The Principle Of Sharia -based Arbitration In The Resolution Of Islamic Banking Disputes

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The Principle of Sharia-Based Arbitration in the Resolution of Islamic Banking Disputes

In the rapidly evolving landscape of Islamic banking in Indonesia, the principle of sharia-based arbitration has emerged as a crucial aspect in dispute resolution. The enactment of Law No. 21 of 2008 concerning Sharia Banking has provided a forum option for Islamic banks and customers to resolve disputes through sharia arbitration, as stipulated in the contract they made. This article delves into the implications of Islamic banking law on arbitration, the validity and jurisdiction of sharia arbitration, and the principles that underlie sharia arbitration in the resolution of banking disputes.

The Implications of Islamic Banking Law to Arbitration

The provisions in the Sharia Banking Law provide a clear legal basis regarding the existence of sharia arbitration as an alternative dispute resolution. Although the decision of the Constitutional Court No. 93/PUU-X/2012 states that the explanation of Article 55 Paragraph (2) of the UUPS/2008 does not have binding legal force, this does not reduce the validity of sharia arbitration. As a forum option outside the religious court, sharia arbitration can still be used as a resolution path as long as there is a written agreement between the dispute parties. This highlights the importance of understanding the implications of Islamic banking law on arbitration, which is a critical aspect in ensuring the effectiveness of sharia arbitration in resolving disputes.

Validity and Jurisdiction of Sharia Arbitration

One of the key focus areas of this research is to analyze the validity and jurisdiction of sharia arbitration both in the perspective of Islamic law and positive law in Indonesia. In this context, sharia arbitration is recognized as a legitimate and recognized method, as long as it is based on sharia principles and an agreement between the parties concerned. This is essential to ensure that the results of arbitration can be accepted by all parties involved. The validity and jurisdiction of sharia arbitration are critical in determining its effectiveness in resolving disputes, and this study aims to provide a comprehensive understanding of these aspects.

Principles in Sharia Arbitration

In this study, it was found that there are several basic principles that underlie sharia arbitration in the resolution of banking disputes. These principles include:

  1. God's Principle: Everything done in sharia arbitration must be based on sharia provisions. This principle is fundamental in ensuring that sharia arbitration is conducted in accordance with Islamic law.
  2. Arbitration Agreement: The basis of the authority of sharia arbitration comes from the agreement agreed by the parties. This principle highlights the importance of a written agreement between the parties in establishing the authority of sharia arbitration.
  3. Good Faith: Every party is expected to be honest and good in the arbitration process. This principle is essential in ensuring that the arbitration process is conducted fairly and without bias.
  4. The Choice of Sharia Law: The parties have the freedom to choose the law in accordance with sharia principles. This principle allows the parties to choose the law that is most suitable for their dispute.
  5. Arbiter Independence: Arbiter must be independent and Muslim. This principle is critical in ensuring that the arbiter is impartial and has a deep understanding of Islamic law.
  6. The Fundamental Difference: The fundamental difference between sharia arbitration and non-sharia arbitration lies in the sharia foundation which is a guideline in the completion process.

Recommendations for the Development of Sharia Arbitration

In the long run, this study aims to become a source of information and references in formulating legislation and law enforcement policies based on sharia outside the Religious Courts. With the rapid development of institutions and Islamic financial transactions, an effective dispute resolution mechanism is needed to maintain good relations between parties. Therefore, there are several recommendations to consider:

  • Socialization: It is necessary to increase socialization regarding the existence of sharia arbitration through print, electronic, seminars, and workshops. This will help to raise awareness about sharia arbitration and its benefits.
  • Amendment to UUAAPS 1999: UUAAPS 1999 needs to be amended to accommodate sharia characters in arbitration, or make special regulations that regulate sharia arbitration. This will help to provide a clear legal framework for sharia arbitration.
  • The Role of Educational Institutions: Educational institutions are expected to compile curriculum relating to sharia business and dispute resolution mechanisms through sharia arbitration. This will help to educate future generations about sharia arbitration and its importance.
  • Basyarnas Development: Basyarnas needs to be developed to expand its existence in all provinces and become an inspiration in the creation of international sharia arbitration instruments. This will help to promote sharia arbitration globally and increase its recognition.

With these steps, it is hoped that the Sharia Arbitration Forum can be the first choice for parties to dispute in solving sharia banking problems and sharia-based businesses in general. The development of sharia arbitration is crucial in ensuring the effectiveness of dispute resolution in Islamic banking, and this study aims to contribute to this development.

Conclusion

In conclusion, the principle of sharia-based arbitration is a crucial aspect in dispute resolution in Islamic banking. The provisions in the Sharia Banking Law provide a clear legal basis for sharia arbitration, and the principles that underlie sharia arbitration are essential in ensuring its effectiveness. The recommendations provided in this study aim to promote the development of sharia arbitration and increase its recognition globally. With the rapid development of institutions and Islamic financial transactions, an effective dispute resolution mechanism is needed to maintain good relations between parties. Therefore, it is essential to develop sharia arbitration and promote its use in resolving disputes in Islamic banking.

References

  1. Law No. 21 of 2008 concerning Sharia Banking.
  2. Decision of the Constitutional Court No. 93/PUU-X/2012.
  3. UUPS/2008.
  4. UUAAPS 1999.
  5. Basyarnas.

Appendix

  1. List of interviewees.
  2. List of documents reviewed.
  3. List of references cited.

Note: The references and appendix are not included in the content, but they are necessary for a complete doctoral dissertation or thesis.
Frequently Asked Questions (FAQs) about Sharia-Based Arbitration in Islamic Banking

Sharia-based arbitration has become an increasingly important aspect in dispute resolution in Islamic banking. However, there are still many questions and concerns about its application and effectiveness. In this article, we will address some of the frequently asked questions about sharia-based arbitration in Islamic banking.

Q: What is Sharia-Based Arbitration?

A: Sharia-based arbitration is a dispute resolution mechanism that is based on Islamic law (Sharia) and is used to resolve disputes between parties in Islamic banking transactions.

Q: How does Sharia-Based Arbitration work?

A: Sharia-based arbitration works by having a panel of arbitrators who are experts in Islamic law and banking. The parties to the dispute agree to submit their case to the arbitrators, who then make a decision based on Sharia principles.

Q: What are the benefits of Sharia-Based Arbitration?

A: The benefits of Sharia-based arbitration include:

  • Fairness: Sharia-based arbitration is based on Islamic law, which is considered to be fair and just.
  • Speed: Sharia-based arbitration is generally faster than traditional court proceedings.
  • Cost-effective: Sharia-based arbitration is often less expensive than traditional court proceedings.
  • Confidentiality: Sharia-based arbitration is a private process, which means that the parties can keep their dispute confidential.

Q: What are the limitations of Sharia-Based Arbitration?

A: The limitations of Sharia-based arbitration include:

  • Limited jurisdiction: Sharia-based arbitration is only applicable to disputes that are related to Islamic banking transactions.
  • Limited expertise: The arbitrators may not have the necessary expertise to deal with complex financial transactions.
  • Limited enforcement: The decisions of Sharia-based arbitration may not be enforceable in traditional courts.

Q: How can Sharia-Based Arbitration be improved?

A: Sharia-based arbitration can be improved by:

  • Increasing awareness: Increasing awareness about Sharia-based arbitration and its benefits.
  • Improving training: Providing training for arbitrators and other stakeholders on Sharia-based arbitration.
  • Developing standards: Developing standards for Sharia-based arbitration to ensure consistency and fairness.
  • Encouraging participation: Encouraging participation from all stakeholders, including Islamic banks, customers, and regulatory bodies.

Q: What is the role of Islamic banks in Sharia-Based Arbitration?

A: Islamic banks play a crucial role in Sharia-based arbitration by:

  • Providing support: Providing support and resources for Sharia-based arbitration.
  • Appointing arbitrators: Appointing arbitrators who are experts in Islamic law and banking.
  • Ensuring compliance: Ensuring compliance with Sharia principles and regulations.

Q: What is the role of regulatory bodies in Sharia-Based Arbitration?

A: Regulatory bodies play a crucial role in Sharia-based arbitration by:

  • Regulating Sharia-based arbitration: Regulating Sharia-based arbitration to ensure consistency and fairness.
  • Providing guidance: Providing guidance on Sharia-based arbitration to Islamic banks and other stakeholders.
  • Ensuring enforcement: Ensuring enforcement of Sharia-based arbitration decisions.

Q: What is the future of Sharia-Based Arbitration?

A: The future of Sharia-based arbitration is promising, with increasing demand for dispute resolution mechanisms that are based on Islamic law. Sharia-based arbitration is expected to become a more prominent feature in Islamic banking and finance, with potential applications in other areas such as trade and commerce.

We hope that this article has provided some answers to your questions about Sharia-based arbitration in Islamic banking. If you have any further questions or concerns, please do not hesitate to contact us.