Law Harmonisation Committee
Press Statement by The Chairman of The Law Harmonisation Committee on Islamic Finance
Islamic finance in its modern form was born in the environment of "conventional" finance and "civil law" (in Malaysia, more correctly, "common law"). While efforts had been made from the beginning to ensure that the products are Shariah-compliant, more can still be done to ensure that the existing laws (statutory or common law) which are applicable to the Islamic finance transactions are compatible with the Shariah. I believe that the reason is partly because to do so would require expertise in Shariah, Islamic finance, common law and practical experience in law and finance. No one person has all those expertise.
We in Malaysia realize that for the Islamic finance products to be fully "Islamic", not only the products should be "Islamic", but all the laws applicable to them, either in documentation or settlement of disputes arising from those transactions should also be "Islamic". By "Islamic", I mean that they are not contrary to Shariah or that they are compatible with the Shariah.
It is with that objective in mind that Bank Negara Malaysia has taken the initiative to establish the Committee. Realizing the various expertise required, the members appointed comprise of representatives from various backgrounds and experience. Apart from myself who has been appointed as the Chairman given that I am the former Chief Justice of Malaysia and member of the Shariah Advisory Council of both Bank Negara Malaysia and Securities Commission of Malaysia, it has been agreed that the remaining members of this Committee are:
- Encik Bakarudin Ishak, the Assistant Governor of Bank Negara Malaysia;
- Encik Mohd Radzuan Ahmad Tajuddin, Deputy General Manager and Head of Islamic Capital Market Department, Securities Commission of Malaysia;
- Encik Kamarolzaman Abideen, Deputy Commissioner of Law Revision & Reform, Attorney General's Chambers, Malaysia;
- Dato' Dr. Nik Norzrul Thani, Chairman of Zaid Ibrahim & Co. (representing the legal fraternity);
- Associate Professor Dr. Mohamad Akram Laldin, Executive Director of International Shariah Research Academy, Malaysia (representing the Shariah Scholars community); and
- A rotating member from among the Islamic banking, takaful and capital market industry who will be invited to the meeting depending on the subject matter of discussion. At the Committee's inaugural meeting, Encik Rafe Haneef, Managing Director, Global Markets, HSBC Amanah (Malaysia) Berhad was the first of such member.
The Committee is supported by a full-time secretariat at Bank Negara Malaysia and the representing member for the legal and Shariah fraternity are responsible in providing the necessary research support in the areas of legal and Shariah respectively.
The main function of the committee is to harmonise existing laws with the view to make them Shariah compatible, where they are not, in so far as they are applicable to Islamic finance. The Committee also emphasizes the need for new laws to cater for Islamic finance. In the course of the review, the committee would consult identified focus groups representing Islamic finance industry, legal practitioners, academicians, as well as relevant Ministries and regulatory agencies to ensure a holistic and comprehensive coverage of issues. At its first meeting, the Committee has identified certain laws and rules that will have to be reviewed. I have also written to the Deans of the various Law and Shariah Faculties of the Universities, Shariah Committees of Islamic Financial Institutions, the Bar Council, Shariah Lawyers' Associations, academicians and others to make their contributions or give their suggestions regarding the laws which, in their view, should be reviewed.
It must not be misunderstood that the Committee is usurping the portfolios of the various Ministries having jurisdictions over such laws. The Committee will only look at the Shariah aspect of the laws and make such recommendations as may be necessary to make them Shariah compatible. It is hoped that the Ministries will give their full co-operation to have the proposals passed by the Legislature as law.
The Committee welcomes members of the public to contribute to this initiative. Such contribution may be made to the Secretariat in the format available on the dedicated webpage at http://www.bnm.gov.my/lhc/ and email email@example.com. Further enquiries on the Committee may also be addressed to the Secretariat at the same email address. More information is available on the dedicated webpage.
While the law is being reviewed, it is also important for other relevant stakeholders involved in the practice of Islamic finance such as the Judiciary and the Bar to be well-versed in Islamic finance and, at least, have a working knowledge of Shariah. This is important in the documentation of the transactions and, eventually, when the cases go to court.
I believe that if Malaysia succeeds in this project, it would not be too far-fetched to dream that, one day, parties in cross-border contracts in Islamic finance, will adopt Malaysian law as the law of reference and Malaysian courts as the forum for settlement of disputes.
If that happens, Malaysia specifically and Islamic finance, generally, will stand to gain. It is for that reason that I call upon all Malaysians having expertise and experience in this area to participate.
Tun Abdul Hamid Mohamad
Law Harmonisation Committee)
18 November 2010