Malaysia, the world largest market for sukuk, plans to improve its legal system to become an alternative location to the U.K. for resolving international Islamic finance disputes.
The goal is to position Malaysian laws as the law of choice for Islamic finance transactions globally, the central bank said in a statement Aug. 30. Disputes about compliance with Shariah principles are a risk to the industry expansion, it said. Persian Gulf companies have traditionally based cross- border contracts on U.K. law to take advantage of the country developed legal system and neutrality, according to Unicorn Investment Bank BSC in Bahrain.
Whilst there is nothing wrong with the Middle Eastern legal systems, many of them are archaic in their procedures, said Nida Raza, senior vice president of capital markets at Unicorn, an Islamic investment bank in Manama. Malaysia can be an alternative jurisdiction as it has sukuk expertise and a system based on British common law, she said.
The Islamic finance industry, with assets of more than $1 trillion expanding 15 percent annually, needs to develop services that can win global investor confidence while taking into account different interpretations of the Koran. U.K. courts lack the expertise to decide on religious matters, according to Hussain Hamed Hassan, chairman of the Shariah Coordination Committee of the Islamic Financial Institutions in the United Arab Emirates, and Mohamed Azahari Kamil, the head of Qatar Islamic Bank Malaysian unit.
Investment Dar Co., the Kuwait-based owner of half of luxury carmaker Aston Martin Lagonda Ltd., had an appeal thrown out of a U.K. court this year in a case where the company argued that financing from a bank breached Islam ban on interest payments.


--Bloomberg omar1.1 iimm.bnm.gov.my