ARBITRATION FOR

ISLAMIC FINANCIAL BUSINESS

UNDER THE AUSPICES OF THE

KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION

“To complement the court system, disputes may also be referred to the arbitration centre for resolution. In this regard, the Kuala Lumpur Regional Centre for Arbitration will be enhanced to serve as a platform to deal with cases involving Islamic banking and finance, and to extend these services beyond our borders”

[Tan Sri Dr. Zeti Akhtar Aziz, Bank Negara of Malaysia governor was quoted as saying in StarBiz dated 26^th August 2004]

“We know there is a lot of money flowing between Asia and the Middle East. Middle East money has been invested in Asia and therefore we are offering our service in case there are business disputes. For a start, we have invited Muslim arbitrators, especially those with Islamic banking background, to handle Islamic banking disputes”

[Dato’ Syed Ahmad Idid, Director of the Kuala Lumpur Regional Centre for Arbitration was quoted as saying in StarBiz dated 2^nd May 2005]

HISTORY  –  KLRCA AND AALCO

The Kuala Lumpur Regional Centre for Arbitration (“KLRCA”) was established in 1978 under the auspices of the The Asian-African Legal Consultative Organisation (AALCO) then known as the Asian-African Legal Consultative Committee (AALCC).

“AALCC RESOLUTION XIX (7) ADOPTED AT ITS NINETEENTH SESSION HELD IN DOHA (QATAR) IN JANUARY 1978

Considering that the Asia-African Legal Consultative Committee at its Baghdad Session held in February 1977 had decided upon the establishment of regional centres for commercial arbitration, one to be located in Asia and another in Africa and had requested the Secretary-General to take steps for implementation of the aforesaid decision of the Committee as early as possible;

Considering that the Secretary-General has initiated prompt action for implementation of the Committee’s decision and has made a report on the progress made;

Noting with satisfaction that the Governments of Egypt and Malaysia had agreed in principle to the establishment of regional centres in Cairo and Kuala Lumpur respectively and had further agreed to provide all facilities for the establishment and functioning of such centres;

And Considering the recommendations of the Standing Sub-Committee on International Trade Law Matters;

The Committee Approves of the recommendations of the Trade Law Sub-Committee contained in its report and decides to make the following recommendations to its member governments:

1.         That the Member Governments be invited to insert in any arbitration clause a reference to the UNCITRAL Arbitration Rules in accordance with the recommendation of the General Assembly of the United Nations, and that they should avail themselves of the facilities provided by the regional arbitration centres;

2.         That the Member Governments be invited to provide the regional centres with information concerning the arbitration facilities provided by the chambers of commerce and other institutions in their countries and to encourage them to co-operate with the arbitration centres by furnishing data and information that may be required by these centres and by participating in seminars and conferences which may be organized by the centres;

3.         That the Member Governments be invited to give wide publicity to the establishment of the arbitration centres and to encourage their chambers of commerce and similar bodies to avail themselves of the facilities offered by the centres; and

4.         That the Member Governments be invited to designate a body or authority or a chamber of commerce to be associated with the arbitration centre and to act as a liaison within the country for the purpose of discharging some of the functions entrusted to the Centre.”

AALCO is an inter-governmental legal organisation comprising of 47 member states.

Membership of AALCO (with year of joining):-

LEGISLATIVE FRAMEWORK

Central Bank of Malaysia (Amendment) Act 2003 (Act A1213)

“Section 16B             Establishment of Syariah Advisory Council

(8) Where in any proceedings relating to Islamic banking business, takaful business, Islamic financial business, Islamic development financial business, or any other business which is based on Syariah principles and is supervised and regulated by the Bank before any court or arbitrator any question arises concerning a Syariah matter, the court or the arbitrator, as the case may be, may –

(a)  take into consideration any written directives issued by the Bank pursuant to subsection (7);  or

(b)  refer such question to the Syariah Advisory Council for its ruling.

(9) Any ruling made by the Syariah Advisory Council pursuant to a reference made under paragraph 8(b) shall, for the purposes of the proceedings in respect of which the reference was made –

(a) if the reference was made by a court, be taken into consideration by the court in arriving at its decision; and

(b) if the reference was made by an arbitrator, be binding on the arbitrator.”

SYARIAH ADVISORY COUNCIL

1.   Datuk Sheikh Ghazali Abdul Rahman - (Chairman)

      Director General,

      Shariah Judiciary Department Malaysia

2.    Dr. Mohd Daud Bakar  - (Deputy Chaiman)

      Chief Executive Officer,

      International Institute of Islamic Finance

3.   Dato' Dr. Abdul Halim Ismail

      Executive Director,

      BIMB Securities Sdn. Bhd.

4.   Associate Professor Dr. Abdul Halim Muhammad

      Lecturer,

      National University of Malaysia

5.   Dato' Abdul Hamid Haji Mohamad

      Federal Court Judge,

      Federal Court of Malaysia

6.   Datuk Dr. Abdul Monir Yaacob

      Director General,

      Institute of Islamic Understanding Malaysia (IKIM)

7.   Dato' Haji Hassan Haji Ahmad

      State Mufti,

      Penang

8.   Datuk Haji Md. Hashim Haji Yahaya

      Academic Fellow,

      International Islamic University Malaysia

9.   Dr. Mohd Ali Hj. Baharum

      Deputy Chairman,

      National Co-operative Organisation of Malaysia (ANGKASA)

10. Dr. Mohd Parid Sheikh Ahmad

      Lecturer,

      International Islamic University Malaysia