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The Shari'a Law Factor in International Commercial Arbitration

Faisal Kutty

Valparaiso University Law School

April 17, 2006

The world has witnessed a phenomenal growth in commercial disputes transcending national borders due to our increasingly interrelated and globalized world economy. In addition to issues in interpretation of commercial agreements and practices, differences in custom, language, culture and religion continue to fuel conflicts and disagreements between commercial players. Over the last few decades there have been growing commercial interaction between Western companies and their Middle Eastern counterparts. Given this interaction and the great geo-political and economic importance of this region, it is imperative that Western lawyers and dispute resolution professionals have a reasonable grasp of the general principles of Shari'a or Islamic law, a source (to varying degrees) of law in most nations in the Middle East. It is clear that the increase in international commercial transactions has contributed to the globalization of the legal community, but it is disturbing that there has been very little examination of the influence and impact on the Middle East's legal system's religious underpinnings upon the continued acceptance of international commercial arbitration. Given the growing calls for a return to the Shari'a and increasing global interdependence, the western legal community can no longer be satisfied to leave the Shari'a as a preserve of Middle East specialists, Arabists and comparative law experts. It is a trite observation that cultural or more aptly in the Middle East, religious considerations, can play a vital role in the acceptance and successful functioning of international commercial arbitration. The religious variable may impact on the following: the scope of arbitration; the nature of arbitration; the choice of law; the appointment of arbitrators; liability of arbitrators; limitations periods; interest awards; public policy considerations; evidentiary considerations; enforceability of decisions, etc. This paper will explore the development and acceptance of international commercial arbitration in the Middle East and analyze the issues and areas which create tension between international commercial arbitration and the Shari'a. There is certainly a need to reform Islamic law from within to deal with contemporary norms, transactions and institutions, but there is an equal need to better accommodate and address the issues of concern from an Islamic perspective. The assumption and belief that the Shari'a is being sidelined, and that the current international commercial arbitration framework is exclusively derived from the Western legal heritage may create obstacles in the acceptance and continued legitimacy of international commercial arbitration in the Middle East, and even in the other Islamic nations. This is clearly unacceptable if we recall that the twin objectives of the legal framework underpinning international commercial arbitration are to ensure enforceability of arbitration agreements/clauses and arbitral awards and to insulate the arbitration process as much as possible from interference by domestic courts and other national or international institutions. This can only be achieved when there is mutual respect and understanding of the various laws, practices, cultures and religious worldviews prevalent in the world today. There is a clear need for dialogue. The aim of such a dialogue will be to help develop an international commercial arbitration regime in which the business community can have confidence, while staying true to the core principles of tahkim (arbitration) under the Shari'a. This will help remove a potential crutch that may be used by those who oppose the international commercial arbitration movement as being one of purely Western import.

Number of Pages in PDF File: 75

Keywords: Islamic law, Shari' a law, comparative law, international trade law, international commercial arbitration, Middle East law

JEL Classification: Z10, P50, K33, K00, K39, F10

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Date posted: April 27, 2006  

Suggested Citation

Kutty, Faisal, The Shari'a Law Factor in International Commercial Arbitration (April 17, 2006). Available at SSRN: https://ssrn.com/abstract=898704 or http://dx.doi.org/10.2139/ssrn.898704

Contact Information

Faisal Kutty (Contact Author)
Valparaiso University Law School ( email )
656 S. Greenwich St.
Valparaiso, IN 46383-6493
United States
219-465-7813 (Phone)
416-289-0339 (Fax)
HOME PAGE: http://www.valpo.edu/law/faculty/fkutty/index.php
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Footnotes:  343