ALTERNATIVE DISPUTE RESOLUTION IN ISLAMIC FINANCE: RECENT DEVELOPMENT IN MALAYSIA

Abstract

On 31st March 2009, Court of Appeal has revoked the decision made by High Court to announce that the contract of Bay Bithaman Ajil is null and void in the case of Arab-Malaysia v Taman Ihsan Jaya Sdn. Bhd. & Onor [2008] 5 MLJ 631. Interestingly, the judgement made by Appeal Court has touched the basic elements of Islamic law especially the fundamental issues of BBA such as sell and buy contract, acceptance of difference views of school of laws in Islam and other basic issues of Shari’ah principles. This subject matter of Shari’ah principles should be decided by the Shari’ah judges who are more expert in Islamic law than the civil court. At the same year, the Government of Malaysia has passed the Central Bank of Malaysia Act 2009 (Act 701) that provided the court shall refer to the Shari’ah Advisory Council or arbitrator before giving any judgment on Islamic Finance dispute. This paper is looking into recent development of legal framework of Islamic Financial System in Malaysia and also the jurisdiction of Shari’ah Court pertaining that matters.

Keywords

• Islamic Financial System, Legal Framework, Malaysia

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