The Flaws in the Legal Regulation of sukuk: Towards a Legislative Reform that enhances its Role in Financing Commercial Business

Prof. Magdy Shehab
Professor of Economics and Public Finance
Kuwait International Law School
Dr. Khaled Al Talahmeh
Associate Professor of Private Law
Kuwait International Law School
Faculty of Law and Public Administration – Birzeit University – Palestine


The study aims to conduct a critical evaluation of legislation related to Islamic sukuk in some Arab countries. It examines the draft of Kuwaiti sukuk law 2019 and attempts to answer the significant questions concerning the sukuk legislative changes; would it improve the competitiveness of the sukuk in financing the company’s project and provide better protection for investors?
Do we need to create a specialized legal regulatory framework for the sukuk or is it sufficient to make up amendments to the current framework for conventional bonds to take in them in the capital markets according to their own nature? Have there been studies for the preparation of legislation before formulating texts of the sukuk laws, or were they drafted through a non-participatory mechanism that did not consider the views of stakeholders and actors in the legislative process?
The paper also addresses the legislative flaws in the legal regulation of sukuk in terms of ambiguity, contradictory, and lack of legislative consistency included within the draft Kuwaiti sukuk law 2019. In addition, the paper proposes some solutions in order to reform these flaws by clarifying the preliminary ways that are needed for the preparation of the sukuk law and legislative’s policy memorandum, which the drafter shall comply with when drafting the sukuk law.

Keywords: conventional bonds, commercial business, legislative policy, legislative reform.

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