Making Agricultural Investment Work for Africa, 4-5 October
2012, Cotonou, Benin
Carin Smaller, IISD csmaller@iisd.org

• Introduction
• Contracts in context: The relationship between the sources of applicable law
• Good contracts: the scope of issues
• Implications and Recommendations

• Domestic law of host state
• Investment contract
• Investment treaty

• IDEAL: comprehensive national laws that make investment contracts unnecessary
• IISD not trying to promote investment contracts or bad investments
• BUT… facing reality:
 Frequent use of contracts in developing countries

2000-2009: 1,217 projects covering 83 million ha of land
• Scope of the study: 60 investment contracts, including
58 from Africa (most are problematic)
• IISD Objective: Improve the quality of contracts

• Domestic law generally not comprehensive in this field in developing countries
– Land rights; water rights; environmental; health and safety; labour rights; indigenous rights; investment rights, incentives, taxation; community rights and benefits; food and water security policies
• Therefore, both treaties and contracts can:
– Guarantee right of investor to all resources necessary to fulfill investment goals
– restrict scope of changes that can be made to domestic law applicable to the investment

–Def’n: a provision that freezes all or part of the domestic laws for the duration of the contract
–Consequences: changes to existing laws or introduction of new laws is either forbidden or investor compensated
Two types:
–Fiscal issues: only fiscal laws are frozen (e.g. taxes and royalties). Often tolerated!
–Non-fiscal issues: Environmental, worker health and safety, human health, water management, etc…). Unacceptable!

GOOD CONTRACTS
PRINCIPLES:
• Use global and regional initiatives as a benchmark
• Must be inclusive of all actors in process
• Must interact carefully with domestic law in host state, set floors, not ceilings for obligations
• Example: Model Mining Development Agreement,
International Bar Association, Mining Law
Committee, April 2011 (www.mmdaproject.org)

Good Contracts
SCOPE:
• Pre-contractual/pre-operational obligations of investors
– Impact assessments (resulting conditions form part of contract)
• Environmental impacts and management plan
• Social impact
• Human rights impact
– Business feasibility study and plan
– Community agreement (free, prior and informed consent)

Good Contracts
SCOPE:
• Water rights for investor
– Domestic water laws versus investment treaties and contracts
– Periodic reviews of water rights and allocations, including obligation to reduce water use
– Water fees and levies

Good Contracts
SCOPE:
• Economic and social obligations of investor
– Transform principles to specific obligations; legallybinding and annual reporting
– Minimum levels of local employment and skills training
– Local economic linkages: goods and services suppliers, value-added industries
– Technology transfer
– Contribution to local community
– Gender and indigenous peoples issues

Good Contracts
IMPLEMENTATION:
– Capacity building for negotiations
– Evaluation and monitoring needs
– Community engagement and review
– Transparency of contracts and annual reporting

• IISD,
Model Investment Treaty
• IISD,
Model Agriculture Contract
• UN Special Representative,
Principles for
Responsible Contracts
• International Bar Association,
Model
Mining Development Agreement
• For contracts: Liberia, Grain
BUT…no perfect model or blueprint, depends on domestic context, laws and regulations