Trowers & Hamlins LLP
17 Experts
20 Contributions by Trowers & Hamlins LLP
PRACTICE NOTES
Terminology
In bai salam arrangements, the purchaser is known as the rabb-us-salam, the vendor as the muslam ilaih, the agreed price as the ra’s-ul-mal, and the underlying item as the muslam fih. Owing to the historic foundations of Shari'ah principles—and the jurisprudence informing bai salam—the language largely centres on commodities, particularly within agriculture. As contemporary Shari'ah structures have broadened to suit a wider range of situations, this Practice Note will therefore use ‘assets’ rather than ‘commodities’. It should be noted that not every asset is suitable for a bai salam arrangement (see the section on ‘Excluded assets’ below). The roots of bai salam reach back to the earliest Islamic era, created to assist farmers and agricultural labourers who needed funds to cultivate crops and deliver the harvest. Bai salam is also commonly termed bay salam, bai al-salam, bay al-salam, or simply salam. Impact of
Banking & Finance
PRACTICE NOTES
Key elements of bai salam
As set out in greater detail in the Practice Note: The structure and required elements of a bai salam transaction, in particular with respect to the differing views amongst Shari'ah schools of thought, there are several essential conditions that must be satisfied for a valid bai salam contract to stand:
payment of the full purchase price by the buyer to the seller at the moment the contract is concluded and the sale takes effect
precise, unequivocal description of the asset’s quality and quantity, generally by reference to recognised trade standards, with all possible particulars expressly set out
the contract must not relate to a specific or unique asset
clear delivery provisions, in particular the date and location for delivery
Additional requirements apply to a parallel bai salam:
the parallel bai salam must be
Banking & Finance
PRACTICE NOTES
Like their conventional peers, takaful operators (ie Islamic insurance providers) employ several channels to distribute their Shari’ah‑compliant life insurance (known as family takaful) and their non‑life insurance (known as general takaful) to the public. These routes include the operator’s direct sales force, independent insurance brokers, and e‑tools. Another channel is bancatakaful.
What is bancatakaful?
Bancatakaful is the distribution of takaful products through banks—Islamic or conventional—so long as the activities conform to Islamic principles (Shari’ah). In essence, the bank acts as the takaful operator’s agent, allowing the operator to utilise the bank’s network.
The key reasons takaful operators use banks as distribution partners are to:
tap the banks’ existing customer base
align with reputable banks and benefit from their expertise in product distribution
maintain smaller direct sales teams, as bank staff sell the takaful products to the banks’ customers
maintain smaller support teams, as
Banking & Finance
PRACTICE NOTES
Over the past twenty years, build to rent offerings have expanded across the UK, most visibly in large metropolitan centres such as London. Professionally operated and held by institutional investors, its rise reflects comparable developments in countries including Germany and the USA. It is now regarded as a separate asset class within the private rented sector and is defined in the National Planning Policy Framework glossary, simplifying its consideration within the planning system. This Practice Note sets out:
the nature of build to rent transactions and how they diverge from conventional residential development finance
the typical financing structures used for build to rent
the principal points to address when documenting build to rent transactions
the applicable regulatory and planning matters
the key legislation influencing the sector
What is build to rent?
‘Build to rent’ describes schemes where homes are delivered specifically for the long-term rental market. In real estate finance terms, it
Banking & Finance
PRACTICE NOTES
Commodity Murabaha and Tawarruq
Murabaha contracts can be structured to fund working capital or acquisitions, including property purchases. When used in this way, the structure is often termed a commodity Murabaha. A related technique, Tawarruq (sometimes called ‘reverse Murabaha’), operates in a very similar manner, and the labels are frequently conflated, yet Shari’ah draws a distinction between them. Commodity Murabaha is required to satisfy the general Murabaha rules and is chiefly concerned with the conduct of the Islamic financial institution (IFI). By contrast, Tawarruq is centred on the Customer: the Mustawriq acquires an asset on deferred terms with the express intention of immediately selling it on for cash to a third party. Scholars of Shari’ah do not all recognise Tawarruq as valid; nonetheless, most consider it allowed where the sale complies with Shari’ah conditions. Meeting working capital needs remains among the most
Banking & Finance
PRACTICE NOTES
Middle East and Far East Markets
This Practice Note outlines distinctions between the Sukuk markets in the Middle East and Far East, highlighting recent trends and commonly adopted structures. For further information on Sukuk transactions and structures, see the Practice Notes on the structure and elements of a Sukuk transaction, and on Sukuk documentation and transaction mechanics.
The Sukuk market is expanding as an alternative to conventional debt for corporates and investors seeking a Shari’ah-compliant approach. It is likewise attracting non‑Shari’ah‑compliant institutions and investors as a credible substitute for traditional financing. Significantly, Sukuk offers access to a pool of Shari’ah‑compliant investors, often regarded by conventional players as an underexplored source of capital.
Although already a sophisticated marketplace across the Middle and Far East, recent developments show growing diversification and globalisation.
‘Conventional’ financial centres, including Hong Kong, London and Luxembourg, are competing with more
Banking & Finance
PRACTICE NOTES
Introduction—transactional Islamic finance
There is a diversity of views and guiding maxims expressed by members of Shari’ah boards when applying Shari’ah to commercial contexts, which in turn can lead to apparent divergence in the legal documents used within Islamic finance transactions. In response to these recognised market inconsistencies, attention worldwide has increasingly turned to the development of national, centralised regulatory authorities dedicated to Islamic finance. As an illustration, in 2017, following the national sanction of an Islamic finance industry, Morocco created by royal decree the Moroccan Shari’ah Committee for Participative Finance, comprising 10 Islamic scholars and financial experts, to oversee and regulate the newly established financial sector. The Central Bank of Bahrain (the CBB), which has overseen Bahrain’s financial system since 2002, has taken a comparable path, announcing in September 2017 that all banking
Banking & Finance
PRACTICE NOTES
Islamic finance contracts
Agreements structured under Islamic finance are, when performed in the UK, ordinarily subject to the laws of England and Wales. In cross-border deals, particularly those involving finance parties from leading Western economies, the governing law is frequently designated as English law too. This approach has developed for several reasons:
in UK-focused transactions, many of the parties are resident in the UK and are familiar with those legal frameworks
Islamic financial institutions (IFIs), often banks or other financial entities, and related institutions, typically insist on this governing law
as a matter of practicality, disputes are likely to be brought before an English court, which works most effectively when applying its own law
no evidently superior alternative legal system presently exists
Some commentators on Islamic finance have criticised the reliance on English law and the English courts, contending that they lack the capability to interpret Islamic finance
Banking & Finance
PRACTICE NOTES
ESG denotes environmental, social and governance. Its role in real estate finance (REF) is expanding as both lenders and borrowers pay closer attention to how funding and its application affect the wider community. In turn, ESG considerations can now directly shape borrowers’ duties within finance documents, while also informing lenders’ credit analysis and the pricing of debt...
This Practice Note covers:
the principal ESG initiatives and guidelines relevant to REF
the minimum energy efficiency requirements for buildings
the adoption of green loans and sustainability-linked loans in the REF market
the main ESG due diligence points in REF transactions
ESG clauses that apply in REF documentation
greenwashing considerations
Industry body initiatives and guidelines
Multiple industry-led efforts have shaped, and continue to influence, this area of the REF landscape...
Green loans and the Green Loan Principles (GLP)
Green loans comprise any form of loan
Banking & Finance
PRACTICE NOTES
This Practice Note outlines the principal distinctions between standard bonds and sukuk, or trust certificates as they are otherwise known, (the Sukuk). It also provides an overview of the principal Sukuk structures and offers commentary on recent trends observed across the Sukuk market. This Practice Note should be read alongside Practice Note: Sukuk documentation and transaction mechanics.
What are Sukuk?
Sukuk are Shari’ah-compliant certificates, defined by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) as evidencing undivided interests in ownership of tangible assets, usufruct and services, or in the assets of specified projects or particular investment activities. The word ‘Sukuk’ is Arabic and broadly translates as ‘instruments’ or ‘certificates’. Sukuk are frequently described as Islamic bonds and, in general terms, operate as the fixed-income counterpart of a conventional bond or note instrument. Sukuk follow
Banking & Finance
PRACTICE NOTES
The rise of equity financing: background to Mudaraba
Interest-based, conventional funding often hampers economic justice, fairness and equity, as it burdens borrowers with liabilities that, in many cases, cannot be settled. Widespread inequality remains a severe global challenge, and Islamic financial models offer means to ease this.
At the heart of Islamic banking and finance lies economic justice realised through risk-sharing. All parties to an investment are expected to participate in both profits and losses. As Ayat 8 of Surah Al Maidah in the Quran declares: O you who have believed, be persistently standing firm for Allah, witness in justice, and do not let the hatred of a people prevent you from being just. Be just; that is nearer to righteousness. And fear Allah; indeed, Allah is acquainted with what you do.
Unlike conventional arrangements, which do not require tangible underlying assets, banks and
Banking & Finance
PRACTICE NOTES
Several observers point out that, in UK tax, the tension between legal form and economic substance mirrors a similar dynamic within Shari’ah. From a Shari’ah vantage point, substance may likewise prevail. Yet, because the contemporary Islamic finance sector is relatively new, uncertainty over what transactions are permissible and the premium placed on Shari’ah conformity have led market actors to prioritise transactional form. Following recognised templates offers comfort that arrangements documented in that way meet Shari’ah requirements. In practice, adherence to approved forms provides reassurance that the transactions represented by such forms align with Shari’ah. Thus, reliance on long-established mechanisms such as Murabaha can seem cautious. Nonetheless, numerous detractors of Islamic finance single out this fidelity to set structures as a principal flaw. They contend these frameworks have been deployed by equity sponsors and financial firms to replicate conventional
Banking & Finance
PRACTICE NOTES
Murabaha
Murabaha ranks among the most widely used techniques in Islamic finance globally. This arrangement, often described as 'cost plus profit financing', requires at least three participants. It is naturally suited to property finance, trade finance, and consumer finance transactions to support the purchase of assets. Beyond this, Murabaha can also (and frequently does) address corporate working capital needs, underpin deposit products, and act as a mechanism to generate cash flows. These arrangements are widely executed to finance the acquisition of defined assets.
In a typical structure, a customer (the Customer) requests a financier—usually an Islamic financial institution (IFI), such as a bank or fund operating in Islamic finance—to procure specified goods from an external supplier (the Seller). The IFI then buys the named goods from the Seller and resells those goods to the Customer. The steps involve the IFI buying, then selling on to the
Banking & Finance
PRACTICE NOTES
During the development of the Murabaha structure for the UK, practitioners recognised that its novelty would inevitably create some uncertainty. Consequently, they aimed to embed features that would assist courts when construing Murabaha arrangements. They also acknowledged that conventional legal systems and Shari’ah approach Murabaha in distinct ways. This divergence did not deter Islamic finance participants from advancing the Murabaha agreement; even closely related legal systems, such as the English system, can reach different views on transactions and structures. Accordingly, Islamic finance specialists have crafted Murabaha contracts and other instruments so that they operate under both Shari’ah and the pertinent conventional legal frameworks. The differing readings of Murabaha under conventional law and Shari’ah reflect contrasts in historical evolution and emphasis. In the UK, funders and customers have built a framework around the notion that money can be treated as an asset, creating a market in
Banking & Finance
PRACTICE NOTES
Introduction to Musharaka—a profit and loss sharing instrument of Islamic finance
At the heart of Islamic finance lies the maxim ‘no profit without risk’, ie no person should realise a gain unless they bear some degree of risk. This concept is most clearly shown through the application of profit and loss sharing instruments. For further detail on this principle, see Practice Note: Key principles of Islamic finance. This Practice Note examines Musharaka, an Islamic finance technique originally founded on profit and loss sharing and broadly analogous to a conventional partnership arrangement. In straightforward terms, a Musharaka is a partnership customarily entered into by two or more parties, not necessarily for a fixed term, and most commonly for the purpose of undertaking a business venture. In a typical Musharaka, each participant makes a capital contribution to the venture and profits and losses are shared between them. A
Banking & Finance
PRACTICE NOTES
Introduction—a pure theory or a dead practice?
For years, both Islamic financial institutions (IFIs) and conventional banks have delivered Islamic financing. As outlined in Practice Note: The structure and elements of a Musharaka transaction, profit-and-loss sharing sits at the heart of Islamic finance because it reflects a core Shari’ah principle: bearing risk. Financing founded on riba (interest) is treated as non‑Shari’ah‑compliant, since the contractors or parties (the Partners) do not participate jointly in gains and losses; the venture lacks fair risk allocation, leaving one side disproportionately exposed. Musharaka—the Shari’ah‑compliant partnership instrument built on sharing profits and losses—together with mudaraba, is among the few Islamic finance tools that rely almost entirely on this model. This emphasis on mutual risk and return has led many within Islamic banking to regard Musharaka as one of the most genuine expressions of Islamic financing. However,...
Banking & Finance
PRACTICE NOTES
This Practice Note outlines the principal factors that an Obligor ought to weigh carefully when choosing an appropriate structure for the issuance of Sukuk, the core documentation linked to those structures, and the key provisions that would ordinarily be incorporated into such documentation. It also explains in brief the forces underpinning the Sukuk market’s prominence in recent years, together with the legislative developments that have driven such growth in the market. For more detail on Sukuk transactions and the background to the transaction structures described below, see Practice Note: The structure and elements of a Sukuk transaction.
Form of transactions
Sukuk instruments allow holders to obtain direct or indirect ownership of an underlying asset or a pool of assets, while not requiring the payment of interest. They have been defined by the Accounting and Auditing Organisation for Islamic Finance Institutions (AAOIFI) as
Banking & Finance
PRACTICE NOTES
Takaful is a form of risk protection arranged in accordance with Islamic principles. To appreciate how takaful operates and how its documentation works, it is vital to note:
the basis of takaful lies in Shari’ah (Islamic law)
its core is the sharing of risk among participants (policyholders), rather than transferring risk to the takaful operator (insurance company)
at all times the risk sits with the fund into which participants pay contributions and from which claims are settled as needed (the Participants Solidarity Fund)
Tabaru’, Qard Hasan and Shari’ah supervision as key underlying mechanics of takaful
Tabaru’
Tabaru’ is an Arabic term signifying a ‘donation’ or a ‘voluntary and gratuitous contribution’. In Islamic legal terms, tabaru’ is a distinctive form of contract: instead of a bilateral exchange, it is a unilateral declaration to transfer ownership without seeking any return. As with the
Banking & Finance
PRACTICE NOTES
What is Takaful?
Takaful stems from the Arabic term ‘Kafala’, meaning to support one another. It is a form of risk protection arranged in accordance with the principles of Islamic law (Shari’ah). It provides a distinctive and important substitute for conventional insurance, meeting the protection needs of many Muslims worldwide. Owing, inter alia, to Shari’ah prohibitions on undue interest (riba) and uncertainty (gharar), some Muslim scholars have ruled conventional insurance haram, i.e. impermissible for Muslims. For further details on these barred elements, see Practice Note: Key principles of Islamic finance. As a direct result, until takaful arose, many Muslims across the globe had no practical way to safeguard effectively against risk. Nevertheless, takaful is not limited solely to Muslims; takaful solutions are open to all, regardless of belief or religion. Accordingly, it fills a historic gap that left many without effective cover, yet it
Banking & Finance
PRACTICE NOTES
Both a straightforward Murabaha and a commodity Murabaha can be arranged either for a one-off deal or set up as a revolving facility, allowing multiple deals to be undertaken under a single umbrella. In each case, the documentation sets out the core mechanics for entering into transactions. For revolving arrangements, however, the customer (the Customer) and the financier (an Islamic financial institution (IFI)) typically conclude a master agreement, which governs the fundamental terms of their subsequent dealings, while the specifics for any particular trade are confirmed at the point of execution. In look and effect, this echoes familiar conventional products, including the revolving loan facility and the note purchase facility. Across these structures, a customer may seek a transaction (whether a sale transaction, a loan, or a note issuance, as applicable) by reference to the baseline terms in the underlying master
Banking & Finance
4 Contributions by Trowers & Hamlins LLP Experts
PRACTICE NOTES
What is grant funding/public subsidy for affordable housing?
Affordable housing grants have been around for many years, but a structured capital funding framework designed to underpin affordable housing delivery only truly took hold from the 1980s with the coming into force of the Housing Act 1988 (HA 1988). Initially confined to housing associations, grant support described as ‘social housing assistance’ is now open to a broader category of beneficiaries (see Who can apply for grant funding/public subsidy for affordable housing? below), and responsibility for the regime’s operation is split between the Homes and Communities Agency (trading as Homes England) and the Greater London Authority (the GLA). Although other public bodies (such as local authorities and combined authorities) may exercise grant-awarding functions, this Practice Note concentrates on the grant regime administered by Homes England and the GLA and on the provision of social housing
Planning
PRACTICE NOTES
Electronic signature platforms (including DocuSign and Adobe Sign) have reshaped the way commercial documents are executed. Within banking and finance deals, this evolution matters especially for security documents, guarantees and intercreditor agreements, many of which are completed as deeds and depend on strict adherence to statutory formalities. These services operate by enabling their users to upload documents into a secure, cloud-based workspace, from which signatories are sent links to review and sign remotely. Entry commonly requires two-factor authentication, and signatories agree to the platform processing personal data such as email addresses, telephone numbers and IP addresses. When signing is finalised, the platform issues a certificate that provides a digital audit trail of the execution. It sets out who signed the document, their email address, their IP address, any extra steps (such as two-factor authentication) used to verify the identity of the relevant
Banking & Finance
PRACTICE NOTES
STOP PRESS
This Practice Note sets out the law as it currently stands in legislative terms, but note that certain elements will be materially affected by the Digital Omnibus proposals issued on 19 November 2025 under the Commission’s ‘simplification’ programme. For further information and updates, see Practice Note: EU Digital Omnibus—tracker. It offers, by way of summary, a concise, high-level survey of EU cybersecurity legislation and regulation at EU level, with particular emphasis on:
Regulation (EU) 2016/679, the EU General Data Protection Regulation (EU GDPR)
Directive (EU) 2022/2555, the EU’s second Network and Information Systems Directive (NIS 2 Directive), which superseded and replaced Directive (EU) 2016/1148, the NIS Directive
Directive (EU) 2022/2557, the EU Critical Entities Resilience Directive (CER Directive)
Directive 2002/58/EC, the EU ePrivacy Directive
Directive (EU) 2018/1972, the European Electronic
EU Law
PRACTICE NOTES
FORTHCOMING CHANGE:
On 12 November 2025, the Cyber Security and Resilience (Network and Information Systems) Bill (CSRB) was laid before the House of Commons. The CSRB provides for amendments to the Network and Information Systems Regulations 2018 (SI 2018/506), notably widening their scope to cover data centres, managed service providers and large load controllers, and allowing regulators to identify ‘critical suppliers’.
It overhauls incident reporting by creating a two‑stage process—an initial alert within 24 hours followed by a comprehensive report within 72 hours—and enlarges the definition of reportable incidents to capture a wider set of security compromises. The Secretary of State is also granted powers to make regulations concerning the security and resilience of network and information systems, to set a statement of strategic priorities for regulatory authorities, and to publish a code of practice. In addition, the CSRB confers powers to issue
Information Law
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