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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Hamzah Al Shammaa
Many Islamic financial institutions and investment companies in Kuwait have used and continue to use Shariah compliant financing methods including murabaha, bay bithamanajil, ijarah, musharaka and istisna. The previously mentioned instruments ensure that those seeking alternatives to conventional financing have an opportunity to use these Shariah compliant methods, allowing them to avoid exposure to riba (interest). As many already know, any form of riba is prohibited under the principles of Islamic Shariah.
More recently, customers now have the opportunity, using the global commodity markets, to open direct investment deposits (“DI Deposit”) with Shariah compliant banks. When completing a DI Deposit, the following procedures are followed:
Unfortunately, there have been instances where DI Deposit agreements do not provide proper instructions on prepayment methods for its customers. The direct investment must outline how prepayment should be distributed in the event the customer or the bank wants to terminate the underlying arrangement.
Some direct investment agreements include language identifying the rights and responsibilities of the parties in the event of prepayment. Nonetheless, the best method to employ in early prepayment is by having the executing customer fill out a prepayment request form with the bank responding with an offer and acceptance form. The prepayment request form must outline the transaction date, the description of commodities, the total price paid and the deferred payment date. The latter form should also reference the original direct deposit agreement and the current request to make payment of the total price on an earlier date subject to a discounted price, while factoring in early payment, and calculate a reduction in the profit amount owed to the Bank. The offer and acceptance form must also provide specific details to identify the underlying transaction.
While Sharia compliant direct deposits can be attractive form of investment, potential investors should seek legal advice prior to undertaking any commitments so as to ensure, amongst other things, they have adequate prepayment options.
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