K&L Gates Supports Hempel Metallurgical and ECHA in Winning First Data-Sharing Appeal

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A much anticipated decision in the first ever data-sharing appeal was announced by ECHA’s Board of Appeal (BoA) this week. The BoA upheld ECHA’s decision taken in July 2013 that the Vanadium Consortium (the Consortium) did not make every effort to ensure that the costs of sharing information on a vanadium substance with FW Hempel Metallurgical GmbH (Hempel) were determined in a fair, transparent and non discriminatory way. K&L Gates represented Hempel in this data-sharing dispute and supported ECHA before the BoA after the Consortium contested ECHA’s decision. As a result, Hempel has been granted permission to refer to vertebrate data contained in the joint registration dossier for vanadium and owners of such data have been given clearer guidance on how to share the costs.

Background to the dispute

Hempel, a member of the Substance Information Exchange Forum (SIEF) for vanadium, questioned the Consortium’s price of €54,166.67 for a Letter of Access (LoA) to data for the 100 to 1000 tonnes per annum tonnage band in January 2013. The total cost consisted of €44,000 base fee, a 10% annual increase for an LoA obtained after 2010 and a €1000 administrative charge. Hempel considered that the 10% annual penalty imposed by the Consortium was discriminatory and the €1000 administrative charge was unjustified.

As Hempel’s attempts to resolve the dispute with the Consortium were fruitless, K&L Gates, on behalf of Hempel, submitted a data-sharing claim to ECHA before the 2013 registration deadline. K&L Gates argued that the Consortium was in breach of REACH Article 30(1), which requires members of a SIEF holding data relating to vertebrate studies “to make every effort” to ensure that the costs of sharing such information with another SIEF member “are determined in a fair, transparent and non discriminatory way”.

After a thorough review of the negotiation records provided by each party, ECHA upheld K&L Gates’s arguments and granted Hempel permission to refer to the Consortium’s vertebrate data. Before that decision was taken, ECHA had also indicated that it was allowing Hempel to proceed with its registration without the full data set as a temporary measure while the data-sharing dispute was processed. The Consortium appealed against both of those actions by ECHA.

The Consortium’s Appeals to the Board of Appeal

In its decision of 3 December 2014, the BoA dismissed the first appeal as inadmissible, ruling that ECHA had not acted illegally in granting a temporary right to proceed with registration without a full data set; the right to proceed with registration emanates directly from REACH.

In its decision of 17 December 2014, the BoA dismissed the second appeal. In particular, the BoA dismissed each of the Consortium’s five arguments, giving detailed reasoning in rejecting each plea. Some of the more interesting points made by the BoA are summarised below.

  • The Consortium argued that ECHA had exceeded its powers in considering the data-sharing terms themselves rather than whether every effort to reach an agreement had been made: The BoA found that it was clear from the language of the decision that ECHA had not considered the terms themselves. The requirement in REACH Article 30(1) that parties to a data-sharing dispute must “make every effort to ensure that the costs of sharing the information are determined in a fair, transparent and non discriminatory way” should be read as a whole: the test for ECHA to apply is whether every effort was made bearing in mind the need for the cost-sharing to be determined in a fair, transparent and non-discriminatory way. An additional charge which is to be paid only by registrants who purchase an LoA after 2010 is de facto discriminatory unless there are legitimate and justifiable reasons for charging additional amounts to later registrants. Any cost-sharing arrangements must ensure that costs are shared fairly amongst all registrants of the same substance. The use of terms such as “compensation” and the implication of a discount (the effect of an “early bird special”) are not consistent with costs being shared fairly amongst all registrants regardless of the time of registration; a later reconciliation is therefore incompatible with the promise of “compensation” or a discount. Although the Consortium had argued that the existence of a reconciliation clause meant that there was no discrimination in practice as the costs would subsequently be fairly shared amongst all registrants, the BoA found that the Consortium had not made it known to Hempel during the data-sharing negotiations that the 10% annual cost increase and the €1000 administrative charge would be included in that reconciliation.
  • The Consortium argued that ECHA should not have accepted the data-sharing dispute because Hempel had not identified the individual studies which it required: The BoA stated that REACH Article 30(1) and (3) do not require a precise list. In any event, there was a common understanding during the negotiations that Hempel was seeking an LoA for vanadium at the 100 to 1000 tonnes per annum tonnage band. Moreover, the Consortium was able to quote a price for that LoA without requiring any additional information regarding the data required.
  • The Consortium argued that during the data-sharing dispute ECHA had breached the Consortium’s procedural rights by not providing it with copies of Hempel’s submissions to ECHA regarding whether every effort had been made: The BoA found that the only documents considered by ECHA were communications between the parties where the Consortium was either the sender or the recipient. The Consortium’s procedural rights had therefore been fully respected.
  • The Consortium argued that ECHA had relied on evidence which could not support its conclusion that every effort had / had not been made: This plea incorporated a series of specific allegations concerning Hempel’s participation in the negotiations, all of which were rejected by the BoA.
  • The Consortium argued that ECHA had failed to take into account its efforts to engage with Hempel several years in advance of the submission of the data-sharing dispute, in particular by circulating the draft SIEF agreement in 2010: The BoA stated that the data-sharing obligations in REACH are only triggered when a registrant makes a request to the SIEF members under Article 30(1), and there was no obligation on Hempel to engage in data-sharing negotiations three years in advance of the relevant registration deadline. While the early circulation of a SIEF agreement is good practice, companies have no obligation to respond.

Lessons from the Appeals

In essence, the BoA supported K&L Gates’s and Hempel’s initial position that the cost-sharing mechanism applied by the Consortium was discriminatory and that companies should not be forced to obtain LoAs in advance of the relevant registration deadline in order to avoid a penalty. Therefore, Consortia should be vigilant as to how they structure their cost-sharing mechanisms and future registrants should not immediately agree to every condition imposed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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