Abstract
.This narrative study presents the ongoing Dana Gas S. ukuk¯
nonpayment and its consequent legal proceedings and implications. Dana
Gas (the company) stirred the global Islamic finance market when in June
2017 it announced that its mud. arabah ¯ based s.ukuk¯ instrument is no longer
Shar¯i‘ah compliant due to changes in Shar¯i‘ah interpretation. It claimed
that this situation has made the s.ukuk¯ unlawful in the UAE and therefore
the company will not be fulfilling its payment obligation under the s.ukuk¯
and will instead seek a restructuring of the instrument. The decision was
contested by the s.ukuk¯ holders, who appealed against the company in the
court of United Kingdom. On the other hand, Dana Gas opted for Sharjah
court to proceed with litigation. This situation is the result of the fact that
the s.ukuk¯ document is governed by the United Arab Emirates laws but
the ’Purchase Undertaking" which was part of this contract is governed by
English law. After months of litigation in these two courts, the English
court decided in favor of the s.ukuk¯ holders asking the company to fulfill its
payment obligations as its Purchase Undertaking is enforceable. On the
contrary, the Sharjah court ordered the company not to follow the orders
of the UK court and instead follow the instructions of the UAE court. The
Sharjah court further added that the question of whether the s.ukuk¯ are
Shar¯i‘ah compliant or have ceased to be so is to be decided by the Sharjah
court itself, and not by the English court. Thus, there is standstill situation
due to the conflicting decisions of the two courts. In this case study, a
detailed description of the legal proceedings as well as other important
episodes like the attempts of an out-of-court restructuring of the s.ukuk¯ ,
the causes of the failure of restructuring attempts, the behavior of the
s.ukuk¯ issuer and s.ukuk¯ investors and the overall legal uncertainty in s.ukuk¯
documentation and default are discussed.
Najeeb Zada, Marjan Muhammad. (2018) The Intricacies of Default in Islamic Finance: A Case Study of Dana Gas S. ukuk¯ Litigation, Journal of Islamic Business and Management, Volume 8, Issue S.
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