Document Type : Original Independent Original Article
Highlights
Introduction
Foreign direct investment is widely regarded as a key impetus for economic growth, especially in developing countries, due to its potential developmental impacts. However, foreign investments can result in irreversible environmental damage if no proper supervisory frameworks are adopted. In other words, foreign investments that disregard environmental standards can cause the relocation of polluting industries to developing nations, leading to the unsustainable and unrestrained exploitation of non-renewable natural resources. Therefore, some scholars argue that the global expansion of foreign investments is likely to facilitate the relocation of polluting industries to regions with more lenient environmental regulations, transforming them into pollution havens in practice.
In other words, the “pollution haven” theory states that developed countries transfer their manufacturing operations and processes to other countries with less efficient environmental policies because they have stricter environmental standards. Accordingly, it is reasoned that we must revise environmental laws and enforce stringent standards to prevent the transfer of polluting industries and outdated technologies to developing countries. Therefore, the host states negotiate bilateral investment treaties with other countries to achieve their economic goals through foreign investment while mitigating detrimental environmental impacts.
Methodology
This research does not seek to exhaustively analyse all bilateral investment treaties of the Islamic Republic of Iran, nor does it intend to comprehensively outline the rights and obligations of the Iranian government with respect to various contracting states. However, the aim is to conduct a theoretical study on the environmental clauses and obligations stipulated within these treaties. Moreover, this study is both innovative and unique, as it offers a new perspective on the subject. To this end, the subject matter is analysed through a descriptive-analytical method applied to bibliographical resources.
The main research hypothesis posits that most of the bilateral investment treaties have neglected environmental concerns because national policymakers lack adequate understanding and interpretation of foreign investment and its unwanted social and environmental repercussions—with climate change among the most adverse effects. In light of the detrimental effects of this oversight, this study will propose recommendations for revising these treaties.
Results and Discussion
Integrating environmental clauses into foreign investment treaties can be considered an emerging global trend. Searching for the keyword “environment” within the United Nations Conference on Trade and Development (UNCTAD) database shows a consistent upward trend in the inclusion of environmental stipulations in investment treaties. From 1958 to 1993, only a handful of treaties included environmental considerations. However, the frequency of treaties incorporating environmental clauses has seen a marked increase in recent decades. In other words, over the past 20 years, the number of investment treaties that include environmental clauses has increased from 100 to 500 agreements.
By 2023, the Islamic Republic of Iran had ratified 70 bilateral investment treaties. A comprehensive review of these treaties reveals that only nine (approximately 13%) include specific clauses and commitments regarding environmental protection. These nine treaties include agreements on the reciprocal promotion and protection of investments between the Islamic Republic of Iran and Tanzania, Slovakia, Japan, Singapore, Luxembourg, the Czech Republic, Hungary, Iraq, and Croatia.
Currently, environmental concerns have not become a widespread discourse within Iran's legal system. This is largely due to the lack of understanding and knowledge of environmental issues and their severe impacts on human life among policymakers and decision-makers. Moreover, foreign direct investment in Iran has struggled to progress comparably with other nations due to international sanctions as well as the policymakers' generally negative perceptions of foreign investments. Nevertheless, given Iran's substantial oil and gas reserves—the largest in the world—exploitation and investment plans for these resources must be in compliance with sustainable development. Undoubtedly, sustainable development is not merely an option but a necessity. Therefore, transitioning to a green economy will be inevitable.
The most serious problem with Iran's environmental laws and regulations is their incompatibility with international standards. As the global landscape advances towards greater industrialisation, significant developments in both industry and technology necessitate modernised methods and approaches to mitigate the adverse effects of industrial activities. Effective measures include promoting foreign investment in low-carbon industries, facilitating the transfer and development of globally compatible and environmentally friendly technologies, and mandating the use of clean energy through different mechanisms such as environmental fees and green taxes. Reviewing the experience of successful countries, we realize that the inflow of foreign direct investment has often been due to the inclusion of stipulations for the transfer of modern technologies in compliance with environmental regulations.
Conclusion
In recent years, environmental considerations have increasingly come to the forefront of policymaking. In many developing countries, foreign direct investment is considered a key impetus for economic growth and development. Since a healthy environment is an indispensable aspect of sustainable development, foreign investments should be managed to minimise their environmental impacts. At the same time, efforts to encourage and promote foreign investment should be integrated with environmental priorities to ensure alignment and compatibility between these two objectives. Investors typically prioritise their financial returns and private benefits, whereas environmental laws and regulations serve to protect ecosystems and the public interest. Investment growth in the absence of stringent environmental standards can result in excessive industrial pollution and lead to the extensive degradation of natural resources. Therefore, environmental clauses must be incorporated into bilateral foreign investment treaties. In some cases, these clauses become a focal point of disputes between states.
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