Investment treaties could mean governments bear big financial costs contesting 'land grabs'

Investment treaties may be exposing governments to legal cases that could result in disproportionately high levels of financial compensation for foreign investors, according to new research from the International Institute for Environment and Development (IIED), which highlights the vulnerability of land rights in low and middle income countries.

IIED has undertaken the first thorough assessment of the legal issues surrounding the interface between land rights and investment treaties, in an attempt to help further understanding of the vulnerabilities they create for indigenous people, local communities and governments alike.

The report draws on legal analysis of investment treaties and how international tribunals have interpreted them in relation to land governance issues.

Investment protection and Investor-State Dispute Settlement (ISDS) are proving the most contentious part of the Transatlantic Trade and Investment Partnership (TTIP) debate. Just this week in Strasbourg, Members of the European Parliament have voted on proposed changes to the investment provisions of TTIP.

IIED's report looks at how the many similar treaties already concluded with low and middle income countries could force states to bear the costs of land governance action. 

The protections provided by investment treaties mean that loss of land for multinationals, for example for redistribution or restitution, or public regulation that adversely affects their land-based business ventures, must be compensated by national governments at market rate, regardless of the rate originally paid. This may also include compensation for loss of projected earnings, all to be paid 'without delay' and with interest.

Commercial pressures on land are growing in many locations, increasing the chance that investment treaties may be activated more directly in relation to land rights. Agribusiness investments, mining and extractives, special economic zones, tourism and infrastructure projects are all vying for space on the world’s most valuable lands.  

In recent years, a wave of large-scale land deals for plantation agriculture in low and middle-income countries across sub-Saharan Africa, Southeast Asia and Latin America have been dogged by reports of dispossession and increased land pressures. Many of these land deals were concluded in contexts characterised by weak land governance, triggering vocal calls to improve standards. 

This concern has been reflected in the widespread global support for the Voluntary Guidelines on the Responsible Governance of Tenure (VGGT) of Land, Fisheries and Forests in the Context of National Food Security, the first global instrument to provide guidance on land governance. The report argues that, depending on circumstances, measures to implement the VGGT or improve standards could expose Governments to investor claims. 

The report argues that in a globalised world, land governance is shaped by international as well as national law. Investment treaties can particularly affect land governance in three interlinked areas: land reform, measures to address land grabs and more general land governance systems.

Quick facts

• There are more than 3,000 investment treaties concluded worldwide
• More than 600 publicly known investor-state arbitrations have taken place

Quotes

Lorenzo Cotula, IIED principal researcher (law and sustainable development), said: "The sustained public debate on TTIP is a positive development. But many investment treaties have been approved with little involvement or even awareness from the public, particularly in low and middle-income countries. These are important and long-term policy choices, so there is a need for greater public oversight.

"Investment treaties can have important implications for land governance. As states improve standards for agricultural investments, the public purse may have to shoulder the costs that result for agribusiness companies. There are also concerns that investment treaties risk crystallising historical injustices, particularly in countries where public finances may face harder constraints, in the face of costly arbitration."

Project background

This research was prepared for 'Legal Tools for Citizen Empowerment', a programme to strengthen local rights and voices in natural resource investments in low and middle-income countries.

Further resources

• Recommendations for government: media factfile (PDF)
• Blog by Lorenzo Cotula: Investment treaties, land rights and a shrinking planet
• Download the briefing: Land rights, international law and a shrinking planet
• View and download the full report: Land rights and investment treaties
• View and download the linked report: Democratising international investment law: recent trends and lessons from experience