Risk Management in
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English law....” With this clause, the parties have agreed that the transaction, as well as any
purchase agreement made pursuant thereto, shall be governed and construed in accordance
with the English law.
In addition, clause 26 of the underlying agreement provides for an irrevocable submission to
the jurisdiction of the English court. It is important to observe that party autonomy is of
paramount importance in the choice of law and jurisdiction. Therefore, the court construed the
agreement as an English law contract, which validated the seemingly invalid murabahah
contract. This case “illuminates the challenges and tensions within the industrial complex of
Islamic finance as it seeks to exist and thrive in a commercial reality, where the regulatory
framework and its associated assumptions (both theoretical as well as those of commercial
practice) differ markedly from those of Islamic law and the contemporary Islamic financial
industry” (Moghul & Ahmed, 2003: 155).
In the Prospectus of GE Capital Sukuk Ltd., it is provided that all the underlying contracts
except the Guarantee will be construed in accordance with the English law. The Guarantee
contract is governed by the New York State law. All the parties in the sukuk transaction agreed
that they shall submit to the exclusive jurisdiction of the English courts, and any judgment
obtained in any proceedings before such courts shall be binding and enforceable in any other
jurisdiction. A similar provision was inserted in the controversial Goldman Sachs sukuk where
the underlying contracts are to be construed in accordance with the English law, New York
laws and the laws of Cayman Islands, respectively. This totally excludes the Sharī'ah as the
governing law. Sharī'ah can only be invoked during the proceedings through the call for expert
opinions from Sharī'ah scholars, which are not necessarily binding on the courts.
A.4.2 English Law and Non-Exclusive Jurisdiction of the English Courts
While maintaining a middle course, there are Sukuk Prospectuses that provide for a mixed
legal and regulatory regime, owing to the fact that the stakeholders in the transaction are in
different jurisdictions. Therefore, this category partly provides for English law as the
governing law, while emphasizing the non-exclusivity of the jurisdiction of English courts in
determining any claim or action under the Prospectus. That is, while some underlying
contracts are construed under the English law, others are construed under the laws of other
jurisdictions. In addition, any of the parties in the transaction can bring an action in other
jurisdictions, though the English courts are preferred. This seems to be the most complex
category, because other related issues, such as recognition and enforcement of foreign
judgments set in. To this end, it is pertinent to observe that some of the countries in the GCC
are not signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards of 1958 (New York Convention).
Worse still, many of those countries in the GCC region do not have bilateral treaties on the
enforcement of foreign judgments, which makes it difficult to enforce an English judgment in
jurisdictions like UAE, Abu Dhabi, Kuwait, Qatar and Saudi Arabia. Examples of Sukuk
Prospectuses which fall under this category include the QIB Sukuk, Nakheel Sukuk, and
1Malaysia Sukuk Global.