Real Estate And Development Expert Leonard Grunstein Proposes Solution For Reconciling Capitalism And Sharia Law

Jul 08, 2013, 11:07 ET from Leonard Grunstein

NEW YORK, July 8, 2013 /PRNewswire/ -- In a new article titled "Interest, Ribit and Riba," real estate and development expert Leonard Grunstein analyzes Sharia finance and proposes a way to reconcile capitalist and Islamic financial markets. The article is being published in three parts in The Banking Law Journal.

In Part One of his piece, published in May, Mr. Grunstein explores the conflicts that arise in a global economy in which lenders and borrowers from different cultures must adapt to conflicting systems of law. Mr. Grunstein focuses specifically on the prohibition of interest – an essential structure of capitalism – under Sharia law and the Halacha.

He writes, in part, "it would appear that the capital markets cannot readily accommodate these Sha'ariah and Halachic compliant formats (designed to deal with the apparent prohibition against charging interest in the form of Ribit and Riba, respectively). This is because they fall astray of the existing legal . . . requirements for accessing the capital markets."

Part Two, published last month, traces the history of the prohibition of interest. Relying on a variety of sources, Mr. Grunstein defines the concept of Riba, a widely disputed term never explicitly defined by religious texts, and uses this definition to outline an approach to banking and finance that respects the traditions of different legal systems while also remaining friendly to capital markets.

The third and final part of Mr. Grunstein's piece, which will appear in August's Journal, explores real-world applications of these structures and promotes a system that recognizes these competing systems rather than attempting to integrate them. 

Mr. Grunstein concludes by asking, "Why be concerned whether a legal structure designed to be compatible with one system of law is enforceable under another conflicting system of law, which has different traditions and ethical practices. Indeed, the best resolution may be to develop lending structures and methodologies that allow each system to exist simultaneously, side by side." 

Leonard Grunstein has decades of experience on the cutting edge of real estate law and finance. After a stint as an Assistant Corporation Counsel for the City of New York and Counsel to the Mayor's Midtown Office of Development, Mr. Grunstein was an associate at Herrick, Feinstein LLP, becoming a partner in 1980. Upon leaving the firm in 2002, Mr. Grunstein joined Jenkens & Gilchrist as a senior partner, where he remained until 2005. He then joined the international law firm Troutman Sanders as a senior partner, rising as Head of the Real Estate Capitalization Group. He retired from the practice of the law in 2012.

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