99 Islamic legal maxims

Muslim Jurists have grouped questions of jurisprudence under certain general rules each one of which embraces a large number of questions. These general rules are taken in the treatises on jurisprudence, as justification to prove these question. (These preliminary study of these rules facilitates the comprehension of the questions and serves to fix them on the mind.) Consequently the ninety-nine (99) rules of jurisprudence have been collected together ... Although a few of them, taken alone, admit of certain exceptions, their general application is in no way invalidated thereby, since they are closely interrelated.

The original Arabic is basically quoted from the original Arabic text by Mahmasani.

The English translation is from the translation by Farhat J. Ziadeh.

Article 1: "Matters are determined according to intention"

Article 2: "In contracts effect is given to intention and meaning and not words and forms"

Article 3: "Certainty is not dispelled, (does not dispel caused), by doubt."

Article 4: "It is a fundamental principle that a thing shall remain as it was originally."

Article 5: "Things which have been existence from time immemorial shall be left as they were."

Article 6: "Injury cannot exist from the time immemorial."

Article 7: "Freedom from liability is a fundamental principle."

Article 8: "Non-existence is a fundamental presumption attached to intervening (transitory) attributes."

Article 9: "Judgment shall be given in respect to any matter, which has been proof at any particular time, unless the contrary is proved"

Article 10: "It is a fundamental principle that any new event shall be regarded as happening at the time nearest to the present."

Article 11: "In principles, word shall be construed according their real meaning."

Article 12: ""No attention shall be paid to inferences (implication) in the face of an explicit statement."

Article 13: "Where there is a text there is no room for interpretation."

Article 14: "A thing established contrary to the Qiyas can not be used as an analogy for other things."

Article 15: "One legal interpretation does not destroy another."

Article 16: "Hardship begets facility".

Article 17: "Latitude should be afforded in the case of difficulty."

Article 18: "Injury may not be met by injury."

Article 19: "Injury is to be repaired."

Article 20: "Necessity renders prohibited things permissible."

Article 21: "Necessity is determined by the extent thereof."

Article 22: "Whatever is permissible owing to some excuse ceases to be permissible with the disappearance of that excuse."

Article 23: "When a prohibition is removed the thing to which such prohibition attaches reverts to its former status of legality."

Article 24: "An injury cannot be removed by a similar injury."

Article 25: "A private injury is tolerated in order to ward off a public injury."

Article 26: "Severe injury is removed by lesser injury."

Article 27: "In the presence of two evils, the one whose injury is greater is avoided by the commission of the lesser."

Article 28: "The lesser of evils is preferred."

Article 29: "Repelling an evil is preferable to securing benefit."

Article 30: "Injury is removed as far as possible."

Article 31: "Need, whether a of a public or private nature, is treated as necessity."

Article 32: "Necessity does not invalidate the right of another."

Article 33: "When it is forbidden to take a thing it is also forbidden to give it."

Article 34: "When it is forbidden to perform an act it is also forbidden to request to its performance."

Article 35: "Custom is authoritative."

Article 36: "Public usage is conclusive and action must be taken accordance therewith."

Article 37: "A thing that is customary to regard as impossible is considered to be impossible in fact."

Article 38: "It is undeniable that rules of law vary with change in time."

Article 39: "The original (real) meaning is to be regarded in favor of that established by custom."

Article 40: "Effect is only given to custom where it is of regular occurrence or when universally prevailing."

Article 41: "Effect is given to what is of common occurrence, not to what happens infrequently."

Article 42: "A matter recognized by custom is regarded as if stipulated by agreement."

Article 43: "A matter recognised customary amongst merchant is regarded as if agreed upon between them."

Article 44: "A matter established by custom is like a matter established by a legal text."

Article 45: "When prohibition and exigency conflict, preference is given to prohibition."

Article 46: "An accessory which is attached to an object in fact is also attached to it in law."

Article 47: "An accessory to an object cannot be dealt with separately"

Article 48: "The owner of a thing held in the absolute ownership is also the owner of the things indispensable to the enjoyment of such thing."

Article 49: "If the principle fails, the accessory also fails."

Article 50: "A thing which has been discharged or annihilated cannot be restored."

Article 51: "When a thing becomes void, the thing contained in it also becomes void."

Article 52: "When the original fails it is restored to its substitute."

Article 53: "A thing which is not permissible in itself, may be permissible as an accessory."

Article 54: "A thing which is not permissible by way of commencement may be permissible by way of continuance."

Article 55: "Continuance is easier than commencement."

Article 56: "A gift becomes complete by delivery."

Article 57: "Management of citizen's affairs is dependent upon public welfare."

Article 58: "Private trusteeship is more effective than public trusteeship."

Article 59: "A word should be construed as have some meaning, rather than disregarded."

Article 60: "When the real meaning cannot be applied, the metaphorical sense may be used."

Article 61: "If no meaning can be attached to a word it is regarded altogether."

Article 62: "A reference to a part of an indivisible thing is regarded as a reference to the whole."

Article 63: "The absolute is construed in its absolute sense, provided that there is no proof of a restricted meaning either in the explicit text or by implication."

Article 64: "A description with reference to a thing present is of no consequence, but the contrary is the case if such thing is not present."

Article 65: "A question is considered to have been repeated in the answer."

Article 66: "No statement is imputed by to a man who keeps silence, but silence is tantamount to a statement where there is a necessity for speech."

Article 67: "In obscure matters the proof of a thing stands in the place of such a thing."

Article 68: "Correspondence resembles conversation."

Article 69: "The recognized signs of a dumb person take the place of a statement by word of mouth."

Article 70: "The word of an interpreter is accepted in every respect."

Article 71: "No validity is attached to conjecture which obviously tainted by error."

Article 72: "No argument is admitted against supposition based upon evidence."

Article 73: "No weight is attached to fancy."

Article 74: "A thing established by proof is equivalent to a thing established by visual inspection."

Article 75: "The burden of proof is on him who alleges; the oath on who denies."

Article 76: "The object of evidence is to proof what is the contrary to the apparent fact."

Article 77: "Evidence is an absolute proof in that it affects third person; admission is relative proof in that it affects only the person making such admission."

Article 78: "A person is bound by his own admission."

Article 79: "Contradiction and proof are incompatible, but this does not invalidate a judgment."

Article 80: "Failure to establish the principal claim does not imply failure to establish a claim subsidiary thereto."

Article 81: "Anything dependent upon a condition precedent is established on the happening of the condition."

Article 82: "A condition must be fulfilled as far as possible."

Article 83: "Promises dependent upon a condition precedent are irrevocable."

Article 84: "The enjoyment of a thing is the compensating factor for any liability attaching thereto."

Article 85: "Remuneration and liability do not run together."

Article 86: "Liability is an obligation accompanying gain.

(That is to say, a person who enjoys the benefits of a thing must submit to the disadvantage attaching thereto.)"

Article 87: "The burden is in proportion to the benefit and the benefit to the burden."

Article 88: "The responsibility for an act falls upon the author thereof; it does not fall upon the person ordering such act, provided that such person does not compel the commission thereof."

Article 89: "In the presence of the direct author of an act and the person who is the cause thereof, the first alone is responsible therefor."

Article 90: "Legal permission is incompatible with liability."

Article 91: "Liability lies on the direct author of an act, even though acting unintentionally."

Article 92: "No liability lies on a person who is the cause of an act unless he has acted intentionally."

Article 93: "No liability attaches in connection with injury caused by animals of their own accord."

Article 94: "Any order given for dealing with the property of others is void."

Article 95: "No person may deal with the property of another without such person's permission."

Article 96: "No person may take another person's property without legal cause."

Article 97: "Any change in the cause of the ownership of a thing is equivalent to a change in that thing itself."

Article 98: "Any person, who hastens the accomplishment of a thing before its due time, is punished by being deprived thereof."

Article 99: "If any person seeks to disavow any act performed by himself, such attempt is disregarded."

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Malaysia exposes Shariah scholars to jail for breaches

The Malaysian law that exposes Shariah scholars to jail terms for rule breaches will ensure tighter compliance, in a market where the regulator has already made progress in unifying standards. Under the Islamic Financial Services Act 2013, which took effect June 30, scholars may be jailed for up to eight years or fined as much as 25mn ringgit ($7.6mn) if they fail to comply with central bank rules. It is the first time Shariah advisers have been expressly made accountable, according to Lee Hishammuddin Allen & Gledhill, a Kuala Lumpur-based law firm. Malaysia set up a dedicated system in the 1990s to avoid disputes over the financing methods that comply with the Shariah. 

Goldman Sachs Group was criticised by some advisers in 2011 for not ensuring its debut sukuk, approved by Ireland’s central bank, would be traded at par value as mandated by Islamic law. Some lenders are appointing scholars who don’t have a thorough understanding of financial products due to a shortage of experts, according to consultancy Amanie Advisors in Kuala Lumpur. “It’s a very good move to stress the accountability of Shariah boards,” Said Bouheraoua, a scholar who advises Affin Islamic Bank Bhd, said in an August 16 interview in Kuala Lumpur. “A doctor who goes against the fundamental rules of medicine is accountable. The same goes for Shariah scholars.” 

Religious experts advise companies on whether their products and services comply with Shariah laws. Under Bank Negara Malaysia regulations, a Shariah scholar can only sit on one board for each type of Islamic financial institution, meaning they can only advise one bank or insurer. In most countries there is no limit to the number of companies an expert can assist. One Syrian scholar was advising 101 financial institutions, standard-setting bodies and other entities, according to a 2011 report by Funds@Work AG, an investment research company based near Frankfurt. 

The Malaysian single board rule has led to a shortage of scholars, according to Baiza Bain, the Kuala Lumpur-based managing director at Amanie. Demand for advice has increased as the nation’s Islamic banking assets climbed 6.3% to $162bn in May from the end of last year, figures from the Malaysia International Islamic Financial Centre show. “What the liability that’s presented by the Act does is to actually put more emphasis on training or retraining of experts,” Baiza said in an interview yesterday. “Financial institutions would have to put a higher standard of care because they know that the Shariah advisers are not going to just sit there and stamp whatever they have produced.” 

Worldwide sales of sukuk, which pay returns on assets to comply with Islam’s ban on interest, have declined 35% to $21bn so far in 2013 from the same period in 2012, data compiled by Bloomberg show. Issuance totalled a record $46.5bn for the whole of last year. Goldman Sachs set up a sukuk programme based on a so-called commodity Murabaha structure, or a cost plus mark-up transaction, that was approved for listing on the Irish Stock Exchange by the Central Bank of Ireland in October 2011. Goldman declined to provide any more details on the debt, it said in an e-mailed response to Bloomberg. 

In 2007, BLOM Development Bank of Lebanon signed a contract with Investment Dar Co to place a Wakalah deposit, where capital is raised to acquire assets that are entrusted to an agent. BLOM sued Investment Dar after the Kuwaiti company missed a payment on its deposit. Investment Dar contradicted its own scholars’ assessment and argued the financing from BLOM breached Shariah principles because Dar “was taking deposits at interest,” according to a court document. 

The new Malaysian regulation would raise the standard of advice and level of services dispensed by religious experts, according to Mohamad Akram Laldin, a member of the Malaysian central bank’s Shariah Advisory Council. “People will be more aware of their duties and responsibilities,” Akram said in an August. 15 interview in Kuala Lumpur. “This means that before they sign off on certain things, they will think twice. (Gulf Times / 24 Aug 2013) 

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Islamic scholars propose new sharia board model

A group of Islamic scholars is proposing a fresh solution to charges that banks' sharia boards are open to conflicts of interest: create partnerships between the boards and Muslim depositors, to insulate the boards from pressure exerted by bank managements.

Sharia boards, composed of experts in Islamic financial law, supervise Islamic banks' activities and products to make sure they conform to religious principles, such as bans on interest and pure monetary speculation.

Traditionally, banks appoint prestigious scholars to their sharia boards and pay them handsome fees and retainers. This has left the system vulnerable to charges of conflict of interest: the scholars are being paid by the institutions which they are supposed to be supervising impartially.

A group of scholars in South Africa, led by Durban-based Ebrahim Desai, a senior figure in the city's Muslim community, proposes that Muslim depositors in each bank fund a sharia compliance body that would be created separately from the bank.

The body would then hire a sharia board to supervise the bank. In this way, the scholars on the board would not be appointed by or report to the bank's management, and would not have a direct financial relationship with the bank.

"We seek a neutral and balanced position," Desai said by telephone, adding that freed of subjection to bank managements, sharia boards would be able to play more strategic and powerful roles in governance.

"This would be in line with the larger interest of the Muslim community in upholding sharia law by maintaining the ultra-independence of the sharia supervisory board."

Emraan Vawda, a colleague of Desai, argued that by their nature, banks were ill-suited to policing their own Islamic activities. "Commercial concerns in the overwhelming majority of Islamic banks far outweigh genuine commitment to Islamic values and precepts," he said.

SCEPTICISM

The proposal is likely to meet with considerable scepticism in the Islamic finance industry. Desai said many institutions had approached him to discuss his proposal but he declined to name them, saying the talks needed to be kept confidential.

One potential issue is whether depositors would be willing to fund the sharia compliance bodies; to compensate for this expense, they might demand higher returns on their money placed with the bank, which the bank might not be willing to provide.

Banks themselves might be reluctant to give authority over their activities to a separate body, while highly paid Islamic scholars might prefer to continue working for bank managements rather than being subject to groups of depositors who could prove more awkward and demanding.

One sharia board member in Dubai, who declined to be named because of the sensitivity of the issue, said the scholars in the South African group were not experienced in the financial world and were instead mostly community-based.

Such scholars can command great influence within their communities and give products informal endorsements to win mass appeal, but they cannot necessarily rule on the finer points of financial contracts, he said.

Desai and Vawda said they had served eight years on the sharia board of South Africa's First National Bank (FNB), the retail arm of South Africa's second-biggest bank FirstRand , where they provided their services at no cost to FNB.

By avoiding financial remuneration, the scholars hoped their decisions would be free of influence, and they rejected several offers to be on FNB's payroll, Desai said. "We were not dictated by money but dictated by principle."

However, working for free is unlikely to become a new model for the mass of Islamic scholars, given the lucrative fees available in the industry.

Desai, Vawda and the rest of FNB's sharia board resigned in July, complaining that the bank had failed to consult with the board on several occasions, and hired a new head of its Islamic finance business without input from the board.

FNB said it aimed to appoint a new sharia board by the end of this year and would draft clear rules and roles for the board, which would not include approving appointments of senior personnel. It said the previous head of its Islamic finance business resigned after the bank conducted an investigation into "internal processes and practices of the businesses aligned to internal governance practice".

(Reuters / 13 Sep 2012)

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Islamic Finance: London Eyes Becoming Western Capital of Sharia-Compliant Banking

London is vying to be the capital of Islamic finance outside of the Muslim world, says the city's Deputy Mayor Sir Edward Lister.

A task force on building the UK's Islamic finance industry has been at work since early 2013 and London will host the World Islamic Economic Forum in October.

"The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them," Lister told a press conference, reported Reuters.

"Only now people are beginning to understand what the products actually mean and how they comply ... What you will see is a lot of companies introducing those products."

Globally, the Islamic finance industry is forecast to be worth $2.6tn (€1.9bn, £1.6bn) by 2017. It has grown by around 30% each year since the millennium and consultancy firm Oliver Wyman predicts that there will need to be at least 150 Islamic finance institutions by 2020 to meet the ever-growing demand.

There are more than 20 UK banks offering Sharia-compliant products, such as HSBC and RBS. There are also three Sharia-only institutions, including the Islamic Bank of Britain (IBB).

By increasing the number of Sharia-compliant financial services in London it will be easier to facilitate investment in the UK from Islamic investors.

What is Islamic banking?

According to IBB's website: "Islamic banking operates without interest which is not permitted in Islam, as money in itself is not considered to have intrinsic value.

"As interest is income generated from money, it is seen as effortless return. Instead money must be used in a productive way and wealth can only be generated through legitimate trade and investment, which involves an element of risk.

"Islamic banking therefore uses various principles recognised as Sharia compliant such as Ijara (leasing), Musharaka (partnership) and Wakala (agency agreement). Islamic banks use these principles to develop Sharia compliant financial products, such as savings accounts and home finance, which allow Muslims to conduct their finances in an Islamic way."

(International Business Times / 19 Sept 2013)

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Malaysia: Takaful operators to use Islamic Financial Services Act (IFSA) grace period to ensure growth

PETALING JAYA: Takaful operators like Syarikat Takaful Malaysia Bhd and Takaful Ikhlas Sdn Bhd, a unit of MNRB Holdings Bhd, are aggressively strategising their operations to ensure profitable growth and taking advantage of the five-year time frame given to composite takaful players to fully comply with the new Islamic Financial Services Act (IFSA).

Under the Financial Services Act (FSA) and IFSA, which came into force on July 1, composite insurers and takaful players would be, among others, required to split their life and general insurance businesses under separate licences.

Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil told StarBiz that as takaful operators are given the five-year time frame by Bank Negara to fully meet the terms of the new Act, the company would be devising and evaluating an array of potential options to achieve more efficient solutions from the capital management and shareholder return perspectives.

“We would review and evaluate all this. Hence, it is unlikely for the changes to materialise in the current financial year. The takaful industry players have yet to digest the full breadth of the IFSA to decide what would work best for them, going forward, especially towards sustainable growth of the takaful markets. This would definitely take time, as financial institutions need to better understand the application of the IFSA,” he added.

On whether the Act would take a hit on Takaful Malaysia’s bottomline in view of the split in operations of its family (life) and general businesses, Hassan said although there would be potentially higher cost initially due to start-up costs, in the long run, it would benefit the company and consumers as a whole, as the company would be more focused in terms of strategic planning, management, cost control and enhanced customer service. The capital position too would be further strengthened, he noted.

RHB Research, in an earlier report, said that the new ruling to split the life and general insurance businesses could have a “huge impact” on insurance firms, especially takaful players like Syarikat Takaful Malaysia and Takaful Ikhlas.

It added that the impact would be felt more deeply in the takaful industry due to the higher number of composite licences issued to them compared with their conventional insurance counterparts.

Meanwhile, Takaful Ikhlas president and chief executive officer Abdul Latiff Abu Bakar said while the split timeline given to comply was within five years, the company was looking more towards compliance with the other requirements first, of which the deadline for compliance was within a year.

“We are currently at the gap/impact analysis stage. As far as business is concerned, Takaful Ikhlas would continue to focus on enhancing its family agency business, of which new investment link products were just recently launched. It is too premature to comment on the capital and profitability.

(The Star Online / 23 July 2013)

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Malaysia: Financial Services Act 2013 and Islamic Financial Services Act 2013 Come Into Force

The regulatory and supervisory framework of Malaysia enters a new stage of its development as the Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA) come into force on 30 June 2013.

The FSA and IFSA is the culmination of efforts to modernise the laws that govern the conduct and supervision of financial institutions in Malaysia to ensure that these laws continue to be relevant and effective to maintain financial stability, support inclusive growth in the financial system and the economy, as well as to provide adequate protection for consumers. The laws also provide Bank Negara Malaysia with the necessary regulatory and supervisory oversight powers to fulfil its broad mandate within a more complex and interconnected environment, given the regional and international nature of financial developments. This includes an increased focus on preemptive measures to address issues of concern within financial institutions that may affect the interests of depositors and policyholders, and the effective and efficient functioning of financial intermediation.

It is important that Malaysia's regulatory and supervisory system is adequately equipped to respond effectively to new and emerging risks so that confidence in the financial system is preserved and that the critical financial intermediation activities which are vital to the economy are not disrupted. The FSA and IFSA amalgamate several separate laws to govern the financial sector under a single legislative framework for the conventional and Islamic financial sectors respectively, namely, the Banking and Financial Institutions Act 1989 (BAFIA), Islamic Banking Act 1983, Insurance Act 1996 (IA), Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953 which are repealed on the same date.

Key features of the new legislation include:

• Greater clarity and transparency in the implementation and administration of the law. This includes clearly defined regulatory objectives and accountability of Bank Negara Malaysia in pursuing its principal object to safeguard financial stability, transparent triggers for the exercise of Bank Negara Malaysia's powers and functions under the law, and transparent assessment criteria for authorizing institutions to carry on regulated financial business, and for shareholder suitability;

• A clear focus on Shariah compliance and governance in the Islamic financial sector. In particular, the IFSA provides a comprehensive legal framework that is fully consistent with Shariah in all aspects of regulation and supervision, from licensing to the winding-up of an institution;

• Provisions for differentiated regulatory requirements that reflect the nature of financial intermediation activities and their risks to the overall financial system;

• Provisions to regulate financial holding companies and non-regulated entities to take account of systemic risks that can emerge from the interaction between regulated and unregulated institutions, activities and markets. The Minister of Finance may subject an institution that engages in financial intermediation activities to ongoing regulation and supervision by Bank Negara Malaysia if it poses or is likely to pose a risk to overall financial stability;

• Strengthened business conduct and consumer protection requirements to promote consumer confidence in the use of financial services and products;

• Strengthened provisions for effective and early enforcement and supervisory intervention

The new laws will place Malaysia's financial sector, encompassing the banking system, the insurance/takaful sector, the financial markets and payment systems and other financial intermediaries, on a platform for advancing forward as a sound, responsible and progressive financial system. This is especially important to enable the financial system to meet the new demands for financing associated with Malaysia's economic transformation programme both during and beyond the next decade, the changing demographics of our population, and the increasing integration of the Malaysian economy with the region and the world.

(Zawya / 02 July 2013)

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MSM Shariah Index to attract more investment in Islamic finance

By Kabeer Yousuf — MUSCAT — Muscat Securities Market launched ‘Sharia Index’ (MSMSI) aiming at measuring the stock’s performance of Sharia-Compliant Companies that pass the AAOIFI for compliance with the Islamic investment principles yesterday. With this launch, more individuals and corporates are expected to make use of the Islamic financial offerings in the country as a better investor sentiment and trust is created with the introduction of the Sharia Index.

AAOIFI (Accounting and Audit Organisation for Islamic Financial Institutions), the Sharia Board is an organisation in Bahrain which comprises Islamic Scholars that issue the religious guidelines to the Islamic financial institutions in the region. “I am certain that there is quite a significant number of people and bodies in our society who are keen to invest in Sharia-compliant financial products and I’m equally certain that the launch would further augment Islamic investment portfolio in the country”, Ahmed bin Saleh al Marhoon, Director-General, MSM said.

Speaking to the Observer, Al Marhoon further noted that “This is the introduction of the Islamic financial institutions and this is the time we have been working on issuing an index which is compliant with the Sharia requirements”. For the introduction of the Sharia Index, MSM has contracted with ‘IdealRatings’ to examine and analyse all the listed companies in order to make sure that those listed companies are in compliant with Sharia requirement. Also, the application of Sharia principle No 21 that is related to securities is also verified. MSMSI is a free-float Index capped at 10 per cent and the index constituents will be revised each quarter.

Marhoon further said that there has been a highly encouraging trend regarding the new IPO’s and an number of companies from both private and public sectors are on the anvil to launch their public offers. “More companies based on Sharia and power generation besides some major public sector companies are expected to launch their IPO’s this year”, Marhoon added.

(Oman Daily Observer / 02 July 2013)

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