LEGAL STRUCTURE OF AGRICULTURAL ENTERPRISES

STUDY LXXX C - PREPARATION OF AN INTERNATIONAL GUIDANCE DOCUMENT ON LEGAL STRUCTURE OF AGRICULTURAL ENTERPRISES

As a natural follow-up from the Legal Guide on Contract Farming (finalised in 2015) and the Legal Guide on Agricultural Land Investment Contracts (finalised in 2020), the Legal Structure of Agricultural Enterprises (LSAE) is the most recent project of the tripartite partnership between the International Institute for the Unification of Private Law (UNIDROIT), the Food and Agriculture Organization of the United Nations (FAO) and the International Fund for Agricultural Development (IFAD).

 

The LSAE project was selected by the UNIDROIT Governing Council, at its 98th session (Rome, 8-10 May 2019) and approved by the General Assembly at its 78th session (Rome, 12 December 2019) to be developed during the 2020-2022 Work Programme, with a medium priority level.

 

As a first step, the Governing Council recommended that the Secretariat conduct a stocktaking exercise and feasibility analysis with respect to the legal structure for investment in agriculture activities, in order to ascertain whether UNIDROIT could make a useful contribution.

The Secretariat prepared and submitted to the Governing Council, at its 99th session (Rome, 23-25 September 2020), the requested background paper (C.D. (99) B.5), which was divided into three parts. Part I provided background on UNIDROIT’s work in the field of private law and agricultural development. Part II provided a summary of recent international initiatives which may directly and/or indirectly influence the scope of UNIDROIT’s future work. Lastly, Part III evaluated whether a new UNIDROIT/FAO/IFAD instrument would be of additional benefit and provided preliminary observations on legal issues to considered.

 

While the content, scope and form of the potential new instrument still requires further definition, the Secretariat proposed to build upon the gaps identified in certain international initiatives, and to further promote the thematic continuity and synergy developed over the years with the collaboration of FAO and IFAD in the field of private law and agricultural development.

 

The background paper suggested that the LSAE project could pursue four main objectives:

  • improve access to market by analysing the current legal structures that limit access to agricultural markets and making recommendations as to which legal structure promotes better access by smallholders and agriculture Small, Medium-sized Enterprises (agri-SMEs) to adequate domestic and global agricultural markets;
  • increase the size and soundness of agricultural enterprises by analysing how contractual and corporate networks – either directly or through collaboration within and across agricultural commodities – may favour that outcome;
  • ease access to critical resources and insurance by analysing which investment vehicles are best suited to promote access to capital, know-how, and technology; and
  • address unfair commercial practices by analysing, in the context of the legal structures and contractual networks considered, how unfair commercial practices in agrifood activities are covered.

 

In September 2020, at its 99th session, the Governing Council authorised the Secretariat to continue consulting with experts and the Secretariats of other relevant international organisations to organise a colloquium in 2021 to discuss and specify the potential scope of the LSAE project.

The Consultation Webinar was held online on 15 and 16 April 2021 and served as a brainstorming session to inform the drafting of an annotated list of possible topics to be addressed in a prospective future instrument. The Consultation included five different sessions respectively focusing on:

  • regulatory demands and new technology scenarios;
  • contractual structures for collaboration and integration of agricultural enterprises;
  • remedies and dispute settlement mechanisms;
  • corporate structures for the organisation of farmers and agricultural enterprises; and
  • challenges for agricultural finance and access to credit.

 

Focusing on the legal and business aspects of agricultural enterprises, the Webinar brought together 35 speakers and over 150 registered participants from a wide diversity of backgrounds including practitioners and academics; representatives of international organisations; as well as representatives of the private sector, NGOs and think tanks.

 

For more information on the Consultation Webinar:

 

Drawing from the conclusions of the Webinar, from the Secretariat’s own research, and considering exchanges with FAO and IFAD, a document with the proposed scope of the project and a request to convene a Working Group will be presented at the 100th session of the Governing Council, in September 2021.

 

For queries related to the LSAE project kindly contact Ms Priscila Andrade (Legal Officer) p.andrade@UNIDROIT.org