ALTERNATIVE DISPUTE RESOLUTION IN ISLAMIC FINANCE:RECENT DEVELOPMENT IN MALAYSIA

On 31stMarch 2009, Court of Appeal has revoked the decision made by HighCourt to announce that the contract of Bay BithamanAjil is null and void in thecase ofArab-Malaysia v Taman Ihsan Jaya Sdn. Bhd. Onor[2008] 5 MLJ 631.Interestingly, the judgement made by Appeal Court has touched the basicelements of Islamic law especially the fundamentalissues of BBA such as sell andbuy contract, acceptance of difference views of school of laws in Islam and otherbasic issues ofShari’ahprinciples. This subject matter ofShari’ahprinciplesshould be decided by theShari’ahjudges who are more expert in Islamic law thanthe civil court. At the same year, the Government of Malaysia has passed the Central Bank ofMalaysia Act 2009 (Act 701) that provided the courtshall refer to the Shari’ahAdvisory Council or arbitrator before giving any judgment on Islamic Financedispute. This paper is looking into recent development of legal framework ofIslamic Financial System in Malaysia and also the jurisdiction of Shari’ah Courtpertaining that matters