Dispute management in Islamic financial institutions: a case study of near sukuk defaults
Journal of International Trade Law and Policy
ISSN: 1477-0024
Article publication date: 9 September 2014
Abstract
Purpose
The purpose of this paper is to examine the vital importance of dispute management in cases of both near and outright sukuk defaults. With the case studies, this study examines the vital importance of dispute management in cases of both near and outright sukuk defaults. With a number of case studies, the study shows how debt restructuring can play a significant role as a dispute management procedure recognized in Islamic law.
Design/methodology/approach
The study uses the case study methodology to determine the impact of debt restructuring in instances of near and outright sukuk default and the process taken to reach a win-win settlement among the parties. Due to some sensitive financial information, the study has fully anonymized the sukuk companies examined.
Findings
The paper finds that for a more sustainable and stable and resilient Islamic finance industry, the role of law through dispute management cannot be ruled out, as appropriate dispute management mechanism facilitates the underlying contracts.
Research limitations/implications
This study limits its focus to near and outright sukuk defaults and the need to come up with Shari’ah-based mechanisms for dispute management when things seem to have fallen apart.
Practical implications
The study proposes an integrated regulatory-cum-remedial framework which may serve as sustainable mechanism for handling circumstances involving near and outright sukuk defaults with a view to protecting the rights of all the stakeholders.
Originality/value
Though few studies have been conducted on sukuk defaults in cross-border transactions, there has not been much focus on dispute management of cases involving such defaults. This study seeks to fill such an important gap, which has the potential of streamlining dispute management practices in the sukuk industry.
Keywords
Acknowledgements
This study was carried out under the general purview of the Fundamental Research Grant Scheme (FRGS) with the ID No.: FRGS13-003-0244 awarded by the Ministry of Education (MOE), Malaysia. The author acknowledges MOE and the International Islamic University Malaysia for their immense financial support. The author also thanks the two anonymous reviewers as well as the Editor of the Journal of International Trade Law and Policy for their valuable comments which have improved the paper tremendously.
Citation
A. Oseni, U. (2014), "Dispute management in Islamic financial institutions: a case study of near sukuk defaults", Journal of International Trade Law and Policy, Vol. 13 No. 3, pp. 198-214. https://doi.org/10.1108/JITLP-12-2013-0034
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited