A court case shakes the foundations of Islamic finance
Dana Gas, an exploration business listed in Abu Dhabi, seems in a spot of bother. Ten years after sealing a landmark production deal with Iraqi Kurdistan, it is struggling to recover $900m it is owed by the autonomous region and the Egyptian government. So it faces a liquidity squeeze. That is not, however, why it says it wants to restructure $700m-worth of Islamic bonds maturing in October 2017. Rather, it says it has received legal advice that the bonds are no longer compliant with sharia—rules based on Islamic scripture.
The bonds were deemed compliant in 2013, but Dana cites evolution in the “interpretation” of Islamic financial instruments. It is seeking to have them declared invalid in a United Arab Emirates court.
This is an excerpt of a piece I wrote for the print issue of The Economist. Click here to read it in full