Europe's Approach to Islamic Banking: A Way Forward - Wbiaus.org

Trakicbe enforceable as the contractual terms. In order to do that, the contracting partiesmust identify clear ‘black letter’ provisions of the foreign law and not the foreign lawas a whole.3. The Investment Dar Company KSCC v Blom Developments Bank SAL [2009]EWHC 3545 (Ch)The master agreement in question was wakalah agreement and the contract wassupposed to be governed by the English law. In this case summary judgment wasgranted by the initial court in favor of the claimant bank referred hereafter as “Blom”.The amount of their claim that was granted was US$ 10,733,292,55. Nevertheless,the appeal was brought by the defendant hereafter referred as “TID” before the HighCourt, Chancery Division. Afterwards, TID experienced some financial difficulties anddefaulted in payment of principal amount plus agreed profits to Blom. The defenseraised by TID was that the wakalah facility was not Shari’ah compliant as it amountsto deposit taking with interest despite the fact that their internal Shari’ah Committeeapproved the facility as Shari’ah compliant. In addition, TID claimed that since thewakalah facility is not Shari’ah compliant it should be proclaimed as null and void asit amounts to ultra vires transaction for which the company has no authority toapprove.The learned judge, Purle QC, of the High Court, Chancery Division observed that thegoverning law shall be the English law and the Court rejected to consider whetherfacility is Shari’ah compliant or not as TID had an internal Shari’ah Committeeentrusted to do that. Thus, the wakalah agreement was held to be valid andenforceable.This case has been subject of much criticism, not because of the way it has beendecided but rather because of how far the parties dealing with the Islamic financefacilities are ready to go to protect their own interest (Hakimah Yaakob, 2011). Thereare few points that could be raised.Firstly, the ethical component of business needs to be incorporated into the cultureamong the players dealing with the Islamic finance facilities. The prefix Islamicfacility in itself implies a huge responsibility on the party that operates Islamicfinancial business. The companies offering Islamic finance products should ensurethat the products offered by them are genuinely Islamic. That is why the Islamicfinancial institutions around the world have their independent, internal Shari’ahCommittee to ensure that the products offered by the institution are Shari’ahcompliant. Those Islamic financial institutions should not put forward in their defensean argument that the facility in question is not Shari’ah compliant and as such thetransaction is null and void. It is their duty to ensure that the facility is Shari’ahcompliant before they offer the facility to their customers.Secondly, some financial institutions by invoking Shari’ah non-compliance of theirfacility as their defense argue that the transaction is void and unenforceable due toultra vires nature of the transaction. In other words, the Islamic financial institutionhas no power to ratify those types of transactions. The old Common law position wasthat ultra vires transactions are rendered as void and the company cannotsubsequently ratify those transactions. 24 However, this law has been changed inmany jurisdictions, including the UK and Malaysia. 25 In Malaysia, for instance,28