Abstract
The objective of this paper is to explore dispute resolution mechanisms in the Islamic capital market. This paper examines out of court traditional dispute resolution mechanisms and innovative hybrid mechanisms for dispute resolution which could be more efficient and less time-consuming. This paper also looks at notable legal disputes relating to the Islamic capital market for the purpose of understanding the procedural challenges and inadequacies in the current legal system. Based on a literature review the authors of this paper note that the majority of Islamic capital market disputes could be resolved through alternative dispute resolution without going through a full trial in court. This paper mainly focuses on the context of Malaysia, with minor references to other countries.
Highlights
Malaysia is one of the largest hubs for Islamic banking and finance
Regulation is a key to sustainable growth in any industry, especially when the key stakeholders look beyond financial interests and aim to achieve best practices
The Islamic capital market is vulnerable to Shariah non-compliance and default risk, as shown in the cases of Nakheel and Dana Gas sukuk default
Summary
Malaysia is one of the largest hubs for Islamic banking and finance. The concept of Islamic banking and finance began in the 1930s and has progressed significantly and consistently since . The Islamic capital market allows fund seekers to mobilise funds and enables investors to diversify their portfolios, thereby enhancing the liquidity of the Islamic financial system. It provides a stable source of funding to finance capital intensive infrastructure development, serving the financial interests of both public and private sectors (Oseni, 2014). The Islamic Capital Market is an integral part of Islamic banking and finance that bridges fund seekers and capital providers. It consists of asset-backed securities, equity-based securities, and Islamic bonds (sukuk). The purpose of this paper is to explore the arbitration and mediation used in Islamic banking in general and in the Islamic capital market in particular
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