Islamic Law (Sharia) on financial and contractual transactions is an integrated part of Sharia and is known as ‘Fiqh Al-Mouamalat’ which means jurisprudence of transactions.[1]

Understanding Sharia has grown in importance for arbitration tribunals and institutions as assets of the Islamic finance sector reached approx $1-1.1 trillion. Institutions such as Goldman Sachs are looking to create an Islamic Bond Fund worth $2billion this year 2012.

Such Islamic transactions must follow Sharia principles and comply to its rules of dispute resolution and any dispute arising from Islamic finance business and capital market products shall be decided by the rules of Islamic arbitration. [2]

Those principles are codified in El- Mejella that was issued in 1876 comprising almost 1900 Articles which are the basis of the generally accepted Sharia rules throughout the Muslim world.[3]

Islamic law made a distinction between absolute nullity and void at initiation upon intention. Sharia went further to recognise suspension by choice of parties and for whom intention was not validly expressed and for whom protection is in nullity.[4]

“In contracts, effect is given to the intention and meaning of the contract and not to the words and phrases upon which it is designed.”[5]

The construction of Contract Law on the basis of these principles is evidenced in the conditions of substantive law which furnish the criteria between void and valid manifestations in Muslim Law and Sharia jurisprudence and is supposed to be reflected upon the public policy and civil law of countries today adopting Muslim Sharia as their national law.[6]

This may explain that enforcement of arbitral awards may be restricted where awards sometimes can fall out of line with public customs and religion or are not in harmony with Muslim public policies.[7]

In Sharia, the only justification for a successful appeal to have an award set aside is that the award is not in compliance with Muslim Law as in calculating interest rate on monies. Fixed interest rate is not allowed in Muslim belief.[8]

However compensation is allowed and it may be calculated on profitability of lost opportunity. [9]

The Egyptian Arbitration Law does not recognise Sharia as an independent source of arbitration rules whilst the Egyptian Constitution holds it as the main source of national law. [10]

In practice, Sharia in Egypt is administered only in family, inheritance, marriage and divorce disputes.

By contrast, England under the Arbitration Act 1996, Sharia Law has been deemed a form of arbitration for Muslim civil cases within the UK and is now enforceable within the forum of arbitration in England and Wales and Northern Ireland.[11]

The adjudication panel in the Muslim tribunals in England is comprised of two male adjudicators dealing mostly with Islamic family and inheritance matters as well as Islamic trade finance (none interest rate bearing) contracts.

The procedural rules of these tribunals clearly state that the tribunals operate under the Arbitration Act 1996 and all decisions reached by this tribunal are enforceable through Civil Courts.

It also states that ‘No appeal shall be made against any decisions of the tribunal’.[12]

However, the same rules indicate that ‘These rules shall not prevent any party applying for judicial review with leave from the High Court’ in an apparent effort to avoid the repugnant image of Sharia and a clear indication that when there is a contradiction of an award made under Sharia and an article enacted in legislation, the rule of the English Law must prevail. [13]

In all systems of law there are conditions of form and substance that are required for the validity of juristic acts which should produce judgements that are binding on all parties concerned.

Like other systems of law certain formalities and substantive elements are essential for juristic acts except that Sharia’ focuses on practical substances such as value and effect rather than form.[14]



[1] Saba Habachy, The System of Nullities in Muslim Law, American Journal of Comparative Laws

[2] Shari’ah Maxims and their Implication on Modern Financial Transactions, Journal of Islamic Economics, Banking and Finance, vol.6 no.3  pp.77-78

[3] Hashim Kamali, The Legal Maxims, Association of Muslim Lawyers (UK). Available on: www.sunnah.org/fiqh/usul/Kamali_Qawaid_al-Fiqh.pdf/

[4] Saba Habashy, System of Nullities in Muslim Law, The American Journal of Comparative Law, Vol. 13 1964

[5] N.J. Coulson, A History of Islamic Law, Edinburgh University Press(1964)

[6] National Thermal Power v. The Singer Corp., XVIII YB Com.  Arb. 403, 1993

[7] New York Convention Art V.2 (b) see also: ARAMCO v. Kingdom of Saudi Arabia (1958)

[8] Irvani v. Irvani (2000) 1 Lloyd’s Rep 412

[9] M. Hashim Kameli, Objectives of Islamic Law, Newsletter of Assoc. of Muslim Lawyers and Islamic Foundations, 1998 vol.3 issue 1, pp13-19.

[10] Egyptian Court of Cassation, Case 2994, (1990). “However contradicting this may sound, let’s not forget that Egypt applies secular legislation with a Muslim spirit.” Mr.Ragaii Attia, MP and Head of the Legislation Committee.

[11] Al-Midani v. Al-Midani (1999) I Lloyd’s Rep 923

[12] Muslim Arbitration Tribunal (MAT) Procedural Rules Clause 23 available at http://www.matribunal.com/procedure_rules.html

[13] Ibid.

[14] Awad El-Morr, Human Rights as Perceived by The Constitutional Court of Egypt, The Role of the Supreme Constitutional Court of Egypt, La Haye, Kluwer Law International, CIMEL Book Series, n° 3, p. 37-60.

Posted by: Mohamed Raffa, LLM, FCIArb, ICCA

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