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Foreigners thrown off their farms under Zimbabwe’s land reform programme could stand a stronger chance of winning compensation if an international arbitration, currently under way between a group of Dutch farmers and Robert Mugabe’s government, rules in the farmers’ favour. The fifteen Dutch farmers launched their claims against the Republic of Zimbabwe through the International Centre for the Settlement of Investment Disputes (ICSID), a World Bank resolution forum, in April 2005. Following an initial hearing last December, it is now pending.
The Dutch argue that under a ratified bilateral investment treaty between the Netherlands and Zimbabwe the government is obliged to compensate them fully for seizure of their land and agricultural investments.
Bilateral investment treaties are agreements signed between two governments that typically require each side to submit to binding international arbitration and to compensate nationals of the other for example in the event of expropriation of their investments or property in that country.
The group, whose claims total more than $15m, is among some 4,000 victims of Zimbabwe’s seven-year-old land reform programme, which kicked off with a string of often violent land-grabs in March 2000. The policy, which Mugabe presented as a rightful return of land stolen from poor blacks by white colonialists, proved a big vote winner, but has since plunged the country into economic crisis as previously fertile farmland stands idle. If the tribunal’s ruling is favourable, it could set a precedent for similar claims in international courts against Mugabe’s government.
However, it is estimated that only around 1,500 of the country’s dispossessed farmers enjoy the protection of a bilateral investment agreement concluded between the farmers’countries of origin and Zimbabwe. Many of Mugabe’s land reform victims are of Zimbabwean descent or hail from other countries with no treaty in place, and the legal situation for them is much more complex.
In the land grab programme’s first years, a flurry of white landowners managed through the country’s courts to successfully evict black farmers installed on their land (instead of the other way around). To stymie such cases, in August 2005 Mugabe’s government changed the law, passing a constitutional amendment which nationalised the farms and barred farmers from challenging in court the seizure of their property. Previous High Court eviction rulings against new black farmers were also overturned.
A number of farmers however continue to fight the land reform programme through Zimbabwe’s courts, although lawyers say that the constitutional amendment persuaded many to drop their claims. One farmer who is currently challenging the constitutional amendment of 2005 in the country’s Supreme Court is Ben Freeth, a British-born farmer who runs the country’s biggest mango farm, which was originally owned by the family of his Zimbabwean wife. He launched his challenge early this year and the court now has to decide on the legality of the amendment.
The case marks Freeth’s last chance of holding onto his land. His safari lodge and farm buildings have already been razed after he refused an offer to share the farm, and in February a band of 30 thugs stormed his land demanding he hand it over. They only left following a rare case of police intervention.
“Since that amendment we are now on state land and anyone on state land without authority from the minister can be put in jail for two years,” Britain’s Daily Telegraph newspaper quoted him as saying in March. Zimbabwe’s security minister said in July 2006 that farmers whose home countries had bilateral investment treaties with Zimbabwe would be compensated for the seizure of their property.
However, the money offered so far equates to less than 10% of their land’s original value, once the country’s breakneck inflation rate is factored in, according to Bob Fernandes, chairman of AgriAfrica, the UK-based group which has helped to coordinate the Dutch farmers’ ICSID claim.
Mugabe’s land reform programme has proved disastrous for Africa’s former bread basket, which is heavily dependent on farming not just for domestic consumption but for most of its export earnings. As agriculture underpins the whole economy, it is not just farming but investments across a range of sectors that are suffering. Inflation stands at 1,700% and rising and the population has, according to estimates by The Economist magazine, slumped in recent years to just 12 million, as two or three million have either died from AIDS or fled hunger and intimidation to Zambia or South Africa. Of those left, four out of five are unemployed and their life expectancy has dived to 34 years, from 61 in 1990.
Between 1999 and 2004, Zimbabwe’s production of maize fell from 1.5 million tonnes to 850,000 tonnes, leaving it with not enough even to feed its own people, according to the Commercial Farmers’ Union. In the same period, tobacco production fell by 70%, cutting export earnings from the crop to £77m, from £263m. The reason for much of the decline is that many of the ‘farmers’ entrusted with Zimbabwe’s economic engine do not know how to farm. By Mugabe’s own admission, in March 2005 only 44% of the land seized under the land reform programme – itself accounting for around 95% of the country’s total farmland - was being fully utilised.
Many of the new black farmers were granted occupation of the snatched farms more for their political allegiance to Mugabe than any agricultural experience. Because the land is now officially state-owned, they do not have title deeds, and therefore cannot raise bank loans to buy farming equipment or even seeds and fertiliser.
Without money or up-to-date tools, many have reverted to using horse-drawn ploughs while others, lacking any farming expertise, have failed to manage a recent drought, turning what might have spelled a short-term and reversible downturn in production into an agricultural disaster. For some farmers financial compensation may now seem preferable to a return to farmland ravaged by drought amid an economy in tatters. But although ICSID arbitration may bring good news for a team of Dutch farmers – and ease the path for potentially hundreds of further successful claims – those without bilateral investment treaties behind them could have a long battle ahead. And even for those with treaty protection, an alarming trend towards non-payment of ICSID awards, especially in Latin American countries, creates another concern for investors.
ICSID awards are final, non-appealable and to be paid without delay. Under the ICSID Convention the awards furthermore have the force of judgements issued by the highest court of any signatory state. However, Argentina, for example, has sought to evade ICSID judgements through legislative change and has suggested it may not pay its awards. Whatever the result of the current round of cases, it seems the prognosis for Zimbabwe is not good. And as long as Mugabe remains in control of the country, its once buoyant economy is unlikely to be able to lift itself out of crisis.

With nearly 20 years’ experience in emerging markets distressed debt recovery and international dispute management, Omni Bridgeway has established an unbeatable track record of successful recoveries for clients including multinationals, banks, insurance companies and export credit agencies. On a no success, no fee basis, its team of litigation experts navigates cross-border claims resulting from expropriation and nationalisation that are subject to bilateral investment treaties, specialising in a range of political risk countries including Zimbabwe.

Heleen Rijkens - Omni Bridgeway Emerging Markets BV
rijkens@omnibridgeway.com