Sharia makes its first incursion into British law
Britain and France appear to be in a race to corner the sharia-compliant Islamic finance market. Both countries are rushing into law new regulations that will make the operation of sharia finance easier and facilitate the issuance of corporate sukuk.
Sukuk are a broad class of financial instruments designed to replicate the economic function of bonds, but with a structure which complies with Islamic principles. Although there is an obvious appeal to the Muslim community, the Treasury spokesman said “sukuk can be issued and bought by everyone.”
In the UK, the Treasury has laid before Parliament the Financial Services and Markets Act 2000 Order 2010 that will clarify the regulatory treatment of corporate sukuk, reducing the legal costs for these types of investments and removing unnecessary obstacles to their issuance.
Exchequer Secretary to the Treasury Sarah McCarthy-Fry MP said: “The Government’s objectives on Islamic finance are to enhance the UK's competitiveness in financial services by maintaining the UK's position as a Western leader for international Islamic finance; and to ensure that everybody, irrespective of their religious beliefs, has access to competitively priced financial products.
“This measure is another important step in the development of the Islamic finance sector in the UK and will help to provide a level playing field for Islamic financial products in this country. It is good news for the UK economy and for our Islamic finance industry.”
Duncan McKenzie, director of economics International Financial Services London said: “The UK is the only western country to feature prominently in provision of Islamic finance and remains in eighth position with assets of $19bn in a global ranking of sharia compliant assets by country.”
But the French Minister of Economy, Industry and Employment Christine Lagrade’s Advisor Thierry Dissaux said his country was going ahead with its own plan to adopt the Islamic financial system.
There is unease among some politicians that these plans will compromise the strict secularity of the French constitution. The government has already introduced legal and tax amendments with a view to matching the requirements of the Islamic Sharia law in terms of Islamic finance, the French official noted. In its official tax guidelines on February 25, 2009, the authority set out procedures pertaining to Murabaha Sukuk (Islamic bonds) operations in the Islamic financial system.
A spokesman for Libre Pensée, the French secularist organisation, said: “Sarkozy wants to outlaw the burka but he approves this. What hypocrisy.”
Not to be left out, Luxembourg took a first step in entering the race for the Islamic financial bonanza when it published last week a new tax circular on the treatment of a whole range of Islamic finance products including murabaha, musharaka, mudarabah, istisna, ijarah, ijarah wa Iktina and sukuk (Islamic bonds).
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