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Will Article 2 of the Iraqi Constitution Establishing

Islamic Law be an Impediment to Iraq’s Economic

Development?

Presented to:

Marshall Taheri

Submitted by:

Keith Adams

ContentsIntroduction..................................................................................................................3

Background Information About Iraq....................................................................................5

Development of Iraqi Law and Shari’ah Law.........................................................................8

Islamic Banking...........................................................................................................10

Transactions Forbidden Under Shari’ah Law....................................................................11

Shari’ah Compliant Transactions...................................................................................13

Influences Impacting the Development of Iraqi Law..............................................................16

Grand Ayatollah Ali al-Sistani Islamic Law Code..............................................................17

Constraints on Shari’ah Law on Commercial Activity in Other Middle Eastern Countries.............20

Conclusion..................................................................................................................21

Bibliography...............................................................................................................23

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Introduction

Today, Iraq is a nation in transition, culturally and legally. Iraq has recently taking steps to assert

control over its borders, as the United States limits its role in the country. Iraq has successfully held

democratic elections and has written a new constitution, guaranteeing the rule of law within the nation.

The Constitution of Iraq has one feature that may alarm Westerners seeking to do business in Iraq,

namely Article 2 which declares Islam to be the religion of Iraq and that all law derives from Islam.

Further, the constitution declares that it is the supreme law of the land and that any law that contradicts it

is invalid.

Islamic law, also known as Shari’ah law, is controversial and misunderstood in the West. One of the

most well known laws of the Shari’ah, and the most widely debated, is the prohibition of riba, or

interest. For most in Islam, riba and interest are terms that are interchangeable, whereas in the West, it

can be split into interest and usury, with only the latter being banned. This general prohibition of

interest in Islamic law has resulted in financial products that skirt the interest prohibition, collectively

known as Islamic financing.

Islamic finance is the dominate form of finance in Islamic lands, and it has been growing in the West as

well. However, despite interest being prohibited by Shari’ah law, many Islamic nations in the Middle

East permit its use. Some outright declare that interest is permissible, like Egypt, while others have been

more discreet, like Saudi Arabia, which allows the payments of various fees on financial instruments

based on percentages. Others have found the use of rent being paid on money financed to be an

acceptable way to pay the costs of financing.

This has resulted in scholars complaining that countries professing to adhere to Islamic law to be doing

so in form and not in substance. Further complicating matters are the internal debates about riba in

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Islam. Some scholars have argued that interest should be permitted, with only usury prohibited, as it

more properly tracks the intent of the ban. Others have said that all interest has to be banned because

the Qur’an says so. In the middle, voices have said that interest has to be prohibited due to scripture, but

money has a value in itself and so a rent may be paid on loans to compensate for the opportunity costs of

not being able to use the money loaned for other endeavors.

Iraq has been a nation that has allowed the payment of interest in financial products. Its original

business law authorized it. Further, during its occupation, the United States modernized the banking

laws, continuing the practice of allowing interest to be paid. Today, though, there is concern that the

new Iraqi Constitution may ban the practice of interest payments, upsetting the traditional practice of

interest bearing finance being used in the country.

This report will explore if the Iraqi Constitution will find the paying of interest to be in violation of its

laws. This paper will start will a general introduction to Iraq, discussing its culture and factors that

influence it. Next, the development of Iraqi law and Shari’ah law will be discussed, leading to the

development and practice of Islamic banking and various financial transactions. Lastly, the Shari’ah

code of Grand Ayatollah Ali al-Sistani will be discussed and compared to various financial products.

This report will conclude by finding that Iraq will likely maintain the practice of interest. First, interest

will be found to be in compliance when practiced with a non-Muslim, as the current Iraqi law and

Shari’ah Code of Sistani permits it. Specifically, the Sistani Code is a form of Shari’ah law, and given

his influence, it will carry enough weight to continue the practice. In terms of interest bearing products

between Muslims, the issuer becomes a bit muddier. It is allowed under the current code, but

categorically forbidden by the Sistani Code, creating a conflict. While this conflict can be fatal to

interest bearing products for Muslim-to-Muslim transactions, most nations in the Middle East have Page 4 of 31

sought to limit the reach of Shari’ah law, either directly by permitting interest or through the use of

colorful terms, which adhere to interest bans but allow payments under other names. In either of these

two forms, Iraq is likely to continue the practice. Lastly, even if interest is banned outright, various

financial vehicles allows for transactions to be conducted to allow and compensate for financing and

risk. These various products allow the same ends to be accomplished, but by modified means so as to

meet the requirements of Shari’ah law.

Background Information About Iraq

Iraq is a nation-state located in Middle East Asia, which borders Iran, Kuwait, Saudi Arabia, Jordan,

Syria and Turkey1. Iraq also has coastal access to the Persian Gulf between Kuwait and Iran. 2 Its

geographic coordinates are 33 00 N, 44 00 E. 3

Iraq has a unique culture that blends traditional Arab and Muslim culture.4 Several factors influence the

individual’s behavior, which include gender, family, tribe, ethnicity, religion, and politics.5

Iraqis hold the family at the central pillar of society.6 Loyalty to the family unit and maintaining its

honor are very important in Iraqi culture.7 An Iraqi’s tribal affiliation, or ashira,8 is another very

important aspect in Iraqi society. As one American study put it, “Loyalty and association with a tribe

serves as the basis before all else; family first, tribe second and government last.”9 In the tribal system,

the fathers and tribe elders are revered and they are the ones who dictate the clan’s loyalties. The leader

of the tribe is the sheik, who provides protection, and guarantees basic economic well being.10 They also

act as a form of judiciary, mediating disputes, resolving property disputes and suggesting marriage

arrangements.11 The role of the tribal leader has also been described as a “ward boss” in reference to the

corrupt patronage that existed in U.S. politics.12 In many areas, the sheiks also act as intermediaries

between the coalition forces and Iraqi government in their respective areas, controlling the issuance of

contracts, thereby increasing their wealth and increasing their power.Page 5 of 31

The power of the tribes can also been seen in the reduction in violence against U.S. troops.13 The U.S.

“Surge” strategy focused, in part, on bringing the Sunni tribes into the arms of the coalition and Iraqi

government, through the Sons of Iraq initiative and through direct aid and contracts administration.

Iraq is a country made up of several ethnic groups, Arab 75%-80%, Kurdish 15%-20%, Turkoman,

Assyrian, or other 5%.14 The various ethnicities carry with them age old bias and animosities. One such

animosity is the Arab disdain for Kurds, who they believe are inferior. Further, these attitudes, along

with Saddam Hussein’s chemical attacks and war on the Kurdish people have created a distrust and has

fueled desires for independence and creation of a Kurdish state, which would include Iranian and

Turkish lands. Iraqi Kurds have supported Turkish Kurds, resulting in Turkish military raids into Iraqi

territory. Hussein also sought to de-Kurdify areas of strategic value, namely Kirkuk, with its massive oil

reserves.

Iraq’s Turkoman population shares an ethnic link to Turks. This has prompted the nation of Turkey to

declare its desire to protect them. Turkoman populations live mainly in northern Iraq, notably in

Kirkuk, Mosul, and Tal Afar.15 They represent the third largest ethnic group in Iraq, after the Arabs and

Kurds, respectively.16

The majority of Iraq is Arab. Iraq, under Saddam Hussein, subscribed to a pan-Arab ideology. Since

the removal of Saddam Hussein, there have been calls to abandon the pan-Arab ideology in favor of a

national one. One author states, “[M]ost Iraqis claim that [they] are Iraqis. [They] go back to the

[ancient Mesopotamians]."17

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Like many nations in the Middle East, religion plays an important role. Iraq’s religious groups break

down as Muslim 97% (Shia 60%-65%, Sunni 32%-37%), Christian or other 3%.18 Iraq’s religious

differences and disputes tend to dominate media coverage. The Shia sect of Muslims further divide

between Grand Ayatollah Ali al-Sistani of Najf and Muqtada al Sadr. Officially, al-Sistani has held the

view and practice that the religious leaders should refrain and remain above politics. Al-Sadr, on the

other hand, has fully embraced politics and controls a militia and is based in a Baghdad slum dubbed

Sadr City, formally known as Saddam City.

The Sunni branch of the Muslim religion is a minority, but until the US intervention in Iraq, was the

dominate and controlling group, although true control came from the al-Tikriti tribes outside of

Baghdad, homeland of Saddam Hussein. Since Hussein’s fall, a near equilibrium had to develop

between the two religious sects. Hard feelings and atrocities committed by the former regime, criminal

actions by Sunni and Shia militias, including torture of civilians and neighborhood cleansing, and

outside influences have made the process harder.

Iraq has a small Christian population, located in Northern Iraq and Baghdad. The Christians also form

separate ethnic groups, the Assyrians and Chaldeans.19 Since 2003, Assyrians have fled to Syria,

although exact numbers are unknown.20

Lastly, politics is a major factor in the culture of Iraq. Politics does not refer to the current political

happenings in Iraq, but rather politics under the Hussein regime and its continued affect on the Iraqi

psyche. Hussein used his intelligence apparatus to monitor and control his internal population.21 As

such, many citizens have a great distrust for the intelligence services in Iraq.22 Hussein sought to closely

monitor those below him, to prevent any kind of overthrow of his government. Hussein was also known

for his immense cruelty to opposition figures. These factors combined to result in “a severe atmosphere Page 7 of 31

of suspicion, paranoia, and distrust.”23 While this quote deals specifically with the building and training

of the new military, it can be easily applied to the general population, as well, as they were subject to the

same level of monitoring and abuses as those in the military.

This has resulted in a culture that is used to micromanagement from the top, with little input or control

from the lower echelons of an organization.24 Further, employment, promotions and other advancements

were not based on merit or ability, but rather on family or tribal bounds, as trust and fear dictated whom

one surrounded himself with.25 Further, due to financial mismanagement of the previous regime, Iraq is

a cashed based society that is distrustful of banks.26

The main language in Iraq is Arabic. Other languages are used in the nation as well, such as Kurdish,

which is the official language in Kurdish regions.27 Turkoman and Assyrian languages are also used.28

Development of Iraqi Law and Shari’ah Law

In the Middle East, most countries follow the continental European system that distinguish issues that

arise from civil related matters to commercial related matters.29 It has been suggested that this legal

differentiation may be more difficult for the common law lawyer to understand than with dealing with

Shari’ah influenced law.30 The countries’ laws can be generally grouped in three different categories,

Western laws, Shari’ah Laws, and a hybrid mix of the two.31 Countries that followed the Western

system include Egypt, Syria and Lebanon.32 Saudi Arabia, Oman and Yemen have based their legal

system on Shari’ah,33 while Iraq, Jordan and Libya have combined the two legal theories.34

“[S]ince its original transition from Ottoman Rule to British at the end of World War I” and to this day,

Iraq has always had a “bureaucratic, complex system of laws, regulations and orders.”35 In 1951, Iraq

attempted to modernize its business laws under Law No. 40, which remains in force today, unless its

specific regulations have been overruled or amended.36 This law is heavily influenced by Abd al-Razzaq Page 8 of 31

Ahmad al-Sanhuri,37 who wrote the Egyptian civil code.38 The Egyptian code is influenced by the

Western civil law and Islamic law.39 Iraqi commercial law was still considered to be a labyrinth,40 but it

proved to be predictable and enjoyed a “relatively prosperous period from 1955-1975.”41

Since the U.S. led war in Iraq and the toppling of the Hussein regime, Iraq has gone through substantial

changes. Among these has been the liberalization of Iraqi law by the Coalition Provisional Authority

(CPA)42 and the Iraqi government that adopted a new Constitution. The present legal system is based on

Sanhuri’s 1955 law, which includes modifications made by subsequent laws, notably the CPA decrees.

The Iraqi Constitution is the supreme law of the land, which any conflicts to be construed in favor of the

Constitution.43 Any gaps in the law are to be filled by the principals of Shari’ah law.44

Under Sanhuri’s Codes, interest is permissible, even though the majority of Islamic movement rejects

the argument.45 This allowance of interest, also known as riba under Shari’ah law, is permitted by

Article 692 of the Iraqi code46 and by the Commercial Banking Law that was signed into effect by the

CPA.47 These authorizations for the charging of interest might conflict with Article 2 of the Iraqi

Constitution, which states:

First: Islam is the official religion of the State and is a foundation source oflegislation:

A. No law may be enacted that contradicts the established provisions of IslamB. No law may be enacted that contradicts the principles of democracy.C. No law may be enacted that contradicts the rights and basic freedoms stipulated in this Constitution.48

Sanhuri, in writing his codes, was able to reconcile the charging of interest with classical Sunni

thought.49 This represents a more Sunni centric model of Shari’ah law. The basis of Sunni centric

Shari’ah stems from the philosophy of medieval Sunni authorities and dominates the Middle East’s

laws.50 In the Shia branch of Islam, “the interpretation of the shari’a belongs to a select group of high

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scholars, each termed a mujtahid, with the entire group collectively referred to as the marja’iyya.” 51 The

current lone example of this school of thought is Iran, which forbids the charging and paying of riba.52

However, it is very important to realize that Islamic law53 is not defined by the context of religion alone,

or even from a single religious source, and these competing forces will also affect how Islamic law

develops. “Islamic law is an academic construction, a brooding omnipresence whose relationship to the

social order in Muslim societies is very much the matter of debate.”54 National Islamic law has been

partially influenced by other factors, such as Soviet domination over Central Asian Muslim nations

before its collapse, and the regional influence of the Thais and Singaporeans over Indonesian

development.55

Islamic Banking

In Muslim nations, a dominant form of finance is Islamic banking. Islamic banking/finance56 differs

from conventional/Western banking in that it is in compliance with Islamic law. The legal principles:

The principles and precepts of Islamic Shari’ah are revealed in (i) the Qur’an, which is

the holy book of Islam, (ii) the sunna,57 or binding authority of the dicta and decisions of

the Prophet Mohammed (PBUH), (iii) ijma, or “consensus” of the community of Islamic

scholars, and (iv) the qiyas, or analogical deductions and reasoning of the Islamic

scholars with respect to the foregoing, as interpreted from time to time by the Islamic

scholars58

(emphasis in the original). The Qur’an and the sunnah provides the basis for the development of Islamic

law.59 The ijma and the qiyas “provide the methodology and procedural guidelines to ensure correct

utilization of the source evidence.”60

In order for a financial product to comply with Islamic law, it must not fall into any of the four

prohibitions, riba- the most controversial, is the prohibition against the use of interest, ghara- prohibition Page 10 of 31

against dealing in uncertainty,61 maysir- prohibition of excessive risk and gambling,62 and haram-

investment in forbidden products, i.e. pork, alcohol, gambling/casinos, etc.63 As long as the transaction

is not specifically forbidden by Shari’ah, the parties are free to contract as they wish. 64 If a party wishes

to assert unlawfulness as to the Shari’ah, that party carries the burden of proof.65

Islamic banking institutions employ Shari’ah Advisory Committees to show compliance with Islamic

law.66 The boards base their advice and guidance on their interpretations of the primary and secondary

sources of Islamic law.67 The Board’s determinations are fiqh, the “human comprehension of

Shari’ah.”68 Determinations of one board are not binding on another, so there is a lack of consistency

from board to board on similar financial products.69 These variances can carry a potential for council

shopping or pressuring of councils to authorize a product for fear that another board will approve it, and

thereby lose business and/or influence. Islamic investors depend heavily on the boards and they may

require a fatwa70 in order to invest in a particular financial product.71

Transactions Forbidden Under Shari’ah Law

Consensus holds that riba is a prohibition against interest on loans and accounts. “The Qur’an mentions

riba and prohibits it but does not provide context for its application in modern transactions … [I]n

Arabic language, riba literally means excess or increase over and above the principal sum loaned.”72

Further, certain passages in the Qur’an are ambiguous as to what types of interest are banned, all or just

usurious.73 The reasoning on banning riba has fallen on scholars to debate. Their reasoning for its

prohibition include that earning interest is not a legitimate form of work,74 to prevent usury,75 to prevent

unjust enrichment,76 “riba could result in laziness,”77 it could lead to “strained relationships” between

people who cannot repay the interest and loan,78 and it can lead to duress on the borrower who may be

taken advantage of by the lender.79

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The debate of what the prohibition of riba means has evolved into three schools of thought, the liberal,

moderate and conservative views. The liberals believe that riba should only be banned when they are

“exorbitantly high interest rates, which is exploitive and forbidden by the Qur’an.”80 They contend that

the prohibition was established in the last days of the Prophet, and he was not able to provide a “proper

interpretation” regarding its prohibition.81 Further, they assert that these prohibitions should be strictly

limited to the sunnah and not to the modern banking industry, which was not present during the

Prophet’s time.82

The moderate interpretation of riba contend that the prohibition applies to both usury and modern

interest payments. However, they also distinguish that the Shari’ah recognizes the value of money, and

so rent can be charged on money loaned. This allows a merchant to sell one item at a lower price for

immediate payment, yet charge a higher price for the identical item if bought on credit.83 This appears

to be the more dominant view.

The conservative school of thought is the most restrictive and encompasses the more radical social

justice schools of thought. “Proponents of the conservative view contend that in addition to usury and

fixed interest, riba also includes all forms of economic exploitation of the poor by the rich like

profiteering and paying of subsistence wages to laborers.”84 They argue that money has no intrinsic

value except for a medium of exchange.85 Further, loans were not meant for commercial or business

activity, but for charity.86 They also view the current Islamic banking models of financial transactions as

riba, because they achieve the same results, but just avoid the word riba.87

The next prohibition under Shari’ah law is gharar, the prohibition against dealing with uncertainty.

“The classical prohibition of gharar rests largely on the basis of Prophetic statements forbidding the sale

of unripe fruit on a tree, the sperm of a stallion, the fetus of a camel, grapes until they are black, or grain Page 12 of 31

until it is strong,”88 because the commodity’s maturity is not certain. This prohibition is not blanket

prohibition against uncertainty, otherwise no contract would be valid because “complete contract

language is impossible.”89 Islamists jurists have distinguished between excessive risk and permissible

risk.

In determining whether gharar will invalidate a particular contract … [the] four conditions [are helpful]: (1) gharar must be excessive -- minor uncertainty will not affect the contract; (2) the potentially affected contract must be a sale and not a gift; (3) the gharar must affect the principal components of the transaction; and (4) if the contract containing gharar meets a need that cannot otherwise be met, the contract will not be deemed invalid based on that gharar.90

Maysir prohibits gambling and haram are forbidden things in Islam, but neither are significant regarding

Islamic finance. These only impact the ability to engage in transactions pertaining to gambling, alcohol,

pork products and the like.91

Shari’ah Compliant Transactions

Islamic banking is the dominant financing vehicle in the Middle East and North Africa.92 Growth has

been increasing as the range of products continues to expand with vehicles such as suhuk (Islamic

bonds), securitization,93 as well as more traditional Islamic banking features.94 It is also worthy to note

that non-Muslims have also been choosing to use Shari’ah compliant products, despite the availability of

Western-style financial products.95 It has also been found that Islamic banking is the “[f]astest-growing

and most dynamic areas in global financial market[s].”96

As Shari’ah banking has expanded, several types of transactions have surface that tend to be compliant

with the needs of Shari’ah law. The following products may be Shari’ah compliant:

Musharaka (partnership): Financing that typically involves a business undertaking in which both the customer and the financial institution provide capital with the understanding that the financial institution and customer will share profits and losses in accordance with a formula agreed upon before the transaction is consummated

Page 13 of 31

Mudaraba (venture capital financing): Financing in which the financial institution typically provides all of the capital for a transaction. The customer acts as the financial institution’s agent in utilizing the funds and also provides sweat equity (including know-how). The financial institution and customer share profits in accordance with a contractually stated percentage formula

Murabaha (cost-plus financing): Financing by a financial institution on a “cost-plus” basis. The financial institution obtains title to a good on behalf of its customer and then sells the good to the customer via installment payments at a contractually pre-arranged cost (set at the original cost of the good plus a reasonable profit for the financial institution)

Ba’i Bithaman Ajil (deferred payment financing): A sale of goods on a deferred payment basis. At the request of its customer, the financial institution purchases an existing contract to buy certain assets on a deferred payment schedule and then sells the goods back to the customer at an agreed upon price, including a profit

Istisna (commissioned manufacturing): Financing in which the financial institution makes payments to a developer or contractor as a job (typically involving construction or manufacturing) is completed

Ijara (lease financing): A leasing arrangement whereby a financial institution purchases an asset and leases it to its customer

Ju’ala (loans with a service charge): Financing through the use of a service charge

Qarde Hasan (benevolent financing): Financing that occurs when the financial institution provides a loan free of charge, typically with the intent to provide financial assistance to ailing institutions or to provide humanitarian assistance to individuals97

(emphasis added). It is important to remember that each product must be individually scrutinized to

ensure that its particulars are properly within the confines of Islamic law.

There is criticism that many of these products put form over substance, by merely eliminating the word

“interest” from the product. While the product is interest free, the product is designed to achieve the

same ends of interest, namely a guaranteed fix rate of return and shifting all risk to the borrower. One

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method is to charge a “rent” on the money used, as in the case of ijarah leasing. Quite often, the value

of the lease is tied to the London Inter-Bank Offer Rate (LIBOR), an interest rate.98 In such a

circumstance, the rent paid on the money financed bears a striking resemblance to an interest paid on the

amount financed.

A fundamental aspect of Islamic banking is the sharing of risk. If “a transaction is structured in such a

way that it secures a guaranteed profit without taking any risks”99 it can be deemed riba, despite the lack

of that specific word being uttered by the parties or written in the contract. Critics contend that modern

Shari’ah banking products are created to “replicate conventional financial products”100 and tweaking

them in order to avoid the dreaded “riba,” replacing it with some type of fee. Some products even

engage in “multiple sales and/or leases to mimic the amortization schedule of a conventional

mortgage,”101 i.e. selling x% of property with y% of profit to the customer until the entire parcel is sold,

mimicking the paying off of a mortgage in traditional banking.

A particular product that is borderline prohibited is the murabaha (cost-plus contract). The Office of

Comptroller of the Currency (OCC) in the United States decided that a “murabaha transaction is … a

permissible … financing method because the economic substance is functionally equivalent to a real

estate mortgage transaction.”102 Another area of concern has been the securitization of loans, which

some believe is a way “to pay disguised interest”103 by way of “lease certificates.”104

In Canada, the Muslim Canadian Congress has criticized Islamic compliant products because they have

been found to be .60 percentage points higher than traditional products.105 However, this might be

needed to compensate for additional risks the Islamic banks are required to take in order to be in

compliance with Shari’ah law, which can include taking an ownership interest or entering into a

partnership with the customer.Page 15 of 31

Influences Impacting the Development of Iraqi Law

The current banking laws in effect in Iraq were written by the Coalitional Provisional Authority (CPA),

a ruling body headed by a U.S. diplomat. Since then, Iraq wrote and passed its Constitution which

requires all laws to be in accordance with Islamic law. Theoretically, the Iraq can change the law to

make in inline with general Shari’ah laws ban on riba. However, the World Bank notes that there is

considerable pressure to maintain the economic regulations passed by the CPA.106 These pressures stem

from the business community’s need to see stable and consistent economic policies being maintained by

the government to foster investment and development.107

Internal forces will also shape the law in Iraq. Commercial development in Iraq is built upon two legs:

[C]ommercial order in Iraq, and in particular among specific categories of Shi’i Iraqi merchants … has been organized through two central sets of rules and principals. The first of these influences is the national law, the civil code, drafted by Abdul Razzaq al-Sanhuri, reflecting modern conceptions similar to those prevailing in civil law countries in the West. The second set of rules and principals, which is administered and enforced on a more informal and localized basis, is the shari’a as developed by the Najaf-based clerical authorities.108

These authorities are the marja’iyya, which are “extremely powerful Shi’i religious institution[s].” 109

The marja’iyya are important because they can essentially overrule any act that the Iraqi commercial

code permits, such as the payment of interests. If the Code110 allows it, but the religious authorities

deem it a sinful act, the likely result is that the Iraqi people will adhere to the religious interpretations, 111

whether due to piety or social pressures.

This results in needing to not only look to the Iraqi code in order to determine whether or not interest

can be used in financial transactions, but also requires looking to the religious authorities and their

interpretations of Islam. On one hand, “[l]eaders such as Shi’i Muhammad Baqir al-Sadr and the Sunni

Sayyid Qutb, tapping into a theme of anti-colonial, regional liberation fervor that lasts to this day,

Page 16 of 31

castigated Muslim societies for acceding to Western notions of finance in permitting interest.”112

However, the current most powerful force in Islam in Iraq is the Grand Ayatollah Ali al-Sistani. 113 He

has been influential in stopping and preventing the sectarian violence that occurred in Iraq, getting Iraqis

to vote and in pushing the Iraqi legislature to adopt shari’ah principals into the Constitution. 114 Sistani

posts his rulings on Shari’ah online and is an invaluable tool in determining where the Iraqi law will go.

One word of caution is warranted, though. Iraq is a complex and dynamic society going through

changes. Under Saddam Hussein, Iraq was ruled as a secular nation.115 After the fall of Hussein, there

was a surge of religious fervor, especially with the Shia who for the first time could worship without

fear of persecution. However, as the religious authorities became stricter and saw it as a vehicle for

power, people have started to become disillusioned with it.116 Some young Iraqis blame the religious

fervor for restricting their freedoms and for the violence.117 This disillusionment has also spread to the

older voters, who believe the religious parties are ineffective and corrupt.118 Some polling suggests that

these voters prefer secular candidates over religious ones, even in southern Iraq,119 which is dominated

by Shia religious parties. This rift can also be observed through Prime Minister Nouri al-Maliki splitting

away from the Shiite block to run on “a secularist [and] nationalist platform.”120 While these historical

patterns and present trends are not determinative alone, they have the potential to greatly affect the

development of the law.

Grand Ayatollah Ali al-Sistani Islamic Law Code

The Grand Ayatollah Ali al-Sistani is the most influential cleric in Iraq and has written his own Shari’ah

law code.121 He takes a relatively moderate/liberal view in terms of commerce and finance. Under Law

200, §2063 Part 4 of his code, he decrees that any transaction involving interest is haram (forbidden).122

However, under §2088 of Law 200, “a Muslim can take interest from a non-Muslim who is not under

protection of Islam.”123 It also says, “if payment of interest is permissible in the religion of that non-

Muslim, a Muslim can receive interest from him.”124 This quite clearly states that under the Shari’ah law Page 17 of 31

espoused by the most powerful Najaf cleric, interest bearing financial products can be permitted under

Shari’ah, and therefore fall within the confines of Article 2 of the Iraqi Constitution. Further, this also

removes social stigma from the interest transaction being a sinful act. However, without this exception,

Sistani’s code is quite clear throughout that interest is forbidden.

If the participants in a transaction cannot meet the aforementioned requirement, the Sistani codes offers

many other options to achieve a desired result. Under Law 200, §2083, currency speculation is

permitted.125 This law essentially allows a person to receive one type of currency, and repay that debt in

another currency for a greater amount.126 However, if he repays in the same currency received for a

greater amount, it is forbidden.127

Law 202, §2098 provides a five part test that must be fulfilled in order to engage in a sales transaction,

which essentially require (1) known quantity; (2) transferable or tangible object; (3) description of the

item and intent of the parties to be known; (4) unconditional ownership; and (5) the item itself is to be

sold, not the anticipated profit.128 This test in important because of Shari’ah compliant products that

require a transfer of property, from seller, to bank to the ultimate buyer. There is no timing requirement,

allowing the parties to determine that themselves. Part (5) of the test specifically addresses issues

related to gharar (uncertainty) and limits speculation by forbidding sales based on anticipated profits.

Law 202, §2104 permits the sale of leases, making a ijara (lease finance agreements) a liquid

investment. The Sistani code also recognizes the time value of money. Law 205, §2116 allows a

vendor to sell a product at an increased price if that sale is based on credit, as opposed to a lower price

for an immediate payment.129 This rule falls squarely within the moderate philosophy of riba, where

money has its own value and so a rental fee can be charged for the opportunity cost of the transaction.

Page 18 of 31

Law 211 deals with the laws of partnership. §2150 allows partners to form a partnership and divide

profits between themselves in any way they desire.130 § 2154 further clarifies and allows the parties to

outline duties between managing partners and potentially limited partners, allowing them to contract

how they will divide profits.131 §2159 permits the partner with “the right of discretion over the capital”

to act in a way that he deems fit for the benefit of the partnership.132 These sections are important for the

development of musharaka (partnership) financial products. This type of product requires the financier

to become a partner. Law 211 permits this type of relationship and permits the parties to contract duties

and payments in a manner that properly compensates both while still being able to compete cost wise

against Western-style loans.

Law 221 deals with agency, important for mudaraba (venture capital financing) where the customer acts

as an agent for the financier providing the capital.133 §2265 states that no formal agreement needs to be

put in place to effect an agency relationship; it also allows for the development of apparent agency

relationships, similar to American common law principals.134 The only substantial deviation from

traditional Amercian agency law is found in §2268, which forbids the Muslims from during anything

that is haram (forbidden) in Islam.135 Aside from that, Law 221 essentially allows the parties to develop

their own agency relationships, as they see fit.136 This benefits the mudaraba agreement as it gives all

parties the ability to create a contract that is flexible enough to be tailored to the needs of various

venture capitalists.

Law 223 speaks specifically to hawala.137 However, §2298 has provisions for the assignment of loans

provided the parties agree. This permission extends to all financiers, not only hawala practitioners. 138

Law 225139 and Law 226140 and their subsequent sections authorize the use of surety agreements that

generally track the guaranty rules in the Uniform Commercial Code (UCC).141

Page 19 of 31

Constraints on Shari’ah Law on Commercial Activity in Other Middle Eastern Countries

In determining the path Iraq will take regarding merging its Constitutional requirement to impose

Shari’ah law with the needs of a flexible business environment, it is important to look at the other

nations in the region. “Every one of the States in the Gulf region now has a set of codified corporate

laws. These laws are based on the civil, or French/Egyptian, model. The judges who were installed to

handle company law disputes in the Gulf were, if not Egyptians, graduates from Egypt’s law schools,”142

which makes the Egyptian/Sanhuri philosophies very influential. Many Middle Eastern nations have

found that when religion and commerce falls into conflict, the most expedient course of action has been

to limit the reach of Shari’ah.143

In Kuwait, the government determined that while Shari’ah may be appropriate for civil matters, it should

not be extended to matters involving commercial law.144 Kuwait maintains a duel banking system, one

Shari’ah compliant one and another Western style one.145 “In fact, during the period between 1985 and

1986, when the leading Islamic bank in Kuwait (Kuwait Finance House) could not pay a profit to its

investors and depositors, many depositors took their funds back to the traditional commercial banking

sector, notably to the National Bank of Kuwait, voting with their feet for profit over piety.”146

In Qatar, the Constitution states that Shari’ah is the main source of law.147 However, “the Civil and

Commercial Code states that Sharia law will apply in the absence of express legislation, provision or

custom,”148 making it a gap filler rather than a source of law. Shari’ah in Qatar has essentially been

regulated to traditional and private matters.149

Saudi Arabia never fell under the jurisdiction of a European power, and so its law developed separately,

with a very Shari’ah based system.150 In doing this, interest is forbidden in Saudi Arabia.151 However,

they do allow fees to be paid through a “commission of services” scheme which is calculated as a Page 20 of 31

percentage of the loans which “never exceeds 8.5%.”152 “Deposits and savings are also entitled to a

commission, which is again based on a percentage that fluctuates between 3.5% and 5%.”153 So while

the Saudis have “banned” the payments of interest, they have developed financial schemes that closely

relate to a fixed percentage return on capital which is essentially interest.

After the Revolution in Iran, changes were made to the financial and banking sectors, which resulted in

“interest-free financing.”154 As stated earlier, the Sanhuri code of Egypt permits the use of interest based

products in Egypt. This same philosophy is found in the Iraqi Commercial Code and in the CPA

Banking Law. Bahrain codiefied its commercial code in 1987, “akin to the Egyptian Law of Commerce

and derived from the Fench commercial code … which effectively subordinates the Sharia in Bahraini

law to filling the gaps left by the Law of Commerce.”155

Another example of the limits of the power of Shari’ah is the presence of the insurance contract.

Insurance represents “riba and ghara (risk, uncertainty, and speculation).”156 Several Middle Eastern

countries allow insurance, including Egypt, Iraq, Libya, Syria and ultraconservative Saudi Arabia, which

boasts a $2.5 billion insurance industry.157 This paints a picture that in terms of business, piety will

generally take a back seat by way of officially allowing interest or by just calling it by another name.

Conclusion

Iraq is a nation in transition. It is a new democracy emerging from the pangs of war and from a recent

history of brutal suppression stemming from its prior government under Saddam Hussein. During the

time of repression, Iraqis, especially the majority Shia were preventing to openly practicing their faith.

After the overthrow of Hussein by U.S. led forces, a wave of religious fervor swept the nation and can

be seem in its Constitution, which declares that Shari’ah law to be the basis of law in Iraq.

Page 21 of 31

This constitutional declaration brings about questions regarding the use of interest in financial products.

Iraq had been traditionally a secular nation, and its laws reflected that and allowed the use on interest in

various financial products. The current swing towards religion, though, and the general ban of interest

by Islamic law, threatens to throw the current financial scheme into uncertainty, with the potential

conflict between the current interest permissive banking laws and the Constitution basing its laws on

Shari’ah principals.

While there is cause for concern regarding this development, the likely result is to be of minimal effect.

Islamic finance has developed to allow for many various financial vehicles to achieve the same ends as

traditional interest bearing products. Further, the leading religious authority, Grand Ayatollah Ali al-

Sistani permits interest bearing products in transactions with non-Muslims, banning only Muslim-to-

Muslim interest products. While this ban might be seen as a hurdle, many Middle Eastern governments

have been adept at limiting the reach of Shari’ah, even when mandated by a national Constitution.

Some outright permit the use of interest while others coin colorful terms, such as rents or fees that are

tied to traditional interest rates. When that fails, financiers have also proven adept at developing

products that mimic an interest based transaction while remaining complaint to Shari’ah law. The end

result is that even if interest in any form is banned, creative legislatures and financiers will be able to

achieve the same ends through a modified means, limiting any impact on business and Iraqi economic

development.

Page 22 of 31

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APS Diplomat Redrawing the Islamic Map, Najaf Hawsa Against Shi’ite Repreisals Despite Neo-Salafi & Ba’thist Bombins, August 17, 2009, 2009 WLNR 16562473

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Omar A. Hashmi, Islamic Home Financing In The United States: Solution Or Deception?, 52 How. L.J. 709 (2009)

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Page 25 of 31

1 Central Intelligence Agency, “The World Factbook,” https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html (last visited on December 27, 2009).2 Id.3 Id.4 James K. Greer, How the Iraqi Army Operates, 2007, http://wikileaks.org/wiki/US_dossier_on_current_Iraqi_Army_Operations%2C_201_pp%2C_8_Jun_2007 at 9 (last visited on December 27, 2009).5 Id.6 Id.7 Id.8 Wikipedia, Arab Tribes in Iraq, http://en.wikipedia.org/wiki/Arab_tribes_in_Iraq (last visited on December 27, 2009).9 Id.10 Council on Foreign Relations, “Iraq: The Role of Tribes,” available at http://www.cfr.org/publication/7681/ (last visited on December 27, 2009).11 Id.12 Ned Parker, Iraq's provincial elections show the power of the tribe, Los Angeles Times, February 3, 2009, available at http://articles.latimes.com/2009/feb/03/world/fg-iraq-sheik3 (last visited on December 27, 2009).13 SAM DAGHER, Tribal Rivalries Persist as Iraqis Seek Local Posts, New York Times, January 19, 2009, available at http://www.nytimes.com/2009/01/20/world/middleeast/20anbar.html?_r=3&ref=world (last visited on December 27, 2009).14 Central Intelligence Agency, “The World Factbook,” https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html (last visited on December 27, 2009).15 Wikipedia, Iraqi Turkmen, http://en.wikipedia.org/wiki/Iraqi_Turkmen (last visited on December 27, 2009).16 Id. 17 Wikipedia, Iraqi People, http://en.wikipedia.org/wiki/Iraqi_Arabs (last visited on December 27, 2009).18 Central Intelligence Agency, “The World Factbook,” https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html (last visited on December 27, 2009).19 Global Security, Christians in Iraq, available at http://www.globalsecurity.org/military/world/iraq/religion-christian.htm (last visited on December 27, 2009).20 Wikipedia, Religion in Iraq, http://en.wikipedia.org/wiki/Iraqi_Christians#Christianity (last visited on December 27, 2009).21 James K. Greer, How the Iraqi Army Operates, 2007, http://wikileaks.org/wiki/US_dossier_on_current_Iraqi_Army_Operations%2C_201_pp%2C_8_Jun_2007 at 11 (last visited on December 27, 2009).22 Id.23 Id.24 Id.25 Id. 26 Id. at 12.27 Central Intelligence Agency, “The World Factbook,” https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html (last visited on December 27, 2009).28 Id.29 H. S. Shaaban, Commercial Transactions In The Middle East: What Law Governs?, 31 Law & Pol'y Int'l Bus. 157, 160 (1999).30 Id.31 Id. at 158-59.32 Id.33 Id.34 Id.35 James Y. Rayis, Business Law In Iraq?, 14-AUG BUSLT 26, 27 (2005).36 Theodore W. Kassinger, Commercial Law Reform Issues In The Reconstruction Of Iraq, 33 Ga. J. Int'l & Comp. L. 217, 221 (2004).37 He “was an Egyptian legal scholar and professor who drafted the revised Egyptian Civil Code of 1948. He wrote the draft of the Iraqi Civil Code with the help of many Iraqi Jurists guided by him… [I]n 1954, Sanhuri left Egypt and helped draft the civil codes of pre-Baath Syria of Husni al-Za'im (who ordered for an exact code of the Sanhuri Code to replace the majalla in 1949), King Hussein's Jordan (only completed and implemented in 1976, after his death), and Libya (1954) and the commercial code of Kuwait (drafted by Sanhuri but only concluded and implemented in 1981, already after his death. In 1970 Egypt awarded him its prize for social sciences. Sanhuri was known for attempting to recreate a "pure" Islamic law by modernizing the sharia using Western civil law (mainly of American and French inspiration), … his place in the legal history of the modern Middle East is secure; his twelve-volume Al-Wasīṭ fī sharḥ al-qānūn al-madanī al-jadīd adorns the bookshelves of many an Arab law firm, even in countries where the Egyptian Civil Code is not law.” (Internal cites omitted); http://en.wikipedia.org/wiki/Abd_El-Razzak_El-Sanhuri (last checked

on Dec. 27, 2009).38 Kassinger, Commercial Law Reform Issues In The Reconstruction Of Iraq, supra, at 221.39 Id. at 221.40 Rayis, Business Law In Iraq?, supra, at 28.41 Id. at 27.42 “The Coalition Provisional Authority was established as a transitional government following the invasion of Iraq by

the United States, United Kingdom and the other members of the Multinational force in Iraq which was formed to oust the government of Saddam Hussein in 2003. Citing UN Security Council Resolution 1483 (2003), and the laws of war, the CPA vested itself with executive, legislative, and judicial authority over the Iraqi government from the period of the CPA's inception on April 21, 2003, until its dissolution on June 28, 2004.” http://en.wikipedia.org/wiki/Coalition_Provisional_Authority (last checked on December 27, 2009).43 Constitution of Iraq, Article 13 Sections 1 & 2, available at http://www.uniraq.org/documents/iraqi_constitution.pdf ( last visited on December 27, 2009).44 Ala Hamoudi, Baghdad Booksellers, Basra Carpet Merchants, And The Law Of God And Man: Legal Pluralism And The Contemporary Muslim Experience, 1 BJMEIL 83, 107 (2008).45 Id. at 109.46 Id.47 Michael F. Silva, A Central Banker In Iraq, 3 J. Int'l Bus. & L. 7, 22 (2004).48 Constitution of Iraq, supra, Article 2 Section 1.49 Houmdi, Baghdad Booksellers, Basra Carpet Merchants, And The Law Of God And Man: Legal Pluralism And The Contemporary Muslim Experience, supra, at 109.50 Id. at 8751 Id.52 Id.53 The terms Islamic Law and Shari’ah can be used interchangeably. Further, because transliteration of words is an inexact undertaking, the word Shari’ah can be written several ways in English, which can include the versions of shariah, sharia, shari’a. 54 Id. at 8455 Id. at 8656 Throughout this paper, the terms finance and banking will be used interchangeable, as Shari’ah law applies to both equally and the distinctions between the terms are not within the scope of this paper.57 May also be spelt as “sunnah”58 Chris P. Sioufi, Banking And Finance Client Strategies In The Middle East And Africa, 2009 WL 2512015, 1 (2009)59 Omar A. Hashmi, Islamic Home Financing In The United States: Solution Or Deception?, 52 How. L.J. 709, 711 (2009)60 Id.61 Nickolas C. Jensen, Avoiding Another Subprime Mortgage Bust Through Greater Risk And Profit Sharing And Social Equity In Home Financing: An Analysis Of Islamic Finance And Its Potential As A Successful Alternative To Traditional Mortgages In The United States, 25 Ariz. J. Int'l & Comp. L. 825, 833-34 (2008)62 Id. at 83063 Id.64 Hashmi, Islamic Home Financing In The United States: Solution Or Deception?, supra, at 713 65 Id.66 Jensen, Avoiding Another Subprime Mortgage Bust Through Greater Risk And Profit Sharing And Social Equity In Home Financing: An Analysis Of Islamic Finance And Its Potential As A Successful Alternative To Traditional Mortgages In The United States, supra, at 829-3067 Id. 68 Michael McMillen, Islamic Shari'ah-Compliant Project Finance: Collateral Security And Financing Structure Case Studies, 24 Fordham Int'l L.J. 1184, 1190 (2001)69 Id.70 “A fatwā in the Islamic faith is a religious opinion concerning Islamic law issued by an Islamic scholar. In Sunni

Islam any fatwa is non-binding, whereas in Shia Islam it could be considered by an individual as binding, depending on his or her relation to the scholar.” http://en.wikipedia.org/wiki/Fatwa (last checked on December 27, 2009)71 McMillen, Islamic Shari'ah-Compliant Project Finance: Collateral Security And Financing Structure Case Studies, supra, at 119172 Hashmi, Islamic Home Financing In The United States: Solution Or Deception?, supra, at 71473 Id.74 Jensen, Avoiding Another Subprime Mortgage Bust Through Greater Risk And Profit Sharing And Social Equity In Home Financing: An Analysis Of Islamic Finance And Its Potential As A Successful Alternative To Traditional Mortgages In The United States, supra, at 832

75 Jensen, Avoiding Another Subprime Mortgage Bust Through Greater Risk And Profit Sharing And Social Equity In Home Financing: An Analysis Of Islamic Finance And Its Potential As A Successful Alternative To Traditional Mortgages In The United States, supra, at 831; J. Michael Taylor, Islamic Commercial Banking--Moving Into The Mainstream?, 18 Transnat'l Law. 417, 419 (2005) 76 Hashmi, Islamic Home Financing In The United States: Solution Or Deception?, supra, at 71477 Id. at 71578 Id. at 715-1679 Id. at 71680 Id. at 717-1881 Id. at 71882 Id. 83 Id. at 71984 Id. at 720 (Internal quotations omitted)85 Id. at 721 86 Id.87 Id.88 Jensen, Avoiding Another Subprime Mortgage Bust Through Greater Risk And Profit Sharing And Social Equity In Home Financing: An Analysis Of Islamic Finance And Its Potential As A Successful Alternative To Traditional Mortgages In The United States, supra, at 83489 Id. at 83090 Id.91 Jensen, Avoiding Another Subprime Mortgage Bust Through Greater Risk And Profit Sharing And Social Equity In Home Financing: An Analysis Of Islamic Finance And Its Potential As A Successful Alternative To Traditional Mortgages In The United States, supra, at 830 92 Sioufi, Banking And Finance Client Strategies In The Middle East And Africa, supra, at 193 Wikipedia, Securitization, http://en.wikipedia.org/wiki/Securitization, (last visited on December 27, 2009), “Securitization is a structured finance process that distributes risk by aggregating debt instruments in a pool, then issues new securities backed by the pool. The term "Securitisation" is derived from the fact that the form of financial instruments used to obtain funds from the investors are securities. As a portfolio risk backed by amortizing cash flows - and unlike general corporate debt - the credit quality of securitized debt is non-stationary due to changes in volatility that are time- and structure-dependent. If the transaction is properly structured and the pool performs as expected, the credit risk of all tranches of structured debt improves; if improperly structured, the affected tranches will experience dramatic credit deterioration and loss.[1] All assets can be securitized so long as they are associated with cash flow. Hence, the securities which are the outcome of Securitisation processes are termed asset-backed securities (ABS). From this perspective, Securitisation could also be defined as a financial process leading to an issue of an ABS.”94 Id. at 295 Id.96 Jensen, Avoiding Another Subprime Mortgage Bust Through Greater Risk And Profit Sharing And Social Equity In Home Financing: An Analysis Of Islamic Finance And Its Potential As A Successful Alternative To Traditional Mortgages In The United States, supra, at 82797 Taylor, Islamic Commercial Banking--Moving Into The Mainstream?, supra, at 420-2198 Jason Chuah, Islamic Principles Governing International Trade Financing Instruments: A Study Of The Morabaha In English Law, 27 Nw. J. Int'l L. & Bus. 137, 150 (2006)99 Hashmi, Islamic Home Financing In The United States: Solution Or Deception?, supra, at 727100 Id. at 729101 Id.102 Id. at 729-30; the murabaha product in question was an “Islamic Cost-Plus” contract, a specific product of an Islamic bank in the United States103 Id. at 740104 Id.105 Id. at 725 106 Kristen E. Boon, “Open For Business”: International Financial Institutions, Post-Conflict Economic Reform, And The Rule Of Law, 39 NYUJILP 513, 547-48 (2007)107 Id.108 Houmdi, Baghdad Booksellers, Basra Carpet Merchants, And The Law Of God And Man: Legal Pluralism And The Contemporary Muslim Experience, supra, at 88-90109 Haider Ala Hamoudi, Money Laundering Amidst Mortars: Legislative Process And State Authority In Post-Invasion Iraq, 16 TRNATLCP 523, 525 (2007)110 Article 692 of the Iraqi Civil Code permits the use of interests on loans111 Houmdi, Baghdad Booksellers, Basra Carpet Merchants, And The Law Of God And Man: Legal Pluralism And The Contemporary Muslim Experience, supra, at 90112 Id. at109

113 APS Diplomat Redrawing the Islamic Map, Najaf Hawsa Against Shi’ite Repreisals Despite Neo-Salafi & Ba’thist Bombins, August 17, 2009, 2009 WLNR 16562473; Philip Kennicott, Shiite Leader Al-Sistani’s Edicts Illuminate the Gap with West, Washington Post, February 18, 2005, cited at 2005 WLNR 234943; Irish Times, Iraqi Cleric Advises on Constitution, August 6, 2005, 2005 WLNR 12374210114 Id. 115 Wikipedia, Saddam Hussein, http://en.wikipedia.org/wiki/Saddam_Hussein#Secular_leadership (last checked on December 25, 2009); in the waning days of his rule, notably after the first Gulf War, Hussein attempt to appear to be a devout Muslim and use religion to help consolidate his power until his eventual removal from power by the United States.116 Sabrina Tavernise, Extremists Shake Faith of Young Iraqis, International Herald Tribune, March 5, 2008, cited at 2008 WLNR 4376764 117 Id.118 Anthony Shadid, In Southern Iraq, Testing Democracy’s Limits, Washington Post, January 19, 2009, cited at 2009 WLNR 1051683119 Id.120 Liz Sly, Iraq’s Maliki Splits with Shiite Bloc, Los Angeles Times, August 25, 2009, cited at 2009 WLNR 16547399121 http://www.sistani.org/ 122 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3048 (last checked on December 27, 2009)123 Id.124 Id.125 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3048 (last checked on December 27, 2009)126 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3048 (last checked on December 27, 2009)127 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3048 (last checked on December 27, 2009)128 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3050 (last checked on December 27, 2009)129 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3053 (last checked on December 27, 2009)130 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3059 (last checked on December 27, 2009)131 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3059 (last checked on December 27, 2009)132 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3059 (last checked on December 27, 2009)133 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3069 (last checked on December 27, 2009)134 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3069 (last checked on December 27, 2009)135 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3069 (last checked on December 27, 2009)136 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3069 (last checked on December 27, 2009)137 Wikipedia, Hamwala, http://en.wikipedia.org/wiki/Hawala (last checked on December 27, 2009), Hawala is outside the scope of this paper, but a minimal definition is beneficial, “Hawala (also known as hundi) is an informal value transfer system based on the performance and honor of a huge network of money brokers, which are primarily located in the Middle East, North Africa, the Horn of Africa, and South Asia.”138 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3071 (last checked on December 27, 2009)139 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3073 (last checked on December 27, 2009)140 http://www.sistani.org/local.php?modules=nav&nid=2&bid=59&pid=3074 (last checked on December 27, 2009)141 Ronald Mann, Payment Systems and Other Financial Transactions. 345-76, Austin: Aspen Publishers, 2008. 142 Shaaban, Commercial Transactions In The Middle East: What Law Governs?, supra, at 165.143 Id. at 157. 144 Id. at 160.145 Id. at 168.146 Id. 147 Id. at 161.148 Id.149 Id.150 Id.151 Id. at 168152 Id.153 Id.154 Id. at 162155 Id. (internal quotation omitted)156 Id. at 168157 Id. at 169