Tuesday, February 02, 2016

Britain's 2014 Sovereign Sukuk Issuance Creates Unexpected Problem For House of Commons

In 2014, Britain in a bid to become the Western hub for Islamic finance, sold £200,000,000 in Sharia-compliant bonds-- otherwise known as sovereign Sukuk. (2014 press release) (Offering Circular).  Under the Sukuk arrangement, investors do not lend money in exchange for interest; instead they share in "rent" payments made by the government on government property which is first leased to the investors and then sub-leased back from them. One of the conditions of the arrangement is that the government property that underlies the Sukuk arrangement cannot be used in ways that violate Sharia law. This means, among other things, that no alcohol can be sold on the premises of the building.

It was reported by the Deccan Herald last week that this condition is now creating a problem for Parliament.  The 182-year old Palace of Westminster in London where the House of Commons now meets is in need of extensive repairs that it is estimated will take six years to complete. A Parliamentary committee is seeking a place for Commons to meet while the repairs are under way.  The Committee has identified Richmond House in the Whitehall district as a good fit.  The building currently houses UK's Department of Health. It is also one of the buildings that has been leased to support the 2014 Sukuk issuance. The Palace of Westminster currently has eight bars in it.  Members of Parliament will have to give up that convenience while in their temporary home.