The Islamic Finance Contract between Indifference, Recharacterisation, and Invalidation: A Look at the Judicial Trends in Light of Economic and Regulatory Backgrounds in Egypt, Kuwait, and Oman

Abstract

Abstract Despite the prominent role that the Islamic faith plays in shaping the social and regulatory aspects of Arab countries and the constitutional recognition of Islamic law (Sharīʿah) as a main source of legislation in most of these countries, judicial precedents regarding Islamic finance contracts remain scarce in the Arab world. This article sheds light on the judicial treatment of the validity and characterisation of Islamic finance contracts. It examines the economic and regulatory backgrounds of the Islamic finance industry in Egypt, Kuwait, and Oman. This examination provides a necessary prelude to the article’s discussion of the Islamic finance contract from jurisprudential and regulatory standpoints. It also provides a foundation for the analysis of noteworthy judicial precedents on the validity and characterisation of the Islamic finance contract. Following such analysis, this article makes recommendations to enhance the regulatory and judicial appreciation for the distinctiveness of Islamic finance.