LONDON/DUBAI, Sept 21 (Reuters) - A London High Court judge will decide on Friday whether to continue proceedings on the validity of $700 million sukuk issued by Dana Gas in a case which is being closely watched by the global Islamic finance industry.
United Arab Emirates producer Dana Gas started proceedings in June in UK and UAE courts seeking to have its sukuk, or Islamic bonds, declared invalid and unlawful because of changes in the interpretation of Islamic finance.
The UK trial started on Tuesday, but a last-minute injunction obtained by some shareholders from a UAE court in Sharjah prevented Dana Gas and the legal representatives of another party to the case, Deutsche Bank, from participating in the trial.
High Court judge George Leggatt on Tuesday adjourned the trial until Thursday, but after hearing the arguments of Dana’s lawyers and the legal representatives of investor BlackRock – which has exposure to Dana’s bonds – he decided to reserve judgement on whether or not to proceed with the trial until Friday, saying he didn’t find the situation “at all easy”.
Dana’s lawyers argued on Thursday that they had applied to the Sharjah court to partially lift its injunction but that a date for a hearing had not yet been set. The lawyers said they were told that a hearing should take place around Oct. 8.
BlackRock’s representatives argued on Thursday that the UK trial should go ahead without any adjournment, even without the company and the creditors’ delegate in court.
The outcome of the trial could have significant repercussions for sukuk issuers and investors worldwide, as it could set a precedent for other issuers to refuse to redeem their debt obligations because of changes in the interpretation of the religious permissibility of the debt instrument.
The case is being disputed in UK and UAE courts because while the purchase undertaking, part of the bond contract, is regulated by English law, the mudarabah agreement underlying the sukuk structure is regulated by UAE law.
Leggatt had indicated on Tuesday that he would consider continuing the trial in the absence of Dana Gas and Deutsche Bank, ruling only on the validity of the purchase undertaking as a matter of English law. (Writing by Davide Barbuscia; editing by Alexander Smith)