chapter  5
33 Pages

Muslims, business transactions and the Common Law

Introduction In our previous two chapters, we have examined the extent to which the Common Law State legislatures and courts have accommodated Muslims in the contexts of family relations and crime. The picture is a mixed one, but there are clear instances across our jurisdictions of Muslims provided with sufficient legal space to manifest their belief and to practice a religious way of life. This is particularly true for Muslims who follow integrationist approaches and understandings of their religious texts (see Chapter 2). On the other hand, we have also witnessed an increasing narrowing of that space, especially in areas that raise issues of crime and security and which are perceived to touch upon foundational values of the Common Law. This has impacted on Muslims of all types of persuasions and influences as courts and legislatures have sought to lay down indicative value markers. Family, and even criminal laws,1 once categorised as ‘personal laws’, are now both firmly in the public domain and seen as a channel for communicating ‘acceptable’ societal values. Anne Black and Kerrie Sadiq (2011: 384) have argued this shift has occurred, in part, because the general public, legislatures and courts (in Australia at least) perceive Muslim family laws and their ‘excuses’ for crime as ‘bad Sharīʽah’. On the other hand, the perception of Islamic transactional law (al-­muʽāmalāt), according to them, is different and deemed ‘good Sharīʽah’. They attribute this alternative view to the alacrity of financial markets and governments to search for new revenue streams in tightening international markets (Black and Sadiq 2011: 389). Perhaps it might also be due to the emphasis of Islamic transactional law on ethical values, transparency and freedom from exploitation, which has struck a chord with legislators and ordinary citizens alike; tired, angered and

frustrated at the apparent amorality of the conventional banking system and its financial apparatus.2 In this chapter, we examine to what extent Common Law jurisdictions, especially the courts, view Islamic transactional law in the same light and as ‘good Sharīʽah’. Much of Black and Sadiq’s discussion has focused on the Islamic and Banking Finance (IBF ) industry and the willingness of many Common Law legislatures to ‘level the playing field’ by removing tax and regulatory obstacles. We take an alternative approach with a focus more on IBF dispute resolution and case analysis than on legislative and administrative responses. We regard the latter as reflecting current political priorities more than the values underpinning the Common Law legal system and the ability of Muslims to navigate the systems. We also include within our analysis non-IBF cases which touch upon choices of law in a variety of commercial situations and forums where questions of Sharīʽah, particularly in civil law, evidence and procedural matters, have arisen directly or indirectly, and well before the current interest in IBF. These cases involve consideration of state legal systems: Saudi Arabia, the United Arab Emirates and Afghanistan. Though a state legal system is not Sharīʽah (see Chapter 2), a Muslim country’s laws reflect interpretations of Sharīʽah and their consideration by Common Law Courts necessarily will also have a bearing on their approaches to Sharīʽah questions. As will become evident, the analysis as a whole is heavily focused on England and the United States because of the limited number of cases reported in Canada and Australia. There is also an imbalance of choice of law cases from America and IBF cases from England and Wales. While this might not facilitate direct comparison between jurisdictions, and clearly qualifies our particular comments regarding Australia and Canada, it is inevitable reflecting each country’s policy initiatives and emphasis. Given our focus is on the context of business as a whole, and the capacity of Common Law frameworks, as opposed to one particular country, to accommodate Sharīʽah-inspired approaches to business, we believe that this does not undermine the strength of the overall analysis and argument. Just as in the family and Criminal Law contexts, we will argue there is evidence of disdain for Sharīʽah law in commercial spheres, although it assumes different forms and emphasis from one jurisdiction to another. That disdain is reflected in the preference for English and American jurisdictions in ‘choice of law’ clauses in international contracts and in tort cases. It is also reflected in judicial treatment of IBF contracts, particularly in England. The English courts have refused to engage with the substantive content of Sharīʽah, regarding it as either too contested or lacking in ‘legal’ content to be determinable or determined by a court. Instead, they have subjected purported IBF contracts to English law concepts irrespective of the actual wishes of the parties. This approach clearly has not recognised Sharīʽah. But equally, it has not prejudiced Muslims to any great extent either. Rather, it has afforded a degree of autonomy to Muslim communities to draft their contracts better and more clearly in line with their normative concepts. The current availability of arbitration, under

English Law, also enables Muslims to choose their own regulations, decision makers and forums to resolve their commercial disputes although that is yet to happen in any significant numbers. Whether this is a good or a bad thing, we discuss further in the conclusion to this chapter where we will revisit our typologies from Chapter 2. In contrast to the English courts, American courts have been more willing not only to engage with Sharīʽah, but also to define its content for themselves. While this approach appears to recognise Sharīʽah explicitly, judicial recognition of Sharīʽah has been contrary to the understandings of Muslim experts and at the expense of Muslim participants to those disputes. Far from freeing space for Muslims to do business in accordance with Islamic norms and standards, it has in fact circumscribed the parameters of the ‘Islamic’ and limited the autonomy of Muslims to operate within their own particular normative and cultural contexts. The few disputes that have come to court in Canada and Australia relate to ordinary, though ‘conservative’, Muslim communities rather than major Muslim corporate entities. There are insufficient cases to come to any general conclusion about judicial approaches in these cases, but their factual contexts usefully demonstrate the troubles of a marginalised and vulnerable minority attempting to apply Islamic transactional rules in everyday life. More positively, they also demonstrate amongst the judiciary an awareness of the broader socio-cultural context of Muslims and that Islamic values are not so alien or foreign to the values of Common Law after all. The chapter is divided into three sections, though there are unavoidable overlaps. The first provides a preliminary and brief discussion of relevant Islamic transactional rules and principles: al-­muʽāmalāt. This includes contemporary manifestations in Muslim countries and a summary of Islamic Banking and Finance. The second looks at choices of law, in contracts and tort, to understand the legal framework in which accommodation of Islamic commercial law arises. The third examines case law across the jurisdictions. This is divided into three sub-sections. The first deals with choices of law cases simpliciter, and explores Muslim commercial entities in the context of an ‘Islamic’ or partially Islamic legal system. Examination of such cases, we suggest, illustrates the extent of judicial understanding of and engagement with Sharīʽah in commercial and corporate contexts. The second sub-section examines the approaches of the courts to IBF contracts and IBF entities specifically. The third examines arbitration and its potential for Islamic dispute resolution within the framework of the Common Law system.