Sustainable Development

UNIDROIT’S WORK AND INSTRUMENTS IN THE AREA OF SUSTAINABLE DEVELOPMENT

As part of its commitment to sustainable development, UNIDROIT has included a project on verified carbon credits (VCCs) in its 2023-2025 Work Programme. Proposed by the International Swaps and Derivatives Association (ISDA) and supported by the Government of Paraguay, this project was recommended for inclusion by the UNIDROIT Governing Council at its 101st session in 2022. The recommendation was subsequently adopted by the UNIDROIT General Assembly at its 81st session on 15 December 2022.

This project, which has been assigned a high priority, aims to analyse the private law aspects and legal nature of VCCs, given their growing significance as a means to channel financial resources into initiatives combating climate change. It is being carried out by a dedicated working group chaired by Professor Hideki Kanda, member of UNIDROIT’s Governing Council, and made up of experts in carbon credit trading, environmental law, property law, secured transactions and digital technology,. The objective is to provide a comprehensive analysis as well as recommendations to States and market participants to establish a clear private law framework and enhance legal certainty for transactions involving these instruments.

The main objective of the UNIDROIT Project on the Legal Nature of Verified Carbon Credits is to provide guidance on private law issues so as to enhance confidence in VCC transactions and support the development of a well-functioning market.

Despite their importance as tools in the fight against climate change and their increasing global prevalence, the legal nature of VCCs remains uncertain in most jurisdictions. Certainty on the classification of a VCC under private law is crucial to support market participation by private entities including project developers and investors. It informs market mechanics such as how transfers may be completed by sale or as collateral as well as the treatment of VCCs held by an entity in insolvency.

A robust carbon credit market could play a central role in fighting climate change, achieving the goals of the United Nations Framework Convention on Climate Change (“UNFCCC”), in particular the Paris Agreement, and facilitating the fulfilment of the UN Sustainable Development Goals. Given that a significant share of the projects that generate VCCs are located in developing economies, a reliable carbon credit market also provides an opportunity to increase capital flow to emerging markets and provide funding to climate mitigation projects.

More information on the background, scope and composition of the Working Group is provided here.

The UNIDROIT/FAO/IFAD Legal Guide on Contract Farming intends to promote good practices between farmers and buyers of agricultural commodities by enhancing knowledge and awareness of the legal regime applicable to contract farming operations.

The practice of producing under a contract is used for a broad array of agricultural commodities in many countries of the world and is growing significantly in developing countries. Contract farming does not disrupt farmers’ rights over the land and under enabling conditions may deliver substantial economic and social benefits to the parties and the community.

One key element of the success of contract farming arrangements is the capacity of the parties to build stable, commercially sound and fair relationships, based on clear commitments and mutual compliance and supported by an enabling legal framework.

The Guide has proven to be a useful tool and reference point for a broad range of users involved in contract farming practice, policy design, legal reform and capacity-building. It can help creating a favourable, equitable and sustainable environment for contract farming.

Useful link: FAO’s Contract Farming Resource Centre

Continuing its collaboration with Rome-based international organisation in the field of agricultural development, UNIDROIT and IFAD recently launched, in September 2021, an international instrument on Agricultural Land Investment Contracts (ALIC Legal Guide) for use by legal counsel working on the leasing of agricultural land, whether from a State, local community or private party perspective. The instrument – developed by a Working Group of renowned experts, representatives of international Organisations and stakeholders builds upon the UNIDROIT-FAO-IFAD Legal Guide on Contract Farming and the UNIDROIT Principles of International Commercial ContractsThe ALIC Legal Guide does not to endorse large-scale land acquisitions and has been developed to raise awareness about alternative investment models. In acknowledging that land acquisitions continue to occur, however, the instrument aims at ensuring that leases of agricultural land are done responsibly and that stakeholders’ rights, including those of legitimate tenure right holders are protected and respected in a way that is fully consistent with principles and internationally accepted standards for the promotion of secure tenure rights, equitable access to land and responsible agricultural investment, as reflected in the VGGT, the CFS-RAI Principles and the UN Guiding Principles on Business and Human Rights.

Information regarding the background on the ALIC Legal Guide, including Working Group meeting summaries and documentation is provided here.

The Legal Guide on Collaborative Legal Structures for 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).

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 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. The high priority level of the LSAE project was maintained in the 2023-2025 Work Programme, until its final completion.

More information on the background, scope and composition of the Working Group of the UNIDROIT/FAO/IFAD LSAE project is provided here.

The Cape Town Convention together with its various Protocols is designed to bring significant economic benefits to countries at all stages of economic development. In developing countries, the Cape Town Convention lowers the cost of finance for mobile equipment that has previously been unavailable or available only at a relatively high cost.

In the agriculture sphere, the Mining, Agriculture and Construction (MAC) Protocol to the Cape Town Convention facilitates the financing and acquisition of high value agricultural equipment. The MAC Protocol establishes an international legal regime for the creation, enforcement, registration and priority of security interests in such categories of equipment.

In the area of agriculture, the Protocol will allow agriculture and farming enterprises to acquire equipment (for example, tractors, harvesters, seeders, sprayers etc) they would otherwise be unable to acquire and thus permit them to optimise their activity. It will also allow producers of equipment to export to markets that without the MAC Protocol would remain closed to them.

The MAC Protocol is predicted to have an annual global economic impact of $23 billion USD in developing countries and $7 billion USD in developed countries. A 2018 independent economic assessment of the MAC Protocol is available here.

For more information on the Cape Town Convention and MAC Protocol, access the Secured Transactions Portal

Introduction      Diplomatic Conference      Background      Study Group Negotiations      Committee of Governmental Experts

LATEST NEWS

UNIDROIT represented at GoF-DLDD Launch in Rome

On 17 February 2025, UNIDROIT President Maria Chiara Malaguti participated…

Read More

UNIDROIT participates in UNCITRAL Secured Transactions Colloquium in New York

On 20 and 21 February 2025, UNIDROIT participated in a…

Read More

UNIDROIT undertakes consultations with Washington-based institutions

On 18 and 19 February 2025, a UNIDROIT delegation travelled…

Read More