Ibn Omar, may Allah be pleased with him, heard the prophet saying: “I have been ordered to fight people until they say that none has the right to be worshipped but Allah, and that Muhammad is His Messenger, and they uphold the prayers, and pay the Zakat. If they do this, their lives and properties will be safe, except for what is due to Islam, and their accounts are with Allah.”
This passage from the Sunna tradition of the prophet of Islam is one of the primary sources utilized by Shariah Compliant Finance (SCF) advisers and scholars to justify their existence as peddlers of fortune and influence in international business today. Let’s be frank. The reason SCF is presented to the world as an “ethical” or “socially responsible” vehicle is not because Islamic Finance limits usury through interest-free products or provides bankers with halal ways and means to profit. The reason SCF is considered socially responsible is because it is a wealth redistribution scheme. One fortieth or 2.5% of the funds are up for grabs; that is, redistribution to the Islamic faith via Zakat. And, while this holy laundering may feed a few hungry children, the Holy Land Foundation trials showed Americans that Zakat charities are possible avenues of support to jihadi cultists. What is certain is that the inability of American and other Western governments to gain complete oversight into the full scope of Zakat redistribution provides an opportunity for unscrupulous behavior.
The Hadith tradition reproduced above was drawn from the Zakat Rules manual of Minhaj Advisory, p.9, which serves as a Shariah Supervisory Board of sorts for the Dubai International Finance Centre (DIFC). The goal of the DIFC is to mainstream SCF into the global economic order. To achieve this, the DIFC has partnered with the American Bar Association.
In late November of this year, the World Islamic Banking Conference (WIBC) will host over a thousand notable transnational business leaders in Manama, Bahrain. The Mega Events “strategic partners” page of the prospectus reveals a small selection of the financial backers and key players who are active in the effort to normalize Shariah compliance on the world stage. Basically, the sponsors of the conference are announcing their presence on the global stage as facilitators of Islamic Finance. Each sponsor holds a specific strategic capacity to advance the aims of the Zakat industry. It is relatively easy to determine the capacity of the big name players, like Citibank, Ernst & Young, Deloitte, Barclays Capital, Deutsche Bank, and McKinsey & Company, to drive confidence in the main. Measuring the capacity of the dozens of other sponsors and showcases in the SCF push of the WIBC is infinitely harder. A level of pragmatic logic is necessary to unravel the matrix.
Capitalism is a good thing. Competition in the free market is that which allowed the ingenuity of America to surpass the collective accomplishments of the remainder of humanity in two centuries. In this, pragmatically speaking, an influx of capital to American enterprise generates jobs, opportunity and tax revenue. Unfortunately, the drive towards a welfare state in the United States, through innumerable legislative maneuvers of Congress, has yielded a mixed economy. The open and litigious nature of our society has given birth to lobby firms representing myriad special interests. Shariah Compliance is one such special interest. Lobby lawyers do not judge the right and wrong of their client’s desires, they merely advise on the limits and parameters of the law and provide consulting services within the letter of the law. A lobbyist is not faced with the moral choice over whether or not the mechanism of Zakat is transparent enough to sit well with the American people. When considering this pragmatic line, King & Spalding, a “Strategic Associate” of the WIBC, stands out as a starting point of query for those Americans determined to head off U.S. Congressional funding of Zakat with U.S. taxpayer dollars.
An Off the Record Brown Bag Program
A turn to the Middle East and Islamic Finance section of the King & Spalding website reveals a medium-sized firm with a powerful core of professionals dedicated to serving the Shariah Compliance needs of their clients:
King & Spalding is a leader in Islamic finance and investment. Our work in the Middle East and our experience with Islamic finance date back to the early 1980s. In 1995, we were the first law firm to establish a dedicated Islamic finance and investment practice group. Our award-winning group has been successful in developing the legal architecture needed by our clients to break new ground in this specialized field. We are the only law firm with recognized experience and the depth to structure and implement sophisticated Shari’ah-compliant investment and financing transactions in the Middle East, Europe and the United States. Our offices in these jurisdictions are staffed with an integrated group of 30 professionals who are dedicated to Islamic finance and investment, and they are supported by an international law firm with more than 800 lawyers located in 13 offices.
King & Spalding’s American offices are located in Atlanta, Austin, Charlotte, Houston, New York, San Francisco, Silicon Valley, and Washington, DC. The firm’s international arms are housed in Abu Dhabi, Dubai, Frankfurt, Geneva, London, Moscow, Paris, Riyadh, and Singapore. Generally, international Islamic Finance companies take their cues from Saudi Arabia. The WIBC takes place in Bahrain, a GCC country. In this frame, out of the 30 professionals at King & Spalding, only a few partners will operate in multiple offices.
To uncover the transnational nature of King & Spalding’s operations in Islamic Finance, the key is to look for nexus figures that operate in both Riyadh and in a second office in either Abu Dhabi, Dubai, or Washington, DC. Two partners at King & Spalding fit the bill: Leroy Levy and Nabil A. Issa. Both of these men operate out of Riyadh and Dubai. Leroy Levy has only been a Partner for about six months as of this writing. Lobbying generally requires years of experience and networked contacts to generate revenue. Nabil A. Issa fits the mold. With well over a billion dollars worth of contracts signed and deals struck in Saudi Arabian Islamic Finance, Issa’s near decade-long career places him in the lead Partner role in King & Spalding’s Riyadh and Dubai offices. More to the point, out of King & Spalding’s 37 award listings in the 2011 Islamic Finance News Awards, Nabil A. Issa received 15. Leroy Levy scored one listing, and Jawad Ali earned eight listings. Notably, Jawad Ali works in the firm’s Dubai office.
On May 2, 2011 King & Spalding announced that Nabil A. Issa would participate in a seminar at the DC Bar Conference Center on K Street. The firm’s press release states that this discussion of the basic concepts of Islamic finance would be “presented by the District of Columbia Bar.”
The seminar aims to satisfy growing interest in Islamic law (shari’ah), which emphasizes socially responsible investments and prohibits interest. Panelists will address recent developments in the field as well as the regulatory and practical aspects of structuring these transactions.
Further information for the event is laid out in a link to a DC Bar portal “for lawyers.” According to the DC Bar release, the May 26, 2011 seminar was an “off the record” discussion:
This Off The Record Brown Bag Program is sponsored by the International Investment & Finance Committee of the International Law Section and in cosponsorship with the Corporation, Finance and Securities Law Section.
Note: Remarks made during "Off the Record" programs may not be used for publication.
Naturally, when international and domestic legal concerns collide on any topic relating to Shariah in this day, questions will arise over why remarks made during a DC Bar-sponsored seminar would be out of bounds for consumption by the American people or, for that matter, legal briefs, collegiate journals and company newsletters.
The DC Bar portal did not list Nabil A. Issa as a speaker. Speakers for the event are listed as:
Farhad Alavi, Partner, BHFA Law Group, PLLC, Washington, DC
Andrew Metcalf, Partner with King and Spalding, New York
Babback Sabahi, Attorney-Advisor, SEC and Adjunct Faculty, Georgetown University Law Center
Michael S Snarr, Partner, Baker Hostetler (Moderator)
To determine if Nabil A. Issa was an unnamed participant in the panel discussion, I contacted the DC Bar to investigate the matter. According to a “Senior Information Specialist” in the DC Bar organization, a substitution was made for King & Spalding 48 hours before the seminar. No names could be discussed in the exchange, but what became clear was that the original registration listing for King & Spalding did not name Andrew Metcalf as its representative. Upon further inquiry about how many people were in attendance at the event, it became apparent that an exact number could not be determined by the records and registrants; however, the Specialist’s off-hand estimate was that the conference room used for the seminar was large enough to hold between 40 to 50 people.
AFIRE in the Netherlands
Since February of 2007, the New York branch of King & Spalding has represented the Real Estate end of the firm’s business interests. According to the 2007 press release announcing the move of the Atlanta-based Real Estate program of King & Spalding, “Islamic finance partners Isam Salah and Andrew M. Metcalf, who represent Middle East real estate clients,” would maintain offices in New York. According to his profile, “Isam Salah is a senior finance partner in King & Spalding’s New York and Dubai offices and heads up the firm’s Middle East & Islamic Finance Practice Group.” Isam Salah, then, is the Senior Partner to Nabil A. Issa in the chain of command. Andrew Metcalf made partner in 2005.
As an expert in Islamic Finance and Investment, Andrew Metcalf has been involved with numerous projects ranging from Arcapita’s groundbreaking buyout of Loehmann’s Holdings, Inc. in 2005 to Seera Investment Bank B.S.C.’s 2008 leveraged buyout of the UK-based BWA Water Additives. These landmark deals in Shariah Compliant Finance are perhaps the highlights of Metcalf’s career at King & Spalding; but, no less important is his Chapter 15 contribution to the 2009 AFIRE Guide to U.S. Real Estate Investing. Indeed, the AFIRE program may be the most powerful piece of the King & Spalding practice:
As the official voice of the foreign real estate industry in the United States and the pre-eminent global real estate organization, the Association of Foreign Investors in Real Estate (AFIRE) represents the interests of nearly 200 investing organizations from 21 different countries. AFIRE, a not-for-profit association of international real estate investors with headquarters in Washington, D.C., was founded in 1988 with strong support from Dutch pension funds. German investment firms now constitute the largest nationality of investors. While inbound investment into the United States remains its members’ common bond, their portfolios have become increasingly global in scope.
Interestingly, AFIRE, the “voice of the foreign real estate industry” is hosting its European Conference today and tomorrow (June 15 – June 16) in Amsterdam’s Amstel Intercontinental Hotel. Sponsors for the conference include some of the largest Real Estate portfolios in the world: Bentall Kennedy; CB Richard Ellis Investors; Cornerstone Advisers; JP Morgan Asset Management; JAMESTOWN; Macquarie; Morgan Stanley; and Paramount Group, Inc. The conference program panelists and speakers on Thursday, June 16th represent a veritable who’s who of investment titans. The keynote will be delivered by the chief economist of Berenger Bank out of Germany. Represented on the first panel is The Townsend Group, a global real estate investment firm with over $100 billion in assets. Apollo Global Real Estate, North America, which holds over $6 billion in assets following its recent acquisition of the Citi Property Investors portfolio of Citigroup, also finds a seat at the venue. Lipper Award winning EuroInvest Portfolio Manager, James Rehlaender, will take his turn at the mic. Before lunch is served, the Executive Vice President of the $15 billion+ North American giant Bentall Kennedy, Douglas M. Potasse, will make a presentation. The AFIRE Conference in the Netherlands represents perhaps the largest gathering of American, European, Middle Eastern, and Asian pension fund managers outside of Davos.
It is no coincidence that the Australian AFIRE sponsor, Macquarie Bank, announced its receipt of a Branch 4 License to peddle Islamic products in the DIFC by the Dubai Financial Services Authority (DFSA) this week. Kylie Rampa, after all, represents Macquarie Capital (USA) Inc. on the AFIRE Board of Directors. On the same Board of Directors, sit Bahraini representatives for Arcapita and Acacia Investments B.S.C. The Kuwait Finance House and Wafra Investment Advisory Group, the Kuwait Social Security Fund Manager, also find representation on the AFIRE Board. Arcapita is licensed as an Islamic Wholesale Bank by the Central Bank of Bahrain, a supporting host of the World Islamic Banking Conference. According to Zawya reports, Acacia Investments is a branch of TAIB Bank, B.S.C.; TAIB is majority-owned by Dubai Financial Group, listed on the Bahrain Stock Exchange and regulated by the Central Bank of Bahrain. For its part, the Kuwait Finance House is a “Gold Strategic Partner” and will host the Gala Dinner at the WIBC.
As an exclamation point on the AFIRE 2011 leadership, the mezzanine finance wizard of New York, Gary A. Goodman, the Real Estate Partner of SNR Denton, is the Executive Committee’s Director of Legal & Tax. SNR Denton, “one of the 25 largest legal services providers” in the world, is a Bronze Partner on the WIBC strategic partners matrix.
Shariah Sways the American Bar Association
By tracking the firm’s lead Islamic Finance Partner, Nabil A. Issa, King & Spalding’s involvement with AFIRE is now its signature; however, this essential tangent does not explain what transpired in the DC Bar Conference room on May 26th. Perhaps a look into the relations of Farhad Alavi and Babback Sabahi might yield a clue or two.
Farhad Alavi is the “FA” in BHFA Law Group, PLLC. The “BH” is Babak Hoghooghi, the founder of the Iranian American Bar Association (IABA) and a founding trustee of the Iranian American Political Action Committee (IAPAC). Hoghooghi’s inflential PAC serves the interests of Iranian Americans in a non-partisan, secular agenda with a steady determination to avoid seeking influence on foreign affairs. However, through the combined efforts of the IABA toward Homeland Security and the advocacy outreach efforts of his Public Affairs Alliance of Iranian Americans toward the State Department, the visa restrictions of the 2002 National Security Entry-Exit Registration System (NSEERS) was abolished in late April and replaced with a more amenable two-year, multiple entry visa system in mid May. This radical departure from the Bush policy may eventually find its way into controversy. Farhad R. Alavi is currently on the Board of Directors for the IABA. A talented young attorney, Alavi’s practice focuses on domestic and international trade, “compliance with U.S. customs, sanctions regimes and U.S. anti-boycott regulations, as well as the Foreign Corrupt Practices Act.” The BHFA facebook page shows him to be a regular contributor to menalawyer.com and an expert in his field. At 12:44pm EST on May 26th, Alavi wrote:
Just spoke on a panel at the DC Bar about Islamic Finance with Andy Metcalf of King & Spalding New York and Babback Sabahi of the U.S. Securities and Exchange Commission (SEC). Discussion centered on the basics of Islamic Finance, how do you structure Sharia-compliant deals, and how regulators address this method of financing.
Professor Babback Sabahi teaches a course in Islamic Finance Law with Professor Ali Adnan Ibrahim at Georgetown Law. Sabahi holds degrees from the University of Tehran and Shahid Beheshti University Law School in Iran as well as a Juris Doctorate from Boston University and an LL.M. from the University of Pennsylvania. He has worked at the IMF, the World Bank as well as the Bureau of International Legal Services in Tehran. Sabahi also served as an associate at Mayer Brown LLP; but, for the most part his career record is that of a technocrat.
Ali Adnan Ibrahim, on the other hand, is a figure to watch. According to Professor Ibrahim’s bio:
Dr. Ali Adnan Ibrahim is a Vice President at the Al Baraka Banking Group, the world’s largest Islamic banking network, in Bahrain where he specializes in Shariah-structuring and Islamic microfinance. Before joining Al Baraka, he was a Counsel at the law firm of Baker & McKenzie. Dr. Ibrahim has extensive experience in Islamic finance and international project development and finance. Dr. Ibrahim also serves as Co-Chair of Islamic Finance Committee of the American Bar Association.
With a degree in Shariah from the International Islamic University of Islamabad, Pakistan and a Masters of Law from Georgetown, Ali Adnan Ibrahim could easily considered one of the most influential players on the world stage in Islamic Finance. However, it is unlikely that this interesting power player has anything to do with the off the record meeting at the DC Bar.
Hdeel Abdelhady of the international legal services practice, MassPoint, PLLC served as Co-Chair of the Islamic Finance Committee alongside Ali Adnan Ibrahim at the American Bar Association. On May 4, 2010, the American Bar Association held a joint program with the DIFC’s governance institute, known as Hawkamah. The DIFC press release noted:
Speakers at the Forum included Dr. Hussein Hassan, Chairman of the Shari’ah Board, Dubai Islamic Bank and Member of the Shari’ah Board, AAOIFI; Dr. Mohd Daud Bakar, member of the Shari’ah Board of AAOIFI; Afaq Khan, CEO of Standard Chartered Saadiq, Standard Chartered Bank; Dr. Qaseem Mihammad, Country Head of Shari’ah and Senior Vice President of Dubai Islamic Bank Pakistan Ltd. and Jawad Ali, Managing Partner Middle East Offices and Deputy Global Head of Islamic Finance, King & Spalding.
Glenn Hendrix, Chair of the American Bar Association Section of International Law remarked that “Islamic Finance has entered the mainstream.” He continued on, “Fascination with the topic goes beyond the dollars at play.” Marwan Lufti, the Deputy CEO of the DIFC Authority and Dr. Mohamad Nedal Alchaar, the Secretary General of the AAOIFI also addressed the forum.
With at least 20,000 lawyers, world-wide, practicing different facets of Islamic Finance, Glenn Hendrix may be correct in his assertions; but, beyond the dollars at play in SCF, the ethical implications of an opaque and unregulated Zakat Industry remain. In that vein, in the 2010 pre-conference workshops at the WIBC, Yasser Dahlawi, CEO and Co-Founder of the Shariyah Review Bureau sought to solidify the necessity of the mandated periodical ‘Shari’ah Review‘ as an essential measure of Shari’a Supervisory Boards, “per AAOIFI standards.” Yet, while the AAOIFI is considered a standard-setting organ of Shariah Compliant Finance, the lack of transparency in its membership should trouble the local, state and national Bar Associations of the United States. Around a fifth of the AAOIFI membership does not have an active website available for examination by investors in the West. Are the “n/a” members of the AAOIFI the depositories of hawaladar network infamy? If transparency is not an AAOIFI member requirement, how can the world be assured of the organization’s pursuit of just and equitable relations in the market?
From the DC Bar to the American Bar Association, Islamic Finance has captured the attention of the legal community. That much is certain. Lost in the momentum is the luxury of wrestling with the implications of dhimmitude.
The World Islamic Banking Conference is now in its 18th year. Islamic Finance has been developing in its modern formulations for 50 years. Most 101 guides on Shariah Compliant Finance will focus on the Islamic principles involved in interest-free banking and the multitude of structures that have been derived from the injunctions in al Qur’an and the Sunna tradition of Muhammad. I have chosen, instead, to provide a broad overview of SCF in action on the legal stage here in America to provide a level of context for those interested in the subject.
Reckoning with the advances of Islamic Finance, today, requires far more than a theoretical awareness of the phenomenon. Without attaining a large dose of contextual intimacy with SCF, its market players and legal brokers, understanding how profit is generated without interest-bearing loans is so much academic postulating. For instance, while this 101 discussion did not broach the topic of Takaful (Islamic Insurance), we are in position to consider the nature of Nabil A. Issa’s most recent article, “Challenges in Structuring non-recourse Financing for Projects in the UAE” and related articles by other counselors on the cutting edge of Islamic Finance and regulatory particulars.
The chief problem in SCF is liquidity, that is, having enough ready assets and liquid capital on hand to structure loans and financing arrangements. Non-recourse financing is a loan that is not re-payable until the project achieves a stage of profit. In the United Arab Emirates, following the 2008 real estate crash, numerous infrastructure projects around Abu Dhabi and Dubai were either shelved or faced default. The banks of the Islamic Finance world are now in search of legal professionals who can structure financing arrangements with conventional bank loans and other bridge financing methods yet remain Shariah Compliant and meet local civil codes.
To provide wind to the flagging sails of the industry, the WIBC hosts have their eyes set on the pension funds of Europe and the Real Estate market in North America through programs like AFIRE.
Connecting the dots on Islamic Finance in context with the WIBC and the legal community is the first step toward understanding the current global economic order.
Family Security Matters Contributing Editor Gary H. Johnson, Jr. is the Senior Advisor for International Security Affairs at the Victory Institute and is host of The Elemental Struggle on the Radio Jihad Network at 6pm every Wednesday. He is also a guest radio show host and head of the foreign affairs desk at the Tea Party Tribune.