Embryonic. That’s the best way to describe Islamic finance practices of Asian law firms outside of Malaysia, but there’s no doubt that there are high expectations for the growth opportunities on offer. Lawyers specializing in Islamic finance, while traditionally based in Dubai or London, are keeping a close eye on developments in the Asia region.
Oliver Agha, partner and Global Head of Islamic Finance at DLA Piper, has over 50 lawyers worldwide in his Islamic finance practice group. “It’s hard to get firm statistics, but we believe it’s the largest such group in existence,” he says. Clifford Chance, Norton Rose and Linklaters are other examples of firms which have worked on substantial Islamic finance transactions.
Of course, when one talks of team size, this begs the question of how law firms are structuring their Islamic finance teams. “I don’t see it as a distinct practice area,” says Hooman Sabeti-Rahmati, Senior Counsel at Allen & Overy Shook Lin & Bok, “Islamic law is a body of law which ultimately needs to be applied to a structure or product. The knowledge of Shari’a is important, but the starting point must be knowledge of the underlying product. This is because most Shari’a-compliant products today are designed to replicate the economic and risk profile of a conventional counterpart.”
Agha places a heavy emphasis on Shari’a knowledge, hiring lawyers who are also Islamic scholars and adopting a sound understanding of Islamic jurisprudence as a starting point. “A lot of firms are simply trying to replicate conventional structures into a Shari’a compliant structure,” he says, “Our approach is to start with a genuinely compliant structure and to build the product from that.”
Banks and other entities looking to raise capital are increasingly turning to Shari’a compliant offerings. A key reason, says Hooman Sabeti-Rahmati,  is the abundant investment capital currently available, and increasingly so, in the Middle East. “Middle Eastern investors generally have not been averse to investing conventionally if Islamic alternatives were unavailable, but now that compliant alternatives are more available and growing, there is ready demand for them, which invites further innovation and growth,” says Sabeti-Rahmati.
Agha agrees and says that Islamic finance is increasingly important as a substitute for conventional financing in light of the credit crunch. “You can see this in the current proliferation of Islamic funds, which is occurring as the traditional market is contracting,” he says.
Islamic finance is an area of exponential growth for law firms, says Oliver Agha. “The main growth has been in the Middle East, but there’s also been strong growth in Asian markets. Kuala Lumpur has always the main [Asian] centre for Islamic finance, but in recent years we’ve seen other jurisdictions such as Thailand, Japan and particularly Singapore take an interest.”
Hong Kong, in particular, is keen to establish itself as the gateway for Muslim investment into mainland China – intentions that were made clear by developments such as last year’s opening of the Hang Seng Islamic China Index Fund. “If they’re able to establish Hong Kong as a viable Islamic finance jurisdiction, I can see Hong Kong, along with Kuala Lumpur, being the region’s hot spots for Islamic finance,” says Agha.
  • Islamic finance is finance conducted in accordance with Islamic law or Shari’a
  • Certain practices in conventional finance are prohibited under Islamic law These include the charging or paying of interest or earning profits from enterprises such as gambling or alcohol
  • The “sukuk” is the Islamic equivalent of a bond. The sukuk market has experienced exponential growth in recent years, although some commentators have questioned its compliance with Shari’a
  • Other than a small number of countries such as Saudi Arabia, Shari’a is generally not part of national commercial laws and therefore would usually be voluntarily used by one or more parties to a financial arrangement



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