Delhi NCR

-Nabeela Siddiqui, Assistant Professor & Research Scholar, CHRIST (Deemed to be University) Delhi NCR