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CHAPTER 1 - THE LEGAL FRAMEWORK
- Overview. An appropriate and effective legal framework can foster responsible agricultural investment and incorporate necessary safeguards to protect legitimate tenure right holders, human rights particularly the right to food, livelihoods, food security and the environment. The legal framework applicable to an agricultural investment is made up of the law of the State in which the land is located (including customary law), international law (e.g. treaties, custom and principles of law), and the agricultural land investment contract, of which the State’s law is the most important component.
- Interplay between domestic law and the contract. At its best, domestic law creates a level playing field for all comparable investments, reflects policy choices made through democratic processes, and establishes transparent and public terms. In those situations, an agricultural land investment contract might only need to address a narrower set of issues (e.g. location of the land, rental rates, and community development aspects). In other situations, however, the law might not address critical issues, or there might be gaps in its implementation. In these instances, an agricultural land investment contract could include provisions and covenants addressing, to the extent possible, such issues or gaps needed to protect right holders. Under either scenario, the agricultural land investment contract plays a significant role in the legal framework applicable to an agricultural investment.
- Freedom of contract. As a general matter, parties are free to enter into a contract and to determine its content how they see fit, based on the freedom of contract.1 In transactions involving governments and local communities in an area as critical to the realization of the right to food and food security, human rights and environmental protection as agricultural investment, however, that freedom is subject to various mandatory rules, which restrict the parties’ freedom of contract without jeopardizing customary tenure system and land rights.
- 1.4. Mandatory rules. The agricultural land investment contract must comply with mandatory rules whether of national, international or supranational origin. Mandatory rules of national origin are those enacted by States autonomously which cannot be varied by express agreements of the parties (e.g. legislation or judicial decisions), while mandatory rules of international or supranational origin are those derived from international conventions (e.g. human rights conventions), custom and principles of law or adopted by supranational organisations (e.g. EU competition law). The Guide’s notion of such rules is meant to be broad. In some domestic systems, for example, mandatory rules may also derive from general principles of public policy (e.g. prohibition of corruption, protection of human dignity, prohibition of discrimination on the basis of gender, race or religion).2 If the parties’ contract fails to comply with those rules, it runs the risk of being unenforceable and overturned, thereby undermining the agricultural investment.
1.11. Customary and Religious rules. While legal professionals are likely familiar with the roles of legislation, regulations and judicial decisions in various legal systems, often there is not the same level of familiarity with customary and religious rules. Such rules may play a significant role in some legal systems, and they often derive from practices, traditions and religion, may be neither codified nor written, and may deal with matters such as personal status, family relationships, inheritance, governance and use of land and other natural resources, rights over livestock or seasonal rights to land for the grazing of livestock. Those latter rights may also be collective and pertain to the whole community. With respect to agricultural land investment contracts, customary rules and religious may deal with who is entitled to hold rights to land, the capacity of persons to enter into and execute an agreement on behalf of group right holders, the validity of agreements, issues of form and evidence, or performance and sanctions for non-performance. Such rules may be exclusionary and inconsistent with human rights and public policy, for example by prohibiting women from owning or inheriting land or from entering into contracts.
1.12. Recognition of customary and religious rules. Customary and religious rules are recognised in certain States, by the State’s constitution, statute or judicial decision. The applicability and scope of these rules, how they are recognised, and how possible conflicts between the various autonomous legal orders are to be solved, depend on the particular features of each State’s legal system. In other settings, customary rules and religious rules may be applied by courts as local customs or usages,6 and these two concepts are often conflated. Even when a particular practice or tradition does not legally amount to a custom, the parties to an agricultural land investment contract should carefully take them into account in their dealings, especially when the relationship has a strong social, cultural and personal dimension. In this regard, the parties should also keep in mind that there may be differences, for example, between how a State’s court interprets and applies a local community’s customary rules and how those communities interpret and apply them.
1.22. Human rights. Various human rights instruments establish civil, cultural, economic, environmental, political and social rights. States have a duty to respect, protect and fulfil such rights,16 and investors have a corresponding responsibility to respect human rights and to identify and assess the potential negative impact their investment would have on rights and establish precautionary ,easure to avoid such negative impacts and also to remedy any negative impacts they have on such rights.17 There are various areas of human rights law that might be affected by agricultural investment including, inter alia:
• Food security and the right to food: Ensuring food security for all and the progressive realisation of the right to adequate food are central tenets of the VGGT and the CFS-RAI Principles.18 In accordance with the VGGT and CFS-RAI Principles, a host State’s legal framework may contain laws or regulations that seek to ensure food security, for example, by temporarily banning the export of food if there is a threat to food in that State. Because an agricultural investment could pose as an obstacle to pose as an emerging obstacle to the right food thus negatively affect food security. and a Any perceived threat to food security could provoke strong local opposition to a possible agricultural investment, it is essential that a risk assessment be conducted in this regard (see Chapter 2.IV.B.2).