The cross jurisdictional challenges of standardizing Shariah compliant documents

Joe Bradford

| 03/28/2010

Many hurdles are faced if Shariah compliant documentation is to be standardized. Of these are the jurisdictional challenges of drafting legal documentation to comply to basic shariah principles, comply to local and national laws, and still remain commercially viable. One major consideration for those that work on the drafting is the ability to craft into the documentation the remedies that are natural to an independent and functioning Islamic legal system, things such as misconduct, negligence, damages etc.

For example, some forms of compensatory damages, while applicable under the common law, may not be acceptable under Islamic law. Awards for liquidated damages are similar, especially in wakala agreements where an agent (wakeel) can not be held liable for losses except in the case of wilful misconduct and negligence. Another point of contention comes up with lost opportunity costs, something that has not been hashed out yet by tradtionalist Islamic scholars giving fatwa in Islamic finance.

To be able to incorporate all principles inherent to Islamic law, along with (and most importantly) being enforceable in the jurisdiction in which the contract is governed, is a challenge that unless faced, will continue to plague Islamic Finance deals for some time.

Share

Related Posts

Spanish Rice Paella - Photo by Young Shih on Unsplash

Cooking Rice, Not Engineering It: Al-Shatibi’s Guidance on relevance in Usul al-Fiqh Studies

May 17, 2023

Consider the process of teaching someone to cook rice. You wouldn’t initially throw them into a deep discussion about the variations among Fahrenheit, Celsius, and…
Photo by Abdulmeilk Aldawsari: https://www.pexels.com/photo/monochrome-photo-of-opened-quran-36704/

Is it Forbidden to Pay Riba? Or is it only forbidden to charge it?

September 8, 2022

Recently someone presented to me the opinion or the assumption that it’s not forbidden to pay interest, it’s only forbidden to take interest claiming that…

Personal Finance: What is your net worth?

August 24, 2022

So you’re wondering what your net worth is. Your net worth is essentially everything you own minus everything that you owe. So if you have…

NFTs: Non-Fungible Tokens – A Very Simple Explanation

November 19, 2021

NFTs give you something that can’t be copied. Not a picture itself (anyone can take a screenshot). Here we’re going to use art as an…

When is staking your crypto allowed?

November 16, 2021

There are three situations in the market currently where they use the word “staking” but mean something different each time. You need to learn what’s…

What makes a crypto coin Shariah Compliant?

November 16, 2021

For those of you concerned with the Shariah compliance of the coins you are buying, Asking yourself these 5 questions will help guide your coin…

Zakat on Assets – A Quick Review

April 12, 2021

Let’s talk Zakat on Assets: – 1st, assets you do not pay Zakat on. – 2nd, assets you do pay Zakat on. – 3rd, deductions and expenses that…

Is SAFE document Equity Conversion Shariah Compliant?

March 23, 2021

SAFE documents are not loans. They are warrants for future equity. The structure found in the SAFE agreement is permissible and offers a viable, interest-free…

Book Excerpt – The Greatest Gifts

June 10, 2020

The following is an excerpt from a collection of short essays I’ve been writing over the last few years, each one encapsulates an event in…