Arbitrating Financial Disputes an Analysis between Common Law and Islamic Law

The common law courts have treated Islamic financial disputes in the same fashion as interest based financial transactions and hence dismissed the applicability of the principles of Sharia law. This requires Islamic financial institutions attempting to be Sharia-compliant to seek an alternative dispute resolution (ADR) mechanism that properly deals with the deficiency in the current common law litigation system to show due respect to the Islamic law. Within this context, this article discusses the suitability and practicality of arbitration for Islamic financial transaction disputes within the common law jurisdiction. It examines the possibility of harmonising Islamic finance arbitration systems with international commercial arbitration standards.
This article elucidates the relationship between international commercial arbitration and the concepts of Sharia, concluding that Sharia law would not be an impediment to the enforcement of arbitral awards. For the objectivity of the study, the article (where necessary) compares the AAOIFI Sharia Standard on Arbitration and the KLRCA i-Arbitration Rules with the UNICITRAL Model Law and the New York Convention. A proposed solution that bridges the gap between Islamic and international commercial arbitration is put forward.