Investment contracts and sustainable development - How to make contracts for fairer and more sustainable natural resource investments

Mar 2010

Negotiations for investment contracts can be extremely complex because they typically involve a large number of sophisticated and context-specific technical, legal, economic and financial issues.
This guide provides the foundations for understanding general contractual issues and processes, focusing on the legal aspects. The content is pitched at an entry to intermediate level: the guide does not require specialised legal expertise, but it does assume a degree of familiarity with investment issues. The guide aims to identify the main issues and map options, rather than provide detailed solutions. It is in no way meant to replace professional legal advice.
This guide is about how to structure investment contracts for natural resource projects in ways that maximise the investments’ contribution to sustainable development goals. Key sustainable development goals include poverty reduction and environmental sustainability. The focus is on natural resource investments in lower- and middle-income countries.
This guide is primarily aimed at host country government agencies, parliamentarians and civil society organisations (CSOs). There may be differences in visions and interests between these different groups. For example, civil society may emphasise different priorities compared to governments. Also, even within these groups there may be a diverse range of actors who have different and maybe even conflicting interests. For example, within government, national oil companies and environmental protection agencies may have different priorities.
Yet all of these groups can play an important role to ensure that investments contribute to sustainable development: government agencies by negotiating good contracts and properly monitoring their implementation; parliamentarians and civil society by scrutinising government negotiations and advocating for better deals.
The guide may also be of interest to businesses eager to ensure that their investments contribute to sustainable development, both in the countries receiving the investment and internationally.
The text is based on legal research undertaken by IIED and partners since 2004, and on trial training sessions for government officials, parliamentarians, civil society and the media. The trainings took place in Ghana and Central Asia in early 2009. They focused on extractive industry contracts and this guide draws extensively on that sector. It also includes experiences from other natural resource sectors, particularly agriculture, because it recognises that cross-sectoral learning can facilitate advances in contractual practice.

By: L. Cotula (IIED)

 
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