Gharar in Islamic Law

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Another major contribution of the Islamic banks is that being under supervision of their Shariah Boards they presented a wide range of questions concerning modern business to Shariah Scholars, hence, providing them an opportunity to understand the contemporary business practice and trade but also to evaluate it in the light of Shariah and to find out other alternatives which may be acceptable according to the Islamic principles (Vogel and Samuel, 1998). Islamic Laws Islam is a complete code of life and encompasses everything in life. It influences families as much as international relations and certainly includes all financial matters. It sources are the Quran and the Sunnah and the consensus of the opinion of the great jurists and interpreters of Islamic Law. If none of cited provide guidance on a particular matter then there is qiyas or analogy by which jurists and scholars compare an issue of today with a similar one described in the Quran or Sunnah and draw conclusions from the principles involved (Usmani, 2001). In all mattes of finance, the essence of Islamic law is perhaps based on a verse from the Quran that says Do not usurp one another’ possessions. The object of Islamic finance is to eliminate injustice and exploitation in financial dealings and to create an equitable distribution of wealth by encouraging effort and mutual co operation. It is believed that this, in turn, will increase productivity and goodwill, alleviate economic hostility and inspire all the members of a society with a feeling of having common economic goals (Al-Qardawi, 2001). However, because the law is derived from writings that predate modern life, the interpretations can be difficult. In the finance sector, banks appoint Shariah boards to consider transactions that the bank wishes to engage in and decide whether they meet the Shariah requirements. However, boards in different banks may often come to different conclusions (Obaidullah, 2005). Almost all transactions entered into by banks are based on legal contracts that conform to local law (or in many cases, English Law) and often add Shariah compliance as an additional requirement. This has not proven to be an easy legal basis for business, although only a few cases have come to the courts, the courts have ruled that only one law can be applied (Ghafoor, 1995). London Rulings Two cases are worth studying a) Islamic Investment Company of Gulf Ltd v Symphony Gems amp. others (London High Court 13.02.02) b) Beximco Pharmaceuticals Ltd amp. others v Shamil Bank of Bahrain EC (Royal Courts of Justice, London 11 amp. 12 December, 2003) In the later case, the banking expert on Islamic Law and former director, Center of Islamic and Middle Eastern Law on the invitation of the court gave following observations (Usmani, 2001): The precise scope and content of Islamic Law in general, and Islamic banking in particular are marked by a degree of controversy within Islamic world, best exemplified by the fact that the actual practice of Islamic banking differs widely within the Islamic world (Usmani, 2001). In the absence of any agreement on the boundaries of Islamic Banking or indeed on what ought to be the precise ingredients of a Morabaha agreement, it is in practice up to the individual banks to determine the issue. In the absence of any legal prescription as to what does and what does not constitute Islamic banking or finance, most Islamic banks, including those in Bahrain, seek the advice of Islamic Scholars who examine and approve