April 2023 – M. Shams Billah wrote an article in Islamic Finance News that explored the established history of U.S. case law on the enforceability of Islamic finance contracts, and why New York is one of the best jurisdictions for Islamic finance transactions.

Although Islamic finance is not necessarily uncharted territory in the U.S. it remains underutilized and has room to grow, wrote Billah. The sluggish growth of Islamic finance in the U.S. is due in part to a misunderstanding of the enforceability of Shariah contracts under U.S. law compared to its European counterparts, he continued.

A 2022 U.S. District Court for the Southern District of New York decision on the U.S. bankruptcy proceedings of alternative asset manager Arcapita was significant to understanding how Islamic finance contracts can be enforced in the U.S., Billah argued. In its decision, the court explored the treatment of Shariah compliant financing contracts in detail, one of the first in either the U.S. or U.K. to do so.

In his article, Billah also defined and explained Murabahah and Ijarah, types of Islamic debt financing that for a long time have been understood to be enforceable under New York law because of the economic substance principle used to determine the legal consequences of U.S. transactions.

Read the article.