Conflicts Between English Law And Sharia-Governed Contracts
1. Conceptual Background: English Law vs Sharia in Contractual Context
Sharia law is a religious–ethical system, not a national legal system. It prohibits riba (interest), gharar (excessive uncertainty), and maisir (speculation), and emphasizes asset-backed, risk-sharing transactions.
English law, by contrast:
Is secular and positivist
Prioritizes certainty, predictability, and freedom of contract
Does not recognize non-state legal systems unless incorporated by contract
Core Conflict
English law does not enforce Sharia as governing law per se, but it will enforce contracts inspired by Sharia principles, provided they satisfy English legal requirements.
2. Governing Law Clauses and the Limits of Party Autonomy
(a) Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd (2004; 2005)
Facts
Contracts stated they were governed by:
“The laws of England subject to the principles of the Glorious Sharia.”
Issue
Whether Sharia principles could operate as an independent or overriding governing law.
Held
English law must be the sole governing law
Sharia is not a “law” for the purposes of Rome Convention / English conflict rules
Courts cannot apply religious law unless incorporated as contractual terms
Principle Established
➡️ Dual governing law clauses combining English law and Sharia are ineffective unless Sharia principles are expressly drafted as contractual obligations.
Significance
This is the foundational authority on conflicts between English law and Sharia.
3. Enforceability of Sharia-Compliant Financial Structures
(b) Islamic Investment Company of the Gulf (Bahamas) Ltd v Symphony Gems NV (2002)
Facts
A murabaha (cost-plus financing) agreement was challenged as being contrary to Sharia due to interest-like features.
Held
English court refused to assess Sharia compliance
Focused purely on contractual form and certainty
Principle Established
➡️ English courts do not adjudicate on theological compliance with Sharia.
Key Conflict Resolution
Sharia objections cannot invalidate an otherwise valid English contract.
4. Interest, Riba, and English Law’s Neutrality
(c) The Investment Dar Company KSCC v Blom Developments Bank SAL (2009)
Facts
A party argued a wakala agreement was void because it breached Sharia prohibition on interest.
Held
Sharia compliance was irrelevant under English law
Contract was enforceable as drafted
Principle Established
➡️ A party cannot rely on Sharia non-compliance as a defence under English law, unless expressly provided for in the contract.
Practical Impact
Prevents opportunistic repudiation in Islamic finance disputes.
5. Arbitration and Sharia Principles
(d) Halpern v Halpern (2007)
Facts
A Jewish religious arbitration agreement was challenged on public policy grounds.
Held
English law permits religious principles in arbitration
Only if procedures remain consistent with fairness and due process
Relevance to Sharia Conflicts
➡️ Sharia principles may be applied in arbitration, but only by party choice, not by default in English courts.
Distinction
Courts: secular, English law only
Arbitration: greater autonomy, but still subject to English public policy
6. Certainty and Incorporation of Religious Rules
(e) Beximco Pharmaceuticals Ltd v Shamil Bank (Court of Appeal, 2005)
Clarification of Earlier Ruling
Held
Sharia principles are too indeterminate unless precisely drafted
English law requires certainty and objective standards
Principle Reinforced
➡️ Religious norms must be translated into clear contractual obligations.
7. Public Policy and Enforcement of Awards
(f) Westacre Investments Inc v Jugoimport SDPR Holding Co Ltd (2000)
Facts
An arbitral award based on a contract alleged to be illegal under another legal system was challenged.
Held
English courts enforce awards unless there is clear violation of English public policy
Foreign moral or religious illegality is insufficient
Application to Sharia Conflicts
➡️ English courts will enforce Sharia-influenced arbitral awards unless they offend English public policy.
8. Contractual Drafting Lessons from Case Law
From the above jurisprudence, English law draws clear boundaries:
English Courts Will:
✔ Enforce contracts inspired by Sharia
✔ Uphold certainty and express terms
✔ Respect arbitration applying Sharia principles
English Courts Will Not:
✖ Apply Sharia as a governing law
✖ Decide theological compliance
✖ Allow Sharia defences to override English contractual obligations
9. Reconciliation Techniques Used in Practice
English governing law clauses with Sharia-compliant structures
Representations and warranties of Sharia compliance (without legal effect)
Expert determination clauses for Sharia issues (non-binding on courts)
Arbitration clauses allowing Sharia-based reasoning
10. Conclusion
Conflicts between English law and Sharia-governed contracts are resolved through a clear hierarchy:
English law governs legality and enforceability; Sharia governs commercial intent and ethical structure only if contractually incorporated.
English courts adopt a pragmatic, commercially neutral approach, enabling Islamic finance and cross-border trade while preserving the certainty and secular integrity of English law.
Case Laws Referenced (Summary)
Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd
Islamic Investment Company of the Gulf v Symphony Gems
The Investment Dar Company v Blom Developments Bank
Halpern v Halpern
Beximco v Shamil Bank (Court of Appeal)
Westacre Investments v Jugoimport
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