Al Tamimi & Company

Implications of the Kuwait TID v. Blom judgment on Wakala contracts


Wakala contracts are agency agreements that are widely used in Shari’ah compliant Islamic finance transactions. A wakala contract is formed when a principal, the muwakkil, appoints an agent, the wakeel, to undertake certain transactions on the principal’s behalf. An important characteristic of wakala contracts is that the muwakkil and the wakeel share in the profit and risk of loss of the transaction.

An important characteristic of wakala contracts is that the muwakkil and the wakeel share in the profit and risk of loss of the transaction. Nonetheless, some wakala contracts contain provisions that guarantee a specified rate of return or certain profits despite the results of the transaction(s). Such provisions arguably contravene Shari’ah principles as guaranteed returns or profits are not Shari’ah compliant in that they do not enable risk sharing between the wakeel and the muwakkil…

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Overview

Al Sila Tower
Level 26
Al Sowwah Square
Al Maryah Island
Abu Dhabi
PO Box 440
United Arab Emirates

Total lawyers: 230