As an International Finance Centre (IFC), Jersey has led the way in evolving its offering and passing legislation that is ideally suited to support the requirements of a growing and progressive Islamic Finance sector. Given Jersey’s international outlook and significance in terms of global capital deployment and investment, it is unsurprising that it has developed strong links with Islamic Financial markets around the world and worked with them to deliver solutions and structures tailored to the needs of the Muslim world. GAVIN WILKINS explores.
Some examples are very much in the public eye such as Sukuk offerings utilising Jersey SPVs or where Jersey trust certificates are issued on international exchanges including the London Stock Exchange, Bursa Malaysia, Nasdaq Dubai and Kuwait Stock Exchange. Important players in the industry such as the Islamic Development Bank, have also utilised Jersey within their Sukuk trust certificate program.
Other examples are less visible although more numerous. By definition, these include private funds and private wealth structures. Today, many Muslim families throughout South East Asia, the GCC and Africa benefit from the strength of Jersey law structures and their application in generational wealth planning and asset protection in compliance with Shariah law principles.
In this regard, the evolution of Jersey Law to include reserved powers, private trust companies and Jersey foundations provides asset protection, governance and operational structures which are underpinned by key Shariah principles such as control, privacy and philanthropy.
Committed to servicing and supporting international Islamic finance
Jersey’s commitment to servicing and supporting international Islamic finance is evident throughout its ecosystem. Relevant structures are typically serviced by specialist teams within service providers that have the necessary skills and experience to satisfy Shariah-compliant objectives.
Consequently, Jersey has the expertise to identify emerging challenges and readily address them. For example, when it was suggested that ambiguity arising from fresh amendments to Jersey tax laws could technically and unwittingly bring the profits arising from specific Commodity Murabahah contracts into the income tax net, Jersey acted swiftly by issuing a Statement of Practice which ruled them out of scope thus providing complete clarity for arrangers/advisors.
Supporting Shariah-compliant financing transactions in the UK
Jersey’s geographical proximity and time zone to the UK make it a favourable option for bringing skilled and specialist expertise to Shariah-compliant financing transactions which have included commodity Murabahah, Musharakah or Musharakah with Ijarah. It is rare to find a workforce in a predominantly non-Muslim IFC where such financing arrangements are commonplace, along with the depth of understanding as to how to account financially for haram sources of income.
London’s continued aspirations to become a global Islamic finance centre are likely, in turn, to further cement these attributes since Jersey has always been an extremely strong partner and conduit for capital into the UK and vice versa. It is well known that Islamic finance is one of the fastest-growing sectors of the financial market place in the UK with many banks now offering Islamic finance products into the UK financial market.
Working seamlessly with onshore Islamic finance centres
Jersey’s advisory and service sectors are extremely well networked with counterparts throughout the Islamic world. This is, of course, vital to ensure seamless delivery and continuity especially when dealing with complex cross border transactions.
By working with onshore Islamic finance centres across the world, in particular, those within the GCC and South East Asia, Jersey is well-positioned to harness its existing wealth management expertise and complimentary private wealth platform to contribute to filling this gap and enhancing the depth and quality of available solutions.
Elsewhere, Jersey continues to welcome a steady flow of work connected to Islamic finance including situations where investors are using Jersey holding entities for their European commercial real estate, infrastructure, debt and private equity deals, not only due to our expertise and our tax neutral position but also for our ability to offer shareholders/investors a rule of law that provides certainty.
Jersey is likely to play an increasing role in Sukuk issuances via international stock exchanges, particularly those in London. This is, in part, attributable to Jersey’s broader standing as a trusted jurisdiction for capital market transactions, noting that there are more Jersey companies registered on the FTSE 100 and AIM than any other jurisdiction outside the UK.
Africa and specifically African sovereign debt raising by Sukuk is also an area of future demand. The continent, which has a significant Muslim population, is undergoing a generation of growth in infrastructure, energy and financial services all of which will require financing. Jersey has for a long time acted as a bridge between capital raising in Europe and investment in Africa.
Forging closer ties from world-class foundations
Jersey’s demonstrable track record, strong links with existing and emerging Islamic Finance centres and desire to forge even closer ties are clear. This is coupled with its world-class financial services regulation, flexible fund and private client regimes, and a legal framework which is readily suited to accommodate a vast array of Shariah-compliant structures in the capital markets, private wealth and fund sectors.
For these reasons it is easy to surmise that Jersey will continue to be a leading partner of choice to support Islamic finance and wealth structuring. From a personal perspective, I and my Hawksford colleagues look forward to continuing to support businesses, families and fund managers across the world — either from Jersey or any other of our international locations.