Dubai Debt Crisis: A Legal Analysis of the Nakheel Sukuk
TISCO Working Paper Series on Banking, Finance and Services No. 5/2010
19 Pages Posted: 22 Aug 2010 Last revised: 17 Sep 2010
Date Written: August 22, 2010
On November 25, 2009, the financial world was shocked when Dubai World requested a restructuring of its debts. Much disturbance in capital markets was caused. The main concern of the ‘Dubai Debt Crisis’ was the delay in repayment of a the Nakheel Sukuk, an Islamic financial instrument. This article discusses the legal structure of these Islamic financial instruments (sukuk), followed by a case study of the Nakheel Sukuk. Several impediments of the legal structure of the Nakheel Sukuk and of the legal system of the UAE will be discussed. All of this will lead to the conclusion that the legal implications of the Nakheel Sukuk were not connected to the legal structure of Islamic financial instruments as such, but they were inherent to the legal structure of this particular transaction and to the legal environment in which it was set up.
Keywords: Dubai, Nakheel Sukuk, Islamic Finance, Financial Instruments, Debt Crisis
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