Food Security and Agri‐Foreign Direct Investment in Weak States: Finding the Governance Gap to Avoid ‘Land Grab’

Published date01 March 2014
DOIhttp://doi.org/10.1111/1468-2230.12062
Date01 March 2014
Food Security and Agri-Foreign Direct Investment in
Weak States: Finding the Governance Gap to Avoid
‘Land Grab’
Christian Häberli and Fiona Smith*
Food security is important. A rising world population coupled with climate change creates
growing pressure on global world food supplies. States alleviate this pressure domestically by
attracting agri-foreign direct investment (agri-FDI). This is a high-risk strategy for weak states:
the state may gain valuable foreign currency, technology and debt-free growth; but equally,
investors may fail to deliver on their commitments and exploit weak domestic legal infrastruc-
ture to ‘grab’ large areas of prime agricultural land, leaving only marginal land for domestic
production. A net loss to local food security and to the national economy results. This is
problematic because the state must continue to guarantee its citizens’ right to food and prop-
erty. Agri-FDI needs close regulation to maximise its benef‌it. This article maps the multilevel
system of governance covering agri-FDI. We show how this system creates asymmetric rights
in favour of the investor to the detriment of the host state’s food security and how these
problems might be alleviated.
INTRODUCTION
Food security is an important policy objective in every country. The World
Bank advocates that states alleviate pressure on their national food security by
attracting foreign direct investment targeted at agriculture (agri-FDI) to address
chronic problems of under investment in agricultural production.1States may get
tax income, new technologies and higher land productivity as well as foreign
*Respectively, Senior Research Fellow, National Centre of Competence in Research – Trade
Regulation, World Trade Institute, Bern University (Switzerland), and Senior Lecturer, Faculty of
Laws, UCL. We are grateful to Christine Kaufmann, Professor of International and Constitutional Law
and Co-Chair of the Centre of Competence for Human Rights at the University of Zurich, for initial
advice on our research project and for alerting us to the activities of the National Contact Points under
the OECD Guidelines for Multinational Enterprises. We also thank Manleen Dugal, independent
consultant on trade policy, for making suggestions for the public interest clause presented in the Annex.
We would like to thank Joanne Scott and our anonymous reviewers for their comments. Any errors
remain our own. This is a substantially revised version of our paper ‘Land Grab and Human Rights:
Mapping Multi-level Governance of Food Security and FDI in Weak States’ e-published and submitted
to the Society of International Economic Law (SIEL) Conference (Singapore, July 2012). Research for
this article was funded by the Swiss National Science Foundation under a grant to the National Centre
of Competence in Research on Trade Regulation, based at the University of Bern’s World Trade
Institute (Switzerland).
1 World Bank, The World Bank Annual Report 2008 Year in Review (2008), glossary. Note, not all
foreign investments qualify as FDI: only those where a foreign actor invests in assets for the
purposes of production: A. Jägerskog, A. Cascão, M. Härsmar and K. Kim, Land Acquisitions: How
Will They Impact Transboundary Waters (Stockholm: Stockholm International Water Institute,
2012) 14 (SIWI Report).
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© 2014 The Authors. The Modern Law Review © 2014 The Modern Law Review Limited. (2014) 77(2) MLR 189–222
Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
currency from the investment;2but, especially in weak states, investors may, for
example, refuse to honour investment commitments3and to abide by domestic
legislation to ‘grab’ large areas of prime agricultural land, evicting farmers
without enforceable tenure rights and leaving only marginal land for domestic
production.4The consequence is a net loss to the state’s food security. This is
problematic when host states lack alternatives and are unable to constrain the
activities of the investor domestically; yet they must continue to meet national
food security policy commitments,5guarantee their citizens’ right to food
and property6and protect the rights of the investor during the course of the
investment.7
Many commentators approach the adverse impact of agri-FDI on the weak
state’s food security from a human rights perspective: that is, they argue that the
weak state, as host state of the investment and primary duty bearer, must provide,
inter alia, for the human right to food (and/or property) of its food insecure
citizens (the rights’ holders).8This approach frames solutions in terms of the duty
of the state to provide appropriate domestic governance structures to guarantee
2 Committee on World Food Security, Policy Roundtable: Land Tenure and International Investment in
Africa (September 2010) FAO, CFS, 2010/7, para 9; L. Colen, M. Maertens and J. Swinnen,
‘Foreign Direct Investment as an Engine for Growth and Human Development: A Review of the
Arguments and Empirical Evidence’ (2009) 3 Human Rights & International Legal Discourse 177.
Some agreements also commit the investor, sometimes with f‌inancial assistance from donor
agencies in its home country, to provide local facilities like schools and hospitals, or generally
available infrastructure like roads: Ibrahim Foundation, African Agriculture-From Meeting Needs to
Creating Wealth (Ibrahim Forum, 2011) 20.
3 For example, in the case of ‘tree farms’ in South Sudan. Center for Human Rights and Global
Justice, Foreign Land Deals and Human Rights: Case Studies on Agricultural and Biofuel Investment
(New York: NYU School of Law, 2010) 16.
4 K. Deininger and G. Feder, ‘Land Registration, Governance, and Development: Evidence and
Implications for Policy’ (2009) 24 The World Bank Observer 233, 238. Other adverse consequences
from the investment may include pressure on available water resources, undermining standards of
living, as well as loss of indigenous land rights when previously occupied land is ‘grabbed’ by the
investor: for an overview of these issues see L. Cotula, S. Vermeulen, R. Leonard and J. Keeley,
Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa
(London/Rome: FAO, IFAD & IIED, 2009). These issues are discussed in detail in the next
section.
5 World Food Summit, Plan of Action, Rome, 13 November 1996, para 1. Amended by the 2009
Declaration of the World Summit on Food Security, 16–18 November 2009, WFS 2009/2,
para 2.
6 O. De Schutter, The Right to Food (A/65/281) United Nations, 11 August 2010. C. Häberli, ‘Do
WTO Rules Secure or Impair the Right to Food?’ in M. Desta and J. A. McMahon (eds), Research
Handbook on International Agricultural Trade (Cheltenham: Edward Elgar, 2012) 70.
7 eg, US Model Bilateral Investment Treaty 2012, Article 5:1 guarantees a minimum standard of
treatment for the investor by the host state.
8 eg, see K. Mechlem, ‘Food Security and the Right to Food Discourse of the United Nations’
(2004) 10 European Law Journal 631; H. Gonzalez, ‘Debates on Food Security and Agrofood
World Governance’ (2010) 45 International Journal of Food Science and Technology 1345; L. Cotula,
M. Djiré and R. W. Tenga, The Right to Food and Access to Natural Resources: Using Human Rights
Arguments and Mechanisms to Improve Resource Access for the Rural Poor (Rome: Right to Food
Studies, FAO & H, 2009). H. Liversage, Responding to ‘Land Grabbing’ and Promoting Responsible
Investment in Agriculture (Rome: IFAD, 2011); V. Vadi, ‘When Cultures Collide: Foreign Direct
Investment, Natural Resources and Indigenous Heritage in International Investment Law’ (2010–
11) 42 Columbia Human Rights Law Review 797.
Finding the Governance Gap to Avoid ‘Land Grab’
© 2014 The Authors. The Modern Law Review © 2014 The Modern Law Review Limited.
190 (2014) 77(2) MLR 189–222
citizens’ human rights. The investor and its home state (where the investor was
incorporated) are neither duty bearers nor rights holders in such analyses and so
solutions are not understood as a duty of the investor/investor home state to the
individual not to infringe their human rights per se.9Instead such solutions
commonly emphasise the responsibility of the investor, inter alia, to undertake
food security impact assessments prior to investing in the host state, or exhort the
home state to exercise its best efforts to restrict companies incorporated in the
state from violating the human rights of the host state’s citizens.10
This rights-based analysis is important, but there is a danger that it can conf‌late
an analysis of the obligation on the host state to guarantee the individual’s right
to food with the host state’s ability to meet that obligation.11 In other words, a
rights based analysis may address the issue from the perspective of the duty on the
state to food insecure individuals, which can underplay the importance of the
many constraints on the state that impede achieving food security more broadly.
A neat line may also be drawn between the legal obligations of the state, the
investor and the investor’s home state, while the reality in practice is much more
blurred.
Approaching the issue from the perspective of food security allows a con-
sideration of the wider web of policy constraints, legally binding obligations
(hard law) and voluntary (soft law) commitments and guidelines that include,
but are not solely restricted to, the rights to food and property that rest on the
host state vis-à-vis its citizens, the investor and the investor’s home state.12 A
fuller picture emerges of the problems created by agri-FDI on the weak host
state encompassing the commitments of all stakeholders. This picture reveals
that some problems are, in part at least, a product of an imbalanced legal order
that works on the assumption that the most vulnerable party is the investor,
9 Note the ‘Ruggie’ Guiding Principles are predicated on such an analysis: J. Ruggie, Guiding
Principles on Business and Human Rights: Implementing the United Nations’ ‘Protect, Respect and
Remedy’ Framework,Report of the Special Representative of the Secretary General on the Issue of Human
Rights and Transnational Corporations and Other Business Enterprises A/HRC/17/31 21 March 2011;
and United Nations, Human Rights and Transnational Corporations and Other Business Enterprises
Resolution A/HRC/RES/17/4 6 July 2011, Recital 3 (emphasising the ‘duty’ of the state) and
Recital 4 (emphasising the ‘responsibility’ of the corporation). Note that a more radical view of
the extraterritorial obligations of states in the context of economic, social and cultural rights was
taken in the Maastricht Principles on Extraterritorial Obligations of States in the Area of Economic, Social
and Cultural Rights 29 February 2012; on the Maastricht Principles see: O. De Schutter, A. Eide,
A. Khalfan, M. Orellana, M. Salomon and I. Seiderman, ‘Commentary on the Maastricht
Principles on Extraterritorial Obligations of States in the Area of Economic, Social and Cultural
Rights’ (2012) 34 Human Rights Quarterly 1084. In this article we follow Ruggie’s interpretation
and assume the conservative view that home states do not have extra-territorial duties.
10 eg, Vadi, n 8 above, 873–877.
11 Clearly some institutions recognise the constraints on states. Notably the United Nations Food
and Agriculture Organization (FAO) recognises that some states lack the capacity to fully realise
the right to food: see FAO: The State of Food Insecurity in the World: Assessing Food Insecurity in
Protracted Crises (Rome: FAO, 2010) 16–17.
12 The focus on the diff‌iculties that the weak state has in achieving food security means the human
rights analysis will be addressed through this lens. As a result, a more detailed discussion of the
extra-territorial application of human rights is beyond the scope of this analysis. On this point see
Vadi, n 8 above.
Christian Häberli and Fiona Smith
© 2014 The Authors. The Modern Law Review © 2014 The Modern Law Review Limited. 191(2014) 77(2) MLR 189–222

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