Shariah’s Black Box

The first order of business for the attorney providing advice in the context of disclosure laws to a U.S.financial institution interested in SCF should be the following question: How intimate is the connection between SCF and Shariah itself? In legal terms, how material is Shariah to SCF? If Shariah is a material part of SCF, the attorney must confront the very real likelihood that it is a material fact of SCF in the context of disclosure laws. While the answer to the question might appear self evident – that is, Shariah has everything to do with SCF – all of the extant literature by legal scholars and practitioners suggest that even if Shariah is a material component of SCF it is not material to any of the disclosure laws because Shariah is treated as a black box that merely turns out rules requiring objective filters to be coded into a software program and specific kinds of contractual arrangements to avoid non-Shariah-compliant interest and uncertainty.

But as the preceding pages have already suggested, when secular lawyers treat Shariah as a black box that does not much concern them, except in the specific rulings relative to a given investment or transaction, this amounts to a willful avoidance of material facts. Those willfully avoided material facts are the endogenous elements of Shariah that result in the “rules and principles” of SCF.[154] Indeed, as indicated above, according to the proponents and practitioners of SCF — Shariah is not simply an approach to interest-free, ethical Islamic business practices or investing. Invariably, SCF is described by its proponents, practitioners, and scholars, as the contemporary Islamic legal, normative, and communal response to the demands of modern day finance and commerce. What makes the response “Islamic” or one pursued almost exclusively by Muslims[155] is the fact that this legal, normative, and communal response to modern finance is framed and regulated by Shariah authorities ruling on what Shariah permits and what it prohibits. Thus, whether called Shariah-compliant finance, Islamic economics and finance, or even “ethical” investing, the one unifying characteristic of SCF in all of its ramifications is the appearance of authoritative Muslim Shariah scholars who, individually and collectively through various manifestations of consensus[156], define the “rules and principles” of SCF and set out how a Shariah-adherent Muslim may “lawfully” engage in commerce, investing, and finance.

Further, the Shariah authorities are clear: SCF is not some discreet or segregable component of Shariah. It is by all accounts a fully integrated discipline within the corpus juris of Shariah which, in turn, is a holistic, all-encompassing way of life that sets out legal mandates, norms, custom, and preferences to guide the Shariah-adherent Muslim in every single aspect of life — be it religious ritual, charity, business matters, family issues and inheritance, war against the infidel, political life, or the afterlife. Shariah is not divisible, moreover, in the sense that one might extract the SCF “commercial legal code” from Shariah and end up with a body of laws articulating a secular code of business conduct. This is demonstrated quite clearly by the prohibitions against businesses that trade in pork products (seemingly a strictly dietary code issue) or the leasing of a building to a church (quite obviously a theological consideration informing a business law issue).[157] Even in the legal rulings relating to whether a Muslim bank or individual may receive interest from deposit accounts, the decision turns in large part on whether the deposits reside in a jurisdiction called the “abode of war” where non-Muslims predominate or the “abode of peace” where Muslims predominate.[158]

The inclusiveness, universality, and indivisibility of Shariah are not just evidenced by the published work of the classical and contemporary Shariah authorities on the one hand and the secular academic scholars who treat Shariah and its jurisprudence as a discipline for study on the other. Especially important for the lawyer attempting to determine what if anything the “Shariah” of SCF is in the context of disclosure laws, and what if anything of this “Shariah” is material and subject to the duty to disclose, is what Shariah actually is in practice. An attorney in search of the actual presentation of Shariah as an extant and authoritative basis for law in modern times has the opportunity to examine several Muslim regimes which have implemented Shariah as the law of the land. The best examples of such implementation are Iran, Saudi Arabia, and Sudan.[159] The Taliban of Afghanistan had also imposed a fully authoritative Shariah and many other Muslim regimes have utilized aspects of Shariah to complement a non-Shariah secular code. Obviously, the more a country’s laws are based upon Shariah, the better the evidence of what Shariah is in actual practice devoid of all the academic theorizing and parsing.[160]

It is not within the scope of this memorandum to determine what Shariah is in fact or what it means to the contemporary Shariah authorities sitting as the final arbiters of SCF. Examining the literature of Shariah over the course of its history, determining what Shariah is in Muslim countries which apply traditional Shariah rules and principles and, importantly, studying the published rulings by contemporary Shariah authorities on what Shariah is[161], what its purposes are, and what Shariah considers the appropriate means to achieve those ends, are, however, all part of any essential inquiry into the material endogenous elements of Shariah subject to disclosure.