Model Contracts for Agricultural Investments | IISD Best Practices Bulletin #3

In this best practices series on legal tools for responsible investment in agriculture, the International Institute for Sustainable Development (IISD) analyzes key legal and policy issues arising from the legal instruments that states use to govern responsible investment in agriculture and food systems.

Ideally, investments in the agricultural sector should be governed by a robust and comprehensive framework of domestic laws; however, in many developing countries, existing laws fail to address all relevant issues in sufficient detail. In such contexts, governments can and do use agricultural investor–state contracts to address gaps, overlaps, and inconsistencies in existing legislation. However, the use of investor–state contracts as a key form of investment governance can also present certain risks when these instruments are poorly drafted or favour one party over the other.

As governments increasingly look to strengthen the legal frameworks regulating investment in the agricultural sector, using a model contract can help them negotiate and design investment contracts that are more comprehensive and balanced than they might otherwise have been. This practice can also help ensure consistency in rights and obligations included in investor–state contracts and that these contracts are fully consistent with domestic law.

This bulletin provides an overview of model contracts and how they can help agricultural investment negotiators, state lawyers, and policy-makers address certain investment-related risks and advance sustainable development objectives in the agricultural sector. It highlights how such instruments have been used to meet these objectives in the agriculture and extractives sectors. It presents some important considerations for policy-makers contemplating developing a nationally tailored model contract that reflects and integrates international best practices, national development priorities, and investment processes.