Mehmet Mucahit Arvas - How Do The UK Courts Apply and Interpret The Islamic Law To Substance in International Commercial Arbitratio

BOURNEMOUTH UNIVERSITY – BUSINESS SCHOOL
LLM INTERNATIONAL COMMERCIAL LAW
DISSERTATION
HOW DO THE UK COURTS APPLY AND

INTERPRET THE ISLAMIC LAW TO SUBSTANCE
IN INTERNATIONAL COMMERCIAL
ARBITRATION?
By MEHMET MUCAHIT ARVAS (46155074)
SUPERVISOR
Dr. SARA HOURANI
BOURNEMOUTH, 9 SEPTEMBER 2015

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Name: Mehmet Mucahit Arvas
Date: 9 September 2015
Programme: LLM-International Commercial Law

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Name: Mehmet Mucahit Arvas
Date: 9 September 2015

ABSTRACT
Because of its advantages arbitration is one of the most popular dispute resolution
methods for international commercial disputes. One of the biggest issues of
international commercial arbitration is applicable law to substantive matters of disputes.
As a rule parties can determine the applicable law by reason of their autonomy. If the
parties do not choose any law for substantive matter of disputes it will be determined by
the arbitral tribunal via some international regulations and conventions or principles of
some bodies such as International Chamber of Commerce and The London Court of
International Arbitration. Furthermore some rules such as lex mercatoria and religious
rules which might confuse for applicable law. The applicable religious rules in
arbitration are accepted by civilized Western countries. Beside international commercial
arbitration nowadays faith-based arbitration systems are accepted in the context of
human rights and accepted by many civilized nation to protect and improve both
legalize the religious disputes and pluralism in legal system. These arbitration
institutions are important and sample for applicable religious law in arbitration.
Islamic law is a sort of religious law and it is considered to be applicable law in
arbitration. Even if it is applied to disputes it may be caused some difficulties for
substance especially before secular courts. However, with increasing Islamic assets in
West countries, Islamic Law is accepted as an applicable law. In this context, the UK
applies Islamic law for international commercial disputes thus; it is a good example to
investigate how the UK courts apply Islamic Law in substance. This dissertation’s
purpose is to determine how the UK courts apply Islamic Law in international
commercial disputes in the substantive matters from The London Courts of International
Arbitration sample cases and clarify the principles about substantive Islamic law under
party autonomy theory.

ACKNOWLEDGEMENT
It gives me great pleasure to give thanks to many people who have made this thesis
possible.
I am heartily thankful to my supervisor, Dr. Sara Hourani, whose encouragement,
guidance and support from the initial to the final level, enabled me to develop an
understanding of the subject.
I dedicate this thesis to my beloved family. I thank my parents, Nimetullah Arvas and
Feyruz Arvas, for giving me love and support. I thank my wonderful wife, Zeynep
Arvas, for her understanding and companion. I also thank my sons, Enver Bayezid
Arvas and Huseyin Ahrar Arvas, for constantly reminding me to look after myself.
I would like to thank my lecturer Dr Melanie Klinkner, and my friends, Mehtap Payne
and Canh Uyen, for their help and supports.

TABLE OF CONTENTS
ABSTRACT ................................................................................................................................ iv
ACKNOWLEDGEMENT .......................................................................................................... v
INTRODUCTION....................................................................................................................... 8
CHAP TER 1. ARBITRATION AND FAITH-BASED ARBITATION ......................... 13
1. What is the traditional arbitration and why is it so popular? ....................................... 13
2. What is the faith based arbitration? ............................................................................. 15
2.1 What is the Christianity approach of alternative dispute resolution and arbitration? .. 18
2.2 What is the Judaism approach of alternative dispute resolution and arbitration?........ 18
2.3 What is the Islamic approach of alternative dispute resolution and arbitration? ......... 19
3. Conclusion ................................................................................................................... 25
CHAPTER 2. HOW IS APPLICABLE LAW DETERMINED IN INTERNATIONAL
COMMERCIAL ARBITRATION? CAN ISLAMIC LAW BE
SUBSTANTIVE APPLICABLE LAW IN INTERNATIONAL
COMMERCIAL ARBITRATION? ........................................................... 27
1. Introduction ............................................................................................................................... 27
2. What are the types of applicable law in international commercial arbitration?......................... 28
2.1 What is the law governing the agreement to arbitrate? ............................................................. 28
2.2 What is the procedural law governing the arbitration? .............................................................. 29
2.3 What is the distinction between procedural and substantive law in arbitration? ....................... 31
2.4 What is the law applicable to the substance in international commercial arbitration? .............. 32
2.4.1 How can non-state law be applicable in international commercial arbitration? ........... 32
2.4.2 What is transnational law? ............................................................................................ 33
2.4.3 What is lex mercatoria? ................................................................................................ 34
2.4.4 What is UNIDROIT principles? ................................................................................... 34
2.4.5 What is Sharia and Islamic law? ................................................................................... 35
2.4.6 Why the history of Islamic law is important for current Islamic law?.......................... 37
2.4.7 What are the Sunni branches? ....................................................................................... 42
3. Conclusion................................................................................................................................. 47
CHAPTER 3. PARTY AUTONOMY OVER APPLICABLE LAW IN
INTERNATIONAL COMMERCIAL ARBITRATION .......................... 49
1. Introduction .................................................................................................................. 49
2. Why and how does the party autonomy reflect applicable law in international
commercial law?........................................................................................................... 49
3. What is the concept of the restriction on party autonomy over substantive applicable
law in international commercial arbitration? ................................................................ 53
4. What are the types of restrictions over party autonomy in international commercial
arbitration?.................................................................................................................... 54
4.1 How does the courts review restrict the arbitral award in international commercial
arbitration?................................................................................................................... 55
4.2 How does public policy restrict party autonomy- recognition and enforcement of
arbitral award? ............................................................................................................. 56
4.3 How do mandatory rules restrict part autonomy?........................................................ 57
5. What is the English arbitration, what are the main restrictions of party autonomy in
English arbitration, and what is the United Kingdom courts’ approach to Islamic law
in international commercial arbitration? ............................................................................. 58
5.1 How have arbitration and party autonomy developed in the United Kingdom? ......... 58
5.2 Composition of arbitral tribunal .................................................................................. 62
5.3 Choosing the place of arbitration................................................................................. 63
5.4 Agreeing on the powers of the tribunal ....................................................................... 64
5.5 Applying for interim measures .................................................................................... 65
5.6 Parties have the right to designate experts................................................................... 67
5.7 Determination of rules of procedure ............................................................................ 68
6. How do the United Kingdom courts apply Islamic law in substantive applicable law in
international commercial arbitration?: Case law and the United Kingdom courts’
approach ....................................................................................................................... 68
6.1 Petroleum Development (Trucial Coast) Ltd v. Sheikh of Abu Dhabi ....................... 68
6.2 Ruler of Qatar v. International Marine Oil Company Ltd. .......................................... 70
6.3 Saudi Arabia v. Arabian American Oil Company (ARAMCO) .................................. 72
6.4 Shamil Bank of Bahrain EC v. Beximco Pharmaceuticals Ltd and others .................. 75
6.5 Sanghi Polyesters Ltd. (India) v. The International Investor KCFC (Kuwait) ............ 76
7. Discussion and conclusion .................................................................................................... 78
CONCLUSION ......................................................................................................................... 82
BIBLIOGRAPY ........................................................................................................................ 83
How the United Kingdom courts apply and interpret the Islamic law in International Commercial
Arbitration – MHMET MUCAHIT ARVAS – LLM – 2015
INTRODUCTION
Litigation is a resolving process of legal disputes before the public court system 1 and
alternative dispute resolution (ADR) covers all dispute resolution methods other than
litigation. 2 ADR can be formed different ways such as mediation, negotiation, and
arbitration.3 Arbitration is an agreed method by the parties that one or more arbitrators
who are submitted by the parties resolve the dispute and make a legal binding decision
instead of going to court.4 Arbitration differs from other ADR methods that the tribunal
can collect documents, hearing witnesses and make awards which are legally binding.5
With increasing economic and political improvements in the last decade, the demand for
arbitration has risen. Arbitration has been one of the leading dispute settlement methods
rather than litigation. Arbitration has some advantages over litigation in; parties’ control,
privacy, flexibility, specific expertise in specific disputes. 6 Arbitration is popular
in7contractual disputes in international commercial arbitration (ICA).8 There are several
reasons for popularity of international arbitration such as costs, 9 certainty, speed,
neutrality, and less complexity. Moreover preferability of law and procedure is quite
1
‘Litigation’ (Legal Information Institute) < https://www.law.cornell.edu/wex/litigation> accessed 04
July 2015
2
Caryn Litt Wolfe, ‘Faith-Based Arbitration: Friend or Foe? An Evaluation of Religious Arbitration
Systems and Their Interaction With Secular Courts’ (2006) 75 Fordham Law Review 427 p.429
3
Ibid p.429
4
‘What is Arbitration’ ( World Property Intellectual Property) <
http://www.wipo.int/amc/en/arbitration/what-is-arb.html> accessed 4 July 2015
5
Wolfe (n.3) p.430
6
Ibid p.427
7
Ibid p.435
8
Craig M. Gertz, ‘The Selection of Choice of Law Provisions in International Commercial Arbitration: A
Case for Contractual Depeҫage’ (1991) 12 (1) Northwestern Journal of International Law & Business 163
p.163
9
Wolfe (n.7) p.430-431
Page 8 of 89
attractive advantage of arbitration.10 Because of mentioned reasons arbitration might be
called universal form of dispute resolution.11
Some cultural and religious groups want to protect their cultures and values and refuse
state’s intervention12for their commercial disputes. Because of this reason those specific
groups may prefer arbitration to solve their commercial disputes.
World public opinion has accepted the autonomy for religious legal practice, one of the
fundamental principles, which are expected to be respected. 13 For instance; the
International Covenant on Civil and Political Rights 14 accepts that all parties should
respect all people’s jurisdiction right without any discrimination including religions. In
addition to this faith-based arbitration is recognized to express religion and necessary to
be protected.15
The arbitration system which can be applied the religious law has the significant
advantage that individuals will feel a sense of belonging to a community and with this,
the value of religion may be determined. Furthermore religious arbitration helps to
protect minority cultures and specific values.16
Religious law which is applicable law is a kind of legal pluralism and Europeans such
as the United Kingdom (UK) has realized the positive impact of legal pluralism. 17
Generally religious law which covers Islamic Law has been accepted in arbitration
10
Ibid p.431
11
Gertz (n.8) p.163-164
12
Wolfe (n.10) p.436
13
Almas Khan ‘The Interaction between Shariah and International Law in Arbitration’ (2006) 6(2) Chi. J.
Int'l L. 791 p.794
14
International Covenant on Civil and Political Rights (adopted 19 December 1966, entered into force 23
March 1976) 999 UNTS I-14668
15
Khan (n.13) p.801
16
Wolfe (n.12) p.441
17
Ann Black ‘Accommodating Shariah Law in Australia's Legal System Can We? Should We?’ (2008)
33(4) AtLJ 214 p.217
Page 9 of 89
system especially for commercial disputes.18 However the applicable law of Islamic law
over Islamic investment and trade which are based on contractual claims can be thought
violation of public, economic, social, and politic policy. Thus the awards may not be
recognised and enforced by the courts.
Beside the ICA, nowadays the faith-based arbitrations are accepted in legal system.19
The popularity of religious arbitration in the UK has been increasing from every
commercial transaction so that the parties can determine the religious arbitration clause.
Because of parties’ autonomy upon the contracts the arbitrators will apply the religious
law which is decided.20
It is estimated that approximately one trillion U.S. Dollars is Islamic based wealth in the
global market.21 For example, $200 billion shari'ah-based investment was made in 2002
and Islamic capital has increased between 5 and 15 per cent per year. 22 Within the
contract concept, the sharia-based commercial contract’s parties have started to demand
the Islamic Law on substantive matters for its legal disputes. 23 For this reason firstly
international legal system will adapt the Islamic law to solve international commercial
sharia-based legal disputes24 in arbitration system. Secondly, rest of nationals especially
west secular states are to take the Islamic law into account to arbitration system soon.25
18
Ibid p.217
19
Charles P. Trumbull ‘Islamic Arbitration: A New Path for Interpreting Islamic Legal Contracts’ (2006)
59(2) Vanderbilt Law Review 609 Ibid (n.18) p. 623
20
Julio Colon ‘Choice of Law and Islamic Finance’ (2011) 46 TILJ 411 p.430
21
Ibid p.412
22
Khan (n.15) p.794
23
Black (n.18) p. 623
24
Colon (n.21) p.434
25
Khan (n.22) p.795
Page 10 of 89
Both in West and Islamic countries, unofficial ADR methods are used to find a solution
for solving some legal disputes within Islamic Law. Some countries have ruled pluralist
legal systems and Islamic Law can be chosen as an applicable law.26
Because of democratic character of the UK, the freedom of religion and religious laws
are encouraged and supported. In this aspect, beside secular judiciary, states can allow
and support to improve Muslims to choose their own law for specific legal disputes
upon application,27 especially in arbitration.
Muslim residents in Western countries may demand the Islamic law for their possible
legal disputes. 28 To give an instance; the UK is one of major leading countries for
sharia-based assets such as banking, mortgage investment.29 So the UK can be one of
the best sample countries for making research on Islamic Law in arbitration.
The research question of this dissertation is that how the UK courts apply and interpret
the Islamic law on substantive matters of international commercial disputes in
arbitration. Because it is globally accepted that parties have autonomy over contract and
applicable law on substantive matters in the ICA. However there are some restrictions
about parties’ autonomy such as bona fide, public policy, and evasion of the national
law. Section 46 of Arbitration Act 1996 accepts the Islamic law as an applicable law to
the substance for ICA parallel with Model law.
There are some cases which are Islamic law applied on substantive matters in ICA
however those are rejected by the courts. So it should be determined under which
26
Ibid p. 799
Mona Rafeeq ‘Rethinking Islamic Law Arbitration Tribunals: Are They Compatible with Traditional
27
American Notions of Justice?’ (2010-2011) 28(1) WILJ 108 p.111

28
Colon (n.24) p. 432
29
Ibid p. 432
Page 11 of 89
principles the UK courts apply or reject the Islamic Law in the ICA. Thus, with this
dissertation the parties’ autonomy restrictions over substantive Islamic Law in the ICA
in the UK will be understood.
After explaining the general arbitration, the first chapter is dedicated to what faith-based
arbitration is and how it is accepted in arbitration context.
In the second chapter it will be discussed that what the applicable law, particularly
substantive applicable law in the ICA is, what the Islamic law is, what the Islamic
schools are and how its history is relevant with interpretation.
In the third chapter the questions of what is the party autonomy, what are the
restrictions of party autonomy over substantive applicable law and how do the UK
courts apply and interpret Islamic Law to the substance in ICA will be explained.
Research Method of this dissertation is black letter law. Thus some of cases will be
analysed to achieve the purpose of this dissertation.
Page 12 of 89
CHAP TER 1. ARBITRATION AND FAITH-BASED ARBITATION
1. What is the traditional arbitration and why is it so popular?
ADR covers all dispute resolution methods other than litigation.30 ADR can be formed
in different ways such as mediation, negotiation, and arbitration.31
Arbitration was used in Greece and Athens for resolving disputes in the 4th century
B.C.. The arbitrator who was chosen by the parties heard the parties and gave the
decision about conflict. This method gave the parties the freedom of place of arbitration
and governing the proceedings.32
Arbitration differs from other ADR in that the tribunal can collect documents, hear
witnesses and make awards which are legally binding. 33 The main advantages of
arbitration are saving money and time.34 In addition preferability of law and procedure
is another advantage of arbitration.35
Arbitration is defined as:
“A device whereby the settlement of a question, who is of interest for two or more
persons, is entrusted to one or more other persons- the arbitrator or arbitrators- who
derive their powers from a private agreement, not the authority of a State, and who are
to proceed and decide the case on the basis of such an agreement.”36
30
Wolfe (n.5) p. 429
31
Ibid p. 429
32
Mann-Long Chang, ‘Harmonisation of Procedural Law in International Commercial Arbitration’
(DPhill Thesis, University of Stirling 2009) p. 2
33
Wolfe (n.31) p. 430
34
Ibid p. 430-431
35
Ibid p. 431
36
Rene David, Arbitration in International Trade (1st edn Deventer: Kluwer Law and Taxation, 1985) p.
5
Page 13 of 89
It can be said that the main characteristic of arbitration is its consensual nature. 37 The
minimum standards of justice and fairness should be met in the arbitration process.
Otherwise it has a risk that is refusing and non-enforcing awards by the court. This is a
control and power of national courts over arbitration.38
Besides general arbitration, ICA derives from general arbitration for its popularity,
historical reasons and acceptance by international bodies. International forum expects to
respect party autonomy and most especially applicable law in ICA.
The expressed intentions of the parties are treated respectfully in the liberal international
arbitration.39 There are two criteria to determine the features of international arbitration
the identification of the parties and nature of the dispute. 40 The identity of parties is
based on the parties’ nationality or practices in the residence such as place of
incorporation or management and control status. The nature of dispute should be
suitable for ICA whose some tests are applied by international conventions and
arbitration institutions. 41
Arbitration is very popular in 42 contractual disputes in ICA. 43 In other words the
contractual disputes of international commerce are not resolved in national legal
system. 44 After the 2nd World War the level of international commerce and trade
37
Okezie Chukwumerije, Choice of Law in International Commercial Arbitration Quorum Books
Wesport, Connecticut London 1994 p 2
38
Ibid p. 2
39
Ibid p. 3
40
Ibid p. 3-4
41
Ibid p. 4-6
42
Wolfe (n.35) p. 435
43
Gertz (n.11) p 163
Helena Carlquist, ‘Party Autonomy and the Choice of Substantive Law in ICA’ (Master Thesis,
44
Goteborg University 2006) p8
Page 14 of 89
increased. Particularly thanks to General Agreement on Tariffs and Trade45 the barriers
of international trade diminished. The rate of foreign investments, joint ventures, capital,
technology transfer increased from developed countries to developing countries.
Because of these commercial activities the parties choose arbitration to resolve
contractual disputes. 46
There are several reasons for the popularity of international arbitration such as cost,
certainty, speed, neutrality, and less complexity. Arbitration might be called a universal
form of dispute resolution.47 Freedom of choosing applicable substantive law is one of
the important factors and reasons to choose arbitration for dispute resolution.48
It can be said that after increasing international commercial transactions all around the
world almost all both developed and developing countries have accepted the ICA and
the non-state laws in substance have gained the opportunity to be applied in ICA. One
of the types of ICA shows itself as faith based arbitration. Because of these reason in
this chapter faith based arbitration is explained.
2. What is the faith based arbitration?
Multiculturalism which affects legal pluralism such as applicable law in international
commercial disputes is accepted for the high level of culture and cultural groups in the
forum. However new approach on multiculturalism is demanding group autonomy and
self-governance 49 which is nowadays being criticized. 50 In this context religious
arbitration promotes multicultural society. 51
45
General Agreement on Tariffs and Trade (entered into force 1 January 1996) PC/12, L/7583
46
Chukwumerije p.6
47
Gertz (n.43) p.163-164
48
Carlquist (n.44) p.8
49
Michael A. Helfand, ‘Religious Arbitration and The New Multiculturalism: Negotiating Conflicting
Legal Orders’ (2011) 86 (5) New York University Law Review 1231 p 1232-1233
Page 15 of 89
Arbitration and its decisions are totally private action. Arbitrator obtains his or her
power from parties’ agreement which is based on consent 52 to avoid standard legal
system.53 Even if there is an arbitration agreement between parties and one of the parties
refuses to go to an arbitral tribunal, the other can claim that this dispute is arbitrated.54
The selecting arbitrator or composition of the arbitral tribunal is determined with some
varieties. The parties may expressly agree on it in the arbitration agreement. If the
parties appoint the arbitrators with determined and agreed rules in the arbitration
agreement it can be said that it is generally in ad hoc arbitrations. If the parties agree on
arbitration rules and do not express their own intention on selection arbitrators or
arbitral tribunal then the arbitral tribunal will be composed accordance with these rules.
In panel of three arbitrators generally each party select its one arbitrator and those
appointed arbitrators jointly select the third arbitrator as chairman. 55 If parties are
agreed and valid agreement has a clause, the religious authorities may resolve the
disputes under religious law principles. 56 Because of that it is worthy to explain the
faith-based arbitration and most especially Islam-based arbitration.
Third parties peaceful solution for all kind of disputes had its source in every religions’
traditions for many thousands year ago.57
50
‘State multiculturalism has failed, says David Cameron’ BBC News (5 February 2011)
<http://www.bbc.co.uk/news/uk-politics-12371994> accessed 29 June 2015
51
Wolfe (n.42) p.455
52
Bilal M. Choksi, ‘Religious Arbitration In Ontario -Making The Case Based On The British Example
Of The Muslim Arbitration Tribunal’ (2012) 33 (3) U. Pa. J. Int'1 L. 791 p 801
53
Helfand (n.49) p.1243
54
Wolfe (n.51) p. 442
55
Emilia Onyema ‘Selection of Arbitrators in International Commercial Arbitration’
<https://eprints.soas.ac.uk/4424/1/Selection_of_arbitrators.pdf> p 3-7 accessed 31 August 2015
56
57
R. Seth Shippe, ‘"Blessed are the Peacemakers": Faith-Based Approaches to Dispute Resolution’
(2002) 9 ILSA Journal of International & Comparative Law 237 p 237-238
Page 16 of 89
The advantages and disadvantages of religious arbitration come from the nature of
religious law. Religious law provide the predictability of substance and stability of
procedure for parties. Thus, the arbitrators can satisfy the parties with common and
shared rules, values and norms.58
Islam, Christianity and Judaism derived from Abraham59 and they are called Abrahamic
religions.60 Over half of the world total population is following Abrahamic Religions.61
Abrahamic religions are familiar with ADR methods and arbitration. Thus it can be said
that all three religions’ rules have the capability to adopt ICA easily. In other words
private arbitration such as faith-based arbitration is common among Abrahamic
Religions, Islam-Christianity-Judaism, provide some types of dispute resolution. 62 In
Christian faith negotiation is the most desirable for alternative dispute resolution. 63
Mediation takes a very important place in Jewish tradition, but is also common in
Islamic and Christian ADR.64 Arbitration is a central position of Jewish ADR tradition
however it is practicable in Islamic and Christian ADR too.65 Arbitration was used in
the modern meaning even in the first years of Islam.66 Whilst adjudication is proper and
acceptable In Jewish tradition67, in Islamic and Christian it is not.68 Thus it can be said
that arbitration is useful dispute resolution method for all Abrahamic religions most
especially in Islam.
58
59
Stan Tenen, ‘Three Pillars of Love’
<http://www.meru.org/Newsletter/3pillarsoflove.html?gclid=CLad55uL1McCFWYOwwodW8gFDQ>
accessed 31 August 2015
60
Missouri Synod, ‘The Abrahamic Religions- An Evaluation from the Theological Perspective of The
Lutheran Church’ <https://www.lcms.org/Document.fdoc?src=lcm&id=2937> accessed 31 August 2015
61
Ibid
62
Wolfe (n.54) p.437
63
Shippe (n.57) p.239
64
Ibid p.239
65
Ibid p.239-240
66
Muharrem Balci, İhtilâflarin Çözüm Yollari ve Tahkim (1st edn, Danişman Yayinlari 1999) p 74
67
Wolfe (n.62) p.438
68
Shippe (n.65) p.240
Page 17 of 89
2.1 What is the Christianity approach of alternative dispute resolution and

arbitration?
As it is well known the United States of America (USA) is a common law country and is
influenced by English law from England.69 Thus it can be said that the examples of faith-
based arbitration are the outcomes of common law advantages and the both the USA and the
UK are impressing to each other. Because of these reasons the faith-based arbitration in the
USA is a good example to understand common law approach in the UK.
The Christian Legal Society was formed in the USA to run dispute resolution services in
1982. In 1987 it was transformed to Association of Christian Conciliation Services and
five years later united with Peacemaker Ministries. This is the largest all types of
Christian dispute resolution organisation and covers over three hundred churches,
organizations, and ministries all around the USA. 70 Beside this organisation, there is
another organisation which is named Christian Dispute Resolution Professionals, Inc.
which focuses on various legal disputes to be solved with ADR by biblical methods.71
2.2 What is the Judaism approach of alternative dispute resolution and arbitration?
According to the Judaism, Orthodox Jews have to apply to religious courts for their
legal issues.72 Jews have their own religious courts. Jewish approach about ADR is very
strict and formal than other faiths. 73 Jewish arbitration procedure is similar to secular
arbitration. 74 The form of Jewish arbitration is called Beth Din 75 and it is formally
69
The Common Law And Civil Law Traditions
https://www.law.berkeley.edu/library/robbins/pdf/CommonLawCivilLawTraditions.pdf> accessed
21/08/2015
70
Shippe (n.68) p.242-243
71
Ibid p.244
72
73
Shippe (n.71) p.249
74
Ibid p.252
Page 18 of 89
recognized courts which apply Jewish Law. 76 However the Jewish law might be
criticized for non-state law by the English court.77 The awards of Bet Din are usually
enforceable and binding in the secular courts because of consistence of proceedings
with secular arbitration system.78 However one of the critical point is that some Jewish
rules are against public policy and might be reject to enforce the arbitral award. For
instance in the case of Soleimany v Soleimany79 the English court reject to recognize and
enforce the arbitral award on the reason of smuggling. Thus it can be said that even
some risks of Jewish law, the UK legal system permits the Beth Din and the award are
recognized and enforced. This case’s outcome will be analysed in the third part however
it can be said that beside the Beth Din in the UK, the legal system should not be so strict
for Islam-based arbitration.
2.3 What is the Islamic approach of alternative dispute resolution and arbitration?
Islam encourages Muslims to peaceful resolution of disputes. In the Quran there are
many provisions about peaceful solution. Moreover the specific guidance about
peaceful solution exists in the Quran.80
Islam has more formal traditions and technics in the dispute resolution than Christianity
and Islamic dispute resolution system can be categorised between arbitration and
mediation.81 Thus the tolerance to both Christian and Jewish based arbitration can be
accepted for Islam-based arbitration because of Islamic ADR traditions and experiences.
75
Wolfe (n.67) p.438
76
Shippe (n.73) p.253
77
Halpern v. Halpern, [2007] EWCA (Civ) 291, [371]
78
Shippe (n.76) p.254
79
Soleimany v Soleimany (UK) Ltd. [ 1999] Q. B. 785
80
Shippe (n.78) p.245-246
81
ibid p.245
Page 19 of 89
However beside its advantages Islam-based arbitration is less organised.82 This situation
has been criticized and on this ground and some applicable Islamic law clause in
arbitration was not applied in some cases only for this reason which will be analysed in
the third chapter.
One of criticism of Islam-based arbitration in non-Muslim country such as the UK is
that the Muslims should apply state law and the legal system should not be derived
pluralist. 83 Actually some scholars of Islam suggest that Islamic Law cannot be
applicable in non-Muslim countries.84 Beside this suggestion general principle of Islam
about migration is that if Muslims immigrate to non-Muslims state Muslims should
obey the non-Muslims state’s laws85. However, it is claimed that if Muslims can follow
their faith via integrated legal system they can feel sense of belonging and be part of
society. 86 For instance some Muslims in the UK have adopted their belief values
because of racial discrimination which caused low level of integration.8788 Because of
that reason nearly 40% of British Muslims claim the applicability of Islamic law for
their dispute such as commercial ones in the UK.89
It is claimed that Islamic faith-based arbitration has insignificant advantages. To give
some examples;
82
Wolfe (n.75) p. 440
83
Marion Boyd, ‘ Religion-Based Alternative Dispute Resolution: A Challenge to Multiculturalism’
<http://policyoptions.irpp.org/wp-content/uploads/2014/08/boyd.pdf> p 465 accessed 20 December 2014
84
85
Stephen Schwartz ‘Modern Islam And Democracy’ (2008) 6 Regent Journal of International Law 375 p.
377
86
Choksi (n.52) p.795
Rebecca E. Maret, ‘Mind the Gap: The Equality Bill and Sharia Arbitration in the UK’ (2013) 36
87
Boston College International & Comparative Law Review 255 p.258

88
Maria Reiss, ‘The Materialization of Legal Pluralism in Britain: Why Shari'a Council Decisions Should
Be Non-Binding’ (2009) 26 (3) Arizona Journal of International & Comparative Law 739 p.760
89
Ibid p.740
Page 20 of 89
- fair and sensitive about gender issues;

- addressing effective ADR system on voluntary submission and consent;
- integrating the Muslim to society90;
- practicing Islamic worship freely91;
- encouraging the Muslim to be part of judicial system;
- avoiding underground legal system and communal manipulation;
- rising human rights;
- promoting to social integration about social problems;
- reducing to waste cost and time over litigation.92
Islam-based Arbitration is preferred because it is believed that in commercial disputes
arbitrators are experts on those areas.93 On the other hand it is criticized that accepting
Islamic law as an applicable law can harm legal system with separating rule of law even
in the UK. However raising numbers of Shari’a court around the UK helps integrating
Muslims to British social and legal community.94
Before official recognized period of Islam-based arbitration in the UK, Muslims have
applied to unofficial “Shari’a Councils” to solve their disputes. Generally these informal
institutions were located at the mosques however the awards were not binding. 95 Even if
parties could run their procedures, because of non-binding award the parties could still
apply to legal system96 to legalize their dispute resolution.
In 2007 Muslims in the UK founded unofficial Shari’a court to resolve many types of
domestic issues. These courts were supported by the Muslims and legalized via party
autonomy on agreement.97 Some scholars asserted that Sharia councils could gain legal
forms with Part I of the Act98 and the outcomes of Halpern v. Halpern99 case. In this
90
Wolfe (n.82) p.442
91
Ibid p.441
92
Choksi (n.86) p.792
93
Wolfe (n.91) p.441
94
Choksi (n.92) p.815
95
Ibid p.811
96
Ibid p.811
97
Ibid p.812
98
Maret (n.87) p.263
Page 21 of 89
case the siblings had a dispute about their parent estate and they applied to Zurich Beth
Din. Later claimant applied to English court to enforce the award however the defendant
claimed the invalidity of contract under Jewish Law. On the other hand there was no
any applicable law clause in the contract. Because of Beth Din, the Jewish law applied
however the English court ruled the applicable law should have been the state law not
Jewish law. However if the parties added any applicable law clause in the contract the
court would have applied the chosen one under Arbitration Act 1996. 100 Finally the
England and Wales Court of Appeals stated that the disputes should be resolved in
accordance with the law which is chosen by the parties.101
In the same year, Muslim Arbitration Tribunal was established like Jewish Bet Din
courts in the UK which has legal power and binding awards under Arbitration Act of
1996.102 Muslim Arbitration Tribunal (MAT) which is a binding arbitral tribunal in the
UK has tackled various disputes from human rights to commercial issues.103 104 Except
judicial review, Muslim Arbitration Tribunal’s awards are binding and enforceable
under UK Law since both procedural and substantive provisions of Arbitration Act of
1996. 105 106

Shari’a tribunal has flourished across to the UK in London, Bradford,
Manchester, Birmingham, Nuneaton, Glasgow, and Edinburgh.107 The number of cases
99
Halpern v. Halpern (n.87)
100
Paul Gershlick, ‘Court of Appeal states that a contract has to be governed by the law of a country and
not some other basis such as Jewish law – Halpern v Halpern, Court of Appeal’ (Matthew Arnold
&Baldwin LLP 1 May 2007) <http://www.mablaw.com/2007/05/court-of-appeal-states-that-a-contract-
has-to-be-governed-by-the-law-of-a-country-and-not-some-other-basis-such-as-jewish-law-halpern-v-
halpern-court-of-appeal/> accessed 2 September 2015
101
Choksi (n.97) p.813
102
Ibid p.812
103
Ibid p.792
104
Reiss (n.88) p.760
105
Choksi (n.103) p.813
106
Reiss (n.104) p.759
Page 22 of 89
such commercial disputes in Muslim Arbitration Tribunal which has its own rules 108 has
been increasing year by year.109
One should note that the numbers of non-Muslims who apply to Muslim Arbitration
Tribunal in the UK has risen gradually because of its efficiency and equal treatment to
the parties.110
Islamic law can be applicable in arbitration in two types; first chosen by the parties
outside of judicial system; second determination by chosen body of religious law.
Hence religious arbitration agreements contain provisions of both choices of law and
arbitration clauses.111 The contract-based which is part of party autonomy is valid for
Islamic Law as well. The parties are free to choose Islamic law for their commercial
disputes in substance. 112 Thus the tribunals generally respect the parties controlling
power on applicable law for substance. However there is no vacuum for applicable law
in ICA. If the tribunal needs any interpretation or implementation it can apply the terms
of general principles of commercial law or public international law. 113 The other option
might be non-applicable law provisions in the contract. If the parties are agreed on
Islamic law as applicable law there is no chance to determination for applicable law by
the tribunal. If it is not determined by the parties and the parties refer to institutional
rules, the tribunal or arbitrator may determine Islamic law as an applicable substantive
107
Ibid p.761
108
<http://www.matribunal.com/rules.php> accessed 27 June 2015
109
110
Ibid p.837
111
112
Ibid p.1253
John R. Crook ‘Applicable Law In International Arbitration: The Iran-U.S. Claims Tribunal
113
Experience’ 1989(83) 2 The American Journal of International Law 278 p 288
Page 23 of 89
law for the international commercial disputes.114 The applicable law especially Islamic
law will be explained deeply in the second chapter.
Even if all risks of ICA is valid for faith-based arbitration. One of the biggest risks for
religious arbitration awards which applied substantive religious law is court’s
intervention under the public policy context. 115 In the same analysis for religious
arbitration in the first sense enforcing religious arbitration awards would be considered
against public policy. However courts should overrate the parties’ religious faith against
third parties’ interest. Commercial arbitration agreements which may contain religious
applicable law are based on parties’ intention and enforce with their terms. 116 In
addition enforceability of chosen law provision is important in international arbitration
because of predictability of international commercial transactions117 and public policy
should be very light degree over ICA.118 Thus in order to ensure the predictability of
religious chosen law should be promoted against public law too. 119 The most important
outcomes of arbitration which comes from party autonomy are the certainty,
predictability and uniformity.120 Thus those factors play a main role in ICA121 and in
addition to the advantages of the ICA because of those reasons the parties’ intent to
apply religious law to predict the possible results of the contract. It can be said that the
courts avoid intervening the parties’ intention on both faith-based arbitration and
applicable religious law in ICA.
114
Gertz (n.47) p.170
115
116
Ibid p.1253
117
Wolfe (n.93) p.435-436
118
Helfand (n.116) p.1289-1290
119
Ibid p.1292
120
Chang (n.32) p.1
121
Ibid p.10
Page 24 of 89
Even it seems impossible some scholar suggest that although religious arbitration
awards violate the public policy they should be enforced.122 It is suggested that secular
courts intervention on faith-based arbitration should only be contract law context. 123 In
principle it is supposed that courts should be reluctant to look over the arbitration
awards in the context of substantive law. Only if the substance violates public policy
can the courts intervene and reverse the judgement. It is assumed that public policy lies
in third parties’ interest. 124 The courts should balance the public policy and invalid
arbitration agreement such as forced-like in religious arbitration awards. 125 126

The
restriction of party autonomy over substantive law in the international commercial will
be deeply explained in the third chapter.
3. Conclusion
The popularity of ICA has increased year by year. One of type of arbitration, faith-based
arbitration, is gaining popularity under the ICA context. The characteristic of faith-
based arbitration is that the religious law might be applicable for international
commercial disputes.
Over half of world people follow Christianity, Islam and Judaism. Both Christianity and
Judaism have the opportunity to apply their own religious law. Especially after Muslim
migration to West secular countries, Muslims want to apply Islamic Law for their
commercial disputes and later the UK adopted and allowed faith-based arbitration under
Arbitration Act 1996. The UK accepts the faith-based arbitration as party autonomy and
freedom to choose applicable law concept. Besides the advantages of arbitration, the
122
123
Wolfe (n.117) p.447
124
Helfand (n.122) p.1256-1258
125
Ibid p.1242
126
Wolfe (n.123) p.444
Page 25 of 89
faith-based arbitration gives extra advantages, such as predictability, rising sense of
belonging to society and preventing discrimination.
Page 26 of 89
CHAPTER 2. HOW IS APPLICABLE LAW DETERMINED IN

INTERNATIONAL COMMERCIAL ARBITRATION? CAN
ISLAMIC LAW BE SUBSTANTIVE APPLICABLE LAW
IN INTERNATIONAL COMMERCIAL ARBITRATION?
1. Introduction
There is no uncertainty about applicable law in arbitration. There are two options for
applicable law in international commercial law. Firstly the agreed applicable law which
is chosen by the parties, secondly if the parties are not agreed the applicable law is the
place of arbitration law. So it means there is a dualism in arbitration.127
One of the advantages of ICA is parties’ power over applicable law which can be
national, international or non-national legal system.128 Thus, in the applicable law in
ICA context, the parties are reluctant to be intervened. 129 However to enforce the
arbitral awards, relevant rule which is law of the place or seat of the arbitration should
be applied.130 So it can be said that even if the applicable law is chosen by the parties
some external rules or law still can be included the applicable law concept.
According to the Redfern and Hunter, applicable law can vary five types in ICA,
namely;131
- The law of the arbitration agreement and the performance of agreement,
- The law which, lex arbitri, whose place of arbitral tribunal and which is
applicable in the proceedings,
- Substantive law which is applied to substantive issues,
127
Nigel Blackaby and Constantine Partasides with Alan Redfern and Martin Hunter, Redfern and Hunter
on International Arbitration (5th edn, OUP 2009) p 164
128
Gertz (n.114) p.164
129
Redfern and Hunter (n.127) p.164
130
Ibid p.164-165
131
Ibid p.165
Page 27 of 89
- Not law but applicable rules, sort of guidelines,
- The recognising and enforcing law or laws of awards,
In this chapter it is going to be explained that how the applicable law is determined in
the ICA. Applicable procedural law and substantive law are going to be distinguished.
Moreover the applicable law in substance most especially non-state law ones will be
explained. Finally with giving its sources and history, the Islamic law in substance is
going to be analysed.
2. What are the types of applicable law in international commercial arbitration?
2.1 What is the law governing the agreement to arbitrate?
The arbitration clause and the submission agreement are the two types of arbitration
agreement. Generally arbitration clause is relevant for future disputes however the
submission agreement is about past. Because the common practice, arbitration clause,
refers possible disputes in the future but the submission agreement refers the existing
disputes.132
In commercial contracts, the law governing the arbitration agreement is generally not
specified. Whilst there is an arbitration clause in most generally in commercial contract,
thanks to separability theory the arbitration clause and substantive contract can be
separated and the principle of separability may play a role to determine the validity of
contract and applicable law to agreement to arbitrate.133 For this reason The New York
132
Ibid p.86
Alan Tsang, ‘Determining The Law Applicable To Arbitration Agreements: The Common Law
133
Approach’ (2014) 29 (5) MEALEY’S International Arbitration Report 1 p 1
Page 28 of 89
Convention134 states that agreement should be valid under the law of the state where the
award was made. 135
In arbitration law, the separability of arbitration clause is related with total jurisdiction
challenges to determine its own jurisdiction and validity of the agreement. 136 On the
ground of separability doctrine is to explain that there are two agreements; the whole
and arbitration, made by parties and the invalidity of agreement does not directly affect
the arbitration clause.137 Should the separability doctrine be applied to the contract, the
governing law of the agreement to arbitrate will be determined with law of the seat, lex
138
arbitri. Thus the validity of contract may be determined with the law of the
substantive contract.
2.2 What is the procedural law governing the arbitration?
Thanks to part autonomy parties can shape the proceedings and choose rules of law
which are applicable to procedure in the ICA. If parties apply ad hoc arbitration the
parties are totally free to choose the procedural rule, if the institutional arbitration is
chosen, the institutional rules will be applied. Beside these option if the parties choose
the state law, their autonomy might be restricted with public policy and mandatory
rules.139 If the parties do not specify the place of arbitration, it will be determined by the
arbitral tribunal or arbitral institution.140141
134
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (adopted
10 June 1958, entered into force on 7 June 1959) 330 UNTS 38
135
136
Ibid p.344-349
137
John J. Barcelo III ‘Who Decides the Arbitrators' Jurisdiction? Separability and Competence-
Competence in Transnational Perspective’ (2003) 36 Vand. J. Transnat'l L. 1115 p.1119
138
Kostyanytyn Olefirenko, ‘Applicable Procedural Law in ICA’ (LLM thesis, Central European
139
University 2010) p 1
140
Page 29 of 89
International commercial players seek neutral jurisdiction to secure their business
transaction. Thus ICA is mostly located in third part countries where the party do not
have relevant business matters. And the law of this third country is called lex arbitri and
it is generally different from substantive law. 142 The codes for lex arbitri for each
country most generally have short articles and regulate the interim awards.143
The internal lex arbitri is about the conduct of arbitration proceedings and guides the
parties’ relationship with each other and the arbitral tribunal. The external lex arbitri is
about the relationship with state courts for enforcement and recognition or other
procedural matters such as taking interim measures during arbitration.144
In this concept the seat theory has been developed that the place of arbitration is directly
relevant with applicable law of proceedings. This theory restricts the party autonomy on
choosing procedural law. The reason of the seat theory is coming from the relationship
between the state sovereignty and arbitral proceedings.145
141
UNCITRAL Rules, Art 16(1) Place of Arbitration:
Unless the parties have agreed upon the place where the arbitration is to be held, such place shall be
determined by the arbitral tribunal, having regard to the circumstances of the arbitration.
ICC Rules, Art 18(1): Place of the Arbitration:
The place of the arbitration shall be fixed by the Court, unless agreed upon by the parties.
Article 16 Seat(s) of Arbitration and Place(s) of Hearing
In default of any such agreement, the seat of the arbitration shall be London (England), unless and until
the Arbitral Tribunal orders, in view of the circumstances and after having given the parties a reasonable
opportunity to make written comments to the Arbitral Tribunal, that another arbitral seat is more
appropriate. Such default seat shall not be considered as a relevant circumstance by the LCIA Court in
appointing any arbitrators under Articles 5, 9A, 9B, 9C and 11.
142
143
Ibid p.176
144
Olefirenko (n.139) p.6
145
Ibid p.7
Page 30 of 89
In Naviera Amazonia Peruma SA v Compania International de Seguros de Peru146 case
even seat of arbitration was Peru the parties chose the English Procedural law. However
the English Court of Appeal rules that although the parties are totally agree and
theoretically it is possible, the English courts are not sufficient to take the jurisdiction
over that case.147
However after this case in Braes of Doune Wind Farm v Alfred McAlpine148 case court
rules the opposite decision. The parties decided that the applicable law was to be
English Law but the seat of arbitration was to Glasgow. English High Court stated that
the reference of Glasgow is about seat of arbitration and Scotland law should be
applicable. 149
2.3 What is the distinction between procedural and substantive law in

arbitration?
For a long time it is assumed that the applicable law to substance should also be
applicable to the arbitral procedure. 150
The distinction between lex arbitri and law governing of substantive matters of the
dispute derives from continental Europe and it is accepted in the ICA as well. 151 The
separation of procedural and substantive law is very common and useful in ICA. 152
The difference between procedural law and substantive laws of arbitration is clear.153
The substantive law can be applicable to the substantive rights and obligations of the
Naviera Amazonia Peruma SA v Compania International de Seguros de Peru [1988] 1 Lloyd’s Rep
146
116
147
Shaun Lee, ‘The Laws Governing an Arbitration’ (Singapore International Arbitration Blog 26 June
2012) <http://singaporeinternationalarbitration.com/2012/06/26/the-laws-governing-an-arbitration/>
accessed 03 September 2015
148
Braes of Doune Wind Farm v Alfred McAlpine [2008] EWHC 426 (TCC)
149
Lee (n.147)
150
Olefirenko (n.144) p.4
151
Redfern and Hunter (n. 143) p.174
152
Chang (n.120) p.30
Page 31 of 89
154
parties. However procedural law governs the proceedings of the arbitration.
Distinguishing the applicable law such as procedural and substantive in ICA shows that
the arbitral process is relevant with arbitration process and it is not about parties’ rights
and obligations which are relevant with substantive agreement.155
The distinction between substantive and procedural law was shown in Campagnie
d’Aremment Maritime v. Compagnie Tunisienn de Navigation156 case that the place of
arbitration was London and governing law was French Law and the applicable law to
the arbitration was English Law. In the House of Lords decision it was affirmed that
although the applicable law of arbitration was English law the substantive law was
French Law.157 In this case the court accepted the distinction from procedural law and
substantive applicable law. The critical point is that the court applied the closest and
most real connection test to implied term of contract and decided that the French law
was the closest and most real connected to substance of agreement and even the place of
arbitration was London, the French law was applied as substantive applicable law.158
2.4 What is the law applicable to the substance in international commercial

zrbitration?
2.4.1 How can non-state law be applicable in international commercial
arbitration?
Arbitration has international feature because of subject matter or the parties’ connection
with several legal systems. Mostly the parties are located in many countries. Thanks to
153
Alastair Henderson, ‘Lex Arbitri, Procedural Law and the Seat of Arbitration’ 2014 (26) Singapore
Academy of Law Journal 886 p 887
154
Chang (n.152) p.29
155
Chukwumerije (n.46) p.78
156
Campagnie d’Aremment Maritime v. Compagnie Tunisienn de navigation [1970] A.C.572
157
Chukwumerije (n.155) p.77-78
158
Peter Ashford, ‘The Law of the Arbitration Agreement: The English Courts Decide?’ 2013 (24) 3 The
American Review of International Arbitration 469 p 476-477
Page 32 of 89
party autonomy the parties may choose the state law however they may agree on non-
national law to be applicable law for their disputes in ICA. Thus they may choose
custom and usages of international commerce, rules of law, lex mercatoria or Islamic
law which can be relevant with their dispute.159
The non-state law can be applicable with two options: agreement of the parties and the
provisions of the applicable law. The Washington Convention 160 is very clear about
applicable of rules o law if parties agreed. The wording of ‘rules of law’ is open to be
applicable of legal rules.161
2.4.2 What is transnational law?
In the applicable rules in commercial law history, some maritime codes which were
used at the beginning of the 1st millennium were accepted by both Romans and
Greeks. 162
There are many different communities’ approaches to international
commerce and some of them may share the main concept such as pacta sunt
servanda.163
The applicable law in commercial disputes can be some rules or relevant international
law principles those are mentioned in Article 42(1)164 of Washington Convention.165 166
159
Ole Lando, ‘The Lex Mercatoria in International Commercial Arbitration’ 1985 (34) International and
Comparative Law Quarterly 747 p 747
160
1965 The Washington Convention on the Settlement of Investment Disputes between States and
Nationals of Other States, (adopted 18 March 1965, entered into force 14 October 1966) 575 UNTS
159/[1991] ATS 23 / 4 ILM 532 (1965) / UKTS 25 (1967)
161
Redfern and Hunter (n.143) p.226-227
162
Ibid p.216
163
Ibid p.216
164
“The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the
parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party
to the dispute (including its rules on the conflict of laws) and such rules of international law as may be
applicable.”
165
1965 The Washington Convention on the Settlement of Investment Disputes between States and
Nationals of Other States, (adopted 18 March 1965, entered into force 14 October 1966) 575 UNTS
159/[1991] ATS 23 / 4 ILM 532 (1965) / UKTS 25 (1967)
166
Page 33 of 89
2.4.3 What is lex mercatoria?
Lex mercatoria whose sources are public international law and general principles of law
is one of the biggest examples of transnational law.167 ICA has been deeply reflected by
lex mercatrioa. 168
Merchant law has practices and rules of international business forums. It has derived
from Roman’s jus gentium which means the commercial law between citizens and
foreigners. This rule has a great advantage in order for its obviousness. 169 The main
features of lex mercatoria are its spontaneous nature and customary.170
There are two methods to determine the lex mercatoria; the list method which is about
some lists of principles and rules are prepared in the previous time and the functional
method which is rules of specific questions. 171
2.4.4 What is UNIDROIT principles
The UNIDTROIT Principles of International Commercial Contracts are general
principles of contract law such as INCOTERMS International Rules for the
Interpretation of Trade Terms. The UNIDTROIT aims to establish neutral rules all over
world without any influence of systems’ law. 172 If parties agree, these rules and
principles can be chosen in the commercial arbitration.173
INCOTERMS and The Uniform Customs and Practice for the Documentary Credits can
be categorized under the trade usages also.174
167
Ibid p.217
168
Ibid p.221
169
Ibid p.217
170
Ibid p.218
171
Ibid p.219
172
Ibid p.222
173
Ibid p.222
174
Ibid p.224
Page 34 of 89
2.4.5 What is Sharia and Islamic law
Like lex marcetoria the Islamic law can applicable law in ICA. It can be said that
Islamic law is not codified. Thus the codification of Islamic law means to gather the
previous solutions and explain them to help the lawyers.175 The previous solutions are
made by companions, the companions’ followers and the view of schools’ founder and
this knowledge has been written by the latters.176 Hence because of the nature of the
Islamic law the settled body of legal principles is not necessary to apply it. In addition
according to some scholars the codification of Islamic law may restrict the applicability
of Islamic law field.177
In Arabic, Sharia means the direction to the spring. 178 Sharia is divided into three
sections that are belief which governs how Muslims should believe and practices that
manage the practices with God called worship and social 179 called Islamic law; and
ethics that organize the ethic180 because of social moral and religious necessity.181
Fiqh means knowing and understanding. In Islamic terminology it covers both psychical
duties and social duties 182 thus; Fiqh is another name for Islamic law. 183 Islamic Law
splits into 4 categories: practices, family law, obligation law, and criminal law.
175
Hayrettin Karaman, ‘İslâm Hukuk Tarihi’ (İz yayıncılık, İstanbul, 1999)
‘<http://www.hayrettinkaraman.net/kitap/tarih/0356.htm> accessed 29 August 2015
176
Ibid
177
Ibid
178
Ekrem Bugra Ekinci, ‘Islam Hukuku’ (Ari Sanat Yayinevi 2006) p.11
179
Jamal J. Nasir, “The Islamic Law of Personal Status” (2nd edn, Graham&Troatman 1990) p.1
180
Ekinci (n.178) p.12
181
Abdur Rahman I. Doi, ‘ Shari’ah:The Islamic Law’ (Abdulqasim Publications 1984) p. 7
182
Ekinci (n.180) p.12
183
Ibid p.16
Page 35 of 89
Obligation law divides into three subcategories; contracts such as gratuitous contract
and onerous contract, procedural law, and succession law.184
Although all schools agree that the primary sources of Islamic law are Quran, Sunna,
Ijma and Qiyas,185 some scholars claim the Quran and Sunna are the primary sources of
Islamic Law but Ijma and Qiyas are secondary. 186
The Quran which contains some information about human beliefs, God himself, and the
prospectus of Muslims about themselves in the world is main source of Islamic Law.187
Prophet Muhammad, who was the best knower of God’s desire, conducted his life with
God’s intentions which is called Sunna. Because of explained reason, the life of him is
the second source of Islamic Law. 188 The Sunna comprises Prophet Muhammad acts,
speeches, or implied approval acts or speeches which were done by others. Those are
called under Hadith term in time.189 There are some tests to determine the authenticity
of Hadith in the Usul al Hadith.190 After these tests it can be said that there are only a
few thousand Hadiths are authentic for the Islamic Law.191
On one hand consensus, Ijma, is defined as common opinion of knowledgeable men and
jurists192 on the other hand it is explained as a common opinion of mujtahid’s ijtihads
184
Ibid p.17
185
Ibid p.63
186
Doi (n. 181) p.78
187
Wael B, Hallaq, ‘An introduction to Islamic Law’ (CUP 2009) p.16
188
Ibid p.16
189
Ibid p.16
190
Ali Arslan, ‘Methods Criticism in History and Hadith’ (2014) 1 (2) Journal of Theology Faculty of
Bülent Ecevit University 53, p 61
191
Mustafa Karatas, ‘Hadis Sayim Metodlarinin Hadislerin Sayisina Etkisi’ (1998) 3 (2) İLAM Araştırma
Dergisi 51, p 67
192
Doi (n.186) p.7
Page 36 of 89
who live in the same period. However there are many different ijma types in the Islamic
legal system.193
Some scholars suggest a few conditions to be al-Mujtahid194 but some others express
very detailed and strict conditions to be fulfilled.195 Ijtichad has two concepts that the
first one is Qiyas and the second one is harmonizing all Islamic legal sources to adapt to
new situations.196
Qiyas is a sort of analogical reasoning197 that unclear or new situation can be illustrated
with clear rules which are explained in the Quran and Sunna.198
There are many secondary sources of Islamic law such as customs, public interest, state
of necessity, Abrahamic religions rule if applicable. 199
2.4.6 Why is the history of Islamic law important for current Islamic law?
It can be said that there is no specific institution to produce Islamic Law. It roots its
historical background. In order to understand the Islamic law legal background, the
history of Islamic law should be explained that how the new legal issue will be solved
because all Islamic schools take its legality from Prophethood, Companions and Tabiin
and Etba’I Tabiin periods. Thus, all matters should be based on all these periods. For
example if the new commercial practice arises in the modern world because of lack of
legal body the interpreter should examine firstly the Prophet Mohammad’s practices or
speeches, secondly companions explanations and practices, thirdly tabiin and ettba’i
193
Ekinci (n.185) p.97
194
Doi (n.192) p.79
195
Ekinci (n.193) p.171-172
196
Ibid p.171
197
Doi (n.194) p. 8
198
Ekinci (n.196) p.101
199
Ibid p.105-152
Page 37 of 89
tabiin interpretations and finally Islamic schools principles. Because of these reasons the
history of Islamic law should be explained.
2.4.6.1 How was the first period?: Prophethood period affected the Islamic law
The first thirteen years of prophethood of Prophet Muhammad was in Mecca.200 In this
period because of a great number of non-muslims he declared the Islamic faith
principles and explained old society’s stories to build new faith system.201 Thus there
were not many rules about practising.202
There were some tribes which settled in Medina who became Muslim and invited
Prophet Muhammad to the city of Medina. Having moved to Medina he signed an
agreement which was called Pact of Medina with Jewish community. This pact
contained some clauses about war time, peace time and presidency of Prophet
Muhammad. This pact is known as the first constitution in the world. Then the
population of Muslim significantly increased in Medina. For this reason the legal issues
of being society such as trade, family, criminal law matters arose. He solved these
problems which are still main principles of these legal branches.203
The reveals were coming in order that he was alive. When any legal issues occurred
these problems were asked to him to solve directly. So, he would solve them under
God’s control because of reveals period and he judged his own resolution hence, these
were definitely correct. In addition he encouraged his companions to call their own
opinions when they faced legal issues.204 Even most of legal and commercial matters
200
Ekrem Bugra Ekinci, ‘İslâm Hukuku Tarihi’ (2nd edn, Ari Sanat Yayinevi 2000) p 11
201
Ilmihal I, ‘Iman ve Ibadetler’, Diyanet Isleri Baskanligi (1998)
<http://www.diyanet.gov.tr/dijitalyayin/ilmihal_cilt_1.pdf> accessed 19 June 2015 p 32
202
Ibid p 32
203
Ekinci (n.200) p.12
204
Ilmihal I (n. 202) p.32
Page 38 of 89
were clarified in this period some of them intentionally were not explained. It seems
loopholes but God did not want to be strict and regulate all matters in order to relieve
the people needs. Latter lawyers would find new solutions by using this period’s
evidence and some secondary source of Islamic law.205
2.4.6.2 How was the second period?: companions of Prophet Muhammad period
affected the Islamic law
In this period Islam spread to large areas and Muslim population was formed in
different nations and cultures. Thus, many different legal problems which did not exist
in the Prophethood period arose. 206 First of all the Caliphs applied the Quran and
Sunnah. 207 The methodology of this time was study circle208 that when the new problem
was faced the companions came together, discussed and solved thus there was no
divergence between them.209 The first four Caliphs always convened the consultation
meeting was called Shura, which was main example of Ijma. 210 In addition, the customs
were valid source of Islamic law thus in the new countries for a new problem those
countries’ customs were used to solve the legal problems. 211
2.4.6.3 How was the third period?: Tabiin and Etba’I Ttabiin affected Islamic law
The companions followers were mostly non-Arabic because, administrations were ruled
by Arabs and those people focused on Islamic studies. 212
205
Ekinci (n.203) p.14-15
206
Karaman (n.177)
207
Ekinci (n. 205) p.29
208
Hallaq (n.187) p.32
209
Karaman (n.206)
210
Doi (n.197) p.66
211
Ekinci (n.207) p.29
212
Ibid p.50
Page 39 of 89
All scholars in this period had their own schools, Madhhab, however lack of
codification or loss of their followers the majority of them were disappeared. 213
In this period there were two approaches to legal studies in Islamic law that the first one
is Hadith approach and the second one is judgement approach. 214 Hadith approach
settled in Medina because majority companions were still living there215 and focused on
hadiths since Prophet Muhammad lived there and the Medina customs originated from
many hadiths still could be seen.216 The life was stable in Medina and did not change
significantly thus the old solutions still could be applicable.217
Judgement opinion arose in Iraq and it had very complicated social and economic
structure. Hence new substantive law218 matters especially commercial ones occurred to
be solved. Even all sources were common for both approaches this approach ruled that
the lawyers should take initiative and judge for new matters 219 after considering all
sources especially Hadith but analogical reasoning can be applicable also.220
In this period Islamic civilization expanded from Atlantic to China and developed more
than from its priors.221 With this great civilization movement, lawyers made an effort to
provide new legal rules because of rising Muslim population via converting to the
Islam.222 In addition the lawyers from different regions such as Africa, Central Asia, and
213
Ibid p.50
214
Ilmihal I (n.204) p.33
215
216
217
Abdulkadir Sener, ‘İslamda Mezhebler ve Hukuk Ekolleri’ (1984) 26 (1) AUIFD 371, 375
218
Hallaq (n.208) p.32
219
220
221
Ibid p.53
222
Karaman (n.209)
Page 40 of 89
Arabia were debating fictional problems 223 thus Islamic law increased and spread all
around the Muslim lands.224
2.4.6.4 How was the fourth period?: The Madhhabs affected the Islamic law
In this period the law methodology, the first example in the world, was established. 225
Lack of codification226 or becoming extinct of their followers only four schools have
survived.227 The ijtihad made legal pluralism in the Islamic Law. 228
In the Muslim world nearly 90% Muslims are following Sunnis schools.229 There are
four Sunni schools which Sunnis follow: Hanafi, Shafi’i, Maliki, and Hanbali230 those
are called with their founders. 231 The difference among then is only small details.232
Rest of Muslims generally belong to Shiite branch. 233 For this reason as a general
explanation of Islamic law will be dedicated to Sunnis Schools.
The rule in Islamic law is that in case of practising, all Muslims should follow only one
school not all. 234 Without any excuse combining all school rules is not valid in
particular school that rule will not be acceptable in the Islamic legal system. 235
223
Ibid
224
Ekinci (n.220) p.53
225
Karaman (n.222)
226
Ekinci (n.224) p.58
227
Hallaq (n.218) p.32
228
Ibid p.32
229
Mehmet Ali Buyukkara, ‘İslam Kaynakli Mezheplerin Ortadoğu’daki Coğrafi Dağilimi ve Tahmini
Nüfuslari’ (2013) 6(2) e-makâlât Mezhep Araştırmaları 321, 348
230
Abd al-Rahman Al-Jaziri, Islamic Jurispridenec According to the Four Sunni Schools (Nancy Roberts
tr, 1st edn, Fons Vitae 2009)
231
232
Doi (n.210) p.87
233
Christopher M. Blanchard, ‘Islam: Sunnis and Shiites’ (2009) Congressional Research Service 7-5700
<www.fas.org/irp/crs/RS21745.pdf> accessed 19 June 2015
234
Ekinci (n. 198) p.190
235
Ibid p.195
Page 41 of 89
For simple specification about schools that Hanaffiyah School is more rational, realist
and individualist; Shafi’i School is more dialectics and academic; Maliki School is more
traditional and aristocratic; and Hanbali School is more conservative. 236
2.4.7 What are the Sunni branches?
2.4.7.1 What is the Hanaffiyah School and how does this school produce Islamic law?
The two of three Muslims follow Hanaffiyah School in the world.237 Hanaffiyah School
is most especially dominant in the former Ottoman Empire states such as Turkey, Syria,
and the Balkans.238 It can be said that Hanaffiyah was the official school of the Ottoman
Empire.239 The founder of this school is Abu Hanifah and he was born in Iraq. 240 He
was educated by 4000 lecturers some of them were Prophet Muhammad’s
companions. 241 In his academia it is estimated that he taught over 4000 students. 242
Shafi’i school founder was a student of him, Imam Muhammad.243 He was very wealthy
merchant thus he could face many commercial disputes and showed the methodology
how it could be resolved. 244 He harmonized and analysed new matters and needs with
local customs besides main source of Islamic Law.245 It is well known he applied the
judgement method more than other 3 schools.246 He mostly used reasoning method to
produce new solutions and gave priority to free enterprise, protecting individual rights
236
Ibid p. 59
237
Sener (n.217) p.384
238
Mohammed Ralf Kroessin, ‘Concepts of development in ‘Islam’: A review of Contemporary
Literature and Practice’ (2008) Religions and Development Research Programme Working Paper 20-2008
<www.epapers.bham.ac.uk/1501/1/Kroessin_2008_Concepts.pdf> accessed 22 June 15 p 22
239
Hallaq (n.227) p.37
240
Neset Cagatay and Ibrahim Agah Cubukcu, ‘Islam Mezhepleri Tarihi’ (Ankara Universitesi Basimevi
1985) p.154
241
Ekinci (n.234) p.60
242
243
Ekinci (n.241) p.60
244
Ibid p.65
245
246
Cagatay and Cubukcu (n. 240) p.162
Page 42 of 89
and freedoms.247 The sources of law which he applied to his school are Quran, Sunnah,
Companions speeches, Ijma, Qiyas, implied Qiyas, and local customs.248 He founded an
academia and in his academia he codified contract law and succession law and he wrote
the first book of international law. 249 He was concerned not only with ex post legal
problems but also fictional ones.250
2.4.7.2 What is the Maliki School and how does this school produce Islamic law?
The founder of this school is Imam Malik bin Anas who was born in Medina251 and he
belonged to Medina approach.252 He attached importance to Medina customs because
Medina’s customs derived from Prophet Muhammad’s life.253 The sources of law are
respectively: Quran; Sunnah; Ijma; companions’ explanations; Medina’s customs;
analogical reasoning; and public interest. 254 While it is claimed that he belonged to
Hadith approach, he applied judgement approach as well.255 This school is popular most
especially in West and North African Muslims. 256 The number of the Maliki School
followers has the third place among four Sunni schools.257
2.4.7.3 What is the Shafi’i school and how does this school produce Islamic law?
The founder of this school is Imam Shafi’i who was born in Gaza and then moved to
Mecca. 258 He was educated by Maliki School founder Imam Malik and one of the
247
248
249
Ekinci (n.243) p.62
250
Ibid p.65
251
252
Cagatay and Cubukcu (n.248) p.176-177
253
Doi (n.232) p.100
254
Sener (n.237) p.385
255
Karaman (n. 225)
Mehmet Ali Buyukkara, ‘İslam Kaynakli Mezheplerin Ortadoğu’daki Coğrafi Dağilimi ve Tahmini
256
Nüfuslari’ (2013) 6(2) e-makâlât Mezhep Araştırmaları 321, p.349

257
Ekinci (n.249) p.77
258
Doi (n.253) p.104
Page 43 of 89
greatest students of Abu Hanifa Imam Muhammad, hence he combined Hadith and
Judgement approaches.259 The sources which are applied in this school are respectively;
Quran and Sunnah; Ijma; companions agreed opinions; companions non-agreed
opinions; and Qiyas.260 Thus the Sunnah has equal level with Quran in this school.261
This school spread to the Middle East and Far East and some African regions and it is
the second largest Sunni School in the Muslim world. 262
2.4.7.4 What is the Hanbali School and how does this school produce Islamic law?
Among the four schools Hanbali Schools founder Ahmad bin Hanbal was reluctant to
codify his school principles because he focused on classification of Hadiths. 263
Generally his students codified this school’s rules.264 He applied the Quran and Sunnah,
Companions Ijma, if any disagreement in Companions opinions the closest opinion to
the Quran and Sunnah respectively to solve any legal problem. Qiyas is very rarely
interpreted in this School thus it can be said that it is fully belong to Hadith
Approach.265 In this school the party autonomy over contract is very wide 266 thus the
people may contract in any field of life. Because of strict practising and hardship of
applicability, 267 Hanbali School is the smallest school among others. 268
Nowadays
Hanbali School is applicable only in Saudi Arabia and some regions of Palestine.269
2.4.7.5 What is the Salaffiya and how does this school produce Islamic law?
259
260
Sener (n. 254) s.388
261
Cagatay and Cubukcu (n.252) p.182
262
Ekinci (n.257) p.82
263
Karaman (n.255)
264
265
266
267
Ekinci (n.264) p.84
268
Hallaq (n. 239) p.37
269
Kroessin (n. 238) p.22
Page 44 of 89
Wahhabi school is the more strict and narrow interpretation of Hanbali School. 270
Sallaffiya term was first used and developed by Ibn Taymiyya.271 At first Ibni Taymiyya
followed the Hanbali School thus it is believed that in Saudi Arabia law is predominated
by Hanbali School however because of official School of Salaffiya the four schools are
banned there.272 According to the Salaffist the sources of Islamic Law are only Quran
and Sunnah. Even Salafiyye means followers of companions of Prophet Muhammad
they do not really care about the Qiyas and Ijma (consensus).273 This sect claims itself
as renovator. 274 Whilst Sallafiyya categorized under Sunni School it has different
approach about faith principle in Islam.275
2.4.7.6 What is Shiite branch and how does this school produce Islamic law?
The reason of Shiite branch occurring is that the party of Ali who was the fourth Caliph
of Muslim believed that he should have been the first Caliph instead of Abu Bakr who
was the closest friend of Prophet Muhammad and the first Caliph of Muslim.276 The
Imamate concept was established instead of Caliphate and it is believed that Imams are
fully immune from mistakes and sins.277
Ja’fariyya is the most crowded school in Shiite. 278 The sources of Ja’fari school are
Quran, Sunnah, Ijma and opinion.279 However the Hadith which is based on Sunna is
limited to family of Prophet Muhammad and only a few companions. Thus ijma’s
270
271
Kroessin (n.269) p.24
272
Ekinci (n.267) p.96
273
274
Kroessin (n.271) p.24
275
Ibid p.25
276
Muhammad Hanif, ‘Islam:Sunnis and Shiites’ (1994) 58(6) National Council for the Social Studies
Social Education 339 <http://www.socialstudies.org/system/files/publications/se/5806/580602.html>
accessed 24 June 2015
277
Ibid
278
279
Page 45 of 89
meaning is different from Sunni Schools. It is claimed that only Imams’ opinions can be
based on Ijma. Moreover, typical Qiyas and judgment are rejected because the
judgement is always possible in this school. This school differs in mostly family and
succession law from Sunni Schools.280
2.4.8. What are the main principles of Islamic commercial law transactions?
The general principle in the Islamic commercial transactions is permissibility yet
prohibition is an exception. This principle encourages the new types of commercial
transactions unless they contain prohibited subjects. 281 Quran says that the main
condition of contract is bilateral declaration of intention. 282 The comment of René
David is that in principal Islamic law is a system which cannot be changed, however
Islamic law is open to modernize the society and has the opportunity to solve the new
modern problems with the influence of custom, the intention of the parties as long as
these solutions do not harm the ground of the Islamic law.283
According to the Hanaffiya school there is only one element of the contract, offer and
acceptance284 which is part of declaration of intention285. However for the other three
schools the contractor, the subject of the contract and the issue of the contract are the
other main elements of the contract.286 Without one of the element of the contract makes
the contract null and void. Besides the elements there are some conditions to make a
contract. First the contractor should have the capability to enter contract, second the
280
Sener (n.260) p.401-402
281
Muhammad Yusuf Saleem, Islamic Commercial Law (John Wiley&Sons 2012) ProQuest ebrary. Web
Accessed 11 June 2015 p 1
282
Ahmet Ünsal, ‘İn‘ikâdın (Akdin Hukukî Varlık Kazanması) Mahiyeti’ (2010) 51 (2) Ankara
Üniversitesi İlahiyat Fakültesi Dergisi 93 p 96
283
Karaman (n. 263)
284
Ünsal (n.282) p.97
285
Ibid p.96
286
Ibid p.97-98
Page 46 of 89
contract should not be prohibited with Quran, third the extra conditions which are
depends on the type of contract should be fulfilled, fourth the contract should be
suitable for the parties’ intentions, fifth the offer should be valid until the acceptance,
sixth the parties should agree on the intentions. 287 If these conditions does not exist in a
contract it means there is no valid contract between parties. 288
The issue of the contract should be suitable with Islamic Law. According to the Islamic
law for instance if the contract is sale of goods, the goods should be suitable to transfer,
to be ownership and not prohibited ones such as blood and wind. 289 Muhammad Yusuf
Saleem explains the main prohibited practices are ‘usury, ambiguity in contracts
(gharar), gambling and games of chance (maysir), fraud, bribery, the use of false
weights and measures, taking others’ property unlawfully, and transactions on
prohibited (haram) things.’290
Usury is forbidden by Quran and the hadith. Usury means the extra amount for the debt
which is made for specific period of time. This extra amount is considered as injustice.
There is no consensus of the concept of the interest and usury. However it is said that
the meaning of riba covers all types of extra charging. 291 Gharar is an uncertainty or the
vagueness of the contract issue292 or benefiting the party’s ignorance293.
3. Conclusion
The applicable law is one of the most important issues in ICA. Thanks to party
autonomy the parties are free to choose applicable law. However there are various types
287
Ibid p.105-107
288
Ibid p.109
289
Ibid p.99
290
Saleem (n.281) p.1
291
Ibid p.2-3
292
Ibid p.2-3
293
Ünsal (n.289) p.111
Page 47 of 89
of applicable law might be chosen. First of all nowadays almost all international
commercial contract have arbitration clause. Beside this there is procedural applicable
law which is about proceedings of arbitration. The law of proceedings provides seat of
arbitration and lex arbitri that is about place of arbitration. Moreover the substantive
applicable law is one of type of applicable law in ICA.
Although applicable law can be state law the some rules of law or usages and custom
also can be substantive applicable law. Sharia is one of accepted applicable in ICA. It
can be said that Islamic law takes it legality from its history and practices such as lex
marcetoria. Because of the lack of legal body to produce Islamic law is not deficiency
of Islamic law. The main principle of Islamic commercial law is permissible thus for
any new solution for the dispute, this principle should be analysed.
Page 48 of 89
CHAPTER 3. PARTY AUTONOMY OVER APPLICABLE LAW IN

INTERNATIONAL COMMERCIAL ARBITRATION
1. Introduction
Party autonomy principle says that the parties are free to choose any law or rules. 294 In
addition this principle covers that the parties are free to choose which law will apply to
substance of the contract. 295
The party autonomy was firstly mentioned by French Scholar, Charles Dumoulin, in
16th century. In the modern world party autonomy over contract has been globally
accepted with governing choice of law.296
Party autonomy over applicable law is a kind of general principle of law297 under the
Article 38 of the Statute of the International Court of Justice of 1945.298
2. Why and how does the party autonomy reflect applicable law in
international commercial law?
The certainty, predictability and uniformity factors are applied in ICA. 299 The party
autonomy is one of outcomes of the certainty, predictability and uniformity. Party
294
Julian D M Lew, ‘Determination of Applicable Substantive Law’, (1997) 25 Int'l Bus. Law. 157 p 158
295
Carlquist(n.48) p.11
296 Mo Zhang, ‘Party Autonomy And Beyond: An International Perspective Of Contractual Choice Of
Law’ 2006 20 Emory International Law Review 511 p516
297
298
ICJ Statute (adopted 26 June 1945, entered into force 24 October 1945)
Article 38 “1. The Court, whose function is to decide in accordance with international law such disputes
as are submitted to it, shall apply:
a. international conventions, whether general or particular, establishing rules expressly recognized by the
contesting states;
b. international custom, as evidence of a general practice accepted as law;
c. the general principles of law recognized by civilized nations;
d. subject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified
publicists of the various nations, as subsidiary means for the determination of rules of law.
2. This provision shall not prejudice the power of the Court to decide a case ex aequo et bono, if the
parties agree thereto.”
Page 49 of 89
autonomy is the main ground principle in ICA.300 This principle has been approved not
only national laws but also international ones.301 302
One of party autonomy results is freedom of choosing law and this is most generally
checked with public policy and mandatory rules. 303 If the substantive law is chosen by
the parties in the international arbitration it is most generally linked with contractual
relationship of the parties. 304 However it is not mandatory connection with dispute or
parties. Moreover party autonomy over applicable law refers not only national law but
also some rules and non-national laws305 such as Islamic law.
In Robinson v. Bland case306 the parties’ dispute occurred in France and it was about
gambling debts. However gambling debts were void In France. 307 The English court, the
first common law state, accepted party autonomy and ruled that even a contract was
invalid in France, if it was valid in the UK law, the contract could be enforceable in the
UK.308 It can be said that from this case the enforceability of the awards change from
state to state and public policy norms are not common for all countries.
Even though the applicable law is a substantive law, the UK has adopted with the
Peninsular and Oriental Navigation Company 309 and Lloyd 310 cases that party
299
Chang (n.154) p.10
300
Ibid p.1
301
Ibid p.1
302
303
Chang (n.301) p.11
304
305
Ibid p.12
306
Robinson v. Bland (1760) I Wm. BI 234. z Burr 1077
Robert Johnston, ‘Party Autonomy in Contracts Specifying Foreign Law’ 1966 (7) 3 William And
307
Mary Law Review 37 p 37

308
Chang (n.303) p.3
309
The Peninsula and Oriental Steam Navigation Company v. Shand (1865) 3 Mco. P. C. (N. S. ) 272
310
Lloyd v. Guibert (1865) L. R. I L. Q. 115
Page 50 of 89
autonomy can be applicable although the contract was made with different countries’
law.311 This principle is also accepted by international law as can be seen from Dallal
and Bank Mellat case.312
When it comes to the conventions, the Geneva Protocol of 1923 313 314
and Geneva
Convention of 1927315 316 provide party autonomy for procedural law in international
arbitration as well 317 318 and this principle can be seen as implied was in the Article V(1)
319 320
(d) of New York Convention. Moreover it can be seen the party autonomy
principle in Model Law321 provision.322
The principle of party autonomy and freedom of contract are different subjects. This is
because the party autonomy refers law of the contract but not regulation of substance of
contract. However in practice there are some restrictions say mandatory rules and public
policy of relevant states. 323 Thus it can be said that party autonomy is wider than
311
Chang (n.308) p.4
312
Ibid p.4
313
Geneva Protocol of 1923 (adopted 24 September 1923, entered into force 28 July 1924) 27 LNTS 157
314
Article 2: “the arbitral procedure, including the constitution of the arbitral tribunal, shall be governed
by the will of the parties and by the law of the country in whose territory the arbitration takes place.
The contracting states agree to facilitate all steps in the procedure which require to be taken in their own
territories, in accordance with the provisions of their law governing arbitral procedure applicable to
existing differences.”
315
Geneva Convention of 1927- Convention on the Execution of Foreign Arbitral Awards (adopted 26
September 1927, entered into force on 25 July) 91 LNTS 301
316
Article 1 (c): “that the award has been made by the Arbitral Tribunal provided for n the submission to
arbitration or constituted in the manner agree upon by the parties and in conformity with law of governing
the arbitration procedure.”
317
Chang (n.312) p.5
318
319
Article (5) 1 (d): “The composition of the arbitral authorities or the arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was not accordance with the law
of the country where the arbitration took place; or”
320
321
UNCITRAL Model Law on International Commercial Arbitration (adopted 21 June 1985) A/40/17
322
Article 19 (1): “Subject to the provisions of this Law, the parties are free to agree on the procedure to
be followed by the arbitral tribunal in conducting the proceedings.”
323
Chang (n.317) p.1
Page 51 of 89
principle of freedom of contract and there is no way to be excluded from the whole
applicable rule of legal system.324
While the party autonomy is broadly accepted by the both international convention and
arbitration institutions’ rules this principle is limited with jurisdictional factors in
arbitration.325
Some fields of law such as competition law and labour law are not open to party
autonomy to choose substantive law. Hence it is a kind of restriction over party
autonomy. Another point for limit of party autonomy is to protect the weaker party of
contract or third party or forum interest under the national interest sphere. To generalize
the restrictions of party autonomy can be categorized with public policy, mandatory
rules, coherence with principle of bona fide and law.326
There are three approaches for party autonomy in international commercial law. 327
Jurisdictional approach states that it is almost fully under supervisory of states both
procedural law and conflict of law of place of arbitration. 328 The contractual theory
claims that the parties have autonomy over contract and the arbitration should be
governed by the parties’ opinion. 329 The mixed theory suggests both mixtures of
jurisdictional and contractual theories. 330331
Even parties have autonomy to select substantive applicable law under some
circumstances, the arbitral tribunal may intervene this principle. Thus it means the party
324
325
Chang (n.323) p.7
326
327
Chukwumerije (n. 320) p.10
328
Ibid p.11-12
329
Ibid p.10
330
Chang (n.325) p.8
331
Chukwumerije (n.329) p.12-13
Page 52 of 89
autonomy is not unlimited. The public policy and the bona fide are the examples of the
limitation of party autonomy. However these terms’ grounds are not clear. The criteria
of public policy and bona fide occur case by case.332
3. What is the concept of the restriction on party autonomy over substantive

applicable law in international commercial arbitration?
The party autonomy is clear over substantive applicable law however there are some
restrictions. Although party autonomy is one of main principle in arbitration, it does not
mean that all certain elements of states law cannot be eliminated by the parties. 333 The
main restrictions of party autonomy in arbitration are mandatory rules and public policy
of law of the place of the arbitration. 334 335

Public policy is a safe harbour of
fundamental legal principles and moral values of public.336 If there are any provisions
which are breach of mandatory rules and public policy, the intervention will exist.337
Public policy is generally thought in recognition and enforcement process of the
awards. 338 However it can be said that generally the courts do not intervene to the
arbitral awards under public policy content.339
While Model Law has liberal approach about party autonomy it has some provisions
which are mandatory and cannot be eliminated by the parties. 340
332
Şeyda Dursun, ‘A Critical Examination of The Role of Party Autonomy in ICA and an Assessment of
Its Role and Extent’ (2012) 1 Yalova Üniversitesi Hukuk Fakültesi Dergisi 161 p.177
333
Chang (n.330) p.20
334
Philippe Fouchard, Emmanuel Gaillard, and Berthold Goldman Fouchard, Gaillard, Goldman on ICA
(Emmanuel Gaillard & John Savage ed, Kluwer Law International 1999), p644-645
335
Lew (n.294) p.159
336
Chang (n.333) p.22
337
Ibid p. 20
338
Ibid p. 22
339
Böckstiegel, Karl-Heinz, "Public Policy as a Limit to Arbitration and its Enforcement", (2008), IBA
Journal of Dispute Resolution, Special Issue, p123 seq., <http://www.arbitration-
icca.org/media/0/12277202358270/bckstiegel_public_policy...iba_unconfererence_2008.pdf > accessed
11 July 2015 p 8
340
Chang (n.338) p.21
Page 53 of 89
The public policy is a kind of restrictions of party autonomy. For instance in Soleimany
v Soleimany case 341 court refused the recognition and enforcement of arbitral award
which was legal under applicable law but not English law within context of public
policy.342 In this case the father and son agreed to smuggle the Iranian carpet and they
chose the Jewish law. Because in Jewish law the illegal purpose of contract does not
affect the validity of contract. The Beth Din in London made an award. However
English Court of Appeal declined to enforce the award due to against the public
policy.343 This case shows that the public policy is a barrier for perfection an illegal
purposes.344
Party autonomy is also limited by the law of the seat of arbitration. In Union of India
and McDonnell Dougles Corp case345 the court rejected the different states procedural
law and applied English Law.346
Because of certain limitations section 33 (1) (a) and (b) 347 of Arbitration Act 1996348
says that the tribunal should be fair and impartial to the parties, give to the parties
opportunity to show their arguments. 349
4. What are the types of restrictions over party autonomy in international

commercial arbitration?
341
342
Chang (n.340) p.23
343
344
Chang (n.342) p.23
345
Union of India v. McDonnell Douglas Corporation, [1993]2 Lloyd's Rep. 48
346
Chang (n.344) p.24
347
The tribunal shall—
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting
his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or
expense, so as to provide a fair means for the resolution of the matters falling to be determined.
348
Arbitration Act 1996
349
Chang (n.346) p.24-25
Page 54 of 89
4.1 How does the courts review restrict the arbitral award in international
commercial arbitration?
The court control over arbitration award is limited.350 The judicial review can provide
involvement of governmental law to protect rights and freedom if inequality awards
exist. 351 Substantive unconscionability means one of the contractual parties has
favourable provisions but other has very low standards. 352 For example if one of the
party is too weak in the agreement, the court can review this unfair situation.
In international arbitration, courts should balance approach to public policy when
enforcing arbitral awards within parties’ interest instead of third parties interest. 353
Commercial arbitration agreements are based on parties’ intention and enforce with
their own terms.354 In addition enforceability of chosen law provision is important in
international arbitration because of predictability of international commercial
transactions355 and public policy should be very light degree over ICA.356
In the same analysis for substantive Islamic law in arbitration in the first sense enforcing
religious law awards would be considered against public policy. However courts should
overrate the parties’ religious faith against third parties’ interest. In addition in order to
ensure the predictability of religious chosen law should be promoted against public law
too.357
350
Wolfe (n.126) p.432
351
352
Helfand (n.125) p.1296-1297
353
Ibid p.1288
354
Ibid p.1253
355
Wolfe (n.350) p.435-436
356
Helfand (n.354) p.1289-1290
357
Ibid p.1292
Page 55 of 89
Redfern and Hunter 358 suggest that in arbitration there are some interpretations to
balance strict law and equity that the arbitral tribunal and:
“should apply relevant rules of law to the dispute, but may ignore may rules
which purely formalistic (for example, a requirement that the contract should
have been made in some particular form); or,
should apply relevant rules of law to the dispute, but may ignore any rules
which appear to the operate harshly or unfairly in the particular case before
it; or
should decide according to the general principles of law; or,
may ignore completely any rules of law and decide the case on its merits as
these strike the arbitral tribunal.”
4.2 How does public policy restrict party autonomy- recognition and
enforcement of arbitral award?
Even if it is a phenomenon there is no certain and universal definition of public
policy.359 It is difficult to determine the certain criteria since it has flexibility of time,
place and circumstance. But it is a reflection of sui generis customs, habits, system of
values, and ethics of a society. 360
In Egerton v. Brownlow361 case the court defined the public policy that is “that principle
of law which holds that no subject can lawfully do that which has a tendency to be
injurious to the public or against the public good” and this definition was supported. 362
Judge Joseph Smith stated in Parson v. Whittemore case 363 that “only where
enforcement would violate the forum state's most basic notions of morality and justice”
and the foreign arbitral award can be rejected on the ground of public policy. 364 This
358
359
Chang (n.349) p.99
360
Ibid p.99
361
Egerton v. Brownlow 10 E. R. 359; (1853) 4 H. L. Cas. l
362
Chang (n.360) p.99-100
363
Parsons & Whittemore Overseas Inc. v. RAKTA, United States Court of Appeals for the Second
Circuit December 23,1974 508 F. 2d, p969
364
Chang (n.362) p.100
Page 56 of 89
definition contains essential legal, economic, political, social, religious and moral
standards of every country. And it is a reason to refuse to enforce the foreign arbitral
awards.365 Article V (2) of the New York Convention clearly demonstrates this result.366
4.3 How do mandatory rules restrict part autonomy?
Party autonomy is not totally unlimited the commercial actors should obey the various
policies and rules. Thus it can be said that this rules aim to control party autonomy. The
mandatory rules affect the states’ both national and international public policy and most
generally aim to protect social, economic or political interest. Near procedural they can
be relevant with any process, or substantive such as tax, import /export tax and
competition laws.367 Mandatory rules are a concept of some rules that the parties cannot
eliminate them in the arbitration. The scope of mandatory rules change from states to
states and it is not easy to determine the provisions which are mandatory or not.368
The context of international public policy generally contains mandatory rules which
cannot be violated. The mandatory rules’ purpose is to protect public policy. 369
However the public policy is dynamic because of changing times and circumstance and
it is hard to say that the mandatory rules are reflection of public policy. 370
Mandatory rules and public policy have common sense: first: the purpose is alive the
national basic interest, fundamental rules’ principle and justice and morality second:
accepts the ways of application of foreign law, and reject to enforce and recognise the
365
Ibid p.100
366
Recognition and enforcement of an arbitral award may also be refused if the competent authority in the
country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that
country. or (b) The recognition or enforcement of the award would be contrary to the public policy of that
country.
367
Andrew Barraclough and Jeff Waincymer, ‘Mandatory Rules of Law in ICA’ (2005) 6 Melbourne
Journal of International Law p 1
368
369
Chang (n.365) p. 84
370
Ibid p.85
Page 57 of 89
awards third: indicate the principles of economics, politics, society, religion, and law
fourth: they should be conformity with purpose of national public policy. 371
All public policy principle is mandatory rule but all mandatory rules do not reflect
public policy.372 Generally the mandatory rules’ examples are derived from competition
or anti-trust law.373
The main difference between mandatory rules and public policy are one- mandatory
rules are originated from compulsory provisions of law and two- mandatory rules might
be seen from the regulation but public policy is generally abstract three- the concept of
public policy is broader than mandatory rules. 374
If the awards are overlooked the mandatory rules the awards may not be enforced and
recognised by the local courts.375 The article V(1)(e) of the New York Convention has
similar provision about mandatory rules.376
5. What is the English arbitration, what are the main restrictions of party
autonomy in English arbitration, and what is the United Kingdom courts’
approach to Islamic law in international commercial arbitration?
5.1 How have arbitration and party autonomy developed in the United
Kingdom?
Dispute resolution process with self-conducted rooted from very early pagan and Anglo
Saxon Communities.377 In Medieval England arbitration was current dispute resolution
method. Moreover commercial arbitration started to grow at that time that merchants
371
Ibid p. 85
372
Karl-Heinz (n.339) p.3
373
374
Chang (n.371) p.87
375
Ibid p.88
376
The award has not yet become binding on the parties, or has been set aside or suspended by a
competent authority of the country in which, or under the law of which, that award was made.
377
Valerie A. Sanchez, ‘Towards a History of ADR: The Dispute Processing Continuum in Anglo-Saxon
England and Today’ (1996) 11 (1) The Ohio State Journal On Dispute Resolution 1 p. 2
Page 58 of 89
were free to choose impartial merchants to solve their disputes. Later on this method
was institutionalised as a professional body and commercial law to resolve merchants’
disputes.378
In seventeenth century since the developed economy lay on commercial tribunal, the
awards of arbitration gained the enforceability in the courts.379
The Arbitration Act of 1698 enforced and adopted the commercial purpose dispute
resolution for traders and merchants. If the parties agreed, Arbitration Act 1698 could
provide legal binding awards without court’s decision.380 Arbitration was very popular
until the early 19th century.381 After this Act, there were some Arbitration Acts: 1889:
1934: 1950: and 1979 passed to minimise the courts’ intervention.382
Today Arbitration Act 1996 which was modified with courts’ decision enforces. This
Act provides very effective power to tribunals to limit courts’ interference.383 Article 1
of Chapter 23 under Part 1 of Act of Arbitration 1996384 regulates the general principle
about arbitration and arbitral tribunal;
“The provisions of this Part are founded on the following principles, and
shall be construed accordingly—
(a) the object of arbitration is to obtain the fair resolution of disputes by an
impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved,
subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as
provided by this Part.”
The UK courts all the time have reversed the supervisory position for parties’ consensus
for the situation of arbitrator’s misconducted about fairness, objectiveness, justice.
378
Michael H. LeRoy ‘Crowning the New King: The Statutory Arbitrator and the Demise of Judicial
Review’ (2009) 1 Journal of Dispute Resolution 1 p14
379
Ibid p.15
380
Ibid p.16
381
Ibid p.21
382
Maret (n.98) p.262
383
Ibid p.262-263
384
Arbitration Act 1996, s 23 a 1.
Page 59 of 89
However, nowadays this situation has changed to respect to party autonomy385 and it is
asserted that the public policy of the UK is less strict than other developed countries. 386
Arbitration Act 1996 accepts the party autonomy with article 14(2).387
In the Deutsche Schachtbau v Shell Petroleum Co Ltd case388, the court accepted that
even if the substantive law in the arbitration is internationally accepted principles of law
governing contractual relations it is not against public policy of England and the award
could be enforceable in the UK. 389 This case was only about enforcement of the award
not for any party autonomy. However it is to be noted that this case shows that the UK
approach for parties’ autonomy over non-UK substantive law of international arbitration
is legally accepted. 390 Section 46 of Arbitration Act 1996391 provides applicable rules
to substance of dispute that:
“(1) The arbitral tribunal shall decide the dispute—

(a) In accordance with the law chosen by the parties as applicable to the
substance of the dispute, or
(b) If the parties so agree, in accordance with such other considerations as
are agreed by them or determined by the tribunal.
(2) For this purpose the choice of the laws of a country shall be understood
to refer to the substantive laws of that country and not its conflict of laws
rules.
(3) If or to the extent that there is no such choice or agreement, the tribunal
shall apply the law determined by the conflict of laws rules which it
considers applicable.”
The Commentary of Report by the Departmental Advisory Committee provides the
rules applicable to substance of dispute:
385
Julian D M Lew, ‘Determination of Applicable Substantive Law’, (1997) 25 Int'l Bus. Law. 157 p157-
158
386
Chang (n.375) p.11
387
Article 14 (2): “The parties may agree on joint proposals for the conduct of their arbitration for
consideration by the Arbitral Tribunal. They are encouraged to do so in consultation with the Arbitral
Tribunal and consistent with the Arbitral Tribunal's general duties under the Arbitration Agreement.”
388
[1990] I AC 295 (CA).
389
Lew (n.335) p.158
390
Ibid p.158
391
Arbitration Act 1996
Page 60 of 89
“222. This Clause reflects much, though not all, of Article 28 of the Model
Law. We have not for example, directed the tribunal to “take into account
the usages of the trade applicable to the transaction.” If the applicable law
allows this to be done, then the provision is not necessary; while if it does
not, then it could be said that such a direction overrides that law, which to
our minds would be incorrect.
223. Sub-section (1)(b) recognizes that the parties may agree that their
dispute is not to be decided in accordance with a recognized system of law
but under what in this country are often called “equity clauses,” or
arbitration “ex aequo et bono”, or “amiable composition” ie general
considerations of justice and fairness etc.. It will be noted that we have
avoided using this description in the Bill, just as we have avoided using the
Latin and French expressions found in the Model Law. There appears to be
no good reason to prevent parties from agreeing to equity clauses. However,
it is to be noted that in agreeing that a dispute shall be resolved in this way,
the parties are in effect excluding any right to appeal to the Court (there
being no “question of law” to appeal).
224. Sub-section (2) does, in effect, adopt the rule found in Article 28 of the
Model Law, thereby avoiding the problems of renvoi.
225. Sub-section (3) caters for the situation where there is no choice or
agreement. This again is the language of the Model Law. In such
circumstances the tribunal must decide what conflicts of law rules are
applicable, and use those rules in order to determine the applicable law. It
cannot simply make up rules for this purpose. It has been suggested to the
DAC that more guidance be given as to the choice of a proper law, but it
appears to us that flexibility is desirable, that it is not our remit to lay down
principles in this highly complex area, and that to do so would necessitate a
departure from the Model Law wording.”
The 223 comments shows that the case law and the legislations eager to reduce the
courts role for parties’ wishes on the applicable law on their disputes.392
According to the section 46 (3) of Arbitration Act 1996 if there is no expression of
parties about substantive applicable law, the tribunal will apply the law under conflict of
law context.393
English law’s approach is that arbitral tribunal should decide the dispute firstly
conformity with law chosen by parties secondly with parties consent ‘such other
considerations as are agreed by them or determined by the tribunal’ which is the same
392
Lew (n.390) p.158
393
Ibid p.159
Page 61 of 89
provision of Article 28 394 of Model Law 395 . Otherwise the tribunal has to apply the
appropriate law for conflict.396
And in Halpern v Halpern397 case the court held that because of place of arbitration is
England, Jewish Law which is kind of non-national law could be allowed to apply to
substance of dispute. 398
In Musawi R E International (UK) Ltd v. Others case399, the court ruled that ayatollah
should be arbitrator to apply Islamic law to be accordance with Section 46(1) b of the
Arbitration Act 1996. 400 Thus this case shows that Arbitration Act 1996 is open to
Islamic law for substantive applicable law for international commercial law.
There are some reflections of party autonomy in the arbitration that will be explained as
general.
5.2 Composition of arbitral tribunal
Parties’ autonomy affects the arbitral tribunal composition that they are free about
condition of authority of an arbitrator. 401 Arbitration Act 1996 section 23402 and 24403
394
(1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by
the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a
given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of
that State and not to its conflict of laws rules.
(2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the confl
ict of laws rules which it considers applicable.
(3) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have
expressly authorized it to do so.
(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall
take into account the usages of the trade applicable to the transaction.
395
UNCITRAL Model Law on ICA (adopted 21 June 1985 A/40/17)
396
397
Halpern v Halpern [2007] EWCA Civ 291
398
399
Musawi R E International (UK) Ltd v. Others [2007] EWHC 2981
400
Redfern and Hunter, (n.398) p.227
401
Chang (n.386) p.14
Page 62 of 89
regulate the authority on conditions of arbitrators and if necessary remove them. 404 If
the parties do not choose them, the arbitral tribunal will choose. Moreover the parties
are free to revoke the arbitral tribunal. If there are the any partial or subjective attitude
of arbitral tribunal the London Court of International Arbitration (LCIA) may remove
them.
5.3 Choosing the place of arbitration
402
(1) The parties are free to agree in what circumstances the authority of an arbitrator maybe revoked.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) The authority of an arbitrator may not be revoked except—
(a) by the parties acting jointly, or
(b) by an arbitral or other institution or person vested by the parties with powers in that regard.
(4) Revocation of the authority of an arbitrator by the parties acting jointly must be agreed in writing
unless the parties also agree (whether or not in writing) to terminate the arbitration agreement.
(5) Nothing in this section affects the power of the court—
(a) to revoke an appointment under section 18 (powers exercisable in case of failure of appointment
procedure), or
(b) to remove an arbitrator on the grounds specified in section 24.
403
(1) A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned
and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds—
(a) that circumstances exist that give rise to justifiable doubts as to his impartiality;
(b) that he does not possess the qualifications required by the arbitration agreement;
(c) that he is physically or mentally incapable of conducting the proceedings or there are justifiable
doubts as to his capacity to do so;
(d) that he has refused or failed—
(i) properly to conduct the proceedings, or
(ii) to use all reasonable despatch in conducting the proceedings or making an award, and that substantial
injustice has been or will be caused to the applicant.
(2) If there is an arbitral or other institution or person vested by the parties with power to remove an
arbitrator, the court shall not exercise its power of removal unless satisfied that the applicant has first
exhausted any available recourse to that institution or person.
(3) The arbitral tribunal may continue the arbitral proceedings and make an award while an application to
the court under this section is pending.
(4) Where the court removes an arbitrator, it may make such order as it thinks fit with respect to his
entitlement (if any) to fees or expenses, or the repayment of any fees or expenses already paid.
(5) The arbitrator concerned is entitled to appear and be heard by the court before it makes any order
under this section.
(6) The leave of the court is required for any appeal from a decision of the court under this section.
404
Chang (n.401) p.14
Page 63 of 89
In fact arbitration is based on choice. The parties have an authority to choose the place
which will be taken and applicable arbitration procedures. The characteristic feature of
arbitration is autonomy that parties can determine the law which will apply their
disputes. 405 The parties have a limitation over procedures with lex arbitri but generally
they are leaved by the lex arbitri to agree the procedures. 406
Choosing the place of arbitration reflects party autonomy. 407 Arbitration act 1996 has
some provisions for place of arbitration in section 3.408 If it is not chosen by the parties
the tribunal may determine the seat of arbitration.
5.4 Agreeing on the powers of the tribunal
The powers of the tribunal can be shaped by the parties thus it clearly reflects the
parties’ freedom.409 Section 38 (1)410 of Arbitration Act 1996 directly and section 48411;
section 39(1)412; and section 39(4) 413 indirectly relevant with parties’ autonomy over
powers of tribunal. 414
Cindy Galway Buys ‘The Arbitrators' Duty To Respect The Parties' Choice Of Law In Commercial
405
Arbitration’ (2005) 79 (1) St. John's Law Review 59

406
Juho Kankkunen, ‘Document Production under the IBA Rules on the Taking of Evidence in
International Arbitration’ (Master’s Thesis, University of Helsinki Faculty of Law 2014) p.21
407
Chang (n.404) p.14
408
In this Part “the seat of the arbitration” means the juridical seat of the arbitration designated—
(a) by the parties to the arbitration agreement, or
(b) by any arbitral or other institution or person vested by the parties with powers in that regard, or
(c) by the arbitral tribunal if so authorised by the parties,
or determined, in the absence of any such designation, having regard to the parties’ agreement and all the
relevant circumstances.
409
Chang (n.407) p.15
410
The parties are free to agree on the powers exercisable by the arbitral tribunal for the purposes of and
in relation to the proceedings.
411
The parties are free to agree on the powers exercisable by the arbitral tribunal as regards remedies.
412
The parties are free to agree that the tribunal shall have power to order on a provisional basis any relief
which it would have power to grant in a final award.
413
Unless the parties agree to confer such power on the tribunal, the tribunal has no such power.
414
Chang (n.409) p.15-16
Page 64 of 89
One of the power sources of the arbitral tribunal is expressing by the parties at first hand
with appointment or agreement such as document production, expert investigation,
hearings, demanding witnesses, collect evidence, viewing the subject-matter. 415 Other
source of arbitral tribunal power is derived from arbitration rules which are set by any
institution or ad hoc. 416
5.5 Applying for interim measures
Sometime the subject-matter of dispute, evidence or relating matters need to be
preserved during arbitration processes. 417 In some occasions the arbitral tribunal can
order to the parties to protect the subject-matter of the dispute for interim measures. 418
Interim measures can be applied only necessary and urgent situations for protecting
rights.419 Generally taking interim measures is accepted by jurisdictions thus it is kind of
power of the arbitral tribunal. 420 Because of taking account of state party of arbitration,
broad power such interim measures are a threat for sovereignty of State. 421 Generally
there three reasons to take the interim measures; to secure the future award; to protect
the remaining situation; and to manage the arbitral processing. 422
Interim measures are enforced to sustain the arbitral procedure such as protect the
evidence, costs and taking the witnesses statements423 thus it means interim measures is
415
Redfern and Hunter (n.400)
416
Ibid
417
Ibid
418
ibid
419
ibid
420
ibid
Babatunde Osadare ‘Interim Measures of Protection In International Investment Arbitration: Whither
421
Sovereign Rights?’ University of Dundee, Centre for Energy Petroleum and Mineral Law Policy, p 4
422
L. Yves Fortier, C.C., Q.c. ‘Interim Measures: An Arbitrator's Provisional Views, Fordham Law
School Conference on International Arbitration and Mediation Investor-State Arbitration, New York, NY
June 16th' 2008 p. 9
423
Ibid p.9
Page 65 of 89
a way to protect the parties rights. 424 In addition, the rights should be related with rights
in dispute425 and a part should burden the urgency of damage that possibility of harm
cannot be compensated. 426
Interim measures issues are regulated under Article 38 (1) of the Arbitration Act 1996.
The parties can demand from the tribunal to take interim measures. Without parties’
agreement the tribunal can decide the interim measures with giving notice for property,
hearing the witnesses and protect the related evidence.427 However like other examples
for affecting the third parties, tribunal has a limited power. 428 For the urgent cases
interim measures can be ordered by the tribunal. However it is kind of limitation for the
tribunal thus the order should be taken by the courts. 429
The subject of interim measures in arbitration is accepted under the concept of the party
autonomy.430 Section 44 of Arbitration Act 1996 is about interim measures.431
424
Ibid p.10
425
ibid p.11
426
ibid p.13
427
Frank Bern D Weigand ‘Practitioner’s handbook on ICA’ (2002) 2nd Edition OZIP p.383
428
ibid p.384
429
ibid p.450
430
Chang (n.414) p.17
431
(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral
proceedings the same power of making orders about the matters listed below as it has for the purposes of
and in relation to legal proceedings.
(2) Those matters are—
(a) the taking of the evidence of witnesses;
(b) the preservation of evidence;
(c) making orders relating to property which is the subject of the proceedings or as to which any question
arises in the proceedings—
(i) for the inspection, photographing, preservation, custody or detention of the property, or
(ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon,
the property;
and for that purpose authorising any person to enter any premises in the possession or control of a party to
the arbitration;
(d) the sale of any goods the subject of the proceedings;
Page 66 of 89
5.6 Parties have the right to designate experts
Actually experts who are proposed by the parties are not witnesses however the courts
appointed ones could be. 432 It is suggested that when appointing the experts, tribunal
should ask to parties about expert’s details, give a chance to the parties to interpret the
expert’s report and let the present their own expert- witnesses. 433
It is generally accepted that the experts who are appointed by the tribunal should be
impartial and independent while the arbitration process on going. 434
In the English Arbitration law, the tribunal can appoint the experts without any asking
to the parties to clarify the technical subject-matter. In addition the chance to challenge
with experts is generally given to the parties. 435 Appointing experts is one of reflecting
of parties’ autonomy in the arbitration. 436 Section 37 (1) (a) (i) and (ii) of Arbitration
Act has a provision about appointing expert.437
(e) the granting of an interim injunction or the appointment of a receiver.

(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the
arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or
assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral
proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal
or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other
institution or person vested by the parties with power in that regard, has no power or is unable for the time
being to act effectively.
(6) If the court so orders, an order made by it under this section shall cease to have effect in whole or in
part on the order of the tribunal or of any such arbitral or other institution or person having power to act in
relation to the subject-matter of the order.
(7) The leave of the court is required for any appeal from a decision of the court under this section.
Giovanni De Berti ‘Experts and Expert Witnesses in International Arbitration: Adviser, Advocate or
432
Adjudicator?’ <http://www.dejalex.com/pdf/pubb_11_AYIA.pdf> accessed 15 January 2015 p.55

433
Ibid p.56
434
ibid p.56
435
Weigand (n.429) p.381
436
Chang(n.430) p.18
437
(1) Unless otherwise agreed by the parties—
(a) the tribunal may—
Page 67 of 89
5.7 Determination of rules of procedure
The characteristic feature of arbitration is autonomy that parties can determine the law
which will apply their disputes. 438 The parties have a limitation over procedures with
lex arbitri but generally they are leaved by the lex arbitri to agree the procedures. 439
Rules of procedure in the arbitration very clear power of parties’ autonomy in the
ICA.440 Section 4(3) of the arbitration act 1996 regulates the freedom of choosing rules
or any methods. 441
6. How do the United Kingdom courts apply Islamic law in substantive

applicable law in international commercial arbitration?: Case law and the
United Kingdom courts’ approach
6.1 Petroleum Development (Trucial Coast) Ltd v. Sheikh of Abu Dhabi
In the case of Petroleum Development (Trucial Coast) Ltd v. Sheikh of Abu Dhabi 442
Sheik Shakbut made a contact with Petroleum Development (Trucial Coast) Limited
which was a member of the Iraq Petroleum Company Group about transferring the right
of drilling the mineral oil in Abu Dhabi. The agreement had arbitration clause and the
dispute was about whether the right of drill was valid for continental self or not. Lord
(i) appoint experts or legal advisers to report to it and the parties, or

(ii) appoint assessors to assist it on technical matters,
and may allow any such expert, legal adviser or assessor to attend the proceedings; and
438
Buys (n.405)
439
Kankkunen (n.406) p.21
440
Chang (n.436) p.19
441
The parties may make such arrangements by agreeing to the application of institutional rules or
providing any other means by which a matter may be decided.
442
Petroleum Dev. (Trucial Coast) Ltd. v. Sheikh of Abu Dhabi, 1 INT’L & COMP. L. Q. 247, 250–51
(Sept. 1951).
Page 68 of 89
Asquith was appointed as arbitrator. The parties are a British Protected State and the
domiciles are in the UK. 443
Article 15 was about arbitration clause.444 Article 17 stated that both parties agreed to
govern the Agreement in a good intention and interpret the Article in a reasonable
attitude. 445
“This is a contract made in Abu Dhabi and wholly to be performed in that

country. If any municipal system of law were applicable, it would prima
facie be that of Abu Dhabi. But no such law can reasonably be said to exist.
The Sheikh administers a purely discretionary justice with assistance of the
Quran; and it would be fanciful to suggest that in this very primitive region
there is any settled body of legal principles applicable to the construction of
modem commercial instruments.” 446
However he compared the municipal law and Article 17 of ‘the application of principles
rooted in the good sense and common practice of the generality of civilised nations’447
and added that the parties were agreed on Article 17. 448
Lord Asquith concluded that although justice was optional in this non-developed region
based on Quran, there was no proper body to in the Sheikdom to construct the modern
commercial instruments. 449 He added that Islamic law was not enough sophisticated to
be applicable complex commercial disputes and applied English Law instead of Islamic
Law. 450
443
Edwin J. Cosford Jr. ‘The Continental Shelf And The Abu Dhabi Award’ 1953 (1) McGill Law
Journal 109 p 110-115
444
Mana Saeed Al-Otaiba, The Petroleum Concession Agreements of the United Arab Emirates 1939-
1971 (Abu Dhabi) 1982 (1), (Vol 1 London & Canberra: Croom Helm 1982) p.15
445
Ibid p.16
446
Ibid p.149
447
Ibid p.149
448
Ibid p.149
449
Edwin J. Cosford Jr. ‘The Continental Shelf And The Abu Dhabi Award’ 1953 (1) McGill Law
Journal 109 p 115
450
Colon (n.29) p.413
Page 69 of 89
At this case time Abu Dhabi was the Britain Colony and under the English Law context
party autonomy was very clear. It can understand from the Agreement, Abu Dhabi was
the weak party. For the Applicable law lord Asquith ruled both the Abu Dhabi was an
undeveloped regions and the lack of settled body of legal principles. 451 Moreover one of
the reasons to reject municipal law was “an archaic verity of the language”452 which was
the language of the Agreement. 453
There is a contradiction that even though the Lord Asquith accepted that the parties
were clearly had agreed on to exclude any local law he stated that an archaic Arabic was
one of the reason not to apply host state law. 454
Actually Article 17 of the Agreement was not an obstacle to apply Abu Dhabi Law. It
can be inferred from the case that the lack of knowledge of the host state law and Arabic.
In addition this case may show that these reasons were an escape from applying host
states’ law. 455
6.2 Ruler of Qatar v. International Marine Oil Company Ltd.456
The Sheik of Qatar made an agreement with Central Mining and Investment
Corporation and Superior Oil Company on 5 August 1949. Both parties had rights for
oil transaction such as explore, drill, and transport in Qatar’s land for 65 years. The
451
Abdullah Mohammed Alsaidi, ‘Petroleum Arbitration: Applicable Law and Appropriate Arbitral
Forum (A Study of Petroleum Disputes in Arab Countries)’ (DPhil thesis, Queen Mary, University of
London 2004) p 80
452
Petroleum Development Ltd. v. Sheikh of Abu Dhabi, 18 ILR 144-, 149 (1951).
453
Alsaidi (n.451) p.80
454
Ibid p.80
455
Ibid p.81
456
Ruler of Qatar v. International Marine Oil Co., (1953) 20 ILR 534
Page 70 of 89
Sheik assigned his right to his son and the companies did the same thing to the
International Marine Oil Company. 457
According to the Article 30 of the Agreement the text of the agreement was both
English and Arabic those had the same validity. 458
The Agreement had arbitration clause and two arbitrators would be chosen by the
parties and a referee would be chosen by the arbitrators. 459
The dispute was about upon notice of termination by the Company, demanding annual
payment of non-petroleum-discovered year, 1952, from Sheik of Qatar. The parties
agreed on appeal to the arbitration. The arbitrators were appointed and Sir Alfred
Bucknill was appointed by the arbitrators as referee. The dispute was relevant with the
scope of annual whether it had covered past or future meaning. 460
When it comes to the applicable law Sir Alfred conclude that the parties did not intent
about this subject and he thought that the Qatar’s Law was an applicable law. He
noticed:461
“If one considers the subject matter of the contract, it is oil to be taken out of
the ground within the jurisdiction of the Ruler. That fact, together with the
fact that the Ruler is a party to the contract and had, in effect, the right to
nominate Qatar as the place where any arbitration arising out of the contract
should sit, and the fact that the agreement was written in Arabic as well as
English, points to Islamic law, that being the law administered in Qatar, as
the appropriate law.”462
457
458
Ruler of Qatar v. International Marine Oil Co., (1953) 20 ILR 534 p 536
459
460
Ruler of Qatar v. International Marine Oil Co., (1953) 20 ILR 534 p 534-536
461
462
Page 71 of 89
After these implications however he overlooked them and listened two Islamic Law
experts and ruled that463 "there is no settled body of legal principles in Qatar applicable
to the construction of modern commercial instruments."464 In addition he said:
I have no reason to suppose that Islamic law is not administered there

[Qatar] strictly, but I am satisfied that the law does not contain any
principles which would be sufficient to interpret this particular contract.465
Moreover he added that there would be a risk to be invalid decision if the Islamic law
was applicable. 466
The consideration of Sir Alfred not to apply Islamic Law was equity, justice and
conscience and insufficiency of constructing contracts. However one of listened expert
stated that “equity is the basis of Muslim Law.” 467 He could not explain enough this
contradiction and just stated about Islamic law capability. Consequently it can be said
that the main reason of excluding Qatar Law was abstaining from any municipal legal
system, not having proper principles for the dispute.468
6.3 Saudi Arabia v. Arabian American Oil Company (ARAMCO)469
Saudi Arabia Government made a concession agreement with Standard Oil Company of
California which changed its title to the Arabian American Oil Company (ARAMCO)
463
464
465
466
467
468
469
Saudi Arabia v. Arabian American Oil Company (Aramco), (1963) 27 ILR 117-233.
Page 72 of 89
on 29 May 1933. 470 With Article 1 of this Agreement ARAMCO Gained rights of
petroleum transactions for a period of 60 years.471
Article 31 had arbitration clause as follows:
If any doubt, difference, or dispute shall arise between the Government and
the Company concerning the interpretation or execution of this contract, or
anything herein contained or in connection herewith, or the rights and
liabilities of the parties hereunder, it shall, failing any agreement to settle it
in another way, be referred to two arbitrators, one of whom shall be chosen
by each party, and a referee who shall be chosen by the arbitrators before
proceeding to arbitration. Each party shall nominate its arbitrator within
thirty days of being requested in writing by the other party to do so. In the
event of the arbitrators failing to agree upon a referee, the Government and
the Company shall, in agreement, appoint a referee, and in the event of their
failing to agree they shall request the President of the Permanent Court of
International Justice to appoint a referee. The decision of the arbitrators, or
in the case of a difference of opinion between them, the decision of the
referee, shall be final. The place of arbitration shall be such as may be
agreed upon by the parties, and in default of agreement shall be The Hague,
Holland. 472
The dispute was about the concession rights that Saudi Arabia Government signed a
new renewable agreement with Mr A.S. Onassis to establish a company, Saudi Arabian
Maritime Tankers Company Ltd for transporting Saudi Oil (SATCO) for 30 years.
ARAMCO claimed that this was exclusive right inherent in the Agreement. The dispute
wanted to be solved peaceful the parties could not success. The parties agreed on
choosing arbitrators and the process of choosing referee and the seat of Arbitration,
Switzerland.473
Even though there was no any clause about applicable in Concession Agreement of
1933 the parties agreed which would be the applicable law, Saudi Arabian Law. 474
470
471
Saudi Arabia v. Arabian American Oil Company (Aramco), (1963) 27 ILR 117-233.
472
Saudi Arabia v. Arabian American Oil Company (Aramco), (1963) 27 ILR 117-233. Article 31
473
Alsaidi (n.470) p.88-88
474
Ibid p.91
Page 73 of 89
There was clause for applicable law in the article 4 of the Arbitration Agreement that475
“The Arbitration Tribunal shall decide this dispute

(a) in accordance with the Saudi Arabian law, as hereinafter defined, insofar
as matters within the jurisdiction of Saudi Arabia are concerned;
(b) in accordance with the law deemed by the arbitration tribunal to be
applicable insofar as matters beyond the jurisdiction of Saudi Arabia are
concerned.
Saudi Arabian law, as used herein, is the Muslim law as taught by the school
of Imam Ahmed ibn Hanbal as applied in Saudi Arabia.”
Arbitral tribunal decided that the parties’ intentions should be taken account but there
was no adequate parties’ effort thus private international law principals would be based
on applicable law. 476
Later on the tribunal examined to categorize the concession Agreement in order for
which type of legal transactions was suitable in contract law, or public law, or
administrative law. ARAMCO claimed that Saudi Law was insufficiency for
determination of legal nature of petroleum agreements. Government responded that the
Agreement had typical contractual nature and the principle of ‘pacta sunt servanda’ is
totally accepted in Islamic Law. 477
The tribunal stated that party autonomy was the private international law principle and
in the first sense chosen law was supposed to be applied. However the tribunal
concluded that according to the Article 4 (b) it had a right to choose system of law
rather than Saudi Law because of its international character. The lack of governing of
Saudi Law in this agreement was also added by the tribunal. Since before agreement
475
Ibid p.91
476
Ibid p.91
477
Ibid p.92
Page 74 of 89
time there was no exploration in Saudi Arabia and the Tribunal applied public
international law.478
However there was a clear rights on such exploration and selling oil transaction in the
ARAMCO’s memorial details that:479
“Under the applicable Muslim law, the Aramco Concession Agreement

gives Aramco the exclusive, absolute and unrestricted right to do anything
by way of sale or export that Aramco may choose with the oil Aramco
produces; that this includes the right to take the oil out of Saudi Arabia and
to put it into export markets by any means that Aramco may deem advisable;
that it includes the right to sell the oil to buyers on any sales terms and
conditions Aramco may decide, and the buyers are likewise free to take the
oil out of Saudi Arabia by any means they may choose; and that the Aramco
Concession Agreement gives Aramco the absolute ownership of the oil it
produces, free from any limitation or restraint. Under Hanbali law, these
scholars say, the exclusive and absolute right of ownership by Aramco of the
oil necessarily implies the right of Aramco to dispose of the oil as it wishes,
there being no limitation found in the Agreement. They say, too, that even
though Aramco had not been given such an exclusive right, by the clear
intendment of the Concession Agreement, it would nevertheless possess it;
and that the Government is under an obligation to observe the rights of
Aramco and to place no restriction or limitation upon them.”
Hence, under these explanations, Islamic law accepted full rights to the Company and
there was no loophole on insufficient competent in the legal basis. Furthermore the
tribunal added the insufficiency of nation’s law. Then conflictingly it applied public
international law. It would be seem that the tribunal was not eager to apply municipal
law. 480
6.4 Shamil Bank of Bahrain EC v. Beximco Pharmaceuticals Ltd and others481
478
Ibid p.93-94
479
Ibid p.94-95
480
Ibid p.96
481
Shamil Bank, [2004] EWCA (Civ) 19, [1], [6], [2004] 1 W.L.R. at 1787–89
Page 75 of 89
Beximco Pharmaceuticals Ltd entered into contract with Shamil Bank of Bahrain,
financial institution which was run by Islamic law. 482 The contract was about forty-
seven million dollars in assets483 and the applicable law in contract was chosen:
“[s]ubject to the principles of the Glorious Sharia’a, this agreement shall be

governed by and construed in accordance with the laws of England.” 484
Beximco failed about the term of payment of agreement and Shamil Bank claimed the
rest of amount. 485 However Beximco asserted that the agreement was not valid because
of hidden type of interest. 486
The Appellate Court concluded that this claimant was invalid because the 1980 Rome
Convention on the Law of Applicable to the Contractual Obligation permitted only one
system law can be applicable in a contract and the chosen law should be of a specific
country. The Court added that the parties’ intentions were not clear on Islamic law and
487
alternated other foreign law. It seems this decision was very strict however
acceptance of the Islamic law as a basic rules which could be applicable.488
It can be concluded that one of the positive outcomes is that Sharia can be applicable
law in the arbitration. Moreover one of the options can be the state law with Islamic law
principles489
6.5 Sanghi Polyesters Ltd. (India) v. The International Investor KCFC

(Kuwait)
482
Shamil Bank, [2004] EWCA (Civ) 19, [1], [6], [2004] 1 W.L.R. at 1787–89
483
Shamil Bank, [2004] EWCA (Civ) 19, [1], [6], [2004] 1 W.L.R. at 1787–89 p 1790-1791
484
Shamil Bank, [2004] EWCA (Civ) 19, [1], [6], [2004] 1 W.L.R. at 1787–89 at 1787
485
Shamil Bank, [2004] EWCA (Civ) 19, [1], [6], [2004] 1 W.L.R. at 1787–89 p 1791-1792
486
Shamil Bank, [2004] EWCA (Civ) 19, [1], [6], [2004] 1 W.L.R. at 1787–89 p 1793
487
Shamil Bank, [2004] EWCA (Civ) 19, [1], [6], [2004] 1 W.L.R. at 1787–89 p 1793 p 1800
488
Shariah Law in the English Courts Lovells
<http://www.yasaar.org/pubs/20259%20Shariah%20Law%20in%20the%20English%20Courts%20broch
ure1.pd> accessed 09/08/2015 p 5
489
Colon (n.450) p.415
Page 76 of 89
In 1995 Sanghi Polyesters Ltd (India) v The International Investor KCFC (Kuwait),
entered into contract for financing to produce and export polyester yarn. They agreed on
advance payment of $5 million and 9% profit rate per annum. However Sanghi
Polyesters Ltd. failed to pay and parties applied to the International Chamber of
Commerce to arbitrate. 490 491
The place of arbitration was London and the Article 10 of the agreement was:492
“This dispute shall be governed by the Laws of England except to the extent
it may conflict with Islamic Shari'a, which shall prevail.”
The sole arbitrator awarded The International Investor KCFC and ordered Sanghi
Polyesters Ltd. to pay the cost. However the decision was appealed by the Sanghi
Polyesters Ltd to the English Court. The court concluded that:
“For this purpose I do not, despite what was suggested, need to characterise
Shari'a law as a foreign law or code or set of customs. This might be a
difficult and complex task for which I have very little material to draw on. I
merely point out the obvious that whatever Shari'a law may be it is not the
law of England and Wales. The issue is whether or not the contracts were
invalidated in the manner claimed for by SPL under Shari'a law.493
For these reasons and because I am wholly convinced that there has been no
injustice in this case I dismiss the application under S. 68.” 494
It can be said that one of the changing approach is not legally but to sustain good
relationship with Arabs after these cases.495
490
Sanghi Polyesters Ltd. (India) v. Int’l Investor KCFC (Kuwait), [2000] 1 LLOYD’S REP. 480, 480
(2000)
491
<http://www.internationallawoffice.com/Newsletters/detail.aspx?g=829336a3-1fdf-49bc-a15c-
a09be9ebef1e> accessed 09/08/2015
492
(2000)
493
(2000)
494
(2000)
Page 77 of 89
7. Discussion and conclusion
Part autonomy is widely accepted principle by all states. However the party autonomy is
not limitless. There are some limitations for the parties such as public policy and
mandatory rules.
In addition public policy and mandatory rules there are some reflection of restrictions
like composition of arbitral tribunal, lex arbitri, interim measures. It can be said that
English Arbitration law is one of the most liberal law all around the world. It respects
party autonomy as much as possible. Even if nowadays the UK Arbitration law accepts
the Islamic law in ICA it can be seen from some cases that the UK courts were reluctant
to apply Islamic law in ICA.
As it is well known the main character of Common law which is applied in the UK is
un-codification and it means it does not bear codified legal rules and statutes. 496 In
common law the main important laws are produced by courts like usage and forms most
especially in commercial law areas.497 Custom plays very important role in the UK law
system and the law is shaped by judges on the ground of custom and precedents.498
In this context it can be said that all laws in common law are produced case by case.
Even though there is a legal authority to make law, courts, and the main source of
common law is unwritten custom. The custom is not produced by any legal authority
but by society. Thus the court’s interpretation of Islamic law which is about deficiency
495
Redfern and Hunter (n 420) p.226
496
The Common Law And Civil Law Traditions
https://www.law.berkeley.edu/library/robbins/pdf/CommonLawCivilLawTraditions.pdf> accessed
21/08/2015
497
Nicola Gennaioli & Andrei Shleifer ‘ 2007 (115) 1 The Evolution of Common Law’ Journal of
Political Economy p 43
498
J. P Sommerville ‘ Custom, common law and constitutionalism’
<https://faculty.history.wisc.edu/sommerville/367/367-044.htm> accessed 22/08/2015
Page 78 of 89
of legal body of Islamic law is a big contradiction. Because one of the sources of the
Islamic law is tradition and custom as well and reasoning method which is one the way
of interpretation of Islamic Law is very similar with court’s precedents. As an
applicable law Islamic Law might be very similar with common law system. In addition
they applied lex mercatoria which is not produced by any legal body without any
concerns. As a result the reason of not applying Islamic Law in the arbitration by the
UK courts seems unrealistic on the ground of lack of legal authority of Islamic law.
It can be seen from the Petroleum Development (Trucial Coast) Ltd v. Sheikh of Abu
Dhabi case even if the arbitrator accepted the party autonomy for applicable law did not
examine the sources of Islamic law about petroleum contracts. He should have looked
the primary sources of law and then custom. On the ground of analogical reasoning and
custom, Islamic law is very adaptably to new disputes. However the arbitrator denied
resolving the dispute in the Islamic law context because of called lack of any institution.
The criticising sophistication of Islamic law may seem unrealistic and prejudice because,
there was no sufficient examination on Islamic law such as appointing the Islamic Law
expert. In addition because of lack of knowledge and for local law Islamic law was not
preferred by the arbitrator. 499 One of the principles of Islamic law is that the parties
should have the right of ownership of the contract issue. Continental shelf is under
authority of the ruler. Because of party autonomy in Islamic law if the agreement text
contain all area of the ruler, it means the Ruler has the ownership of continental shelf
thus it can be said that the agreement covers the continental shelf also. Thus if the
arbitrator examined the Islamic law he would have resolved the dispute in the Islamic
law.
499
Page 79 of 89
In Ruler of Qatar v. International Marine Oil Company Ltd. Case in the first sense the
arbitrator accepted the Qatar’s Law which is based on Islamic Law however later on
appointing expert about Islamic law he reached the conclusion on non-proper legal
principles body of Qatar as well. And he added that Islamic Law does not have suitable
norms for oil and gas field. However as mentioned above Islamic law has very flexible
most especially contracts and he did not examine the Islamic law whether it has suitable
norms for oil and gas law or not. It can be said that the arbitrators were insufficient to
examine the Islamic law and reluctant to apply municipal law.500 One of the reasons to
deny applying Islamic law invalidity of contract but the arbitrator did not seek the types
of contract and the validity or invalidity for contracts in Islamic Law. If anything can be
issue of the contract, Islamic law says that this is valid contract, thus oil and gas is
suitable to buy and sell. The contract is valid under Islamic law. However the arbitrator
did not examine it. It can be said for this conclusion that the lack of knowledge was the
primary reason to reject the Islamic Law in the commercial arbitration.
In Saudi Arabia v. Arabian American Oil Company (ARAMCO) case the tribunal
accepted that the party autonomy should have considered and concluded that the parties’
efforts were not adequate on this matter. Thus it applied private international law. Even
the tribunal’s effort to categorize the concession agreement to apply proper law it
accepted the ARAMCO’s claim about insufficiency of Saudi Law. However as the
Government response the Islamic Law grounds on ‘pacta sunt servanda’. The tribunal
chose its right rather than parties’ chosen law. One of the reasons to decline Islamic law
was inadequate Islamic law for this dispute but even ARAMCO’s memorandum the
right of parties and type of contract were explained under Islamic law and Hanbali
500
Ibid p.85
Page 80 of 89
School. Unfortunately although this clearance, the tribunal did not apply Islamic Law. It
seems the tribunal did not want to apply Islamic law without any rational reason. As it is
mention earlier Hanbali School is the most liberal school is that almost all types of
contracts are valid. If the arbitrator examined the basic Islamic commercial law he
would have realized that one of the main sources of commercial law was agreed
agreement and the agreement did not separate the right of concession agreement. Thus it
can be said that if parties are not categorized the concession agreement covers all types
of oil and gas transactions.
In Sanghi Polyesters Ltd. (India) v. The International Investor KCFC (Kuwait) case
English court stated that there was no irregularity and focus on the invalidity of the
contract whether Islamic law was part of English law or not. Before the Shamil Bank
case it might be the first positive step for Islamic law in ICA.
The Shamil Bank of Bahrain EC v. Beximco Pharmaceuticals Ltd and others case was
the cornerstone for Islamic Law in ICA. Since although the Appellate court did not
apply the Islamic Law, it concluded the only one system law could be applicable in the
arbitration however parties were not clear on applicable law. One of the outcomes of
this case from that on if the parties are fully agree on only Islamic law for the dispute,
Islamic law can be applicable for the ICA.
Page 81 of 89
CONCLUSION
ADR methods have given an opportunity to resolve the legal disputes rather than
litigation. One of the ADR methods, arbitration, is very popular all around the world.
This method offers legal binding decision to the parties.
Because of economic increase the international commercial player seek neutral
judgement process. The arbitration is an agreed solution and has many advantages such
as flexibility, cost, speed and preferability of law.
As the consensus of applicable law in ICA, the religious law can be applicable law as
well. Islamic law is an Islamic faith law and can be applicable law within faith-based
arbitration context. Even it is a non-Muslim country because of its democratic regime
the UK has accepted applicable religious law under Arbitration Act 1996. However,
before this evolution, even if the parties agree to be applied Islamic law to substance for
their international commercial disputes, the UK courts was intent to decline to apply it
in substance.
From the case analysis, it can be said the UK courts approach has been changed
gradually. At the beginning of the substantive Islamic law in the ICA, because of lack of
knowledge Islamic law was rejected as for applicable law. Reluctant of examining
Islamic law may mean a little bit of prejudice. However for some other reasons such as
raised of awareness, economic, and Arabs relationship the courts have accepted Islamic
law to apply as substantive applicable law.
Word account: 14776
Page 82 of 89
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Mehmet Mucahit Arvas - How Do The UK Courts Apply and Interpret The Islamic Law To Substance in International Commercial Arbitratio

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BOURNEMOUTH UNIVERSITY – BUSINESS SCHOOL

LLM INTERNATIONAL COMMERCIAL LAW

HOW DO THE UK COURTS APPLY AND

By MEHMET MUCAHIT ARVAS (46155074)

BOURNEMOUTH, 9 SEPTEMBER 2015

I confirm that this Research Project does not contain information of a

The copyright for this Research Project remains with me.

Requests for Information

Name: Mehmet Mucahit Arvas

Date: 9 September 2015

Programme: LLM-International Commercial Law

Name: Mehmet Mucahit Arvas

Date: 9 September 2015

methods for international commercial disputes. One of the biggest issues of

international commercial arbitration is applicable law to substantive matters of disputes.

arbitration are accepted by civilized Western countries. Beside international commercial

arbitration nowadays faith-based arbitration systems are accepted in the context of

Islamic law is a sort of religious law and it is considered to be applicable law in

arbitration. Even if it is applied to disputes it may be caused some difficulties for

purpose is to determine how the UK courts apply Islamic Law in international

party autonomy theory.

I am heartily thankful to my supervisor, Dr. Sara Hourani, whose encouragement,

understanding of the subject.

and Canh Uyen, for their help and supports.

privacy, flexibility, specific expertise in specific disputes. 6 Arbitration is popular

in7contractual disputes in international commercial arbitration (ICA).8 There are several

reasons for popularity of international arbitration such as costs, 9 certainty, speed,

attractive advantage of arbitration.10 Because of mentioned reasons arbitration might be

called universal form of dispute resolution.11

groups may prefer arbitration to solve their commercial disputes.

fundamental principles, which are expected to be respected. 13 For instance; the

addition to this faith-based arbitration is recognized to express religion and necessary to

the value of religion may be determined. Furthermore religious arbitration helps to

protect minority cultures and specific values.16

recognised and enforced by the courts.

law which is decided.20

sharia-based legal disputes24 in arbitration system. Secondly, rest of nationals especially

legal systems and Islamic Law can be chosen as an applicable law.26

upon application,27 especially in arbitration.

sharia-based assets such as banking, mortgage investment.29 So the UK can be one of

the Islamic law on substantive matters of international commercial disputes in

the substance for ICA parallel with Model law.

American Notions of Justice?’ (2010-2011) 28(1) WILJ 108 p.111

in the UK will be understood.

arbitration is and how it is accepted in arbitration context.

schools are and how its history is relevant with interpretation.

analysed to achieve the purpose of this dissertation.

CHAP TER 1. ARBITRATION AND FAITH-BASED ARBITATION

1. What is the traditional arbitration and why is it so popular?

in different ways such as mediation, negotiation, and arbitration.31

and governing the proceedings.32

is another advantage of arbitration.35

Arbitration is defined as:

to proceed and decide the case on the basis of such an agreement.”36

control and power of national courts over arbitration.38

historical reasons and acceptance by international bodies. International forum expects to

respect party autonomy and most especially applicable law in ICA.

based on the parties’ nationality or practices in the residence such as place of

incorporation or management and control status. The nature of dispute should be

Arbitration is very popular in 42 contractual disputes in ICA. 43 In other words the

contractual disputes of international commerce are not resolved in national legal

Goteborg University 2006) p8

technology transfer increased from developed countries to developing countries.