LEGAL TOOLS FOR RESPONSIBLE INVESTMENT IN AGRICULTURE

The document explains that while MOUs are often viewed as non-binding 'soft' agreements, they can unintentionally create binding legal obligations or 'legitimate expectations' enforceable under international investment treaties. It provides specific drafting strategies to avoid these risks, such as using explicit non-binding statements and avoiding overly broad commitments regarding land tenure, permits, and tax incentives. Additionally, it demonstrates how governments can use MOUs as a positive tool to establish a roadmap for pre-contractual due diligence, including the screening of investors' experience and financial capacity, and the requirement for feasibility studies and environmental and social impact assessments.

• MOUs are frequently treated as non-binding agreements and may be rushed through without legal vetting, yet they can unintentionally create binding legal obligations if they contain all the essential elements of a contract, regardless of the document's title.
• To prevent an MOU from being interpreted as a binding contract, governments should include explicit blanket statements of non-binding intent or clearly distinguish between binding ancillary provisions (such as confidentiality, governing law, and dispute resolution) and non-binding substantive commitments.
• Host governments face risks of creating 'legitimate expectations' under the 'fair and equitable treatment' (FET) clauses of bilateral investment treaties (BITs), which can lead to expensive international investment arbitration. To mitigate this, MOUs should explicitly exclude the creation of such expectations and affirm the government's right to enact future laws and regulations.
• Governments should avoid overly broad commitments in MOUs regarding land tenure, permits, and incentives. Land provisions should emphasize consultation with tenure rights holders and local communities, while permit and incentive clauses should be framed as assistance subject to applicable laws rather than guaranteed entitlements.
• MOUs can be used as a positive governance tool to map out pre-contractual screening of investors, requiring the provision of curricula vitae, sources of finance, and corporate organization details to prevent tax avoidance and ensure the investor has relevant experience.
• MOUs can establish a framework for screening the investment project itself by requiring the investor to produce feasibility studies, detailed business plans, and environmental, social, and climate risk assessments before a binding agreement is reached.
• To avoid being construed as a binding 'agreement to agree,' MOUs should avoid language that commits the government to enter into future contracts and should include statements clarifying that the MOU does not constitute a binding commitment to conclude a definitive agreement.

APA

Brewin, S. (2023). LEGAL TOOLS FOR RESPONSIBLE INVESTMENT IN AGRICULTURE. International Institute for Sustainable Development. https://www.iisd.org/system/files/2023-04/investment-agriculture-memorandums-understanding.pdf

Chicago

Brewin, Sarah. LEGAL TOOLS FOR RESPONSIBLE INVESTMENT IN AGRICULTURE. International Institute for Sustainable Development, 2023. https://www.iisd.org/system/files/2023-04/investment-agriculture-memorandums-understanding.pdf.

Wikipedia

{{cite report |last1=Brewin |first1=Sarah |title=LEGAL TOOLS FOR RESPONSIBLE INVESTMENT IN AGRICULTURE |publisher=International Institute for Sustainable Development |date=April 2023 |url=https://www.iisd.org/system/files/2023-04/investment-agriculture-memorandums-understanding.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{brewin2023legal, author = {Brewin, Sarah}, title = {{LEGAL TOOLS FOR RESPONSIBLE INVESTMENT IN AGRICULTURE}}, institution = {International Institute for Sustainable Development}, year = {2023}, month = apr, url = {https://www.iisd.org/system/files/2023-04/investment-agriculture-memorandums-understanding.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }