scholarly journals A JUDICIAL PERSPECTIVE ON ISLAMIC FINANCE LITIGATION IN MALAYSIA

1970 ◽  
Vol 21 (2) ◽  
Author(s):  
Tun Arifin Bin Zakaria
Keyword(s):  
Dispute Resolution ◽  
Financial Services ◽  
Legal Framework ◽  
Islamic Finance ◽  
Finance Industry ◽  
International Recognition ◽  
The Future ◽  
Competitive Products ◽  
Civil Courts

In the last four decades, Malaysian jurists and Sharî’ah scholars have immensely contributed to the field of Islamic finance sufficient to attract international recognition and acceptance. This has turned Malaysia to a vibrant global hub for Islamic financial services. In furtherance of this enviable position, a new legal framework was recently introduced which is expected to reemphasize the pragmatic and resilient nature of the Islamic finance industry. This paper therefore provides a judicial perspective on the recent reforms in the legal framework of Islamic finance industry, examines the dynamics of Islamic finance litigation, and highlights the important role of the judiciary and other dispute resolution institutions in shaping the future of the industry. In Malaysia, the nature of the trading concepts, upon which the Islamic finance facilities are based, are the major sources of disputes since the Islamic finance industry operates within a conventional framework and related disputes are litigated in the civil courts. It is therefore argued that the biggest challenge for the courts in the exercise of its judicial function is the application of relevant laws to Islamic finance transactions. The paper concludes that strengthening the legal architecture of the industrywill necessarily lead to the development of competitive products that are not only Sharî’ah-compliant but alsoconventionally viable. This can be achieved through the channelling of Islamic finance disputes to an alternative forum for appropriate dispute resolution. ABSTRAKDalam empat dekad yang lalu, cendekiawan Malaysia dan pakar Syariah telah memberi sumbangan yang besar kepada bidang kewangan Islam yang cukup bagi menarik pengiktirafan dan penerimaan antarabangsa. Ini telah menjadikan Malaysia suatu hab global bertenaga untuk perkhidmatan kewangan Islam. Bagi meneruskan kedudukan yang dicemburui ini, satu rangka kerja undang-undang baru telah diperkenalkan baru-baru ini yang diharap lebih menekankan kepada lumrah pragmatik dan berdaya tahan industri kewangan Islam. Oleh itu, kertas kerja ini memberikan perspektif kehakiman terhadap pembaharuan mutakhir dalam rangka kerja undang undang industri kewangan Islam, mengkaji dinamik litigasi kewangan Islam, dan menjelaskan peranan penting badan kehakiman dan institusi-institusi penyelesaian pertikaian yang lain dalam membentuk masa depan industri ini. Di Malaysia, lumrah konsep perdagangan, yang mana menjadi dasar kemudahan kewangan Islam, adalah punca utama pertikaian sejak industri kewangan Islam beroperasi di dalam rangka kerja konvensional dan pertikaian berkaitan telah dilitigasikan di mahkamah sivil. Maka ia telah dibahaskan bahawa cabaran terbesar bagi mahkamah pada menjalankan fungsi kehakimannya adalah aplikasi undang-undang yang berkaitan dengan urus niaga kewangan Islam. Kertas kerja ini menyimpulkan bahawa pengukuhan rangka kerja undang-undang industri akan membawa kepada pembangunan produk yang berdaya saing yang bukan sahaja patuh Syariah tetapi juga berdaya maju dari sudut konvensionalnya. Ini boleh dicapai melalui penyaluran pertikaian kewangan Islam kepada forum alternatif untuk penyelesaian pertikaian yang sesuai.

scholarly journals Court referral and Nigeria's Financial Regulation Advisory Council of Experts (FRACE)

2019 ◽  
Vol 11 (2) ◽  
pp. 206-225
Author(s):  
Zakariya Mustapha ◽  
Sherin Kunhibava ◽  
Aishath Muneeza
Keyword(s):  
Dispute Resolution ◽  
Financial Regulation ◽  
Common Law ◽  
Advisory Council ◽  
Islamic Finance ◽  
Content Type ◽  
Finance Industry ◽  
Legal Risks ◽  
Civil Courts

Purpose This paper aims to highlight resolution of Islamic finance dispute by common law-oriented courts in Nigeria with respect to Sharīʿah non-compliance and legal risks thereof, as well as the lesson to learn from Malaysia in that regard. This is with view to ensuring Sharīʿah compliance and legal safety of Islamic finance practice as prerequisites for sustainability of the Nigerian Islamic finance industry. Design/methodology/approach A qualitative method was used; interviews were conducted with different categories of experts and primary data collected in relation to Sharīʿah non-compliance and legal risks in adjudicating Islamic finance dispute by civil courts and the role of expert advice as basis for court referral to Financial Regulation Advisory Council of Experts. A doctrinal approach was adopted to analyse relevant legislative provisions and content analysis of secondary data relevant to applicable provisions in matters of finance before civil courts. Findings The paper discovers an indispensable role of conventional financial regulations in sustaining Islamic finance industry. Appropriate laws for Islamic finance under the conventional framework foster legal safety and Sharīʿah compliance of Islamic finance activities in related cases handled by courts. Nigeria civil courts can aid sustainability of Islamic finance when so equipped and enabled by laws that address apparent Sharīʿah non-compliance and legal risks in judicial dispute resolution. Inadequate legal provisions for dispute resolution breeds Sharīʿah non-compliance and legal risks in Islamic finance, undermine its prospects and stand inimical to its sustainability. Research limitations/implications This research is limited by its focus on Sharīʿah non-compliance and legal risks alone, which emanate mainly from judicial resolution of Islamic finance dispute by Nigerian civil courts. Practical implications This research seeks to motivate a determined and deliberate regulatory action and change in approach towards addressing apparent risks associated with Islamic finance while resolving disputes therein by civil courts. It has implications on common law jurisdictions generally that adopt similar approach as Nigeria's while introducing Islamic finance into their conventional finance framework. Originality/value Dispute resolution and other regulatory functions of civil courts are important to Islamic finance though apparently overlooked while introducing Islamic finance in Nigeria as in other emerging jurisdictions. This research ascertains the role of the civil courts as indispensable for Islamic Financial Institution (IFIs) operations and demonstrates that such courts are needed for the development and sustainability of Islamic finance industry. The research demonstrates the end-to-end requirement of Sharīʿah compliance of Islamic financial transactions as absolute and needs be ensured and guarded at dispute resolution level by properly equipped courts.

Judicial Challenges Facing the Islamic Finance Industry of Nigeria

2021 ◽  
Vol 29 (2) ◽  
pp. 244-262
Author(s):  
Zakariya Mustapha ◽  
Sherin Kunhibava ◽  
Aishath Muneeza
Keyword(s):  
Dispute Resolution ◽  
Judicial System ◽  
Islamic Finance ◽  
Curricular Reform ◽  
Legislative Reform ◽  
Finance Industry ◽  
Financial Regulations ◽  
Contractual Agreements ◽  
Civil Courts ◽  
Fundamental Requirement

A fundamental requirement of Islamic financial practice, Shariah-compliance covers all aspects of the transaction from contractual agreements to execution to dispute resolution. Thus a sound judicial system with in-built Shariah-compliance mechanisms is indispensable to facilitate the execution of such contracts and to ensure the sustainability of the practice. In Nigeria, this system is still under development with the judiciary the most readily available option for dispute resolution. However, comprised merely of civil courts with jurisdiction to hear Islamic finance cases, these mechanisms subject the industry to possible legal and Shariah-compliance risks. Having conducted a series of interviews with experts, this study recommends: constitutional and legislative reform to grant jurisdiction to existing civil courts; the Financial Regulations Advisory Committee of Experts (FRACE) should be statutorily entitled to offer binding advice to courts; the practice itself should be enshrined in appropriate legislation; and there should be curricular reform to ensure judges and lawyers are adequately trained/educated in the particulars of Islamic finance.

Dispute Resolution in the Islamic Finance Industry

2020 ◽  
pp. 804-833
Author(s):  
Camille Paldi
Keyword(s):  
Dispute Resolution ◽  
Common Law ◽  
Legal Framework ◽  
Islamic Finance ◽  
Finance Industry ◽  
The Common ◽  
Law Courts

A unique and independent legal framework is important to effectively adjudicate Islamic finance disputes, Sukuk bankruptcies, and Takaful disputes. Currently, these disputes are being adjudicated in common law courts or ineffective arbitration centres where often the Islamic finance transaction is inadvertently converted into a conventional transaction due to the common law nature of the dispute adjudication. In this chapter, a framework is proposed for Islamic finance dispute resolution in the form of the Dubai World Islamic Finance Arbitration Centre (DWIFAC), DWIFAC Jurisprudence Office, the Sukuk Bankruptcy Tribunal (SBT) and the Takaful Tribunal (TT).

Towards a global hub

2016 ◽  
Vol 58 (1) ◽  
pp. 48-72 ◽  
Author(s):  
Umar A. Oseni ◽  
Abu Umar Faruq Ahmad
Keyword(s):  
Dispute Resolution ◽  
Legal Framework ◽  
Institutional Framework ◽  
Islamic Finance ◽  
Legal Analysis ◽  
Content Type ◽  
Finance Industry ◽  
Recent Developments ◽  
Islamic Financial Institutions ◽  
Resolution Processes

Purpose – The paper aims to examine significant developments in the institutional framework for dispute resolution in the Islamic finance industry in Malaysia. Malaysia, as part of its efforts to consolidate its enviable Islamic finance industry, has strengthened its institutional framework for dispute resolution. Design/methodology/approach – Data for this study were collected from both primary and secondary legal sources. Through a conceptual legal analysis, the institutional frameworks of dispute resolution in the Malaysia’s Islamic finance industry are studied. Findings – The study finds that Malaysia is far ahead of other jurisdictions by a significant margin in spearheading reforms in the emerging global Islamic finance industry. The dispute resolution framework has been largely affected by the recent reforms. Research limitations/implications – Other jurisdictions may borrow a leaf from Malaysia’s initiative in providing a robust legal framework for dispute management in the Islamic finance industry. Practical implications – Apart from adopting Malaysia’s framework and possibly adapting it to suit their specific local variations, other jurisdictions may also encourage Islamic financial institutions to incorporate effective dispute resolution processes in Islamic finance contracts. Originality value – This study critically discussed most recent developments in the institutional framework on dispute resolution in the Islamic finance industry in Malaysia.

Fatwā shopping and trust: towards effective consumer protection regulations in Islamic finance

2017 ◽  
Vol 12 (3) ◽  
pp. 340-355 ◽  
Author(s):  
Umar A. Oseni
Keyword(s):  
Consumer Protection ◽  
Financial Services ◽  
Relevant Literature ◽  
Legal Framework ◽  
Legal Regulation ◽  
Policy Framework ◽  
Consumer Trust ◽  
Islamic Finance ◽  
Content Type ◽  
Finance Industry

Purpose This study aims to examine the phenomenon of Fatwā shopping, its effect on consumer trust in Islamic finance products and the need for effective consumer protection regulations in the Islamic finance industry. Design/methodology/approach The methodology used in this study is qualitative research which draws significantly from relevant regulations on financial consumer protection through analytical method to identify common themes on Fatwā shopping and consumer trust in the relevant literature. Findings This study finds that the increasing practice of Fatwā shopping through clandestine searches by some Islamic banks to get their new products endorsed by leading Sharī‘ah scholars requires proper legal regulation to avoid a total erosion of trust in the entire Islamic finance industry. Research limitations/implication Though Fatwā shopping is practiced in the Islamic finance industry, it is always difficult to get some desperate Islamic bankers to agree to this; hence, this study does not portend to examine the evidence on Fatwā shopping, but it seeks to bring to the fore the effect of Fatwā shopping on consumer trust in Islamic financial services, and the need for effective consumer protection regulations. Practical implications This study is expected to provide an invaluable guide and policy framework for emerging and promising jurisdictions on the need to regulate Fatwā shopping through an effective legal framework based on some best practices identified in the study. Originality/value Though there have been a number of studies relating to Fatwā shopping, focusing on the need for effective consumer protection regulations in the Islamic finance industry will enrich the existing literature and have significant implications for the future of the industry.

scholarly journals Peranan Otoritas Jasa Keuangan (OJK) Sebagai Lembaga Muhtasib Dalam Industri Keuangan Syariah di Indonesia

2020 ◽  
Vol 9 (2) ◽  
pp. 73
Author(s):  
Abdul Salam ◽  
Syaiful Muhammad Irsyad
Keyword(s):  
Financial Services ◽  
Banking Sector ◽  
Financial Service ◽  
Integrated System ◽  
Islamic Finance ◽  
Financial Industry ◽  
Finance Industry ◽  
Central Java ◽  
Service Activities

<p>In Indonesia, one of the institutions that can be considered a Muhtasib institution in the sharia financial sector is the Financial Services Authority (OJK). As Law Number 21 of 2011, the OJK has the function of organizing an integrated system of regulation and supervision of all activities in the financial services sector which include financial service activities in the Banking sector; financial service activities in the Capital Market sector; and financial service activities in the Insurance, Pension Funds, Financing Institutions and Other Financial Services Institutions sectors, including the Islamic finance industry sector. This study will unravel the extent of the role of the FSA as the Muhtasib in the Islamic finance industry in Indonesia, especially in the regional areas of Central Java and D.I. Yogyakarta.</p><p>This research did 2 (two) kinds of research, they are field of study and literature study. The collecting data of this research through observation and non-structured interview. The methode of data collection is conducting  interviews  with  the Central Java OJK, OJK D.I. Yogyakarta.</p><p>The conclusion of this study is that the role of the Financial Services Authority (OJK) in Regional Region 3 of Central Java and Yogyakarta as a Muhtasib institution in supervising the Islamic financial industry in Central Java and Yogyakarta is quite significant, although with some notes, including the position of OJK Regional 3 Central Java and DIY Yogyakarta which is only able to reach Islamic financial institutions (LKS) whose head office is located in Central Java and Yogyakarta, while LKS only has branch offices in Central Java and Yogyakarta Yogyakarta. Is the authority of the Regional OJK 3 of Central Java and DIYogyakarta, meaning that it is the domain of the authority of the Central OJK in Jakarta. The problem is if there is a violation or an act that is against the law, then the Regional OJK 3 of Central Java and D.I. Yogyakarta is only reporting or coordinating with the Central OJK. The Financial Services Authority (OJK) in Region 3 of Central Java and Yogyakarta Yogyakarta has carried out its function as an actress in the context of violations of law or criminal acts, in which the OJK has played a function as an investigator and then reported to law enforcement officials (APH ) and submitted to the judicial process. However, related to the implementation of the Microfinance Institution Law, OJK has not been able to carry out its function as a constitutional acter in enforcing Article 39 of the LKM Law regarding the existence of BMTs in the community which should abide and comply with licensing regulations under the OJK</p><p><strong>Keywords:</strong><strong> </strong><strong>Financial Services Authority, Muhtasib Institution, Sharia Financial Industry</strong></p>

scholarly journals ARBITRATION AS A MECHANISM TO RESOLVE ISLAMIC BANKING DISPUTES IN MALAYSIA: CHALLENGES AND DRAWBACKS

2019 ◽  
Vol 10 ◽  
pp. 19-44
Author(s):  
Mohamad Fateh Labanieh ◽  
Mohammad Azam Hussain ◽  
Nazli Mahdzir
Keyword(s):  
Dispute Resolution ◽  
Research Methods ◽  
Legal Framework ◽  
Advisory Council ◽  
Islamic Banking ◽  
Court System ◽  
Legal Research ◽  
Finance Industry ◽  
Tremendous Progress

Malaysia has shown tremendous progress in the arena of Islamic banking and the finance industry, and has become an essential Islamic financial hub within the region. The comprehensive legal framework consisting of legislation and dispute resolution mechanisms have been crucial elements that ensured the robust development of the industry. The court system and arbitration are two significant platforms for the settlement of Islamic banking disputes that are brought before them. However, the court system has been widely favoured compared to the arbitration, even though both approaches have almost identical roles. Therefore, one question arises; why is arbitration less preferred compared to the court system? By using legal research methods, this article seeks to analyse the challenges and drawbacks that faces the current arbitration framework when dealing with Islamic banking disputes. This study suggests that the Malaysian arbitration framework faces several challenges such as, issues regarding high-cost, high-formality, less-speed, and the uncertainties when referring any Shariah matters to the Shariah Advisory Council. This article suggests that some improvements should be made by the relevant authorities and establish the necessary statutory amendments to strengthen the role of arbitration in Malaysia as a complementary forum to the court system in settling Islamic financial disputes.

Building trust in Islamic finance products and services

2017 ◽  
Vol 12 (3) ◽  
pp. 356-372 ◽  
Author(s):  
Syed Nazim Ali
Keyword(s):  
Financial Services ◽  
Islamic Finance ◽  
Illustrative Case ◽  
Content Type ◽  
Finance Industry ◽  
The Past ◽  
Building Trust ◽  
Central Tenet ◽  
Stake Holder ◽  
Perceived Impact

Purpose With the increasing instances of malfeasance and frauds coming to light in the financial services industry, trust has become a key concern for customers. Fortunately, in the case of Islamic Finance, trust is a central tenet, and its importance can be seen through the emphasis of Amanah or trustworthiness that should be present in every financial transaction. However, it has been argued that the principle of trust has not been truly realized in Islamic Finance, or that there are still issues of distrust regarding anything which is obtrusively branded as “Islamic”. In this paper, the author will analyze the reasons for gaps between the expectations and reality of the finance industry today by looking at the main factors contributing to distrust among the different stakeholders and the perceived impact of the distrust on the industry and the general public. It then focuses on the past and ongoing efforts by academia to bridge these gaps between the different stake holder groups with the help of illustrative case studies as well as recommends future steps to be taken to ensure a stronger foundation of trust within the Islamic Finance community.

scholarly journals ??? ???? ??????? ??????? ?? ??????? ??????? ??? ??????? ????????? ?? ????????? ??????? ?? ??????: ????? ????? ?????? ?????

2016 ◽  
Vol 1 (2) ◽  
pp. 215
Author(s):  
Hatta Syamsuddin ◽  
Abdul Khaliq Hasan ◽  
Moh Muinudinillah
Keyword(s):  
Supervisory Board ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Finance Industry ◽  
Islamic Jurisprudence ◽  
Banking Business ◽  
Rules And Principles ◽  
Muslim Communities ◽  
Financial Transactions

The emergence of Islamic banking was considered as a response to the desire of Muslim communities to disassociate from usury (riba-based) system. The development of time increasing the diversity of financial transactions, both in trading and banking business, which has no provisions in the old sources of Islamic jurisprudence. This dangerous phenomenon was the reason for the importance of a Sharia Supervisory Board to ensure all of the banking transactions comply with the rules and principles of sharia. This research focused on the role of National Sharia Board and his methodology in the fatwa. This research uses analytical descriptive methodology. The limitations of this research were about: how the National Sharia Board played their roles in Indonesia and how the method applied by the National Sharia Board in issuing a fatwa. The research found that: the National Sharia Board in Indonesia has played their roles, especially in developing Islamic finance industry, ensuring financial and banking transaction comply with the rules and principles of sharia, and providing awareness and guidance to the Muslim communities. The issuing of fatwa on financial transactions was the authority of the National Sharia Board. The National Sharia Board hold on procedures, specific steps, and certain agreed methodology in issuing the fatwa. Nevertheless, there still some fatwas that caused controversy in the Islamic community

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