Islamic finance involves the application of Sharia principles to financial activity. The Kingdom of Saudi Arabia derives its laws from the Holy Book, the Quran, and the Sunnah, which is a collection of statements made by the Prophet Mohammed (PBUH).
In practice, judges normally refer to historical statements of established scholars of Islamic theology (commonly known as Sharia) to ascertain and apply the true intentions of the sacred texts. Sharia principles can impact financing structures in a number of ways; the most widely known issue is the prohibition on interest, but other principles, such as the non-permissibility of both speculation and uncertainty, can impact a wide range of areas, such as the enforceability of warranties and indemnities, recoverable damages, and events of default.
Sharia and other Saudi law issues, such as the possibility of applying foreign governing laws and international arbitration, will apply equally to conventional financing structures adopted in Saudi Arabia.
Working with Linklaters’ specialist Islamic Finance team, Z&Co. has advised extensively on such structures in both the banking and capital markets spaces. Examples of our recent experience include: