Islamic finance law

Islamic finance is one of the fastest growing areas of international finance. Lawyers are often needed to structure transactions, albeit using principles based on Islamic law and precedent.

What does a job as a solicitor practising Islamic finance law involve? 

When it comes to financial matters, much Islamic law is based on the Qur'an, the Sunnah (religious precedents) and the Ijtihad (a method of decision making). Since one of the tenets of Islamic law is that the payment of interest is forbidden (based on the underlying idea that money cannot simply be used to make more money) lawyers are often involved in devising and implementing structures that avoid the payment of interest. Other common aspects of international finance, such as excessive uncertainty in contracts (gharar), gambling and chance-based games (qimar), and transactions involving unethical goods and services, are also prohibited in Islam. Broadly speaking, the Islamic financial model works on the basis of risk sharing between the participating parties, individuals’ rights and duties, property rights and the sanctity of contracts. Islamic finance has been used in private equity transactions such as the purchase of the Aston Martin sports car company as well as real estate transactions such as the purchase and financing of commercial property in London.

English law is quite flexible in its approach and traditional Islamic financing structures can be accommodated quite easily.

English law is quite flexible in its approach and traditional Islamic financing structures can be accommodated quite easily. Furthermore, in recent years HM Treasury has encouraged Muslim investors to invest in the United Kingdom and the tax regime is now quite favourable. Islamic financing may involve using Islamic concepts such ijarah (a form of lease), murabaha (a sale contract under which payment of the purchase price of an asset is deferred for an agreed period), musharaka (a partnership arrangement under which two or more partners share profits or losses from a venture) or mudaraba (where investors provide funds to a manager who manages the funds on their behalf) within the context of English law.

What skills do you need as a solicitor in the field of Islamic finance law? 

• An analytical mind to understand the fine details of financial transactions.
• An interest in business.
• A willingness to learn – although no prior knowledge of the Qu’ran is needed to work in this area.

What is it like doing a trainee solicitor job in Islamic finance law? 

Trainees are involved in all aspects of transactions, from due diligence and drafting simple documents through to pre- and post-completion matters. As some of the transactions may be cross border, trainees may be required to travel to completions or even be seconded abroad if necessary, as many Islamic transactions take place in Saudi Arabia and the Gulf states as well as the United Kingdom and Europe.

Types of law practised

• Corporate.
• Finance.
• Tax.

About the author

NEILL GIBSON is a partner in the banking and finance department of TROWERS & HAMLINS. He graduated with a degree in law from the UNIVERSITY OF LIVERPOOL.