Legal Investor Protection in the case of Foreign Direct Investment in land in developing countries: conflicts with the human right to food

Hausarbeit, 2010

39 Seiten, Note: 1,3


Table of contents

List of acronyms

1. Introduction
1.1 Research Problem and Utility
1.2. Definitions
1.2.1 Foreign Direct Investment (in land)
1.2.2 Food Security and the right to food

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

III. Competing Legal Regimes in the context of FDI in land
3.1 International regime of investor protection
3.2 Food-related international human right regime
3.3 The right to food in the context of protected foreign investment in land
3.3.1 Principles of international investment law and food related human right norms
3.3.2 Structural causes for the supremacy of international law

IV. Code of Conducts as a mean to preserve and fulfill the Right to Food
4.1. General approaches of Code of Conduct
4.2. Discussion

V. Conclusion



List of acronyms

illustration not visible in this excerpt

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 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.[5]

1.2. Definitions

1.2.1 Foreign Direct Investment (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).

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.

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

Current evolvements

It is estimated that since 2006 15 to 20 Million ha of farmland[7] has been acquired or sought by foreign investors (v. Braun/Meinzen-Dick, 2009). Some of these deals have led to an interest in public media and by many scholars, policy institutes and NGOs. Supposable, the best-known case is the so called ‘Daewoo affair’[8] in Madagascar in the year 2009 which probably contributed to the overthrow of the government due to civil strife. (ODDO Securities 2010, 11). However, there is lots of opacity in scope, design of contracts, actors as well as planned and executed investments (Smaller/Mann 2009, 2 et seq.)

The main target countries are developing or least developed countries in Southeast Asia and Africa, especially Sub-Sahara Africa. Indeed, there are also investments in Latin America and Eastern Europe. The biggest deals and most interest in investments are coming from Gulf States, South Korea and emerging economies such as China and India. Investments occur by purchasing or long-term leasing up to 99 years. (GTZ 2009, 12). However, private investors from OECD countries have turned their attention to land acquisition due to the new demands from bioenergy in the EU and the United States. Land and soft commodities have become attractive investments (Daniel/Mittal 2009, 5).

The investors in the field of FDI in land are primarily private (investment companies, private equity managers and hedge funds), but governmental actors play a pivotal role due to the fact that governments can facilitate the achievement of deals significantly, e.g. public-private partnerships (ODDO Securities 2010, 10). An example of such deals gives the website, maintained by the NGO GRAIN, in order to provide civil society with information. Reports show how governments facilitate commercial farming, e.g., the India in case of investments by non-agricultural companies like the Tata Group that seeks to invest in land in Uganda. According to this report, about 70 Indian companies are involved in projects in Ethiopia, Malawi, Kenya, Uganda, Liberia, Congo and Rwanda. (Duttagupta/ Ghosal 2010). Besides the possibility of intergovernmental negotiations, governments of investors can frame an overall investment environment based on principles of international investment law, e.g. by BITs, while governments in host states are typically engaged in negotiations and adjust the domestic legal framework to the needs of investors (GTZ 2009, 14). Furthermore, state owned sovereign wealth funds are engaged in the agricultural sector by granting financing facilities to private investors while state-owned enterprises invest directly in large-scale land projects. (Cotula et al. 2009, 30 et seq.).

Key drivers

The two principal motives for the rise in FDI in land can be reduced to the motives of food security and energy needs. China only possesses 10% of the worldwide arable land, but has to feed 20% of the world population. The same applies for the Gulf States, or for South Korea (ODDO Securities 2010, 7 et seq.). Population growth worldwide pressures food security in many countries. “According to UN forecasts there will be more than 9bn mouths to be feed by 2050” (ODDO Securities 2010, 12). Agricultural land is not infinitely and better crop yields are insecure. Due to the high level of urbanization, arable area is reduced and productive forces like labor are detached from the agricultural sector. These urban masses are dependent from the delivery of food. Changing eating habits, particularly the consume of more meat, contributes to high incentives to grow more crops for feed (ODDO Securities 2009, 12).

The other big driver is the promise of energy security. Countries like the United States, Brazil or the European Union have established compulsory rates for biofuels. Countries with suitable soil and climate conditions are therefore on the target lists of foreign investors. These policies will contribute to price increases for foodstuff. Lampe assumes that with “an additional 60 million tons of wheat and coarse grains estimated to go into ethanol production by 2014 in the EU and in North America (…) world wheat and maize prices are projected to be some 5% and 7% higher than without growth in biofuel production” (Lampe 2007, 235 et seq.).

The competition on land between food, feed and fuel is discussed controversial, but appears to be crucial in light of recent developments: First, the food crisis in 2007 and 2008 “led to a special focus on food security in particular for food importing countries and their dependency on the world markets” (GTZ 2009, 13). The rising food prices, also spurred by export restrictions from food exporting countries such as Argentina, have contributed to national strategies to produce food abroad in order to be more independent of imports and of the volatility of global food prices (Rudloff 2009a; 43 et seq.). Second, the financial crisis of 2008 and 2009 urged analysts, fund managers and investors to watch out for new option to speculate. The scarcity of farming land and water on the supply side and the growing demand on agricultural commodities have increased the attractiveness of land significantly. The expectation of rising levels of prices for agricultural commodities contributes to high prices for ‘soft’ commodities and to the run for cheap land in developing countries in order to grow food or energy crops (Daniel/ Mittal 2009, 4).

Other reasons for the incentives on FDI in land are trade liberalization, free trade agreements (FTA) and reforms of national agricultural policies. Many developing countries were encouraged to draw up a PRP or to undergo a SAP by the IMF and the World Bank in order to receive loans. These programs regularly include the prescribed reduction of subsidies in the agricultural sector and the installment of free market policies (Wiggerthale 2009, 18 et seq.). These policies contributed very much to an investor-friendly policy by assuring legal certainty and will be discussed later.

Possible and current effects

The presented economic and financial motives have led to a rise in inflow investment into agriculture, amounted to more than 3bn dollar in 2007, compared to 1bn dollar in 2000 (FAO 2009a). Thus, some positive and negative points or risks and opportunities can be foreseen.

Due to the fact that the agricultural sector has been underfunded for decades with the result of stagnant production and low productivity, FDI in land can “be seen as an opportunity for increased investment in agriculture” (v. Braun/ Meinzen-Dick 2009, 2). International organizations like the World Bank and FAO, specialized agencies such as IFAD and research institutes like IFPRI highlight the possible opportunities for host countries. Among the potential benefits are “the creation of a potentially significant number of farm and off-farm jobs, development of rural and poverty-reducing improvements […] positive spillovers include resources for new agricultural technologies and practices as well as […] increased production of food crops that could supply local and national consumers […](v. Braun/ Meinzen-Dick 2009, ). The achievement of these benefits are provided by a pro-poor, sustainable win-win strategy that take care of the needs of small-holder farming (Haralambous et al. 2009, 8). In this context, alternative investment measures such as contract farming[9] are promoted by these organizations that further rural development (Haralambous et al. 2009, 8 et seq.). The later discussed CoC is the overall approach for mitigating risks and seizing opportunities in order to achieve a win-win policy.

Other researchers, institutes and NGOs emphasize the potential threats that large scale land acquisitions can bring to rural people´s livelihood, however this is also not neglected by the group of “win-win promoters”. As v. Braun and Meinzen-Dick (2009, 2) states that “the bargaining power in negotiating these agreements is on the side of the foreign firm […]”. In many developing countries formal land titles are not common. Land leases on “surplus” land does not mean that land is unused or unclaimed. Due to their informal land rights, “the poor run the risk of being pushed off the plot in favor of the investor without consultation or compensation” (v. Braun/Meinzen-Dieck 2009, 2). Land tenure[10] is a political issue and the change of use can involve negative effects on food security and contribute to socio-political instability. If investments compete with smallholder agriculture the latter are probably seriously affected. Land degradation, depletion of water resources and other adverse environmental impacts as well as the increasing dependency on food imports can displace small-scale farmers and peasants (FAO 2009a). This raises political, social and ethical concerns in food insecure countries where traditionally most people live in rural areas and work in the agricultural sector. For instance, in Madagascar more than 80% of the total workforce are employed in the agricultural sector (World Bank 2005), while 76% of the rural population are poor in contrast to 52% in urban areas (IFAD 1999).

In sum, domestic food security can be affected positively or negatively in all dimensions by FDI in land. However, the benefits to local communities depend on how investment projects are designed and managed, e.g. if the project generates fair paid employment opportunities. Likewise, the state responsibility is pivotal in order to secure benefits and to fulfill the right to food. Yet, the structural conditions for the ability to fulfill these responsibilities and obligations have to be identified. The investor protection regime is crucial to understand the structural causes in order to assess the impact of FDI in land for the right to food.[11]

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

3.1 International regimeof investor protection

The current investor protection regime that is crucial for FDI in land has been developed in the last decades due to the fact that a sovereign host state has in principle the power to threaten the investment in different ways. The common ground for an investor-friendly legal environment “lies in the recognition that […] an appropriate degree of stability and predictability of policies form the governmental framework for domestic economic growth and […] the willingness of foreign investors to enter the domestic market” (Dolzer/Schreuer 2008, 11). This notion emerged with the so-called Washington Consensus[12], the concept of economic liberalism as the prevalent development model.

In the decades before the Second World War debates circled around the question of expropriation. Calvo presented his doctrine that foreign property should be treated like property guarantees for nationals, but he remained in the margin of the discipline. Opposed to this view, Hull wrote that according to international law, an expropriation of foreign property requires ‘prompt, adequate and effective compensation’ (Dolzer/Schreuer 2008, 12 et seq.). Between 1945 and 1990 there were various confrontations about questions of expropriation and compensation between newly independent developing countries, claiming for strong sovereignty and applying the Calvo doctrine, and capital-exporting states relying on customary law and the Hull formula. The culmination of this battle was in the UN General Assembly in 1974 with the resolution for a ‘New International Economic Order’[13], claimed by the developing nations (Dolzer/Schreuer 2008 14 et seq.).

After this period of insecurity about customary international rules, the Washington Consensus became the predominant economic model. The emphasis on the role of private investors for the benefit of developing economies led to enforced investment protection. The Hull rule “became a standard element of hundreds of new bilateral investment treaties […]”(Dolzer/Schreuer 2008 16). Until 2003 almost 2300 BITs have been concluded, encompassing 176 countries (UNCTAD, BITs database 2010).

The fundament for this BIT regime was laid by OECD efforts in the 1960s for a multilateral treaty that came not into force. However, the World Bank wanted to address the legal framework of foreign investment and could establish a body for the settlement of disputes in 1965, the ICSID. This body was quite innovative with the feature of investor-state arbitration under international law which restricts state immunity. Since 1990 the number of cases increased heavily. Of the 357 known disputes, 225 were filed with ICSID. (UNCTAD 2010, 2 et seq.)

The focus nowadays is on understanding and interpretation of treaties on foreign investment. As states denounce a part of their sovereignty for economic growth and more FDI, there are manifold legal debates and conflicts on case law and customary law. The most important standard protection mechanisms that have been included in BITs and FTAs like NAFTA are Fair and Equitable Treatment (FET), Full Protection and Security, settlement of disputes[14], an umbrella clause[15], Most-Favored Nation Treatment[16], National Treatment and the Protection from Expropriation and Compensation (Dolzer/Schreuer 2008, 89 et seq.). The latter principle are the core of investment treaties. While direct expropriations have become rare, indirect expropriations that deprive the investor to utilize the investment are more common. However, the duty to pay a compensation (prompt, adequate, effective) is legal for direct and indirect expropriation which are ‘measures tantamount to a nationalization or expropriation’ (Herdegen 2008, 259). If general regulatory measures by the host state or issues of control of an enterprise may amount to an expropriation depends on case law by tribunals such as ICSID. Another issue of expropriation are legitimate expectations on the part of the investor. Changes in the host state´s legal system may affect a FDI and violate legitimate expectations. They also play a key role in the interpretation of the FET standard (Dolzer/Schreuer 2008, 92 et seq.).

The FET standard can be identical to the minimum standard of customary international law. The ICSID sees the standard as an expression of the good faith principle that protects the legitimate expectations of the investor (Herdegen 2008, 257) Thus, the standard leaves room for governmental regulation, but “[…] will narrow down the discretionary space available to the host state” (Dolzer/Schreuer 2008, 149).

The standard of Full Protection and Security aims to protect the investor against physical violence and harassment. However, the contemporary understanding includes also guarantees for legal security against infringement of the investor rights (Dolzer/Schreuer 2008, 149 et seq.).

National Treatment is also one of the core standards of BITs. The purpose of the standard is “[…] to make no negative differentiation between foreign and national investors when applying its rules and regulations […]” (Dolzer/Schreuer 2008, 178). Though, positive differentiations are possible which is very often stated in BITs by the word ‘no less favorable’ (Dolzer/Schreuer 2008, 178).

Other standards in BITs are legal rules which are applicable to extraordinary events such as social and economic disorder (Emergency, Necessity, Armed Conflicts, Force Majeure). The host state has to protect the interests of the investor practicable under the circumstances against violence. Force majeure occurs when the host state loses control over a situation (e.g. civil war) and is not able to perform its obligations. (Dolzer/Schreuer, 2008 166 et seq.).

Current trends in treaty practice are efforts by the OECD and the WTO for a multilateral investment treaty to provide an alternative to the current patchwork of BITs, although both initiatives came to an halt. The WTO Agreement of 1994 already embodied the so-called TRIMS agreement in order “[…] to regulate those aspects of foreign investment that led to direct negative consequences for a liberalized trade regime” (Dolzer/Schreuer 2008 26).

Efforts of the UN to include human rights obligations to investors failed in the past or lack a legally binding character. The OECD adopted Guidelines for multinational enterprises which are voluntary and include issues on labor, human rights and environment. However, these efforts lack the wide support of governments and the conclusion of a future agreement remains uncertain (Dolzer/Schreuer 2008 25).

Members of the World Bank Group that protects and promotes FDI, are the Multilateral Investment Guarantee Agency (MIGA) and the International Finance Corporation (IFC). MIGA provides political risk insurance for foreign investments. The IFC mainly allocates loans for investing projects in developing countries (UNCTAD 2008, 189). Both cooperate with the Foreign Investment Advisory Service (FIAS), a service of the World Bank for improving business environments. They define and implement strategies to promote investment through technical assistance, e.g. the newly established Investing Across Borders initiative which provides services for accessing land (Daniel/Mittal 2010, 14)

Clearly, governments are part of the investor protection regime by providing an investor-friendly environment. In 2007, the government of Madagascar developed with the assistance of the IMF and the World Bank a Poverty Reduction Strategy Paper, the so called Madagascar Action Plan, with a clear focus on attracting FDI for a high growth economy (MAP 2007, 11). The measures include the implementation of new laws on investment, the cutback of impediments to FDI, the promotion of BITs and the creation of a land bank for agribusiness (MAP 2007, 86). The FDI inflows of Madagascar have skyrocketed from 294 Million dollar in 2006 to 1.18bn dollar in 2008 (UNCTAD 2010, Madagascar). As van Harten (2005, 612) states: “the system of investor protection is the child of states”, although we have to consider that TNCs play a central role in the emerging protection regime. The investor lobby, particularly of major capital-exporting states promoted the current regime in which TNCs can sue states for damages before tribunals based on liberal standards of investor protection (van Harten 2005, 612).

In Chapter 3.3 the presented investor protection regime is compared to the below described Right to Food Regime in the context of FDI in land.

3.2 Food-related international human right regime

In 1945 the FAO was established as an international organization in the UN that seeks to cover the vast range of food, hunger and malnutrition issues. Since then specific instruments and institutions such as IFAD have been installed. “These international agencies have contributed substantially to shaping the norms which govern the international food regime” (Alston 1984, 14). The widespread acceptance in the international community of these norms, first and foremost the right to food[17] as a relevant principle of international law, led to manifold declarations. States recognized the existence of the right by treaty obligations, customary international law principles or by established practice. However international economic law in general stands insulated from the references of this human rights (Alston 1984, 14).

The right to food has been formalized in diverse human rights instruments. The UN Charter Art. 56 remarks that all states members accept the international legal obligation to achieve in joint and separate action the purposes of Art. 55 like higher standards of living, conditions of economic and social progress and development, and respects for human rights inter alia. The UNDHR took this approach in the Charter and refers to the right of food in Art. 25(1). The binding character of the Declaration is widely accepted, although it was first conceived by most states mere as a common standard of achievement than as international law per se (Alston 1984, 21 et seq.).

The adoption of the ICCPR and the ICESCR by the GA in 1966 was the crucial step in the emergence of a food-related human rights regime. Art. 1 of both Covenants state that “all people have the right to self-determination” and chose their economic, social and cultural development (Art. 1(1)). The enjoyment of this right is basic to the enjoyment of the right to food and vice versa (Alston 1984, 22 et seq). The ICESCR in its Art. 11 is clearly the hallmark of the right to food due to the fact that it is signed by more than 160 states and is very detailed and specific. Furthermore, it disposes of a mechanism to monitor state compliance (Alston 1984, 29). Art. 11 states:

1. The States Parties to the present Covenant recognize the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, […]. The States Parties will take appropriate steps to ensure the realization of this right, recognizing to this effect the essential importance of international co-operation based on free consent.

2. The States Parties to the present Covenant, recognizing the fundamental right of everyone to be free from hunger, shall take, individually and through international co-operation, the measures, including specific programmes, which are needed:

(a) To improve methods of production, conservation and distribution of food by making full use of technical and scientific knowledge, by disseminating knowledge of the principles of nutrition and by developing or reforming agrarian systems in such a way as to achieve the most efficient development and utilization of natural resources;
(b) Taking into account the problems of both food-importing and food-exporting countries, to ensure an equitable distribution of world food supplies in relation to need

According to Alston (1984, 32) the specific of Art. 11 is the acknowledging of a “fundamental” right to be free from hunger (Para. 2), the emphasizing of “international co-operation” (Para. 1 and 2) and the concept of “equitable distribution…in relation to need” in Para. 2b.

Like any other human right, the right to adequate food imposes obligations on states to respect (not to prevent the access to adequate food), to protect (measures by the state to ensure that individuals are not deprived to their access to adequate food by other individuals or companies) and to fulfil (facilitate and provide the utilization of resources and means to ensure food security) (CESCR 1999, Statement 15).

The primary norm of Art. 11 is the right to adequate food. The principal objectives of this are the improvement of methods of food production, conservation and distribution by developing agrarian systems among other measures. The principal beneficiaries of the right to food are individuals (Art. 1(1): “the right of everyone”). States clearly have the obligation to co-operate in order “[…] to ensure an equitable distribution of world food supplies” (Art. 11(2a,b)) (Alston 1984, 32 et seq.) and represent the main duty-holders based on the “[…] fundamental obligation of each state party […] to take steps […] with a view to the progressive realization of the right of everyone […] to adequate food” (Alston 1984, 37). Obligations of State Parties to the ICESCR include the adoption of a national food strategy, to monitor the extent of hunger and to take measures that people are not deprived of its own means of subsistence (Art. 1 (2)) ( (Alston 1984, 39 et seq). States also have external duties like food aid, based on free consent as well as a duty to ensure an “equitable global distribution” (Art. 11(2)b)) and careful consideration of the impact of food policies and TNCs according to Art. 1(2) (Alston 1984, 40 et seq.).

The ICESCR came into force only in 1976 while there was little attention to the right to food in human rights forums, although food was a key issues during the debates of a new international economic order (Alston 1984, 40).In 1985 the CESCR was established to overtake monitoring functions, e.g. all states are obliged to submit regular reports on how the rights are being implemented (CESCR, 1985) Furthermore in the year 2000, a Special Rapporteur on the right to food has been appointed by the Commission on human rights (CHR) which is mandated to cooperate with international organizations, states and NGOs in order to promote and implement the right to food (Human Rights Council 2000). In 2001, the political action plan of the Millennium Development Goals were announced with the target “to halve the proportion of people who suffer from hunger” (MDG 2001) A target which derived from the right to food.

International agencies which are committed to promote the right to adequate food have only contributed marginally to the fulfillment of this right. No legally binding instruments have been promulgated while the policies promoted often had the effect of greater dependency on export markets that put the right to food at stake (Alston 1984, 48). Indeed, to issues of agrarian reform and rural development have been paid more attention in recent years. The FAO´s Voluntary Guidelines to support the progressive realization of the right to adequate food in the context of national food security [18] and other proposals [19] are efforts on this way. Likewise, World Food Summit Declarations pay attention to these developments and reaffirm that states have the duty to reform agrarian structures with taking into account that rural people have the right to benefit from these reform policies (Plant 1984, 189 et seq.)

The food related human rights regime also intersects with the right to development. The Declaration of the Right to Development states in Art. 8(1) “the equality of opportunity for all in their access to […] food […]. Derived from the right to development the UN Declaration on the Rights of Indigenous People does not mention a right to food explicitly, but the norm is included in Art. 20 (“the enjoyment of their own means of subsistence and development). Art. 3,4 and 23 emphasizes the concept of self-determination in terms of their right to development and the entitlement of the right to the lands that they traditionally own (Art. 26). Art. 8b claims that states should prevent the deprivation of the lands of indigenous people in order to protect their means of subsistence.

In the context of FDI in land, the alienation of property is crucial as the following chapters will show.

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

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

As in Chapter 3.1 mentioned, the investor protection regime can limit the ability of state´s sovereignty to take action in the public interest that threatens the investment. Therefore, the balancing of legal investment protection with public interests, particularly with the right to food, in the context of FDI in land is a tough issue that raises questions of national sovereignty and state responsibility, land tenure issues, power relations between investor, state and local people and economic questions in the light of the right to food and the right to development inter alia (Cotula et al. 2009, 89).

At stake are questions of distribution and allocations due to the commodification[20] not only of crops but also of land. As the right to food is a claim of individuals on society, that starts with the obligation on the state but includes the international community as well, it is crucial to shed light on the question which relevant legal issues are concerned with FDI in land.

Three sources of law are relevant in the context of FDI: domestic law, international investment contracts and IIAs. As domestic law concerning land and water rights is often unclear and international treaties and contracts in most cases fail to address social dimensions, the international law framework provides hard rights to investors in contrary to the right to food which is not directly enforceable by law (GTZ 2009, 18). Even if clear land and water rights exist in domestic law, there is often no enforcement. According to Smaller and Mann (2009, 9) foreign investor´s rights in domestic law is designed explicitly, while subsistence farmers have ill-defined land tenure rights. “This leads to a layering of international law over domestic law, with significant impacts” (Smaller/ Mann 2009, 8). However, in Art. 1(2) of the ICESCR which states that all peoples may decide over their natural wealth and resources, the final sentence of the paragraph claims that “In no case may people be deprived of its own means of subsistence.” which can be directly applied to the right to food in the context of FDI in land.

Access to land plays a key role for rural people, particularly for indigenous people. Loss of access to land or forced eviction[21] puts the right to food for the affected rural population at stake. The right to self-determination in Art. 1(1) of the ICESCR and in the UN Declaration on the Rights of Indigenous People Art. 3 could arguably be violated if a government permits “the exploitation of the country´s food-producing capacity (natural resources) in the exclusive interest […] of foreign (public or private) corporate interests, while a large number of the State´s inhabitants […] are malnourished” (Alston 1984, 23). The right to self-determination has a strong link to ensure food self-reliance. The notion of ‘underutilized” or idle land is critical due to the fact that there is some form of traditional land use which is not regarded by market interests of actors. FDI in land can deprive local poor “of this safety net function that this type of land and water use fulfills (v. Braun/Meinzen-Dick 2009, 2).


[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

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

[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)

[7] In comparison: The farmland of Germany: 16.8 million ha (2005), (GTZ 2009, 9).

[8] The South Korean Group Daewoo Logistics were in negotiations with the Government of Madagascar for a 99 years lease on 1.3 Million ha land; The project was later cancelled by the interim government (Oddo Securities 2010, 11).

[9] Contract farming is a model of investment where the farmer agrees to provide certain quantities of a given agricultural product. The buyer agrees to purchase the product and will in some cases supply material or technical inputs (ODDO Securities 2010, 26).

[10] Tenure is the complex relationship among people with respect to land and its resources, and access to land and other natural resources is defined by the rules of tenure. This relationship may be defined by written law or by custom.[…] […]tenure systems determine who can use what resources of the land for how long, and under what conditions (FAO 2009c, 5)

[11] According to Krasner, an international regime is defined as a set of „implicit or explicit principles, norms, rules and decision-making procedures” around which the expectations of relevant actors converge (Krasner 1982, 186)

[12] This model was transposed to PRPs and SAPs of World Bank and IMF. Policy reforms such as trade liberalization, privatization, reducing price controls and subsidies are one of the measures of these programs for developing countries. (Biersteker 108 et seq.)

[13] UN GA Resolution No. 3281, 12 December 1974(Charter of Economic Rights and Duties of States)

[14] In most BITs the settlement of investor-state disputes is submitted to ICSID or UNCITRAL (Herdegen 2008. 261)

[15] An umbrella clause obliges the parties “to observe any obligation it may have entered with regard to investments (Dolzer/ Schreuer 2008, 155).

[16] Most-Favored Nation Treatment „is to ensure that the relevant parties treat each other in a manner at least as favorable as they treat third parties. The scope of the agreement depends on the wording of the clause in the treaty (Dolzer/ Schreuer 2008 186).

[17] The right to food also contains the right to water as the Committee of Economic, Social and Cultural Rights (CESCR) has proclaimed in its General Comment No. 15 in 2002 in Paragraph 4: “Article 11, paragraph 1, of the Covenant specifies a number of rights emanating from, and indispensable for, the realization of the right to an adequate standard of living “including adequate food, clothing and housing”. […] The right to water clearly falls within the category of guarantees essential for securing an adequate standard of living, particularly since it is one of the most fundamental conditions for survival. (CESCR 2002).

[18] Available at:

[19] For instance, the Voluntary Guidelines on responsible governance of tenure of land and other natural resources Available at

[20] Commodification means here the transformation of relationships, formerly untainted by commerce, into commercial relationships, relationships of exchange, of buying and selling.

[21] Forced eviction and arbitrary displacement are not in concordance with the right to adequate housing (ICESCR, Art. 11(1)) (FIAN 2010, 12).

Ende der Leseprobe aus 39 Seiten


Legal Investor Protection in the case of Foreign Direct Investment in land in developing countries: conflicts with the human right to food
Technische Universität Dresden  (Zentrum für Internationale Studien)
Law and Morality in International Relations
ISBN (eBook)
ISBN (Buch)
881 KB
Recht auf Nahrung, Investitionsrecht, BITs, land grabbing, Menschenrechte, ländliche Entwicklung, ICSID
Arbeit zitieren
Martin Kurray (Autor), 2010, Legal Investor Protection in the case of Foreign Direct Investment in land in developing countries: conflicts with the human right to food, München, GRIN Verlag,


  • Noch keine Kommentare.
Im eBook lesen
Titel: Legal Investor Protection in the case of Foreign Direct Investment in land in developing countries: conflicts with the human right to food

Ihre Arbeit hochladen

Ihre Hausarbeit / Abschlussarbeit:

- Publikation als eBook und Buch
- Hohes Honorar auf die Verkäufe
- Für Sie komplett kostenlos – mit ISBN
- Es dauert nur 5 Minuten
- Jede Arbeit findet Leser

Kostenlos Autor werden