The Future UNIDROIT-FAO-IFAD Legal Guide on Agricultural Land Investment Contracts (ALIC)
The process of preparing, negotiating and implementing an agricultural land investment contract in a manner consistent with the principles and standards laid out in the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security (VGGT) and the CFS Principles for Responsible Investment in Agriculture and Food Systems (CFS-RAI Principles), can be very challenging for investors, governments, legitimate tenure right holders and local communities alike.
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 future Legal Guide on Agricultural Land Investment Contracts (ALIC), to cater for the needs of legal counsels working on the leasing of agricultural land from States and local communities.
The ALIC guide’s aim is not to promote large-scale land acquisitions, but rather to raise awareness about alternative investment models. In acknowledging that land acquisitions continue to occur, however, the instrument will help to ensure that leases of agricultural land are done responsibly, with necessary safeguards to protect human rights, livelihoods, food security, nutrition and the environment, and that stakeholders’ rights, including those of legitimate tenure right holders, are both protected and respected.
The instrument, building on the success of the UNIDROIT-FAO-IFAD Legal Guide on Contract Farming and the UNIDROIT Principles of International Commercial Contracts, is being developed by a Working Group of experts, representatives of international organisations, and stakeholders. The resulting Zero Draft is currently being circulated as widely as possible in order to solicit comments and feedback.
Structure of the ALIC Zero Draft
The instrument will address the following six main aspects:
(1) Legal framework: The applicable legal framework is made up of various domestic sources of law (e.g. legislation, judicial decisions, regulations and, in some instances, customary rules) and various international sources (e.g. international human rights treaties, investment treaties or soft law instruments). The framework may also vary according to the type of agricultural land investment contract, which might be an investment agreement, lease contract or related agreements.
(2) Parties, due diligence and formation: There are various possible parties to agricultural land investment contracts, and numerous stakeholders that could be affected by such contracts. Difficult tasks could include: (a) identifying both the holders of legal title to the land and any holders of legitimate tenure rights with respect to that land; (b) consulting with those various holders, including in customary settings in which the roles of various authorities might not be clearly defined; and (c) conducting detailed feasibility studies and rigorous impact assessments, with respect to possible tenure, social, environmental and economic impacts.
(3) Obligations and rights of the parties: The agricultural land investment contract, which may be a single agreement or series of agreements, can set out provisions addressing not only the particular tenure and related rights that are granted, but also necessary safeguards to bridge gaps in the State’s law and possible impacts of the investment.
(4) Contractual non-performance and remedies: As leases of agricultural land usually involve long-term contractual relationships, it is important to understand the inherent risks in a particular investment and to promote cooperation between the parties and stakeholders.
(5) Transfer and return: The transfer of leased agricultural land from one investor to another can raise various concerns, including whether or not the granted tenure rights are actually transferable, the transfer complies with any contractual limitations, and such transfer is disclosed to the public.
(6) Grievance mechanisms and dispute resolution: Understanding the types of grievances and disputes that commonly arise under agricultural land investment contracts and the various mechanisms for resolving them (e.g. expert determinations, negotiation, mediation, arbitration and litigation) can also create a more balanced and sustainable contract.
Your views
In this online consultation we invite you to share with us thoughts and inputs you may have on the Zero Draft. Comments concerning the general approach of the Guide or on specific Chapters, sections or issues would be most welcome. In particular, we are seeking feedback on the following:
- Are there sections in the draft Guide that appear to be non-exhaustive or to have gaps in the addressed issues? If so, how would you propose to bridge them?
- Are there sections that lack clarity? If so, how would you propose to clarify them?
- Does the draft Guide present any sections where the content is redundant (i.e. has already been presented elsewhere)?
All comments received will be submitted to the Working Group and taken into account, as appropriate, for the draft's final revision, which is to take place between 1 October and 20 December 2019.
Subject to the final revision process in coordination with FAO and IFAD, the Legal Guide on Agricultural Land Investment Contracts will be adopted by the UNIDROIT Governing Council at its 99th session in May 2020.
Many thanks in advance for your time and valuable input.
Carlo Di Nicola
Senior Legal Officer, UNIDROIT
- Read 34 contributions
Dear
First, thank you for the topic and the debate.
On the subject, I think it is necessary to create a legal framework that can safeguard the investor, family producers, entrepreneur. In the case of Mozambique, there is a law called Law and Use of Land Use, which unfortunately has fragility in the defense of rights mainly to family farmers, peasants. So with Legal Guide os Agricultural Land Investiment Contracts I believe it will safeguard the use and safety for investors primarily.
Another point relevant to the target audience is that I am worried that the private parties may not voluntarily apply these guidelines because measures to enhance environmental protection and human rights will increase costs.[1] Foreign private investors may not voluntarily follow the guidelines unless there is enough price premium for more responsible agriculture activities or company branding. Then this process would need to involve independent certification schemes. Additionally, the local farmers in developing countries may not care about the environment or other long-term benefits to the extent of reducing their yearly income.[2] Hence, they may not voluntarily apply the guidelines at the cost of lower income in the short term.
[1] Preface 9, Target Audience, ALIC Zero Draft, UNIDROIT/FAO/IFAD (2019), p. 12. J. M. Rodriguez, et al. "Barriers to adoption of sustainable agriculture practices: Change agent perspectives." Renewable Agriculture and Food Systems 24.1 (2009), pp. 60-71.
[2] W. E. Oates & R. M. Schwab, ‘Economic Competition among Jurisdictions: Efficiency Enhancing or Distortion Inducing?’ (1988) 35 (3) Journal of Public Economics, pp. 333-54, at 351. E. Hettig, J. Lay & K. Sipangule, ‘Drivers of Households’ Land-Use Decisions - a Critical Review of Micro-Level Studies in Tropical Regions’ (2015) 5 (4) Land, pp. 1-32, at 18.
I am also wondering whether the revision of the Zero Draft can include a format contract for users in practice as an annex attached to the guidelines. Thorough explanations and reasoning are beneficial for legal professionals, researchers, and legislators. However, the guide may be too complicated for a layman to comprehend. Notably, in rural areas in developing countries, lawyers are not so popular or widely asked to participate in contract matters. The involved lawyers from the grantors’ side may not have full professional proficiency in English. Therefore, straightforward contract clauses may be more helpful to make the guide more practice-oriented for developing countries.
The contract template can comprise a complete set of optional clauses written in a simple and clear format including fundamental operational issues and arrangements ensuring legitimate tenure rights and responsible/sustainable agriculture investment. There is not a well-known contract template published yet by any independent and authoritative organizations, especially from a perspective of contributing to sustainable development. Parties who are to be engaged in such a transaction can use this document as the basis to formalize a contract by editing, adding, or deleting clauses as they wish.[1] Allowing modifications to the template is essential because it gives flexibility to the practitioners and increases the viability of the guide. At the moment, we cannot expect that all projects in relevant countries can apply the same level of responsible practices.
[1] Preface 4. Focus and Guidance. ALIC Zero Draft, UNIDROIT/FAO/IFAD (2019), p. 11.
The agriculture sector faces multiple globally interactive environmental and social challenges: greenhouse gases emissions, biodiversity loss, food security, and human rights of tenure right holders and indigenous peoples. The ALIC Zero Draft has adopted an exciting angle to tackle these issues. By focusing on the ‘investment contracts involving transaction of tenure and related rights’, the guide actually contributes to setting in advance the framework for actors and activities on the agricultural land in the future.[1] I also find it very insightful and comprehensive in terms of avoiding conflicts between various actors and improving their performances on sustainable agricultural practices.
Before going into detail, I was wondering could the working group clarify the following points about references?[2]
a. ‘the Guide refrains from making specific references to States, identifying particular domestic legislation, citing case studies or quoting contract clauses.’
Does this mean the guide refrains from citing domestic cases or also from cases from international courts or arbitrations?
b. ‘Instead, the Guide refers to international instruments…’
The following example documents are mainly international declarations and guidance, i.e., non-binding. Does the guide also refer to relevant binding international treaties or cases from international courts?
For instance, 3.111 ‘…international courts increasingly require States to conduct and demand an environmental impact assessment…’. A footnote with relevant case numbers will be helpful to support this claim.
Dr. Selvankumar Thangaswamy
The contracts should cover to sustain the soil fertility and restoration of soil microbial community.
The contracts also insist to cultivate plants, not for the trees in the specified locations.
Make a regulation to cultivate common varieties i.e. nearer to the other cultivars.
Good evening,
Regarding the topic of the structure of the ALIC Zero Draft i believe that part 4 which is about Contractual non performance and remedies need to be clarified! What are the proposes and ideas of achieving cooperation between parties and stakeholders? Also, part 6 is an interesting issue but lacks of details!
Thank you in advance,
Joanna Grammatiki
Agricultural Land contracts should be made available to farm workers in responsible and functional increments, useful territories by both private owners and by government land portions.
A positive permaculture and nature conscious movement of agriculture is both very positive to our green world and can also be the cure to many social problems, health crisis and poverty.
Education and agro-redesign directives in such a contract should be very considerate of cattle and livestock maxims per portion of land, that should not be cleared completely as is currently practiced.
Education about chemical agriculture, and the many harms from it, should be attatched to contract documents.
Converting cattle land to permaculture (multipurpose) contracts should be made most available, there should be tax break incentives to those implementing sustainable ecology and systems as it is a win win for all involved, including the cows and the greater health of everything.
The most important opportunity I see, while the FAO is drawing a useful contract set(s) for land use agricultural, that certain contracts be made for poor individuals and families, with no money to start a sustainable land development, that will use zero chemicals, utilizing all natural organic farming techniques. Possibly the mere existence of this contract standard could motivate what is needed to see the new future phases of organic natural, agricultural abundance potential take hold.
Agricultural Land Investment Contracts (ALIC) also have the opportunity to mandate a 50 / 50 % split of ownership, or 100 percent ownership of 50% of the land, etc., to lands developed agriculturally within the model of sustainable organic nature, to give security to those who tend the farm using the natural methods.
Appropriations of Federal and Nation Lands should be made available for this purpose, as a way of diversifying the assets, especially in cases of clearing and fires. This can motivate a rapid response to the casualty itself, and work as a deterrent to those who may purposely see acreage burned. For example is if x amount of natural disaster acreage could be claimed by one person's name, to be used specifically in an all natural permaculture or the like method, of reforestation, we would be then working in nature so much so to take advantage of the massive ash carbon infusions to soil.
Specifications such as how much livestock is permitted per acre, can be set.
Job creation incentives should be there for governments' also the private sector to consider, such as a Reforestation & Resource Protection officials who have the power to enforce livestock limits and chemical / GMO free small family agriculture.
Private land reserve investment can motivate wildlife and ecosystem security also, and this is the perfect conscious effort for wealthy people and companies.
Certain Species can be recommended to certain geographies and ideas like rotational re-visit style permaculture through a named resource link.
I sincerely hope that the committee can take into account these opportunities while drafting up their Agricultural Land Investment Contracts.
Please also see, best diet information, to help emphasis the optimal human health benefits that come with permaculture investment. This information is also important in fueling individual motivation towards better, all natural agricultural systems.
Dear
It looks like an interesting zero draft because it has all the necessary steps, yet it can be developed to more fully fledge.
I have read the Preface it appears good; but:-
preface1:- land tenure in Ethiopian case good gaze from points of;-
- Irrigate ( where mostly encompass the low land ago-ecological areas-or pastoral, agro-pastoral and sedentary farming (crop production)
- Rainfed system (which more of to the high lander and mid altitudes); the tenure here is grazing communal and agricultural crop production system
Preface 2:- this looks great especially the corporate social responsibility might assure the smallholder's producers for future food security and the right to invest in its own land without scarcity to access capital; social welfare and livelihood development might accelerate.
Preface 3:- it is great that the guide does not promote investors for tenure transactions as it will create more unemployment and cumulative poverty with different dimensions.
English translation below
Je propose également qu'on réserve une partie sur la contractualisation en matière agricole entre investisseur et producteurs suivi d'un modèle type de contractualisation qui peut servir de guide ou de support.
Merçi
Dr Aliou NIANG
I also propose that we reserve a part on agricultural contractualization between investor and producers followed by a standard model of contractualization that can serve as a guide or support.
Thank you
Dr. Aliou NIANG
English translation below
Bonjour Carlo,
Je suis Dr Aliou NIANG, juriste, chercheur et agriculteur à la fois.
Je trouve original le guide. Il y a un aspect qui me parait intéréessant et qui doit etre abordé dans le guide et il s'agit l'éthique dans les contrats d'investissement en terre agricole. l'éthique comme comme valeur, doit constituer le fondement de ces types de contrats qui comportent des aspects économiques, des valeurs marchandes et des valeurs non marchnades telle la sécurité alimentaire, la nutrition, la protection de l'envirionnement.
Plus précisément dans le guide, il doit apparitre une partie qui traite des aspects économiques et commerciaux dans les contrats d'investissement en terre agricole et une partie qui traite des valeurs non marchandes dans ces contrats, telle l'éthique...etc.
Dr Aliou NIANG
Docteur en Droit International Economique
Hello Carlo,
I am Dr. Aliou NIANG, lawyer, researcher and farmer.
I find the guide innovative. There is one aspect that seems to me to be interesting and which must be addressed in the guide. It is the ethics in investment contracts on agricultural land. Ethics as a value must be the foundation of these types of contracts which include economic aspects, market values and non-market values such as food security, nutrition and environmental protection.
More specifically, in the guide, there should be a section dealing with economic and commercial aspects in investment contracts for agricultural land and a part dealing with non-market values in these contracts, such as ethics ... etc.
Dr. Aliou NIANG
Doctor in International Economic Law
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