Dispute Resolution in Islamic finance: A Case Analysis of Malaysia

The paper’s purpose is to contribute to the existing body of work in the area of Islamic finance through the discovery of the feasibility of effective dispute resolution mechanisms for the resolution of disputes for Islamic banks and institutions offering Islamic financial services. This is investigated to determine whether the Shariah framework for the enforcement of financial contracts and dispute resolution is a legal risk or appropriate alternative mechanism to the world on whole, individual countries, the business environment, organisations and individuals. The research methodology employed in this study is an amalgamation of direct observation from legal and regulatory perspectives and case analysis of some landmark cases of the English and Malaysian courts. However, the Islamic legal framework remains the only hypothetical basis of the study. Through examining the above, the paper proposes to complement the civil court scheme with a hybrid feature of expert determination whereby the court would refer all issues pertaining to Islamic law to a recognized body of Shariah experts for an opinion that would bind the court. Such a body should be an independent arbitral tribunal, which may or may not be court-annexed, composed of Islamic finance experts whose decision is final. This will complement the work of the Financial Mediation Bureau, which has been handling small claims in banker-customer relationship. The paper concentrates on exploratory study of the viability of dispute resolution mechanisms for the resolution of Islamic finance disputes. The investigation has been supplemented by case analysis of some English and Malaysian courts. © Authors