Shariah’s Black Box

[90] While the terms “certainty, consistency, predictability, and transparency” are oft-used in the law in this context, this memorandum borrows these precise terms and their meanings from one of SCF’s biggest advocates and one of the most influential of the legal practitioners making a career of SCF in Michael J.T. McMillen, Islamic Shariah-compliant Project Finance: Collateral Security and Financing Structure Case Studies, 24 Fordham Int’l L.J. 1184 (2001).

[91] As discussed supra at notes 60-62 and accompanying text, there is no universal standard of authority or hierarchy for Shariah authorities. This fact alone and the development of authoritativeness is part of the black box of Shariah.

[92] See, e.g., McMillen, supra note 88, at 1196, n.14.

[93] According to Shariah doctrine rooted directly and firmly in the Qur’an, and agreed upon by all legal schools, no secular law can take precedence over Allah’s divine law: “Whoever does not follow the revealed law and does not judge according to it is counted an unbeliever.” See, e.g., Al-Azami, supra note 29, at 12; see also Coughlin, supra note 24, at 90:

Known among Islamic jurists to take a more “liberal” view toward Islamic law, Mohammad Hashim Kamali, in his Principles of Islamic Jurisprudence, nonetheless comes down four-square on the notion of the absolute sovereignty of Allah that necessarily pre-empts all other forms of sovereignty – including the democratic concept of sovereignty of the people.

The blending of secular law and Shariah as it has unfolded in many Muslim countries would appear to be ipso facto evidence of the failure to tame Shariah since there are no Muslim dominated countries that one might call “mostly free” with real representative government except possibly Turkey and Indonesia. Most observers recognize Turkey’s success has come at the expense of “religious freedom” since the Kemalists and their use of the army to suppress the public expression of Islam and Shariah is well documented. Indonesia is changing for the worse due in large part to the growing violence against non-Muslims which in turn is due in large part to the increasing influence of Shariah. See, e.g., Freedom House, Country Reports,  available at https://www.freedomhouse.org/template.cfm?page=21&year=2007 (last visited Jan. 28, 2008) [hereinafter Freedom Survey 2007]. For a careful analysis of the extent to which Shariah is codified as the law of the land in Muslim countries, see Tad Stahnke & Robert C. Blitt, U.S. Comm. on Int’l Religious Freedom, The Religion-State Relationship and the Right to Freedom of Religion or Belief: A Comparative Textual Analysis of the Constitutions of Predominantly Muslim Countries (Mar. 2005) [hereinafter Stahnke & Blitt, Religious Freedom Shariah Report], available at https://www.uscirf.gov/countries/global/comparative_constitutions/03082005/Study0305.pdf (last visited Jan. 28, 2008).  For an examination of “religious freedom” in such Muslim countries as Indonesia, Egypt, Iran, Saudi Arabia, see U.S. Comm. on Int’l Religious Freedom, Annual Report (May 2005), available at https://www.uscirf.gov/countries/publications/currentreport/2005annualRpt.pdf#page=71 (last visited Jan. 28, 2008). For the growing influence of Shariah in Indonesia, see Tom A. Peter, At Massive Rally, Hizb Ut-Tahrir Calls For A Global Muslim State, Christian Science Monitor, Aug. 14, 2007, available at https://www.csmonitor.com/2007/0813/p99s01-duts.html (last visited Jan. 28, 2008). For a good discussion of “modernist legislation” vis-à-vis Shariah in Muslim countries, albeit somewhat dated, see Schacht, supra note 62, at 100-111.

[94] Certainty, consistency, predictability, and transparency in transactional law are never perfect but operate within a range of comfort for investors. The market tends to step in and price deals inversely to their approximation of these goals. As transparency goes down, price goes up until the deal or product just is no longer in reach of the demand’s willingness to pay.

[95] For a SCF-friendly practitioner’s view of these problems, see McMillen, supra note 88.

[96] The existence of the “corporate veil” to protect the individual from liability is a good example of this “form” over “substance.” Even though an individual might “maintain the corporate formalities,” in substance he is acting as the sole entrepreneur but the law and the policy behind the law shield him from personal liability to promote the risk taking inherent in commercial endeavors. For a discussion of this “legal fiction,” see Sanford A. Schane, The Corporation Is A Person: The Language Of A Legal Fiction, 61 Tul. L. Rev. 563 (1987).

[97] Even this is not exactly true. According to some scholars, interest was once not divinely prohibited per se. But the debate about the divinity of this prohibition as it exists today is not open to a societal or political discussion and conclusion. Rather, it is confined to the Shariah black box entrusted to the Shariah authorities. See generally Kuran, supra note 18; El-Gamal, supra note 18.

[98] See, e.g., Text of the Historic Judgment on Interest Given by the Supreme Court of Pakistan, Albalagh, https://www.albalagh.net/Islamic_economics/riba_judgement.shtml (last visited Jan. 28, 2008).

[99] Islamic scholars in academia have given this issue much attention. See, e.g., Mahmoud A. El-Gamal, An Economic Explication of the Prohibitions of Riba in Classical Islamic Jurisprudence, in The Proceedings of the Third Harvard University Forum on Islamic Finance: Local Challenges, Global Opportunities 29-40 available at https://www.ruf.rice.edu/~elgamal/files/riba.pdf (last visited Jan. 28, 2008); see also Kuran, supra note 18; McMillen, supra note 87, at [page number] n.2; Timur Kuran, The Genesis Of Islamic Economics; A Chapter In The Politics Of Muslim Identity, Social Research (Summer 1997), available at https://findarticles.com/p/articles/mi_m2267/is_n2_v64/ai_19652892/pg_1 (last visited Feb. 1, 2008).

[100] This would be the case as a matter of theory, prudence, and actual practice. Theory: the lawyer is not an expert; prudence: the lawyer’s involvement would expose him to accusations of tampering with divine law, extending beyond his area of expertise, and for disturbing the lines of authority and discipline in a team effort; actual practice: lawyers are not Shariah authorities and use good judgment in not pretending to be such. See supra note 71; DeLorenzo & McMillen, supra note 34.