Distr.

GENERAL

UNEP/CBD/COP/4/22

9 February 1998

ORIGINAL: ENGLISH

CONFERENCE OF THE PARTIES TO THE

CONVENTION ON BIOLOGICAL DIVERSITY

Fourth meeting

Bratislava, 4-15 May 1998 Item 16.2 of the provisional agenda

ADDRESSING THE FAIR AND EQUITABLE SHARING OF THE BENEFITS ARISING OUT OF GENETIC RESOURCES: OPTIONS FOR ASSISTANCE TO DEVELOPING COUNTRY PARTIES

TO THE CONVENTION ON BIOLOGICAL DIVERSITY

Note by the Executive Secretary

I.INTRODUCTION

A. Background and mandate of the note

In paragraph 7 of decision III/5, "Additional guidance to the financial mechanism", the Conference of the Parties requested "the Secretariat of the Convention and the Global Environment Facility to collaborate in preparing, for consideration by the Conference of the Parties at its fourth meeting, a proposal on the means to address the fair and equitable sharing of the benefits arising out of genetic resources including assistance to developing country Parties".

The present note has been prepared in response to that request and is the result of a collaborative effort by the secretariats of the Convention and of the Global Environment Facility (GEF). The objective of the note is to assist the Conference of the Parties in its consideration of steps that Parties could undertake to address the third objective of the Convention -the fair and equitable sharing of the benefits arising out of genetic resources.

B. The concept of benefit-sharing in the Convention

Article 1 of the Convention states that the objectives of the Convention are "the conservation of biological diversity, the sustainable use of its components and the fair and equitable sharing of the benefits arising out of the utilization of genetic resources, including by appropriate access to genetic resources and by appropriate transfer of relevant technologies, taking into account all rights over those resources and to technologies, and by appropriate funding".

The Convention can be broadly interpreted as an instrument to promote the equitable exchange, on mutually agreed terms, of genetic resources and associated knowledge, innovations and practices, in return for appropriate sharing of benefits. Provisions of the Convention that assist a Party in promoting the sharing of the benefits arising out of genetic resources include Article 15, paragraph 5 (concerning access and prior informed consent), Article 15, paragraph 4 (concerning access on mutually agreed terms) and Article 8(j) (concerning the sharing of benefits arising out of the use of knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles).

These provisions are also linked to the provisions on access to, and transfer of technology (Article 16), exchange of information (Article 17), technical and scientific cooperation (Article 18), the handling of biotechnology and distribution of its benefits (Article 19, paragraphs 1 and 2), and financial resources and financial mechanism (Articles 20 and 21).

The issue of benefit-sharing has also been addressed, directly or indirectly, by several decisions of the Conference of the Parties, including decisions III/5, III/14, III/15, III/16, III/17, III/22 . Under item 16 of the agenda, "Matters related to benefit-sharing", this meeting of the Conference of the Parties will address benefit sharing under three sub-items: 16.1, "Measures to promote and advance the distribution of benefits from biotechnology in accordance with Article 19 ('Handling of Biotechnology and Distribution of its Benefits')"; 16.2 "Means to address the fair and equitable sharing of benefits arising out of genetic resources"; and 16.3, "Compilation of views of the Parties on possible options for developing national legislative, administrative or policy measures, as appropriate, to implement Article 15 ('Access to Genetic Resources')". This paper addresses sub-item 16.2. In accordance with decisions of the third meeting of the Conference of the Parties, the Executive Secretary requested submission of case-studies on benefit-sharing, including studies related to genetic resources and the associated knowledge, innovations and practices of local and indigenous communities. A synthesis of the findings of case-studies received is contained in document UNEP/CBD/COP/4/Inf.7.

C. Assistance to developing country Parties

Many organizations assist developing countries in meeting the objectives of the Convention related to conservation, sustainable use, and benefit-sharing. These organizations include bilateral and multilateral development agencies, foundations, and non-governmental organizations.

The Conference of the Parties designated the Global Environment Facility (GEF) to serve as the institutional structure to operate the financial mechanism of the Convention on an interim basis (Article 39 and decisions I/2 and II/6). GEF is a mechanism for international cooperation for the purpose of providing new and additional grant and concessional funding to meet the agreed incremental costs of measures to achieve agreed global environmental benefits in its four focal areas, one of which is biological diversity. Article 21 of the Convention provides that the Conference of the Parties is to determine the policy, strategy, programme priorities and eligibility criteria related to the access to, and utilization of, the resources of the financial mechanism. To date, the Conference of the Parties has not approved specific guidance to the GEF concerning benefit-sharing.

Benefit-sharing in a broad sense is already becoming standard practice in many biodiversity-related activities. Stakeholder involvement, participation and sharing in the project's benefits are increasingly perceived as essential ingredients of technical, social and financial sustainability, and therefore indispensable conditions for a project's success.

D. Scope of the paper

The three objectives of the Convention on Biological Diversity are closely inter-related. No biological resources will be available for sustainable use unless they are properly conserved; on the other hand, there will be few incentives for conservation and sustainable use, unless biological resources generate benefits for, inter alia, local stakeholders and the country of origin, who are the principal custodians of biological diversity.

This first, joint exploration of the issue of benefit-sharing by the secretariats of the Convention and of the Global Environment Facility takes as its mandate the language of the Convention itself. The present document will confine itself to an examination of the sharing of the benefits arising out of utilization of genetic resources, and of knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and sustainable use of biological diversity, as defined in the Convention.

E. Broader context

As discussed below, fair and equitable sharing of the benefits of genetic resources requires legislative, administrative and capacity-building measures in the countries of origin of these resources. However, there are broader dimensions to the problem, including legislation in user countries on exchanges of genetic resources, and international intellectual property rights regimes, related to trade in genetic material. Initiatives to be taken by non-recipient countries, as well as issues related to international negotiations (e.g. Farmers' Rights in the negotiations on the International Undertaking on Plant Genetic Resources) fall outside the scope of this paper, and will be addressed only in the context of possible synergies with country-driven initiatives undertaken by developing country Parties to the Convention on Biological Diversity.

II. DEFINITIONS AND SCOPE

A. Genetic resources

Article 2 of the Convention defines genetic resources as "genetic material of actual or potential value" and genetic material as "any material of plant, animal, microbial, or other origin containing functional units of heredity". The scope of the access and benefit-sharing provisions of the Convention are limited to those genetic resources provided by Contracting Parties that are countries of origin of such resources, or Parties that have acquired genetic resources in accordance with the Convention, as set out in Article 15, paragraph 3, and the relevant definitions in Article 2 .

B. Benefit-sharing

The Convention mentions the sharing of benefits in several articles, but does not define "benefit", "sharing", or the "sharing of benefits". Consequently, the meaning of benefit-sharing is open to interpretation within the letter and spirit of the Convention as a whole. Any interpretation of benefit-sharing needs to address the nature of "benefits", how the obligation to share benefits arises, with whom benefits should be shared (who are the beneficiaries?), how to quantify and allocate benefits between beneficiaries, measures to promote the sharing of benefits, and the mechanisms by which benefits can be delivered to beneficiaries. These issues are reviewed below.

C. Benefits

Benefits can be either monetary or non-monetary in nature. Monetary benefits include collection fees, royalties and research grants. Non-monetary benefits can be environmental, social or economic in nature. They include benefits-in-kind, such as technology transfer of hardware, software and know-how, training, joint research, capacity- and institution building, and creation of employment opportunities. What constitutes a "benefit" that can be shared is limited only by the imagination and ingenuity of the partners involved.

D. The trigger for benefit-sharing: prior informed consent

According to the Convention, access to genetic resources requires the prior informed consent of the Contracting Party providing the resources (Article 15, paragraph 5), unless otherwise determined by that Party. Application of the knowledge, innovations and practices of indigenous and local communities should be with the approval and involvement of the holders of such knowledge (Article 8(j)). Prior informed consent is thus the trigger for benefit-sharing.

The requirement to obtain prior informed consent provides an opportunity for those whose consent is sought to reach "mutually agreed terms" (Article 15, paragraph 4) with those seeking access, and to stipulate the exact nature of the benefits to be shared. Various measures for reaching and recording such agreement on the sharing of benefits include access legislation, partnerships and contracts, which are described in chapter III below.

E. Beneficiaries

The Convention makes access conditional on prior informed consent by Contracting Parties. However, access legislation in different countries should take into account the interest of different stakeholders, including local communities, indigenous groups, protected-area management boards, and owners, holders and administrators of land. In some national measures, benefit-sharing with such groups is explicitly required .

Other stakeholders whose involvement or prior informed consent may be required in national measures include departments of environment, development, science and technology, trade and industry, health education and tourism in central or state Governments, regional and local offices of Government, protected-area management boards, municipalities, ex situ collections, universities and research centres, and non-governmental and intergovernmental organizations.

F. "Fair and equitable" benefit-sharing

Several sources are likely to be involved in a determination of fairness and equity. These range from national authorities that regulate access, grant prior informed consent and negotiate mutually agreed terms with applicants for access and agreements reached between parties to specific arrangements, to courts and tribunals charged with deciding disputes concerning breaches of access legislation or contracts.

Any assessment of fairness and equity involves tackling issues of quantification and valuation of

(a)	The benefits that arise from using genetic resources and knowledge;

(b)	The contributions from different stakeholders to the creation of these benefits;

(c)	The benefits provided in exchange for access to, and use of, genetic resources; and

(d)	The allocation of benefits between different beneficiaries.

"Best practice", in terms of normal market transactions, may offer a useful benchmark.

The allocation of benefits arising from the utilization of genetic resources should fairly reflect the contribution of the different stakeholders in making genetic resources available (through conserving, allowing access to, providing information on, collecting, and conducting research on such resources).

A number of conditions can contribute to the fair and equitable sharing of benefits from genetic resources. One is a conducive policy setting, where measures such as access legislation, incentives, partnerships and contracts are encouraged, monitored and enforced. Another is adequate capacity to negotiate on the part of provider country authorities, local and indigenous communities and other stakeholders. To counteract inequality in bargaining power, such groups may need training in negotiation skills and law; an understanding of the markets for genetic resources, the economics of product development, the risks and time-frames involved; and knowledge of best practice in partnerships.

G. Mechanisms for sharing benefits

Institutional frameworks can help ensure that benefits are delivered to the appropriate beneficiaries. These include partnerships between institutions that allow technologies to be transferred between them, trust funds that can receive and distribute financial benefits, non-governmental organizations or citizen groups that enable a community to make joint decisions and enter into legally binding agreements, and networks, journals and Internet facilities that enable information to be shared.

III. MEASURES FOR BENEFIT SHARING

According to Article 15, paragraph 7 of the Convention, Contracting Parties are to "take legislative, administrative or policy measures... with the aim of sharing 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 Contracting Party providing such resources". This provision leaves the field open for the Parties to design measures of their choosing to facilitate benefit-sharing. In practice, the measures most commonly adopted are access legislation, incentive measures, partnerships and contracts.

A.	Access legislation

National measures on access to genetic resources, in forms such as laws, executive orders and regional regulations, have already been adopted in some countries, for example, the Philippines and countries participating in the Andean Pact. Most access legislation contains definitions of such terms as "genetic resources" or "prior informed consent", sets out the scope of their application, and designates appropriate authorities empowered to take decisions on access applications. Access-legislation provisions generally contain both procedural and substantive elements. The procedural elements typically set out the steps that must be followed by an individual or institution applying for permission to prospect for genetic resources. The substantive elements often set certain conditions that an applicant must fulfil in order to gain access to genetic resources, such as protecting biodiversity during the access activities, and providing certain benefits in exchange for permission to collect.

To date, national measures on access have commonly required the following "benefits" to be shared in exchange for access: participation of nationals in research; sharing of research results, including discoveries; deposit of voucher specimens in national institutions and access by nationals to specimens lodged in international collections; support for research in conservation; technology transfer, such as the donation of equipment and technologies derived from endemic species; capacity building of institutions and indigenous and local communities; and fees, royalties and other financial benefits.

B. Incentive measures

Incentives are inducements for companies, communities and individuals to undertake certain activities in their own interest. Incentive measures are designed to encourage stakeholders to engage in benefit-sharing activities on their own initiative (as opposed to complying with an external norm or law).

Incentive measures to promote benefit-sharing include taxes raised on the sale of goods derived from genetic resources and used to support benefit-sharing activities, tradeable bio-prospecting permits, and demarcation of property rights. Some incentive measures are intended to promote benefit-sharing by influencing the supply of genetic resources. These include export permits, and tax and investment policies to encourage the transfer of technology and capacity-building.

Both legislative and non-compulsory incentive measures have also been proposed in countries that are users of genetic resources. Such measures include import requirements; procedural and/or substantive changes in intellectual property law requiring disclosure of the country of origin and/or proof of prior informed consent; tax policies to encourage technology transfer and joint research; provision of financial resources (for example to trust funds); and concessional loans to support activities that facilitate the sharing of benefits.

C. Contracts

While several developing countries are now introducing access legislation, most have not yet enacted such legislation. In the absence of access legislation, contracts between providers and users of genetic resources can introduce and clarify benefit-sharing obligations. Even in those countries where access and benefit-sharing measures are in place, these measures often require individual arrangements to be captured in a contract . Material-transfer agreements frequently clarify royalty sharing arrangements between the various parties, and can be a tool for allocating benefits among beneficiaries.

Contracts are the most common way of recording "mutually agreed terms". Historically, before the advent of either the Convention or access legislation covering benefit-sharing, collecting permits, memoranda of understanding between institutions exchanging genetic resources and expertise, material transfer agreements, and partnership agreements were the standard means for setting out benefit-sharing obligations.

D. Partnerships

It is rare for a single individual or institution to possess both the authority and the technological, human, institutional and financial resources necessary to conduct all the activities involved in accessing and utilizing genetic resources. More often, a network of different institutions is involved, performing a range of functions such as collecting genetic resources or traditional knowledge, granting access on certain terms, conducting various kinds of research, and possibly developing and marketing commercial products derived from the resources. The different institutions involved in these activities may enter into partnerships, in which genetic resources, traditional knowledge or their derivatives are exchanged for other benefits.

The rights and responsibilities of the individuals and institutions involved in a partnership are usually clarified in a contract or partnership agreement. Complementary arrangements can take many forms including small-scale loans to finance community entrepreneurs, memoranda of understanding for cooperation between two scientific research institutes, and agreements between governments and companies specifying the terms of access to genetic resources for screening.

IV. FACILITATING BENEFIT SHARING: OPTIONS FOR ASSISTANCE

TO DEVELOPING COUNTRIES

It can be seen from chapter III above that there is a range of measures that developing country Parties to the Convention may take in order to promote the sharing of benefits arising out of the use of genetic resources. In discussing options for assistance to these Parties, there are two issues that have to be considered. The first concerns broad strategic aspects. The second concerns possible options for Parties to consider when seeking assistance. These two issues are discussed below.

A. Strategic considerations

1. Complementarity of objectives

In order to meet the Convention"s fundamental objectives, assistance should be targeted to activities that promote benefit sharing, and at the same time support conservation and/or sustainable use of biological diversity.

2. Process orientation

Chapter III above has highlighted a set of key activities that may promote fair and equitable benefit-sharing. Such activities include the establishment of access legislation, the identification of incentive measures, the formation of partnerships and the negotiation of contracts. A common element of all these activities is the importance of the "process" dimension. Processes of dialogue and consultations among domestic stakeholders are key consensus-building tools for the development of a country's approach to benefit-sharing, and for determining the appropriate mix of access and incentive measures. Another important set of processes include those required for conducting negotiations and reaching agreements for partnerships and contracts, both within recipient countries and with partners outside the country.

Benefit-sharing can be promoted by facilitating those country-driven processes. Resources employed in supporting dialogue, consultations and capacity-building for benefit-sharing, can help in "levelling the playing field" for the various stakeholders, thereby contributing to fairness and equity.

3. Enabling partnerships

In several of the cases illustrated in chapter III, promoting benefit-sharing is tantamount to facilitating cooperation among parties interested in transactions involving the exchange of genetic resources on a sustainable basis. A dimension of the facilitating role of assistance to developing country is to help create conditions conducive to "fair and equitable" negotiations among prospective partners (as defined in chapter II above). Strengthening the capacity of stakeholders likely to be involved in access-related activities, through improvement of legal and technical knowledge, is an example of an intervention that would help level the playing field.

4. Removing obstacles

In some cases, there may be opportunities for mutually advantageous exchanges of genetic resources between parties in developing and developed countries. These opportunities may go unseized if the former are at a disadvantage vis-à-vis the latter (and hence unwilling to negotiate with them), because of limited access to information, technical or managerial resources. These limitations may effectively act as an obstacle to benefit-sharing.

In the process of developing a strategic approach to benefit-sharing, countries may realize that they do in fact face barriers to "fair and equitable" negotiations and agreement. In these cases, assistance to developing countries would catalyse financially sustainable solutions, through removing obstacles to exchanges of genetic resources that would otherwise be in the economic interest of domestic stakeholders to undertake.

B. Options for assistance

In order to ensure programmatic, long-lasting benefits, as well as efficient use of resources, developing countries Parties may want to integrate benefit-sharing activities in existing or planned national biodiversity strategies or national environmental action plans. Because of the different steps that may need to be followed for that purpose, developing countries are likely to sequence their efforts. The different steps may be clustered into:

(a)	Stock-taking exercises;

(b)	Development of strategies and plans for their implementation; and

(c)	Implementation of specific initiatives.

Assistance to developing country Parties may be provided at each stage of this sequence, as discussed below. The order of presentation of the different activities is not mandatory; rather, it tries to encompass the various needs that developing countries may have in a logical path leading from planning to implementation of benefit-sharing.

1. Stock-taking activities

Stock-taking activities may consist of assessments of the current legislative and regulatory frameworks on access to genetic resources, evaluations of strengths and weaknesses of the country's institutional and human capacity, and consensus-building among the country's different stakeholders. Some stock-taking activities may be conducted with a regional focus in instances where the sharing of experiences of neighbouring countries may result in the harmonization of existing or planned access-legislation.

Stock-taking activities, which may be carried out through workshops, assistance provided by consultants to national experts preparing reports, public consultations, or others initiatives, would also help those countries laying out options for further benefit-sharing activities, such as access legislation, incentive measures or project level-initiatives (see below). Consultations undertaken in the context of stock-taking activities may also help identify which groups among the different stakeholders (local and indigenous communities, academic and research centres, private sector, public agencies) are likely to play a major role in the development and implementation of the country's approach to benefit-sharing.

In some cases, stock-taking may require addressing, through country-driven, targeted research, such issues as: identification of stakeholders, and potential partnership participants; financial sustainability (revolving funds, cost-sharing and other options); issues of traditional knowledge and intellectual property rights; and assessment of overseas markets.

2. Access legislation and incentive measures

Through stock-taking activities, some countries may identify framework arrangements for the sharing of benefits arising out of genetic resources as being a national priority. These arrangements may include the introduction of access legislation, modifications to the existing biodiversity strategy to include benefit sharing provisions, or the design of incentive measures that would facilitate the formation of partnerships or the negotiations of contracts.

In such cases, assistance would be provided to help developing countries undertaking activities required for the identification, design and implementation of access legislation (including the necessary regulatory system) and incentive measures. Broad principles guiding assistance would be the flexibility to respond to different national situations, and to an evolving situation over time. Where appropriate, the formulation of regionally harmonized access legislation would be encouraged.

3. Specific initiatives

In parallel with the processes of stock-taking and the enactment of access legislation or the design of incentive measures, those countries that have identified benefit-sharing as a national priority may be assisted in the implementation of specific project initiatives.

In conformity with some of the strategic considerations discussed earlier, a reasonable principle for support to specific initiatives would be to stress "processes", i.e., the creation of national conditions conducive to fair and equitable sharing of benefits arising out of genetic resources. Some key measures that are likely to contribute to these processes include: capacity-building, entrepreneurial development, facilitation of financial sustainability (e.g., revolving funds, cost-sharing), institution building or strengthening, and targeted research.

(a)	Capacity-building

An area of particular relevance is capacity-building. In some cases, there may be specialized skills which need to be developed in-country, such as those required by taxonomists or other scientists. These may include basic technological skills (for example, extraction, chemical analysis, purification).

(b)	Entrepreneurial development

Significant capacity-building efforts could be directed at "levelling the playing field" among key stakeholders involved in the process of defining how to share benefits from genetic resources. For example, appropriate technical training could strengthen or enhance legal, administrative, and negotiating skills, which could help forge partnerships for research and commercial-use purposes. Local communities who are keepers of the genetic resources or have specific knowledge concerning their use, may be the primary beneficiaries. Emphasis may be given to the development of entrepreneurial strategies (community-based, market-based) and specialized skills (financial, legal, administrative) that improve business acumen. Attention could also be paid to project-design arrangements that ensure financial sustainability, such as revolving funds or cost-sharing schemes.

(c)	Institutional capacity

Sustaining benefit-sharing over time is likely to require mechanisms that ensure the continuity of relevant processes. Recipient country institutions that can contribute to promoting benefit-sharing over time may be both at the central level (government ministries or specialized technical agencies) and the local level (e.g., traditional healers' organizations). In building a framework conducive to benefit-sharing, it may be more helpful to contribute to the formation of institutions, or to the strengthening of existing ones, rather than support activities on a case-by-case basis.

(d)	Targeted research

Targeted research efforts could include market analysis and assessments of traditional knowledge systems, including the innovations and practices of indigenous and local communities related to genetic resources, as prerequisites for benefit-sharing.

C. Synergies among development organizations

As there are many organizations assisting developing countries in fulfilling the obligations of the Convention, there may be a number of opportunities for synergies in development work that may help promoting benefit-sharing.

For example, the implementing agencies of the Global Environment Facility (the United Nations Development Programme, the United Nations Environment Programme, and the World Bank) support a host of development activities in sectors with a clear bearing on the sustainable and equitable use of genetic resources: for example, reforms of land-tenure systems, support to traditional systems of natural-resource management in indigenous communities, and the development of human and institutional capacity in natural-resource management.

Where relevant GEF projects already exist, these can provide lessons and suggestions for the replication of benefit-sharing activities to be funded through the regular programmes of the Implementing Agencies. In other cases, GEF may provide seed money for capacity-building and the development of alliances and partnerships, which may subsequently be expanded on a larger scale through the implementing agencies.

D. Broader aspects of benefit sharing

In addition to studies and assessments to be undertaken in the context of stock-taking activities, the development of access legislation or incentive measures, and specific initiatives, a separate area for investigation concerns some of the non-country-specific aspects of benefit-sharing. As discussed in chapter I above, the full realization of benefit-sharing may require broader issues to be addressed, such as intellectual property rights, linkages between access legislation and trade agreements, legislation on genetic resources in user countries, etc. In these cases, there may be opportunities for synergies between research supported by organizations entrusted with the appropriate thematic mandate (for example, the World Intellectual Property Organization (WIPO), the World Trade Organization (WTO), the Organisation for Economic Cooperation and Development (OECD), and the United Nations Conference on Trade and Development (UNCTAD)) and activities implemented through direct assistance to developing country Parties.

V. CONCLUSIONS

In considering the means of addressing the fair and equitable sharing of benefits arising out of genetic resources, the Conference of the Parties may wish to give special emphasis to the following programme priorities for assistance to developing country Parties in order to help those countries integrate benefit-sharing into national biodiversity strategies or action plans:

(a)	Stock-taking activities, such as, for example, assessments of the current legislative and regulatory frameworks on access to genetic resources, evaluation of the strengths and weaknesses of the country's institutional and human capacity, and promotion of consensus-building among the country's different stakeholders; and

(b)	For those developing country Parties that have identified arrangements for benefit-sharing as a national priority:

(i)	The development of access legislation or incentive

measures;

(ii)	Specific benefit-sharing initiatives, such as capacity

building, entrepreneurial development of local and indigenous communities, facilitation of financial sustainability of projects promoting the sustainable use of genetic resources, and appropriate targeted research components within biodiversity projects.

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