India and the European Union (EU) have reached an interim agreement on preventing the seizure by EU authorities of Indian-made generic drugs while they are in transit through Europe.

The EU Commission has also agreed to put forward to Parliament a new regulation replacing the current version, under which the seizures have been made. However, India reserves the right to continue with the case it brought against the EU over the issue last year with the World Trade Organisation (WTO) if it is not happy with the amended regulation.

Under the new interim deal, or Understanding, border enforcement authorities in the EU's 27 member states will now be issued with guidelines instructing them that they may only seize Indian-made drugs bound for developing countries while they are in transit at their ports if there is a "substantial likelihood" that the medicines will be diverted into the EU.

The EU has also agreed to draw up a new rule to replace Regulation (EC) 1383/2003, the "regulation concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights," under which the disputed seizures have been made. The Commission has agreed that its proposals for an amended regulation will reflect the principles contained within the Understanding, 

In return, the EU has sought from India an assurance that it will not take the complaint lodged at the WTO any further. Indian government officials have responded by stating that while they have agreed the interim deal they will await the final settlement agreed by the EU Parliament.

However, local reports state that India is already unhappy with the initial draft version put forward by the Commission, although the widespread support which it has received over the seizures from aid agencies, the public and Members of the European Parliament (MEPs) mean that a version acceptable to India is unlikely to meet any obstacles on its way through Parliament. Passage of the legislation is expected to take 12-18 months, after which India will examine it, but it will withdraw its complaint with the WTO only if it is satisfied, say reports.

In a statement on the interim agreement, India's Ministry of Commerce and Industry notes that it has "taken note of the commitments offered by the EU," but also points out that the "core principle of the Understanding" is that "the mere fact that medicines are in transit through EU territory, and that there is a patent title applicable to such medicines in the EU territory, does not in itself constitute enough grounds for customs authorities in any member state to suspect that the medicines at stake infringe patent rights."

India is the world's biggest manufacturer of generic medicines, and it lodged its complaint against the EU with the WTO on May 11, 2010, following what it says were "repeated instances" of detentions and seizures at EU ports, particularly in the Netherlands, of Indian-made generics destined for Latin America and Africa. The detentions were made by invoking Regulation 1383/2003, but they were in violation of world trade agreements, say India and Brazil, which has also filed a complaint against the EU.