Modern Application of the Roman Institution of fiducia cum creditore contracta

This is a preprint of a piece that appeared in Letitia Vacca, ed., La Garanzia nella prospettiva storico-comparatisca (Torino, 2003), pp. 327-44.The author illustrates the modern application of the Roman fiducia cum creditore contracta by reference to the South African case of Nedcor Bank Ltd v Absa Bank Ltd 1998 2 SA 830 (W)

Global Financial crisis and Islamic finance

The world economy is still suffering the crisis, considered the most severe since the Great Depression, where economic downturn at historic magnitude and many countries across the globe, irrespective of their development level, are still under strain dealing with this crisis. The severe global crisis that has spilled from the financial sector to the real economy, including international trade in manufactures, commodities and services. The onset of the present crisis can be traced back to July 2007 with the liquidity crisis due to the loss of confidence in the mortgage credit markets in the United States. At first, there was uncertainty about the possible spillovers to the rest of the economy, and there was also discussion about the risks of contagion and decoupling, that is to say, the capacity of other countries – especially developing countries – to isolate themselves from the problems originating in the United States (which is the largest market for many countries). The hope was that the crisis would be restricted to financial markets, with few repercussions on the real economy and the rest of the world. This hope was shattered in September 2008 as the crisis entered an acute phase, with strong downward fluctuations in the stock markets, substantially reduced rates of economic growth, volatile exchange rates, and squeezes in demand and consumption, leading to falls in industrial production and decreasing flows of international trade and FDI, and causing impacts on related areas such as transfer of technology. The crisis has also been accompanied by increases in unemployment, with concomitant declining incomes and demand. The severity of the current crisis has led to the evaluation of the foundations of the capitalist financial system and the search for ideas and solutions. While some have proposed that the Islamic finance serves as a vehicle for recovering from the international financial crisis and The Islamic banking industry may be able to strengthen its position in the international market as investors and companies seek alternate sources of financing. Other economists have argued that Islamic finance, is a different way of structuring financial dealings; but, it is not a totally different financial system. This paper tries to note the main causes and the impacts of the current financial and economic crisis. In addition to discuss the belief that the Islamic finance and its prospective is a viable alternative to the ailing global financial system.financial and economic crisis , Islamic finance

The Inherent Irrationality of Judgment Proofing

In recent articles in the Yale Law Journal and the Stanford Law Review, Professor Lynn M. LoPucki has sparked much academic discussion arguing that recent developments in corporate law have led to an erosion in the system of corporate liability, such that it might one day prove impotent. LoPucki has argued that transactions such as asset securitizations, sale-leasebacks, and corporate structures in which liabilities are placed in asset-poor subsidiaries are driving this change. One early critic to the LoPucki thesis, Professor James J. White, has argued that empirical data show no evidence of increasing use of judgement proofing techniques. In this Article, Professor Steven L. Schwarcz joins this debate, arguing that an economic analysis of these transactions suggests that widespread use of these judgement proofing techniques is unlikely. A key distinction in the analysis, Schwarcz argues, is between arm\u27s length and non-arm\u27s length transactions. Arm\u27s length transactions are unlikely to lead to judgement proofing because corporations will receive value--often cash-- for the assets they sell. It is only by paying out this value in dividends that a corporation begins to judgement-proof itself. The theoretical possibility to take value away from future involuntary creditors through such transactions will rarely be realized because of the costs--taxes, negative publicity, personal and criminal liability--of entering into such agreements. By contrast, in non-arm\u27s length transactions, corporate owners do have the incentive to create judgement-proof structures. However, these structures are not innovative, and they will continue to be well-regulated ex post by existing legal doctrines in bankruptcy, corporate law, tort law, and criminal law. Following this article are a response from Professor Lynn LoPucki, a comment by Professor Charles Mooney, and a breif rejoinder from Professor Schwarcz

Shifting Title and Risk: Islamic Project Finance with Western Partners

Project finance exemplifies modern globalized business transactions in that a single project can bring together numerous participants from across the world, and in that sense it is a truly international undertaking. A general definition of project finance is the financing of an economic unit in which the lenders look initially to the cash flows from operation of that economic unit for repayment of the project loan and to those cash flows and other assets comprising the economic unit as collateral for the loan. The economic unit is often referred to as a Special Project Vehicle (SPV). Project finance is commonly used to finance large-scale infrastructure projects such as toll roads, power plants, airports, and desalination plants, as well as natural resource exploitation projects such as hydroelectric dams, mining projects, oil and gas assets, and paper mills. These types of projects often require larger amounts of capital than one company alone can raise, or entail greater amounts of risk than one company alone can bear. Thus, project finance enables companies to pool capital and spread risk. Moreover, because the project is its own economic unit, it is off-balance sheet from the vantage point of the sponsor companies, thus further insulating the sponsors from the project\u27s liabilities. Also, governments will sometimes look to project finance to undertake projects that would be difficult for the government to finance through its own resources, or because the host country and its government lack the expertise to domestically construct and operate the project. In sum, project finance is common in both the public and private sector, and has been since the mid 1970s

Islamic Banking And Economic Growth: A Review

Many previous studies have focused on the impact of finance on economic growth. However, few studies have examined the impact of Islamic banking on economic growth. To fill this gap in literature, this paper investigates the potential effects of Islamic banking on economic growth. The paper has two main results. The first result is that previous studies show mixed support for the hypothesis that Islamic banking is a main channel of economic growth. The second result is that previous studies on the impact of Islamic banking on growth are single-country studies and their findings are difficult to generalize. In addition, the results of this paper point to several implications for policy. One of its implications for policy is that Islamic banking positively contributes to countrys macroeconomic stability