The case is being closely watched by the global Islamic finance industry because some investors think it could set a precedent for other issuers of Islamic bonds or “sukuk.”
Dana has said it does not have to redeem the bonds because it claims changes in the interpretation of Islamic finance over the past few years means the securities are no longer Shariah-compliant and have become unlawful in the UAE where Dana Gas is based.
Dana could not immediately be reached for comment on Friday.
The judge said in the ruling that Dana Gas’ challenges to the validity and enforceability of the purchase undertaking of the bond were “unfounded” and declared the purchase undertaking for Dana’s sukuk as valid and enforceable.
A source familiar with Dana’s position said the company would appeal the court ruling, and that court proceedings in the UAE to declare the Islamic “mudaraba” structure of the sukuk invalid would continue.
The total of Islamic bonds globally is close to $370 billion. Islamic finance follows religious principles which includes bans on speculation and with interest-bearing products deemed off-limits.
A trial on the validity of the sukuk started at a London High Court in September but injunctions issued by a court in the UAE emirate of Sharjah have slowed proceedings.