data sharing / transparency regulation

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Data Sharing / Transparency Regulation

Legal Challenges before ECHA Board of Appeal

Nice, 7 September 2016

Claudio Mereu, Managing Partner

Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 2

Overview

1. Data sharing (transparency) Regulation -- main principles

1. BoA – overview of main cases decided in the past 12 months (none on data sharing)

i. Carbon tetrachloride case – substance evaluation process

ii. BoA case on ‘’one substance, one registration’’ (‘’OSOR’’)

iii. Diarsenic trioxide case – dossier evaluation

iv. 2-ethylexyl case – Compliance check decision

v. EBP case - Substance evaluation process

vi. Case on a pre-natal development toxicity matter (PNDT)


Commission Implementing Regulation 2016/9

• Art. 2: Data-sharing agreement shall be clear/comprehensible to all parties, and include :

(a) itemisation of data to be shared, including cost of each data item, description ofinformation requirements to which each cost corresponds and justification of how datato be shared satisfies the information requirement;

(b) itemisation and justification of any cost of creating and managing data-sharingagreement and joint submission of information between registrants of same substance(‘administrative costs’);

(c) cost-sharing model, which shall include a reimbursement mechanism

• Timing: cost itemisation shall be provided without undue delay

• Record keeping: duty to document/itemise all relevant costs, provide proof thereof,record of any compensation received and reimbursment mechanism for 12 years

• Retroactivity: existing agreeements inapplicable to prospective applicants, unlessunanimous waiver

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Costs Breakdown

• Costs for Project preparation

• Costs for Project Management

• Members’ time costs

• External work

• Additional technical work

Administrative Expenses

• Consortium data

• Prospective applicant’s data

• External data

Data Costs


Cost sharing

Make every effort to ensure costs are determined in a “fair, transparent and non-discriminatory way” …

What is every effort? Case-by-case analysis in light of circumstances

What is a fair “cost allocation”?

• Sharing data equally among the involved parties (within the same tonnage band);• Sharing data based on alternative mechanisms (see Guidance on data sharing, e.g.

applicants with same studies but variable quality, volume-based LoA etc.).

Cost determination (average of two or three lab quotes, Fleischer list, etc.)

Cost compensation mechanism based on value of studies provided against each of the endpoint covered (Klimisch etc.) and taking into account reimbursement mechanism

Data comp formula example: data cost + mark up (admin. and monitoring costs) + risk premium) / number of registrants * reimbursement factor


Administrative Expenses

Costs for Project preparation including all expenses incurred during theConsortium preparation phase (pre-Consortium phase).

Costs for Project Management including costs for the Consortium daily management (Secretariat costs, Legal costs, Financial/Accountancy costs)

Members’ time costs including members’ contribution costs to the project(sweat equity) and costs for submission of information

External consultant costs including costs incurred by the Technical ServiceProvider/any external Consultant for the generation of IUCLID file and CSR(>10 ton/y)

Additional technical work necessary before the substance registration orafter, due to the eventually evaluation of thesubstance/Authorisation/Restriction (any future cost)

• Costs Breakdown


Data costsData owned by the Consortium and jointly developed by members

Prospective applicants’ data include data owned by prospectiveapplicant before joining the Consortium

External data includes data owned by prospective applicants or byother Consortia, used as read-across studies or reference studies

• Costs Breakdown


Step One Agree on the reliability,relevance and adequacy of thedata (“Data Quality”)

Step TwoThe economic value of the data (“Data Valuation”)

Step Three

• Studies Replacement Value

Value to be shared among parties (“Cost Allocation and Compensation”)


• Data Quality: correcting factors

From ECHA Guidance on data sharing – Version 2.0 April 2012

The baseline costs is calculated as an average of the prices charged by two (2) or three (3) laboratories according to their catalogue (price lists) or Fleischer, or a mix/mean value.

The replacement cost for each endpoint has to be calculated taking into account the Klimisch et al. rating assigned to the study:

1. reliable without restriction (minus 0% of the study value)2. reliable with restriction (minus 20% of the study value)3. not reliable (minus 100% of the study value, based on a case by case basis)4. not assignable (minus 100% of the study value, based on a case by case basis)


• Study Valuation: correcting factors

• Robust study summaries for key studies – may be compensated by a maximum value of up to 30% of the value of the administrative costs.

Other deduction factors:

A decrement of 50% linked to restriction on use (REACH uses only)

Any other decrement to be discussed / agreed upon (no co-ownership / hard copies, LoAonly, depreciation, age of study, multiple use by data owner etc.)

Number of parties involved cost sharing mechanism / reimbursement


• Reimbursement mechanism

Reimbursement mechanism shall include:

• a method of proportional redistribution to each participant

• future costs resulting from substance evaluation decisions (need for further studies)

• economic viability of certain reimbursements where the costs of these reimbursements are higher than the amount to be reimbursed

Existing agreements: consortia members may waive reimbursements mechanisms may be waived by unanimous consent

Regsitrants having ceased activities may be required to share in costs resulting fromsubstance evaluation decision (e.g. if decision was taken at the time when they were a consortium member)


• LoA cost calculation mechanism - template

100009000

3000

40005000

10000500

500

LoA costs 1-10 t/a 10-100 t/a 100-1000 t/a

number of registrants 0 0 3

Study costs 0 0 1500

CSR costs - 0 5500

Adm costs 0 0 10000

Total 0 0 17000 LoA price

1500

5500

20000

27000

CSR preparation costs (including updates)Project Management costs (Secretariat costs)

LR costs

>1000 t/a

1

Dossier Cost calculation according to the rules laid down in the Commission Implementing Regulation (EU) 2016/9 of 5 January 2016

External work (technical service provider for IUCLID

preparation)Adm

cos

tsC

SR

cost

s

Project Preparation costs (pre-Consortium costs)Project Management costs (Secretariat costs)

Members' time costs

Additional technical work (LR work, future costs)


• New draft data sharing guidance doc

Ongoing discussions (latest version June 2016)

• Takes into account Implementing Regulation 2016/9

• Deals with various correcting factors (mark up)

• Relevance for data used in biocides dossier

• Aligns section on dispute with current practice

• Limited applicability and need to justify risk premium

• Clarification about data sharing related to read-across



Key principles

• Registrants must make “every effort” to reach an agreement on data sharing

• Each legal entity required to comply with itrs own individual obligations (theapproach of considering all “affiliates” as one company in the calculation of the shares is being questioned by the Guidance document)

• Companies should keep good records of all communications

• Data compensation fees should not aim at making “profits”

• Data sharing dispute with ECHA only as a last resort

• Pending a dispute the parties should continue to negotiate


•Only key study to be compensated, however, participants owningcomparable studies should not share the costs disproportionately

• All registrants must agree on and share potential future costs (eg, substanceevaluation requests from ECHA, dossier update etc.)

• Revision to stress the OSOR principle (also in light of BoA decision)

• Clarified that the opt out requires to discuss with other co-registrants aboutthe relevance of the information separately submitted

• New section on potential high variability of agreements and forms of cooperation

• New section on future costs resulting from substance evaluation decisions (need for further studies)

• Examples of cost itemisations / reimbursment mechanism

• New draft Guidance doc



Substance sameness is a pre-requisite for being part of the same SIEF

• BUT -- the compilation of informationto estalish substance sameness notsubject to cost-sharing (Art. 4(2) of the Implementing Regulation).

SIEF Agreement and Data sharing agreements

Optional but highly recommended (transparency, legal certainty, reducesdisputes)

Possibility to deal with inter-SIEF data sharing (optional), eg, read-across

Recommended to extend activities beyonf 2018 as evaluation etc. willbe longer


• Conclusion

Cost-sharing model for all relevant costs, including provisions for cost sharing in case of any further substance evaluation decision

Itemisation of the costs to be shared (including administrative costs and study costs incurred before the date of entry into force of Regulation No. 2016/9)

Justification and evidence of any cost incurred

Record of any compensation received from new registrants

Reimbursement mechanism

Yearly documentation of any further costs incurred


Board of Appeal Cases : prelimary remarks

• 66 cases in total have been filed to date before the Board of Appeal.

• 31 decisions have been issued by the Board of Appeal (BoA). The other cases havebeen withdrawn.

• The decisions include :

- Compliance check of registrations ;

- Application of specific provisions of the REACH Regulation ;

- Substance evaluation ;

- Data-sharing issues ;

- Examination of testing proposals or

- Rejection of registration.


No data sharing cases in 2016

• Last BoA decision is the ‘Vanadium’ case (17/12/2014 :

• BoA upheld Agency decision that

• By making an agreement to share data conditional upon a 10 % increase, which discriminated against all registrants, who are obliged to register after 2010, the existing registrants did not contribute to finding a non-discriminatory agreement on data sharing.

• The existing registrants, have therefore not made every effort to reach an agreement on the sharing of data and their costs in a fair, transparent and non-discriminatory way, as required by Article 30(1) ….

• Consequently, [the Agency] provides [the Data Claimant] the permission to refer to the requested data in accordance with Article 30(3)


2. Carbon tetrachloride case – substance evaluation process

Case A-005-2014 from 23 September 2015 – proportionality of substance evaluation – the EOGRTS test.

Background: • Carbon tetrachloride is a substance used in closed industrial processes that is already highly

regulated and subject to strict handling measures.

• As part of the evaluation process, ECHA reviewed the dossiers produced by the six registrants(the ‘’Appellants’’) and requested that an additional one-generation reprotoxicity testing study("EOGRTS") be submitted to assess the reproductive properties of the substance. Such studiesare expensive and involve testing on vertebrate animals.

• One of the reasons for ECHA to request the EOGRTS study - the dossier of the registrant with thehighest tonnage band was missing that particular study, part of the standard information requiredby REACH for that tonnage band

• Appellants argued that that study was disproportionate and unnecessary, because existingdata shows that reproductive toxicity only occurs at very high levels of exposure and that sufficientmeasures are already in place to ensure human health protection.


2. Carbon tetrachloride case – substance evaluation process

• On 23 September 2015 the BoA annulled the ECHA decision.

Main findings of the BoA:

• Infringement of principle of proportionality by ECHA: BoA set out a three-tier test that ECHA must satisfy before it can request additional information under substance evaluation:

1. First, there must be a potential environmental or health risk – and such a risk should be one that “occurs in reality and not only theoretically”;

2. Second, ECHA must prove that the potential risk needs to be clarified; and 3. Third, it must show that the information requested has a realistic possibility of

leading to improved risk management measures.

BoA concluded that ECHA had not met these criteria because:

• Carbon tetrachloride has already been subject to extensive risk management measures and ECHA could not show that they were inadequate.

• ECHA's assertion that there was a concern over reproductive toxicity was insufficient since it did not demonstrate that the study would lead to any improvement to risk management.


3. BoA case on ‘’one substance, one registration’’ (‘’OSOR’’)

Case A-022-2013 from 15 March 2016 - Joint submission for a dossier registration and the principle of ‘’one substance, one registration’’(‘’OSOR’’) – important decision in view of the new Implementing Regulation 2016/9 on joint submission of data and data sharing Regulation under REACH.

Background:

• REACheck Solutions (the ‘’Appellant’’), lead registrant for charcoal, asked BoA to reject a registration dossier for the same substance, submitted by the Bulgarian company Nikimol, which ECHA accepted as complete on 19 July 2013.

• Appellant had already received acceptance from REACH for its joint submission dossier in 2010.

• REACheck complained that several individual submissions had been made for charcoal, outside the joint submission; it asked ECHA to revoke registration numbers assigned to other registrants.

• Main issue: free riders companies registering a substance under REACH without being part of a SIEF – i.e., without sharing costs of data used in the registration dossiers.

• On 15 March 2016, BoA annulled ECHA decision to accept separate registration dossier.

• OSOR principle


3. BoA case on ‘’one substance, one registration’’ (‘’OSOR’’)


Infringement of Articles 10, 11 12 , 20(2) and 27 REACH + Regulation 2016/9:

• ECHA failed to examine completeness of Nikimol’s dossier adequately, with regard to the elementsrequired by REACH Articles 10 and 12, and by Article 20(2).

• ECHA failed in insuring that the OSOR principle is adhered to; this is also in line with Recital 12 ofRegulation 2016/9: ‘’ [t]he principle of “one substance, one registration” should be reinforced byemphasising the role of the Agency in ensuring that all submissions of information regarding thesame substance are part of the same registration’’.

• ECHA allowed the company Nikimol to circumvent its obligations under REACH and, as a result, deprived Articles 11 and 27 of their effect.

• ECHA circumvented the obligations in REACH that give force to the objective that testing on vertebrate animals should be reduced and that the sharing of the costs burden of registration among the registrants of a substance shall take place in a fair, transparent and non-discriminatory way.

• ECHA undermined the underlying goal of the joint submission obligation – i.e., the information provided on a substance should allow the relevant actors to form as complete a picture as possible of the hazards posed by the substance, its uses on the EU market, and the risks involved therein.


4. Diarsenic trioxide case

Case A-010-2014 from 25 May 2016 - Dossier evaluation – Compliance check –Intermediate

Background:

• Nordenhamer Zinkhütte appealed an ECHA decision on compliance check of its registration dossier for Diarsenic Trioxide;

• Diarsenic Trioxide was used as a reactant in the production process where it was transformed into the substance ‘’copper residue’’, which was then treated and refined in order to produce copper concentrate;

• ECHA found that: (i) the use of Diarsenic Trioxide within a zinc electrolysis plant was not to transform the substance into another substance (i.e. copper concentrate), alleging that a residue is not a product deliberately produced = > it was used to achieve another function; (ii) a substance must not only be transformed, but this transformation must mainly aim at manufacturing the other substance.



The main legal issue: Was ECHA reference to the notion of ‘’main aim’’ in line withthe definition of intermediate under Article 3(15) of REACH?


• The BoA looked at the definition of intermediate according to Article 3(15) of REACHand identified two clear requirements: (i) the substance must be manufactured for,and consumed in, a chemical process and; (ii) there must be an intentionaltransformation of the substance into another substance in that chemical process;

• The interpretation suggested by ECHA could not be accepted - the wording of Article3(15) does not include a reference to the "main aim of a production process" => itamounted to an overly restrictive interpretation of the concept of intermediate;



• The relevant process to be considered in order to determine the aim of the use ofDiarsenic Trioxide was the reaction of Diarsenic Trioxide with the raw materials => itwas irrelevant whether the resulting substance was the only or the main substanceproduced in the plant.

• The BoA also noted that this interpretation was in line with the Judgment of theGeneral Court in case T-268/10 RENV and with the ECHA Guidance.

• The BoA concluded that ECHA should have looked at whether Diarsenic Trioxide isintentionally transformed into copper residue or copper concentrate or whether itsimply helps in their production.

The BoA annulled the Contested Decision.


5. 2-ethylexyl case

Case A-015-2014 from 28 June 2016 – Environmental exposure assessment and riskcharacterisation – Interpretation of Article 14 of the REACH Regulation

Background:

• BASF SE (Germany), Appellant, was a registrant of the substance 2-ethylhexyl acetate.

• The Contested Decision was adopted following a compliance check under the dossierevaluation procedure of the registration submitted by BASF SE for 2-ethylhexyl acetate.

• In the Contested Decision, the Agency requested the Appellant to submit in the chemicalsafety report an environmental exposure assessment and risk characterisation.

• The Appellant challenged the Contested Decision on the ground that (i) it was taken withoutlegal basis (first plea) and (ii) was in breach with the principle of legal certainty (second plea).

• In particular, the Appellant argued that ECHA misinterpreted the term ‘hazard’, therebyillegally extending the scope of application of Article 14 of the REACH Regulation.

• According to the Appellant, in case no hazard is identified, Article 14(4) of the REACHRegulation should not apply and therefore no environmental exposure assessment and riskcharacterisation should be required.


5. 2-ethylexyl case

Main findings of the BoA (1.):

First plea in law : lack of legal basis

• Plea mainly related to interpretation of Article 14 of REACH (Chemical safety report and dutyto apply and recommend risk reduction measures)

• BoA noted that, in addition to human health hazards, Appellant had also identified a hazard toenvironment (although this did not lead to CLP classification)

• BoA considered that under Article 14(4) of REACH the scope of exposure assessment and riskcharacterization is not limited only to hazards which lead to classification under CLP.

• Article 14(4) also requires to perform environmental exposure assessment and riskcharacterisation for the hazard identified in this case.

• Second plea in law related to the breach of the principle of legal certainty

• ECHA did not breach principle of legal certainty by extending concept of ‘hazard’ within themeaning of Article 14 REACH

• The Board rejected the two pleas and dismissed the appeal in its entirety.


6. EBP case

Case A-009-2014 from 12 July 2016 – Substance evaluation, duty to state reasons, necessity of new testing requests

Background

• Appellants (Albermarle Europe Sprl, Chemical Inspection & Regulation Service Limited andICL-IP Europe B.V.)

• Contested Decision adopted by ECHA following substance evaluation of 1,1'–(ethane-1,2-diyl)bis [pentabromobenzene] (the ‘EBP Substance’).

• Agency requested Appellants to submit information on results of several tests and to conducta detailed exposure assessment (with sensitivity analysis) for the whole life cycle of EBP.

• For some tests, Appellants were instructed to use ‘the least pure form of the registeredsubstance’ whilst for other tests they were instructed to use ‘the test material in the purestform” of the registered substance.

• The statement of reasons in the Decision also drew parallels between the EBP Substance andanother separate substance.

• Main pleas raised by the appellants: (i) failure to state reason, (ii) failure to address asuspected concern and (iii) unlawful choice of testing materials and protocols and (iv) right tobe heard.


6. EBP case

Main findings of the BoA (1.)

Alleged failure to state reasons

• The BoA observed that Appellants were closely involved in administrative procedure leading to adoption of Decision and had several opportunities to provide comments. Therefore they were in a position to understand the scope of the Decision and thereasons beyond it.

• This plea was dismissed.

Failure to address a suspected concern

• BoA examined whether the grounds for concern identified by ECHA were sufficient todemonstrate need for information requested. the BoA noted that the structuralsimilarity with another substance (decaBDE) is used as a ground for concern to justifythe information request (structural similarity vs read-across).

• Reasoning by analogy with the ‘Akzo Nobel Industrial Chemicals’ decision of the BoA(23 Sept. 2015)


6. EBP case

Main findings of the BoA (2.)

Unlawful choice of testing materials

• The BoA considered that ECHA did not justify why tests on the substance should be performedon the purest or least pure form.

• Furthermore, BoA found that ECHA failed to adequately state reasons for this requirement.

• BoA considered that Decision should be annulled so as to remove all references torequirements to perfom tests on ‘the purest form’ and the ‘least pure form of substance’.

Right to be heard:

• This plea was dismissed as Appellants did not identify any elements capable of giving rise to aright to comment beyond the opportunities already foreseen in the REACH Regulation.


7. Pre-natal development toxicity (PNDT) case

Case A-014-2014 from 1 August 2016 – Compliance check under dossier evaluation

Background:

• Appellant BASF Pigment GmbH, Germany

• Contested Decision adopted following compliance check under dossier evaluationprocedure submitted for “chrome antimony titanium buff rutile”

• ECHA requested Appellant to conduct pre-natal developmental toxicity study tosatisfy endpoint at Annex IX, Section 8.7.2 of the REACH Regulation.

• Main pleas raised by the Appellant: (i) lack of legal basis; (ii) breach of the principle oflegitimate expectations and (iii) right to heard.


7. Pre-natal development toxicity (PNDT) case


• As for the lack of legal basis: BoA found a correct legal basis since Decision was takenafter compliance check initiated pursuant to Art. 41 REACH. Furthermore, ECHAassessed registration dossier correctly.

• As for the breach of legitimate expectations: BoA considered that ECHA was notrequired to state reasons relating to an assessment it was not required to perform.

• As for the right to be heard: BoA recalled that the General Court held that this rightmust be construed as meaning that “it guarantees that the parties will not beconfronted with a completely unexpected decision”.

• BoA considered that the Appellant should have anticipated the assessment made byECHA. Thus, the assessment was not unexpected.

The BoA rejected all the pleas and dismissed the appeal in its entirety.


Conclusion - recap

Variety of issues under examination before BoA:

• Tethrachloride case: “necessity test” to perform new studies

• ReaCheck case: “OSOR” principle

• Diarsenic trioxide: “intermediate” definition (intentional transformation)

• 2-ethylexyl case: interpretation of “hazard” for env exposure and risk assessment

• EBP: no requirement to test the most pure or the least pure version of substance

• Pre-natal tox study: application of Annex IX, point 8.7.2

The BoA upheld 4 out of 6 appeals in the past 12 months

No new BoA decision on data sharing, but important new Regulation 2016/9


Conclusions - Closing Remarks

Claudio Mereu

Partner

+32 2 742 70 60

[email protected]

Q&A

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