Conflicts of Interest between Sharia and International Sale of Goods: Does CISG Interest Fit with Islamic Law?

(2023) 49(1) Monash University Law Review 151

48 Pages Posted: 24 Aug 2023 Last revised: 12 Apr 2024

See all articles by Lisa Spagnolo

Lisa Spagnolo

Macquarie Law School

Maria Bhatti

Western Sydney University

Date Written: August 23, 2023

Abstract

Obligations to pay interest are widely accepted in commerce. However, in Muslim-majority countries subject to sharia law, they are normally forbidden. The United Nations Convention on Contracts for the International Sale of Goods (‘CISG’) art 78 imposes an interest obligation. Consequently, many have been reluctant to accede to the Convention. The CISG Advisory Council has partially addressed how the CISG interest obligation is affected by prohibitions on interest. What remains unresolved is whether this renders the CISG compatible with sharia law. To date, perceptions of their compatibility have relied on generalised views of both the Islamic prohibitions and CISG interest. This article seeks to truly determine whether sharia and the CISG are reconcilable on the question of interest. It examines the basis for Islamic prohibitions on riba and gharar, but importantly, considers differing approaches across individual Muslim-majority states. Likewise, interpretation of the CISG interest obligation is considered in detail. Given this richer contextual landscape, we analyse whether sharia ‘fits’ with the CISG. We conclude that the CISG and sharia are compatible if slight modifications to Opinion No 14 are adopted. This may encourage greater accession to the CISG by Muslim countries as part of their push to adopt laws that attract more international trade.

NOTE: Uploaded version is the Advance Online Version. See print version in Monash University Law Review for correct page numbering.

Keywords: CISG, Vienna Sales Convention, interest, riba, gharar, Islamic law, Sharia

JEL Classification: K12, K22, K33, K42

Suggested Citation

Spagnolo, Lisa and Bhatti, Maria, Conflicts of Interest between Sharia and International Sale of Goods: Does CISG Interest Fit with Islamic Law? (August 23, 2023). (2023) 49(1) Monash University Law Review 151 , Available at SSRN: https://ssrn.com/abstract=4549110

Lisa Spagnolo (Contact Author)

Macquarie Law School ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Maria Bhatti

Western Sydney University ( email )

Locked Bag 1797
Penrith, NSW 2751
Australia

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