Malaysia continues to amalgamate Islamic finance into the country’s legal system - IFN

Malaysia continues to amalgamate Islamic finance into the country’s legal system

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MALAYSIA: The state’s Law Harmonization Committee established under Bank Negara Malaysia has released a report on the current progress of its legal initiatives. Founded in 2010, the committee’s primary objective is to reinforce the Malaysian legal system in terms of certainty and enforceability of Islamic finance laws. Since its inception, the committee has had under its purview a total of nine legal issues under revision, which pertains to 17 local laws. The Law Harmonization Committee yesterday released a report stating that recommendations for legal amendments on four issues have been made and escalated to relevant government ministries, departments and agencies. These recommendations include: the incorporation of late payment charges on Islamic judgement debt into the Malaysian court rules; better access to Islamic financing for consumers in terms of charging reserve lands in all states; the recognition of Islamic financing in the National Land Code 1965 and the appropriate modifications in the Companies Act 1965 to enable more efficient collateralization of commodity Murabahah transactions. The first recommendation has already been fully implemented whilst the remaining three are reported to be under implementation. Another issue concerning the implications of Wa’ad on the Contracts Act 1950, the Civil Law Act 1956 and the Specific Relief Act 1950, is said to be resolved in due course, as it requires further research in terms of its relevant Shariah aspects. Wa’ad is generally used in Murabahah or Istisnah transactions, and in an event of breach it currently does not carry a legal sanction. Moving forward, the committee aims to focus on consequential legal issues which may arise from the issuance of Shariah contracts pursuant to the Islamic Financial Services Act 2013.