National and Global Islamic Financial Architecture:

Prolems and Possible Solutions for the OIC Member Countries

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Tax regimes and impact on Islamic finance

As the whole financial system in Sudan is Islamic, issues related to disparities between the

conventional and Islamic financial sectors do not arise. Overall, the Sudanese taxation system

comprises VAT, Custom Duty Tax (CDT), and Business Profit Tax (BPT). While BPT on banking

sector is 30%, it is exempted from VAT and CDT on banking equipment. Specifically Articles

37(1) and (2) of the VAT law exempts certain items including banks, insurance companies,

sales of sukuk and stocks (Siddig, 2014). The taxation system in Sudan accommodates the

unique features of sukuk. The profits of all kinds of investment certificate sukuk, and any other

financial investment instruments, are completely exempted from BPT as per clause number

(20/a) of the Sukuk Act of 1995.

Dispute Settlement/Conflict Resolution Framework and Institutions

Since the financial sector of Sudan completely follows Islamic Shari'ah Principles, the legal

framework, including disputes settlement and resolution framework has also been

transformed and adjusted to comply with the Islamic Shari'ah principles. The judicial structure

of the country has specialized courts that include Commercial Court, Intellectual Property

Protection court, Public Property Court, and Environment Court, (Judiciary 2016). The

Commercial Court was established in January 2002 following the Judiciary Law 1986 with the

formal name "Khartoum Commercial and Intellectual Property Court" (KCIPC) and deals with

all business-related disputes. It is concerned with commercial disputes, and, when contracts

are claimed to be non-Shari’ah compliant, the SHSB of the CBOS solves such issues. There has

never been a case of an appeal brought from the SHSB to any court (IMF and WB, 2005).

Arbitration constitutes an alternative dispute resolution framework in Sudan and all

commercial and civil matters are considered arbitrable by law. Arbitration is managed by the

Khartoum Center for Commercial Arbitration (KCCA) and is governed by The Arbitration Act of

2005 amended 2016. This act is not based on the Model of the United Nations Commission on

International Trade Law (UNCITRAL). Sudan has not yet signed the 1958 New York

Convention

but has approved the International Center for Settlement of International

Disputes (ICSID) Convention (TWB, 2010). Sudan faces the challenge of complying with some

of the international standards that disregard Islamic Shari'ah principles. Although Arbitration

Act 2016 has made different amendments in different clauses of the Arbitration Act, 2005, the

clauses related to International Arbitration remain without changes (Arbitration, 2016). It is

quite difficult to spot the number of commercial arbitration disputes in Sudan. It was reported

that most commercial arbitration disputes in Sudan are unplanned or under international

arbitration institutions without providing additional details. ICSID has reported two continuing

disputes (UNCTAD 2015).

New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards entered into force in June 1959. The

Convention requires national courts to recognize and enforce foreign arbitral awards, subject to specified exceptions; requires

national courts to recognize the validity of arbitration agreements, subject to specific exceptions; and requires national courts to

refer parties to arbitration when they have entered into a valid agreement to arbitrate that is subject to the Convention (World Bank,

2010).