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Voluntary guidelines on the governance of tenure
Article Type: Education briefing From: Journal of Property Investment & Finance, Volume 30, Issue 5
On 11 May 2012 a special session of the Committee on World Food Security endorsed the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security (VGGT) which have been developed by the Food and Agriculture Organization (FAO) of the United Nations (FAO, 2012). This remarkable document is likely to bring profound changes to the way in which property investment is undertaken and financed, particularly direct investment by firms and governments from richer countries in land, real estate and natural resources in poorer ones, and on how firms manage their supply chains. Although placed in the context of food security by virtue of FAO’s terms of reference, the principles they contain apply to any type of property investment. They could be argued to extend the principles of fair trade from commodities and products to the land itself.
Central to the VGGT is the belief that many tenure problems arise because of weak governance. They are therefore an attempt to address governance problems, including corrupt practices and the failure of implementing agencies to protect tenure rights. Responsible governance of tenure is seen as the way of promoting sustainable social and economic development and encouraging responsible investment. The VGGT are intended to improve the governance of tenure by providing guidance and information on internationally accepted practices and to contribute to the improvement of policy, legal and organizational frameworks for regulating tenure rights and the functioning of tenure systems. They can strengthen the capacities of implementing agencies, including not just government bodies but also civil society and the private sector.
The VGGT have been ratified at a time when there is concern about foreign direct investment in land and natural resources in a number of countries that are rich in land and natural resources but have low incomes per capita. Direct investment has been encouraged by economic and population growth as well as fears over food security. A number of the countries which have experienced rapid economic growth in recent years also have limited areas of agricultural land. They see investment in productive capacity in other countries as a way in which they can provide food security for their populations. Such investment is often facilitated by the governments of the host countries making available what has been designated as state land. This may be land that is used by communities with informal or customary rights. This has led to concerns over “land grabbing” (Oxfam International, 2011). Communities have also been displaced from land intended for manufacturing or to be used for infrastructure to enable land and natural resources to be exploited, such as the construction of new harbour facilities for the export of crude oil or mineral ores. They may also suffer from the pollution of their land and water supplies from mineral extraction or industrial production.
This article explains what the Voluntary Guidelines on the Governance of Tenure contain, discusses their importance, and draws out their implications for property investment.
The Voluntary Guidelines on the Governance of Tenure
The VGGT were drafted over the period 2009-2012. They were developed initially through 15 consultative meetings held by FAO around the world involving over a thousand people from more than 133 countries, representing government institutions, civil society, UN agencies, the private sector, and academic bodies. These included a private sector meeting held in London under the auspices of the Royal Institution of Chartered Surveyors (RICS). The draft went through an extensive electronic consultation process before being negotiated by governments through the Committee on World Food Security. They have been supported by the World Bank, other UN agencies, and many non-governmental bodies, and also by the surveying and valuation professional bodies, including the International Federation of Surveyors (FIG) and the RICS. The VGGT can therefore be argued to embody a very wide consensus as to what good governance in land tenure involves.
The Voluntary Guidelines on the Governance of Tenure are the sixth set of voluntary guidelines that FAO has produced. The others are concerned with responsible fisheries (1995), the progressive realisation of the right to adequate food (2004), the distribution and use of pesticides (1985, revised 2002), fire management (2006), and planted forests (2006). The World Food Summit Plan of Action (FAO, 1996; FAO, 2002) which included commitments to securing an enabling environment for food security and the eradication of poverty and the promotion of sustainability, trade, and investment, provided the mandate for developing voluntary guidelines on land and natural resource tenure.
The key to understanding any of the voluntary guidelines produced by FAO, including VGGT, is that they are voluntary. They do not create any new obligations either on countries or individuals, groups or organisations. They draw upon the international and regional instruments that address human and tenure rights and should therefore be seen, first and foremost, as being concerned with human rights. Countries already have obligations on the governance of land tenure under international law and human rights instruments, such as the Universal Declaration of Human Rights. Article 17 of the Universal Declaration of Human Rights states that everyone has the right to own property alone or in association with others and that no-one shall be arbitrarily deprived of his property (United Nations, 1948). Many countries also have entered into commitments under regional initiatives. For example, Article 1 of Protocol 1 of the European Convention on Human Rights states that every natural or legal person is entitled to the peaceful enjoyment of his possessions and shall not be deprived of them except in the public interest under conditions provided for by law (Council of Europe, 1950). Article 14 of the African Charter on Human and People’s Rights similarly guarantees the right to property which may only be encroached upon in the interest of public need or in the general interest of the community in accordance with law (Organization of African Unity, 1981).
The VGGT builds, in particular, on the Voluntary Guidelines for the Progressive Realization of the Right to Adequate Food in the Context of National Food Security (FAO, 2005). The argument in this document is that good governance should be promoted as an essential factor that enables sustained economic growth and sustainable development. States should promote a free, democratic and just society so that a peaceful, stable and enabling environment is provided in which individuals can feed themselves and their families. Although the document is supportive of improved access to land, the promotion of security of tenure, the mobilisation of savings and investment, and improving the functioning of markets, it does not have a coherent narrative as to how this might be achieved.
By contrast, the “Responsible management of planted forests: Voluntary guidelines” (FAO, 2006) does address issues like land rights and security of tenure and investments. Whilst it is concerned with a single land use, it has to address the issue that there are many different users of forests, often with more than one interested party or claimant in a given area. There are frequently overlapping tenures and land use rights. These voluntary guidelines had to address how to balance the interests of different groups of stakeholders, which makes the governance of land tenure important. It argued that clarity of land tenure is important for sustainable development. Private investors require the security of legal tenure to protect their investments, including assurance about the duration of their rights, their robustness, and the degree of excludability they confer. This requires consultation with other stakeholders, a means of conflict resolution, and shared decision-making. The principles it set out for land tenure included recognition of “just” ownerships together with the rights and obligations these confer, access to land for investors and local communities, respect for international law, the recognition of the customary rights and tenures of forest dwellers, and the prevention of the displacement of communities without their free and informed consent.
Building on these precedents, the VGGT sets out five general principles concerning tenure (Paragraph 3A):
That states should recognise and respect all legitimate tenure right holders and their rights.
That states should safeguard legitimate tenure rights against threats and infringements.
That states should promote and facilitate the enjoyment of legitimate tenure rights.
That states should provide access to justice to deal with infringements of legitimate tenure rights.
That states should prevent tenure disputes, violent conflicts and corruption.
These general principles are supported by ten implementation principles, which are concerned with the governance of tenure and ensuring that this is in accordance with human rights and internationally agreed undertakings (Paragraph 3B):
The recognition of the dignity and the equal and inalienable human rights of all individuals.
That no-one should be subject to discrimination under the law and policies or in practice.
Recognition of the equality between individuals and that this may require acknowledging differences between them and taking positive action.
Equal rights for women and men and, in particular, that women should have equal tenure rights and access to land independent of their civil and marital status.
The taking of a holistic and sustainable approach to natural resources and their uses.
There should be consultation with and participation by those with legitimate tenure rights who could be affected by decisions.
Implementation should be governed by the rule of law with a rules-based approach through laws that are consistent with international law and international voluntary commitments, are widely publicised, applicable to all, enforced, and independently adjudicated.
That transparency should be achieved by clearly defined and widely publicised policies, laws and procedures, with decisions similarly being widely publicised and accessible to all.
Individuals, public bodies and private organisations should be accountable and responsible for their actions and decisions according to the principles of the rule of law.
There should be continuous improvement in which states should improve mechanisms for monitoring and analysis of tenure governance in order to develop evidence-based programmes and to secure on-going improvements.
The five general principles raise an important question as to what ought to be regarded as a legitimate tenure. The VGGT argue that no tenure right, including private ownership, can be regarded as absolute (Paragraph 4.3). All tenure rights are limited by the rights of others and by government actions necessary for public purposes. Tenure rights are balanced by duties and that, ultimately, the use of land, fisheries and forests must be on a sustainable basis. The problem is that many tenure rights around the world are not formally recorded in land registers or cadastres and may not be regulated through statute law. Rather many tenure rights are informal in the sense that they have not been formally recorded by the state and may be subject to customary rather than statute law. The VGGT urges states to provide legal recognition for legitimate tenure rights not currently protected by law and that those who possess them should not be arbitrarily evicted or their tenure rights extinguished or infringed (Paragraphs 4.4-4.5). When states recognise or allocate tenure rights, they should establish safeguards to avoid infringing on or extinguishing the tenure rights of others and should identify all existing tenure rights and right holders (Paragraphs 7.1 and 7.3). States are urged to promote recognition of informal tenure in ways that respect existing formal rights (Paragraph 10.1). Where legal recognition of tenure rights is not possible, states should prevent forced evictions.
All human rights are “universal, indivisible, interdependent and interrelated” (Paragraph 4.8). It is therefore important to take account not only of those rights that are related to the access and use of land, fisheries and forests but also civil, political, economic, social and cultural rights. For example, protecting human rights can be dangerous for the defenders particularly in situations in which powerful groups are attempting to seize land from weaker ones. Therefore, states are urged to respect and protect the civil and political rights of those seeking to defend human rights.
The voluntary guidelines and property investment
The voluntary guidelines are not intended to be addressed exclusively to governments. There are also important messages for non-state bodies, including businesses. It is argued in the VGGT that businesses have a responsibility to respect human and legitimate tenure rights as well as national laws (Paragraph 3.2). This means carrying out due diligence in order to avoid infringing the human and tenure rights of others and to identify the actual or potential impacts on human and tenure rights. These should form part of risk management systems. Where businesses have caused or contributed to adverse impacts on human or tenure rights, they should provide remedies, including non-judicial grievance mechanisms. Non-state actors, like businesses, should adhere to ethical standards (Paragraph 11.7). Home states have a role in assisting multi-national corporations and host states in ensuring that businesses are not involved in the abuse of human rights or legitimate tenure rights.
The VGGT argue that responsible public and private investments are essential to improve food security (Paragraph 12.1). Responsible investment should do no harm and should safeguard against the dispossession of legitimate tenure right holders and environmental damage. Where investments involve large-scale transactions of tenure rights, states should make provision for independent assessment of their potential positive and negative impacts.
Home states have a particular role in protecting against the abuse of human rights or legitimate tenure rights by businesses that they own or control, or which receive substantial support from state agencies. When states invest or promote investments abroad, they should ensure that their conduct is consistent with the protection of legitimate tenure rights, the promotion of food security, legal obligations, and voluntary international commitments.
States are encouraged to recognise and facilitate fair and transparent sale and lease markets for the transfer of use and ownership rights (Paragraph 11.1). The VGGT are characterised by the absence of an anti-market rhetoric that is sometimes found in international documents. Instead, states, it is argued, should facilitate the operations of efficient and transparent markets to promote mutually beneficial transfers of tenure rights. States are encouraged to simplify administrative procedures to avoid the discouragement of market participation by the poor. The cost and difficulty of using procedures such as land registration can have the effect of excluding such groups from land markets. Information on market transactions and market values should be transparent and widely publicised. There should be reliable recording systems on tenure rights and duties, such as land registries, in order to increase tenure security and reduce the costs and risks of transactions. Ethical standards in markets should be publicised and monitored to prevent corruption.
In some countries all land belongs to the state or there are publicly-owned land and forests that are collectively used. In both cases there are communities and individuals who claim customary rights over state land, which can act as a constraint on how the state disposes of this land. Many of the conflicts over “land grabbing” are centred on such land. The VGGT argue that states should recognise and protect the legitimate tenure rights of individuals and communities, including those with customary tenure rights (Paragraph 8.2). States should establish up-to-date tenure information and develop policies for the retention and use of state land by the public sector or its allocation for use by others. The VGGT acknowledge that states have the right to expropriate land for public purposes, where these are clearly defined in law and are subject to judicial review (Paragraph 16.1). The processes should be transparent and participatory, and compensation should be prompt and at fair valuation. Evictions should not result in individuals being homeless or vulnerable to the violation of their human rights.
States can only fulfil their obligations if they have the capacity to implement policies and laws in a timely, effective and fair manner. The VGGT wants states to encourage implementing agencies and judicial authorities to foster a culture based on service and ethical behaviour (Paragraph 6.7). These are particularly important in the areas of the recording of tenure rights, valuation, taxation, spatial planning, and dispute resolution. Both states and non-state actors should endeavour to prevent corruption. Relevant professional associations should be allowed to develop. Those working in the public and private sectors should adhere to appropriate ethical standards and be subject to disciplinary action in the case of violations.
Implications of the Voluntary Guidelines on the Governance of Tenure
It would be easy to dismiss the VGGT as something primarily concerned with agricultural and forestry land and to over look the fact that the principles they contain are applicable to all forms of land use and types of real estate. There is competition for agricultural land from offices, retailing and industry and individuals or communities may be deprived of land that they use for agriculture to make way for these.
Recent decades have been characterised by increased globalisation of the world economy. Under the influence of the General Agreement on Tariffs and Trade and its successor, the World Trade Organisation, tariff barriers and quotas on trade have been reduced. The International Monetary Fund and the World Bank have put pressure on the countries seeking their aid to open their economies to trade and to make their currencies at least partially convertible. Governments have come to realise that opening up their economies to foreign firms can bring much needed investment and know how. The result has been relative freedom in trade, investment and the establishment of enterprises. There is a degree of asymmetry in the free movement of factors of production as most countries have retained controls over immigration. This makes it more feasible for companies to move capital and enterprise to places where cheap labour can be found than to import labour. Mobile capital can be moved to immobile land and natural resources.
The reduction in trade barriers has made possible outsourcing, the extension of supply chains into new areas, new opportunities for investment, and the potential for developing countries to raise the living standards and life chances of their citizens. Whilst such developments are to be welcomed, they are not without risk for the companies seeking to take advantage of the opportunities these offer. Freedom of trade and investment can involve doing business with countries where there are human rights issues. Developing international supply chains can result in sourcing goods and services from countries in which there may be human rights abuses. The risk to a company is that it may be viewed as complicit in such abuses.
Principle 2 of the United Nations (2000) Global Compact states that companies should not be complicit in human rights abuses. In guidance on the Global Compact, the United Nations argues that the company itself need not actually cause human rights abuses for it to be complicit. Complicity can arise through the actions of business partners or agents. The United Nations argues that if a company assists or encourages human rights abuses to the extent to which, without its participation, the abuses would either not have occurred or occurred to the same extent, then it is complicit in the abuses. A company can be directly complicit in human rights abuses, for example, where it assists in forced migration to secure the land it needs. It can also be beneficially complicit where it directly benefits from human rights abuses committed by someone else. There can also be what the United Nations calls silent complicity, where a company fails to raise issues of human right abuses in its dealing with the authorities.
The risks to a company from being accused of being complicit in human rights abuses include litigation where those who have been abused seek redress against the company. This can include seeking enforcement in the company’s home country of compensation orders awarded in other jurisdictions. There can be a risk to reputation and potential losses of customers. A company may be faced with a higher premiums when raising or borrowing capital. It may face increased regulation or investigation by its home government. Accusations of complicity in human rights abuses can therefore have a high impact on the company’s business.
Much international investment involves the acquisition of land as an investment or acquiring premises from which to do business or trade. The quality of governance of land tenure in a country affects the risks of this investment. The industries for which the governance of land tenure has a high impact include food and agricultural production and processing, forestry and forest products processing, oil, gas, mining and mineral extraction, water supply, mineral extraction and processing, retailing, construction, civil engineering and building materials, tourism, real estate investment and development, and banking and financial services. They are characterised by requiring land as a significant input to their production processes or producing products directly derived from the land, investing in land, or the taking security over it.
Two examples illustrate the types of problem to which investors can be exposed:
State land was allocated to a foreign company to set up a production facility. Land in the country has not been in private legal ownership since it was nationalised in 1970s under a law that vested all land in the ownership of the state. The land occupied by the new production facility had been occupied by customary occupiers and users for generations. They have been forcibly relocated to housing in the regional capital 30 miles away, where the government says it can provide them with better access to public services, such as education and health care. The customary occupiers of the land have received compensation as tenants at will of the state for the loss of growing crops, but not for the land itself, which by law belongs to the state. The community is angry at the loss of what they see as being “their” land and at having been forcibly relocated to an alien area and environment.
A foreign company has developed a scheme to buy agricultural produce from cooperatives of small farmers. The area is one where there is a significant incidence of HIV/Aids leading to a high rate of adult mortality. Minors legally cannot be registered as owners of land so that the land they inherit from their parents is normally registered in the name of a relative. By custom women are not regarded as being heads of household. Land inherited by widows is re-registered in the names of their late husbands’ brothers. The company has been accused of being complicit in the theft of land from widows and orphans.
The quality of land governance varies between countries and there is some evidence that it is one of the more problematic areas of governance. For example, Transparency International in its 2009 Global Corruption Barometer found that 15 per cent of respondents reported paying a bribe for land services in the previous 12 months, compared with 24 per cent to the police and 16 per cent to the judiciary (Transparency International, 2009). Land services appear to be the third most corrupt of the eight areas covered in the survey. Access to land is highly regulated, for example, through land registration, spatial planning consents, and building control consents, which probably accounts for its vulnerability to corruption. Corruption varies between different parts of the world. Transparency International states that 40 per cent of persons in the Middle East and North Africa, 28 per cent of those in Newly Independent States, and 26 per cent of those in Sub-Saharan Africa reported paying bribes during the previous 12 months compared with 2 per cent of those in North America, 4 per cent of those in the Western Balkans and Turkey, and 5 per cent of those in the European Union/European Economic Area. The FTSE4Good Index identifies 100 countries as being particularly high risk for bribery in the sense that they have scored 0 or less (negative) on the World Bank Governance Indicators and 4 or less on the Transparency International Corruption Perception Index (FTSEIndex Company, n.d.).
The VGGT are not by themselves going to solve problems concerning access to land and the actual and potential infringements of human and tenure rights associated with this. They provide a framework for preventing new problems developing and how existing ones could be resolved. For investors they provide an important checklist of items to be examined as part of due diligence. They provide a framework for relations between the state and businesses and those with customary rights to land. They can be used to establish an environment in which mutually beneficial exchanges of land use and ownership rights can take place.
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