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Book “The Transformation of Islamic Law in Global Financial Markets”

This book was written by Jonathan Ercanbrack over the course of  seven years in which his principle research interest resided in understand the role of law in inspiring, facilitating regulating Islamic finance.

The role of global capital in relation to human social systems has assumed enormous proportions in liberalised, deregulated markets. States attempt to nationalise it, financial centres spring up in its wake, and INGOs attempt to deal with its de-territorialising, supranational characteristics. A global adjudication system (arbitration) has been introduced to safeguard and buttress its flow. The power of Islamic capital has generated numerous sites of legal contestation and negotiation, ranging from gateway financial centres, international law firms and transnational financial institutions, all of which interact in the production of Islamic financial law (IFL). The process of producing IFL illustrates complex fields of action driven by power dynamics, neoliberal paradigms and the institutional momentum of the global economy. The municipal legal systems under study in this book (the United Kingdom, Bahrain, United Arab Emirates and the Dubai International Financial Centre) illustrate globalisation’s acceleration of legal, economic and social production.

  • Case studies encourage readers to assess the different regulatory approaches to Islamic finance and the ways in which these differences contribute to the developing legal system
  • Provides readers with a comparative perspective of the way in which legal systems interact and are reproduced in global markets
  • Suggests that diversity in the global economy takes place within a dynamic power structure in which leading economies largely dictate the rules, standards and best practices of financial markets

Table of Contents

  1. Introduction

Sharia and the nation state

The globalisation of commercial law

The role of context in the analysis of IFL

Structure

Technical matters

  1. The sharia: sources, legal theory and unofficial sources of law

The formal sources of Islamic law

The theory of Islamic law

The epistemology o f acts

The textualism of the Usū l Al-Fiqh

Maslahah and rationalising legal tools 34

Legal stratagems (hiyal)

The role of custom as a legal source

The sharia in pre-modern legal practice

Concluding remarks

  1. Islamic commercial doctrine and classical commercial transactions

God covenant with mankind

The role of intention (Qasd)

The system of Islamic nominate contracts

The conditions necessary for the general validity of contract

Appending shurūt (conditions) to contracts

Conditions and the four schools of law

Gharar

The sale of an on-existent object

The sale of debt (bay‘al-dayn)

Gharar and the four schools of law

Avoiding the rigidities if gharar

The prohibition of usury: ribā

The Islamic origins of the prohibition of ribā

The differentiation of the ribā concept: money, time and

Historical commercial practice

The partnership (sharikah)

The use of interest in commercial transactions

Concluding remark

  1. Global financial markets and legal transformation

The globalisation of financial services

Liberal values in the global economy

Globalisation and financial in notation

Transnational corporations and Islamic financial law

Commercial pressures for standardised Islamic financial contracts

The religious and ethical aspects of standardisation

The methods and organisations of international legal convergence

Standard terms and conditions in cross-border financial transactions

Standard terms in a syndicated murābahah facility

Islamic financial ijtihād

The limits of Islamic financial innovation

Concluding remarks

  1. Vehicular legal systems: the legislative implementation of sharia principles

Islamic finance and the United Kingdom

The transmission of Islamic finance to the United Kingdom

Retail markets

The inclusion of the sharia in English law

The legislative and regulatory approach to Islamic financial transactions

The legislative implementation of Islamic financial transactions

IFIs and the benefits of sovereign sukuk issuance

U K sovereign sukuk issuance

The implementation of sukuk

Concluding remarks

  1. The regulation of Islamic financial institutions in the United Kingdom

The regulation of financial markets

The objectives of financial services regulation

Islamic financial intermediation

The FSA/PRA regulatory approach to Islamic finance

The regulatory classification of Islamic financial products

The regulatory classification of sukuk

The regulatory classification of mudārabah

The sharia audit process

The risks of sharia non-compliance

The impact of EU regulatory harmonisation

Global regulatory in initiatives

The impact of Basel II

Basel III capital and liquidity reforms

Islamic financial transactions in English courts

The Symphony Gems case

The Beximco case and the Rome Convention

The Investment Dar case

Concluding remarks

  1. The regulation of Islamic financial institutions in Bahrain

Islamic finance and GCC financial centers

The role of the sharia in the legal system of Bahrain

Bahrain: an Islamic financial centre

The authorisation of Islamic banking services

Types of licensee

The regulatory definition of Islamic financial services

Capital adequacy requirements or IFIs

Minimum capital adequacy ratios

Minimum capital requirements for a murābaḥah to the purchase orderer

Governance standards for sharia supervisory boards

A hands-on approach to sharia governance

Approved persons criteria

Concluding remarks

  1. The regulation of Islamic financial institutions in the United Arab Emirates

The role of the sharia in the judicial systems of the UAE

The Central Bank of the UAE and its regulatory approach to Islamic finance

The authorisation of IFIs

The regulatory classification of Islamic financial products

Capital adequacy standards for IFIs

Governance standards for IFIs

Concluding remarks

  1. The regulation of Islamic financial institutions in the Dubai International Financial Centre (DIFC)

The legal and regulatory system of the DIFC

The DFSA and its regulatory approach to Islamic finance

The authorisation of IFIs

The regulatory classification of Islamic financial products

Capital adequacy standards for IFIs

Governance standards for IFIs

Concluding remarks

  1. The enforcement of non-national legal systems: the arbitration of Islamic financial disputes

Arbitration and Islamic financial transactions

The nature of arbitration

The compatibility of sharia and modern arbitration

Arbitration in the Arab world

The enforcement of arbitral awards

The enforcement of arbitral awards in English courts

The enforcement of arbitral awards in GCC states

Concluding remarks

  1. Conclusion.

Jonathan G. Ercanbrack is Lecturer in the Law of Islamic Finance and Assistant Director of the Centre for Islamic and Middle Eastern Law at SOAS, University of London.

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