COLLABORATIVE LEGAL STRUCTURES FOR AGRI-ENTERPRISES

STUDY LXXX C - PREPARATION OF AN INTERNATIONAL GUIDANCE DOCUMENT ON COLLABORATIVE LEGAL STRUCTURES FOR AGRICULTURAL ENTERPRISES

The project on Collaborative Legal Structures for Agricultural Enterprises (CLSAE) 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 CLSAE project is 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 2021). Compared to the Legal Guide on Contract Farming, which focused on bilateral agricultural production contracts between farmers/producers and buyers, the CLSAE project adopts a broader scope to cover “collaborative legal forms” that support smallholders and agri-MSMEs to enhance sustainable agricultural development in value chains and contribute to the transformation of agrifood systems.

The future legal guide will mainly cover four collaborative legal forms:

(i) Cooperatives
(ii) Companies
(iii) Multiparty contracts
(iv) Digital platforms

The analysis is premised on complementarity rather than on the disparate collaborative legal forms being separate alternatives. The CLSAE project presupposes that the needs of smallholders and agri-MSMEs to overcome challenges posed by global value chains can be addressed through collaboration by: (i) improving access to viable markets, market resources and inclusive financial services; (ii) exploring the enormous innovation opportunities while giving due consideration to the risks created by digitalisation, digitisation and digital platforms; (iii) addressing power imbalances and increasing participation in decision-making; and (iv) proposing remedies for unfair commercial practices.

The fundamental differences between the collaborative legal structures covered in the CLSAE Project are explained by considering their different purposes; formation and entry requirements; governance and decision-making procedures; scope of liability; remedies and sanctions for breach; as well as the requirements for exit and dissolution. Horizontal and vertical forms of collaboration are considered to clarify the different collaborative legal structures that may be adopted within the value chain.

The tentative calendar for the CLSAE Project envisages the preparation of the draft instrument over seven Working Group sessions, followed by a period of consultations in 2025 before submitting the complete draft for adoption by UNIDROIT, FAO and IFAD.

The development of the CLSAE project, began during the 2020-2022 Work Programme, initially with a medium-priority level, and was extended at high-priority level to the 2023-2025 Work Programme by the UNIDROIT Governing Council (UNIDROIT 2022 C.D. (101) 21) and General Assembly (UNIDROIT 2022 A.G. (81) 9).

In 2020, as a first step for the development of the CLSAE project, the Secretariat prepared and submitted to the Governing Council, at its 99th session a background paper (UNIDROIT 2020 – 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. The Secretariat  drew the Governing Council’s attention to the strong interest identified, in particular from economists, of undertaking work on the private law aspects of legal structures for agricultural enterprises to: (i) improve market access; (ii) improve forms of coordination of agricultural enterprises; (iii) ease access to critical resources and insurance; and (iv) address unfair commercial practices.

In 2021, on 15 and 16 April, the Secretariat co-organised a Consultation Webinar with FAO and IFAD to gather further input on the topics that could be potentially covered in the Guidance Document (for more information see below). The conclusions and recommendations of the Webinar were presented at the 100th session of the Governing Council which agreed with the Secretariat’s proposal to upgrade the status of the LSAE project to allow for the establishment of a Working Group and to permit the allocation of resources for experts to continue the delineation of the scope and content of the prospective Guidance Document (UNIDROIT 2021 – C.D. (100) B.5). The General Assembly supported the recommendation by the Governing Council, allocating high priority status to the LSAE project at its 80th session in December 2021.

In 2022, the first session of the CLSAE Working Group took place from 23-25 February   and the second session of the Working Group was held on 2-4 November. Progress was made in clarifying the scope and content of the prospective guidance instrument and the Governing Council recommended maintaining the high-priority level of the CLSAE project in the 2023-2025 Work Programme (UNIDROIT 2022 – C.D. (101) 10).

In 2023, the third and fourth session of the Working Group were respectively held on 8-9 May and 8-10 November. More progress was made within the respective subgroup areas, namely: cooperatives; corporations; and multiparty contracts. Additional efforts were made to gather empirical evidence on the use of multiparty contracts, cooperatives and companies in the agricultural sector. The UNIDROIT Governing Council agreed with the proposal to change the project’s working title from “Legal Structures of Agricultural Enterprises” to “Collaborative Legal Structures for Agricultural Enterprises”, to reflect the content that was actually being developed (UNIDROIT 2023 – C.D. (102) 25).

In 2024, the fifth session of the Working Group was held on 18-20 March. The Working Group heard presentations from each of the three Subgroups based on the discussion papers that had been circulated, as well as a presentation on digital platforms. Discussions were also held on certain exogenous factors that could affect the choice of legal structure, namely, sustainability and access to credit, and how to combine and compare the collaborative legal forms.

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:

Consistent with UNIDROIT’s established working methodology, the Secretariat set up a Working Group in 2022, initially chaired by Governing Council Member ad honorem Justice Ricardo Lorenzetti (Argentina). The Working Group is currently chaired by Governing Council Member Professor Maria Ignacia Vial Undurraga (Chile) and coordinated by Professor Fabrizio Cafaggi (Italy). The Working Group is composed of members and observers selected for their expertise in the field of contract law, corporate law, cooperative law, commercial law and agricultural law, as well as for their experience in economics, finance, digitalisation and sustainability.

As of August 2024, the Working Group is composed of the following expert members:

  • Virgilio De Los Reyes, Dean, De La Salle University (The Philippines)
  • Isabelle Deschamps, Lawyer, Consultant | Law and development (Canada)
  • Matteo Ferrari, Professor, University of Trento (Italy)
  • Cynthia Giagnocavo, Professor, Universidad de Almeria (Spain)
  • Hagen Henry, Professor, University of Helsinki (Finland)
  • Paola Iamceli, Professor, University of Trento (Italy)
  • Morshed Mannan, Research Fellow, Robert Schuman Centre, European University Institute (Italy)
  • Georg Miribung, Professor, Eberswalde University for Sustainable Development (Germany)
  • Francisco Reyes Villamizar, Adjunct Professor, University Javeriana, Partner at Francisco Reyes & Asociados SAS (Colombia)
  • Carlo Russo, Associate Professor, University of Cassino and Lazio Meridionale (Italy)
  • Dongxia Yang, Professor, China University of Political Science and Law (China)

The Working Group also includes representatives of FAO and IFAD legal departments and technical experts from other departments (FAO’s “Agrifood Economics Division”,“Food Systems and Food Safety Division”, and “Inclusive Rural Transformation and Gender Equality Division” as well as IFAD’s “Research and Impact Division” and “Sustainable Production, Markets and Institutions Division”.

In addition, a significant number of observers, representing international and regional intergovernmental organisations, farmers associations, non-governmental organisations, and the private sector have also been invited to join the Working Group which include, among others, the following:

  • Asian Farmers’ Association for Sustainable Rural Development (AFA)
  • Eastern Africa Farmers Federation (EAFF)
  • International Development Law Organization (IDLO)
  • International Cooperative Alliance (ICA)
  • International Institute for Environment and Development (IIED)
  • Organization of American States (OAS)
  • United Nations Commission on International Trade Law (UNCITRAL)
  • World Bank Group (WBG)
  • World Food Programme (WFP)
  • World Food Law Institute

Moreover, the Working Group has seven individual expert observers: Karel Osiris Coffi Dogue (University of Abomey-Calavi); Leonardo Rafael De Souza (Pontifical Catholic University of Paraná); Ifigeneia Douvitsa (Hellenic Open University); Roberta Peleggi (University of Rome Sapienza); Alphonce Mbuya (Moshi Cooperative University); Edward Kyei Twum (University of Cassino and Lazio Meridionale); and Robert Yalden (Queen’s University).

1st Working Group Meeting

The first meeting of the CLSAE Working Group took place in a hybrid manner on 23-25 February 2022.

 

2nd Working Group Meeting

The second meeting of the CLSAE Working Group took place in a hybrid manner on 2-4 November 2022.

 

3rd Working Group Meeting
The third meeting of the CLSAE Working Group took place in a hybrid manner on 8-9 May 2023.

4th Working Group Meeting

The fourth meeting of the CLSAE Working Group took place in a hybrid manner on 8-10 November 2023.

5th Working Group Meeting

The fifth meeting of the CLSAE Working Group took place in a hybrid manner on 18-20 March 2024.

6th Working Group Meeting

The sixth meeting of the CLSAE Working Group will take place in a hybrid manner on 20-22 November 2024.