Jurisdiction(s):
United Kingdom

Key definition

Shari’ah definition

What does Shari’ah mean? Used in UK and Irish practice to describe Islamic religious principles referenced in contracts (especially Islamic finance) or personal matters, rather than a source of state law. Shari’ah (also Sharia; literally, “the clear path to water”) is not defined in UK or Irish legislation or case law and is treated by the courts as religious doctrine. Across England & Wales, Scotland, Northern Ireland and Ireland, conflict of laws rules do not permit Shari’ah, by itself, to be the governing law of a contract (see Beximco v Shamil Bank [2004] EWCA Civ 19). Parties may, however, incorporate Shari’ah‑compliance undertakings or...

Murabaha and Organised Tawarruq: Form–Substance Tensions, Shari’ah Critiques, Market Practice, and the English Law Perspective

Published by a LexisNexis Banking & Finance expert

Practice notes

Several observers point out that, in UK tax, the tension between legal form and economic substance mirrors a similar dynamic within shari’ah. From a Shari’ah vantage point, substance may likewise prevail. Yet, because the contemporary Islamic finance sector is relatively new, uncertainty over what transactions are permissible and the premium placed on Shari’ah conformity have led market actors to prioritise transactional form. Following recognised templates offers comfort that arrangements documented in that way meet Shari’ah requirements. In practice, adherence to approved forms provides reassurance that the transactions represented by such forms align with Shari’ah. Thus, reliance on long-established mechanisms such as murabaha can seem cautious. Nonetheless, numerous detractors of Islamic finance single out this fidelity to set structures as a principal flaw. They contend these frameworks have been deployed by equity sponsors and financial firms to replicate conventional interest-based dealings, including loans, thereby sidestepping the substantive character of the transactions those forms are meant to capture. Islamic jurisprudence, moreover, covers the interpretive methodologies through which Islamic Shari’ah is deduced from the foundational sources of Islamic Shari’ah...

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Web page updated on 21/05/2026

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