1) The document discusses differences and similarities between Islamic (Shariah) law of contracts and conventional law of contracts. It argues that exclusion of Shariah in conventional contracts shows a lack of understanding of Islamic law. 2) Litigation under Shariah aims for consensus and agreement between parties, while conventional litigation focuses more on individual rights and gains. Excluding Shariah courts and law undermines the validity of Islamic principles in finance. 3) Better understanding is needed between the two legal frameworks to develop Islamic finance properly without distorting its foundations.

1. The Author SHARI’AH AND
CONVENTIONAL LAW OF
From origin a Belgian lawyer
specialized in international
financial regulations and corporate
CONTRACTS Are the two friendly neighbors?
consulting, Paul WOUTERS has
been resident in Istanbul-Turkey for
years, where he is counsel to Bener
Law Office.
Focusing on Islamic finance and
Paul WOUTERS
contract law, he has introductions
from the GCC over Turkey to South
East Asia. Paul is amongst others
Member of the Advisory Board of
Islamic Finance News and consults, Excerpt from : Business Islamica (UAE)
lectures and writes on ethical and
legal aspects with respect to the
Islamic finance sector.
http://www.business-me.com
He can be reached at
Edition December 2010
pwouters.law@gmail.com
Istanbul - Turkey

2. SHARI’AH AND CONVENTIONAL be surprising to the untrained, conventional lawyer, but they usually
are very predictable and they are by no means erratic. Without being
LAW OF CONTRACTS elevated to binding precedents, those decisions that very often are
extremely well motivated should be made more public.
Are the two friendly neighbors? Exclusion of the Shari’ah in conventional contracts
By: Paul WOUTERS Most conventional trained lawyers lack sufficient knowledge of the
pwouters.law@gmail.com Islamic law of contracts, leave alone the underlying Islamic framework
within which they should function.
Despite core differences between conventional and Shari’ah legal This often gets translated into the inclusion of Shari’ah waiver clauses
contexts, litigation aims are the same: to benefit and safeguard the and escape from Shari’ah compliant jurisdictions.
general public interest. But are Islamic contract disputes really using
Shari’ah as the basis to find a just resolution to all parties? When two investors enter into a contract that contains a financial
structure that they claim to be compliant and subsequently eliminate
The Islamic system is different, but not unreliable the application of the Shari’ah and an even marginal assessment in a
Shari’ah compliant litigation environment, questions could be raised.
The Shari’ah is an open-ended framework. There are rules that can
be derived thereof, but that subsequently do not stand alone. They
have to be interpreted within the light of that entire framework and
even then – through the mazes of that framework - within the goals of
the underlying, ultimate reasons of the Lawgiver.
Daily regulations and laws can be construed, just as in a conventional
environment, but they then have an extra dimension that the Islamic law of contracts vs conventional law of contracts
conventional regulations completely lack of.
There is a remarkable poor understanding of Islamic law amongst the
Conventional regulations are closed-ended. One reads the letter of legal profession. Islamic finance and law of contracts often gets
the law and applies that as far as proven by law to a situation, without isolated out of its framework and narrowed down to a technique only.
consideration to the real facts, to the real position of the people That on his turn gets set in a conventional framework, with all
concerned, the position and broader interests in the long term of the consequences thereof. The Ijarah concept gets qualified and reduced
community and of the Supreme Law itself. to “leasing”, that incites different legal thinking and so forth.
The Shari’ah does not lead to a shaky framework that cannot be The industry should strive for better knowledge of the Shari’ah by the
trusted. There are things that you can do, things that you cannot do legal profession and make the conventional lawyers to adapt their way
and then there is a grey zone where you should be careful. And you of thinking and to reassess their copy-and-paste contract templates
do not fill that with daring, dissenting opinions from Scholars instead of the Shari’ah being adapted to the conventional settings.
pertaining to another jurisdiction and school of thought, but with –
where possible innovative - consensus based fatwa of scholars in line Otherwise, the standards might get corrupted and a product might
with the place where the contract has to be lived and applied. emerge that no longer has binding with its own sources and lacks the
extra dimension.
The outcome of the decisions by the Shari’ah courts sometimes may

3. Islamic based litigation vs conventional litigation Bank Sal was a significant eye opener to that respect. But the
problem is more fundamental. It is a conflict between a multi
Whilst going to the conventional Western style-jurisdictions, also a dimensional vision of the Law and way of litigation that supports it,
different stance of litigation was introduced. that strives for unity and respect as opposed to a one sided vision and
attached way of litigating that only goes for the personal and
The traditional Islamic way of dispute settlement that strives for immediate gain.
consensus and agreement, Suhl and looking through the words of the
contract and through the Law to the intention of the Supreme Just as the application of the Shari’ah appears to be linked to unity,
Lawgiver appears to belong to the past. community and respect, the application of the most conventional legal
systems indeed appears to be linked with pure individual rights with
the assumption that the combined individual rights make the benefit of
the group, instead of the other way around.
As said, it creates not only a problem of interpretation of the Law, but
also a conflict in the way with which people seek redress in courts and
the way the lawyers and other administrators of justice behave
altogether.
Moreover, one can witness a movement that tries to lure Islamic
based court decisions – and implicitly the interpretation of the
underlying Shari’ah – into a binding precedent framework that is
completely foreign to traditional Islamic conflict settlement. Not only it
threatens to reduce the Shari’ah to dead matter – instead of the living
alternative that it proposes – it also threatens to freeze certain
contemporary interpretations unnecessary.
Binding precedents do not create more certainty. The Common Law
legal environment is not more or less certain or flexible than the Civil
Law counterpart. They only have a different dynamic. So has the
We witness litigation that strives for the personal and immediate gain Shari’ah based environment.
of concerned parties and that by contract set aside the very principles
on which they claim the contract was based (Shari’ah waiver clauses). Conclusion
With a complete disrespect of the ultimate purposes of the Shari’ah, This article only touches upon some hot issues.
parties try to dodge their responsibilities based upon alleged
infractions of the Shari’ah1 by the counter party or – even worse – Arguments can be developed to sustain claims to keep Islamic law
using their own infractions for that very reason. The Shari’ah that and compliant regulations (as applied in specific jurisdictions) as the
should govern the dispute could become subjected to it. contract governing law, or at least not to exclude application thereof in
conventional environments and even exclude a basic marginal
The case of Investment Dar Company KSCC v Blom Developments assessment.
Furthermore, arguments can be sustained to keep the litigation
And of the underlying regulations
1

4. attached to those contracts out of jurisdictions that simply stand for a
different world view and may try to force a conventional interpretation
of the Shari’ah upon Islamic law and that may take the very dynamics
Bener Law Office is a full service Turkish law firm
thereof out of the very initial framework.
with a strong international practice. Our results
The refusal to make the effort of training and of submission (and the oriented team of lawyers provides international
subsequent contractual shortcomings) combined with a desire to quality counsel to both businesses and
enforce conventional standards, wrongly got translated to suggestions individuals across a diverse practice area.
of non reliability of the Shari’ah. It is better to accuse the victim than
to acknowledge own shortcomings. We are committed to serving our clients’ needs
by providing not only advisory and transactional
Some regulators, both in the GCC and in Southeast Asia, appear to work but by seeking to add value through
have realized that and – besides installing the nec plus ultra on implementing tailor-made, best-practice
regulations (according to the local interpretation of the Shari’ah) – also solutions. Our clients value the quality of our
aim to broaden the application of Islamic based litigation in Islamic people, our successful track record and our in-
based courts by litigating parties that behave with respect to the Law. depth market knowledge. We are committed to
delivering results with the highest quality
And it is not because the surrounding, conventional environment is technical expertise and commercial pragmatism.
not construed to be receptive to Islamic law of contracts or Islamic
finance, that such undermines the validity and credibility of the very A thorough understanding of complex, cross-
Islamic precepts or its surrounding legal environment. It only means cultural business environments has enabled
that adaptation is necessary. Bener Law Office to develop a client base which
includes many of the world’s leading
Few people however seem to realize how fundamental the debate corporations.
might be for the further development of the Islamic finance industry.
At least there should be an open discussion and decisions should be We provide high caliber legal services with our
made that consciously will affect the future of legal life for Islamic team of, 3 partners, 15 lawyers, 6 interns and 6
finance practitioners and their clients. support staff in; Turkish, English, German,
French, Italian and Spanish.
Business Islamica – December 2010
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