Abstract
Abstract The project to standardize the commercial elements of the sharia as undertaken by standard-setting bodies, such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), is a lawmaking effort that is incentivized by market forces and the interaction of municipal legal systems. This Article examines the ways in which these factors contribute to the development of private Islamic legal standards, and in doing so, contribute to an emergent legal architecture that is integrated within the global economy. Contrary to the primary role assigned in existing analyses to sharia scholars and sharia supervisory boards, the Article shows that the processes that determine the composition of Islamic financial law (IFL) highlight the starkly reduced role of jurists in developing law in accordance with the traditional methodology (usul al-fiqh). Such analyses have failed to consider the standardization effort as a lawmaking project driven by market forces, which must be realized if authentic sharia principles are to be given effect. Therefore, examination of these market-led processes and their contribution to the creation of Islamic standards is essential for understanding what standardization means in relation to the fulfillment of Islamic principles and whether a high degree of standardization is desirable. First, the Article examines the role of interpretation, which highlights the methodological challenges of the standardization project. Second, the Article investigates the AAOIFI’s standard-setting efforts, including the methods of standardization, its market- and law-driven incentives, and the status of standardization efforts including the madhahib (schools of law)’s differences of legal thought. Third, an analysis of the interaction of IFL and the law of municipal legal systems (the United Arab Emirates, England and Wales, and Malaysia) highlights the legal incentivization for developing sharia standards. Finally, an analysis of the commercial practice of IFL, particularly in retail markets, demonstrates commercial law’s trend toward standardized contractual practices. Market forces compel the use of standard-form documentation, comprising standards that reflect the commercial practice of law firms and corporations.
Highlights
The long and rich tradition of Islamic jurisprudence is no stranger to commercial and financial transactions
The Article examines the ways in which these mechanisms compel the development of Islamic private law standards and other Islamic financial practices, and in so doing, contribute to an emergent legal architecture that is integrated within the global economy.[12]
Contrary to the primary role assigned to sharia scholars in earlier analyses, the Article shows that the processes that determine the composition of Islamic financial law (IFL) highlight the starkly reduced role of jurists in developing law in accordance with the traditional methodology
Summary
The long and rich tradition of Islamic jurisprudence is no stranger to commercial and financial transactions. The standardization of the commercial elements of the sharia has received only cursory attention.[10] Few analyses have been undertaken, and most focus solely on the diversity of classical sharia (and its multiple schools of law) and the inherent difficulties of reconciling an ancient legal tradition with modern financial practices.[11] Such analyses do not recognize IFL as a legal system that is markedly different from classical sharia. It does not deal holistically with the topic of standardization, nor does it deal with the application of the law, which is the final determinant of legal similarity)
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