"Not So Sweet: Tanzania Confronts Arbitration over Large-Scale Sugarcane and Ethanol Project"

Large-scale agricultural investments raise a number of challenges: negative environmental and social impacts, often borne primarily by local communities and land users, as well as operational and reputational risks, which have pained many an investor. Host governments also confront a number of challenges arising from investments, from facilitating investments that align with sustainable development objectives, to monitoring investor compliance with relevant obligations and best practices regarding responsible investment. One challenge that receives less attention is the risk that governments run of being sued by investors when projects don’t proceed as planned, often for legitimate reasons.

Tanzania is currently confronting this challenge, faced with a new international investment dispute tied to a proposed large-scale sugarcane and ethanol production project. The dispute concerns the Agro EcoEnergy project in Bagamoyo, a venture that has been criticized for its potential impacts on local farmers and villagers...In January 2015, the Tanzanian parliamentary committee on Land, Natural Resources, and Environment reportedly required the Ministry of Lands, Housing, and Human Settlements Developments to recover 3,000 hectares of the land allocated for the project that fell within the national park; the following year, the entire project was reportedly halted. The claim against Tanzania is being brought by four companies involved in the project, under a bilateral investment treaty in force between Sweden and Tanzania. It will be determined by means of investor-state arbitration, a unique and privileged form of dispute settlement available to foreign investors under many international investment agreements (IIAs), including the Sweden-Tanzania treaty. Investors with recourse to investor-state arbitration can bypass domestic court systems, bringing their claims directly before an international panel of arbitrators.