Essay: Problem of Islamic Finance Arbitration Laws

The problem found in dealing with Islamic finance disputes outside Islamic countries is also evidenced in the case below. In the case of  International Banking Corp. V. Deutsche Bank, a case which was also filed in New York, the problem of Islamic finance arbitration laws is evidenced. In this case, Deutsche bank claims that International Banking Corp. had entered into foreign exchange transactions with Deutsche bank in two cases which obligated deutsche bank to pay an amount of $59.7 million to International Banking Corp. and in return International Banking Corp. was expected to pay $40 million. Deutsche bank claims That International Banking Corp. did not honor the contact and hence owns the balance to Deutsche bank. International Banking Corp. has filed a case asking for the dismissal of the case due to lack of personal jurisdiction between the two companies . This is another instance where lack of the right jurisdiction can lead to failure of an arbitration process.

A similar case involving  Mashreqbank v. International banking corp. where Mashreq made claims similar to the Deutsche bank case above against International Banking Corp, where it claimed to have transferred $75 million to International Banking Corp. in return for $282 million Riyals which International Banking Corp. did not honor when the amount became due. Analyzing the above cases shows the failure of jurisdiction structures owing to the inclusion of Islamic finances in the case. The structures for arbitration processes involving Islamic finances are not clear when dealing with countries which are non-Islamic such as the United States of America . This can be used as a loophole by some unscrupulous businesses to get unjust enrichment .