Role of sharia boards needs modernisation

* username: rupertbu

It is an extraordinary sight. A sharia-compliant finance company is arguing in an English court that it should not have to make good on one of its financial obligations because the obligation was never Islamic.

Yet that is exactly what Kuwait’s The Investment Dar company is arguing as it tries to avoid paying Lebanon’s Blom Bank a return on deposits placed with it.

TID’s argument is that, since its articles of association permit it to engage only in business that is sharia-compliant, if the way in which it calculated the returns to Blom breached sharia law, the contract with Blom is void. As the lawyers say, TID would have acted ultra vires – beyond its powers – in entering the transaction.