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Islamic
banking in Luxembourg and the conflict of law
The
financial center of Luxembourg, in its quest for diversification away from former
niche banking made impossible through automatic reporting, has turned among
others to Islamic Finance. Products formerly unknown are listed on the
Luxembourg Stock Exchange, Parliament recently authorized the first Luxembourg
Sukuk, and private banking based on Sharia is offered by many financial
institutions. We are here at the intersection of Sharia and Luxembourg’s
secular law. Conflicts will arise, as they do with much closer jurisdictions
and legal systems, such as France or Spain and other western law. The victims
of Landsbanki and Madoff have brought lawsuits abroad with dramatically
conflicting outcomes with the Luxembourg (very slow) courts.
As
a matter of thought for Luxembourg banking, the article referenced below by
Nicholas H D Foster is well researched and documented about Islamic commercial
law in western secular courts. Sharia compliance conflicts are described with UAE,
Saudi, Malaysia, and Indonesia.
“The
revival of interest in Islamic law prompts a number of questions, including its
suitability for the modern commercial world, and the appropriateness of western-style
courts for enforcement of the sharia.
This
is true even of Gulf states, the regimes of which are based, to a greater or
lesser degree, on the sharia. So whether one attempts to follow the principles
of the sharia in one’s financial dealings within a Western law context, or one
attempts to incorporate rules based on the sharia into a state-based legal
system, Western and Islamic legal mindsets come into contact. o as to permit the sharia to be the
applicable law of a contract, as it is not the law of a “country” in the
presumed intention of the parties” in the context of “the commercial purpose of
the contract.
As
a conclusion, the author “submits that the answers to the question posed at the
beginning of the previous sub-sections are: No and No.
No:
the sharia is not inherently unsuitable for the modern commercial world, even
if the process of adaptation is not yet complete.
No:
with the possible exception of the UAE assignment case, the decisions discussed
herein do not constitute instances of secular, Western-style courts dominating
and overturning the sharia. There is no inherent or insoluble dichotomy between
the sharia as it concerns financial transactions and Western-based legal
systems……
On
the conflict point, if a secular, say, English, court did find itself in the
position of having to enforce the sharia, whether as the governing law of the
contract (if this is made possible by the revised Rome Convention), or as a set
of rules incorporated by reference, various issues would arise…..
We
can see, therefore, that although the apparent problems of adaptation and
conflict are actually not anywhere near as serious as they might appear at
first glance, the relationship between the sharia and secular law is far from
settled, and will be one of the most interesting and significant topics for
legal studies over the course of the next few decades.”
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