US legal win to boost Islamic finance -lawyers
* Case dismissed against govt support of AIG's takaful ops
* Lawyers see more law suits targeting Islamic finance
By Shaheen Pasha
DUBAI, Jan 18 (Reuters) - Lawyers said a U.S. court decision to dismiss a case alleging AIG's (AIG.N) sharia-compliant businesses promoted religious doctrine, will boost confidence in the industry and lift sales of Islamic products in the longer term.
A Michigan district court rejected on Friday a claim filed by Marine veteran Kevin Murray in 2009 that the U.S. government violated the constitution by allowing funds from insurer American International Group's $40 billion bailout to be used to fund its Islamic insurance businesses.
Lawyers say the case is significant for the industry in the United States, which has struggled with a backlash against Islam, and is looking for support from the courts and government to promote Islamic finance as a legitimate business.
"The decision ... debunks the myth that Islamic finance is unacceptable and unlikely to withstand legal challenges to its validity in court," said Megat Hizaini Hassan, head of Islamic finance at Malaysian law firm Lee Hishammuddin Allen & Gledhill.
"Once the financial services industry in the US realises that there should be no major legal issues, then hopefully this may help to make Islamic finance more acceptable in the mainstream."
Islamic finance has been plagued by criticism in the U.S. that it is a means of funneling funds to terrorists or a plot by Muslims to spread a system of Islamic principles known as sharia has plagued the industry in the U.S.[ID: nLDE6971BO]
In his opinion, District Judge Lawrence Zatkoff, said the plaintiff did not prove that AIG's sharia-compliant businesses engaged in religious indoctrination.
The distinction between sharia-compliant business as a financial model and overall Islamic law, is a positive step for Islamic finance growth in the U.S., lawyers said, but is just one battle won as the industry seeks to grow.
"The case helps the industry by putting the fringe element that is fearful of sharia in its place," said Isam Salah, partner at King & Spalding in New York. "But I expect we'll see more of these kinds of cases as we see a multi-pronged effort to combat all things Islamic in the U.S."
An appeal of the ruling has already been filed to the Sixth Circuit Court of Appeals, said David Yerushalmi, Murray's attorney and general counsel for the Center for Security Policy.
"Sharia compliant finance is a religious endeavour, there is no way you can separate it from political Islam," Yerushalmi said. "Sharia can't be cut up and diced, it's an integral whole." (Editing by Louise Heavens)
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