Committee to enhance its legal framework

IN a move to position and strengthen its existing legal framework as ‘the Laws of Choice’ for Islamic financial transactions, Bank Negara Malaysia, the central bank, last week established a Law Harmonization Committee (LHC) comprising members from among key government stakeholders, including the Attorney General's Chambers as well as industry players and experienced Islamic finance legal practitioners, reports Arab News.

The report, authored by Mushtak Parker, goes on:

The LHC, which is chaired by Tun Abdul Hamid bin Mohamad, the former Chief Justice of Malaysia and a current member of the Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM), the Shariah authority of last resort for the Islamic finance industry, is engaging with the industry and general public for feedback on laws which require harmonization.

Muhammad bin Ibrahim, Deputy Governor of Bank Negara, revealed at the recent 21st Conference of Presidents of Law Associations in Asia (POLA) held in Kuala Lumpur that the establishment of the LHC “is also consistent with our objectives to create an enabling environment that facilitates and accommodates the development of the industry, a clear and efficient system that preserves that enforceability of Islamic financial contracts and a credible and reliable forum for settlement of legal disputes arising from Islamic financial transactions.”

There is a consensus that Malaysia’s Shariah framework is distinctively robust. Malaysia pioneered the centralized Shariah authority in the form of the consultative role of the Shariah Advisory Council of Bank Negara Malaysia and Securities Commission, complemented by the Shariah board of individual Islamic financial institutions.

This strategy has nurtured innovation whilst ensuring stability in the marketplace. It has also paved the way for other countries such as the UAE, Pakistan, Indonesia and Brunei to emulate the same centralized SAC model.

“This referral system,” maintained the deputy governor, “preserves the sanctity of Shariah rulings and the consistency in the interpretation and application of Shariah principles for Islamic finance transactions in Malaysia.”