The Role of the Court of Cassation Provisions in Regulating Investment and Financing Contracts in Islamic Financial Institutions
Dr. Daoud Salman Bin Essa
Assistant Professor of Comparative – jurisprudence and Islamic Studies – Kuwait International Law School
This study examines the role of the judiciary of Cassation in regulating financing and investment contracts in Islamic financial institutions. The role of this judiciary, as a legislative body, is part of a governance system that is applied to institutions. There are many jurisprudences regarding sharia rulings (Ijtihad) which are determined by members of Fatwa and Sharia Supervisory bodies in Islamic banks and financial institutions, including certain organizations, such as Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and others. These jurisprudence opinions are included and stipulated in the contracts concluded between investors. However, legislator, or the governor, may consider these jurisprudence opinions to be against the interest of investment or the development of contracts. As a result, the legislator may issue provisions contrary to these jurisprudence opinions.
The purpose of this paper is to highlight the role of Cassation judiciary in regulating financing and investment contracts. The paper emphasizes the need to find a proper mechanism to control these jurisprudence opinions according to sharia policy, sharia rulings, interest, and sharia objectives. This will only be possible by linking these jurisprudence opinions to the basis of contract, addressing sharia fundamentals relevant to this topic, as well as examining and analyzing these fundamentals, and extracting the correct meanings to determine opinions and rulings.
The paper is divided into an introduction, two chapters, and a conclusion. In the first chapter, the attention is entirely devoted to the general framework of Cassation’s principles and provisions in terms of origin and ideas, as well as the Court of Cassation provisions and their role in regulating financing and investment contracts. The second chapter addresses the guarantees presented by Cassation to make contracts effective. It also explains the role and impact of the Court of Cassation provisions on the relevant institutions, where some sharia boards have endeavored to include texts in contracts concluded between investors that violate the original contract in accordance with the provisions and principles of Islamic Sharia. This paper answers numerous questions, particularly the following two: What is the role of Cassation judiciary in regulating financing and investment contracts? What is the best mechanism that can control and regulate jurisprudence rulings? The paper adopts a descriptive analytical approach and a critical approach and concludes that Cassation judiciary has a primary role and a direct effect on regulating contracts. Furthermore, the lack of good governance in various aspects has a huge effect on investment’s stability and development.
Keywords: cassation principle, provisions and rulings, regulating, Encouragement, contracts, agency (Wakala) in investment.