For years, the financial instruments known as sukuk have been structured and sold as India markets shut on Monday for holidayDebt deals help foreign banks in South KoreaBond of Texas financier is revoked Hong Kong planning $6.45billion bond sale Bonds electronic trading breaks down Islamic bonds, but a highprofile default is renewing debate about whether they are in fact equitylike instruments that expose investors to greater risk.

As the sukuk market emerges from the shadow of the global credit slump, the $1 trillion overall Islamic finance industry is grappling with the extent to which sukuk should mirror conventional bonds, an issue that will determine holders’ returns and whether they will be the first to be repaid if the investments sour.

Sukuk are, strictly speaking, ownership certificates, but in practice they have become considered to be Islamic bonds, with their investors holding debt.

The way investors view sukuk could influence demand for the best-known financing tool that complies with Shariah, or Islamic law, and the pace at which Islamic finance and the $107 billion sukuk market will grow.

‘‘A U.S. investor would want to have the sukuk classified by the court as debt, not as equity,’’ said Sheik Yusuf Talal DeLorenzo, an influential, U.S.-based Shariah scholar. ‘‘Even though that goes against the Shariah characterization, in court, if it’s classified as debt, then the debtors stand in line before equity holders, and they’re more likely to get paid.’’ The question of a sukuk holder’s rights has come under scrutiny since an issuer, the U.S. energy company East Cameron, filed for bankruptcy in October 2008.

The case, pending in U.S. bankruptcy court, could shed light on the extent to which East Cameron’s sukuk holders own the oil revenue that underpinned the sukuk issue and indicate how sukuk should be structured so that holders get paid in the event a company goes into bankruptcy protection.

The East Cameron holders are considering a plan of reorganization that has yet to be filed with the bankruptcy court, said Michael McMillen, a partner in Fulbright & Jaworski, the law firm representing them.

‘‘Alternatives being considered for the reorganization plan include collapsing the current structure in such a manner that the sukuk holders will become equity holders in the debtor entity,’’ Mr. McMillen said. ‘‘It is hoped that East Cameron Partners will emerge from bankruptcy protection sometime in early 2010.’’ The legal debate over protection for sukuk investors is largely uncharted territory, as Islamic finance has gained prominence only in recent years.

The East Cameron case and recent defaults, like the one by Kuwait Investment Dar this year, are expected to provide guidelines for a market that is subject to varying regulatory and Shariah standards worldwide.

Lawyers expect more sukuk defaults to emerge as traditional Islamic banking centers struggle to recover from the recession and real estate slump. Dubai, one of the hardest hit centers, is working to repay and restructure some of its $80 billion debt.

As sukuk transactions go through the process from documentation to dispute resolution, Shariah advisers, lawyers and judges will have a hand in deciding whether the instruments are debt, equity or an asset class of their own.

‘‘To say sukuk are bonds is like trying to fit a square peg into a round hole,’’ said Megat Hizaini Hassan, who heads the Shariah banking practice of Zaid Ibrahim & Co., a Malaysian law firm.

‘‘There has been considerable work to ensure it does function as such, for commercial reasons. But that’s not something that should be continued forever, because one is trying to contort the features to ensure that it does function like a debt instrument.’’ The Accounting and Auditing Organization for Islamic Financial Institutions, an influential industry body based in Bahrain, defines sukuk as certificates of equal value representing undivided shares in ownership of tangible assets and services, suggesting investors are owners rather than debt holders.

Earlier debate about where sukuk really fit in among the asset classes was ignited by a ruling by the accounting organization last year that questioned the use of repurchase undertakings in sukuk — pledges found in many sukuk that the borrower will pay back their face value at maturity — using the mudaraba and musharaka, traditional contracts that are popular in Islamic financing.

The organization said such pledges violated the duty to share risk under mudaraba and musharaka, a ruling that some lawyers said drew a distinction between sukuk and conventional bonds.