1. Fair and Equitable Treatment

FET standard is an international obligation for the host state to treat foreign investors in a fair and equitable manner. The notion of fair and equitable is broad. The typical provision of FET provides that “[e]ach Contracting Party shall ensure fair and equitable treatment.” Sometimes the same provision can also add a reference to customary international law, a minimum standard of protection, or international law. Notwithstanding the debate over a putative existing difference between an autonomous treaty’s FET standard and the customary international law minimum standard,^{Footnote 25} it is possible to infer standard FET features. As Schill pointed out, there are seven principles that can be deduced under the FET standard: (1) stability, predictability and consistency of the legal framework; (2) legality; (3) legitimate expectations’ protection; (4) procedural due process and denial of justice; (5) substantive due process and protection against discrimination and arbitrariness; (6) transparency; and (7) reasonableness and proportionality.^{Footnote 26} If at least one of the aforementioned principles is breached, there is a violation of the FET provision.

Granting stability and predictability of the municipal legal framework is undoubtedly an excellent benefit for the investors for managing the investment well and avoiding risk-related consequences—considering that a sudden change in the legal framework can obstruct the investment if it affects the acquired land rights of the investor. As property rights are supposed to be unlimited, and the lease or concession contracts usually have a long-term duration, the investor in farmland can receive a tremendous substantive guarantee under this principle. Nevertheless, this principle does not mean that the host state framework cannot be changed.^{Footnote 27} Therefore, it is utopic to think that during a ninety-nineyear lease contract, a host state will not change its legal framework. Furthermore, another significant investors’ protection related to large-scale investment in farmland is the protection of their legitimate expectations, which sometimes correlates with the legal framework stability. This principle is not an absolute one, either. Investor’s legitimate expectations must be reasonable and, in principle, the change of the legal framework must be strongly related to the commitments that the host state guaranteed when attracting the foreign investor within its territory, if it is to be considered a breach of the FET standard.^{Footnote 28}

Therefore, a FET-based claim can be raised if the host state neglects to respect its commitments by fundamentally altering the legal framework which the investors had reasonably relied on. This provision is especially important for long term investments, including large-scale investments in farmland. Even if a former government had previously taken some commitments, a newly elected government could nevertheless develop new policies against fulfilling those commitments and thus breach the FET standard. To skirt international liability, an incoming government has to respect those commitments and avoid changing the investment environment granted by the former government. This is a challenging task for the host state because the stability of a legal framework can concern far-reaching prerogatives—such as regulations on taxation, on water supply, and on the environment. In order to prevent these investments’ risks, a stabilization clause is usually stipulated under the contract defining the large-scale investments in farmland between investor and host state.^{Footnote 29} In signing a stabilization clause, the host state promises not to change its legal framework on domains affecting the investment environment during the investment period. Stabilization clauses function to freeze the effect of a legal framework at the time of the investment’s admission.^{Footnote 30} Alternatively, as defined by Schreuer, stabilization clauses do not prevent change in legal frameworks, but rather protect the investor from the adverse result of these changes.^{Footnote 31} Thus, stabilization clauses aim at protecting the investor in case of a change in the legal framework regarding compensation, and can render inapplicable the changed legal framework for the investor.^{Footnote 32}

Stabilization clauses are usually confined in a domain such as tax law^{Footnote 33} and are usually stipulated in long-term investment contracts.^{Footnote 34} By contrast, in a research conducted by Cotula on land deals in Africa in which he had the opportunity to examine twelve investment contracts on large-scale investments in farmland,^{Footnote 35} he found that some of those contracts provided broad stabilization clauses. The latter are far-reaching because stabilization clauses allow the investment contract to prevail on any future changes in the legal framework that could directly or indirectly affect the investment.^{Footnote 36} Because an infringement of these clauses implies an obligation to repair the contract damages,^{Footnote 37} the investors have a strong guarantee that host states will not engage in arbitrary conduct and dispose of them once the infrastructures needed to cultivate the land are completed.^{Footnote 38} Nevertheless, the stabilization clause here can freeze not only potential arbitrary regulation but also bona fide regulation in the public interest.^{Footnote 39} This is because the implementation of environmental, social, labor, and human rights standards can indirectly affect the irrigations cost and violate the stabilization clause.Footnote ⁴⁰ Within the investment treaty’s provision, these stabilization clauses are of significant importance concerning a putative breach of the FET standard due to the predictability and stability of the legal framework as well as the legitimate expectations. If, despite the stabilization clause, the legal framework is changed, however, the arbitral tribunal will most likely ascertain a breach of the FET standard.^{Footnote 41} For example, in Philip Morris v. Uruguay the arbitral tribunal observed that in the absence of a stabilization clause, a change of legal framework is not absolutely prevented by the FET standard.^{Footnote 42}

Stabilization clauses can be broad and are likely to result in a breach of the FET standard even in cases in which the host state legislates to improve social and environmental standards. For this reason, it is recommended for the host states—especially for weak states—to not undertake such broad commitments.^{Footnote 43} When a legal framework is conceived to achieve sustainable development, it is counter-productive to exempt the foreign investor from the application of the new law or to prevent the host state from adopting it. Nevertheless, by applying new generation investment treaties, an arbitral tribunal may question the validity of such clauses in relation to FET standard because the scope of these investment treaties is promoting sustainable development.^{Footnote 44}

A FET breach can also occur when the host state does not maintain its commitments. For instance, in von Pezold and Others v. Zimbabwe, the claimants—property owners of large-scale investment in agribusiness—were expropriated due to land reform.^{Footnote 45} Among other claims, the investors raised the breach of FET standard. The arbitral tribunal concluded that Zimbabwe breached the FET standard after the enactment of the Constitutional Amendment of 2005.^{Footnote 46} The government at the time issued a “Note Verbale” declaring that the Amendment did not involve the claimant’s properties because they were owners of agricultural land and protected by an investment treaty.^{Footnote 47} Nonetheless, in 2007, the “Government of Zimbabwe changed its mind and declared that the Constitutional Amendment had expropriated their investments.”^{Footnote 48} Thus, the arbitral tribunal concluded that this conduct breached the FET obligations.^{Footnote 49}

The FET standard is normally examined by balancing the interests of host state and foreign investors using the principles of proportionality—notably, Principle 7 as pointed out by Schill. Consequently, the FET standard is a flexible one.^{Footnote 50}

2. Full Protection and Security

FPS is an obligation for the host state to grant physical security to foreign investments against interference by third actors or the state itself.^{Footnote 51} This standard is not an absolute one, either. The host state must take all reasonable, necessary, or proportionate measures^{Footnote 52} to protect the investment—and as such, it is a due diligence obligation.^{Footnote 53} Under this provision, physical and material protection are granted both to the investor and the investment. By contrast, there are also opinions indicating that the FPS standard goes beyond the physical protection and reaches the legal protection.^{Footnote 54} Moreover, due to the amended language, FPS can sometimes be granted under the FET standard instead of as an independent standard.

The FPS clause implies, for large-scale investments in farmland, that the host state has to take all measures to remove civilians occupying the investor’s properties, for instance. The host state breaches the standard if the police fail to protect and do not act responsively.^{Footnote 55} Also, the FPS clause concerning investments in farmland can raise difficulties between the protection of conflicting rights.^{Footnote 56} For example, property rights over real estate can be in contrast with the customary land rights of indigenous people.

3. Focus on Expropriation

An investor can also raise claims based on an alleged breach of the expropriation provision. Expropriation is an act by sovereign states in relation to their territories and natural resources, which can affect the acquired rights of foreign investors. International investment law developed substantive standards that host states have to respect when acting under their legitimate exercise of sovereignty to balance these two main rights. Depending on the host state’s measures, investors can raise a claim defending a seizure of their property rights or for deprivation of their investments without compensation. The substantive standard on the prohibition to expropriate without compensation is a significant guarantee for the investor’s protection in large-scale investment in farmland. As mentioned before, large-scale investments in agribusiness can be based on a real estate property, as a large-scale land acquisition, or based on the grant or use of the land through concessions or lease contracts.^{Footnote 57} As these investments can be directly or indirectly affected by a host state’s conduct, it is useful to examine the recent development of expropriation in international investment law. Usually, the existence of expropriation is recognized by an arbitral tribunal, then its lawfulness or unlawfulness must be examined considering whether—or to what extent—compensation or reparation is due. Before showing the main differences and consequences between lawful and unlawful expropriation and the related issue on compensation, it is useful to present the main differences between direct and indirect expropriation.

1. Land Reform

Land reform is one of the most invasive state measures affecting large-scale investments in farmland because it deprives foreign investors of properties. It is not surprising that the controversial land reform conducted by Zimbabwe during its independence was challenged at least three times by foreign investors in different fora. Two were related to BITs and the other to the Treaty of the Southern African Development Community.^{Footnote 101} While the claimants in Funnekotter and Others v. Zimbabwe were deprived of their properties between 2000–2001 without receiving compensation,^{Footnote 102} the properties involved in the von Pezold and Others decision were expropriated through formal nationalization in 2005.^{Footnote 103} In these two awards, arbitral tribunals found a breach of the expropriation provision. In the Campbell decision, the Southern African Development Community Tribunal (SADCT) ascertained that the applicant suffered racial discrimination, and Zimbabwe was directed to pay compensation for the compulsorily acquired lands.^{Footnote 104} Despite its controversial character, Zimbabwe’s land reform shows the peculiarity and difficulty of land reform in weak states with historical wrongs. The SADCT pointed out that a land reform to right historical wrongs can be legitimately performed if it is objective, includes fair compensation, and the expropriated land is indeed redistributed to poor, landless, or other legitimate beneficiaries. In this way, if Zimbabwe had performed the land reform following these three above mentioned requirements, the differential treatment of the applicants would not have been held as racial discrimination.^{Footnote 105} Nevertheless, in the dissenting opinion, Judge Tshosa observed that the Zimbabwean land reform did not target white people as such, but large-scale owners of agricultural land. The fact that, due to the historical background of Zimbabwe, large-scale owners were white did not, in and of itself, imply racial discrimination.^{Footnote 106} By contrast, the award in von Pezold and Others indicated that the expropriation was discriminatory because it was based on skin color.^{Footnote 107} In this context, one of the challenging topics for future arbitral tribunals will be to evaluate to what extent it is appropriate for a host state to deal with historical wrongs based on racial discrimination breaching the non-discrimination requirement of the expropriations provision.^{Footnote 108}

From the aforementioned cases, it can be inferred that land reform can be legally performed if the four requirements for lawful expropriation are met: (1) land reform has to be in conformity with the domestic law and offer the possibility for the expropriated investors to challenge the act—in other words, due process; (2) the scope of the land reform has to accomplish the goal to redistribute or reallocate land for righting historical wrongs or improving national food security, among others—in other words, public purpose; (3) the non-discrimination requirement has to be justifiable concerning the public purpose; and (4) compensation has to be given, or at least offered.

Redistributive land reform underlines the importance of non-party rights. In the case of von Pezold and Others v. Zimbabwe, four communities of indigenous people and the European Center for Constitutional and Human Rights submitted an amicus curiae petition. The arbitral tribunal dismissed the petition based on legitimate doubts on the independence and neutrality of the applicants. This was because the communities’ chiefs were found to be related to a person firmly positioned against the claimants, and the communities had customary rights on the claimants’ properties.^{Footnote 109} Moreover, although both the claimants and the arbitral tribunal recognized the interest of indigenous communities in the land over which claimants’ have property, the arbitral tribunal held that indigenous communities could unfairly prejudice the claimants—hence, the arbitral tribunal dismissed the petition.^{Footnote 110} This Procedural Order No. 2 was sharply criticized by the Special Rapporteur on the rights of indigenous people.^{Footnote 111} In fact, even if the denial of the amicus curiae petition was well-argued on the basis of the applicable law,Footnote ¹¹² it seems unfair for non-dispute third parties to see the faculty to submit their opinions denied. First, they have a significant interest in defending their customary land rights. Second, if customary land rights are disputed, it is difficult to demonstrate a lack of an eventual “unfair prejudice” against one of the parties, or the lack of independence for defending their customary rights over parties’ properties.

Indigenous communities could be directly affected by the decision of arbitral tribunals. The arbitral tribunal in that case decided in favor of restitution for the expropriated land to the claimants. Moreover, it is interesting to note that the arbitral tribunal concluded that the land reform in Zimbabwe was not redistributed to indigenous communities solely because of findings from the parties’ submissions, witnesses, or testimonies. It is to hope that the interpretation of “unfairly prejudice either party” would not hinder future indigenous communities’ submission to be heard because their customary rights on land could be threatened by both host states and investors. Along the same lines—and based on this interpretation of Article 37(2) of the ICSID Arbitration Rules— it is unlikely for indigenous people to be able to participate in submissions as amicus curiae due to their customary land rights that could unfairly prejudice either party.

In conclusion, land reform may be an appropriate measure depending on the host state’s needs. Nevertheless, the execution of the latter is undoubtedly delicate, and requires good governance,^{Footnote 113} which may be lacking in low or middle-income countries. If the host state has sold public land to a foreign investor for large-scale investment in farmland—and at a later time wants to redistribute or reallocate that land due to historical wrongs, or give it to disadvantaged groups—this costly procedure may restrict the host state from acting in the public interest.^{Footnote 114}

2. Implementing Legislation on Human Rights, Land Tenure Rights, and Environment

Host states receiving large-scale investments in farmland are usually low or middle-income countries due to their historical background. Currently, these countries are pushed to develop policies to improve social and economic development. The VGGT provide advice to improve land tenure rights and protect human rights and the environment. For instance, the VGGT provide for the protection of customary land tenure rights under municipal law,Footnote ¹¹⁵ and give consultations to indigenous communities or other affected persons when the host state intends to allocate tenure rights.Footnote ¹¹⁶ Additionally, the VGGT provide for the implementation of standards set forth by the International Labour Organization (ILO)Footnote ¹¹⁷ and implement the mandatory assessment on the potential positive or negative impacts of projects involving large-scale investments in farmland.Footnote ¹¹⁸

Here, it is worth stressing that the host state’s duty to consult with indigenous peoples before implementing measures that may affect them under Article 19 of the UN Declaration of the rights of indigenous peoples may be elevated as a customary international rule.^{Footnote 119} Yet, the implementation of these guidelines in national law may affect the farmland investor by increasing the investment costs. These implementations may threaten the FET standard. In this way, if a state establishes that it is required to obtain the informed consent of potentially affected communities, as well as an assessment on the impact of the project before renewing a concession or a lease contract, the investor could raise a FET-based claim. In principle, these host state measures can be elevated as a FET breach if the new regulations are arbitrary, discriminatory, violate the legitimate expectations of the investors, and are implemented without due process. However, a host state will succeed in adopting such regulations with respect to the FET standard if it can justify it with the proportionality of the measure. When an arbitral tribunal performs an analysis of FET standard breaches, it is also important for the tribunal to interpret the standard with the goal of the investment. If the investment treaty promotes sustainable development and the protection of the investment, the regulations mentioned above are unlikely to be held as a breach of the FET standard.^{Footnote 120}

1. Right to Regulate

The right to regulate, as a defense, can be used to justify a host state’s measure or a change of the legal framework. Although the pure exercise of the sovereign powers of a host state cannot as such justify a breach of an international obligation.^{Footnote 122} Of course, this is an undisputed principle when dealing with international obligations and domestic law. Nevertheless, the problem comes when there is a conflict between divergent treaties’ obligations. As there is no hierarchy in the sources of international law, peremptory norms excepted,^{Footnote 123} a host state’s right to regulate can turn out to be a successful defense if the latter is a consequence of an international obligation or supported by an international legal instrument. The defense based on the right to regulate can be evaluated within the context of police powers doctrine. Instead of balancing divergent international obligations, arbitral tribunals seem to give some deference to the police powers of the host states, still limiting it by the police powers doctrine. If the state’s bona fide conduct aims at protecting a public purpose, it is proportionate and non-discriminatory, then the defense based on the right to regulate has the potential to dismiss the alleged expropriation breach. In the context of large-scale investments in farmland, the police powers doctrine may justify the host state’s adoption of provisions inspired by the VGGT—which oblige the investor to respect tenure rights of other beneficiaries, and adopt measures to improve food security and the environment.^{Footnote 124} In contrast, the police powers doctrine is unlikely to be applicable to justify a land reform without compensation. As land reform implies a direct expropriation of property rights on land, the applicable requirements are those for a lawful expropriation, including the compensation.^{Footnote 125}

The right to regulate as a defense also plays a role in contesting FET claims. Under the FET standard, the predictability and stability of the legal framework are guaranteed together with the investor’s legitimate expectations. Still, this principle is to be read in relation with the social and economic peculiarities of the host state.^{Footnote 126} As most host states receiving large-scale investments in farmland are so-called weak states—where the social and economic standards are not as advanced as in developed countries—a large-scale investor in farmland should not be surprised if the host state starts improving its legal framework to reduce the negative impact of large-scale investment in farmland in order to avoid harm to the environment, to indigenous communities, and threats to human rights.^{Footnote 127}

2. Investor’s Illegal Conduct

Another host state defense can be grounded on the investor’s illegal conduct. As previously indicated, the illegal conduct of the investor ab initio can be recognized as not arbitrable. However, if the investor’s conduct is ex post, the arbitral tribunal considers it when assessing the claim’s relief.^{Footnote 128} Nevertheless, as it can be inferred from Philip Morris v. Uruguay—in spite of the case Yukos v. Russia which denied the existence of the unclean hands doctrine as a general principle of law^{Footnote 129}—that the alleged fraudulent behavior of an investor may be considered by an arbitral tribunal and prevent the investor from raising treaty provisions’ claims.^{Footnote 130} Therefore, while the defense based on the illegal conduct of the investor in obtaining the investment places the investment outside the scope of the investment treaty and excludes jurisdiction, subsequent illegal conduct may also play a role, not only by assessing the claim’s relief, but also in defining the admissibility of the single claims.

Regarding an alleged violation of human rights, the award in Urbaser v. Argentina, though dealing with a counterclaim, indicated that corporations could be held to respect human rights as an international obligation. The arbitral tribunal pointed out that under the international investment regime, a corporation is able to hold rights as a subject of international law. Thus, along the same lines, a corporation can also be a subject of international law holding international obligations.^{Footnote 131} Because this reasoning was developed recently in international investment law, it will be interesting to see how this principle is received or adopted by future arbitral tribunals. The emergence of legally binding obligations for corporations under international law is also sustained by the Resolution adopted by the Human Rights Council on the creation of a working group to put together a legally binding instrument on corporations regarding human rights.^{Footnote 132} In conclusion, if a large-scale investor in farmland violates municipal law or negative international obligations, the host state can use this illegal conduct as a defense or to justify its conduct and obtain a reduced assessment of investor’s relief or directly prevent the investor from raising the treaty claim.

3. State of Necessity

State of necessity is one of the customary rules that justified a host state’s breach of an international obligation. This principle is codified under Article 25 of the International Law Commission (ILC)’s Articles on Responsibility of States for internationally Wrongful Acts.^{Footnote 133} State of necessity can be invoked to justify a breach of an international obligation due to a severe and imminent peril threatening an essential interest of the state. State of necessity cannot justify a breach of a peremptory norm.Footnote ¹³⁴ Under international investment law, the host state’s defense based on the state of necessity was used mostly by Argentina in defending its conduct as a result of the 2001–2002 financial crisis.^{Footnote 135} Even though arbitral tribunals treated Argentina’s state of necessitybased defense in different ways, it can be said that they all admitted the state of necessitybased defense was a principle of international customary law.^{Footnote 136}

In cases dealing with Zimbabwean land reform, the host state also invoked the state of necessity. In both cases, the arbitral tribunals rejected the defense. While in Funnekotter and Others v. Zimbabwe, the arbitral tribunal rapidly rejected the defense, in von Pezold and Others v. Zimbabwe, the arbitral tribunal analyzed in detail the state of necessity requirements under Article 25 on State’s Responsibility before rejecting it as unconvincing. On the one hand, in Funnekotter and Others v. Zimbabwe, Zimbabwe invoked the state of necessity to justify its difficulty to control the invasion of farms and the expropriation in the public interest. But as the claim was based on the lack of compensation for the expropriated properties, the arbitral tribunal observed that Zimbabwe could not explain why the state of necessity impeded the host state from calculating and paying compensation.^{Footnote 137} Apart from that, in von Pezold and Others v. Zimbabwe, the arbitral tribunal carefully analyzed the state of necessity’s requirements. Zimbabwe held that FastTrack Land Reform Program (FTLRP)—expropriation without compensation—was justified as a state reaction to the land invasions during 2000 and 2013. Therefore, the investment treaty violation was justified by the state of necessity.

Article 25 on State’s Responsibility provides:

Based on this wording, the arbitral tribunal examined the conduct of Zimbabwe in relation to the following requirements: (1) the existence of an essential interest of the state; (2) the existence of a grave and imminent peril; (3) no other means were available; (4) the impairment of the international community as a whole; (5) the exclusion of the state of necessity’s defense; and (6) the state’s own contribution to the necessity situation. First, the arbitral tribunal indicated that the farm invasions were not a threat to the essential interest of the state, but instead to the survival of the incumbent government.^{Footnote 139} Second, the arbitral tribunal observes that the uprising movement occupying the land was not a grave and imminent peril, because it was not a threat to the state, but more to the government. Moreover, the economic threat increased only after the implementation of the FTLRP because the foreign direct investments were diminished.^{Footnote 140} Third, the adoption of the FTLRP was not the only means available to contrast the land invasions. Also, the arbitral tribunal pointed out that the government decided not to act against the occupiers and instructed the police not to act. Furthermore, according to the findings of the tribunal, President Mugabe encouraged the occupiers. Therefore, the arbitral tribunal concluded that the FTLRP was not the only method.^{Footnote 141} Fourth, while the arbitral tribunal was not unsympathetic to the state performing positive discrimination to correct colonial wrongs, the Zimbabwean land reform was based on racial discrimination and FTLRP cannot be elevated as positive discrimination. Additionally, the land reform from the Lancaster House Agreement until 2000 was legitimate because the expropriation had been provided with compensation, and the land had actually been redistributed. By contrast, the FTLRP was pushed as a result of the political pressure felt by the government from occupiers who were led by strong prejudice and racial discrimination—notwithstanding that the claimants invested in the Republic of Zimbabwe and not during the Rhodesian era. Because the government could not justify the racial discrimination of foreign landowners in favor of indigenous communities, it breached its erga omnes obligation and impaired the international community as a whole.^{Footnote 142} Fifth, the investment treaty provision did not prevent the respondent from invoking the state of necessity.^{Footnote 143} Finally, the arbitral tribunal observed that Zimbabwe was the first actor in its economic decline and acted as an instigator of the situation that gave rise to the alleged imminent peril. In conclusion, Zimbabwe could not invoke the state of necessity to justify the investment treaty’s breaches legally. Even though the arbitral tribunal conducted a careful analysis of the requirements to invoke the state of necessity, the latter would have been more accurate if the indigenous communities interested in the reform could have submitted their opinion on the merits, especially by evaluating the discriminatory feature of the FTLRP.

In conclusion, the state of necessity can be successfully invoked if the investment treaty does not exclude its application and if the aforementioned strict requirements are fulfilled. As a general matter, land reform is, in principle, a planned government policy aiming at achieving sustainable development and not a reaction to a grave and imminent peril. Thus, the state of necessity’s defense may be invoked in a case where the host state interferes with foreign investment to guarantee its national food security in a severe food crisis. In any event, the state of necessity is a very exceptional defense.

1. International Standards Preventing Land Grabbing

Adverse effects of investments related to exploitation and use of land comprise the majority of the Compliance Advisor Ombudsman’s (CAO) tasks. The CAO is an independent accountability mechanism that aims to resolve conflicts between communities and corporations that make investments supported by the private sector of the WBG, such as the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). It is therefore not surprising that fifty-two percent of eligible complaints before the CAO between 2000–2014 were landrelated claims.^{Footnote 158} Moreover, evidence of the potentially adverse effects caused by some of the investments were included in the UN Guiding Principles on Business and Human Rights.^{Footnote 159} These Principles impose a duty on the states to protect against human rights abuses in their territories, and they also make corporations responsible for maintaining human rights. Like the UN Guiding Principles, the VGGT do not provide a direct obligation for corporations or non-state actors, but rather a responsibility to respect human rights and land tenure rights.^{Footnote 160} The latter implies that non-state actors are not directly bound to human rights obligations, but they have to exercise due diligence in order not to impair human rights and land tenure rights.^{Footnote 161} Just like the VGGT, the UN Guiding Principles also provide that, in order to exercise their human rights diligence, corporations should identify all adverse human rights impacts resulting from their own business.^{Footnote 162} A human rights impact assessment can be performed before implementing the investment as well as periodically during the development of the business.^{Footnote 163} The mentioned soft law instruments dealing directly or indirectly with investments in farmland show that an internationally recommended method to prevent, mitigate, and limit adverse effects on human, environmental, and social rights is to implement a mandatory impact assessment. This assessment should be done, not only before obtaining the investment, but also afterward and periodically.^{Footnote 164} Even though these impact assessments depend only on corporate goodwill, they could be implemented as mandatory in either national law or international law, if introduced in investment treaties.^{Footnote 165} To limit the adverse effects of large-scale investments in farmland, the introduction of a mandatory environmental, sustainability, and human rights impact assessment should be considered.^{Footnote 166} These three impact assessments could prevent environmental harm, human rights violations, and at the same time foster sustainable developmentoriented investments—which would limit human rights violations, environmental harm, and food insecurity.

International standards related to indigenous peoples’ rights are to be seen together with their self-determination right as an erga omnes obligation, which constitutes a public interest to be protected.^{Footnote 167} This last point suggests that indigenous peoples shall enjoy the participatory rights of consultation and consent for measures that could affect their land and natural resources rights. This participatory right was first recognized in the ILO Convention concerning Indigenous and Tribal Peoples in Independent Countries.^{Footnote 168} Moreover, the General Assembly adopted the UN Declaration of the rights of indigenous peoples in 2007, which is widely accepted, though not binding.^{Footnote 169} This Declaration proclaims, pursuant to Article 19 and Article 32 para. 2, that representatives of indigenous communities shall be consulted and shall give their consent before adopting measures that may affect them. Even though it is still disputed whether the right to consult indigenous peoples has already acquired the status of customary international law,^{Footnote 170} this principle was also introduced in the UN Guiding principle under Principle 18, which, at the very least, promotes its consultation. Moreover, the Inter-American Court of Human Rights stressed that largescale investments affecting indigenous peoples’ rights entail a duty for the host state to consult the indigenous community and obtain the free, prior, and informed consent on an investment project.^{Footnote 171} Equally, Principle 2 of the minimum human rights principles applicable to large-scale land acquisitions or leases proclaims the same standard.^{Footnote 172} As suggested by Freiburg, this principle may not only be applied to indigenous peoples but could also be related to other peoples affected by large-scale investments in farmland.^{Footnote 173} In this context, the free, prior, and informed consent allows considering and protecting the rights of small-scale farmers and disadvantaged groups such as historically discriminated groups or rural farmers.

To preserve the public interest threatened by large-scale investments in farmland, human rights, social, and environmental impact assessments are to be performed before their establishment, but also during their operations. Also, where peoples may be affected in their land rights, the free, prior, and informed consent shall be a prerequisite for establishing such large-scale investments.

2. Obligations of the Host State and the Investors

The aforementioned international standards bind neither the host state nor the investor, because they are soft law instruments. Nonetheless, introducing these standards as binding in order to admit the international protection of an investment can lead to an improvement of the state governance—especially where the latter is weak or unwilling to protect and foster some public interests. This suggests that, even if the host state did not transpose the international standards in domestic law, they could be held as mandatory through an investment treaty if an investor or host state wants to raise a claim. Therefore, contracting states should negotiate for these standards to be binding under the investment treaties and that arbitration clauses allow the host state to raise counterclaims against the investor—thus providing a cause of action.

In the award in Hesham v. Indonesia, the arbitral tribunal had to deal with a binding treaty provision on investor’s conduct.^{Footnote 174} The arbitral tribunal found that the investor violated Indonesian laws and went against the public interest (Indonesian financial sector), and as such, was precluded from receiving protection under the investment treaty even though the arbitral tribunal found there was a breach of the FET standard.^{Footnote 175} As pointed out by Newcombe and Marcoux, this award is somewhat unique because it recognizes that investment treaties can provide binding obligations on investors.^{Footnote 176} The arbitral tribunal observed that this provision ensured compliance with the domestic law of the state for foreign investors. This provision sets forth a positive obligation for the investor to comply with municipal law and respect public order. Therefore, the investor’s obligations under municipal law acquire the rank of international obligation.^{Footnote 177} The authors pointed out that this would be the starting point for a new trend in international investment law, which suggests a switch from the asymmetrical mechanism to a symmetrical one, where both individuals and host states hold international rights and obligations.^{Footnote 178} They also added that negotiating states can create international obligations to respect municipal law, international human rights, environmental obligations, and sustainability standards by introducing positive obligations in investment treaties.^{Footnote 179} Therefore, the mentioned internationally accepted standards related to large-scale investments in farmland can be introduced in investment treaties and elevated as binding obligations.^{Footnote 180}

If there is misconduct against the public interest of either the investor or the state, the claimant’s claims or respondent’s counterclaim shall be treated as inadmissible. For this purpose, the Special Rapporteur on the rights of indigenous people recommended that investment treaties provide for a denial of benefits to investments that exercised an inadequate corporate due diligence in human rights and also caused harm to indigenous peoples.^{Footnote 181} Even though she advised that arbitral tribunals should not have jurisdiction in such cases, it is somewhat more appropriate to treat the claim as inadmissible—if the investment was not illegal ab initio. Therefore, if the investor’s conduct does not respect the municipal law or the international standard and causes serious harm to public interest, the latter cannot be entitled to receive the substantive protections provided under the investment treaty.^{Footnote 182} However, if the misconduct by the investor infringes international standards but is still in accordance with the law of the host state, a concurring “responsibility” of the host state shall be considered in assessing compensation, damages, or costs. Furthermore, the eventual host state counterclaim should also be dismissed as inadmissible if the host state did not incorporate international standards in its legal framework, or if it prevented the investor from complying with the public interest clause.^{Footnote 183} Thus, taking into account the investor’s and host state’s obligations, as well as the ISDS clause, I propose the following public interest clause:

In the case of an ISDS, this provision gives the arbitral tribunal broad power to evaluate whether the investor demonstrated reasonable due diligence—and it should encourage the host state to transpose internationally accepted standards as mandatory in its municipal law to preserve the public interest as a whole.^{Footnote 184} This public interest clause shall preclude substantive protection to investors if they breach municipal law or internationally accepted standards, but only if there is an arbitrable claim. Therefore, the investment treaty provided by the public interest clause shall explicitly indicate that a state’s consent to arbitration is uniquely given for investments obtained “in accordance with the law”; the language here implying the municipal law.^{Footnote 185}

Thus, a ninety-nine-year land-lease contract concerning a 10,000 ha piece of land in exchange for the exploitation of agribusiness activities will be held as perfectly legal and arbitrable if municipal law does not provide a mandatory impact assessment, consultation, or consent of the affected communities. However, if, under municipal law, the precondition for concluding land-deals contracts—which may include largescale land purchases, landleases, or land-concessions—requires impact assessments and obtaining the consent of potentially affected groups, an investment devoid of these pre-establishment requirements may be held as not arbitrable. By failing the investment’s legality condition, a host state does not consent to arbitration. Therefore, the arbitral tribunal does not have jurisdiction to decide the investors’ claims. By contrast, the absence of a pre-establishment impact assessment or consultation and consent of potentially affected groups will, in principle, preclude investors from receiving substantive standards protection. This could then motivate the investor to perform the latter even if municipal law does not require it.

3. Exceptions

With the introduction of the public interest clause, the presence of a general exception to grant the host state’s right to regulate becomes less important. For instance, the International Institute for Sustainable Development (IISD) BIT model general exception provision under Article 51 provides that investor’s substantive protections do not apply if the host state takes measures aimed at the improvement of equality in its territory or to protect disadvantaged persons due to historical discrimination. If these measures or laws comply with the internationally accepted standards, they should not create impairment to investors, as they should already apply those standards because of the public interest clause. According to the previously mentioned research, an exception is provided for direct expropriation. This implies that in the case of a land reform aimed at land reallocation, the expropriation requirements cannot suffer an exception, and, as such, compensation is required—even for the authors of the IISD BIT model. Nonetheless, this also implies that if the remaining substantive standards are allegedly breached, such as the FET, the investor cannot find relief. The application of this kind of general exception is also recommended by the Special Rapporteur on the rights of indigenous peoples, but only in the investment treaty where the right to regulate is not sufficiently protected.^{Footnote 186} A public interest clause, together with the scope of the treaty, should be interpreted as attempting to improve the legal framework and, therefore, implicitly granting the host state’s right to regulate. Nevertheless, the public interest clause can also coexist with general exceptions, as long as it does not limit the public interest purposes on limited topics.