Sharia as applicable law in Western Courts

Sharia as applicable law in Western Courts

Islamic Finance is the fastest growing industry in the financial panorama. The contractual arrangements are based in the Sharia, or Islamic Law. What would be the applicable law in a dispute between parties in an English or Spanish law jurisdiction where the parties submitted to the Sharia law?

This is a new area where very few western trained lawyers have a say. In any case, we will rely on existing Conflict of Laws’ principles. A paper from Julio Colon in the Texas International Law Journal discusses this topic, as published on the www.conflictoflaws.net page.

The paper opens an interesting debate regarding the aplication of the Sharia law by a Western court to judge a case in a dispute arising out of an Islamic finance agreement.

Colon explains that the past decade has seen the rapid growth of Islamic finance on both international and domestic levels. Accompanying that growth is a rise in the number of disputes that implicate Islamic law or Sharia. This remains true even when the primary law of the contract is that of a common law or civil law country.

If judges and lawmakers do not understand the reasoning of Islamic finance professionals in incorporating Shariah law, the result could be precedents and codes that hamper the growth of a multi-trillion dollar industry.

This note compares the reasoning of the English court in Shamil Bank v. Beximco Pharmaceuticals to the practice of forums specializing in Islamic finance dispute resolution. The note then addresses other perceived difficulties in applying Islamic law in common law and civil law courts.

The practice of Islamic finance alternative dispute resolution (ADR) forums shows a consistent reliance on the use of national laws coupled with Shariah. Also, there are cases showing that U.S. courts and European arbitrators are willing to use Islamic law.

Research indicates that the decision in Shamil Bank v. Beximco Pharmaceuticals was not consistent with the intentions of the parties or the commercial goals of Islamic finance.

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