Norsuria Jani Farhah Hayati Mamat
Legal Executive Partner
Azmi & Associates Azmi & Associates
Singapore Kuala Lumpur
Like any commercial agreements, disputes may arise from Islamic finance agreements and special attention be given to agreements that have cross-border transactions elements. To ensure the enforceability of Islamic finance cross-border transactions and rights of the parties are still protected, a reliable legal recourse should be provided. Singapore has a robust infrastructure for dispute settlements in parallel with its resilient position in legal, financial and economic infrastructures. We explore the suitability of such mechanisms for potential disputes arising from cross-border Islamic finance transactions.
Back to topSINGAPORE’S ADJUDICATION SYSTEM
Singapore’s judiciary system sets an impressive benchmark and with its most respected system, financial market players would generally feel secure because of the effective and substantial commercial requirements. As such, they are considerably advantageous for potential disputes arising from Islamic finance agreements. However, there is still no judicial precedent in Singapore on Islamic finance disputes to support such conviction. In fact, the suitability of such medium to accommodate Islamic finance intricacies is continuously debatable as the governing legislations for the adjudication system do not provide a specific avenue for Islamic finance transactions to be tried.
Shariah court has its unique presence in the Singapore courts system. However, it is restricted to Muslim personal laws only as provided under the Administration of Muslim Law Act (Cap.3) (AMLA). Sadly, civil courts are the only options available for disputes over Islamic wealth management matters such as law of inheritance (faraidh) and endowment (waqf). By this, Islamic finance disputes could easily fall within the civil courts jurisdiction.
Singapore being a Commonwealth country has a higher inclination to adopt legal principles established in prominent Islamic finance cases tried in the English courts.2 Hence, the Singapore existing laws would not be desirable to try disputes in relation to cross-border Islamic finance agreements.
The newly launched Singapore International Commercial Court (SICC) on 5 January 2015 could shed some light on Islamic finance industry as a whole. SICC serves to deal with transnational commercial disputes. Interestingly, a quite significant number of International judges are also appointed to hear cases in SICC.3 This could be one of the suitable platforms to try cross border Islamic finance disputes as the SICC has jurisdiction to hear if:
a. the claim has international and commercial characteristics;
b. the litigants have submitted to the SICC’s jurisdiction under
a written jurisdiction agreement; and
c. the litigants do not seek any relief in the form of, or connected with, a prerogative order.
Back to topALTERNATIVE DISPUTE RESOLUTION (ADR): MEDIATION
For the purpose of cross-border Islamic finance transactions, the relevant avenue could be private commercial mediation under the Singapore Mediation Centre (SMC) as it is tailored to a wide range of cases including international commercial transactions.
Typically, SMC provides mediation services on disputes over commercial matters such as banking. Although to date, there is no record found in SMC dealing with Islamic finance disputes, such disputes are deemed to be within the purview of commercial matters.
Another significant milestone in the Singapore legal industry is the establishment of the Singapore International Mediation Centre (SIMC) on 5 November 2014.4 One unique service it offers is a hybrid form of mediation with arbitration named Arb-Med-Arb Service, under the collaboration of both the SIMC and the Singapore International Arbitration Centre (SIAC).5 The hybrid service starts with arbitration first and attempt mediation at the second stage and arbitration again takes place when the dispute is still unsettled. Overall, this international mediation centre would provide an effective medium for disputes in relation to Islamic finance cross-border transactions.
Back to topADR: ARBITRATION
Cross-border Islamic finance transactions can incorporate clauses to arbitrate within the international domain and adopts the United Nations Commission on International Trade Law (UNCITRAL) Model.
Arbitration provides autonomy to parties by giving them flexibility to choose the substantive law to be tried and governed in the related disputes based on their mutual agreement.
The institutional framework for international arbitration practices in Singapore is mainly led by the SIAC. The comprehensive SIAC rules alongside with well-organized facilities can effectively facilitate international arbitration and cross-border Islamic finance transactions could be considered too.
Back to topPROSPECTS
The dearth of local judges, qualified mediators and arbitrators who are competent to hear Islamic finance cases is greatly felt in Singapore.
To bridge this gap, Shariah expert opinions can be referred to by the civil courts through invoking Section 31 of the AMLA which empowers the Fatwa Committee of the Islamic Religious Council of Singapore to issue fatwa or decrees on Muslim law upon request, but such reference could give legal binding effect only on Shariah aspects of Islamic finance.
There is still an absence of legal recognition and rules on the dispute settlement mechanisms in Singapore to cater to the intricacies of Islamic finance disputes.
Having comprehensive guidelines would substantiate the Singapore’s support for Islamic finance practices in cross border transactions. This also would certainly facilitate the nation’s pavement to be a leading International Financial Centre for the Islamic finance industry.
1 An article which has been reproduced from a paper titled “Alternative Dispute Resolution in Singapore for Islamic Finance” presented at Islamic Business Management Conference 2014, August 18, PWTC, KL.
2 Such as Islamic Investment Company of the Gulf (Bahamas) Ltd v Symphony Gems NV &Ors [WL 36969 Q.B.Com.Ct.Feb 13 2002, unreported] and Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd [2004] 1 W.L.R 1784.
3 Singapore International Commercial Court Website, http://www. sicc.gov.sg
4 It was officially launched on 5 November 2014 as reported in Today, http://www.todayonline.com/new-singapore-internationalmediation- centre-launched
5 Singapore Mediation Centre website,