<p>As the Middle East grows as a hub for dispute resolution, the role of Sharia law  in the legal affairs of the region is becoming an increasing cause for concern.  Paul Turner, head of arbitration at Al Tamimi &amp; Co in Dubai, and Robert  Karrar-Lewsley, a senior associate at the same firm, consider its impact on  arbitration and whether it gives rise to public policy defences to enforcement  under the New York Convention.<br /><br /><strong>What is the  Sharia?</strong><br />The Arabic word &ldquo;Sharia&rdquo; literally means &ldquo;the way&rdquo; or &ldquo;the  path&rdquo;. It refers to the divine law that Islam teaches has been prescribed by God  to govern human life. Muslims believe that this divine law has been revealed to  different communities though various prophets throughout the ages, concluding  with the Prophet Mohammad.<br /><br />The divine law (Sharia) is found in two  sources, the Quran and the Sunnah. The Quran is the written collection of  revelations verbally communicated to the Prophet Mohammad. The word &ldquo;Quran&rdquo;  literally means &ldquo;the recitation&rdquo;, and is believed by Muslims to be the direct  word of God. The Sunnah consists of authenticated stories regarding the customs  and practices of the Prophet Mohammad, who was divinely guided. Together these  two sources constitute a basic divine law, which for the believer is immutable  and absolute. The Sharia is not, however, solely concerned with law but also  comprises rules regarding moral, economic, social and political issues. In fact  only 350 of its estimated 6,616 verses address legal issues. Many of its  provisions are unique to the time and place of revelation (7th century Arabia),  while others are universal and perennial.<br /><br />It is important to distinguish  between Sharia law and Islamic law, because they are terms that are often  mistakenly used synonymously. Islamic law includes the Sharia, but also includes  the rulings of scholars and courts on the interpretation and application of the  Sharia. Since the Quran and Sunnah are not self-explanatory, the role of the  Islamic scholar and the courts is to interpret and develop the Sharia into a  robust code of rules and principles so as to assist the wider Muslim community  to live in accordance with God&rsquo;s law. These rulings and laws are created using  &lsquo;fiqh&rsquo; (literally &ldquo;understanding&rdquo;, or jurisprudence) and &ldquo;ijtihad&rdquo; (legal  reasoning). Unlike the Sharia, which is a &ldquo;revealed&rdquo; law that is divinely made,  the rulings of judges and scholars are man-made and so change over time as  attitudes and beliefs develop. For Sunni Muslims, who form the vast majority,  the four main authoritative schools of Sunni Islamic jurisprudence are the  Hanafi, Maliki, Shafi&rsquo;i and the Hanbali, all named after their respective  founders and established as far back as the 10th century.&nbsp;<br /><br />All this means  that, although the Sharia is static and unchanging, Islamic law is dynamic &ndash; it  alters as each generation interprets the Sharia. Many centuries of scholarly and  judicial debate regarding the interpretation and application of the Sharia have  given rise to competing schools of thought: including modernist, traditionalist  and fundamentalist schools. To give an example of how Islamic law interprets and  develops the Sharia, at the time the Quran was revealed slavery was an everyday  part of life in Arabia (as it was in most parts of the world). Accordingly there  are many verses in the Quran, as well as stories of the Prophet, that address  slavery and how slaves are to be treated. Although the Quran recommends that  slaves be freed, it does not expressly forbid slavery. However not even the most  fundamentalist or traditional Muslim advocates that slavery be made lawful, and  indeed the consensus amongst scholars today is that slavery is contrary to the  Sharia.<br /><br />Thus Muslims are not the passive recipients of divine knowledge  they are sometimes portrayed to be, but are participants in a debate as to what  the Sharia consists of and how it is to be applied &ndash; with ideas developing over  time and differing from one country to another.&nbsp; The amorphous nature of Sharia  law can be difficult to appreciate as one often reads that a product is  &ldquo;Sharia-compliant&rdquo;, or that a state applies &ldquo;Sharia law&rdquo;. In fact, the term  Sharia no more denotes a cohesive, codified law than the term &ldquo;natural law&rdquo;  does.<br /><br /><strong>The role of Sharia in national laws in the Middle East  today </strong><br /><br />Given the origin of the Sharia it should be of no  surprise that, in many Muslim states, it is explicitly referred to in their  constitutions as a primary source of law. It is often applied through three  gateways. Taking the UAE as an example, the first gateway is the constitution,  which states at Article 7 that the Sharia shall be &ldquo;a main source of  legislation&rdquo; (although not the source of legislation, as it is in some other  states). Secondly, the Sharia is to be applied where legislation is silent (this  rule is found in Article 1 of the UAE Civil Code). The third gateway is that  when interpreting the law, the courts are to take notice of Islamic  jurisprudence (fiqh). This is found in Article 2 of the UAE Civil  Code.<br /><br />However, people should not be misled into believing that lawyers  and judges in the Middle East are constantly referring to the Quran and  reviewing it for applicable legal provisions, before moving on to the national  statutes. The Sharia really acts as a kind of common law, and its influence on  national laws varies widely between states. In some countries the national laws  are heavily influenced by former colonial regimes and so are similar to European  legal systems, whereas in other states the influence of the Sharia is more  apparent. At one end of the spectrum is Turkey, which has an almost exclusively  Muslim population but removed Sharia from its legal system in order to produce a  secular state. At the other end, Saudi Arabia has a constitution that states (at  Article 1) that the Quran and the Sunnah are the country&rsquo;s constitution. In  Egypt, Sharia is the source of legislation, but the country does not adopt  Sharia&rsquo;s criminal provisions and has a modernised family law. Each country  therefore needs to be considered separately.<br /><br /><strong>The Sharia and  arbitration<br /><br /></strong>Arbitration, in some form, has been practised in  Arabia for thousands of years. In pre-Islamic Arabia, tribes would settle  disputes by referring them to a neutral third party who was considered  trustworthy and respectable. This form of dispute resolution was subsequently  recognised and confirmed by Islam, and there are stories regarding the Prophet  Mohammad being asked to act as an arbitrator due to his personal qualities both  before and after becoming a prophet. Arbitration is also referred to and  promoted in the Quran, most explicitly at verse 4:35, which states that &ldquo;If you  fear dissention between a married couple, send forth an arbiter from his family  and an arbiter from her family. If they desire reconciliation, God will bring  them together&rdquo;. The Quran and the Sunnah repeatedly stress the benefits of  settling disputes quickly and discreetly, and at a time when courts did not  exist the arbitral process was the only means of achieving this.<br /><br />The  process in those days was, however, quite different to what we consider  arbitration to be today. It was often more akin to conciliation, with the  arbitrator liaising between the parties to find a solution to a dispute rather  than the parties formally presenting their case before the arbitrator, who would  then decide the matter on the application of the law. Further, arbitrators were  often considered to be the representative of the party that had nominated them,  and were not always required to act in a neutral and impartial manner. The award  rendered was binding but not enforceable (there being no courts), so to ensure  compliance parties would be asked to provide security before any decision was  made.<br /><br />Nonetheless, history shows that arbitration is not a process alien  to or incompatible with the Sharia. On the contrary, it is specifically  recommended by it and all the four main schools of Islamic thought endorse it,  although their approaches are different. For example in the Hanafi school,  arbitration is closely connected with conciliation and the award is considered  as having less force than a court judgment. In contrast, in the Hanbali school  (which is considered the most conservative of the four main schools) an award is  just as binding as a court judgment, and the arbitrator must be as qualified as  a judge. This is another illustration of how, although the Sharia law remains  the same, its interpretation and application can vary widely and change over  time.<br /><br />Broadly speaking, the Sharia rules on arbitration are not unusual  to modern practitioners. All four main schools agree that there must be a  dispute, and that there must be an agreement by the parties to submit the  dispute to the arbitrator; they also agree that all commercial matters can be  arbitrated. It has been said that Sharia does not allow parties to agree to  arbitrate future disputes, but this does not prevent conventional arbitral  agreements being used in the Middle East, including in Saudi Arabia where such  clauses are explicitly allowed under Article 1 of the Arbitration Law.  Similarly, in Islamic jurisprudence there is much debate as to whether an  arbitral award is binding, but in practical terms all Middle Eastern states  accept that they are. Finally, under traditional Sharia principles, the  arbitrator must be a male Muslim, but Saudi Arabia is the only country in the  Muslim world to enforce this rule.<br /><br />In practice, arbitration proceedings  are not greatly influenced by the Sharia, and those who wish to undertake an  arbitration in a Muslim country will only need to consider the arbitration law  in that country. Many countries have undergone modernising reforms in recent  years, and modern arbitration laws can be found in many Middle Eastern states,  such as Bahrain, Dubai, and Qatar.<br /><br /><strong>Sharia and public  policy</strong><br /><br />The main concern raised regarding Sharia is that it may  make it difficult to enforce arbitral awards in the region because there is  always the risk that the award will be deemed non-compliant with a Sharia  principle (such as the rule against interest), and so be found to be contrary to  public policy and unenforceable. Although it is generally the case that Muslim  states will consider non-compliance with (their understanding of) the Sharia a  breach of public policy (as stated explicitly in Article 3 of the UAE Civil  Code, for example), in practice&nbsp; these fears are largely unfounded.<br /><br />With  the exception of Iraq, Yemen, Libya and Sudan, all the Middle Eastern and Muslim  countries are signatories to the New York Convention. Many, furthermore, have  acceded to it without making any reservations (in contrast to the US, the UK and  France). Under Article V(2)(b) of the convention it is open to all signatory  states to refuse to enforce a foreign arbitral award on the basis that the award  is contrary to the state&rsquo;s public policy &ndash; a provision that can be applied  inconsistently because of the lack of definition of &lsquo;public policy&rsquo;, and because  the concept is interpreted differently from country to country. On occasions  this has led to awards being refused for unforeseen reasons. For example, an  award was refused enforcement by the Chinese courts in the 1970s on the basis  that it related to the performance of heavy metal music in China, which at that  time was considered to be contrary to social and public interests. It is  unlikely that this would be the case today.<br /><br />Given the flexibility with  which the Sharia is applied in the national laws of modern Muslim states, there  is no basis for believing that it will cause problems when it comes to the  enforcement of awards. Those states that are supportive of arbitration will be  slow to set aside an award on the grounds of public policy (either because of an  infringement of Sharia law or otherwise), whereas those that are more wary of  the process may look to the Sharia for a pretext to refuse enforcement. The  dominant issue for practitioners, then, is not whether a particular state  applies the Sharia, but its attitude to arbitration.<br /><br />Practitioners must  accept that the enforcement of foreign arbitral awards will never be a certainty  in the Middle East, just as it will never be a certainty in any region. There  will always be occasions where the public policy exception will be used because  the award violates a state&rsquo;s basic notions of morality and justice, even if they  have a well-established pro-arbitration policy. For example, in the 1998 case of  Soleimany v Soleimany, the English courts refused to enforce an award that arose  from a contract relating to an illegal operation to smuggle rugs out of Iran.  Under the applicable law (Jewish law) the illegality did not impede the claim,  but the English courts found that it was against the public policy of England  for an illegal contract to be enforced.<br /><br />Furthermore, domestic awards must  comply with domestic laws to be enforced at the seat, and this is so in the  Middle East as in other parts of the world. Those unfamiliar with the region  need therefore to seek advice from local practitioners to avoid falling foul of  local practices. For example, the Dubai courts have ruled that if an arbitral  award is not signed by the arbitrators on every page (or if the signed page  containing the award does not also contain part of the reasoning) then the award  will not be enforced. This is because, under UAE law, an award simply does not  exist unless the arbitrator has signed it to evidence both the award and the  reasoning (whereas in England, for example, the award simply needs to be  signed).<br /><br />Finally, there is a common assumption that, because interest is  forbidden under Sharia law, awards granting interest will not be enforced in  Muslim countries. This is not the case. Although it is commonly accepted that  Sharia forbids interest, the great majority of Muslim states have legalised it,  and only a few continue to forbid it. The UAE courts, for example, have stated  that the charging of interest is in the public interest and so permissible, even  though it is contrary to Sharia law. Even in those states that continue to ban  interest, such as Saudi Arabia, the rest of the award will be enforced, assuming  it can be severed from that part which relates to interest.<br /><br /><strong>The  usual questions</strong><br /><br />The mere fact that a country enforces Sharia in  some form, or ostensibly gives it prominence, should not concern arbitration  practitioners. Indeed its impact on their arbitration is likely to be no more a  matter of consideration than the impact of Christian values on an arbitration in  Western Europe. When considering whether to conduct an arbitration in a Muslim  country, or assessing how easy it may be to enforce an award, practitioners  should instead focus on the usual questions. Does the country have a modern  arbitration law? Does it have courts that are arbitration-friendly, efficient,  and generally permit enforcement?&nbsp; Is there any case law relating to the  question of whether an award might be set aside for public policy &ndash; and if so do  the courts construe this concept widely or narrowly? Only local counsel will be  able to give reliable answers to these questions - we recommend practitioners  seek advice at an early stage, or they risk overlooking one of the most diverse  and dynamic commercial regions in the world.<br /><br /><strong>Cases  referenced</strong><br /><strong>Soleimany v Soleimany [1999] QB  785.</strong><br /><strong>First Published in Global Arbitration Review, Volume 6  Issue 3</strong></p>