Vladimir Komarov, Managing Partner of GRATA International St. Petersburg, Commented for Business FM Radio

The State Duma plans to legalize Islamic banking. This will allow non-credit financial organizations to attract money from citizens and legal entities and invest it in projects that comply with Islamic law on a partnership basis. In general, as Kommersant writes, the scheme resembles trust management. Will it take root in Russia, and what opportunities will financial market participants get?

The explanatory note contains an important clause that an investor who enters into an agreement with a partner financing organization participates not only in profits, but also in losses - that is, it is far from a fact that the invested money will be returned. However, in the context of sanctions and the severance of economic ties with Western companies, the instruments of partnership or, in other words, Islamic financing are becoming relevant. The managing partner of the law firm GRATA International St. discusses the possible features of law enforcement practice. Petersburg Vladimir Komarov.

Managing partner of the law firm GRATA International St. Petersburg Vladimir Komarov:

Today, if a law enforcer comes across a corresponding contract that is concluded according to the norms of Islamic finance, then, most likely, in our legal system it will be qualified by the civil code as an “interest-bearing loan.” Also, our tax system and tax code do not know any exceptions and features for this type of activity. How taxation of these transactions will occur is also unclear at the moment. This will probably require making appropriate changes, including to the tax code. As for law enforcement, training a large number of arbitration judges in the specifics of applying these rules is probably a possible task, but a very ambitious one. A solution here may be to involve commercial arbitration in the consideration of disputes arising from the norms of Islamic law.

It is worth noting that last year the Duma Committee on the Financial Market spoke about the creation of a working group on Islamic finance, whose members will deal with targeted changes in legislation to attract investments from Islamic countries.