The Regulatory Vicious Circle of Investment Operations in Agriculture

M. Alabrese et al. (eds.), Agricultural Law, LITES – Legal Issues in Transdisciplinary Environmental Studies, 311-340 (2017)

Posted: 22 Feb 2019

See all articles by Federica Violi

Federica Violi

Erasmus University Rotterdam (EUR) - Erasmus School of Law; Dipartimento di Giurisprudenza; University of Milan

Date Written: 2017

Abstract

Large-scale investment operations in land might represent a double-edge sword for host countries, thus producing negative externalities on both their territory and population. These investment contracts—often concluded under the auspices of bilateral investment treaties (BITs)—usually grant investors a wide series of incentives and guarantees. These clauses have the potential to incisively affect the host States’ right to regulate, thus seriously constraining their capacity to exercise sovereign powers on those areas subject to a land deal.Nevertheless, investment protection is sanctioned by host States’ consent to contract and treaty provisions, which exempt investment activities in land from practically any kind of State regulatory “interference”. This circumstance highlights the tension between the obligation of host countries to honor investment commitments and the pursuit of their public interest, a notion that might—with caution and under certain conditions—include international human rights and environmental protection rules. Therefore, host States are likely to incur international responsibility on two different sides. This is all the more evident when dealing with umbrella or stabilization clauses, which are very common in BITs and land investment contracts, respectively. Both these provisions strengthen investors’ safeguards and blur the distinction between contract and treaty claims, thus lowering the threshold to hold a host State internationally responsible for a violation of the investment standard of treatment. The result is that the regulatory framework governing foreign direct investments (FDIs) in agriculture is composed of a series of international obligations that overlap, thus creating a multilevel system of regulation, which is particularly difficult to untangle. After analyzing some of the general features related to investment contracts and the regulatory overlap that they are embedded in, the present study aims at identifying different mechanisms of harmonization able to accommodate this tension between human rights and investment agreements in the framework of large-scale investments in land. Potential accommodations will be identified, recurring to both public and private international law mechanisms. Hence, the aim is to go beyond the traditional interpretation methods that are usually referred to reconcile investment and non-investment obligations. The investigation will try to infer general conclusions from the analysis of illustrative relevant contract clauses of the Convention between the Republic of Cameroon and SG Sustainable Oils Cameroon PLC—an investment contract in land—and the corresponding 1986 BIT between Cameroon and the US.

Keywords: land grabbing, investment contracts, treaty claims, contract claims, state contracts, international investment law, public international law, private international law, umbrella clauses, stabilization clauses

Suggested Citation

Violi, Federica, The Regulatory Vicious Circle of Investment Operations in Agriculture (2017). M. Alabrese et al. (eds.), Agricultural Law, LITES – Legal Issues in Transdisciplinary Environmental Studies, 311-340 (2017), Available at SSRN: https://ssrn.com/abstract=3330034

Federica Violi (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

Dipartimento di Giurisprudenza ( email )

Piazza Pugliatti, 1
Messina, 98122
Italy

University of Milan

Via Festa del Perdono, 7
Milan, 20122
Italy

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