Iranian Journal of Trade Studies

Iranian Journal of Trade Studies

Economic Analysis of the Legal Aspects of Foreign Investment with Emphasis on Non-Financial Considerations

Document Type : Research Paper

Authors
Mohsen Sadeghi 1
Farzan Iranpour 2
1 Associate Professor, Department of Private Law, Faculty of Law and Political Science, University of Tehran, Tehran, Iran. (Corresponding author)
2 M.A. Student in International Economic and Commercial Law, Faculty of Law and Political Science, University of Tehran, Tehran, Iran.
10.22034/ijts.2026.2087891.4260
Abstract
In recent decades, foreign investment has evolved from a purely profit-driven approach toward the integration of non-financial requirements into investment decision-making. The main issue addressed in this study is that, within the traditional legal and economic framework, compliance with environmental, social, and governance (ESG) standards is often regarded as a constraint on profitability and an additional cost, whereas neglecting these requirements may lead to creeping expropriation, violations of the fair and equitable treatment (FET) standard, and increased political and legal risks. The main research question is how non-financial requirements influence the reciprocal rights and obligations of host states and foreign investors, and whether they enhance investment efficiency from an economic perspective.
The study adopts a descriptive-analytical approach combined with quantitative econometric analysis. In the quantitative section, the Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS) is employed as a multi-criteria decision-making method. The study examines the role and necessity of non-financial requirements, particularly environmental, social, and corporate governance (ESG) criteria, within the legal framework governing foreign investment.
The findings indicate that, contrary to the traditional view that considers these requirements merely as compliance costs, they function as effective mechanisms for internalizing externalities and correcting market failures. From a legal perspective, the study analyzes the evolution of international legal instruments toward binding treaty obligations and examines the status of these requirements in Iranian law within the framework of public economic order and Article 50 of the Constitution. Finally, the TOPSIS analysis demonstrates that investment projects committed to non-financial requirements achieve higher economic efficiency than conventional investments by reducing political and legal risks while ensuring long-term profitability.
Keywords
Foreign Investment
Non-Financial Requirements
Economic Analysis of Law
Environment
Social Issues
Corporate Governance
Economic Efficiency
Subjects
 
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  • Receive Date 02 May 2026
  • Revise Date 02 June 2026
  • Accept Date 01 July 2026