Islamic Sukuk Securities : from the Perspective of Czech and European Legal Regulation of Financial Instruments
Abstract
Sukuk are a special kind of securities based on Islamic law. Being an up-to-date and increasingly important instrument, sukuk are traded in financial markets of not only Muslim countries.
The aim of the publication is to review this Islamic legal institute in its entirety and to examine it from the point of view of the Czech and European Union legal regulation of securities and financial instruments. The starting point of the research is the assumption that by studying foreign law and comparing its institutes, it is possible to achieve a better understanding of one's own legal regulation and possibly create new solutions that would otherwise be hidden in the standard context of understanding national law.
The present publication deals with sukuk both in terms of their theoretical definition provided by the Islamic legal theory (the idealistic approach) as well as from the point of view of their actual form in practice as products of Islamic securitization (the pragmatic approach). The analysis of the examined legal institute results in a new definition of the concepts of sukuk and Islamic securitization.
The paper further concentrates on the structures of a total of seven main types of sukuk, namely: (i) Sukuk al-Ijarah, (ii) Sukuk al-Murabahah, (iii) Sukuk as-Salam, (iv) Sukuk al-Istisna'a, (v) Sukuk al- Musharakah (vi) Sukuk al-Mudarabah and (vii) Sukuk al-Wakalah. Following the elimination of non-negotiable types of sukuk and sukuk which by their nature are close to corporate securities, Sukuk al-Ijarah as the most important type of sukuk was chosen for a comparative analysis within the Czech and European Union legal framework.
The analysis results in the conclusion that although the examined Islamic legal institute is not contained in law applicable in the Czech Republic, sufficient legal support for the issuance of Sukuk al-Ijarah can be found in the form of three different types of securities under Czech law, namely: (i) bond secured by transfer of ownership right, (ii) trust certificate and (iii) mutual fund certificate. These securities can also be classified within the legal definition of financial instruments.
The comparative approach to sukuk has solved an issue that remained unclear in the Czech legal theory so far while bringing new theoretical knowledge with wider impact and practical relevance, thus confirming the initial assumption. The conclusions of the publication lead to the presentation of a number of de lege ferenda proposals concerning the Czech legal regulation of investment instruments, securities and investment funds and above all result in designing two completely new types of securities under Czech law.
A bond providing creditors with temporary ownership of a particular asset in addition to the right to have the nominal value repaid and a security in which the rights of a trust fund beneficiary are incorporated represent original concepts that could lead to practical application and serve future legislation.