Chicago Journal of International Law


Some recent developments in the US are of particular significance in the context of the growth of sukuk offerings. While the general expansion of sukuk beyond the immediate Islamic world represents a noticeable shift in the origination and marketing of Islamic finance and investment products, the pioneering use of sukuk in the US marks the most dramatic extension of Islamic finance into the world's most sophisticated capital market. The first US sukuk is a product of the unique marriage of American oil and gas law with Shari'ah concepts, two jurisprudences that complement each other surprisingly well. Given the compatibility of sukuk with US oil and gas law and the voracious appetite for capital in the petroleum industry, sukuk may provide a relatively small but important (and, in nominal dollar terms, potentially very large) contribution to the growth potential of the energy industry and create additional outlets for Muslim capital investment. This Article seeks to demystify sukuk by providing an analysis of the nature and application of sukuk structuring techniques, with an emphasis on legal considerations, in the rapidly changing world of Islamic finance. It also attempts to explore emerging trends in the rapidly evolving marketplace for sukuk investments. In particular, this Article will evaluate both the underlying legal principles involved in innovative sukuk structures and the use of assets in non- Islamic jurisdictions to back securitizations represented by sukuk certificates. After providing a general explanation of the fundamentals of sukuk as an Islamic investment vehicle and an overview of the growing importance of sukuk in the marketplace, this Article will turn to a discussion of the primary legal challenges of utilizing assets to back sukuk offerings in non-Islamic jurisdictions. In addition, this Article will provide an analysis of key conflicts of law considerations posed by the "exportation" of sukuk products outside their traditional markets. The first ever sukuk offering involving US assets will be examined as a case study to provide additional insight into how asset-backed sukuk deals in non-Islamic jurisdictions must be carefully structured. [CONT]