NEWS | 17 Jan 2017
The Need for an Islamic Bankruptcy Code

Student editor Esther Agbaje (HLS 17) suggests that sukuk (commonly called Islamic bonds) are insufficient to handle bankruptcy in financial systems operating with respect to Islamic law, or sharīʿa compliance. Banks and other financial institutions or municipalities that issue sukuk intend for these instrument to organize debt and therefore to be insulated from default. This idea seeks to implement the Islamic law financial principle of profit/loss sharing, designed to limit exposure to default by making both parties invested in the success of the venture. Thus, the Accounting and Auditing Organization for Islamic Financial Institutions – the premier regulatory authority in the Gulf for financial institutions engaged in Islamic finance – defines sukuk as “not debts from the issuer,” but as “fractional proportional interests in underlying assets, usufructs, services, projects or investment activities.” Using sukuk for sharīʿa-compliant financing, the East Cameron Gas Company defaulted in 2008. With this example, Agbaje argues that sukuk offer an imperfect means of organizing debt or debt-organization schemes, the latter of which can often fail. In short, the East Cameron Company failed to pay its sukuk holders, investors that had loaned money to the company. In the end, a Chapter 11 (U.S. Bankruptcy Code) reorganization reset things by “transform[ing] the sukuk holdings into preferred stock options,” leaving the sukuk scheme Islamic in name only. If sukuk is not protected from default, then it stands to reason that other debt structures within Islamic finance are likely to be susceptible to failure using sukuk. The logical conclusion, Agbaje argues, is that countries that want to rely on Islamic financial instruments still need to develop (or borrow) bankruptcy codes to both support Islamic finance principles and to standardized regulations for handling loan defaults in cases of insolvency. Read more. Image credit: The Financial Times

REPORT :: East Cameron Gas: A New Frontier in Sukuk?

This report assesses the attempts of a major oil company, East Cameron, to operate a large oil and gas company with respect to Islamic finance principles (so-called sharīʿa compliance). The bankruptcy proceeding that follows hints at the difficulty and potential conflicts of interest in creating sharīʿa-compliant financial instruments that permit company independence without sufficient mechanisms to avoid default. Read more. Image credit: Public Domain/Flickr

STANDARDS:: Auditing and Accounting Organisation for Islamic Financial Institutions' (AAOIFI) Sharīʿa Standards for Financial Institutions (2010)

In 2007, the Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) considered about 85% of sukuk (commonly called Islamic bonds) to be non-sharīʿa-compliant. In 2010 they released these comprehensive guidelines on Islamic finance, including a section on sukuk (pg. 303), which outlines factors to consider when creating Islamic bonds. One such factor is industry, which affects how the terms of the sukuk should be decided. Read more. Image credit: Arabian Business

Other News

Opportunities
International Pluralism Conference (09-11 Aug 2017| Syracuse, NY). The conference is organised in collaboration with the Maxwell School of Citizenship and Public Affairs, Syracuse University. The conference theme is: Citizenship, Legal Pluralism and Governance in the Age of Globalization. Prior to the conference, from 4-7 August, a course will be organized for young scholars on the main theories, themes and methodologies of legal pluralism. More information on the course can be foundhere. To get an impression of the previous conference and course, you can already have a look at the information provided below. Paper proposals due 31 Jan 2017Read more.

Abdallah S. Kamel Fellowships in Islamic Law and Civilization (Fall 2017-Spring 2018 | New Haven, CT).  The Abdallah S. Kamel Center is seeking scholars from diverse backgrounds and academic disciplines who have completed or are near completion of an advanced degree (e.g., Ph.D., J.S.D., D.Phil.) and whose work engages with the intellectual and social history of Islam, Islamic legal and political theory, or law in contemporary Muslim societies. Scholars working or studying abroad are welcome to apply. Fellows are expected to be in residence for the duration of the one-year fellowship and will receive a stipend in the range of $45,000 and $60,000 commensurate with their education and experience. Traveling expenses of fellows coming from abroad will be covered. Applications due  01 Feb 2017 . Read more.

Al-Qasimi Chair (Professor/Associate Professor) in Islamic Studies, IAIS, University of Exeter (Exeter, UK). The post holder will be a leading international figure with the ability to attract high quality researchers at doctoral and postdoctoral level to the Islamic Studies research group. Any area of Islamic Studies is an appropriate specialism including (but not limited to) history, theology, philosophy, literature, mysticism, law, jurisprudence, art and architecture, art history, anthropology and sociology, digital humanities, and any period of the study of Islam. Applications due 01 May 2017Read more.

Engagement Lab @ Emerson College: MA in Civic Media, Art, and Practice (Boston, MA). For those who have an interest in digital Islamic law/humanities, and want graduate training to better prepare for an academic or industry career in the field, the Engagement Lab is accepting applications for their graduate program. Read more.

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