Investment Contracts for Farmland and Water

The document outlines a ten-step framework for negotiating agricultural investment contracts to ensure sustainable development, emphasizing the need for independent feasibility studies, environmental and social impact assessments, and the protection of local land and water tenure rights. It warns against broad stabilization provisions and advocates for legally binding development obligations and community development agreements to prevent the negative impacts often associated with large-scale foreign land acquisitions.

• The document argues that agricultural investment contracts are not always necessary; if a state has sufficient domestic laws and regulations, these should govern foreign investment, including the issuance of permits and licenses.
• Large-scale foreign investments in land, often termed "land grabs," frequently result in negative outcomes, such as reduced food security and the undermining of land and water rights, particularly for women, while failing to deliver promised economic benefits like employment and infrastructure.
• A 2012 World Bank survey of 179 agricultural investment projects across 32 countries revealed that 50% were financial failures or moderate failures, primarily due to fatally flawed concepts involving incorrect locations, wrong crops, or over-optimistic planning.
• Environmental and Social Impact Assessments (ESIAs) are often deficient or omitted in the agriculture sector; the guide recommends that ESIAs be conducted before contracts are signed and that their results be incorporated as legally binding obligations.
• In many states signing investment contracts, land and water rights are often vague, non-existent, or based on local customs, which can lead to investors receiving secure tenure while local communities are left with weak or no rights.
• The guide advises against broad stabilization provisions—clauses that protect investors from new laws—especially those covering non-fiscal regulatory areas like labor, health, safety, and the environment, though limited fiscal stabilization may be acceptable.
• To ensure local benefits, contracts should include specific, legally binding development obligations and Community Development Agreements (CDAs), which can establish Community Development Funds for health, education, and infrastructure.
• Regarding dispute settlement, the document recommends that host states prioritize domestic courts over international arbitration to ensure a balanced approach to legal disputes.

APA

Smaller, C. (2013). Investment Contracts for Farmland and Water. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/investment_contracts_farmland_en.pdf

Chicago

Smaller, Carin. Investment Contracts for Farmland and Water. International Institute for Sustainable Development, 2013. https://www.iisd.org/system/files/publications/investment_contracts_farmland_en.pdf.

Wikipedia

{{cite report |last1=Smaller |first1=Carin |title=Investment Contracts for Farmland and Water |publisher=International Institute for Sustainable Development |date=April 2013 |url=https://www.iisd.org/system/files/publications/investment_contracts_farmland_en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{smaller2013investment, author = {Smaller, Carin}, title = {{Investment Contracts for Farmland and Water}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = apr, url = {https://www.iisd.org/system/files/publications/investment_contracts_farmland_en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }