Land deals and investment treaties
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IIED | 17 December 2015

Land deals and investment treaties

by Lorenzo Cotula and Thierry Berger

Executive summary

There has been much debate about the national and international legal frameworks regulating large-scale land deals for agribusiness investments in low and middle-income countries. Investment treaties are an important part of the international legal architecture governing foreign investment, including in agriculture.

Investment treaties aim to promote investment flows between the state parties. They establish obligations on the admission and protection of foreign investment. Most investment treaties allow investors to bring alleged violations to international arbitration (investor-state arbitration).

An earlier IIED report shed light on how investment treaties can affect land deals for agribusiness investments in low and middle-income countries. That report drew on the legal analysis of investment treaties and the ways in which international arbitral tribunals have interpreted them. The report concluded that, while the recent surge in agribusiness investments is yet to result in publicly known investor-state arbitrations, businesses could rely on investment treaties to challenge public action to terminate, renegotiate or regulate agribusiness investments.

This report measures the geographic extent to which investment treaties protect agribusiness investments initiated as part of the recent wave of large-scale land deals in low and middle-income countries. The report draws on three research strands:
●● Global-level quantitative analysis based on online databases of land deals and of investment treaties;
●● A more in-depth investigation of the corporate structures relating to a subset of land deals for which contractual documentation is publicly available; and
●● The analysis of publicly known agriculture-related investor-state arbitrations.

The findings indicate that the vast majority of the land deals from the recent wave of agribusiness investments in low and middle-income countries are protected by at least one investment treaty. Limitations in publicly available data mean that the analysis remains inevitably preliminary. But the findings are corroborated both by the global-level quantitative analysis and by the more in-depth investigation of a subset of land deals.

The fact that most land deals are protected by an investment treaty does not necessarily mean that the treaty promoted the investment. Multiple business factors are thought to underlie agribusiness investment decisions and location choices. But the extensive coverage of investment treaties does mean that the exposure of states to the risk of arbitration claims for public action they may take to address issues raised by agribusiness investments is real and relevant to a wide range of geographic contexts.

The analysis of agriculture-related investor-state arbitration points to a small but growing number of cases; to a substantial share of investor wins; and to several cases where the investor had its claim dismissed but the state still had to bear legal costs.

Overall, the findings highlight the relevance of international investment treaties to the recent wave of land deals for agribusiness investments in low and middle income countries. More research is needed to shed light on the extent to which investors are actually relying on these treaties, and with what results, including in situations that do not lead to investor-state arbitration.

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source: IIED