This article deals with litigation related aspects of
Islamic financing transactions. It focuses on those enforcement and
litigation issues that arise specifically from the Sharia compliant
nature of a certain transaction – so called "Sharia
risk". It is based on an analysis of relevant court
precedents, and provides concrete suggestions of what to bear in
mind when drafting Sharia compliant agreements and capital market
documents. It concludes with some reflections on whether it makes
sense to set up specialized dispute review bodies for Islamic
financing transactions.
When Things Go Wrong
Islamic finance litigation? Disputes arising out of Sharia
compliant agreements were unheard of in the early days of Islamic
finance. Banking transactions, by their very nature, are discrete,
and as long as Islamic finance was confined to a small community,
there was no need to enforce contractual arrangements in court. The
growth of Islamic finance, however, and the
