The lacuna in judicial settlement of Islamic banking disputes in Tanzania

Abstract

The appropriate dispute settlement mechanisms for Islamic banking pose critical legal challenges and raise great concern among legal fraternity and society. In Tanzania, there are various ways of solving Islamic banking disputes, which include judicial settlement, arbitration and mediation. However, the experience in Tanzania shows that judicial settlement is the most applicable method. This method to a certain extent, does not provide appropriate remedies to the disputing parties since some of the existing laws and courts’ procedures do not accommodate the principles of Islamic banking. Therefore, this study aims to analyse whether the current judicial settlement of Islamic banking disputes in Tanzania provides the appropriate remedies for disputing parties. The study confines to the court structure, laws and procedures that govern Islamic banking disputes. The study analyses the situation by employing qualitative methods by adopting interviews from different respondents. The findings of the study show that the current judicial settlement of Islamic banking dispute does not guarantee appropriate remedies to the disputed parties since the laws exempt application of Islamic law in commercial transactions, the laws are silent on the unilateral promises, and the seller has no duty to inform the purchaser any defect of the goods. In addition, most of the laws contain provisions which allow interest, a debtor can be discharged from his debt without paying anything, after declared a bankrupt, and members of the company may avoid liability under a corporate veil. Again, the application of summary procedure denies defendant’s right to be heard, expert opinion is required for foreign law only, and most of the judges have limited knowledge of the principles of Islamic banking. Therefore, the study recommends some measures to ensure judiciary settlement provides appropriate remedies in Islamic banking disputes. The measures include; establishing a Central Shariah Advisory Council, provide training for judicial officers and assign cases to judges who have knowledge of Islamic banking. Also there is a need for amendment of some provisions of laws to allow the application of Islamic law in commercial transactions, to recognise a unilateral promise, to make a bankrupt pay his debt and interest free in remedies. In addition, court procedure should be amended to make expert opinion binding to the court, to remove summary procedure and to allow payment of compensation (ta’wid).