Global law firm DLA Piper’s large-scale litigation and arbitration funding solutions as well as its tokenization offering, both launched late last year, have benefited from the challenges faced by the global Islamic finance market during the pandemic.
“Undoubtedly, the last 12 months have been challenging for many sectors, in particular Islamic financial services, but there have also been a number of positives in terms of how the industry has responded to those challenges. In particular, we’ve seen a rapid growth in the digitalization of Islamic finance — not just fintech but digital transformation generally has been pushed to the forefront of stakeholders’ minds,” Paul McViety, the head of Islamic finance – Middle East at DLA Piper, told IFN, the sister publication of IFN Fintech.
These have affected the ways that law firms do business. An example is the way blockchain technology has made its way to the top of the agenda of most market players, which in turn has, inevitably, resulted in a massive change in the way contracts are traditionally executed. DLA Piper’s new digital asset creation engine TOKO, which provides a smart contract functionality, has been a response to that.
Outside of digitalization concerns, the industry has had an opportunity to step back and look at other areas where it can do better. McViety cites the rising importance of environmental, social and governance (ESG) criteria and the transition into a green economy as an example, where legislation has resulted in these principles being embedded in not only the constitution of organizations but also regulatory benchmarks.
The Islamic finance industry has responded to that with the global Islamic capital market’s renewed focus on sustainable and green Sukuk, with many landmark issuances in the past year alone. Sohail Ali, the legal director – London at DLA Piper, also noted that the overlap in ESG and Shariah principles shows that Islamic finance is well placed to take the lead on ESG.
Another relevant solution for the Shariah finance industry is third-party litigation funding. “We’ve seen a wave of third-party litigation funders in the last few years, and this is relevant and of interest to the Islamic finance industry, particularly now with the pandemic putting a lot more pressure for borrowers in general. Third-party litigation funding offers a practical solution to covering legal costs in litigation and arbitration in a transaction and frees up capital,” Sohail explained.
DLA Piper’s newly formed Aldersgate Funding does just that — it offers the firm’s clients access to GBP150 million (US$208.46 million) to fund large-scale litigation and arbitration, offered on a financial risk-free (non-recourse) basis with a streamlined approval process embedded within the offering.
This is an excerpt of a podcast interview with DLA Piper’s Paul McViety, the head of Islamic finance – Middle East, and Sohail Ali, the legal director – London. For the full discussion on the Islamic financial industry’s opportunities for globalization, log on to IFN Podcast.