Land grab is not solely a question whether a particular investment contract is legal or not.
Working Paper No. 2012/09
Third Biennial Global Conference
July 12 - 14, 2012
National University of Singapore
NUS Faculty of Law
Centre For International Law
Foreign direct investment in agriculture : Land grab or food security improvement?
Christian Häberli
Senior Research Fellow, NCCR Trade Regulation
World Trade Institute, Bern Switzerland
June 19, 2012
Published by the Society of International Economic Law with the support of the University of Missouri-Kansas City (UMKC) School of Law
This paper can be downloaded free of charge from: http://www.ssrn.com/link/SIEL-2012-Singapore-Conference.html
Introduction
“Large-scale acquisition of land by foreign investors” is the correct term for a process where the verdict of guilt is often quicker than the examination. But is there something really new about land grab except in its extent? In comparison with colonial and post-colonial plantation operations, should foreign investors today behave differently? We generally accept coffee and banana exports as pro-growth and pro-development, just as for cars, beef and insurance. What then is wrong with an investment contract allowing the holder to buy a farm and to export wheat to Saudi Arabia, or soybeans and maize as cattle feed to Korea, or to plant and process sugar cane and palm oil into ethanol for Europe and China? Assuming their land acquisition was legal, should foreigners respect more than investment contracts and national legislation? And why would they not take advantage of the legal protection offered by international investment law and treaties, not to speak of concessional finance, infrastructure and technical cooperation by a development bank, or the tax holidays offered by the host state? Remember Milton Friedman’s often-quoted quip: the business of business is business! And why would the governments signing those contracts not know whether and which foreign investment projects are best for their country, and how to attract them?
Besides, foreign investors are not the only land grabbers. There are many similar practices by absentee landowners in South America or South Asia, or by Israeli settlers in occupied Palestinian territories. This chapter tries to show that land grab, where it occurs, is not only yet another symptom of regulatory failures at the national level and a lack of corporate social responsibility by certain private actors. National governance is clearly the most important factor. Nonetheless, I submit that there is an international dimension involving investor home states in various capacities. The implication is that land grab is not solely a question whether a particular investment contract is legal or not.
Since about 2008, advocacy groups have drawn attention to numerous cases of what they consider as land acquisitions with a doubtful legal basis, especially in so-called weak states. Economic studies as far back as 1989 had shown the advantages and the intrinsic distortions of agricultural FDI in a food security perspective (Drèze and Sen 1989) and taking into account variables such as tenancy, dualistic land ownership distributions, social divisions, and anti-small farmer biased land reforms in poor countries (Binswanger, Deininger and Feder 1993). Since then, numerous impact modelling and assessment studies have been conducted, often with the World Bank economic research programme, and in a land governance
framework (Deininger, Selod and Burns 2011). A recent modelling study concludes that local populations can be better off with agricultural FDI if their government has the necessary negotiating capacity and willingness, and if alternative sources of income are available at a sufficient level of remuneration (Dessy et al. 2011, p.28).
Legal scholars and policy makers lag far behind. The numerous new proposals for codes of conduct, voluntary guidelines and principles for responsible agricultural investment are typically less than three years old, and they tend to focus on the national dimension of land grab. This chapter deals with legal issues which seem to have largely escaped the attention of both human rights lawyers and, especially, of investment lawyers. It addresses this fragmentation between different legal disciplines, rules, and policies, by asking two basic questions: (i) Do governments and parliaments in investor home countries have any responsibility in respect of the behaviour of their investors abroad? (ii) What should they and international regulators do, if anything?
