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Report Islamic Financial Cases

4483 words - 18 pages

SUMMARY

Dato’ Hj Nik Mahmud v. BIMB (1996)

* FACTS:
* The plaintiff with attorney had entered into a PSA and PPA with the defendant in respect of 25 lots of land in BBA concept.
* The defendant purchased the properties and resold back to the plaintiff with additional prices and charges.
* The plaintiff applied for an order that the charges be declared null and void.
* He also applied for the return the titles of the properties, free of all encumbrances.
* ISSUES:
* Whether sale of land in accordance with IB Concept of BBA contravened the Malay Reservations Enactment 1930 of Kelantan.
* Whether purchase and resale of land for profit ...view middle of the document...

Dispute Resolution in Islamic Finance
The number of Sharia compliant products that are available has grown enormously over the past few years. Many Islamic finance transactions are governed by English law or the law of another country, instead of Sharia law. Sharia is a set of moral and religious principles rather than a codified body of laws. These types of transactions often take place on a global level, with parties originating from different regions in the world. For example a Swiss bank may launch a Sharia compliant financial product aimed at investors in the Middle East using documentation governed by English law. Due to the diverse backgrounds of the parties involved, the specialist nature of the agreements and the potential variety of legal jurisdictions in play, there may be considerable benefits in having an authoritative common platform to resolve disputes as they arise in a manner that is guided by Sharia within a modern commercial context.

The tendency to favour litigation
Litigation (the resolution of disputes through the courts) is the most well known method of determining disputes. Amongst some entities working in Islamic finance there is scepticism towards alternative forms of dispute resolution, such as international arbitration and mediation. At the Asia Pacific Regional Arbitration Group Conference 2011,Hakimah Yaakob, of the International Shariah Research Academy for Islamic Finance in Kuala Lumpur, stated that, following a survey that she conducted of 10 Islamic banks and 12 takafuloperators (Islamic insurance providers) in Malaysia, she found that there was a ‘credit policy’ in many of these institutions not to include alternative dispute resolution clauses in their contracts, but to opt for litigation instead. This was said by the financial institutions to have been done, in many cases, in order to avoid credit risks for legal uncertainty. The preference for litigation was further confirmed by enquiries made of arbitration centres in Malaysia for the purpose of this report.
Malaysia is not the only Islamic country where there is some reticence towards non-litigation forms of dispute resolution. In Middle Eastern states, many people have also been sceptical of using alternative dispute resolution since the outcome of a series of oil concession arbitrations conducted in the 1950s to 1970s. In these arbitrations the local laws were refused and Western systems of law took priority. For example, prior to the tribunal award in Saudi Arabia v Arabian American Oil Company (ARAMCO) (Award of 23 August 1958, 27 ILR 117 (1963)), international arbitration was the most commonly used method of settlingdisputes between the Saudi government and foreign oil companies. In the ARAMCO case the tribunal stated that the law of Saudi Arabia should be “interpreted or supplemented by the general principles of law, by the custom and practice in the oil business and by notions of pure jurisprudence ” and therefore ARAMCO’s rights could...

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