By Ahmed Lotfy

CAIRO, April 15 (Reuters) - A law that will allow Egypt's Islamist-led state to issue Islamic bonds contravenes the sharia in numerous ways, according to a panel of senior Muslim clerics whose objections are likely to hold up ratification of the legislation.

President Mohamed Mursi of the Muslim Brotherhood referred the law to the Senior Scholars Authority of Al-Azhar, a thousand-year seat of Islamic learning, after it was driven through parliament by his Islamist allies last month.

Egypt has never before issued Islamic bonds, or sukuk, which adhere to Muslim principles that deem the payment of interest as impermissible. The government, which is struggling with an unaffordable budget deficit, hopes passage of the law will allow it to raise billions of dollars in the Islamic bond market.

But it has triggered tension between the ruling Islamists and Al-Azhar. Its scholars complained when the Brotherhood-led parliament approved the legislation and referred it to Mursi without first consulting them, as required by the constitution.

The clerics are demanding the amendment of nine of 31 articles in the law, according to details of their objections published in local newspapers on Monday. An Al-Azhar official contacted by Reuters confirmed the details.

The clerics are seeking amendments that include putting a 25-year limit on the maturity of Islamic bonds, justifying this by saying that in Islamic law the period of investments must be "suitable for the lives of their owners".

They also objected to language that could allow state assets to be used as collateral for the bonds, said sukuk must not be issued to finance Islamic endowments, or 'awqaf', in Arabic, and demanded a role for the Senior Scholars Authority in deciding who sits on the official body that will oversee sukuk issuances.

The clerics last week said they approved the law, but on condition the amendments were made.

The Islamist-tinged constitution fast tracked into law in December does not say whether the Senior Scholars Authority's view is binding on the executive. Mursi must now decide whether to refer the law back to parliament for further amendments.

The constitution says that the Senior Scholars Authority must be consulted on all matters pertaining to sharia - vague language which critics say will open the door to future legal and political confrontation.