About the Book

Islamic commercial and financial practice has not experienced the trial-and-error style of development that has characterised the development of the common law in the English-speaking world. Many of the principles, rules and practices prevalent in the Islamic law of contract, commerce, finance and property remain the same as those outlined by the Quran and the Prophet Muhammad, and expounded by scholars of jurisprudence as far back as the 13th century, despite the advancement in time and sophistication of commercial interaction. Hanaan Balala here demonstrates how, in order to bridge the gap between the principles outlined by the Quran and the Prophet in the 7th century and commercial practice in the 21st century, Islamic finance jurisdictions need to open themselves to learning from the experience (including the mistakes) of the English common law. 'Islamic Finance and Law: Theory and Practice in a Globalized World' provides an analysis of the fundamental principles underlying the Islamic law of contract and commercial practice in comparison with their equivalents in common law in the English-speaking world.
It seeks to draw parallels (and differences where appropriate) to facilitate the growth and development of Islamic commercial and financial law globally.

Table of Contents:
List of cases Acknowledgements Preface 1 ISLAMIC LAW AND THE ROLE OF INTERPRETATION • Form versus substance in the Quran • Form versus substance in Islamic finance transactions • The role of interpretation under the common law • Form versus substance under the common law: the Exfinco scenario 2 SCOPE, METHODOLOGY AND OBJECTIVE • Scope • Methodology • Objective • Approach 3 ISLAMIC FINANCE: AN INTRODUCTION • Principles governing contract and finance in Islam • Specific rules of the sharia governing contract and finance in Islam • Riba • Gambling (maysir) • Prohibited transactions/investments • Predetermined profit • Gharar • Hoarding • Financial assets • Transactions in Islamic finance • Musharaka • Mudharaba • Murabaha • Ijara •Sukuk (Islamic bonds) and the development of a sukuk market • Distinguishing sukuk from conventional bonds • The fourmadhahibs (schools) of Islamic jurisprudence 4 GHARAR IN ISLAMIC LAW • Origins of the prohibition • Defining gharar and the ‘gharar sale’ • The principle behind the prohibition of gharar • The effect of gharar and the differing opinions within Islamic jurisprudence • Gharar: conceptual or evidential? • Certainty under English common law: conceptual or evidential? • Curing contracts of uncertainty under the common law • Historical context and the rules of gharar • Present context application of Islamic law of transaction 5 RIBA: MEANING, SCOPE AND APPLICATION • Riba redefined • Riba according to the Quran • Riba according to Muhammad • The principle behind riba and its implications for Islamic finance • Riba: the what or the how? • Principles of Islamic law on matters of commerce vis-a-vis rituals • Social justice and implications of the redefinition for Islamic finance •Riba and the common law doctrine of consideration • Equitable transaction versus adequate consideration • Raison d’etre behind riba and the doctrine of consideration • Riba as a vitiating factor versus consideration as a distinct element of contract formation • Riba, consideration and intention to create legal relations 6 THE NATURE OF DEBT AND THE LEGALITY OF ITS SALE • The concept of debt • The relationship between debt and money under Islamic law • Is debt money? • The relationship between debt and money under English law • Defining money • Debt • Legal characteristics of physical money • The distinction between physical money and intangible money • What is property? • Distinguishing personal from proprietary rights • Property: a right or a thing? • Debt vis-a-vis property under Islamic law • Is debt property? • Transferability of debt under Islamic law and the contextual evolution of property rights • Future (debt) contracts under Islamic law and practice • Future (debt) contracts and gharar • Deferred ‘sale of debt’ transactions • The common law attitude to sale of future debts • The ‘asset-backed’ requirement under Islamic law • Judicial support in acknowledging the proprietary nature of debt 7 SECURITISATION • Defining and outlining securitisation • Securitisation of receivables • Requirements of a securitised transaction • The benefits of securitisations • The drawbacks of securitisations and issues in application • True sale: the re-characterisation of a ‘sale’ as security interest • True sale: bankruptcy remoteness 8 STRUCTURING A SECURITISATION TO BE COMPATIBLE WITH BOTH THE SHARIA AND COMMON LAW • Issues involving gharar, riba and bay at dayn • General issues arising from dual compatibility structuring • True sale and the risk of re-characterisation • Bankruptcy remoteness • Security interest • Tax • Uncertainty regarding choice of law and enforcements of judgements • Asset selection • The use of the London inter-bank offered rate (Libor) • Late payment and penalty charges • The creation of a trust within a civil law framework • Interpretation of commercial laws and contracts in sharia jurisdictions • The role of the sharia committee 9 ISLAMIC FINANCE IN MALAYSIA: A MODEL TO EMULATE • Genesis and growth of Islamic finance in Malaysia • Malaysia’s distinct structural and institutional advantages over other Islamic finance participants • A common law jurisdiction • Dual banking system • Multifaceted approach to Islamic banking • Labuan international offshore financial centre • Making a difference through Islamic finance 10 THE WAY FORWARD Notes Bibliography Index