Islamic Legal Maxims & Their Application in Islamic Finance

The legal foundations of Islamic finance

Shari’a scholars are the centrifuge from which Islamic finance flourishes. Without them, there is no industry. However, the weakness of the industry is the lack of Islamic scholars that can understand both conventional finance and Islamic law. It makes it increasingly important to train scholars with the right tools to apply Islamic law to the financial customs of society.

For better or worse, the definition of Shari’a has been reduced to “God’s law”. Whatever God has said, that is what should be done. However, deciphering God’s law is not easy. Following the death of the Prophet, access to God terminated. Muslims had to gather all the evidence that was available to formulate and understand God’s law. In this endeavour, their evidence of God’s intent was the Quran and veritable sayings and actions of the Prophet (the Sunnah).

Scholars thereafter worked to create a discipline that allowed an objective application of the law to a situation. The accumulation of their efforts resulted in what is known as usul ul fiqh (the roots of the law). Broadly, usul is the way to understand the sources and the methods to deduce positive law (fiqh). The difference between Shari’a and fiqh is that the former is God’s law, which is the legislation enacted by God and his Prophet. Fiqh is the understanding of what God’s law would have been in a situation different to the situation experienced by the Prophet.

In observing the law promulgated by the Prophet, general principles can be extrapolated from his verdicts. These principles can then be used to determine law in new situations. This is known as a qawaid al-fiqhiyya or legal maxims. These legal maxims enable jurists in successive eras to form law while remaining within the boundaries of the general principles that could be extrapolated from observing the life and actions of the Prophet. There are many legal maxims, general in scope but applicable to specific situations to formulate laws. They act as a connecting thread between rulings. Today, no student in an Islamic country can obtain a degree in Shari’a unless s/he has completed specific legal maxim courses, and no graduate may aspire to be part of the judicial system unless s/he has mastered this field of Islamic law. Understanding legal maxims is a fundamental element of an Islamic jurist’s education.

Islamic legal maxims and their application in Islamic finance

ISRA’s “Islamic Legal Maxims and Their Application in Islamic Finance” offers a profound insight into these legal maxims and their application in determining Islamic financial law. This is perhaps the first book to discuss legal maxims in English. No comprehensive book in English has been written on this field, unlike other aspects of Islamic law such as usul and different categories of fiqh.

But there is much literature in Arabic, and this book relies heavily on this literature as evidenced by its bibliography. The number of English titles is limited. The book includes 40 maxims (seen in the table) which are relevant to Islamic finance, and therefore is not a comprehensive articulation of all Islamic legal maxims. Concentrating on Islamic finance allows the reader to see the practical application of a juristic tool in the derivation of Islamic finance law. The book itself is divided into 40 maxims or 40 chapters and each chapter is divided into four sections. The Arabic of the maxim along with a translation is provided at the top of each chapter.

Qawaid al-fiqhiyya (Legal Maxims)

1. Judgment is to be based on knowledge and understanding
2. The presumption of validity and permissibility applies to all contracts and conditions
3. The fundamental requirement in every contract is justice.
4. The general principles conferring validity of contracts is the consent of both parties, and the effective terms and conditions are what they agreed.
5. Deferment constitutes a part of the price.
6. Matters are determined by intentions.
7. In contracts, greater weight is given to intention and meaning than words and forms.
8. Giving effect to words is preferable to giving them no effect.
9. Certainty is not overcome by doubt.
10. No legal consideration is given to conjecture that is obviously tainted by error.
11. Freedom from liability is the pre-existing and therefore prevailing state.
12. The basic rule is that a thing remains in its original state.
13. The presumptive rule is that transitory attributes do not exist.
14. The presumption is that a development of legal significance is only of recent occurrence.
15. Hardship begets facility.
16. That which is easy cannot be waived due to that which is difficult.
17. Necessities render the prohibited permissible.
18. Necessity is to be assessed and treated proportionally.
19. Need, general or specific, is treated like
20. necessity.
21. Harm is to be eliminated
22. Averting harm takes precedence over achieving benefit.
23. When the impediment is removed, the original Shari’a rule is restored to full effect.
24. Violations may be tolerated in the means of performance but not tolerated in the objectives.
25. Custom is an arbiter.
26. A matter recognised by custom is like a [contractual] stipulation.
27. Consideration is given to the predominant and widespread, not to the rare.
28. Evolution of Shari’a rulings [based on custom and Ijtihad] due to changing times is not to be denied.
29. Benefit goes with liability.
30. Liability accompanies gain.
31. Legal permission negates liability.
32. Ijtihad is not set aside by another Ijtihad.
33. Acts of those with authority over people must take into account the interest of the people.
34. It is impermissible to dispose of another’s property without authorisation.
35. Subsequent ratification is similar to prior approval.
36. If permissibility and prohibition coincide, prohibition prevails.
37. What is prohibited to take is also prohibited to give.
38. What is auxiliary [to something in fact] is auxiliary [to it in ruling].
39. When a thing becomes null and void, what is included in it becomes null and void too.
40. What has already been engaged cannot be engaged by another.
41. Conditional promises are binding.

The four sections are as follows:

This book relies heavily on this literature as evidenced by its bibliography. The number of English titles is limited. The book includes 40 maxims (seen in the table) which are relevant to Islamic finance, and therefore is not a comprehensive articulation of all Islamic legal maxims. Concentrating on Islamic finance allows the reader to see the practical application of a juristic tool in the derivation of Islamic finance law. The book itself is divided into 40 maxims or 40 chapters and each chapter is divided into four sections. The Arabic of the maxim along with a translation is provided at the top of each chapter.

The four sections are as follows:

1. Explanation of the Maxim

In this first section following the title, a hermeneutic approach is adopted in which brief explanations of words are provided as well as discussions on legal principles of the Shari’a. These discussions of the Shari’a serve to clarify words of the maxim. The reader is then afforded an insight into the legal interpretative process that is involved in determining Islamic law. It involves an understanding of language, its construction, the meaning imbued in the words and the context in which it is applied.

The brief discussions alert the reader that deriving Islamic law is not a simple case of “here is the rule, now apply it.” It is far more complex and profound.

1. Authority of the Maxim

The second section identifies the channel from which the maxim has derived its authority which is typically from the Quran and the Sunnah. There are also references to the opinions of different legal schools for certain maxims. Interestingly, the hadiths used are referenced from a number of hadith collections, and there are occasional comments in the footnotes on the classification of the hadiths and their authenticity. It is suggestive that even in the sayings of the Prophet, there can be doubts as to its veracity. Subtly, then, the book, by not exploring the extensive disputes on hadith classification, encourages a more interpretative approach to deriving law, rather than a slavish following of text. During the formative period of Islamic law, the categorization of legal scholars and hadith scholars displayed the difference between the two and rallied against a prescriptive approach of simply following hadith. Hadith scholars concentrated on the veracity of hadith;

legal scholars had much broader concerns. Formulating a legal opinion was not a literalist endeavour.

In the discussion on Maxim 7 (In contracts, greater weight is given to intention and meaning than words and forms) the authors point out that Shafii’s believed that greater weight should be given to words and forms. However, little time is spent dwelling on this point and there is preference for the more substantive approach of the other schools. Consequently, one can identify the author’s position against the formalist approach to Islamic law especially in Islamic finance, and encourage more focus on the substance and effects of the transaction. It is noteworthy that the book references a number of different scholars and opinions. The book itself is 249 pages with each discussion on a maxim taking up three to eight pages. To condense the amount of information available in a short amount of space is quite impressive

• Applications of the Maxim in Fiqh

The next section looks at how this maxim relates to fiqh by listing a number of practical examples. These examples can be related to both commercial and non-commercial practices. For instance Maxim 10 – No legal consideration is given to conjecture that is obviously tainted by error – there is a brief discussion on impurities on clothes during prayer. The applicability of legal maxims can be quite broad and operate in a number of different fields from law relating to worship to criminal law. Hence, the book has applicability to fields beyond Islamic finance.

• Applications of the Maxim in Islamic Finance

The final section lists examples of the application of the maxims in the Islamic financial industry. Examples include bank practices, AAOIFI standards, central bank opinions and those of multilateral organizations. There are, however, more references to the practice of Malaysia which is not surprising given that ISRA originates from Malaysia. It would have been worthwhile if there were examples of differences of opinions in the use of the maxim between Malaysian countries and the GCC. The only difference of opinions explored is between the canonical schools of thought. For instance, in Maxim.

6 – Matters are determined by intentions – there is a brief discussion on the difference of opinion on inah between the schools. Dispute between the contemporary scholars in GCC and Malaysia on inah is not mentioned. It would have been informative for the reader to see how these maxims, in the application to contemporary Islamic finance, can lead to contrasting results.

These four sections make up the infrastructure for the discussion on each maxim. For a few maxims, there are additional sections. There is a system in the layout of the maxims, however, due to the general nature of the maxims, this system can be impaired at times. In general, Islamic law has five main maxims from which there are sub-maxims. The book places these maxims in different places and discusses some of their corollaries.

1. Actions are judged by intentions (Maxim 6)
2. Certainty is not superseded by doubt (Maxim 9)
3. Hardship begets facility (Maxim 15)
4. Harm is to be eliminated ( Maxim 20)
5. Custom is an arbiter (Maxim 24)

However, these corollaries can be found away from prevailing maxim. For instance, one corollary of Maxim 9 is “Unlikely possibilities are given no consideration”. It is not immediately discussed but finds similarity in Maxim 26 – Consideration is given to the predominant and widespread, not the rare. The authors class this as a subsidiary of Maxim 24, but admit that its scope is wide. Thus while there are leading maxims, there are likely to be overlaps between principles.

Read the book?

Overall, the book is a welcome addition to not only Islamic finance but also to our understanding of Islamic law. Indeed, much can be gathered by seeing the application of the maxim to real-life, contemporary situations. Focus on classical Islamic law can far too often be unrelated to the experience of modern man. This can make Islamic law abstract and a fascination for historical junkies. We see in the Western university curriculum, Islamic law subsumed under the banner of Islamic studies, a much more amorphous umbrella.

The richness of Islamic law lies not so much in positive law but rather in its derivation, and the legal maxims offer a remarkable insight into the deductive faculties of classical Islamic scholars. The application of the maxims to Islamic finance shows its perennialism and also its universality because they are being used in contemporary contexts far different to the time of the Prophet and thereafter. For the legal reader – Islamic or Western – this book is informative and succinct. It does not dwell on any one maxim for too long, and there is enough information within to reveal the complexity involved in deriving law. For non-legal readers, this book may be too prosaic and specialist, but the succinctness does offer a peek into the challenges facing an Islamic scholar in deriving law.

In the preface, Dr Laldin hopes that the book provides insight to unbiased readers about the Shari’a’s overriding concern for promoting human wellbeing. While there are maxims which relate to human well-being, any critique of Islamic law relates to positive law and not to how law is derived. The unbiased reader is unlikely to make that connection. Nevertheless, s/he should be impressed by erudition of the jurists deriving the law. This book clearly reflects the richness of Islamic legal thinking and how it is not an anachronistic vestige of yesteryear but has contemporary applicability for Islamic finance and beyond.