085 Improving Agricultural Investment Contracts and the Contracting Process

Examining key issues and safeguards for making the contracts and their negotiation and implementation consistent with the VGGT and CFS-RAI Principles

Organizers

  • International Institute for the Unification of Private Law (UNIDROIT)
  • FAO
  • IFAD

Abstract

The VGGT and CFS-RAI Principles set out high-level principles and standards to promote secure tenure rights, equitable access and responsible agricultural investment. For investors leasing land for an agricultural investment, as well as for States, legitimate tenure right holders and local communities that might be affected by that investment, the preparation, negotiation and implementation of an investment contract that is fully consistent with those principles and standards can be challenging.

The International Institute for the Unification of Private Law (UNIDROIT), in collaboration with the Food and Agriculture Organization of the United Nations (FAO) and the International Fund for Agricultural Development (IFAD), is preparing a Legal Guide on Agricultural Land Investment Contracts (the Guide) for use by counsels working on the leasing of agricultural land, whether from a State, local community, customary authority or private landowner. The Guide - which is being developed by a Working Group of renowned experts, representatives of international organizations, and stakeholders and is to build upon the success of the UNIDROIT-FAO-IFAD Legal Guide on Contract Farming and the UNIDROIT Principles of International Commercial Contracts - will not endorse large-scale land acquisitions and will raise awareness about alternative investment models. In acknowledging that land acquisitions continue to occur, however, the Guide will help to ensure that leases of agricultural land are done responsibly and that stakeholders' rights, including those of legitimate tenure right holders, are both protected and respected.

The Side Event seeks to present and debate some of the key issues and safeguards that will be covered by the future Guide. Such issues and safeguards include, for example, identifying legitimate tenure right holders, their involvement in the contracts and the contracting process, and safeguards for such holders and local communities, as well as for other possible impacts (e.g. food security, nutrition, environment) and aspects (e.g. gender, youth and employment).


Key speakers/presenters

  • Professor Ignacio TIRADO, Secretary-General, UNIDROIT (moderator);
  • Ms Margret VIDAR, Legal Officer, Development Law Service, Legal Office, FAO;
  • Mr Charles FORREST, Senior Legal Officer and Head of the Operations Unit, Legal Office, IFAD;
  • Mr Lorenzo COTULA, Principal Researcher in Law and Sustainable Development and Team Leader of the Legal Tools Team, Natural Resources Group, International Institute for Environment and Development (IIED);
  • Mr Brian BALDWIN, CFS/PSM Representative and Development and Policy Adviser, Emerging Ag Inc.; and
  • Ms Ilaria BOTTIGLIERO, Chief of Research and Learning, IDLO.

Main themes/issues discussed

The Side Event considered key issues and safeguards for making agricultural land investment contracts and their negotiation and implementation consistent with the VGGT, CFS-RAI Principles and other key instruments (e.g. the UN Guiding Principles on Business and Human Rights). At the outset, it was emphasised that there was an important investment gap in agriculture and that greater and more responsible investment was needed. The VGGT and CFS-RAI Principles provided the overarching policy framework for filling that gap, and there were various existing tools (e.g. the VGGT Technical Guides) which supported that framework’s implementation.

It was then presented how the International Institute for the Unification of Private Law (UNIDROIT) had an ongoing collaboration with FAO and IFAD in the area of private law and agricultural development, which had already resulted in the UNIDROIT-FAO-IFAD Legal Guide on Contract Farming. As the next step in that collaboration, a Working Group – comprised of experts, representatives, and stakeholders – was preparing a Legal Guide on Agricultural Land Investment Contracts (the Guide) to provide guidance on the leasing of agricultural land from States and local communities in order to support contracts that were consistent with the VGGT, CFS-RAI Principles and other instruments, to further operationalise those instruments and to build on existing tools. It was further presented that the Guide, while not promoting large-scale land acquisitions, would acknowledge the continued use of agricultural land leases and would be responsive to the need for greater and more responsible agricultural investment by raising awareness about alternative investment models (e.g. contract farming) and by helping to ensure that stakeholders’ rights, including those of legitimate tenure right holders, are protected and respected.

In providing an overview of the Guide’s content and seeking participants’ input on the Guide, there were discussions, inter alia, about the Guide’s: (a) scope, particularly regarding the types of contracts, scale of covered investments, and various parties for which it would provide guidance; (b) handling of the relationship between the contract and the domestic law of the State in which the land was located, the latter of which may also involve traditional authorities and customary rules; (c) gender inclusiveness, for example with respect to performance of gender impact assessments, women’s inclusion in the contracting process, and safeguards in the contracts’ provisions; and (d) treatment of various issues, such as water tenure and transparency. It was emphasised that the Guide would provide guidance on the contracting process, resulting obligations and safeguards to legal counsel representing a broad range of parties and stakeholders – including by covering multi-party contracts and addressing legitimate tenure right holders as possible parties to contracts or third-party beneficiaries – and that such guidance was not trying to interfere with domestic law but to support best or good contracting practices. The Side Event also addressed how those interested could get more involved with the work, by considering the outreach thus far, mechanisms for obtaining input, and the upcoming consultations in early 2019 on a consolidated draft, which would be made available on UNIDROIT’s website for review and comments.

Summary of key points

  • UNIDROIT is preparing, in collaboration with FAO and IFAD, a Legal Guide on Agricultural Land Investment Contracts (the Guide) to make such contracts for the lease of agricultural land consistent with the VGGT, CFS-RAI Principles and other key instruments.
  • While not promoting large-scale land acquisitions, the Guide will raise awareness about alternative investment models (e.g. contract farming) and seek to ensure that agricultural land investment contracts protect and respect the rights of legitimate tenure right holders and other stakeholders.
  • The Guide will address key issues in the contracting process and of contractual content including, for example, identifying legitimate tenure right holders, their involvement in negotiations and the contracts, and safeguards for such holders and local communities, as well as for other possible impacts (e.g. food security, nutrition, environment) and aspects (e.g. gender, youth and employment).
  • Input was received from participants on a range of points (e.g. scope of the Guide; interplay between domestic law and the contracts; gender inclusiveness; water rights; and transparency), all of which will be reported to the Working Group for its consideration.

Key take away messages

  • Agricultural land investment contracts involving leases of land continue to occur and present many challenges which, depending on the particular context, may be addressed through alternative investment models, due diligence and consultations, impact assessments and contractual safeguards or may indicate that an investment should not proceed.
  • The law of the State in which the land is located is the most important component of the applicable legal framework, though agricultural land investment contracts may address gaps in that law or its implementation. 
  • Agricultural land investment contracts may contain various safeguards (e.g. respecting the rights of legitimate tenure right holders; protecting food security, nutrition and the environment; and promoting gender and youth inclusiveness) to avoid or mitigate possible negative impacts or to promote positive ones.
  • The future Guide will provide guidance on key issues and safeguards for legal counsel supporting parties and stakeholders involved in contracts for the lease of agricultural land. A draft of the Guide will be made available in early 2019 on UNIDROIT’s website for review and comments by all those interested. For more information about the Guide and the upcoming consultations, as well as the ongoing collaboration between UNIDROIT, FAO and IFAD, see https://www.unidroit.org/work-in-progress/agricultural-land-investment.
CFS 45 - Side Event 085: Improving Agricultural Investment Contracts and the Contracting Process