If sukuk bonds go mainstream, as is poised to happen in Britain with David Cameron’s blessing, the way will be open for the wider introduction of Islamic principles. Is the likely erosion of Common Law worth that short-term gain?
Cultural diversity promoted in the name of multiculturalism must never be allowed to undermine the basic liberal principle that all people are to be treated equally under the law. Yet the British government has taken a significant step away from its commitment to uphold that principle.
At the World Islamic Economic Forum held in London last week, British Prime Minister David Cameron unveiled an ambitious plan to develop London as one of ‘the great capitals of Islamic finance anywhere in the world.’ The plan is to issue a £200 million sukuk, an Islamic bond that avoids the use of interest which Islam forbids. Instead, the bond pays a return from a specified asset. The value of private sukuk bonds currently traded on the London Stock Exchange exceeds £20 billion. The issue of a new Islam-compliant British government bond would see that figure soar.
The Muslim Council of Britain, which estimates that British Muslims contribute some £30 billion to the economy, welcomed Cameron’s announcement declaring it would lead to even greater choice in London’s financial market and boost Muslim savings. With Islamic banking growing 50% faster than conventional banking, Cameron says the opportunity for the British government to issue its own sukuk is too good to miss.
Britain is already the leading Western centre for Islamic banking. Islamic financial products and legal services are offered by many British banks and law firms. In part, this reflects the extent of demographic changes in the country. In 2010, 2.7 million Muslims, or 4.6% of the population, were living in Britain. The Pew Research Forum on religion predicts that this figure will rise to 8.2% by 2030. Faced with that kind of population growth, sharia-compliant financial and legal services will become increasingly integral to the British economy.
But Cameron’s plan has attracted criticism, as the issuance and use of the sukuk is governed by Islamic law. So when the British government starts issuing its own taxpayer-guaranteed Islamic financial instrument, its actions will be bound not just by English and European law but also by Islamic law, or sharia. This could complicate the government’s foreign and domestic policy. For example, Cameron wants to attract money from Muslim investors, but some may baulk at buying bonds from a government that has commercial dealings with, say, Israeli-owned companies. Would-be investors might also exert increasing pressure on British governments to legislate to protect Muslim cultural and religious practices, such as arranged marriages.
In other words, once the authority of the sharia in providing financial services has been accepted and legitimised, the way will be open for for sharia law to be introduced more widely in British society.
That’s the fear voiced by Dr Michael Nazir-Ali, former UK Anglican bishop of Rochester and a convert from Islam. He has warned that Cameron’s plan could trigger a series of ‘unforeseen consequences,’ including the enforcement of sharia at the heart of government and in its courts of law.
In the course of its recent inquiry, the Federal Parliamentary Joint Standing Committee on Migration identified clear community concern that many Australians are genuinely anxious that federal and state government support of minority customs, such as Islamic finance, could lead to just the same kind of ‘unforeseen consequences’ in this country. A 2010 Austrade report stated that Australia’s attractiveness as a regional financial centre meant that ‘Islamic finance has considerable potential to become an important element in Australia’s aspirations to be a global financial services centre in the region.’ The report also called for a review of tax laws by federal and state governments to ensure Islamic financial products were not disadvantaged and to stimulate the growth of Islamic financial services providers. These calls have been supported by the Australian Centre for Islamic Finance, which actively lobbies government and business to raise awareness of Islamic finance.
Australia is a cohesive and peaceful society. Muslims number about 480,000, just 2.2% of our population, according to the 2011 Census; the 2013 Scanlon Foundation’s Mapping Social Cohesion report says 84% of Australians think multiculturalism has been good for our country. But the Scanlon report also found that more and more of us believe government should not be in the business of supporting the customs and traditions of minority groups – up from 29% in 2012 to 31% in 2013.
The report of the Joint Standing Committee on Migration identified fears that were such practices as Islamic financial arrangements to be introduced in the name of diversity, it could be a first step to the implementation of sharia. The committee came down strongly against legal pluralism and argued that while multiculturalism entails respect for diversity, it must always uphold a commitment to the traditions and principles of the Australian legal system.
Australia will come under increasing pressure from its banking and financial sectors to adopt Islamic financial models to take advantage of regional trade and investment opportunities. Along with this will come increasing pressure to adopt sharia-compliant practices in this country. Yet moves to introduce the beginnings of a parallel legal system in Australia are likely to set up dangerous conflicts and undermine social harmony and cohesion.
If the price of short-term growth in Islamic investment is long-term damage to the key principles of our Common Law legal tradition, is it a price Australians should consider worth paying?
Peter Kurti is a research fellow at The Centre for Independent Studies