A JUDICIAL PERSPECTIVE ON ISLAMIC FINANCE LITIGATION IN MALAYSIA

In the last four decades, Malaysian jurists and Sharî’ah scholars have immensely contributed to the field of Islamic finance sufficient to attract international recognition and acceptance. This has turned Malaysia to a vibrant global hub for Islamic financial services. In furtherance of this enviable position, a new legal framework was recently introduced which is expected to reemphasize the pragmatic and resilient nature of the Islamic finance industry. This paper therefore provides a judicial perspective on the recent reforms in the legal framework of Islamic finance industry, examines the dynamics of Islamic finance litigation, and highlights the important role of the judiciary and other dispute resolution institutions in shaping the future of the industry. In Malaysia, the nature of the trading concepts, upon which the Islamic finance facilitiesare based, are the major sources of disputes since the Islamic finance industry operates within a conventional framework and related disputes are litigated in the civil courts. It is therefore argued that the biggest challenge for the courts in the exercise of its judicial function is the application of relevant laws to Islamic finance transactions. The paper concludes that strengthening the legal architecture of the industry will necessarily lead to the development of competitive products that are not only Sharî’ah-compliant but also conventionally viable. This can be achieved through the channelling of Islamic finance disputes to an alternative forum for appropriate dispute resolution.