Papers by Michael McMillen
John Wiley & Sons Singapore Pte. Ltd eBooks, Nov 15, 2013
Routledge eBooks, Jul 6, 2022
Int'l Law., 2008
... See also, Asifa Quraishi, Interpreting the Qur&am... more ... See also, Asifa Quraishi, Interpreting the Qur'an and the Constitution: Similarities in the Use of Text, Tradition and ... ON ISLAMIC Fi-NANCE: LOCAL CHALLENGES, GLOBAL OPPORTUNITIES 111, 199-212 (2000) [hereinafter "THIRD HARVARD FORUM"]; Abbas Mirakhor & ...
I. Special Report Despite an exceptional growth rate,' the infant Islamic finance industry remain... more I. Special Report Despite an exceptional growth rate,' the infant Islamic finance industry remains only vaguely familiar to the broader finance community. 2 Unimaginable changes in global financial markets have occurred since the previous review of Islamic finance. Predictions of massive project and infrastructure spending, particularly in the Middle East, have proven incorrect, at least in terms of timing; 3 spending is significantly below predictions, 4 with limited exceptions for oil-based economies (like Saudi Arabia and Abu Dhabi) that invested cautiously in the last decade. Private equity financings have largely ceased. Real estate financing has evaporated. Global recession has ensued. Private commercial financing is tepid and based upon new models. Equity capital markets are quiescent; debt capital
Islamic Capital Markets and Products, 2017
A book chapter providing an overview of select aspects of legal and regulatory issues affecting I... more A book chapter providing an overview of select aspects of legal and regulatory issues affecting Islamic capital markets. The categories of issues discussed are (ad) securities laws and regulatory regimes, (b) securitization laws, including laws and regulations applicable to sukuk, and legal regime matters, including both legal opinion matters that are critical to capital markets transactions and general systemic matters.
English Law: Personal Obligations & Legal Theory (Topic), 2015
An abbreviated case study of the second formal bankruptcy in the Islamic finance realm, involving... more An abbreviated case study of the second formal bankruptcy in the Islamic finance realm, involving the U.S. bankruptcy proceeding for Arcapita Bank and its debtor and non-debtor affiliates.
This paper considers four recent developments in Islamic finance. These are: (1) increased recogn... more This paper considers four recent developments in Islamic finance. These are: (1) increased recognition within the conventional finance community of the legitimacy and sustainability of Islamic finance; (2) increased recognition within the Islamic finance community that cooperation with the conventional community and conventional finance is both appropriate and acceptable; (3) an increased focus on the objectives (maqasid, broadly defined) of Islamic finance and how the practice of Islamic finance might be nudged in the direction of greater sensitivity to those objectives; and (4) a tentatively expanding willingness to objectively reconsider some oft-repeated, and rather dogmatic, assertions that have guided the development of Islamic finance.
Social Science Research Network, 2013
This article considers a range of topics relating to Shari'ah-compliant investment banking ac... more This article considers a range of topics relating to Shari'ah-compliant investment banking activities under the Islamic Banking Regulatory Framework of the Central Bank of the Sultanate of Oman. The article discusses the seven tiers of investment banking activities under the Framework and provisions relating to investor protection, capital, financial ratios, prohibited activities, approvals to be obtained from the Capital Markets Authority.
Governance, 2012
This article reviews certain of the corporate governance provisions of the Islamic Banking Framew... more This article reviews certain of the corporate governance provisions of the Islamic Banking Framework of the Central Bank of Oman, specifically those pertaining to Shari`a supervisory boards and related Shari`a governance entites and mechanisms. The article considers requirments pertaining to the constitution of Shari`a boards, the qualifications of members of those boards, the roles and responsibilities of Shari`a supervisory boards, fiduciary duty and conflict of interest provisions, and management responsibilities of Shari`a supervisory boards.
Real Estate eJournal, 2016
Sukuk issuances remain the most rapidly growing area of Islamic finance, a trend that shows no si... more Sukuk issuances remain the most rapidly growing area of Islamic finance, a trend that shows no signs of abating in the near future. True private sector sukuk issuances - particularly rated issuances - and those outside the financial services (particularly the banking) area - are rare. Those that exist are largely issuances by sovereign-controlled entities or are otherwise dependent upon sovereign credits somewhere in the structure. This paper identifies certain categories of factors that inhibit these private sector issuances. The factors discussed are (a) bankruptcy and insolvency issues, particularly pertaining to the use of special purpose entities, true sales, and substantive consolidation, (b) collateral security issues, and (c) systemic legal structures, processes and procedures. Suggestions are made for both longer-term reforms and, more immediately, reorientation of the private sector issuance process.
ERN: Procurement (Topic), 2017
The purpose of this paper is to introduce, preliminarily explore, and generate discussion regardi... more The purpose of this paper is to introduce, preliminarily explore, and generate discussion regarding select issues relating to enforceability of, primarily, unilateral promises and pre-closing promises. General principles applicable to unilateral and pre-closing promises in common law and Shari'ah-based systems are considered, including in the project finance context. The paper explores elements, factors, and principles relevant to making a determination as to whether to enforce a particular unilateral promise (wa'd) under Islamic shari'ah, and whether secular law doctrines (such as promissory estoppel, quantum meruit, and others) can assist in the necessary analysis. The paper explores a range of pre-closing discussions, promises, offers, and documents across the entire continuum of pre-closing negotiations. Documents that are considered include term sheets, general terms and conditions, letters of intent, agreements in principle, memoranda of understanding, letters of u...
Emerging Markets: Finance eJournal, 2014
This chapter considers select provisions of the current draft of the UNCITRAL Model Law for Secur... more This chapter considers select provisions of the current draft of the UNCITRAL Model Law for Secured Transactions from the perspective of Islamic Shariʿah. The current draft of the Model Law focuses on systems that do not apply the Shariʿah. This chapter was prepared as an element of the efforts of UNCITRAL Working Group VI (Security Interests) to expand the scope of the Model Law. This is a particularly important endeavor in light of the global growth of Islamic finance and the current state of development of legal regimes for secured transactions in many of the jurisdictions in which Islamic finance is practiced. The objective is to provide a comparative vantage on the types of adjustments that must be considered in adapting the Model Law to jurisdictions in which Shariʿah principles are applicable. December 15, 2015 revision.
Contemporary Issues in Islamic Law, Economics and Finance
SSRN Electronic Journal, 2019
Despite an inadequate inventory of locomotives in 1844, the Philadelphia & Reading sold one l... more Despite an inadequate inventory of locomotives in 1844, the Philadelphia & Reading sold one locomotive — the Mohegan — to the State of Michigan. The seemingly simple sale was complex and curious. The engine was precious to the PR surprising because the bonds, which had been issued to finance Michigan’s ill-fated internal improvements program, had been repudiated in 1842 and were in default in 1844. And Michigan was then trying to sell the Central Railroads’ assets, which would include the Mohegan, to a group of Boston and New York investors. Those investors, particularly the Bostonians, held significant investments in each of the Philadelphia & Reading and Locks & Canals. Unheralded, but pivotally, the Baldwin Locomotive Works was aggressively seeking to build locomotives for each of Michigan and the Philadelphia & Reading. This paper explores the confluence that enabled, resulted in, and influenced the terms of the sale of the Mohegan, particularly from financial and business perspectives. The story is a vehicle for examining intricate financial maneuverings that shaped the emergence of a capital-intensive industry (railroading) as each transactional participant protected and enhanced its own financial and operational interests within its constraints. Each party, using its knowledge of the objectives and needs of and constraints affecting each other party, sought to maximize the probability of realizing its own objectives, which required facilitating each other party’s realization of its objectives in accordance with that other party’s constraints. A sort of multiple regression analysis over seemingly unrelated parties, objectives, imperatives, and constraints wove together a series of otherwise independent transactions.
SSRN Electronic Journal, 2019
The Philadelphia &amp; Reading was conceived to transport anthracite coal from the mining reg... more The Philadelphia &amp; Reading was conceived to transport anthracite coal from the mining regions of Pennsylvania to the tidewater at Philadelphia. It built its roads and other system infrastructure during one of the worst economic depressions in U.S. history (the Panic of 1837, Crisis of 1839, and Collapse of 1842) by incurring massive amounts of indebtedness, which was in default for nonpayment of interest by 1842 when, teetering on bankruptcy, the P&amp;R commenced operations. The P&amp;R needed locomotives to generate revenue but had no cash to expend on engine purchases. In 1843 Locks &amp; Canals agreed to build twelve engines for the P&amp;R on a deferred payment basis. Despite its critical need for the engines, and rather curiously, in 1844 the P&amp;R sold one of the precious engines (the twelfth engine), which was only fifteenth months of age. More perplexing, the engine was sold to the Central Railroad of Michigan, which was also in diminished financial circumstances, unable to pay cash for the engines, and in the process of being sold by Michigan. <br><br>The twelve engines are given passing mention in the literature. Some railroad historians, even those focusing on P&amp;R engines, ignore them completely. The failure to explore the sale of the twelfth engine and the superficial treatment given all twelve engines in the literature are a bit surprising because they were among the first locomotives purchased by the P&amp;R as it became operational and because the financing arrangements for their sale to the P&amp;R were critical first steps in the developmental lineage of the equipment financing structure that has predominated continuously from the mid-1800s to the present.<br><br>This paper is one of two exploring a story not previously told: sale of the twelfth engine. This paper focuses on identification of the twelfth engine and its fate. The companion paper focuses on related questions. From the perspectives of the P&amp;R and the Central Railroad, why was the engine sold and purchased?
This article provides an introduction to the discussion of sukuk as framed by the Draft Sukuk Reg... more This article provides an introduction to the discussion of sukuk as framed by the Draft Sukuk Regulations of the Capital Markets Authority of the Sultanate of Oman and the Islamic Banking Framework issued by the Central Bank of Oman. Sukuk are asset securitizations and whole business securitizations (and are commonly referred to as "Islamic bonds", although they are not bonds). Topics considered include: capital adequacy considerations under the Islamic Banking Framework; Shari'ah board requirements; issuer and obligor requirements and permissible activities; mandatory and permissible structural elements of sukuk, financial trusts and related considerations; and general assembly, sukuk agent and other corporate governance considerations.
This article discusses the Islamic banking law royal decree of 6 December 2012 in the Sultanate o... more This article discusses the Islamic banking law royal decree of 6 December 2012 in the Sultanate of Oman. The Islamic Banking Law leaves much to the Islamic Banking Framework (which has been issued) and future regulations, circulars and guidelines. But, laying the foundation for the development of the Islamic banking industry in Oman, the Islamic Banking Law does specifically address four critical substantive structural elements, as well as a few procedural elements of the transactional structure of Islamic banking in Oman. This Client Alert focuses on those four areas, leaving discussion of the Islamic Banking Framework to future Client Alerts. The four substantive structural elements are: (i) the transactional base of Islamic banking in the Sultanate, and some fundamental requirements pertaining to that transactional base; (ii) the status of Islamic banking and Islamic banking transactions in terms of taxation, land law constraints and the provisions of other areas of substantive law; and (iii) two matters pertaining to Shariʿah supervisory boards, one at the level of the individual banks and one at some higher level. The procedural matters pertain to: (a) the obligation of the Board of Governors of the Central Bank of Oman to issue the Islamic Banking Framework; (b) the obligation of the Central Bank of Oman to license Islamic banks and Islamic windows at conventional banks; and (c) interpretation of the Islamic Banking Law, particularly as its provisions may conflict with other laws, rules, regulations and Royal Decrees. As is so often the case, a great deal of substantive law impact is embedded within the procedural provisions. Each of these structural elements and procedural matters is discussed.
This article describes the generic musharaka mutanaqisa (diminishing musharaka or diminishing par... more This article describes the generic musharaka mutanaqisa (diminishing musharaka or diminishing partnership) structure used in Shari'ah-compliant home purchase financings. The same structure, in a more sophisticated form, is used in some project and infrastructure financings.
Chi. J. Int'l L., 2006
Contractual Enforceability Issues The AAOIFI Sukuk Standard carefully distinguishes sukuk from eq... more Contractual Enforceability Issues The AAOIFI Sukuk Standard carefully distinguishes sukuk from equity, notes, and bonds. 6 It emphasizes that sukuk are not debts of the issuer; they are fractional or proportional interests in underlying assets, usufructs, services, projects, or investment activities. Sukuk may not be issued on a pool of receivables. Further, the underlying business or activity, and the underlying transactional structures (such as the underlying leases), must be Shari'ahcompliant (for example, the business or activity cannot engage in prohibited business activities). The AAOIFI Sukuk Standard provides for fourteen eligible asset classes. In broad summary, they are securitizations: (a) of an existing or to-be-acquired tangible asset (Oz'ara, or lease); (b) of an existing or to-be-acquired leasehold estate f'ara); (c) of presales of services (f/ara); (d) of presales of the production of goods or commodities at a future date (salam, or forward sale); (e) to fund construction (islisna'a, or construction contract); (f) to fund the acquisition of goods for future sale (murabaha, or sale at a markup); (g) to fund capital participation in a business or investment activity (mudaraba or musharaka, or types of joint ventures); and (h) to fund various asset acquisition and agency management (wakala, or agency), agricultural land cultivation, land management, and orchard management activities. 7 Sukuk may be divided into those that bear predetermined returns and those that allow for sharing of profit and, in some instances, loss. To date, most issued sukuk have borne predetermined returns, and most such sukuk have been sukuk al-ijara, frequently at a predetermined rate of return. The sukuk al-musharaka and the sukuk al-mudaraba are examples of profit-sharing (and, in the case of the sukuk al-musharaka, loss-sharing) sukuk. Both types of sukuk issuances-bonds and securitizations-access the capital markets and are necessary for the balanced growth of those markets. However, true securitizations have benefits that transcend those available from bond issuances alone. Securitizations allow, and often require, broad diversification of the assets in the securitized pool. The originator of the transferred assets uses the securitization to manage its balance sheet and capital structure. The originator transfers assets that generate deferred payments and receives an immediate cash payment from the capital markets in respect of that transfer. This enables the originator to immediately generate more assets and results in further diversification of the financing in respect of the transferred assets. It also allows the originator to access a broader financing base and obtain Management: Forming the Future for Shari'a-Compliant Investment Strategies 72, 73-75 (Euromoney 2004). 6 Adam and Thomas, eds, Islamic Bonds, Exhibit 2 and related text at 54 (cited in note 3). 7 The parenthetical in each of the foregoing indicates the relevant Shari'ah structure.
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Papers by Michael McMillen
The twelve engines are given passing mention in the literature. Some railroad historians, even those focusing on P&R engines, ignore them completely. The failure to explore the sale of the twelfth engine and the superficial treatment given all twelve engines in the literature are a bit surprising because they were among the first locomotives purchased by the P&R as it became operational and because the financing arrangements for their sale to the P&R were critical first steps in the developmental lineage of the equipment financing structure that has predominated continuously from the mid-1800s to the present.
This paper is one of two exploring a story not previously told: sale of the twelfth engine. This paper focuses on identification of the twelfth engine and its fate. The companion paper focuses on related questions. From the perspectives of the P&R and the Central Railroad, why was the engine sold and purchased?
This paper explores the confluence that enabled, resulted in, and influenced the terms of the sale of the Mohegan, particularly from financial and business perspectives. The story is a vehicle for examining intricate financial maneuverings that shaped the emergence of a capital-intensive industry (railroading) as each transactional participant protected and enhanced its own financial and operational interests within its constraints. Each party, using its knowledge of the objectives and needs of and constraints affecting each other party, sought to maximize the probability of realizing its own objectives, which required facilitating each other party's realization of its objectives in accordance with that other party's constraints. A sort of multiple regression analysis over seemingly unrelated parties, objectives, imperatives, and constraints wove together a series of otherwise independent transactions.