June 18, 2017 | Author: Hdeel Abdelhady*

As discussed briefly in this June 16 MassPoint blog post, Dana Gas PJSC, the Sharjah, UAE-based gas producer, has unilaterally declared “unlawful” sukuk [2] instruments issued by the company in 2013 [3] (through, as issuer, Dana Gas Sukuk Limited, a Jersey public company with limited liability).

This post discusses some of the Shari’ah, UAE law, and factual issues triggered by the Dana Gas statement on the unlawfulness of its sukuk. Additional commentaries on the Dana Gas sukuk may follow.

In a June 13 release, Dana Gas Explained that its sukuk is “unlawful” and “cannot be paid” due to illegality. Specifically, Dana Gas explained that:

“Due to the evolution and continual development of Islamic financial instruments and their interpretation, the Company has recently received legal advice that the Sukuk in its present form is not Shari’a compliant and is therefore unlawful under UAE law. As a result, a restructuring of the current Sukuk is necessary to ensure that it conforms to the relevant laws for the benefit of all stakeholders . . . The next two Distributions scheduled for 31 July 2017 and 31 October 2017 cannot be paid now that the existing Sukuk is deemed unlawful but will be accounted for as part of the new Sukuk instrument.”

The above statement raises several Shari’ah, UAE, and other legal issues and questions, as well as factual questions about events leading to Dana Gas’ stated position on the lawfulness of its sukuk. Some of these issues and questions, along with observations, are discussed here.