The adjudication of Shari'ah issues in Islamic finance contracts: Guidance from Malaysia

Tun Abdul Hamid Mohamad, Adnan Trakic

    Research output: Contribution to journalArticleResearchpeer-review

    Abstract

    Islamic finance contracts are not immune to the Shari ian compliance risk. Parties are free to raise Shari ah issues and courts are expected to recognise and adjudicate the same. English law was and still is the most preferred choice of law in cross-border Islamic finance contracts. However, there is little that an English court can do to adjudicate Shari ah issues. This is not surprising as it is, after all, a secular court which is not equipped to ascertain Shari ah ruling. Hence, this article proposes Malaysian law as the law of reference. The Shari ah issues raised before the Malaysian courts will be referred to the Shari ah Advisory Council of the Central Bank of Malaysia for ruling which will then bind the courts. The efficacy and workability of this model has already been tested in Malaysia. This article argues that the model could be exported to and adopted by other countries wishing to introduce and develop their own Islamic finance industry.
    Original languageEnglish
    Pages (from-to)39 - 59
    Number of pages21
    JournalJournal of Banking and Finance - Law and Practice
    Volume26
    Issue number1
    Publication statusPublished - 2015

    Cite this