| June 21
June 21 To many in the West, a fatwa is often
associated with the 1989 religious edict against author Salman
But, in what may be a first, a party has cited the term in a
U.S. bankruptcy court, citing a "fatwa" as a reason to prevent
Goldman Sachs from making a loan to bankrupt Bahrain
investment firm Arcapita Bank BSC.
Earlier this month, U.S. Bankruptcy Court Judge Sean Lane in
New York confirmed Arcapita's reorganization in what many
experts said was the first Chapter 11 that was compliant with
Islamic law, or Sharia.
Under Central Bank of Bahrain rules, Arcapita must obtain a
fatwa, or religious edict, from a supervisory board of Islamic
experts, before undertaking new finance.
In a filing in U.S. Bankruptcy Court in New York on Monday,
Hani Alsohaibi, who had invested money with by Arcapita, said
only one member of Arcapita's supervisory board signed the fatwa
setting the conditions for a debtor-in-possession, or DIP, loan
from Goldman Sachs. Therefore, the court should reject the loan,
the filing said.
Goldman Sachs did not immediately respond to a request for
Attorneys for Arcapita Bank were quick to direct the judge
back to the governing law.
"The principal DIP transaction documents are governed by
English Law, and compliance with moral and religious principles
of sharia, on which there is no universal view (at least on
earth), is not pertinent to the courts' final ruling," a lawyer
for Arcapita, Craig Millet of Gibson, Dunn and Crutcher, wrote
in a filing on Thursday.
A search of court records in the Westlaw legal database
suggests that the Goldman loan appears to be the first time a
question of a fatwa has been presented to a U.S. bankruptcy