The Law Of Islamic Finance In The United Kingdom-PDF Free Download

THE LAW OF ISLAMIC FINANCE IN THE UNITED KINGDOM

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THE LAW OF ISLAMIC FINANCE IN THE UNITED KINGDOM: ... which itself incorporates European Union financial ... World Trade Organisation . 9



THE LAW OF ISLAMIC FINANCE IN THE UNITED KINGDOM LEGAL PLURALISM AND
FINANCIAL COMPETITION
JONATHAN G ERCANBRACK
SCHOOL OF LAW
SCHOOL OF ORIENTAL AND AFRICAN STUDIES SOAS
UNIVERSITY OF LONDON
THESIS SUBMITTED FOR THE PHD IN LAW
15 SEPTEMBER 2011
DECLARATION FOR PHD THESIS
I have read and understood regulation 17 9 of the Regulations for students of the School of
Oriental and African Studies concerning plagiarism I undertake that all the material presented
for examination is my own work and has not been written for me in whole or in part by any other
person I also undertake that any quotation or paraphrase from the published or unpublished
work of another person has been duly acknowledged in the work which I present for
examination
Jonathan G Ercanbrack
15 September 2011
DEDICATION
I would like to thank my wife Anna and my daughter Saskia for putting up with me these past
four years I could not have completed this thesis without their love and support Furthermore I
owe a great deal to my supervisors Professor Peter Muchlinski and Mr Nicholas HD Foster
who devoted countless hours to my supervision and most importantly pushed me to achieve
I also wish to thank the William Ballantyne Fund and the School of Oriental and African Studies
for generous grants without which I would not have been able to carry on
The extant literature concerning the Law of Islamic Finance LIF is dominated by illustrations of
Islamic financial contracts and critiques of the way in which the sharia has been circumvented
Much less emphasis has been placed on understanding the regulatory and financial
environment in which the LIF is formed and practiced This thesis considers the challenges in
formulating and implementing a modern transnational LIF in the conventional financial and legal
environment and offers solutions to these problems It demonstrates the way in which the
classical sharia is transformed by these challenges into a LIF a hybrid law resulting from
pluralistic legal interaction and financial competition In assessing the manner and impact of
implementing the LIF in the United Kingdom the thesis considers the interaction of the sharia
with English law UK financial services law and international regulatory standards Comparative
law methodology with a particular emphasis upon legal pluralism and legal transplants are
The sharia a relatively stateless law is the inspiration behind Islamic financial contracts
Dominated by transnational corporate interests Islamic financial ijtih d represents the strategy
to adapt conventional financial contracts to sharia criteria The results are hybrid structures that
conform to Islamic legal theory but which generate municipal legal challenges in practice as
well as sharia compliance risks Such structures have been integrated in English law with the
creation of tax exemptions and novel regulatory classifications that treat these structures as
loan arrangements and debt based instruments Furthermore Islamic financial transactions are
subject to UK financial services regulation which itself incorporates European Union financial
directives and Basel Capital Adequacy Standards Finally Islamic financial contracts which are
often governed by English law face challenges in English courts concerning parties choice of
the sharia as the proper law of their contract Arbitration on the other hand offers parties the
autonomy to choose the sharia as the substantive law of their contract and to have it enforced
under English law
The wide range of challenges in articulating and implementing a LIF demonstrate the hybrid
nature of the law resulting from pluralistic legal interaction in modern financial markets This
pivotal insight may encourage scholars and practitioners to revise their conception of the LIF
and by extension their view of the industry and its financial practices In sum the LIF is a
modern transnational law that derives its inspiration from the classical Islamic tradition of
commerce but which has been innovated in ways that distinguish it as an emergent law in its
ABBREVIATIONS
AAOIFI Auditing and Accounting Organisation for Islamic Financial Institutions
AB Advising Bank
AFIB Alternative Finance Investment Bond
BCBS Basel Committee on Banking Supervision
BIS Bank for International Settlements
CAR Capital Adequacy Requirement
CE Common Era
CDO Collateralised Debt Obligation
CIS Collective Investment Schemes
DCR Displaced Commercial Risk
DGS Deposit Guarantee Scheme
DIFC Dubai International Financial Centre
EC European Council
EEA European Economic Area
ESUA Exchange in Satisfaction and User Agreements
EU European Union
FSA Financial Services Authority
FSCS Financial Services Compensation Scheme
FSMA Financial Services and Markets Act 2000
GCC Gulf Cooperation Council
HMRC Her Majesty s Revenue and Customs
HPP Home Purchase Plan
IAB International Accounting Board
IAH Investment Account Holders
IB Issuing Bank
IBB Islamic Bank of Britain
ICC International Chamber of Commerce
ICTA Income and Corporations Tax Act
IDB Islamic Development Bank
IDR Issuer Default Rating
IFI Islamic Financial Institution
IFRS International Financial Reporting Standards
IFSB Islamic Financial Services Board
IFSL International Financial Services London
IIC Islamic Investment Company
IIFM International Islamic Financial Market
IILM International Islamic Liquidity Management Centre
IIRA International Islamic Ratings Agency
IMF International Monetary Fund
INCOTERMS International Commercial Terms
IOSCO International Organization of Securities Commissions
LIBOR London Interbank Overnight Rate
LIF Law of Islamic Finance
LMC Liquidity Management Centre
LSE London Stock Exchange
MENA Middle East and North Africa
MLIF Municipal Law of Islamic Finance
NS I National Savings Investments
OECD Organization for Economic Cooperation and Development
OIC Organization of the Islamic Conference
PLS Profit and loss sharing
PRA Prudential Regulatory Authority
PSIA Profit sharing and investment account
RAO Regulated Activities Order
SDLT Stamp Duty Land Tax
SG Symphony Gems
SPL Sanghi Polyesters Ltd
SPV Special Purpose Vehicle
SSB Sharia Supervisory Board
TCF Treating Customers Fairly
TID The Investment Dar Company
TII The International Investor
TNC Transnational Corporation
UAE United Arab Emirates
UK United Kingdom
UNCITRAL United Nations Commission on International Trade Law
US United States
VAT Value Added Tax
WTO World Trade Organisation
Note The transliteration of Arabic words into the Roman script has been undertaken according
to the Library of Congress transliteration standard For the sake of simplicity most singular
Arabic words have been given an English s to denote the plural form Words such as sukuk
however which are often used in modern financial markets are used in the plural Finally
Arabic words which according to the Oxford English Dictionary have been borrowed into the
English language have not been transliterated or italicised Such words include the sharia
Hadith Sunna and others
ARABIC ENGLISH GLOSSARY
dat at tujj r practice of the merchant trader
Adh b punishment chastisement
Ahd obligation covenant treaty agreement
Aqd contract covenant
Amal labour action performance
Am nah trust faithfulness
Ariyah loan
Ark n pl component s pillar s of a contract
A b al hadith people of the Hadith traditions term associated with the M lik s
Ayn a corporeal matter substance
B il void legal
Bat n inner meaning or interpretation
Bay al dayn sale of debt
Bay gh ib contract of sale for an absent thing or object
Bay al nah double sale used to circumvent the prohibition of lending with interest
Bay al waf a contract in which the owner of property house or land sells it with the
condition that that he will repurchase the property for a larger sum than
the original price
Bid a innovation
Dal l sign indication
ar rah necessity need
Dayn obligation debt also expresses the idea of claim or right
Dhimmah capacity personal responsibility or obligation
F ida interest growth
Faq h sg Fuqah pl Expert in Islamic jurisprudence fiqh
Far obligatory
F sid defective legal
Faskh rescission of a contractual bond
Fatwa legal opinion
Fiqh Islamic jurisprudence
Fi ra the native ability to know of God s existence
Fur branches of jurisprudence whereas the u l al fiqh indicates the roots of
Gharar excessive risk speculation
Hadith narration of the words and deeds of the Prophet Muhammad
al l lawful
ar m forbidden
aw lah transfer of debt
Hibah gift
Hijra the emigration of the Prophet Mohammed from Mecca to Medina in 622
lah sg iyal pl legal stratagem
Ib d t devotional worship e g prayer fasting
Ib hah permissibility
Ij rah lease
Ij rah wa iqtin financial lease
Ijm scholarly consensus
Ijtih d independent reasoning
Ikhtil f disagreement difference of opinion
Ikhtiy r option choice preference
Illah effective cause The element utilised in establishing a connection
between the holy sources the Quran and Sunna and a novel case
requiring independent juristic reasoning ijtih d
Ir dah human will
Isn d chain of authorities of a Hadith
Isti s n juridical or personal preference
Isti la public benefit technical legal term
Isti n contract of hire manufacture
Jahl want of knowledge ignorance
J hil yah time of ignorance pre Islamic
Ju lah reward
Kaf lah guarantee
Khultah mixed type of partnership
Kit b book
Kit b al iyal book of iyal
Madhhab Madh hib schools of law Sunni schools of law Sh fi i M lik anaf and anbal
Mafsadah evil
Majlis noun of place indicating a session or meeting assembly
Makhraj sg Makh rij pl exit s anaf term for iyal
Makr h reprehensible
Mal property
Mand b meritorious recommended
Manfa ah usufruct
Maq id al sharia objectives of the sharia
Ma la ah public interest
Maysir gambling
Mu mal t transactions
Mub h permissible licit
Mu rabah an investment partnership also known as muqar ah and qir
Mu rib investment agent
Mujtahid Islamic scholar who possesses the aptitude of performing ijtih d
Mukh arah legal stratagem lah commonly associated with bay al nah
Mur ba ah a sale with a mark up profit
Mush rakah contractual partnership participation financing
Musta abb recommendable
Muz ra ah agricultural partnership
Na a text whose presence in the Quran or Hadith must be demonstrated
N yah intention
Qab l acceptance contractual relation
Q d Islamic law judge
Qard asan loan a charitable loan without interest
Qa d human intention
Qir d sleeping partnership also known as mu rabah and muqar ah
Qiy s analogical reasoning one of the four sources of Islamic law according to
orthodox Sunni Islam
Rabb al m l investor a partner in the mu rabah contract
Ra y discretion legal reasoning
Rib al fa l rib of excess
Rib al nas ah rib by delay
Rib w rib based illicit
Ri an the fact of being pleased or contented approval
Rukn sg component s pillar s of a contract
Sabab cause
adaqa voluntary contribution
add al dhar i blocking the means legal principle
akk sg Sukuk pl cheque Islamic bond Islamic investment certificate
Salam a forward sale fungible commodity
a valid legal
Shah dah witness the declaration by which a believer professes her belief in the
Islamic faith
Sharia literally the way Islamic law
Shirkah Sharikah partnership
Sharikat al milk partnership based on joint ownership
Sharikat al wuj h credit partnership
Shur legal formularies also conditions or appendages to contracts
Sukuk al ij rah Islamic securitisation based on a lease
Sunna the living tradition the sayings and doings of the Prophet Muhammad
holy source
S rah chapter or segment indicating the way in which the Quran has been
Tak ful Islamic insurance
Takhayyur eclectic choice legal
Tal q pronunciation of divorce by the man
Talf q patching a legal technique used to derive a novel legal opinion
Taql d juristic conformity in the period after gates of ijtih d were said to have
been closed
Tashr refers to modern statutory legislation which incorporates elements of the
Tawarruq sale and re sale transaction used to generate cash liquidity
Thaw b merit compensation offered where not required
Ulema religious scholars
Umlah commission
Ummah community
Urf custom
U l al fiqh the principles of jurisprudence methodology
Wak l agent
Wak lah agency investment contract in which agent represents investor s
Waqf charitable endowment
Wa f attribute
Zak h obligatory charitable contribution Islamic law
hir outward meaning of a word language or event


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