Introduction

The growth of the Islamic financial industry is nowadays a tangible phenomenon. This can be gleaned from its geographical reach, as well as from the increasing range of Shari’ah-compliant financial institutions and financial products (Abdul-Rahman, 2010): from Islamic banking based on equity participation—rather than on capital deposit; to Islamic financial instruments (sukuk)—as opposed to ordinary debenture bonds; to takāful insurance—in contrast to conventional fixed-premium insurance (Jadalhaq and Russi, 2020). In the same vein, Islamic commercial arbitration has emerged as an alternative means of resolving disputes that arise in connection with economic transactions that are aiming to be Shari’ah-compliant (Farah and Hattab, 2020).

By ‘arbitration’, we mean a procedure to which parties to an agreement submit, in order to have their disputes settled by a third adjudicator (the arbitral tribunal). This, for example, is the definition one finds in Article 1 of the UAE Arbitration Law of 2018. Arbitration may have a domestic or an international character. International arbitration deals with matters pertaining to cross-border trade—as stated, for example, in Article 1504 of the French Civil Procedure Code (Moreau et al., 2016). In general, international commercial arbitration enables citizens of different nationalities to address the absence of inter-state courts, in order to settle disputes arising from commercial transactions between them (Granier, 2015). Whether a dispute pertains to international trade depends on the facts of the matter under arbitration.Footnote 1 Moreover, in some jurisdictions, like France, it is not for the parties to determine their domestic or international character.Footnote 2 In this wider context, Islamic commercial arbitration caters to major commercial institutions that conduct their transactions in accordance with Shari’ah law, in order for them to settle disputes with their clients. However, the same need arises for smaller institutions, known as Sharia Micro Financing Institutions (SMFIs), which are also used as a source of financial capital in Indonesia (Sukriya, Yasir & Kamal, 2022). Historically, Arab cultures favour settling disputes between parties informally, through means such as negotiation, mediation and conciliation rather than through litigation. In addition to the structure of Arab society, this trend has historical roots dating back to the pre-Islamic era. In this respect, some studies report that individuals and tribes would resort to arbitration and other dispute-resolution mechanisms, although primarily in the wake of a war (Rahman, 2018).

Islamic arbitration is an offshoot of conventional arbitration. The difference is that the former aims to be valid specifically under the rules of Shari’ah law.Footnote 3 According to Resolution No. 91 (9/8) of the International Islamic Fiqh Academy (1417/1996), Islamic arbitration refers to ‘[t]he agreement between the two parties to a particular dispute to designate a third party to arbitrate between them, and to settle their differences by virtue of a binding award in accordance with Islamic Shari’ah’. When arbitration compliant with Shari’ah rules relates to commercial transactions, then we are in the domain of Islamic commercial arbitration. Hence, Islamic commercial arbitration relates to transactions in the Islamic (i.e. Shari’ah-compliant) economy, and it can in turn be domestic or international in nature. In some cases, parties may attempt alternative dispute resolution mechanisms, such as mediation, before coming to arbitration (Islam, 2013). Nevertheless, this article focuses solely on arbitration proper.

When Islamic commercial arbitration is considered alongside the growing transnational reach of Islamic commercial transactions—especially in connection with the emergence of international Islamic banks—a number of problematic questions come into view, which pertain to the domain of private international law. What law can be applied to international commercial disputes that are subject to Shari’ah compliance? What role does ‘public order’ play in the context of Islamic commercial transactions? Are Shari’ah-compliant arbitral awards transnationally enforceable? The matter, here, is not whether these questions have an answer at all. Of course they do: in the rules on private international law enacted by national legal systems. The question is whether these solutions are also suitable to safeguard the integrity of awards made in conformity with Islamic commercial arbitration principles. In other words, the question we try to address in this paper is whether (i) compliance with the Shari’ah in international commercial arbitration and (ii) compliance with the rules of private international law in the same domain have to be mutually incompatible.

Islamic commercial arbitration is based on certain rules of religious origin that discriminate between lawful (halal) and prohibited (haram) conduct. This is a trait that sets it apart from conventional commercial arbitration, and which creates a gap between the fundamentals of Islamic commercial arbitration and the solutions offered by national conflict of law rules. In this article, we wish to track more closely the extent of this gap, and we also advance a number of proposals to establish more of a common ground between Islamic commercial arbitration and national bodies of private international law. For this purpose, the next section maps the main difficulties in harmonising Shari’ah compliance in commercial arbitration with the categories of private international law. In that context, we also explore more closely the possibility of a notion of ‘public order’ suitable to accommodate Islamic economic principles. In Section 3, we consider international conventions and model rules, as additional avenues for harmonising Islamic commercial arbitration with private international law. Lastly, the conclusion reviews our main findings and suggestions.

From a methodological standpoint, this article is based on the qualitative methodology that is standard in legal analysis. This methodology consists, first, of desk-based research to compare the formulations found in a variety of textual sources: national and international legal sources, doctrinal opinions and the rulings of different courts. In our case, this comparison involves more closely (i) the legal texts and doctrinal opinions based on Shari’ah law that would apply to commercial arbitration with (ii) applicable rules and principles of private international law, common to a wide variety of jurisdictions. Second, the implications of different formulations are explored, by considering actual and possible ‘limit cases’ in which different wordings would translate in incompatible solutions. Third, proposals are made to help address the ensuing incompatibilities. In our case: the broadening of the private international law category of ‘public order’ to embed compliance with Shari’ah principles directly in existing bodies of private international law.

Mapping the gap between islamic commercial arbitration and private international law rules

The scrutiny of applicable law for Shari’ah compliance

Arbitration is considered a legitimate practice under Shari’ah law, with its basis in the Qur’an and Sunna, and with additional explicit acknowledgement by juristic consensus (ijma) (Dadash, 2008, p. 1201). Islamic law empowers people to request the assistance of arbitrators when disputes arise between them, as well as when they are unable to resolve private issues between them (Islam, 2012). At the same time, for an arbitral award to be Shari’ah compliant—i.e. for it to be considered valid and binding in conformity with the Shari’ah—it must meet certain conditions, which can differ from those provided by otherwise applicable private international law rules. Before elucidating what those conditions are, it is helpful to clarify that—in what follows—‘positive law’ refers to ‘the set of rules that regulate relations within a specific society in which a degree of order prevails’, and in particular to state-enacted legal provisions (Granier, 2015, p. 3).Footnote 4This includes all branches of national law, from private international law rules, to substantive legal provisions and procedural norms. Shari’ah-compliant commercial arbitration might well involve the application of a particular type of positive law, so long as it meets certain tests of Shari’ah conformity. In this respect, the Islamic Fiqh Council attached to the Muslim World League (MWL) has clarified that ‘arbitration between Muslims must be in conformity with Shari’ah law’ (Islamic Fiqh Academy, 1432/2011). More specifically:

The stipulation to have recourse to arbitration is … only permissible if it is made in accordance with Shari’ah law; it is a command from God to His faithful servants, and the fulfilment of it is a sign of faith, submission and obedience to God. Contemporary stipulations by Muslims to have recourse to arbitration based on positive laws that are at odds with Shari’ah law contradict explicit and valid Shari’ah evidence, it is not permissible for a Muslim to enter into or accept such stipulations (Islamic Fiqh Academy, 1432/2011).

It follows from the above that, when parties enter into an agreement to resolve any dispute that may arise between them by means of arbitration, for that arbitration to be Shari’ah-compliant the choice of law isn’t entirely without constraints. In fact, conformity with the Shari’ah demands foregoing application of any specific rules found in the foreign positive law chosen by the parties, whenever those rules would contravene the Shari’ah. In addition, the prohibition against recourse to arbitral proceedings that apply positive law at odds with the Shari’ah extends to pre-contractual dealings, final agreements, or any other interactions to which the attribution rule might attach significance, for the purpose of mandating application of a foreign positive law.

There are some areas where such an outcome might be particularly likely. In a capitalist economic system, individuals enjoy unrestricted and unconditional freedom to dispose of their financial assets, both in terms of how they are earned and of how they might be spent (Murid, 2012, p. 108). In the Islamic economy, earning and spending are channelled in conformity with the provisions of Shari’ah law (Bin Hadi, 2014). These fundamental differences between a capitalist economy and an Islamic economy result in differences in the regulation of economic transactions, which would be of import for an arbitral award to be deemed valid according to the Shari’ah. It also needs to be emphasised that the ex ante scrutiny of transactions, undertaken by the internal Shari’ah committees of Islamic financial institutions, does not prevent ex post scrutiny from an Islamic arbitral tribunal (Al Khwaldi, 2008, p. 1153): conflicts might still be arise in reading and interpreting what is permissible (haram) conduct in the light of the Shari’ah.

In addition to compliance with the substantive prescriptions of Shari’ah law, another procedural condition with its basis in the Shari’ah mandates that the arbitrator ought to be a Muslim: ‘whereas each party to a dispute has the right to choose an arbitrator, it is not permissible for a Muslim to accept the choice of a non-Muslim arbitrator’ (Islamic Fiqh Academy, 1432/2011). In fact, the choice ought to fall on arbitrators who are believed to have knowledge and experience relevant to the matter of the dispute and of legal procedure (Abdul Aziz & Sasongkojati, 2022), beyond mere knowledge of Islamic law. The Islamic religion of the arbitrator is another necessary condition. An exception to this principle applies to Muslims residing in non-Muslim communities or countries who may, ‘when necessary or inevitably required, have recourse to arbitration before the courts of law in those countries in order to protect their rights and receive compensation for any damages suffered, unless there is an Islamic arbitral tribunal to which they may have recourse’ (Islamic Fiqh Academy, 1432/2011). Outside of this exceptions, the implication of this rule is that, if an arbitral tribunal consisted of—say—three arbitrators, all of its members ought to be followers of the Islamic religion. Hence, arbitral awards reached by panels in which one or more of the arbitrators were not Muslims would ordinarily fall outside of the scope of valid arbitration according to Shari’ah rules. Another problematic issue could arise with regard to the acceptability of women arbitrators, specifically in connection to their capacity to deliver an arbitral award that would be deemed valid under Shari’ah rules. On this point, irrespective of differences in doctrinal opinions on the part of Muslim jurists, we would however like to point out that there is no explicit provision in the Qur’an or Sunnah that prohibits performance of arbitral roles on the part of women (Alqudah, 2017, p. 14).

Where Shari’ah does not form part of the hierarchy of sources of law, arbitrators delivering Shari’ah-compliant decisions face additional legal and practical difficulties. Specifically, they also need to ascertain whether the arbitration, although based on the provisions of Shari’ah law, does not contravene the rules of the constitution of the jurisdiction where the award is to be issued or enforced, as well as being in conformity with national rules and international instruments that govern private transactions (Khan, 2006, p. 798).

On a possible notion of ‘Islamic economic public order’

In private international law, ‘public order’ is the technical justification for setting aside any arrangements that would threaten the integrity of a state or cause a prejudice to its public interest—whether understood in political, economic, social, or legal terms. As such, ‘public order’ can be a very useful notion for attaining legally acceptable and practically workable solutions in cross-border disputes (Remy, 2008, pp. 3–4). Despite the Shari’ah being deemed non-state law (Farah and Hattab, 2020), its acknowledgement as the pillar of a possible notion of ‘Islamic economic public order’ would nevertheless constitute a step forward towards greater coordination between Islamic commercial arbitration and private international law rules.

More specifically, ‘public order’ is a regulative notion in private international law, which comes into play in the context of the extraterritorial enforcement of ‘foreign’ law—i.e. in the presence of competition between legal systems (Audit, 2008, p. 263). Specifically, it provides a reason for disallowing application of foreign legal provisions (Loussouarn et al., 2008, p. 352), whenever their application would threaten ‘public order’: this amounts to a refusal to recognise rights that have been acquired, on grounds incompatible with those of the legal system where enforcement is sought (Court De Fontmichel, 2004, p. 49). In other words, when the foreign legal system designated by the attribution rule in private international law would provide a solution that isn’t deemed acceptable by the judge adjudicating the dispute, then he/she might refuse to apply the rules of that foreign system on grounds of ‘public order’ (Mayer and Heuze, 2010, p. 149). The notion of ‘public order’ demonstrates that even if transnational commercial arbitration has gained an increasingly important role over the past few decades, local factors such as religious and political considerations continue to influence the resolution of disputes (Khoukaz, 2017). At the same time, ‘public order’ is not devoid of controversy: its indiscriminate use would—for example—surely undermine most bilateral international conventions concluded between Western and Islamic nation-states (Gannagé, 2001, p. 212).

As an attempt to regulate use of the ‘public order’ exception, more specific notions have been distinguished, such as a ‘political’ public order, public order in ‘social’ relations and an ‘economic’ public order (Nammour, 2013). Economic public order, in particular, is there to safeguard the integrity of a nation’s economy. This is why international commercial arbitration might rub against notions of economic public order, such that a judge might refuse to implement legal outcomes reached on the basis of a foreign system of law, when asked to enforce an arbitral award. For example, it is considerations of economic public order that guide such decisions as to whether to defer to freedom of competition on particular matters, or whether to subject certain types of contracts or contractual conditions to more rigorous regulation (Guery, 1999, p. 97). Thus, it is usually considerations of economic public order that drive the legal regulation of commercial transactions, because the conduct of commercial transactions affects the circulation of money and trade, which are in turn considered the backbone of a national economy.

Arbitration, per se, allows for the resolution of disputes concerning international commercial exchanges outside of the constraints of national legal systems, and of the uncertainties relating to determination of the competent judge (Ancel, 2009, p. 197). This is because the jurisdiction of the arbitrator finds its basis in the will of the parties, as manifested in the arbitration agreement (Caprioli, 2007, p. 136). By means of such agreement, the parties effectively submit to an arbitral tribunal for the settlement of their substantive rights and obligations (Train, 2003, p. 2). In this context, economic public order comes into play at a later stage: namely as grounds for refusing enforcement of an arbitral award, when it has been reached according to the provisions of a law that is incompatible with that of the jurisdiction in which enforcement is sought.

The emergence of Islamic commercial arbitration and the internationalisation of Shari’ah-compliant commercial transactions—such that many now involve a cross-border dimension—suggest the possibility of arguing for a notion of ‘Islamic economic public order’. In that case, the vicinity between Islamic and conventional commercial arbitration would be reaffirmed, construing the control of Shari’ah compatibility as another instance of enforcing ‘public order’. While Western courts would be highly unlikely to incorporate the need for Shari’ah compliance in their notion of public order, such a notion would still be helpful for facilitating enforcement of Shari’ah-compliant arbitral awards in Muslim jurisdictions—which have differing degrees of integration of the Shari’ah with their respective positive law systems (Kutty, 2006, p. 595). In particular, ‘Islamic economic public order’ could give greater prominence to Shari’ah principles, when these do not automatically take precedence over state-enacted legislation (i.e. in such jurisdictions as Syria, Lebanon, or Egypt). Secondarily, it would also afford some guidance on the degree of divergence from the Shari’ah, which might warrant the non-application of foreign legal provisions—i.e. when their application would threaten the very integrity of ‘Islamic economic public order’.

If one were to reject the admissibility of a notion of ‘Islamic economic public order’, it would then become more challenging to ensure consistent outcomes between national conflict of law rules and the provisions of the Shari’ah. Economic public order would retain a more limited scope of application in private international law, i.e. for mandating the non-application of foreign legal provisions only when these materially conflict with state-enacted legislation. The case-by-case assessment of Shari’ah compliance—in jurisdictions where the judiciary is allowed to perform such a scrutiny—would remain the sole test of validity for Islamic commercial arbitration. In this context, Resolution No. 91 (9/8) of the International Islamic Fiqh Academy stipulates that Muslim parties should usually carry out ‘the arbitrator’s award … on a voluntary basis. In the event of a refusal by either party, the matter shall be brought before the law courts, and the latter may not repeal the award unless it is found to constitute an evident inequity or a departure from Shari’ah law’ (in jurisdictions in which the courts are allowed to apply the Shari’ah) (Islamic Fiqh Academy, 1417/1996).

This implies that, in some jurisdictions, Shari’ah compliance might not be taken into consideration, in the absence of an agreed notion of ‘Islamic economic public order’ to help ensure that commercial arbitral awards would also retain validity in the light of the Shari’ah. In such cases, the uncertainty concerning enforcement would then place greater stress on preventative controls to prevent the arising of disputes. Such preventative controls to uphold the religious and moral foundations of Islamic economics can take the form of legal opinion (fatwa; plur. fatāwā) and Shari’ah supervision. Fatāwā are legal opinions expressed by the internal committees of Islamic financial institutions, concerning the lawfulness (in light of Shari’ah law) of proposed transactions, ensuring against their subsequent invalidation. Shari’ah supervision is an ex post verification of the means through which fatwa-approved transactions have been carried out, to check that no steps in their implementation would warrant invalidation in the light of the Shari’ah (Mohamed, 2013, p. 367). In fact, in an international context, greater compatibility between Islamic commercial arbitration and the rules of private international law would benefit international economic public order, by way of easing political tensions and promoting peaceful relations among countries (Meshel, 2015, p. 395).

Legislative initiatives for improved coordination between islamic commercial arbitration and private international law

International conventions

Islamic financial and banking services are going through a phase of internationalisation, which involves having more frequent recourse to international Islamic commercial arbitration. In international commercial arbitration, private international law norms play a pivotal role. These are national legal rules enacted to adjudicate questions of jurisdiction, in disputes with multiple points of connection to different legal systems. In this respect, each national system provides for rules of attribution that determine the applicable law, in light of the points of connection a dispute might have to different jurisdictions (Aboud, 1994, p. 7). It follows that, for Islamic commercial arbitration to become an alternative means of resolving international disputes, a certain degree of harmonisation needs to be reached with the rules and principles of private international law. Otherwise, it will always remain likely that an award, issued by an arbitration centre that specialises in Islamic banking disputes, might not be held up by—say—a French judge that might be asked by the parties to enforce it. It might well be possible that such an arbitral award might not be enforceable in a Western country, for instance on grounds of conflict with public order (Farah and Hattab, 2020). If it were brought, instead, before a judge in an Islamic country, the chances of enforcement not being allowed would be lower. In order to avoid this particular discrepancy, a notion of ‘Islamic economic public order’ would remain of limited use, and an international multilateral convention would be a more suitable means of establishing a common ground between Islamic commercial arbitration and the rules of private international law—addressing such controversial issues as the law applicable to Islamic commercial disputes and the enforcement of foreign arbitral awards.

In this respect, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention’),Footnote 5 has brought a decisive contribution to strengthening the effectiveness of international commercial arbitration, by establishing a common ground between various legal systems. While international bilateral conventions on judicial assistance usually deal directly with the issue of enforcement of foreign arbitral awards, other conventions often refer back to the New York Convention (Hascher, 2016).

Article 2 of the Vienna Convention on the Law of Treaties carries the following definition of ‘convention’: ‘an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation’.Footnote 6 Multilateral international conventions can, in principle, be organised into three main types. The first type seeks to address the conflict of national laws, or to determine the competent jurisdiction, by directing the choice of applicable law according to private international law rules. The second type mandates the application of certain uniform provisions to a specific type of international trade relationship, without overriding national legislation. Finally, a third type of international convention seeks to unify the legal provisions applicable to national and international trade relations, in such a way that those uniform provisions need to be incorporated into national legislation after signature and ratification. The New York Convention falls in the first category. As a consequence of this, the New York Convention hasn’t managed to override considerations of public order, which still feature as one of the grounds for refusing enforcement to foreign arbitral awardsFootnote 7—so that the New York Convention is understood to operate on an equal footing with national procedural law.Footnote 8 Nevertheless, in some jurisdictions (e.g. France), national provisions on enforcement of foreign arbitral awards have at times been given priority over the rules of the New York Convention.Footnote 9 A different example is that of the Kingdom of Saudi Arabia, where Article 2 of the Arbitration Law, issued on 16 April 2012, stipulates that ‘international conventions to which the Kingdom is a party’ shall prevail over domestic law, provided that ‘they do not contravene the provisions of Islamic Shari’ah law’. Although the wording of this Article grants pre-eminence to international conventions, the requirement of Shari’ah compliance broadens the scrutiny that is possible for a national judge, faced with the question of enforceability of a foreign arbitral award.Footnote 10

Quite apart from concerns around refusal of enforcement on public order grounds, Islamic commercial arbitration comes with the added difficulty that it is not a unified body of law, given the multiplicity of sources and the existence of different schools of Islamic jurisprudence (Kutty, 2006). The existence of doctrinal differences between Islamic jurisdictions (for instance, on grounds of preference of one over the other school of Islamic jurisprudence), and sometimes even within the same jurisdiction, adds considerable complication to the enforcement of Shari’ah-compliant arbitral awards. Within the framework of Shari’ah law, doctrinal differences are viewed as a gift from God, since they enable flexibility in the adjudication of practical cases, making the Shari’ah adaptable to a wide range of temporal and geographical contexts (Khan, 2006, p. 798). Still, considering the difficulties this diversity poses for the enforcement of Islamic arbitral awards, some commentators have called for the establishment of a body to be entrusted with the task of reducing doctrinal differences (Khoukaz, 2017, p. 193).

Adding to the obstacles that might affect the recognition of Islamic commercial arbitration awards is the fact that—since they are usually issued by accredited arbitration centres—those awards are typically drawn up in Arabic (particularly those issued by Arab arbitration centres). This means that demanding enforcement in a foreign jurisdiction will first of all entail obtaining an official translation. However, it is worth noting that, according to French jurisprudence on the matter, enforcement is granted to the original arbitral award, not its translation.Footnote 11

Model rules

Model rules are an example of ‘soft law’ issued by international bodies whose mission is to suggest viable solutions to specific issues in international trade. Among such bodies is the International Chamber of Commerce (ICC) in Paris. In addition to acting as a forum for international commercial arbitration, the ICC also plays a role in advancing standards and practices in international trade. In this regard, its activity has sparked a set of publications that propose model rules, such as Publication No. 500 on ‘Uniform Customs and Practice for Documentary Credits’, or its collection of international commercial terms ‘Incoterms’ (Hascher, 2009, p. 10). Despite the establishment of other competing arbitration centres worldwide, some of which have been modelled on the arbitration system of the ICC, the latter remains the main entity active in international commercial arbitration (Philippe-Gazon, 1997, p. 443). When it comes to model rules, the United Nations Commission on International Trade Law (UNCITRAL) is another body that has produced template rules to govern commercial transactions, such as the UNCITRAL Arbitration Rules that were initially adopted in 1976 and subsequently amended and supplemented over time.

Model rules like these are a possible means of enacting greater coordination between Islamic commercial arbitration and private international law. An example of the influence of model rules can be found in the Saudi Arbitration Law of 2012. This piece of legislation strives to combine the provisions of Islamic Shari’ah law with the UNCITRAL Arbitration Rules, and thereby attempts an initial convergence between Islamic commercial arbitration and traditional commercial arbitration.Footnote 12

A third body that has been active in the issuance of model rules is the International Institute for the Unification of Private Law (UNIDROIT). The latter has been especially active in the harmonisation of private international law. It has, for example, compiled basic principles governing international contracts. In this respect, we note Jolivet’s (2005, p. 71) observation that ‘the UNIDROIT principles relating to international trade contracts may have some effect on arbitration practices, in which case, the said effect appears in the awards issued by those arbitral tribunals applying the arbitration system of the ICC in Paris’.

While the aforementioned entities have published model rules applying to international commercial arbitration in general, we submit it would be highly useful to experiment with model rules specific to Islamic commercial arbitration. This would allow a degree of incorporation of the basic tenets of Shari’ah law—insofar as they are not in conflict with state-enacted laws—into the internal regulations of the leading international commercial arbitration tribunals. This scenario would then lead to the issuance—by those international arbitral tribunals—of awards that address, in their reasoning, matters relevant to Shari’ah compatibility: arguably a step forward towards greater harmonisation.

One could say that such an effort is already underway, at least in incipient form, For example, Shari’ah Standard No. 31 on Arbitration issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is the first realistic attempt to put forth requirements that do not conflict with state-enacted law, but do not, at the same time, deny the provisions and principles of Shari’ah law underpinning Islamic commercial arbitration (Al Khwaldi, 2008, p. 1158). Still, we feel that a more coordinated international initiative would be desirable for the establishment of a widely accepted common ground concerning the recognition of Islamic commercial arbitration awards.

Model rules might not be needed solely for greater harmonisation between Islamic commercial arbitration and national conflict of law rules. Indeed, considerable plurality exists at the level of jurisprudential doctrines, even within Islamic law itself. This translates into different approaches to the interpretation and application of Shari’ah law across the Islamic world (Nammour, 2013, p. 101). It is for this reason that some commentators salute with favour the possibility of a set of ‘model rules’ in connection with Islamic commercial jurisprudence (Farah and Hattab, 2020).

Last, but not least, all aspiration towards greater coordination in commercial arbitration must be placed alongside the role of contractual freedom in the choice of applicable law, since the arbitrator in traditional international commercial arbitration is primarily obliged to stick to the parties’ choice of law (Derains, 1995, p. 14). Hence, the parties’ choice of law might fall on a set of ‘model rules’ (Mestere and Pancrazi, 2006, p. 1087)—bearing in mind that the principles and provisions of Shari’ah law remain applicable in the context of Islamic commercial arbitration. The rules of procedure of the International Islamic Centre for Reconciliation and Arbitration (IICRA), located in Dubai, offer an interesting example of how party autonomy concerning the choice of applicable law could be reconciled with the needs of Shari’ah compliance. Arbitrators must first ‘abide by the laws chosen by the parties to the dispute’. Should the parties have failed to specify the applicable law in their arbitration clause or arbitration agreement, then it will be for the arbitral tribunal to determine the applicable law, assessing its strength of connection to the matter of the dispute, on the basis of such factors as ‘the venue where the contract is to be implemented and the nationality and residence of the contracting parties’. As an overarching criterion, however, the arbitral tribunal must refrain from applying any provisions of the applicable law, whenever those provisions would contravene Shari’ah law. Last, but not least, the arbitral can choose ‘whatever provision it deems appropriate from among the viewpoints of various schools of Islamic thought, rulings of Islamic Fiqh academies, and opinions of Shari’ah supervisory boards at Islamic financial institutions’, thereby being entitled to a degree of discretion in its interpretation of the content of Islamic law (International Islamic Centre for Reconciliation and Arbitration, 2016).

Conclusion

This article has mapped the current lack of coordination between Islamic commercial arbitration—with its requirement for Shari’ah compliance—and state-enacted rules of private international law, which usually govern the recognition and enforcement of arbitral awards. The special nature of Islamic arbitration is connected to the fact that arbitrators, in this type of alternative means of dispute resolution, face additional constraints not usually found in traditional arbitration—which is based on the will of the parties and is completely removed from religious reference. Among the areas of concern specific to Islamic arbitration, we have surveyed the following: the religion of the arbitrator, the acceptability of women’s jurisdiction under Shari’ah law, and the requirement to refrain from applying those rules of positive law at odds with the provisions of Shari’ah law. At the same time, these particularities do not prevent the arbitrator(s) from ascertaining whether Islamic commercial arbitration would be in line with constitutional rules (of the country of arbitration or of enforcement), and to ensure its compliance with national and international rules pertaining to private relations.

Linked to the process of enforcement of an arbitration award is the concept of economic public order. More widespread acknowledgement of the existence of Islamic commercial arbitration, and of its international dimension, raises a question around the opportunity of extending the notion of ‘public order’ to the fundamental tenets underpinning Islamic commercial arbitration. Recognition of a notion of ‘Islamic economic public order’ would place the scrutiny for Shari’ah compatibility within the received categories of private international law—and thereby enable greater coordination between private international law rules and the Shari’ah. Lacking such a notion of ‘Islamic economic public order’, Shari’ah scrutiny would remain something ulterior to the customary tests admitted in private international law. In that case, Islamic commercial arbitration would still remain subject to checks for Shari’ah compatibility in jurisdictions where the Shari’ah is an applicable source of law.

In light of these misalignments, our article has surveyed various means for enacting greater coordination—multilateral or bilateral international conventions, as well as model rules—to bring Islamic commercial arbitration closer to the operating principles of private international law. Islamic commercial arbitration remains difficult to implement in non-Muslim jurisdictions on grounds of conflicting with notions of national public order. On the contrary, if it is brought for enforcement before a court in an Islamic country, the chances of refusal of enforcement will be less. In order to address this discrepancy, international conventions could help by introducing agreed ways of proceeding when addressing such issues as applicable law, enforcement of foreign arbitral awards and what might count as public order. A greater degree of integration with the system of private international law would make it possible for Islamic commercial arbitration to gain acceptance at international arbitration institutions. This, in turn, might help shift received notions of ‘public order’ that stand in the way of international enforcement of awards delivered by Islamic commercial arbitral tribunals. Hence, the conclusion of an international multilateral convention; the inclusion—in a bilateral convention on judicial cooperation—of provisions permitting the enforcement of Islamic commercial arbitration awards in a foreign state party to the same convention; and the enactment of uniform model rules on Islamic commercial arbitration are all solutions that could help establish greater coordination between the practice of Islamic commercial arbitration and the criteria normally acknowledged in private international law. One final issue—this time internal to Shari’ah law—is the existence of doctrinal differences within Islamic jurisprudence, which makes it so that a solution that is permissible under the jurisprudence of one school might be rejected by the jurisprudence of another school (at times, different opinions might be found even within the same school). This suggests that it would be advisable to establish a body entrusted with the task of addressing doctrinal differences in Islamic jurisprudence, particularly on the topic of commercial practice. This slow work of harmonisation internal to Islamic commercial law would reflect positively on any attempts to enhance coordination with traditional commercial arbitration. In this respect, AAOIFI’s Shari’ah Standard No. 31 on Arbitration marks a significant first step. However, a more comprehensive international initiative is still lacking. The existence of international model rules for Islamic arbitration would make it possible to incorporate many provisions of Shari’ah law—insofar as they did not contradict other state-enacted positive laws—into the internal regulations of the leading international commercial arbitration tribunals. In turn, this would allow them to issue decisions that also take into account relevant Shari’ah concerns, making possible a greater degree of harmonisation between application of the Shari’ah to international commercial arbitration, and the traditional categories accepted within private international law.