is celebrating a boost to its Islamic finance practice with the success of drafting the International Swaps and Derivatives Association’s (ISDA) sharia-compliant master agreement.
The latest draft agreement, which will allow investors to tap the sharia-compliant derivatives market, will be discussed at the ISDA AGM this week.
Clifford Chance won the beauty parade in 2005 to draft the agreement over ISDA’s standing counsel and Islamic finance experts Allen & Overy.
Policy director at ISDA Peter Werner said market participants, including banks and law firms, have been invited to contribute to the drafting, but Clifford Chance has been selected to formally draft the documents because of the firm’s relevant experience.
Werner said: “We have a number of firms working on other projects, but we felt Clifford Chance had the right combination between Islamic finance and derivatives experience.”
Conventional forward trading, which covers futures and derivatives, is not accepted under sharia law. This agreement will allow the gap between Islamic derivative-style instruments and conventional derivatives to be closed. It will provide a standard global contract enabling Islamic investors to tap the market more easily and will be approved by Islamic scholars.
Clifford Chance partner Habib Motani said: “This is very important because it will help liquidity in the market and should have a real impact on the volume of Islamic finance transactions.”
The document is a collaborative effort between ISDA and the International Islamic Financial Market. The sharia-compliant agreement is expected to be ready for market by the end of the year.