Hasan, Zulkifli and Asutay, Mehmet (2011) 'An analysis of the Courts’ decisions on Islamic finance disputes.', ISRA International journal of Islamic finance., 3 (2). pp. 41-71.
Most Islamic financial institutions operate in an environment where the legislative framework consists of mixed legal systems where the Shari'ah (Islamic law) co-exists with common law and civil law legal systems. As such, every transaction, product, document and operation must comply with the Shari'ah principles as well as relevant laws, rules and regulations. In the case where Islamic law is the ultimate legal authority, such as in Iran and Saudi Arabia, any issue in Islamic banking cases may not pose a big problem; whilst in the countries of mixed legal systems as in the case of Malaysia or in a non-Islamic legal environment such as in the UK, the issue is very significant. This inherent issue will be more complicated if Islamic finance disputes involve parties from different jurisdictions in cross-border transactions. This leads to the question of how Shari'ah principles apply together with the laws of the jurisdiction and how a case will be adjudicated in a court. In view of this unresolved issue, this paper attempts to critically review and analyse the courts’ decisions on Islamic finance disputes in four different jurisdictions, namely Malaysia, the United Kingdom, India and the United States. With the emergence of Islamic finance litigation, this paper strongly advocates that a proper legal framework and infrastructure as well as the substantial support of the legal fraternity are the prerequisites for the advancement and significant growth of the Islamic finance industry.This paper argues that Shari'ah-compliant Islamic banking is essentially a value co-creation business model that illustrates attributes associated with the emerging service-dominant logic paradigm. The underpinning Shari'ah philosophy of minimising ‘usage’ of one party by another results in the sharing of profit, losses, risk and the promotion of interest-free principles. Islamic banks that follow Shari'ah traditions endeavour to co-create value with their business and corporate customers in a manner that would resonate with the proponents of service-dominant logic. The authors argue that Shari'ah-compliant business models may be more appropriate for today’s volatile and socio-economic climate, evidencing their potential via business case examples. Shari'ah-compliant Islamic financing, such as sukuk (Islamic bonds), istisna' (construction finance), murabahah (commodity trade finance), mudarabah (finance trusteeship), musharakah (joint venture) and ijarah (Islamic leasing), is generally based on a business relationship and partnership approach. Such approaches are now gaining popularity and offer those engaged in service exchange the opportunity to co-create value or at least mutual benefit.
|Keywords:||Islamic finance, Cases, Courts, Shariah.|
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|Publisher Web site:||http://www.isra.my/publications/journal-english/current-issues/volume-3-dec-2011.html|
|Record Created:||20 Jul 2012 12:35|
|Last Modified:||08 Aug 2012 15:48|
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