Islamic Finance in the Financial Markets of Europe Asia and America

239 Pages·2022·9.368 MB·English

by  Faiza Ismail

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Islamic Business and Finance Series
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Faiza Ismail
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Islamic Finance in the Financial
Markets of Europe, Asia
and America
Among international financial centers (IFCs), London is known as the
‘Western hub of Islamic Finance’, on account of its well-developed legal
infrastructure. However, Brexit has threatened London’s status and conse-
quently, the financial services industry is moving to Dublin to continue oper-
ating in the Euro region. Similarly, Islamic finance (IF) service providers in
the UK are also looking to Dublin for expansion of this niche area in euro
member states.
This is the first book to be written about Islamic finance operations in the
Eurozone. The book offers an in-depth description of International Financial
Centers and the growth of Islamic Finance, compares the growth of Islamic
finance in London, Dubai and Kuala Lumpur, outlines the implications of
Brexit for financial service providers in London in general and Islamic inves-
tors in particular and also presents a case study of Ireland to establish the latter
as the most appropriate country to promote IF in the Eurozone.
The time is particularly right for a book exploring the potential of Ireland
to emerge as a Eurozone hub of Islamic finance, as a result of Britain’s exit
from Europe. The book will cater to the needs of readers studying IF in
the disciplines of economics, business, law, and religion. A secondary mar-
ket includes practitioners, such as policymakers, lawyers, fund managers,
accountants, regulators and international investors, who will be interested
in exploring the benefits that the UK and Ireland have to offer the Islamic
finance industry.
Faiza Ismail is an Assistant Professor at the Shaikh Ahmad Hassan School of
Law, Lahore University of Management Sciences, Pakistan.
Islamic Business and Finance Series
Series Editor: Ishaq Bhatti
There is an increasing need for western politicians, financiers, bankers, and
indeed the western business community in general to have access to high
quality and authoritative texts on Islamic financial and business practices.
Drawing on expertise from across the Islamic world, this new series will
provide carefully chosen and focused monographs and collections, each
authored/edited by an expert in their respective field all over the world.
The series will be pitched at a level to appeal to middle and senior man-
agement in both the western and the Islamic business communities. For the
manager with a western background the series will provide detailed and
up-to-date briefings on important topics; for the academics, postgraduates,
business communities, manager with western and an Islamic background the
series will provide a guide to best practice in business in Islamic communities
around the world, including Muslim minorities in the west and majorities in
the rest of the world.
Labor Economics in an Islamic Framework
Theory and Practice
Toseef Azid, Umar Burki, Muhammad Junaid Khawaja, Nasim Shah Shirazi and
Muhammad Tahir
Islamic Capital Markets
The Structure, Formation and Management of Sukuk
Imam Uddin, Rabia Sabri, M. Ishaq Bhatti, Muhammad Omer Rafique and
Muhammad AsadUllah
Institutional Islamic Economics and Finance
Edited by Ahsan Shafiq
Islamic Finance in the Financial Markets of Europe, Asia and America
Faiza Ismail
For more information about this series, please visit: www.routledge.com/
Islamic-Business-and-Finance-Series/book-series/ISLAMICFINANCE
Islamic Finance in the
Financial Markets of Europe,
Asia and America
Faiza Ismail
First published 2023
by Routledge
4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2023 Faiza Ismail
The right of Faiza Ismail to be identified as author of this work has
been asserted in accordance with sections 77 and 78 of the Copyright,
Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced
or utilised in any form or by any electronic, mechanical, or other
means, now known or hereafter invented, including photocopying and
recording, or in any information storage or retrieval system, without
permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks
or registered trademarks, and are used only for identification and
explanation without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
A catalog record has been requested for this book
ISBN: 978-1-032-03583-3 (hbk)
ISBN: 978-1-032-03589-5 (pbk)
ISBN: 978-1-003-18807-0 (ebk)
DOI: 10.4324/9781003188070
Typeset in Bembo
by KnowledgeWorks Global Ltd.
Contents
Acknowledgement ix
Introduction 1
1 International Financial Centers and Islamic Finance 4
London as an International Financial Center 5
An Analysis of the UK Regulatory Framework 10
New York as an International Financial Center 11
The US Regulatory Approach 16
Singapore as an International Financial Center 20
The Initial Stimulus 21
The Contributions of the Monetary Authority of Singapore (MAS) 21
The Singapore International Commercial Court (SICC) 23
Crisis 2008 25
Engagement with the Islamic Finance Industry 26
Hong Kong as an International Financial Center 29
Stock Market Crash 1973 30
Beginning of Regulations 31
Global Financial Crisis of 2008 33
Regulatory Response 34
Tokyo as an International Financial Center 35
Period of Economic Growth Up Until the 1970s 35
Liberalization and Deregulation 36
The ‘Bubble Economy’ and the Subsequent Burst 39
Islamic Finance in Dubai 40
Establishment of DIFC 41
Regulatory Framework of DIFC 41
Regulatory Framework of Islamic Finance in Dubai 42
Challenges to Islamic Finance in Dubai 44
Islamic Finance in Malaysia 48
vi Contents
The Initial Phase of Development 49
Islamic Banking Act (IBA) 1983 and the BAFIA 1989 49
Bank Islam Malaysia Berhad (BIMB) 50
The Skim Perbankan Tanpa Faedah (SPTF)/Skim Perbankan Islam
(SPI) Scheme 50
Regulation of the Banking Industry: Central Bank of Malaysia 51
Development of Islamic Capital Market 52
Shariah Advisory Councils (SAC) 54
Jurisprudence on Islamic Finance 56
Conclusion 60
Notes 61
Bibliography 81
2 English Commercial Courts and Islamic
Finance Disputes 88
English Courts on the Commercial Law 88
Islamic Finance Developments in the UK 98
Islamic Finance Disputes in English Courts 105
Impact of the English Court’s Approach toward Islamic
Finance Disputes 110
Brexit and Islamic Finance in the UK 111
Conclusion 113
Notes 114
Bibliography 127
3 Islamic Finance Developments in the Republic
of Ireland 131
The Finance Act 2010 131
Islamic Finance Products 132
Islamic Finance Products Addressed in the Finance Act 2010 133
Double Taxation Agreements 134
Irish Stock Exchange 134
Islamic Banking in Ireland 135
Absence of Dispute Resolution Mechanism in the Irish
Jurisdiction 135
Choice of Law in Irish Courts 138
Brexit and IF in Ireland 139
Notes 142
Bibliography 149
Contents vii
4 Standardization and Irish Policy Makers 152
Need for Standardization in the Islamic Finance Industry 152
Challenges to Standardization 153
Global Islamic Finance Standard-setting Bodies 157
AAOIFI as a Global Standard-setting Body Addressing Challenges to
Standardization 158
Standardization and Financial Services Industry 160
International Swaps and Derivative Association (ISDA) 161
Contribution of ISDA to the Global Derivatives Market 162
Recommendations 164
Conclusion 167
Notes 168
Bibliography 173
5 Islamic Finance in International Commercial Arbitration
and International Investment Arbitration 176
Islamic Arbitration 176
International Commercial Arbitration 178
Challenges 178
Recommendations 181
International Investment Arbitration (IIA) 185
Bilateral Investment Treaties (BITs) 185
UK Sovereign Sukuk 189
Dispute Settlement Mechanism Included in the Sukuk
Certificates 190
Additional Protection to Sukuk Holders under International
Investment Law (IIL) 190
UK’s Concerns about Protection to Foreign Investors under the
IIL 191
Conclusion 191
Notes 192
Bibliography 199
6 Irish Financial Regulators Regulating Shariah
Supervisory Boards 202
Shariah Risk and Shariah Arbitrage 203
Transparency and Disclosure 204
Competence 206
Competence under UK Regulations 207
viii Contents
Fit and Proper Tests for the Approved Person as Specified in
Ireland 208
Conflict of Interest 210
Liability 210
Collaboration between Islamic and Conventional Standard-setting
Bodies 212
Conclusion 213
Notes 213
Bibliography 219
Conclusion 222
Index 224
Acknowledgement
This book is an important milestone in my professional life. Completion
of this enormous project was not possible without the constant mentoring
of a senior colleague Dr. Muhammad Azeem and the dedicated assistance of
Mr. Qazi Ali. Meantime, I am grateful to my family and friends for their
support during the various ups and downs I have faced while carrying on this
enormous milestone of my life.