Law Commons^™

Incorporating Free, Prior And Informed Consent (Fpic) Into Investment Approval Processes, Kelly Dudine, Sam Szoke-Burke

Columbia Center on Sustainable Investment Staff Publications

Investment approval processes are the gateway through which governments set the agenda for their country’s investment environment. Yet too often these processes fail to incorporate meaningful requirements regarding participation in decision-making by Indigenous and other affected communities, increasing the risk of under-performing and conflict-ridden investments.

Enabling meaningful participation by rights holders and obtaining and maintaining their Free, Prior and Informed Consent (FPIC) throughout different investment approval processes can help governments to fulfill their legal obligations, mitigate financial and political risk, and, ultimately, attract more sustainable land-based investments.

Featuring concrete guidance and drawing on case studies from Kenya, Liberia, Mexico, Peru, …

Mechanisms For Consultation And Free, Prior And Informed Consent In The Negotiation Of Investment Contracts, Sam Szoke-Burke, Kaitlin Y. Cordes

Columbia Center on Sustainable Investment Staff Publications

Investor-state contracts are regularly used in low-and middle-income countries to grant concessions for land-based and natural resource investments, such as agricultural, extractive industry, forestry, or renewable energy projects. These contracts are rarely negotiated in the presence of, or with meaningful input from, the people who risk being adversely affected by the project. This practice will usually risk violating requirements for meaningful consultation, and, where applicable, free, prior and informed consent (FPIC), and is particularly concerning when the investor-state contract gives the investor company rights to lands or resources over which local communities have legitimate claims.

This article explores how consultation …

Revising Boilerplate: A Comparison Of Private And Public Company Transactions, Stephen J. Choi, Robert E. Scott, G. Mitu Gulati

Faculty Scholarship

The textbook model of commercial contracts between sophisticated parties holds that terms are proposed, negotiated and ultimately priced by the parties. Parties reach agreement on contract provisions that best suit their transaction with the goal of maximizing the joint surplus from the contract. The reality, of course, is that the majority of the provisions in contemporary commercial contracts are boilerplate terms derived from prior transactions and even the most sophisticated contracting parties pay little attention to these standard terms, focusing instead on the price of the transaction. With standard-form or boilerplate contracts, this dynamic of replicating by rote the terms …

Innovation Versus Encrustation: Agency Costs In Contract Reproduction, Stephen J. Choi, Mitu Gulati, Robert E. Scott

Faculty Scholarship

This article studies the impact of exogenous legal change on whether and how lawyers across four different deal types revise their contracts’ governing law clauses in order to solve the problem that the legal change created. The governing law clause is present in practically every contract across a wide range of industries and, in particular, it appears in deals as disparate as private equity M&A transactions and sovereign bond issuances. Properly drafted, the clause increases the ex ante economic value of the contract to both parties by reducing uncertainty and litigation risk. We posit that different levels of agency costs …

Foreign Contracts And U.S. Copyright Termination Rights: What Law Applies? – Comment, Richard Arnold, Jane C. Ginsburg

Faculty Scholarship

The U.S. Copyright Act gives authors the right to terminate assignments of copyrights in works other than works for hire executed on or after 1 January 1978 after 35 years, and to do so notwithstanding any agreement to the contrary. Given that agreements which are subject to the laws of other countries can assign U.S. copyrights, and purport to do so in perpetuity, U.S. law’s preclusion of agreements contrary to the author’s right to exercise her termination right can give rise to a difficult choice of law issue. Two recent cases which came before courts in the U.S. and England …

Contractual Arbitrage, Stephen J. Choi, G. Mitu Gulati, Robert E. Scott

Faculty Scholarship

Standard-form contracts are likely to be incomplete because they are not tailored to the needs of particular deals. In an attempt to reduce incompleteness, standard-form contracts often contain clauses with vague or ambiguous terms. Terms with indeterminate meaning present opportunities for strategic behavior well after a contract has been executed. This linguistic uncertainty in standard-form commercial contracts creates an opportunity for “contractual arbitrage”: parties may argue ex post that the uncertainties in expression mean something that the contracting parties did not contemplate ex ante. This chapter argues that the scope for contractual arbitrage is a direct function of the techniques …

The Economics Of Leasing, Thomas W. Merrill

Faculty Scholarship

Leasing may be the most important legal institution that has received virtually no systematic scholarly attention. Real property leasing is familiar in the context of residential tenancies. But it is also widely used in commercial contexts, including office buildings and shopping centers. Personal property leasing, which was rarely encountered before World War II, has more recently exploded on a world-wide basis, with everything from autos to farm equipment to airplanes being leased. This article seeks to develop a composite picture of the defining features of leases and why leasing is such a widespread and highly successful economic institution. The reasons …

Freedom, Choice, And Contracts, Hanoch Dagan, Michael A. Heller

Faculty Scholarship

In “The Choice Theory of Contracts,” we explain contractual freedom and celebrate the plurality of contract types. Here, we reply to critics by refining choice theory and showing how it fits and shapes what we term the “Contract Canon”.

I. Freedom. (1) Charles Fried challenges our account of Kantian autonomy, but his views, we show, largely converge with choice theory. (2) Nathan Oman argues for a commerce-enhancing account of autonomy. We counter that he arbitrarily slights noncommercial spheres central to human interaction. (3) Yitzhak Benbaji suggests that choice theory’s commitment to autonomy is overly perfectionist. Happily, in response to Benbaji, …

Autonomy For Contract, Refined, Hanoch Dagan, Michael A. Heller

Faculty Scholarship

In The Choice Theory of Contracts, we advance a claim about the centrality of autonomy to contract. This Issue offers thoughtful and penetrating critiques. Here, we reply. Autonomy is the grounding principle of contract. In Choice Theory, we stressed the (1) proactive facilitation component of autonomy, in particular, the state’s obligation regarding contract types. Here, we highlight two additional, necessary implications of autonomy for contract: (2) regard for future selves and (3) relational justice. These three aspects of autonomy shape the range, limit, and floor, respectively, for the legitimate use of contract. They provide a principled and constrained path for …

Why Autonomy Must Be Contract's Ultimate Value, Hanoch Dagan, Michael A. Heller

Faculty Scholarship

In “The Choice Theory of Contracts”, we develop a liberal theory of contract law. One core task of the book was to persuade advocates of economic analysis that they must situate their enterprise within our liberal framework. Autonomy, rightly understood, is the telos of contract.

Oren Bar-Gill pushes back strongly in “Choice Theory and the Economic Analysis of Contracts”. He offers a penetrating – perhaps devastating – critique of our approach. Bar-Gill notes the substantial convergence between choice theory and a welfarist view. If he is right, then what does choice theory add?

Our task in Part I of this …

The Middleman’S Damages Revisited, Victor P. Goldberg

Faculty Scholarship

If A promises to sell to B who, in turn, promises to sell to C and either A or C breaches should B receive the gain it expected had both transactions occurred (lost profits) or the larger market/contract differential? Recent case law and commentary argues for the lost profit remedy. The argument is that there is a conflict between awarding market damages and making the nonbreacher whole. This paper argues that there is no conflict. If B were a broker, and C breached, then A would have an action against C for market damages. If B were party to the …

Mechanisms For Consultation And Free, Prior And Informed Consent In The Negotiation Of Investment Contracts, Sam Szoke-Burke, Kaitlin Y. Cordes

Columbia Center on Sustainable Investment Staff Publications

Investor-state contracts are regularly used in low-and middle-income countries to grant concessions for land-based investments, such as agricultural or forestry projects. These contracts are rarely negotiated in the presence of, or with meaningful input from, the people who risk being adversely affected by the project. This has serious implications for requirements for meaningful consultation, and, where applicable, free, prior, and informed consent (FPIC), and is particularly important in situations in which investor-state contracts grant the investor rights to lands or resources over which the community has legitimate claims.

The paper explores how consultation and FPIC processes can be integrated into …

Guide To Land Contracts: Forestry Projects, International Senior Lawyers Project, Kaitlin Y. Cordes, Sam Szoke-Burke

Columbia Center on Sustainable Investment Staff Publications

Agricultural investment contracts and forestry projects can be complex, with complicated provisions that are difficult to understand. To assist non-lawyers in better understanding agricultural investment contracts, such as those available on the Open Land Contracts repository, CCSI has developed a Guide to Land Contracts: Forestry Projects.

This Guide, prepared by International Senior Lawyers Project staff and volunteers in collaboration with the Columbia Center on Sustainable Investment, aims to assist the Open Land Contracts repository users in unpacking the technical provisions and language typically found in forestry contracts in order to better understand the contracts and the potential implications of …

Resourcecontracts.Org – A Searchable Repository For Publicly Available Mining And Petroleum Contracts, Sophie Thomashausen

Columbia Center on Sustainable Investment Staff Publications

ResourceContracts.org is an online, searchable and user-friendly repository of publicly available mining and petroleum contracts from around the world. It currently includes over 1,000 from 72 countries. In addition to PDF scans of each executed contract, the site includes: the full text of contracts in searchable format; plain language summaries of each contract’s key social, environmental, human rights, fiscal, and operational terms; and tools for searching and comparing contracts. Users can search contracts by country, natural resource, year, by type of contract, company, corporate group, or by annotation category.

A Silver Lining? Impact Of Commodity Price Fall On Good Governance In Sierra Leone, Herbert M'Cleod, Nicolas Maennling, Lisa E. Sachs

Columbia Center on Sustainable Investment Staff Publications

From 2002 to 2013, resource-rich countries in Africa enjoyed the benefits of a commodity boom, using increased revenues to embark on major infrastructure projects in roads, rail, ports, and housing. But when commodity prices fell starting in 2011 (see figure below), public sector revenues took a major hit with private sector companies scaling back operations, delaying investment decisions and suspending unprofitable operations. Especially as the number and size of investments in the sector contracted, Governments felt increased pressure to collect, manage and spend those revenues more efficiently. As a result, the fall in commodity prices and mounting economic pressure actually …

Guide To Land Contracts: Agricultural Projects, International Senior Lawyers Project, Kaitlin Y. Cordes, Sam Szoke-Burke

Columbia Center on Sustainable Investment Staff Publications

Agricultural investment contracts can be complex, with complicated provisions that are difficult to understand. This Guide provides explanations for a range of common provisions, and includes a Glossary of legal and technical terms. It assists non-lawyers in better understanding agricultural investment contracts, such as those available on the Open Land Contracts repository.

The Guide was prepared by International Senior Lawyers Project staff and volunteers in collaboration with the Columbia Center on Sustainable Investment.

The Common Law Of Contract And The Default Rule Project, Alan Schwartz, Robert E. Scott

Faculty Scholarship

The common law developed over centuries a small set of default rules that courts have used to fill gaps in otherwise incomplete contracts between commercial parties. These rules can be applied almost independently of context: the market damages rule, for example, requires a court only to know the difference between market and contract prices. When parties in various sectors of the economy write sales contracts but leave terms blank, courts fill in the blanks with their own rules. As a consequence, a judicial rule that many parties accept must be "transcontextual": parties in varied commercial contexts accept the courts' rule …

Meeting Summary Of Colloquium On Policy, Law, Contracts, And Sustainable Development, Columbia Center On Sustainable Investment

Columbia Center on Sustainable Investment Staff Publications

In November 2014, CCSI and the Institute for Human Rights and Business co-convened a colloquium on policy, law, contracts, and sustainable development, with a particular focus on large-scale investments in the extractive industries and the agriculture sector. The colloquium provided an opportunity for practitioners to share information on their related work, as well as to reflect on current practices and remaining gaps regarding efforts to embed sustainability and human rights into large-scale deals. This outcome document provides a summary of the discussion, while its annex includes information on participants’ relevant programs, initiatives, and tools.

Devil In The Bidding Detail, Lisa E. Sachs, Jacky Mandelbaum, Perrine Toledano

Columbia Center on Sustainable Investment Staff Publications

In light of the recent boom in natural resource prices, India is one of them many countries facing heightened scrutiny of the allocation and terms of their resource deals. In India, that scrutiny has uncovered a multi-billion dollar controversy over coal block allocations that has gridlocked Parliament. More generally, citizens in resource-producing countries around the world are asking whether the public is getting a fair value for their countries resources, or whether investors and politicians are walking away with the prize. Finally, the important questions are being asked: how should resources be managed to ensure that they benefit the citizenry, …

Paper On The Business Case For Transparency, Perrine Toledano

Columbia Center on Sustainable Investment Staff Publications

CCSI strongly supports the transparency of contracts and tax flows. CCSI shares the belief of many stakeholders that transparency is essential to leverage extractive industries for sustainable development and is in the mutual interest of all stakeholders. However, some industry players continue to voice the concern that increased transparency would be harmful for their business. Therefore, CCSI is working to also establish the business case for transparency.

In one such case, some industry players have been lobbying against the regulations developed by the Security and Exchange Commission to implement the mandatory disclosure provisions of the Dodd Frank Wall Street Reform …

Origin Myths, Contracts, And The Hunt For Pari Passu, Mark C. Weidemaier, Robert E. Scott, G. Mitu Gulati

Faculty Scholarship

Sovereign loans involve complex but largely standardized contracts, and these include some terms that no one understands. Lawyers often account for the existence of these terms through origin myths. Focusing on one contract term, the pari passu clause, this article explores two puzzling aspects of these myths. First, it demonstrates that the myths are inaccurate as to both the clause’s origin and the role of lawyers in contract drafting. Second, the myths often are unflattering, inaccurately portraying lawyers as engaged in little more than rote copying. The article probes this disjunction between the myths and lawyers’ actual practices and explores …

Contracts – Only With Consent, Ronald J. Mann

Faculty Scholarship

My friend and former colleague Omri Ben-Shahar has established a reputation for providing nuanced and well-grounded applications of economic analysis to important problems of contract law. In recent years, he has undertaken the ambitious task of exploring a significant topic at the boundary of contract law: liability for problems that arise out of efforts to form a contract. The essay to which I reply, Contracts Without Consent: Exploring a New Basis for Contractual Liability, is his second work on that topic, following his 2001 article with Lucian Bebchuk entitled Precontractual Reliance. Collectively, these pieces provide a comprehensive analysis …

Self-Enforcing International Agreements And The Limits Of Coercion, Robert E. Scott, Paul B. Stephan

Faculty Scholarship

International law provides an ideal context for studying the effects of freedom from coercion on cooperative behavior. To be sure, almost all academic discussions on the subject begin by asking whether international law constitutes "law." But the category of all "international law" is too big and heterogeneous to permit useful analysis. Whether to regard, say, the rules governing the conduct of war or international humanitarian law as "law" presents radically different issues than analyzing the legal character of the Treaty of Rome (the constitutive instrument of the European Community), or the Warsaw Convention (the instrument governing contracts for the carriage …

Embedded Options In The Case Against Compensation In Contract Law, Robert E. Scott, George G. Triantis

Faculty Scholarship

Although compensation is the governing principle in contract law remedies, it has tenuous historical, economic, and empirical support. A promisor's right to breach and pay damages is only a subset of a larger family of termination rights that do not purport to compensate the promisee for losses suffered when the promisor walks away from the contemplated exchange. These termination rights can be characterized as embedded options that serve important risk management functions. We show that sellers often sell insurance to their buyers in the form of these embedded call options, and that termination fees, including damages, are in essence option …

(Baby) M Is For The Many Things: Why I Start With Baby M, Carol Sanger

Faculty Scholarship

For several years now I have begun my first-year contracts course with the 1988 New Jersey Supreme Court case In the Matter of Baby M. In this essay, I want to explain why. I offer the explanation in the spirit of modest proselytizing, recognizing that many of us already have a favored method or manner into the course: some introductory questions we pose before leaping into (or over) the introductions already provided by the editors of the many excellent casebooks available. But I have found that Baby M works extremely well in ways that others may want to consider. …

An Economic Analysis Of The Guaranty Contract, Avery W. Katz

Faculty Scholarship

Guaranty arrangements, in which one person stands as surety for a second person's obligation to a third, are ubiquitous in commercial transactions and in commercial law. In recent years, however, scholarly attention to the topic has been scant; and no one has systematically analyzed this body of law and practice from an economic policy perspective. Accordingly, this Article attempts to outline the basic economic logic underlying the guaranty relationship, and applies the results to a variety of specific issues in government policy and private planning. It poses and answers three main questions: First, why would a creditor prefer to make …

Bloomer Girl Revisited Or How To Frame An Unmade Picture, Victor P. Goldberg

Faculty Scholarship

Nearly all contracts casebooks feature the saga of Shirley MacLaine's suit against Twentieth Century Fox arising from the cancellation of the proposed film Bloomer Girl. None really get the story right. To be fair, none try. The case is a vehicle for exploring the obligation of the victim of the breach of an employment contract to take alternative employment. If MacLaine refused an offer of alternative employment that was not "different and inferior," her failure to mitigate would mean that the earnings she would have received would be offset against the damages; so, asked the court, was the alternative …