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the underlying products in court, others have questioned the very forum of dispute resolution
where the jurisdiction of the court itself is challenged. 8 This requires some level of clarity in
drafting enabling laws and/or subsidiary legislation on the one hand and legal documentation
for Takaful on the other to ensure all potentially ambiguous clauses are addressed ex-ante
(Oseni, 2016).
In cases involving a conflict of laws in Islamic finance contracts, the courts have either resorted
to the applicable conventions or invite expert witnesses. There are situations where expert
witnesses’ opinions are contradictory. This has been experienced in several English cases
involving Islamic financial services and products. Hence, in Malaysia, Shari'ah issues involving
Islamic banking and Takaful matters are by-law referred to the Shari'ah Advisory Council (SAC),
a statutory body whose jurisdiction to determine all Shari'ah issues was recently challenged and
finally laid to rest in the majority decision i
In
the case, per Mohd Zawawi Salleh FCL held:
“ The civil courts were not sufficiently equipped to make findings on Islamic law. They were
not in a position to appreciate and determine the divergence of opinions among the experts
and to decide based on Shari'ah principles. Since its inception, the SAC had been
harmonising the proliferation of Shari'ah opinions in the industry. There was a need for
certainty in the industry of Islamic banking [and Takaful] principles. Therefore, the binding
nature of the SAC’s ruling was justified as s 56 of the CBMA [Central Bank of Malaysia Act]
was enacted for the purpose of conserving and protecting the public interest.”
This shows the contentious nature of the conflict of laws in the Islamic financial services
industry – a phenomenon which remains a significant challenge. This can only be addressed
when there is both legislative and judicial clarity. At present, there are different types of
legislation relating to Takaful in some Muslim-majority countries. While some are enabling
legislation, most are subsidiary legislation (Oseni, 2016, p. 136).
4.4.3. Takaful Contracts and Interpretation of Clauses
One of the most contentious legal issues in Takaful relates to the interpretation of clauses in the
Takaful contracts. It should be borne in mind that the contracts are modified forms of
conventional insurance policies, which one may refer to as “Islamised” forms of such agreements
to make them Shari'ah-compliant (Mohd Yusof & Oseni, 2019). As a result, they are bound to be
disputed relating to the interpretation of specific clauses that are alien to Islamic finance
principles. For instance, the nomination clause in modern Takaful contracts has its origin in the
8 See the following English cases: Shamil Bank of Bahrain v Beximco Pharmaceuticals Limited and others [2003] EWHC 2118
(Comm), The Investment DAR Company K.S.C.C. v Blom Development Banmk S.A.L [2009] EWHC 3545 (Ch), and in the following
Malaysian cases: Tahan Steel Corp Sdn Bhd v Bank Islam Malaysia Bhd [2004] 6 MLJ 1, Bank Islam Malaysia Bhd v. Rhea Zadani
Corp Sdn Bhd and Ors [2012] 10 MLJ 484. In those cases, the “The courts have consistently considered such a defence as merely
“a lawyer’s construct” which holds not water in the determination of the case.” See (Oseni, 2015, p. 384)
9 [2019] 3 MLJ 561.