Memorandums of Understanding | IISD Best Practices Bulletin #2
Legal Tools for Responsible Investment in Agriculture Series
This bulletin outlines the key legal and policy issues associated with investor–state memorandums of understanding and how they can be used to govern and promote responsible investment in agriculture.
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Investor–state MOUs in agriculture can create unexpected risks and unwanted legal effects for host governments.
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The way MOUs are developed and used and the details they contain or omit determine their benefits, limitations, and risks.
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Host governments can carefully craft MOUs to minimize risks and support effective governance for responsible investment in agriculture.
An MOU is often the first formal step toward a collaboration between a host government and a private, typically foreign, investor for an investment project. In the context of agribusiness investments, this early phase is crucial because there are many important precontractual steps needed to ensure that the investment is made and operated responsibly in a way that respects legitimate tenure rights and safeguards the interests of local communities. Despite this, many MOUs are rushed or not carefully vetted.
Depending on how they are drafted, MOUs can create unexpected risks and unwanted legal effects for host governments. Conversely, host governments can carefully craft MOUs to minimize these risks and help promote effective governance for responsible investment in agriculture.
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