Table of contents

List  of acronyms  

1.  Introduction  1

1.1  Research Problem and Utility  1

1.2.  Definitions  3

1.2.1  Foreign Direct Investment (in land)  3

1.2.2  Food Security and the right to food  3

II.  FDI in land: current evolvements, drivers and consequences  5

III.  Competing Legal Regimes in the context of FDI in land  8

3.1  International regime of investor protection  8

3.2  Food-related international human right regime  10

3.3  The right to food in the context of protected foreign investment in land  13

3.3.1  Principles of international investment law and food related human right norms  13

3.3.2  Structural causes for the supremacy of international law  17

IV.  Code of Conducts as a mean to preserve and fulfill the Right to Food  20

4.1.  General approaches of Code of Conduct  20

4.2.  Discussion  20

V.  Conclusion  23

   Appendix

Literature   

List of acronyms

Art. Article

BIT Bilateral Investment Treaty

Bn Billion

CESCR Committee on Economic, Social and Cultural Rights

CoC Code of Conduct

ECOSOC Economic and Social Council

EU European Union

FAO Food and Agricultural Organization

FDI Foreign Direct Investment

FET Fair and Equitable Treatment

FTA Free Trade Agreement

GA General Assembly

GATT General Agreement on Trade and Tariffs

GTZ Deutsche Gesellschaft für technische Zusammenarbeit

Ha Hectare

IATP Institute for Agriculture and Trade Policy

ICCPR International Covenant on Civil and Political Rights

ICSID International Centre for Settlement of Investment Disputes

ICESCR International Covenant on Economic, Social and Cultural Rights

IFAD International Fund for Agricultural Development

IFPRI International Food Policy Research Institute

IFC International Finance Corporation

IIA International Investment Agreement

IMF International Monetary Fund

MAI Multilateral Agreement on Investment

MIGA Multilateral Investment Guarantee Agency

NAFTA North American Free Trade Agreement

NGO Non-Governmental Organization

ODA Official Development Assistance

OECD Organization for Economic Co-Operation and Development

Para Paragraph

SAP Structural Adjustment Program

TNC Transnational Corporation

TRIMS Trade Related Investment

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

UNDHR Universal Declaration of Human Rights

UNCTAD United Nations Conference on Trade and Development

WTO World Trade Organization

1. Introduction

1.1 Research Problem and Utility

The current trend of investing in land ¹ in developing countries by foreigners provokes wide interest due to amount, intensity, scope and manifold questions that are related to this phenomenon. It is discussed among scientists of politics, law and economics as well as NGOs, international organizations and statesmen. Complex and sometimes controversial economic, political, institutional, legal and ethical issues are raised in relation to property rights, food security, poverty reduction, rural development, technology and rights to water and land (FAO 2009a).

Whilst some experts appreciate the effects of these investments in domestic agriculture as urgent and beneficial, others state in contrast, that the proclaimed win-win situation hazards in fact domestic agriculture production and threatens food security in already food insecure regions and states. Therefore the negative connotation of FDI in land is “land grab” ² in order to express a predacious action of seizure of ownership. A quite new trend in foreign investment, talking about scale and intensity, many investigations lack empirical analysis and empirical value. Furthermore, data about the extension, contracts and consequences of these investments are only available in particular cases. ³ However, some trends are already observable that are worth to discuss and investigate. The key drivers of these investments are identified by import-substitution of food-insecure, but rich in capital nations such as the Gulf States and the biofuel boom in OECD countries. The food and oil price hikes in 2007 and 2008 created further incentives for future investments in lands (Cotula et al. 2009, 52 et seq.). Although international prices for both food and oil lowered in the wake of the financial crisis, uncertainties in food supply due to environmental externalities like water scarcity and extreme weather events affects harvests (Cotula et al. 2009, 53). Recent catastrophes such as the forest fires in Russia and the massive flooding in Pakistan clearly show that unexpected harvest losses are not only a danger for the local population but will also probably lead to higher agricultural commodity prices, intense speculation and to more efforts on acquisition of arable land. Russia imposed an export ban on wheat, while Pakistan relies heavily on food aid for the next months (Amann/Jung 2010).

Besides the economic and political discussion about the benefits or drawbacks of investment in land for domestic food security, there is a legal debate about the possible introduction of a code of conduct (CoC) to channelize investments in order to realize possible win-win situations for both, the investor and the host state and its local people. As this paper will show, such a CoC is disputable, particularly in case of host states and for the local people due to the fact that there is a conflict between different legal

¹ It is an old phenomenon from colonial times that foreigners cultivate cash crops like coffee and cacao in former colonies in Africa,

Asia or Latin America for commercial export; the difference now is that basic food, feed and biofuel is produced for repatriation

(FAO 2009a)

² The term ‘land grab’ similar to FDI in land refers “to the purchase or leasing of vast tracts of land by wealthier countries to create

agricultural operations producing food or biofuels, the aim being to secure long-term supplies” (ODDO Securities 2010, 7).

³ Due to the lack of transparency GRAIN (GRAIN 2008) and IFPRI (v. Braun and Meinzen-Dick 2009) provides one of the few

databases for FDI in land and agreements

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norms ⁴ . For this reason, this paper will show how the different legal regimes developed, precisely how the regime of investor protection and the human rights approach of the right to food emerged and if the right to food is possibly undermined by the standards of investment protection in the context of FDI. The aim in this context is to ask and answer, if the approach of a CoC will safeguard the right to food and in the overall context contributes to the right to development. Alongside the legal and moral debate of this research question, are aspects belonging to the sphere of global political economy. Pivotal in this context are state-market relations and public-private authority demands. For this reason the approach of “Disciplinary Neo-Liberalism and New Constitutionalism” by Stephen Gill will be used to show the political and legal ‘lock-in mechanisms’ and to analyze the political-juridical exertion of the dominant forces of global capitalism, exemplified by foreign investment in land in developing countries. While there is almost no doubt that the current trend of FDI in land is going to prolong and probably will intense and expand, there is a discussion on the economic and social question if these investments can contribute to food security or not. This leads to the moral question if FDI in land are truly supporting domestic development: Will a CoC for FDI in land lead to a self-determined development path in political and legal terms?

The aim of the paper is to give an overview of the current evolvements and to analyze the different legal regimes in order to assess in economic and moral terms the proposals for a CoC. This includes a a general critical analysis of such a CoC. Domestic and international legal systems dealing with FDI and TNCs are considered by their influence for the realization of the right to food. Likewise in the human rights context are declarations related to land rights and questions of distribution and allocation for local people considered.

After a conceptualization of the important concepts, the current status, drivers and consequences of FDI in land will be explained before highlighting the development of the different legal regimes and their conflicting nature. The asymmetrical relationship of these legal regimes will be conceptualized. Afterwards the concept of a CoC for FDI in land in developing countries by contrasting the conflict of the different legal norms of both legal regimes will be briefly explained. The paper concludes in a summary of the important findings as well as an outlook on future trends.

⁴ Norms in this context are defined as “proper understandings of the collective behavior of actors” (Legro 1997, 33)

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1.2. Definitions

1.2.1 Foreign Direct Investment ⁵ (in land)

While there are different and detailed definitions of what counts as a Foreign Direct Investment, the IMF gives a broad description that serves the purpose and scope of this paper well. According to this, FDI

“describes a category of international investment made by a resident entity in one economy (direct investor) with the

objective of establishing a lasting interest in an enterprise resident in an economy other than that of the investor

(direct investment enterprise). “Lasting interest” implies the existence of a long-term relationship between the direct

investor and the enterprise and a significant degree of influence by the direct investor on the management of the

direct investment enterprise.” (IMF 2003, 23)

In legal terms however, “a wide range of activities have been subsumed under the term ‘investment’” (Dolzer/ Schreuer 2008, 69). Covered by a BIT ⁶ or any other treaty are almost always all assets of an investment. In case law the ICSID jurisprudence is based on four criteria for the understanding of an investment: contribution of the investor; certain duration of the project; existence of operational risk; contribution to the host state´s development. The criteria are embodied in Art. 25 of the ICSID Convention (Dolzer/ Schreuer 2008, 68). The German GTZ characterizes FDI in land as follows:

“FDI in land by a foreign company or state is based on a lasting interest in taking control over land use rights. The

transaction includes either rights of land-use or land-ownership. The land-use rights are generally valid for a limited

period and can possibly be extended.” (GTZ 2009, 9)

Although it is not clear, if investors in foreign countries may buy property by themselves or if they acquire shares of a domestic enterprise (e.g. a joint venture with a domestic investor), this working definition is sufficient in the context of this paper.

1.2.2 Food Security and the right to food

The definition of food security created by the World Bank is most commonly used and widely international accepted. According to this definition food security is described as “access by all people at all times to enough food for an active healthy life” (World Bank 1986, 1). This definition not only includes the current status of food security but also vulnerability and coping with food insecurity (Maxwell 2008, 7). Additionally to the aspect of quantity the FAO stresses the quality, diversity and cultural appropriateness of food:

“Food security [is] a situation that exists when all people, at all times, have physical, social and economic access to

sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life”

(FAO 2002a).

For ensuring food security the FAO stresses four aspects: availability, accession, stability and usability (FAO 2005, 5).

⁵ For the sake of simplicity I will not distinguish between foreign investment and foreign direct investment

⁶ According to UNCTAD, BITs “are agreements between two countries for the reciprocal encouragement, promotion and protection

of investments in each other's territories by companies based in either country (UNCTAD What are BITs, 2010)

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In their voluntary guidelines the FAO emphasizes the responsibility of states to fulfill relevant human right obligations under international law: “states have obligations under relevant international instruments relevant to the progressive realization of the right to adequate food” (FAO 2005, 6) The UN Special Rapporteur on the right to food defined that

“The Right to adequate food is a human right, inherent in all people, «to have regular, permanent and unrestricted

access, either directly or by means of financial purchases, to quantitatively and qualitatively adequate and sufficient

food corresponding to the cultural traditions of people to which the consumer belongs, and which ensures a physical

and mental, individual and collective fulfilling and dignified life free of fear.»” (FAO 2002b)

The UNDHR (Art. 25) (UN) encompass the right to food. This right was operationalized by 185 states. Food security as a state responsibility is fixed in Article 11 of the ICESCR. Any other definitions will be explained in the relevant chapter.

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