Shariah finance lawyers: The pool of specialist is very limited
Every cash-strapped company or institution seems to look to the Middle East for extra capital these days. There’s no cheap debt anymore, but the deep pockets of Middle Eastern investors has made sharia-compliant financing mightily attractive. Even the British Government is proposing its own sharia bond, or sukuk.
But Rahail Ali, Lovells’ Dubai-based head of Islamic finance wonders if this seminal moment won’t merely highlight the limitations of the law firms positioning themselves to grab a share of the market. Fresh from chairing an Islamic products conference at the London Stock Exchange, Ali warns that "the pool of specialists is very limited". Conventional finance lawyers can’t just be turned into sharia experts by reading a few textbooks, he says. "Until lawyers have the interaction with sharia scholars and spend a considerable amount of time satisfying Islamic jurisprudence there is going to be a reactive approach to Islamic financing."
A moderate Muslim, Ali is able to empathise with the subject more than most of his ilk. For an Islamic financing to proceed, it must be endorsed by sharia scholars. As one City finance partner puts it: "They like nothing more than debating various interpretations of the Koran." Sharia deals are not standardised like other, conventional transactions and no one transaction follows another. In terms of complexity, Ali says, it makes conventional loans seem as easy as "ordering a pizza".
It was in 2001, after the "horrendous" events of 9/11, that Islamic finance took off. The attacks forced Islamic investors to reconsider the make-up of their portfolios with their money suddenly not so welcome in some parts of the West. "9/11 was the seminal moment for the Islamic finance industry," Ali says. "One of the repercussions of it was the huge repatriation of liquidity back into the [Gulf Cooperation Council (GCC)] states, coupled with the GCC states being re-enlightened about retaining domestic liquidity and having investments compatible with their religious beliefs. It led to an upsurge in Islamic finance transactions."
The challenge over the next ten years for the sharia finance lawyers will be to ensure that the legal profession is not found wanting as the demand for Islamic financing mounts. The proposal by the British Government to issue its own sukuk merely confirms its potential in the global arena. With oil prices at over $100 a barrel, the wealth of Arab states can no longer be overlooked. "It displays at the very least the higher profile that Islamic financing has achieved and the need for financial centres to take a serious look at Islamic financing," Ali says. "It goes with the domain of London as major international financial centre that there needs to be a focal point for Islamic finance, and London has pushed that agenda."
Source: Times on-line
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