During recent years, the global economy has seen significant growth in transactions which purport to be governed by classic Islamic – or Shari’a – law.¬† Primarily, the legal and business community’s focus has been on Shari’a finance.¬† But what happens under Shari’a law when a transaction or venture turns sour?
That is the question posed recently by Abed Awad and Robert E. Michael of Pace Univeristy in White Plains.¬† In IFLAS AND CHAPTER 11: CLASSICAL ISLAMIC LAW AND MODERN BANKRUPTCY, Awad¬†and Michael (both adjunct professors at Pace, and both practicing¬†attorneys in the New Jersey-New York metropolitan area) explore this issue in some much-needed detail.
Specifically, their article:
is intended to provide an exposition and analysis of the basic precepts of this side of Islamic commercial law and, in doing so, compare them to the basic elements of western bankruptcy, notably that of the most successful and emulated one, Chapter 11 of the U.S. Bankruptcy Code. Above all, this article will discuss what the authors consider to be the five primary concepts that underpin or constitute the foundation of the Islamic law of bankruptcy: (1) the prohibition of riba (interest), and the concomitantblack of a theory of the time value of money; (2) the obligation to be socially responsible; (3) the divine directive to pay all of one’s debts if you are able to do so, with death being the only source of a final discharge; (4) the absence of a limited liability or entity shielding concept; and (5) the absence of concepts of intangible assets and many forms of non-possessory rights common in other legal systems. These five concepts are interwoven in the fabric of Islamic commercial and financial law.
In light of continuing global financial turmoil and further political turmoil in the Middle East, the article – which first appeared in last fall’s issue (Vol. 44) of¬†SMU’s International Lawyer – is worth reading.¬†
- The World of Islam (time.com)