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Dear Friends and Colleagues

How Investment Treaties Affect Local Land Rights

In a globalised world, as pressures on valuable lands intensify and land relations become more transnationalised, land governance is increasingly shaped by international investment treaties.
A new report explores how these treaties can affect local land rights, especially in low- and middle-income countries.

The report finds that investment treaties can have far-reaching implications on land reform, public action to address “land grabbing” and land governance frameworks. It cites how foreign investors have relied on investment treaties to bring international dispute settlement proceedings against states, challenge land reform before national courts, and seek significant amounts in compensation. It highlights the stark contrast between the stringent legal protection accorded to foreign investors and the legal insecurity to which many rural people are exposed.

The report provides several recommendations for policy and practice. These includes calling on governments to upscale efforts to improve national land governance through implementing the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the context of national food security. It also charts directions for further socio-legal research to explore how investment treaties are affecting land rights on the ground.

The Executive Summary of the report is reproduced below.

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LAND RIGHTS AND INVESTMENT TREATIES: EXPLORING THE INTERFACE

Lorenzo Cotula
International Institute for Environment and Development(IIED)
http://pubs.iied.org/pdfs/12578IIED.pdf

Executive Summary

Land governance, local to global

The spread and deepening of economic globalisation has highlighted the ever closer connections between the international legal arrangements governing the global economy on the one hand, and claims to land and natural resources on the other. In a globalised world, land governance is shaped by international as well as national regulation. As pressures on valuable lands intensify and land relations become more transnationalised, increasing recourse to international investment treaties – the treaties concluded between two or more states to promote cross-border investment flows – is redesigning spaces for land claims at local and national levels.

Over the past few years, investors have relied on investment treaties to bring a growing number of international dispute settlement proceedings against states. In some of these proceedings, investors have challenged the legality of state conduct linked to land governance, and sought significant amounts in compensation.

The measures challenged included land reform programmes, handling of farm occupations and termination of land transactions. Investors have also wielded investment treaties to challenge land reform before national courts, while governments have invoked them to resist indigenous peoples’ restitution claims targeting land owned by foreign investors.

These connections between land rights and investment treaties are likely to become increasingly prominent in the coming years, compounded in many locations by the growing pressures on land from mining and petroleum projects, agribusiness investments, special economic zones, tourism developments and infrastructure projects. The recent wave of large-scale land deals for plantation agriculture in low and middle-income countries (“land grabbing” in the critical literature) could result in more investors bringing claims for land-related disputes.

Despite its growing importance, the interface between land rights and investment treaties remains poorly understood, caught between preconceived positions and limited in-depth analysis. A better understanding of that interface can help to rethink land policies and investment treaties, at a time when both are forming the object of much international debate.

This report sheds light on how investment treaties can affect land rights. It draws on the legal analysis of investment treaties and how international tribunals have interpreted them. The report finds that investment treaties can have far-reaching implications for land reform, for public action to address “land grabbing” and more generally for land governance frameworks. The report also charts directions for socio-legal research to explore how investment treaties are affecting land rights on the ground.

Land rights and investment treaties: a far-reaching interface

Investment treaties establish standards of treatment primarily aimed at protecting foreign investment against adverse state conduct. They allow investors to seek compensation for state conduct that breaches those standards, by bringing investor-state arbitration claims to international arbitral tribunals. In some respects, investment treaties reinforce international policy guidance setting parameters for quality in land governance and reform processes.

But important distributive issues are also at stake, because investment treaties can protect the landholdings of foreign investors against the legitimate land claims of indigenous peoples, small-scale rural producers, the landless and more generally poor and marginalised groups. By increasing the cost of land redistribution, restitution or tenure reform, or of public action to address “land grabbing”, investment treaties could enter into tension with progressive land policies – including measures to implement recently developed and widely supported international guidance on responsible land governance.

Investment treaties typically recognise that states have the right to expropriate land in order to implement land reform. But they can also establish compensation requirements that go beyond the standards applicable under national law, and even international human rights law. At scale, applying these more stringent requirements without considering historical injustices that may have occurred, and without the flexibility allowed by international human rights law, can make it very costly, and in that sense more difficult, for states to redistribute or restitute land, or to reform land tenure regimes.

In relation to “land grabbing”, the legal protections enshrined in investment treaties risk compounding any shortcomings in national governance. For example, investment treaties could protect one-sided land deals that comply with national law but dispossess rural people; a mechanical application of investment treaties might enable investors to obtain compensation at full market value, even if they acquired the land at less than market price; and the doctrine of “legitimate expectations” could expose governments to liabilities for promises that public officials made to investors before consulting communities. As states and non-state actors take measures to tackle “land grabbing” and improve governance, the public purse may have to shoulder the full costs that result for agribusiness companies.

Most investment treaties enable states to regulate the acquisition of land rights by foreign investors. But depending on their formulation, “pre-establishment” investment treaties can require states to remove restrictions on the acquisition of land rights that treat foreign investors differently from local nationals. This could foster commercialisation of land relations in places where land has important social, cultural and spiritual value. Investment treaties could also expose governments to liabilities for conduct caused by limited capacity in administrative or judicial authorities.

Some recent international jurisprudence provides pointers on how arbitral tribunals can consider the complexities of land relations in investment disputes – for example, by excluding from protection investments made through corruption or other illegality, or by considering whether investors were aware of the tenure risks when they made the investment. But important questions remain, and much depends on how these lines of jurisprudence will evolve in the coming years.

Empirical evidence on the actual extent to which investment treaties are affecting land rights on the ground remains limited, not least because information is not in the public domain and methodological challenges are at play. There is a need for sociolegal research on the operation of investment treaties, including in situations that do not result in publicly known arbitrations and as such remain below the public radar.

However, the analysis of legal frameworks and the growing body of investor-state arbitrations do highlight the multiple channels that can connect international investment treaties to local land rights. They indicate that investment treaties can affect how the costs of socially desirable land governance action are distributed among public and private actors. They also highlight the stark contrast between the legal protections accorded to foreign investment, and the legal insecurity to which many rural people are exposed worldwide.

As pressures on the world’s natural resources bring competing land claims into contest, imbalances in the law regulating foreign investment raise probing questions about whose rights are being protected and how. Land rights are essential in realising human rights in many contexts, so addressing these imbalances is not just a matter of policy choice, but a human rights imperative.

Recommendations for governments

As the primary actor in land governance and investment treaty making, governments should:

-  Carefully think through their policy choices about whether to conclude, terminate or renegotiate investment treaties, and in what form, including through systematic reviews of existing investment treaties and their actual and potential ramifications.

-  Promote transparency in investment law and arbitration, to enable more inclusive policy choices and facilitate better monitoring of the ways in which investment treaties affect land rights.

-  Consider the implications of existing investment treaties when designing and implementing land governance action, to avoid or mitigate liabilities through well thought out conduct.

-  Expedite and upscale efforts to improve national land governance, through implementing the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security.

-  If new investment treaties are negotiated, consider treaty formulations that align investment treaties to pursuit of sustainable development; that align compensation standards to national constitutions and international human rights law; that commit both host and home states to implement the Voluntary Guidelines on the Responsible Governance of Tenure; and that spell out investor obligations to comply with applicable law and possibly specified international standards.

-  Ensure that they have the capacity to comply with any investment treaties they conclude; and where capacity challenges exist, consider treaty formulations that recognise the differentiated capacities of the states parties.

Recommendations for parliaments, social movements, civil society, researchers and donors

Land is eminently political, and often emotive. Choices on whether to conclude, terminate or renegotiate investment treaties, and in what form, are also political. Legitimacy of political choices rests on inclusive and informed debate. So addressing the interface between land rights and investment treaties is not a government job alone:

-  Parliaments should claim an important role in investment treaty making, using any constitutional powers they may have in relation to investment treaties and more generally holding debates, asking questions, raising issues, tabling motions, expressing policy orientations and prompting the government to consider the issues raised by social movements and civil society.

-  Social movements including organisations of rural people and small-scale rural producers can play a key role in representing and strengthening the voices of their constituents in national and international policy processes concerning both land rights and investment treaties.

-  Civil society organisations should remain vigilant andstep up advocacy on investment treaties and their implications for land rights. They can play a key role in promoting public awareness and debate; advocating and holding governments to account; and developing arrangements for international alliance building and lesson sharing. There is also growing experience with civil society submissions to raise public and grassroots concerns in investor-state arbitration proceedings.

-  Researchers should strengthen the evidence base to facilitate informed policy debates and choices. There is significant scope and need for in-depth case studies on the ways in which investment treaties operate in real-life situations, including situations that do not result in publicly known arbitrations; on the bearing that these treaties can have, directly or indirectly, on decision-making processes; and on approaches to handle possible tensions between competing policy objectives.

-  Donor agencies should support the efforts of governments, parliaments, social movements, civil society and researchers, through both technical and financial support.

Final remarks

The interface between land rights and investment treaties highlights the need to place discussions aboutinvestment treaties in a wider context. Investment treaties protect foreign investors and their investments, within a bilateral relationship between investor and government. But land-based investments can involve or affect other actors too, including aspiring land reform beneficiaries and people who may lose land to business ventures. Multiple national and international legal instruments apply, and an exclusive focus on investment treaties risks producing biased outcomes, even in reform efforts.

These considerations require giving proper thought to the overall legal frameworks that govern land and investment, of which investment treaties are but one important part. Protecting the land claims of some, without also taking action to protect different and potentially competing land claims, can entrench imbalances in both legal rights and power relations. In the longer term, solutions should lie less in legal arrangements that insulate foreign investment from shortcomings in national legal systems, and more in establishing fair and effective land governance that can cater for the needs of all.

 


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