Spirit or the Letter of the Law?

UK Islamic Finance Law does not purport to settle this age-old debate (which long predates the advent of modern Islamic banking and finance, and extends well beyond the reaches of commercial or economic life): which matters more, the spirit or form of Islamic law? A facile answer would be that it is a forced and false choice as the two may (and quite likely do) matter equally, with their respective importance in a given transaction or exchange turning on the facts.

Setting that answer aside, UK Islamic Finance Law operates from the assumption that the letter of the law — in other words its forms (including legal fictions) and nominate legal structures are highly pertinent to the modern industry even if there can and should be no final agreement that values should be relegated to a position secondary or subordinate to the letter of the law. Compared to forms and formal considerations, values or the spirit of the law are necessarily — definitionally even — more subjective and therefore generative of greater uncertainty, which is inimical to the development of a novel and a unique variant of modern banking and finance.

Therefore UK Islamic Finance Law does not subscribe to the view of some authors that because a legal requirement is essentially one requiring formal rather than substantive compliance that it is therefore hollow or otherwise unimportant; an implication of this view is that the fact a contract in Islamic law may describe a transaction that is economically equivalent to a contract compatible with (or even characteristic of) conventional finance does not thereby render adherence to Islamic law nugatory or meaningless — that difference formal though it may be is at least partly the raison d’être of Islamic law and the modern industry of Islamic banking and finance, whether in the UK or wherever else on the globe it may continue to develop and change over time.