Dispute Resolution and Insolvency in Islamic Finance: Problems and Solutions -Workshop 19 September 2013: Report of Proceedings

It is a truism that Islamic finance is based on the Sharia. However, neither the Sharia nor Islamic finance has its own legal system, so the application and enforcement of Islamic finance depends on the secular law of nation states. A particularly important aspect of this situation is that disputes have to be adjudicated through a national system, which usually means the secular courts. The results of some recent cases resolved in this way have led to a considerable degree of controversy. For example, some commentators have criticised the English courts for refusing to adjudicate Sharia issues, while others have criticised the Malaysian courts for doing just that. Other solutions have been proposed, such as arbitration and alternative dispute resolution, in order to sidestep the problems associated with courtbased methods. In like manner, Islamic finance transactions may also have to exist and operate within the context of conventional insolvency laws, which were not designed for Islamic finance and had not been developed with Islamic finance in mind. In this workshop we considered the dispute resolution issue by looking at the general background to the problem, the situation in England, Malaysia and arbitration/ADR. On the question of the impact and relevance of the insolvency regime in relation to Islamic finance, the Singaporean insolvency regime was examined. Some potential solutions were also explored and examined