Sunday, May 24, 2009

Islamic banking unclear on conventional arbitration-scholars

MANAMA: The Islamic finance industry is still searching for a stance on to what extent conventional international law should be accepted in arbitration cases, Islamic scholars said on Monday. Many Islamic finance products and contracts are being scrutinized in courts for the first time during the current global economic downturn, after the industry got caught up in last year's global liquidity freeze and now feels its exposure to slumping real estate markets in the Gulf Arab region, reports Reuters (May 18, 2009).
"We have to find a solution, this should be discussed in terms of legal needs and necessities, this hasn't been discussed by Islamic financial institutions collectively," it quoted Islamic scholar Sheikh Saleh Abdulla al-Haidan said during a conference held in Manama.
Islamic law, or sharia, in principle does not accept human-made law besides those derived from Islam unless Muslims have no choice, for instance when living in countries without Islamic law. But conservative scholars argue that non-Muslim courts and non-Muslim courts should not be written into contracts as a reference for arbitrations, the report added.
Al-Haidan said contracts, in which both parties agree that British law should be reference for the contract and therefore any arbitrations, violates Islamic law. On the other hand, Western businesses partners are often reluctant to use sharia as a legal reference for contracts, as they are not familiar with it, he said.