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Litigation as dispute resolution mechanism in Islamic finance: Malaysian experience

Author

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  • Ruzian Markom
  • Noor Yaakub

Abstract

Litigation as the popular mode of dispute resolution in Islamic finance has proven inadequate in its application and interpretation of Shariah. Trails of Islamic finance cases have shown that civil court judges have no problems deciding on the civil law issues pertaining to Islamic finance, however, they are unsuited for adjudicating the Shariah issues. Section 55–58 of the Central Bank Act 2009 accords formal recognition to the Shariah Advisory Council (SAC) as their rulings is binding to the Islamic financial institutions and the courts. Post 2009 have seen that cases of law challenged the said sections as unconstitutional. The objective of this paper is to analyse the role of SAC either as expert ascertain or expert determination of the rulings on Islamic finance. In the course of discussion, s. 55–58 of Central Bank of Malaysia Act 2009 and Article 121(1) of the Constitution are analysed. Findings of the study showed that the role of SAC is merely expert ascertain of the rulings since they have no judicial power. Islamic financial law is divine in nature and different from the man made laws. Copyright Springer Science+Business Media, LLC 2015

Suggested Citation

  • Ruzian Markom & Noor Yaakub, 2015. "Litigation as dispute resolution mechanism in Islamic finance: Malaysian experience," European Journal of Law and Economics, Springer, vol. 40(3), pages 565-584, December.
    • Handle: RePEc:kap:ejlwec:v:40:y:2015:i:3:p:565-584
    DOI: 10.1007/s10657-012-9356-x
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    Citations

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    Cited by:

    1. Umar A. Oseni & Abideen Adewale & Nor Razinah Binti Mohd Zain, 2016. "Customers' perceptions on the dispute resolution clauses in Islamic finance contracts in Malaysia," Review of Financial Economics, John Wiley & Sons, vol. 31(1), pages 89-98, November.
    2. Oseni, Umar A. & Adewale, Abideen & Mohd Zain, Nor Razinah Binti, 2016. "Customers' perceptions on the dispute resolution clauses in Islamic finance contracts in Malaysia," Review of Financial Economics, Elsevier, vol. 31(C), pages 89-98.

    More about this item

    Keywords

    Litigation; Shariah Advisory Council; Mediation; Arbitration; Maqasid Al Shariah; Shariah governance framework; Discretionary powers; G21; G28; K12; K42;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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