Islamic banking dispute resolution: the experience of Malaysia and Indonesia

• Main Authors: Hassan, Rusni, Ilias, Ibtisam @ Ilyana, Tuan Ibrahim, Tuan Nur Hanis
• Format: Article
• Language: English
• Published: IIUM 2022
• Subjects: HG3368 Islamic Banking and Finance
• Online Access: http://irep.iium.edu.my/101263/7/101263_Islamic%20banking%20dispute%20resolution.pdf; http://irep.iium.edu.my/101263/; https://journals.iium.edu.my/iiumlj/index.php/iiumlj/article/view/771/371; https://doi.org/10.31436/iiumlj.v30iS2.771
• Institution: Universiti Islam Antarabangsa Malaysia

The dispute resolution mechanism in a country involving Islamic banking depends on its applicable law. A workable mechanism guarantees a harmonious settlement and ensures justice is upheld in conjunction with the spirit of Islamic law. This study aims to analyse various mechanisms to resolve Islamic banking disputes in Malaysia and Indonesia by referring to the latest legal and judicial developments in both jurisdictions. It adopts doctrinal and comparative legal research methodology whereby the relevant primary and secondary sources of law were meticulously appraised. Findings of this study reveal that both countries have their own unique way of dealing with Islamic banking and finance cases. In Malaysia, the jurisdiction is vested in civil courts with mandatory reference to the SAC in deciding Shari’ah issues. Regarding Indonesia, Article 55 (1) of Law No. 21 (2008) provides that a Religious Court shall have jurisdiction to hear matters involving Islamic banking disputes, unless there is an agreement stating that the dispute resolution should be done in another manner, provided the chosen manner does not contradict with Shari’ah principles. There is also an option to refer to the Dewan Shari’ah Nasional Majlis Ulama Indonesia for expert opinions. Both jurisdictions also acknowledge alternative dispute resolution as a mechanism for dispute settlement. This study emphasises the need to enhance the knowledge and in-depth understanding of judges in the relevant field of law; Shari’ah law for civil court judges and civil law for religious court judges, to facilitate the dispute resolution process.