Wednesday, May 6, 2009

Controversial BBA case put to rest

By Habhajan Singh
The Al-Bai Bithaman Ajil (BBA) case that shook the local Islamic banking industry has come to an end as the parties involved are not taking the case to the nation's highest court.
On March 31, the Court of Appeal reversed a High Court decision by Justice Datuk Abdul Wahab Patail that the application of BBA contracts in the cases before him were contrary to Malaysia's Islamic banking regulations. The move created ripples in the industry, which was very much dependent on BBA-related Shariah contracts.
The one-month window for parties to take the case to the Federal Court has ended with no signs of the case making its way to the nation's apex court.
"My client is not appealing," Datuk Harpal Singh told The Malaysian Reserve.
The partner, from the legal firm AJ Ariffin, Yeo & Harpal, had represented the appellant in the Bank Islam Malaysia Bhd vs Ghazali Shamsuddin & two others, and nine other cases.
In a unanimous decision, the Court of Appeal bench made up of Justices Datuk Md Raus Sharif, Datuk Abdull Hamid Embong and Datuk Ahmad Maarop, had reversed Abdul Wahab's decision in the Arab Malaysian Finance Bhd vs Taman Ihsan Jaya & two others (2008), and 12 other cases.
Though of keen public interest, it is understood that cost was one of the reasons for the parties not proceeding with an appeal. "If they loose the appeal, the client could end up having to pay a few hundred thousand (ringgit) in costs to the other party," said a corporate lawyer.
Since Abdul Wahab's string of judgments at the High Court, mostly dated July 18, the local Islamic finance fraternity had been rattled by whether their contracts were Shariah-compliant, a key element that has to be observed diligently in any Islamic finance transaction or contract.
These have revolved around the concepts of BBA and Bai Inah, both heavily used by various Islamic financial outfits on the local front, but rejected by Shariah scholars in most jurisdictions in the Middle East and some other parts of the world.
On April 1, the same bench of the Court of Appeal had also decided to overturn another of Abdul Wahab's judgment, this time on Bai Inah. The bench ruled that Bai Inah, the concept of sale with an imediate repurchase widely used for personal and corporate financing, is a valid transaction.

(This story appeared in The Malaysian Reserve on May 7, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

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