City firms Trowers & Hamlins and Clifford Chance have acted on the world’s largest Islamic financing, while UK law firms are set to benefit at the expense of US firms in the Middle East in the aftermath of the invasion of Iraq.

The $1.6 billion (£886 million) deal will see United Arab Emirates-based telecoms company Etihad Etisalat run the first privately owned mobile telephone operation in Saudi Arabia following privatisation of the sector. Etihad Etisalat, advised by Trowers, won a coveted bid to run the mobile operation this summer after competing against a raft of other bidders.


The financing of the operation in Saudi Arabia is twice as large as the previous largest Islamic finance deal that saw a $750 million (£415 million) bond raised for the redevelopment of Dubai International Airport.


Trowers’ London-based finance partner Adrian Creed told the Gazette that the firm was expecting the deal to keep it busy for at least two years. He added that he believed there would be similar work coming the way of UK firms because of a growing tendency not to use US practices. ‘There is more interest in non-US firms and this has created opportunities,’ said Mr Creed.


Islamic financing is particularly complex as Sharia law, which must be adhered to, forbids the use of interest payments. It is also common for every Middle Eastern bank involved in a finance deal to have its own Sharia council, often with different interpretations of Islamic law.


In this case Trowers was able to arrange the financing in four weeks through its network of Middle East offices in Dubai, Abu Dhabi, Oman and Bahrain.


Clifford Chance advised the lead financiers of the Etisalat project - Samba Financial Group, Saudi Arabia’s National Commercial Bank, CitiGroup and a dozen other institutions. The magic circle firm was aided in Saudi Arabia by local ally the Al-Jadaan Law Firm.


City firms are also hoping to take advantage of the potential use of Islamic finance techniques in Europe as well as the Middle East, after the German state of Saxony-Anhalt this summer structured a €100 million (£66 million) bond issue to make it acceptable to Islamic investors (see [2004] Gazette, 5 August, 6).


Richard Tromans