Saudi Business Law in Practice: Laws and Regulations as Applied in the Courts and Judicial Committees of Saudi Arabia 1509927220, 9781509927227, 9781509927210

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ACKNOWLEDGEMENTS While working on this book for a period of over six years, I have become indebted to scores of institutions and hundreds of individuals. To all I express my gratitude for their interest in the venture, their generosity in supporting it, and the kindness and hospitality they extended to me personally. I am sure they will find many errors in what I here produce, for which they are not responsible; but I hope they will also be generous in forgiving the mistakes. My first acknowledgement must be to the King and government of Saudi Arabia who immediately saw value in supporting an independent study, by an outsider, of the laws of Saudi Arabia as practised. King Abdullah by royal order decreed the study proceed, acting on the recommendation of then Minister of Justice Dr Abdullah Al Al-Shaykh and others. Even before the government was involved, however, another group provided the essential impulse for the study. This is a group of my long-time mentors, friends, and ex-students among the loose association of Saudi Harvard Law School alumni. They received with interest my initial idea for the project, helped me propose it to the government, guided its progress toward official adoption, and then supported it during its course. They include HRH Ambassador Mohammad bin Nawwaf, HE Dr Motleb Al-Nafisseh, HE Dr Abdulrahman Al-Hussayen, Saud Al-Ammari, HE Dr Musaed Al-Aiban, and Professor Ayoub Al-Jarbou. Without their generous support, this study would never have been undertaken, nor could it have surmounted various obstacles in its path. King Abdullah on issuing his order named King Saud University (KSU) in Riyadh as the formal sponsor of the project. I am grateful to the two rectors of the University who oversaw it, Dr Abdullah Al Othman and Dr Badran Al-Omar, both of whom intervened at crucial points to resolve administrative difficulties. The task of actually administering the project day-to-day was undertaken by KSU’s King Abdullah Institute of Research and Consulting Studies, a body specialised in administering academic research projects. The deans and staff of the Institute have honoured this project with their respect and support, administering it with integrity and patience. There are many at the Institute who deserve mention, but I confine myself to the former and current deans of the Institute, Dr Mohammed Al-Harthi and Dr Said Al-Said, and two deputies to the dean immediately in charge of supporting my project, first Dr Mohammad Aldughaishem and later Mr Bader Al-Majed, who were the ones who made sure the needful got done. Also part of the administrative structure of the project was the Scientific Committee that the King ordered be established to assist me in my research, to consist of five individuals, three professors of law from KSU, one Sharia judge, and one judge from a specialised tribunal. In the end there were two Scientific Committees, the second of which had the function of reviewing the manuscript on completion. As for the first Committee, five impressive individuals were appointed, all of whom generously offered their own knowledge and advice as scholars and judges on how to accomplish the study. From the KSU College of Law and Political Science came Professors Khalid Alomeir, Khalid Al-Ruwais, and Rezeq Al-Rayes. Particularly generous with his time was Professor Alomeir, who as Chair conducted the v

Acknowledgements committee’s work with deep appreciation of the needs of a sound academic study. He assisted at many crucial stages in the course of the study. The Sharia judge on the committee was Dr Ahmad al-`Ubudi, who not only is a respected judge of the commercial court of the Kingdom, then the Board of Grievances, but served as head of the technical committee working toward the publication of court decisions. Himself an academic, he was at the time completing his doctoral dissertation on procedure before the commercial courts. He served throughout as my contact within the Board of Grievances. He helped arrange many visits and interviews with Board judges and worked hard to obtain for me copies of as yet unpublished decisions and other materials. Finally, Shaykh `Abd al-Karim al-Izkari, a senior judge of the Commercial Papers Committee of the Ministry of Commerce, represented the specialised tribunals of the Kingdom. As for the second Committee, while it functioned for a matter of weeks only, not years, it also helped the project substantially, by helping me meet the last formal requirements of the project, and by offering a number of useful suggestions to improve the book. Its members were, in addition to Dr Abudi and Dr Izkari from the earlier Committee, three professors of law from King Saud University, Professors Abdulaziz  bin Ahmad al-Tuwaijiri, Fahd bin Muhammad al-Majid, and Abdul Latif bin Muhammad Al Al-Shaikh. I should emphasise that even these bodies whose immediate task it was to administer and assist the project – KSU, the Institute, and two Scientific Committees – bear no responsibility for what I have written, errors and all. Their assistance to me was throughout supportive, collegial, and respectful of my academic independence and objectivity. The two next institutions that must be recognised are the bodies that administer the regular courts of the Kingdom, both the general courts and the Board of Grievances. From the general court system, I would like to thank many, but confine myself to the former and present Ministers of Justice and Presidents of the Supreme Council for the Judiciary, who both showed great interest in the project: Dr Mohammad Al-Issa and Dr Walid al-Sam`ani. Through Dr Issa I arranged a visit to the highest court of the Kingdom during May 2014. Within these institutions I acknowledge the extremely useful assistance of Shaykh Yusuf al-Farraj, a judge who has also held many important positions within the Ministry. Within the Board of Grievances, I must thank Dr Ali al-Hammad, Deputy President, who with his authority supported all my initiatives within the Board, including my visits to several branches of the Board throughout the Kingdom, and also answered many questions based on his own experience as a judge. Other figures in the administration offering valuable support include Dr Tariq al-Omar, also involved in the publication of decisions. As a last institution to thank I mention the Prince Sultan University headed by Rector Dr  Ahmed Yamani. Having previously had the opportunity to visit its college of law for women, I approached Dr Yamani with a request to organise a research team among its law students to assist my research. Understanding at once its academic value also for the students, he asked the very able Dr Emna Chikhaoui, a professor in the College, to set up the team. In one form or another, through several succeeding classes of ambitious and diligent law students, this team continued throughout in support of the project. Turning to individuals, there are too many even to name, much less to thank appropriately. I will mention a few, beginning with judges, then lawyers, then others, all of whom generously gave of their knowledge and experience. Among judges, taking first the Board of Grievances, I must thank first Shaykh Ibrahim al-Rasheed, Chief Justice of the Supreme Administrative Court, earlier President vi

Acknowledgements of the Dammam Administrative Court of Appeal. He arranged for me many meetings with commercial law judges, both in groups and as individuals, and both in Dammam and in Riyadh. Of judges within the Board, particularly generous with their knowledge, advice, and assistance were Mohammad al-Ahmad, Majid al-Mushayqah, Abdullah al-Zahrani, Ahmad al-Jundi, and Budayya al-Budayya. In the general courts I received useful advice from many, among them notably Dr Hamad al-Khudayri, Shaykh Abdullah Al-Umarini, Shaykh Salih al-Yusuf, `Abd al-Rahman al-Luhaydan, `Abd al-Rahman al-Rumayh, and Bassam al-Nujaidi. Among lawyers, again many, including Saud al-Ammari, Mohammed al-Jadaan, Abdullah al-Hashim, Abdullah al-Ghamdi, `Abd al-Latif al-Qarni, Abdulaziz al-Fahad, Mohammed Salih Zubeir, Abdullah al-Hoqail, Abdullah al-Habardi, and Ahmad Al-Sgaih. Bandar al-Rasheed, a lawyer working within the Bureau of Experts of the Council of Ministers, kindly introduced me to a number of scholars and judges. Among professors of Sharia and of law, much help was received from Professors Bashshar al-Mufdi and Mansour al-Shabeeb. Next I have the pleasure of thanking the many young Saudis who joined my research team. First is Yousef al-Muzeini, who has worked with me, usually full-time, for three years, often representing me in the Kingdom. I cannot thank him enough for his intelligent assistance to this project, often anticipating the needs of the project before I did and proposing sound solutions. He grasped the purposes of the project from the start, even in its comparative dimension, an approach new to him. His skills proved impeccable, offering a model of how a Sharia college education prepares students to serve as lawyers and scholars of law. He is now pursuing advanced law degrees in the United States. A UK doctoral graduate in law, Ahmad Alkhamees, who now has his own law firm, assisted me earlier in the same role, though for a much shorter time. In 2014 he skilfully used his many contacts in the judiciary to arrange a successful series of interviews with judges both of the Board of Grievances and the general courts, in various cities of the country. Among the other researchers are many who were very part-time, working while they studied or as they began their careers at law firms. First among these are the leaders of the teams at Prince Sultan University, three extraordinarily capable young lawyers, Sara AlAyyaf, Najla Al-Qadi, and Raneem AlSuhaibani, all of whom have gone on to earn advanced degrees in law in the United States. Very capable members of the University team have included May Alajlan, Reem Al-Mousa, Jomana Al-Kathiri, Danah Al-Muhanna, Hanouf Aldrees, Hind Bahabri, Fahda Alshaykh, Nuha Almashal, Nora Al-Othman, Saba Algosaibi, Haifa Al-Khenaifer, Alanoud bin Rageeb, and Noura Al-Owaidah. Also assisting have been a number of young students and instructors from Sharia and law colleges. These have included Shakir Sufyani, Nasser al-Majed, Noura al-Zamil, Yasir al-Urayni, Abdulaziz al-Hoqbani, and Razan al-Othaim. Various colleagues have given me much support. I must single out Ms Peri Bearman, who generously read over the entire manuscript and offered invaluable comment and advice, catching many flaws and errors (while not being responsible for the rest of them). Lastly, I owe much gratitude to Sinead Moloney, Tom Adams, and others at Hart Publishing for their thoughtfulness and diligence in arranging the editing and production of this volume, but even more so for taking on so unconventional a project in the first place, and for remaining patient and supportive throughout, even in the face of various administrative complexities.

vii

LIST OF ABBREVIATIONS The following are abbreviations used in the text of this book. Abbreviations used in the footnotes are explained in the Bibliography.

IMBT

Hire-purchase contract, ijāra muntahiya bi-al-tamlīk (literally ‘lease terminating in transfer of ownership’)

MWL-Academy

Islamic Fiqh Academy of the Muslim World League, al-Majma` al-Fiqhī al-Islāmī li-Rābiṭat al-`Ālam al-Islāmī (fatwa body)

MT

Vicarious liability or respondeat superior (eg of employer), mas’ūliyyat al-maṭbū` `an af`āl tābi`ih (literally, ‘the liability of the superior for the acts of his subordinate’)

OIC-Academy

International Islamic Fiqh Academy of the Organization of Islamic Cooperation (formerly, Organization of the Islamic Conference), Majma` al-Fiqh al-Islāmī al-Duwalī li-Munaẓẓamat al-Ta`āwun al-Islāmī (sābiqan Munaẓẓamat al-Mu’tamar al-Islāmī) (fatwa body)

Ottoman-Majalla

Mecelle-i ahkam-i adliye, in Arabic Majallat al-aḥkām al-`adliyya (Ottoman statute of 1877)

Qari-Majalla

Aḥmad al-Qārī, Majallat al-aḥkām al-shar`iyya (unofficial codification of legal rulings on civil obligations in the Hanbali school of Islamic law, composed in the 1930s)

xxi

1 Introduction 1.1. About the Subject-Matter of this Book ...............................................................................1 1.1.1. Saudi Business Law and Islamic Legal Principles .................................................1 1.1.2. Introducing the Saudi Legal and Judicial System .................................................3 1.1.3. The Comparative Aspect ..........................................................................................4 1.1.4. Aspects of Business Law Covered in the Book .....................................................5 1.2. Sources for this Study ............................................................................................................8 1.2.1. Publications by the Court Systems .........................................................................8 1.2.2. Unpublished Court Decisions ...............................................................................10 1.2.3. Interviews.................................................................................................................11 1.2.4. Fatwas .......................................................................................................................11 1.2.5. Graduate Dissertations...........................................................................................12 1.2.6. Various Other Published Sources .........................................................................12 1.2.7. My Own Prior Research and Experience ............................................................12 1.3. How this Study Came About ..............................................................................................13 1.4. Some Technical Matters ......................................................................................................14 1.4.1. Terminology ............................................................................................................14 1.4.2. Other Technical Matters ........................................................................................15

This book seeks to explain to outsiders to the Saudi legal system some basic matters of Saudi law of relevance to business as these are actually applied. For evidence on practice the book relies on many sources, but primarily on thousands of newly published court decisions covering, for commercial cases, twenty-eight years of past decisions. The goal for this book is not another summary of laws and regulations on ‘doing business’ in Saudi Arabia of a sort that already exists in English. Rather the book has two goals: first, to reveal those aspects of the Saudi system of business law that are the most difficult for the outsider to identify and comprehend; and second, because the subject is a broad one and this book only a single volume, to cover those aspects of that system that are among the most basic and encompassing.

1.1. About the Subject-Matter of this Book 1.1.1. Saudi Business Law and Islamic Legal Principles It turns out that, given these goals, one subject for the book emerges as the obvious focus of attention – the Islamic legal principles of property, tort, and contract that underlie all the 1

1.1.1

Introduction

business law of the Kingdom. Islamic law, in a form until now uncodified and drawn from centuries-old scholarly texts, remains the general law of the Kingdom, stating the unwritten constitution of the country and forming the basis of its civil, commercial, and criminal law. From the viewpoint of business, this body of law serves as the equivalent of the laws of property, tort, and contract that are found in the civil code in a civil law system or in the common law of a common law system – with the distinction, however, that in Saudi Arabia the statutes that alter and supplement this basic private law are far fewer and weaker than in other countries, and this in turn is because, under the constitution of Saudi Arabia, many basic Islamic law principles constrain the legislative power. And it is these principles that account for almost all the characteristics of Saudi business law that seem to stand outside the pattern of laws elsewhere. It is an oddity of Saudi Arabia that the most basic, most encompassing, rules of the legal system are the most unapproachable, the least known, both within the Kingdom and outside, at least for those unable to consult the sources on Islamic law from medieval times down to today. The rules and principles of traditional Islamic law that are most relevant for business have not been written about extensively in English, except insofar as these are relevant to Islamic finance. And even for those who can use works on Islamic law in Arabic, evidence of the actual current practice of the Saudi courts has been – until very recently – almost impossible to gather. Even for me, possessed of a royal order endorsing my study, a diligent effort over two and a half years and many trips to the Kingdom yielded a total of 19 unpublished court decisions, counting only those obtained through official channels. Local scholars and lawyers have faced the same difficulty; even judges were unable to access the decisions of their own courts conveniently or in large numbers until recently. Lawyers and litigants have gleaned knowledge of the courts’ actual practice from personal experience, anecdotes from other litigants and lawyers, and copies of unpublished decisions shared with them by others. A few judges created collections of unpublished cases and circulated them informally. This was the situation until 2015, more than half-way through the period of this study – when the floodgates opened. In one of the most significant steps of legal reform it has taken for decades, the judicial system began a process of publishing thousands of court decisions. These decisions, which continue to appear in large numbers, are the chief source for this study. Because the focus of this book is on the general private law, rather than the many relatively ad hoc commercial statutes and regulations Saudi Arabia also possesses (called niẓām), I chose not to refer to ‘commercial law’ in the title of this book, using ‘business law’ instead. ‘Commercial law’, in the modern Saudi sense of that term, refers chiefly to the laws governing legal institutions specific to merchants (like commercial companies, commercial papers, and commercial bankruptcy) and to certain commercial functions (like banking, financial securities, and consumer finance), all of which in Saudi Arabia are matters governed chiefly by specific niẓams. This is because the rules and concepts of such commercial law were unknown in Islamic law, and were therefore imported from other legal systems, originally from continental civil law systems (often via the laws of other Arab countries, principally Egypt), and now increasingly from common law systems and international treaties. In any case, the subjects that do fall within ‘commercial law’, being framed on western models and articulated in niẓams, are much easier for the outsider to the system to grasp. Many of them are described and analysed in materials available in English. Again, to avoid confusion with that body of law, I chose as the title of this book ‘Saudi Business Law’. 2

About the Subject-Matter of this Book

1.1.2

Even though the study of business law here focuses on the Islamic ‘common law’ or ‘civil code’, statutes make a frequent appearance in this book. My emphasis on the ‘civil code’ aspects of Saudi business law – due to the considerations of relative priorities just explained – should not mislead the reader about the importance also of the ‘commercial law’ component of Saudi law. In everyday business, indeed, the latter is by far the salient part of the law. But I hope this book will aid the outsider to Saudi law even in appreciating Saudi commercial law proper. This is for two major reasons: first, the form and function of the commercial statutes within the legal and judicial system does differ somewhat, due to Saudi Arabia’s unique constitutional framework (to be explained in Chapter 2), from that in other legal systems; and second, as one consequence of that difference, one needs some Islamic law background even to understand and apply the commercial statutes, since they are promulgated with the expectation that the uncodified Islamic law will fill their gaps and guide their interpretation. Since I focus in this book on how Saudi courts apply the basic or common law of Saudi Arabia in deciding cases brought before them, I will not address, among other things, the degree to which Saudi courts enforce foreign judgments and arbitral awards, or support the use of arbitration, whether domestic or foreign, for the settlement of business disputes. These are areas where Saudi law and practice, regulated through niẓāms, are developing rapidly. They are, again, matters often analysed and written about in English. The term ‘business law’, as used in this book, includes some subjects outside ordinary commercial practice but of interest to businessmen and legal professionals engaged with Saudi Arabia. Thus, I discuss issues of tort and even criminal law. Criminal law is relevant mostly due to a large overlap in the treatment of tort and crime in Islamic law. Also, some issues of criminal law do directly concern business, such as the crimes of embezzlement, fraud, forgery, and breach of trust.

1.1.2. Introducing the Saudi Legal and Judicial System Before engaging with the business law, I offer introductions to the Saudi legal and judicial system (Chapter 2) and to the Saudi judicial process (Chapter 3). On both subjects my own examination of the Saudi legal system in a book published in 2000 remains relevant, the Saudi system not having changed in fundamental respects from the system I then described, though it has evolved, and sometimes rapidly and extensively, on the same terms. In Chapter 2, along with basic descriptions of the legal system, I bring my earlier treatment up to date, noting many significant changes in the legal system during the last two decades, especially as to the jurisdictions of various courts, the administrative organisation of courts, the roles and responsibilities of trial and appellate courts, and efforts to unify the rulings of the courts, including a proposal to codify some or all of those rulings. In Chapter 3, I offer my understanding of the process of judicial reasoning in Saudi courts, as shaped both by Islamic law and by longstanding and evolving Saudi judicial practice. The chapter addresses the sources on which Saudi judges base their rulings, and how they reason from those sources. I speculate about the ways in which the current program of extensive publication of court decisions and the possibility of the codification or compilation of Sharia rules may impact judicial practice in the future. I also give a brief summary of procedure and proof in the Saudi courts, because these often have a substantive impact on outcomes 3

1.1.3

Introduction

and play a role in my later discussions of doctrine, and because they exhibit many features unfamiliar to the outsider.

1.1.3. The Comparative Aspect If this book attempts to describe Saudi law in three dimensions (business, law, and actual judicial practice), which is a challenge in itself, it also, because it is addressed to outsiders to the system and is in English, intrinsically involves a fourth dimension: comparison with contemporary theory and practice elsewhere. It proved impossible, even with the generous amount of time devoted to research on this book, to incorporate that fourth dimension in an explicit way. To do so at all would require reference to at least the three legal systems most normative today, the French, English, and American, and this neglects dozens of others of interest, European (including the European Union itself) and Arab systems in particular. Therefore, though the choice of subjects for this book was partly driven by the comparative significance of the topics chosen – their interest when juxtaposed with other contemporary laws and legal systems – the comparisons remain largely implicit. Hopefully, given the details on Saudi law covered in this book, the reader will be able, if a legal professional or comparatist, to make comparisons himself. Despite its being implicit, the comparative dimension will be a constant presence, as is unavoidable given my purpose. I generally do not use legal terminology in English to organise my discussion of Saudi law, except at the most general level. In my view, to do so would be artificial and distorting. In fact, at various places I advocate, and I believe demonstrate, that learning to think about Saudi law and practice using its own legal categories is more than worth the effort. Saudi law, even for business, takes its shape from Islamic law, a religious law with unique characteristics. Approaching it on that basis avoids endless surprise and confusion. Of course, my approach can fall into the trap of making strange or exotic what is in fact not. But I hope my treatment will show that although Saudi law is sometimes anomalous among modern laws, it is also in wide spheres perfectly natural, not strange. Indeed, one of the conclusions of this study is that much of the Islamic law relevant to business is modern and normal (and predictable), especially in the manner in which contemporary Saudi Arabia applies it. But while the results of the law may often match results elsewhere, the intellectual and institutional process that delivers those results is often very different. This is true to the degree that if one starts with some artificially constructed sameness one is unlikely to be able to predict outcomes, or explain them. I believe the truth of this has been demonstrated by the history of outsiders’ efforts to understand and explain the Saudi common law for business. Too often such efforts reach conclusions that outcomes in Saudi courts are unsophisticated, unpredictable – and exotic. A side advantage of using Saudi conceptual categories in this book is that it may equip a reader to engage with Saudi professionals using a shared, and more accurate, standard of reference. Pursuing the discussion using chiefly Saudi and Islamic law categories entails the use of Arabic technical terms. I generally accompany their use with an approximate one- or twoword translation of these into English. Those interested in pursuing particular topics using English terms will find assistance in the index. I sometimes repeat definitions of legal terms in briefer form when they reappear in the book at points far separated from their original explanations. A glossary of Arabic terms is provided at the end of the volume. 4

About the Subject-Matter of this Book

1.1.4

1.1.4. Aspects of Business Law Covered in the Book Again, this book does not attempt to describe, or even to survey, all Saudi business law. To do so, even in superficial fashion, would have been difficult in the period allowed for this study. And it would be impossible if one attempts to determine on each point the law actually observed in practice, especially in cases where that law is also unwritten (typically due to its reflecting the contemporary interpretation of the uncodified Islamic jurisprudence). Even if one narrows one’s scope to the Islamic law of contract, tort, and property as applied in Saudi Arabia and related statutes, the topic is too large. Still one has to make choices as to topic and depth of coverage. Given the difficulties one experiences trying to verify the actual practice, on what topics should one expend the effort to do so? As to doctrine, what level of detail should one reach for, when trying to reveal how Saudi judges and scholars reason about and decide an issue? The approach I have decided to take is to describe the law in two distinct ways, in two registers. My first method, the first register, is to offer general introductions to broad areas of legal doctrine. (Again, these areas of law are those governed in the main by Islamic law, not statutes, and most of them fall within a sphere that would be called ‘civil’ or ‘common’ and not ‘commercial’ in other systems.) These descriptions of substantive law take up three chapters: Chapters 4, 6, and 7. These descriptions are not intended to be comprehensive even within their own scope. Their purpose is, first, to offer introductions to areas of the law of fundamental importance in commercial or business litigation, emphasising those difficult for outsiders to ascertain; and, second, to enable the reader to appreciate the more detailed studies to follow. In the course of these broad descriptions I refer to, or at least cite in footnotes, many pieces of evidence as to the actual Saudi practice from the plethora of such evidence this study has gathered and analysed, in case they prove useful to the reader. But I cannot claim that these references capture the real Saudi practice on those points. In fact, even in the summaries there may be many deficiencies of commission or omission. My second level, or register, of treatment uses a case-study approach. The book carries out three major, highly detailed case studies, each a chapter in its own right, in Chapters 5, 8, and 9. Several other such studies are given in more summary form, these appearing as part of the descriptive chapters. In the three main case studies the attempt is made to ascertain, fully explain, and document the actual Saudi legal practice as comprehensively as possible, using to the full extent the materials I have that might expose that practice. I originally chose the case-study topics, drawing on my prior experience and knowledge, as areas where Saudi  law is contested, under evolution, or offers important contrasts with law applying elsewhere. The topics chosen are, frankly, complex ones to analyse, where the details of doctrine, the pattern of the results in the courts, or both have been largely unknown even to most Saudi judges and lawyers. In several of the case studies we see points on which the courts have taken conflicting positions, so that the outcome of any fresh case can be indeterminate. All the case studies concern areas of law for which, in other legal systems, the doctrine and the practice are not problematic at all, but settled and routine. In thus choosing for my case studies issues where Saudi Arabia seems an outlier, beset with complex dilemmas other legal systems never concerned themselves with, or which they settled long ago, I may 5

1.1.4

Introduction

be creating a false impression – that the Saudi legal system is fraught with struggles at every turn as it seeks to reconcile a medieval law with a modern present. This is absolutely not my intention, nor would that impression be correct. I hope that the general, descriptive chapters will counter it. In Chapter 10, my conclusion, I list a number of areas of law, some of them touched on in the course of the book, where Saudi law has absorbed modernising changes even in the face of certain doubts or objections stemming from Islamic law, and did so relatively rapidly and easily, without the complex and prolonged difficulties posed in my case studies. Also, my focus on issues that have proved controversial may create the false impression that Saudi law is unpredictable in its application by judges. My description of some aspects of judicial reasoning and of the court structure (in Chapters 2 and 3) may further contribute to such an impression, since, as will be seen, Saudi Arabia does not deploy many of the same positive-legal or structural mechanisms used in other systems to assure uniformity and stability in the law. But, for reasons to be explained throughout, particularly in Chapter 3, this impression of unpredictability is falsified by the experience of practitioners and litigants in Saudi Arabia who observe, outside areas of controversy such as I highlight in my case studies, that Saudi courts do follow commonly held and stable opinions on most issues. Sometimes this will be observed even in my case studies, such as in Chapter 8 on the question of compensation for lost profits for contract breach. Why did I then choose to dwell at length on these particular topics as case studies? This is because together they served many purposes. First, by taking topics where Islamic law strains against an international consensus, I hope to show how Saudi scholars and judges handle those stresses and evolve their law. Second, these case studies reveal what a serious undertaking Islamic jurisprudence in Saudi Arabia is, in business matters as in others – how sophisticated, complex, and internally cohesive it is, and yet how it is facing new conditions and finding ways to evolve from its past. Third, they show, particularly the case study on means for establishing authority in an agent to represent his principal, how the Saudi system can complement Islamic law doctrine with institutional and administrative mechanisms that adapt the law to new legal expectations without changing the doctrine – something that all legal systems do, including Islamic legal systems of the past. This indicates that no one should assume that a doctrine that, read literally, sounds outlandish and impractical is always so in practice. Fourth, they include subject-matters that arise frequently enough in practice that analysing them would in and of itself be a worthwhile undertaking for a book on Saudi business law. Fifth, they demonstrate the operation of the doctrines of business law I explain in the descriptive chapters, and in that way fill out those descriptions. And lastly, and perhaps most important, such case studies dispel, I hope, some of the mystery about what Islamic law in Saudi Arabia is and about how it is applied in the regular Saudi courts. Much of the uncertainty about Saudi law among non-Saudi businessmen and their legal advisers has had to do not just with the content of the law, but also with how justice is done in Saudi Arabia – as to process as well as outcome. Outsiders may be told, or form an impression, that Saudi courts are an impenetrable ‘black box’, that the law they apply is unknowable and unpredictable. I hope this book, and particularly the case studies, will give them sufficient evidence to decide that question for themselves. My claim to study and represent Saudi law in practice needs some caveats. First, by ‘practice’ I am referring chiefly to the law as applied by courts hearing disputes, and not to other aspects of business that are inflected by law, such as how best to structure business 6

About the Subject-Matter of this Book

1.1.4

organisations or relationships. Second, notwithstanding that it is now much easier than even a few years ago to learn about the practice of Saudi courts, even today the researcher faces many difficulties in observing it; the major change is the availability of thousands of court decisions. Third, in any legal system, published decisions hardly do a perfect job of reflecting the law as practised. From any anthropological or sociological perspective, the written judicial opinion is worlds away from the law as lived. Fourth and last, the Saudi decisions have weaknesses for legal research compared to decisions in other systems. Saudi court decisions are not, as yet, sources of law, as they are in common law countries and increasingly in civil law countries. Those now being published were not written for the purpose of serving thereafter as a precedent, but rather for the purpose of justifying the result before the parties and the appellate court. Their summaries of legal reasoning are often short and highly general, and they often omit important facts; they also redact the parties’ names, which can cause ambiguities and erase important detail. And the decisions that have been published are not all decisions, but a subset of them, selected by teams of researchers. But it seems no heavy hand was used in the selection, perhaps because until now no strong claims have been made for the value of the decisions as precedent or principle for later cases. The major criteria may have been whether or not a case is clearly argued, not excessively long, and decides a significant point of law; that such was the approach was indicated to me by more than one of the officials involved in the process. As the case studies show, some of the published decisions reveal judges holding conflicting opinions, making mistakes, or failing to follow the more ‘modern’ view. One hears talk in Saudi Arabia that a codification of the substantive Islamic law as applied by the courts may be issued at any moment. A commission of scholars and judges, created by King Abdullah in 2014, has apparently finished a draft code. But publicly it remains unclear whether that draft, if it is ever issued, will be submitted for adoption to the legislative bodies of the state or merely issued by the judiciary itself – and even whether it will bind judges or merely guide them. When I published my book on the Saudi legal system in 2000, the issue of codification was already 70 years old, and now nearly another 20 years have passed with it remaining open. As will be discussed in Chapters 2 and 3, proposals to codify the Islamic law doctrines applied by the courts have been put forward by kings at least four times during this span of years – by Kings Abdulaziz, Faisal, Fahd, and Abdullah. Each time something – presumably the opposition of leading scholars – has prevented a codification from emerging. The climate now is different, and the nature of the codification now proposed is less ambitious, so some sort of codification is possible. So far King Salman bin Abdulaziz has not announced his intentions in this respect. As will be observed throughout this book, he has carried forward many other initiatives to develop the legal system begun by his predecessors, including publication of court judgments, reorganisation of the courts, and issuance of many new statutes in commercial matters. To these his government has added other major initiatives, although ones that largely fall outside the subject-matter of this book – such as enhancing the judicial system’s efficiency, transparency, and use of modern technology, steps in line with Vision 2030, the government’s general plan for governmental transformation.1 What if a codification is issued just as this book goes to print? If that were to happen, I do not expect this book to become one of legal history. Given the strong opposition to

1 See

eg ‘Walīd al-Sam`ānī: Muhandis tahawwul al-qaḍā’’, al-Balad, 4/8/1439 (21 April 2018).

7

1.2

Introduction

codification until now, the likelihood is that any codification that does emerge will not be radical enough to supplant the courts’ ongoing development of Islamic law doctrines that is described in this book. More likely the codification – it will probably be called a ‘compilation’ – will attempt to guide that process, seeking results more congenial with modern expectations and to unify the courts’ positions on points of controversy. If the compilation is not binding but only advisory (in the manner of authoritative scholarly opinions or the preferred opinions of appellate courts),2 it will not interrupt but only guide the process. And any compilation, even if binding, would most probably allow judges to dissent from it for reasons given, which dissent the appellate body will then review as a potential amendment or addition, perhaps via judicial precedent, to the compilation itself. I discuss this potential development in more detail in the next chapter, section 2.1.4.1-b.

1.2. Sources for this Study 1.2.1. Publications by the Court Systems 1.2.1.1. Published Court Decisions Besides the works of Islamic legal doctrine, the most important sources for this study – certainly as to matters of practice – have been Saudi court decisions. Until recently very few court decisions were available. The current initiative to publish thousands of decisions of the two major court systems is considered for its own significance in Chapters 2 and 3. As will be explained in Chapter 2, the two major court systems are the general or Sharia courts and the Board of Grievances. For many years, the only published decisions were volumes of decisions of the Board of Grievances, six on administrative cases and three on criminal cases, for years 1977–1981 (1397–1401), published in the years 1984–1988. Thereafter a few volumes of summaries of decisions by tribunals adjudicating under one or another specialised statutorily designated jurisdiction also came out. I have obtained two of the latter, both modest-size single volumes, one for the Commercial Papers Committee of the Ministry of Commerce3 and one for the Committee for the Settlement of Banking Disputes under the Saudi Arabian Monetary Authority.4 In 2006, three volumes of decisions of the general courts, containing 129 decisions, were published by the Ministry of Justice. Then, a few years later, a program of publishing cases began in earnest. Beginning slowly in 2012 with 300 decisions, and accelerating in 2015, by the end of 2018 10,196 judgments, in 188 volumes, had been published in full text by the administrative bodies of the two major court systems, the Ministry of Justice and the Board of Grievances. Teams

2 Scholarly opinions or fawas are described in section 1.2.4 below. The effect of prior decisions of appellate courts in stabilising the practice of lower courts is discussed in Chapter 3, section 3.2.6.3. 3 Ministry of Commerce, Majmū`at al-mabādi’ al-niẓāmiyya fī mawādd al-awrāq al-tijāriyya: 1403–1405 (Riyadh: Ministry of Commerce, 1405 (1984)). 4 Saudi Arabian Monetary Authority, al-Munāza`āt al-maṣrafiyya: Ijrā’āt al-taqādī amāma lajnat taswiyya al-munāza`āt al-maṣrafiyya wa-al-mabādi’ allatī qarrarathā (Riyadh: Saudi Arabian Monetary Authority, 2006).

8

Sources for this Study

1.2.1.2

of editors within those two bodies select the decisions appropriate for publication, adding to each a summary and sometimes a list of authorities cited and keynotes. Publication is done simultaneously in two mediums, publication as bound volumes and posting on the website of the relevant judicial body.5 As of the end of 2018, these publications cover a range of years – for the Board of Grievances, thirty-five years, from 1402 AH (1981 CE) to 1436 (2015): these include commercial cases for twenty-nine years (1408–1436 (1987–2015)), administrative cases for thirty-five years (1402–1436 (1981–2015)), and criminal cases for eight years (1428–1436 (2007–2014)), and for the general courts for two years (1434–1435 (November 2012–October 2014)). Of the total number of decisions, 2,373 are decisions of the general courts, and 7,823 are decisions of the Board of Grievances in its criminal (810), administrative (4,323) and commercial (2,690) benches. It appears that decisions for further years can be expected to be issued periodically. In fact, the Ministry of Justice is now publishing all decisions of the recently reorganised commercial court on the internet as they are affirmed on appeal or become final.6 As we shall see in Chapter 2, section 2.2.4, a number of specialised tribunals created to apply particular statutes have recently begun publishing their decisions, including historical ones, on the internet. For the purposes of this study, all the cases for all the above years for both the Board of Grievances and the general courts have been reviewed for relevance and then the relevant ones analysed, with the exception of cases from 1436 (2014–2015) for the Board of Grievances (some scattered ones we did use), which became available in early 2018; the Board’s criminal cases from 1435 and 1436; and the 19 volumes of administrative decisions from years 1981–2005 (1402–1426) which became available only in December 2018. The total number of decisions reviewed comes to 8,564. We consulted, much less thoroughly, published decisions of a number of specialised statutory jurisdictions, including those for labour, banking, finance, and capital markets disputes. To satisfy any curiosity about how published decisions read, I have included as an appendix the translation of two decisions that are each cited several times in the book.

1.2.1.2. Other Publications by the Two Main Court Systems Over the years, the highest levels of appeal in the two major court systems have sought to enhance predictability and stability in judicial decision-making through the exercise of statutory authority to declare judicial ‘general rules’ (mabādi’). This practice is discussed in Chapter 3, sections 3.2.6.1 and 3.2.7.1. In the general court system, three bodies – the Supreme Court, the Supreme Judicial Council, and the Ministry of Justice – have taken such measures. The Supreme Judicial Council has for many years issued decisions meant to bind judges, mostly on criminal and procedural matters. These emerge singly, circulated to judges. Informal compilations of them exist and circulate. With the creation of the Supreme Court in 2007, the power to issue 5 Ministry of Justice: www.moj.gov.sa/ar/Ministry/Departments/ResearchCenter/Pages/press.aspx, accessed 1 August 2019; Board of Grievances: www.bog.gov.sa/ScientificContent/JudicialBlogs/Pages/default.aspx, accessed 1 August 2019. 6 See www.moj.gov.sa/ar/Ministry/Departments/ResearchCenter/Pages/Documents.aspx, accessed 1 August 2019. These are not included in the preceding calculation of the numbers of cases published.

9

1.2.2

Introduction

these decisions has shifted to the general assembly of the Supreme Court. Some of these decisions have significant effects on practice. A recent major publication by the Supreme Court, issued in January 2018, restates as short maxim-like ‘judicial general rules’ many past decisions and resolutions of the Supreme Judicial Council.7 This publication, further explained in Chapter 3, section 3.2.7.1, is frequently relied on in this book. The function of inspection (taftīsh) of judges, as mandated by laws organising the general court judiciary, has yielded another publication, issued by the Ministry of Justice, also intended to guide judges.8 It is a list of various errors by judges observed by the inspectors along with short comments by the inspectors correcting those errors. This also has proved a useful indicator of judicial practice. The Board of Grievances in 2014 published resolutions adopted over the years by its appellate court which, in exercise of an authority granted by statute, declare general legal rules meant to bind trial circuits.9 These previously had been collected more or less ad hoc by individual judges or circuits. Another earlier publication, which was given to me by a Board judge and seems not to have been made public, summarises and comments on rulings of the criminal branch of the Board.10

1.2.2. Unpublished Court Decisions Over the years I have obtained hundreds of unpublished decisions of the various courts. Most of these were an early gift from the Board of Grievances itself in the early 2000s, from its then President, Mansur al-Malik. A few others came into my possession as gifts from Saudi lawyers and judges during the course of my research. Many of these are cited in the book. A very significant source for useful decisions has been decisions included by way of citation, summary, or in full text in graduate dissertations submitted to Saudi universities. My research team garnered about 300 useful court decisions in this way. The students preparing these dissertations obtained unpublished decisions in the same way as anyone else, by soliciting them from sitting judges and from lawyers; sometimes they find them in other dissertations. These decisions tend to be useful ones, meaningful enough to be included in a dissertation. Especially useful for our purposes were those from the dissertations of graduate students who by reason of employment in the courts, especially the Board of Grievances, had better access to unpublished decisions. Just two examples of this type are the dissertations of Dr Walid al-Sam`ani, former judge within the Board of Grievances and now the Minister of Justice and acting President of the Supreme Council of the Judiciary;11 and

7 Ministry

of Justice-Principles of Highest Courts-2016. Court-Inspectors’ Observations-2014. 9 Board of Grievances, Qarārāt hay’at al-tadqīq mujtami`a (Riyadh: Maktab al-Shu’ūn al-Fanniyya, 1435 (2014)). 10 Board of Grievances, Majmū`āt al-mabādi’ al-niẓāmiyya allatī qarrarathā hay’at al-tadqīq bi-dīwān al-maẓālim fī aḥkām al-jazā’iyya wa-al-ta’dībiyya `an al-fatra min 6/1/1410 H wa-ḥattā 30/12/1420 H al-ṣādira `an hay’at al-riqāba wa-al-tadqīq (Riyadh: 1422 (2001)). 11 Walīd al-Ṣam`ānī, al-Sulṭa al-taqdīriyya li-al-qāḍī al-idārī: dirāsa ta’ṣīliyya taṭbīqiyya, 2 vols (Riyadh: Dār al-Mayman, 1436 (2014)). 8 Supreme

10

Sources for this Study

1.2.4

Dr Ahmad al-`Ubudi, a former judge of the Board of Grievances, until recently head of the Board’s technical committee preparing court decisions for publication, and now an adviser to the Minister of Justice.12 Also useful has been a well-known summary of decisions of the commercial branch of the Board of Grievances, never published but circulated informally, by Ibrahim al-`Ajlan.13

1.2.3. Interviews During the course of research on this book, at a point where it looked as if I would not obtain sufficient court decisions on which to base my study, I spent months in Saudi Arabia conducting extensive interviews with sitting judges, of both the Board of Grievances and the general courts, asking questions about points of law and practice to be covered in this book. I put hypothetical cases to the judges, to help focus on the exact questions of law that were of interest. While time-consuming, these interviews were useful, but mostly in providing illuminating background, rather than hard data. Despite the generosity and broad knowledge of these interlocutors, the drawbacks of individual scattered interviews with judges as a source of legal data persisted; they can easily be guessed by the reader. In the relatively few instances in this book where I cite these interviews, I do not name my interviewees, since to have conducted the interviews with sitting judges on the basis that I would eventually quote them would have embroiled the study in bureaucratic complications at a minimum. The interviews proved of more lasting value for information about sources on which judges rely in reaching their decisions, and about the internal processes of the judiciary itself, points mostly discussed in Chapters 2 and 3.

1.2.4. Fatwas Fatwas – the legal opinions of scholar-jurists known for their learning and acumen – are an important source of law for Saudi judges, even though, by definition, no fatwa is binding. For this study we gathered, categorised, and analysed a great many fatwas. Among them were about 200 fatwas from the following official fatwa bodies considered authoritative by Saudi judges: •

• •

Board of Senior Scholars (Hay’at Kibār al-`Ulamā’), a council of scholars appointed by the King and organised and supported by the Presidency for Studies of the Religious Sciences and Ifta; the Standing Committee (al-Lajna al-Dā’ima) of the Board, which answers requests for fatwas from the general public, and also conducts studies as requested by the Board; Saudi scholars highly regarded for their learning, such as Muhammad bin Ibrahim, `Abd al-Aziz Bin Baz, and Muhammad al-`Uthaymin;

12 Aḥmad al-`Ubūdī, ‘Ṭuruq al-ithbāt fī al-qaḍā’ al-tijārī wa-taṭbīqātuhā fī al-Mamlaka al-`Arabiyya al-Sa`ūdiyya’ (Doctorate, High Judicial Institute, Imam Muhammad University, 1433 (2011)). 13 Ibrāhīm al-`Ajlān, Majmū`at al-mabādi’ allatī qararathā hay’at al-tadqīq al-tijārī fī Dīwān al-Maẓālim min `ām 1407–1423 H (unpublished, nd).

11

1.2.5 •

Introduction

two Islamic law fatwa academies (singular majma`), international bodies that convene member-scholars to issue fatwas, one organised under the Organization of Islamic Cooperation and the other under the Muslim World League. For the first of these bodies we also considered studies commissioned by it by way of preparation of its fatwas.

1.2.5. Graduate Dissertations We gathered as many relevant dissertations presented by masters and doctoral students at the Imam Muhammad bin Saud Islamic University, in both its Sharia Faculty and its High Institute of the Judiciary, and from a few other universities in the Kingdom, as the current system allowed us to gather – over 200. The dissertations offered at the Institute in its ‘public policy’ (siyāsa shar`iyya) section were particularly useful, since for their degrees students were required to address to the extent possible the actual practice of the law. These theses offer valuable research, but also useful insights tested against the views of their professors of Islamic law and adjudication. In my interviews, judges often mentioned to me that a thesis had been done on a particular topic, and suggested that I consult it. Many of these dissertations have been published, and appear in the bibliography as published books.

1.2.6. Various Other Published Sources Many publications were gathered and reviewed for useful material, including all relevant articles from a number of Saudi legal and academic periodicals, as well as a number of books. These play a smaller role in legal practice than they do in other legal systems and proved mostly useful in understanding the doctrine.

1.2.7. My Own Prior Research and Experience Forming the essential background to the above body of discrete evidence of Saudi practice, and indispensable for me to appreciate its meaning and significance, is my own study and experience of the Saudi legal system over nearly 40 years, including: a five-year period of research for my doctoral dissertation (1982–1987), later published as a book on the Saudi legal system; practice in a Saudi law firm from 1985–1987; many visits throughout later years, often for research on articles published about Saudi law; and many months of residence in preparation of this study scattered over the five-year period from 2012–2016. (My published writings on Saudi Arabia appear in the bibliography.) Also useful has been my experience serving as consultant and expert witness on Saudi law in over 30 separate matters, most of them litigations in the United States or the United Kingdom. This is in addition to 40 years of intensive study of Islamic law itself, in both its theory and its specific doctrines, including research and writing on two particularly relevant matters: first, the Islamic legal system, with focus on the roles of scholars and judges, both historically and in modern Muslim countries, especially Saudi Arabia; and second, as a substantive area within Islamic law, the Islamic law of contract, tort, and property, much of it for the purpose of research and writing on the law of Islamic finance and of contemporary Muslim countries. 12

How this Study Came About

1.3

1.3. How this Study Came About In 2008, on the occasion of a visit to the Arabian Gulf for a conference, I discussed with several Saudi friends the idea of a study of Saudi business law in practice, this growing out of my past work on both the legal system of Saudi Arabia and the Islamic law of transactions as applied in Islamic finance. They encouraged me to propose this study to the then Minister of Justice, Dr Abdullah Al al-Shaykh, and in June 2008 I did. The Minister, somewhat to my surprise, passed my proposal on to the Royal Diwan. After review by a committee of several ministers, King Abdullah agreed to it, and issued a royal order on 25 October 2009 directing the King Abdullah Institute of Research and Consulting Studies, an arm of the King Saud University, to contact me to arrange for the study. After several years of correspondence and discussions first with the Institute, and then with the Ministry of Higher Education and the Ministry of Finance, the project was inaugurated on 1 July 2012 for a term of four years. A Scientific Committee was created to assist me with my research needs and give advice, composed of three law professors and two judges. My efforts during the first year and more of the project were mostly spent securing official support from the main judicial bodies, gathering secondary materials, making many contacts with judges, lawyers, and officials, and forming a team of student researchers to help me collate and analyse all materials. My efforts to obtain the primary form of data on which my proposal had been premised – a sufficient number of court decisions – through the two major court systems were still mostly unproductive even as the second year came to a close. Therefore, I devoted most of 2014, spanning the second and third years of the project, to trying other avenues to learn about judicial practice, mostly by interviewing many judges and lawyers and obtaining unpublished decisions from them. As the third year of the project progressed, officials of the judicial system began to answer my requests for court decisions with assurances that large numbers of cases would soon be published. This did in fact come about, but in numbers only as the fourth year of the project was beginning. In view of these delays, unanticipated at the start of the project, I requested and obtained from the Rector of the King Saud University, Dr Badran al-Omar, an extension of my project through 2018. The next two years, through June 2018, were spent completing the research – most of the time being spent on reviewing and analysing the published cases, including thousands more that issued during that same period – and preparing this book. Throughout the project all involved, including the King Saud University, the King Abdullah Institute, and the Scientific Committee, have treated this project with respect as a purely independent academic study. I provided detailed outlines and partial drafts of the book to the Scientific Committee in 2014 and 2016, to assure the Institute that progress was being made, but no committee member requested changes or even offered any comments. At the end of the project, after the book had been submitted to the press, the Dean of KAI felt that a reconstituted Scientific Committee (the original Committee had disbanded in 2016), consisting as before of three law professors and two judges, should review the book to assure that it contained no statements that were both false and damaging to Saudi Arabia. The Committee did so, but without infringing the independence of the project: it merely asked me to provide proof, or additional proof, for six potentially negative specific factual statements, without requesting any change to my conclusions. It also offered several useful comments. After I provided proof for several of the statements in question, clarified others, and omitted one where proof was lacking, the Committee approved my draft. 13

1.4

Introduction

While in an ideal world it would have been nice to translate the book into Arabic and seek comment from senior Saudi judges and scholars, to have taken such a course would involve work akin to writing a second book, such that I could never consider it. Less ambitiously, I considered trying one more round of interviews, to inform a number of high-ranking judges about the conclusions I was coming to from my case studies – but, assuming even that were feasible, time did not allow for it. This was the price paid for the fact that cases came out in great volume only late in the project. But on that point, I find some comfort in having taken the opportunity in 2014 to make the rounds of judges and ask questions on many of the issues on which my case studies have focused. But still, this means that this study should be understood as ultimately resting – for matters of detail – on its cited documentary evidence, more than on oral interactions. Finally, I cannot hope that this study will have captured Saudi law or practice accurately in every matter I cover, especially at the level of detail. But I still hope that my study will be considered down to the level of its details, particularly in the case studies. This is because, while those details may not always be exact, it is only their combined effect, and not the summaries I provide about Saudi doctrine or legal system, that can meet the overarching goal of the study, to convey a better understanding of Saudi business law as practised.

1.4. Some Technical Matters 1.4.1. Terminology Some of the terminology I use in the book needs explanation.

1.4.1.1. Traditional Law In practice one needs a term by which to distinguish Islamic jurists’ works prior to the transformations in Middle Eastern legal systems that began in 1839 with the Ottoman legal reforms known as Tanzimat. Before that period scholars of Islamic law worked in scholarly institutions and courts, composed books in genres, wrote in styles, and engaged methods to evolve the law that, however changed through the centuries, remained in continuity with a millennium of legal development. But as the era after Tanzimat saw codifications across all fields of law except ritual, even that of the family, and modernised state structures everywhere, those aspects of the jurists’ life and work also changed, and along with it the nature of juristic production. Writers in English often distinguish between ‘classical’ Islamic law and ‘modern’ Islamic law. I prefer to use the word ‘traditional’ instead of ‘classical’, since those seeking to understand contemporary practice can never neglect the last, the most recent, of the ‘traditional’ works, which no one would describe as ‘classical’. For purposes of Saudi Arabia, the last major exemplar of the traditional law is the Egyptian scholar Mansur al-Buhuti (or al-Bahuti) who died in 1641. After him, many scholars down to today have written works in more or less the traditional genre that have importantly guided the practice, such as works by Ibrahim al-Duyan (d 1935), Abd al-Rahman al-Sa`di (d 1956), or Muhammad al-`Uthaymin (d 2001). But it remains the case that these more recent works, being no longer produced within the same system of institutions and 14

Some Technical Matters 1.4.2.1 functions, do not possess the authority or engage with law as practised as did the works of the pre-Tanzimat period. Admittedly this shift is less drastic in Saudi Arabia than in other Arab countries, which entirely transformed their legal systems on a western model. But, as is explained in Chapter 2, section 2.1, though never supplanted by one framed on western models, the Saudi constitutional and legal system has undergone many fundamental changes under the influence of foreign legal systems, especially that of Egypt. The traditional Islamic jurisprudence with which we shall be concerned is only that of the Sunni branch of Islam, as opposed to that of other branches of Islam, such as the Shi`i (including the Ithna-`Asharis and the Isma`ilis – both represented by minorities in Saudi Arabia – and the Zaydis of Yemen), and the Ibadis, the majority sect in Oman. For business law as applied in the Saudi courts, only Sunni jurisprudence is relevant.

1.4.1.2. General Courts The original system of courts of general jurisdiction in the Kingdom are the courts that apply Sharia law, which remains in uncodified form the general law of the Kingdom, along with relevant statutes. Until very recently, the statutes that these courts have been expected to apply concerned only procedural and criminal law. These courts are a continuation of the courts that have existed in all Muslim legal systems since the earliest eras. It is common to refer to them in English as ‘Sharia courts’. But to use that term would be to imply that other courts and tribunals in Saudi Arabia apply something other than Sharia, when in fact all of them apply Sharia as well as statutes. I shall use instead the term ‘general courts’ (al-maḥākim al-`āmma), which is how they are now referred to in Saudi Arabia.

1.4.1.3. Male Pronouns In the Saudi context, for reasons of continued gender separation, women do not serve as judges. Until recently, no women were licensed as lawyers, and while there have been female religious and legal scholars, I have not happened on any reference to them in discussions of law by Saudi judges or scholars. Women of course appear often as parties in disputes, very commonly in family law matters; but in administrative and commercial cases they appear less frequently than do men. For all these reasons, I have reverted to the practice, now obsolete in English, of using male pronouns as referring to both genders when discussing Saudi and Islamic law in general.

1.4.2. Other Technical Matters 1.4.2.1. Hijri Dates Saudi Arabia uses the Islamic lunar Hijri (AH) calendar for almost all purposes. Many sources and events cited in this book are datable only by Hijri year. For others the full date may be known or recoverable, but to convert these to accurate common era (CE) dates would be a lengthy task. So for sources or events where the exact date is less important, I have opted to show Hijri dates using the year only. To convert AH year to CE year confronts the problem that AH and CE years span each other. So, unless the source also provides the 15

1.4.2.2

Introduction

CE year, I almost always enter only the CE year in which the AH year begins: for example, 1431 (2009). The alternative would be 1431 (2009–2010). When I do carry out conversions of full Hijri dates (day/month/year), the result I obtain from conversion programs may be in error by plus or minus one day, or even two. This is because of the variations in Hijri dating across various jurisdictions. I generally do not use the designations ‘AH’ or ‘CE’ following dates, since the two systems are easily distinguished. For works in Arabic, I include the author’s CE death year at first mention in each chapter, this on the ground that the reader may benefit from knowing to which era of Islamic legal scholarship the author belongs. I do not do so for authors who are more or less contemporary. Often the Hijri month of death is not known, leading to uncertainty as to the Gregorian year (eg, 1196–1197); in these cases again I enter only the earlier year.

1.4.2.2. Citations to Hadiths The Sunna, meaning the life example of the Prophet Muhammad, the second of the four canonical sources of Islamic law, is constituted from reports called hadith (ḥadīth). In the earliest centuries of the Islamic era, particularly in the third Hijri century (ninth century CE), specialised collections of authenticated hadiths emerged, considered authoritative by later generations. Hadiths are normally cited to these collections. Six of these collections are the most relied upon, generally referred to by the name of their author: Bukhari, Muslim, Abu Dawud, Tirmidhi, Nasa’i, Ibn Maja. I shall cite hadiths simply by reference to these names, omitting exact citations to any particular edition. I also occasionally cite to other famous collections, similarly identified by their authors: Ibn Hanbal, Hakim, Bayhaqi, etc. I should note that evaluating the authenticity of hadiths is a major preoccupation of Saudi Islamic law scholars, and a science in which they are highly trained. For example, they often mention the greater authenticity of one hadith compared to another as an argument in deciding a legal question. My analysis in this book neglects this aspect of Saudi legal reasoning, operating instead at the level of declared scholarly opinions and actual judicial decisions and the reasoning or logic that links them jurisprudentially. In Chapters 2 and 3 I do describe the authoritative sources and hermeneutical methods on which scholars rely in deriving Islamic legal opinions.

1.4.2.3. Transliteration It is always an open issue whether to introduce some method by which to represent Arabic spelling, ie transliteration. After all, those who know Arabic do not need it, and those who do not know Arabic do not need it. But, on balance, as an aid to those of middling knowledge of Arabic or those trying to make links to other references, and just for a certain precision, I decided to use it. I do not use it, however, for proper names in the text, or for certain words used throughout the book. The latter include: nizam (niẓām, statute issued by the Saudi king after review by the Council of Ministers and Consultative Council); hadith; ijtihad (ijtihād, meaning the process by which a qualified scholar or judge reaches an opinion about the Sharia ruling for a particular act or dispute), fiqh (Islamic jurisprudence, the accumulated opinions of scholars reached through ijtihad), and Hanafi, Maliki, Shafi`i and Hanbali (the four Sunni schools of fiqh, Ḥanafī, Mālikī, Shāfi`ī, and Ḥanbalī). Words that have entered

16

Some Technical Matters 1.4.2.7 the English language, like Sharia, Quran, Sunna, qadi, fatwa, mufti, shaikh, Saudi, Wahhabi, and Salafi, are used without transliteration. My method of transliteration is detailed in an appendix. It is a simplified version of the Library of Congress system, and almost identical to that of the International Journal of Middle East Studies.

1.4.2.4. Omission of the Definite Article ‘al-’ I will usually omit the prefix al-, the definite article in Arabic, from surnames in the text (eg Buhuti, not al-Buhuti). For purposes of alphabetical order in the bibliography and index, ‘al-’ is either ignored or moved to the end of an entry (eg Buhūtī, Manṣūr al-).

1.4.2.5. Specification of Various Executive Decrees, Orders, Resolutions, Decisions, Etc Saudi administrative protocols may distinguish between actions of various types and levels within the Saudi executive branch, from the King to the Council of Ministers down to the Ministers and others of ministerial rank. In this book I observe a difference only between royal decree (marsūm), the level at which statutes are issued, and all others. For those others I tend to use ‘order’, ‘decision’, ‘resolution’, or ‘regulation’.

1.4.2.6. Abbreviations A number of abbreviations have been adopted for sources frequently cited in the footnotes. The use of an abbreviation for a source is usually signalled by use of hyphens connecting author, title, and/or date (such as Ministry of Justice-Principles of Highest Courts-2016 or Nizam of the Judiciary-2007). A list of these appears among the end matters, just before the Bibliography.

1.4.2.7. Headers and Cross-References Sections of the book are organised hierarchically in up to six levels. Up to five levels are represented in the numbering of sections which is used for cross-references within the book. The first number represents the chapter. Thus, for the discussion in Chapter 4 of contract interpretation, section 4.1.1.2-d.

17

2 Saudi Legal System: Constitution, Laws, and Courts 2.1. The Saudi Legal System ......................................................................................................18 2.1.1. Uniqueness of the Saudi Arabian Legal System ................................................18 2.1.2. The Nature of Scholarly Law: Its Sources, Methods, and Authority ...............20 2.1.3. Traditional Constitutional Law Under Sharia and Fiqh ..................................25 2.1.4. The Saudi Arabian Constitution..........................................................................28 2.2. Court System of Saudi Arabia............................................................................................36 2.2.1. General Remarks ...................................................................................................36 2.2.2. The General Courts ...............................................................................................36 2.2.3. Board of Grievances ..............................................................................................38 2.2.4. The Specialised Tribunals .....................................................................................46 2.2.5. The 2007 Court Reorganisation ..........................................................................52

This chapter falls into two major parts. In section 2.1, I introduce the structure of the Saudi legal system, with emphasis on the Islamic legal doctrines that shaped Sunni Muslim states and legal systems of the past and that in contemporary Saudi Arabia are the avowed justification for its constitutional and legal system. In Saudi Arabia these theories serve in place of a constitution and give shape to what in other states are referred to as the three branches of government: the executive, legislative, and judicial. In the second major part, section 2.2, I provide an overview of the various court systems of the Kingdom, explaining their organisation, character, and jurisdictions.

2.1. The Saudi Legal System 2.1.1. Uniqueness of the Saudi Arabian Legal System In the legal system of Saudi Arabia one encounters a structure that, as the formal legal system of a sovereign state, is rare – or simply unique – in today’s world, though not historically. It is a system where law is made not by rulers, legislatures, or court decisions, but by legal scholars who, as private persons and not as officials of the state, exercise an authority based on their knowledge of an authoritative body of legal materials and their skill in interpreting those materials. It is, in other words, jurists’ law rather than law from statute or judicial precedent. Besides Islamic law systems of the past, other examples historically are

18

The Saudi Legal System 2.1.1 Roman law and, when it enjoyed autonomy, Jewish law. And it is a vital point, and our main concern in this chapter, that jurists in Islamic states have claimed not only to determine the substantive law – laws governing the family, property, commerce, contract, criminal law, for example – but also to lay down the very constitution of these states. Of course, in Islamic legal systems, scholars do not acknowledge that they are constitution-givers or law-makers; rather, God himself has laid down his perfect law in the Quran and through the example of the Prophet Muhammad, known as the Sunna. This divine law, called Sharia, governs every aspect of human life, including law and constitution. The role of scholars is only to distil out from these sources the specific rulings that govern individual acts. Saudi Arabia is unique among Muslim states in the extent to which it has maintained this millennium-and-one-half old conception of both law and legal system. In particular, scholarly law has kept most of its historical importance in Saudi Arabia. Other contemporary Muslim-majority states have constitutions which may acknowledge a role for Islamic law as law but are otherwise free-standing; and in these states it is the constitution, the legislature, and the courts that determine the law, including whether Islamic law applies.1 One of the lessons of this book is how thoroughly and persistently the Saudi legal system adheres to the scholarly law – and not just as a symbol, but even as to the details of doctrine, and even in applications far from the sphere most would consider religious, such as constitutional law or business law. Saudi scholars and courts continue to evolve that law on its own terms, expecting thereby to preserve its dominant position as the constitution and common law of the Kingdom while also meeting all contemporary legal challenges. To explain how a law whose origin is religious faith is translated into practical law, I need to summarise some of the findings of my earlier book, which took Saudi Arabia as a case for the study of the Islamic legal doctrines, institutions, and practices that bring fiqh into application.2 For present purposes that book makes two major points, these in reference to Islamic legal systems historically as well as Saudi Arabia. The first point concerns the nature of the scholarly law, showing its particular idealism and how that idealism renders it best suited to the function of generating rulings to govern individual acts. This point is covered in the next section, section 2.1.2, describing both the traditional doctrine and its application in Saudi Arabia. The second major point of my earlier book is that this same idealistic and individualistic nature of the scholarly law dictates its innate incompleteness when it is asked to serve as the law for states, and that as a result scholars have always

1 The United Arab Emirates offers a useful example of a state among the few that approximate Saudi Arabia in upholding Sharia and applying uncodified fiqh. In such states, the Sharia is neither law nor constitution as in Saudi Arabia; state law is sovereign. But in their constitutions or other laws, these states require a degree of conformity with Sharia as a condition for the validity of legislation, and statutes may incorporate fiqh principles and rulings by reference. Thus, the UAE Constitution, Art 6, provides only that ‘the principles (mabādi’) of the Islamic Sharia are a principal source of legislation’, but the Federal Supreme Court Law, Federal Law No 10 (1973), Art 75, states that the Supreme Court upholds ‘provisions of Sharia and [federal and emirates statutes] conforming to the Islamic Sharia’. See also Federal Law No 6 (1978), Art 8. The UAE Civil Transactions Code, Federal Law No 5 (1985), Art 1, provides that, if the judge cannot find an applicable provision in the Code, he should decide according to ‘the most appropriate solution from the [Maliki or Hanbali] schools. If there is none, then from the [Shafi`i or Hanafi] schools as welfare demands.’ Art 2 requires interpreting statutes in the light of the ‘principles’ and ‘sources’ of Sharia. 2 Frank E Vogel, Islamic Law and Legal System: Studies of Saudi Arabia (Leiden: Brill, 2000).

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2.1.2

Saudi Legal System: Constitution, Laws, and Courts

acknowledged that states also perform an essential, even independent, role in upholding Islamic law – though they enjoin that states perform this role according to doctrines that the scholars themselves have laid down. Thus, the second section below, section 2.1.3, describes the scholarly doctrines that historically define the legitimate authorities, powers, and functions of the state. Finally, drawing on the material introduced in these first two sections, I describe in section 2.1.4 the present constitutional structure of Saudi Arabia.

2.1.2. The Nature of Scholarly Law: Its Sources, Methods, and Authority In this section I explain some unique characteristics of the law of the scholars, both historically and as practised today in Saudi Arabia. This introduction is essential for understanding the law as applied today in Saudi Arabia, even in the field of business. As just noted, in Muslim belief, God is the law-maker, his law having been perfectly revealed in the scripture of the Quran as expounded and exemplified by the Sunna of the Prophet Muhammad. The role of scholars is only to acquire knowledge of the Quran and Sunna, and by a process known as ijtihad, meaning the exertion of effort, discover the law that God intends should apply to every aspect of human life. The Sunna was at first understood as the lived example of the Prophet and of the first generations following him, but with time it gradually became constituted in a body of written reports about him and early generations called ‘hadith’. Scholars have agreed that the ‘roots’ or sources on which ijtihad is based are four: the text of the Quran, the written record of the Sunna, analogy (qiyās) upon those, and consensus (ijmā`) meaning adherence to what scholars of the past have agreed upon. There are also various supplementary interpretive techniques on which scholars are not agreed. Ijtihad and the ‘roots’ of the law are described further in section 3.2. While the opinion on God’s law reached by a qualified scholar through ijtihad is a valid basis for action, it is not considered to be certainly true, but at most probable. A scholar’s opinion is therefore called fiqh, meaning ‘understanding’. Fiqh is also the term applied to the entire corpus of legal learning and interpretation that has accumulated over the centuries and to which scholars continue to add today. In either meaning, fiqh must be distinguished from the Sharia. While Sharia means the immutable and perfect divine law, fiqh, representing human effort to know the divine will, is imperfect, admitting of change, error, and disagreement; it offers multiple holdings on nearly all issues. When we use the term ‘Islamic law’ we are referring ambiguously to both Sharia and fiqh. For Muslims who put full faith in their scholars, the distinction between the two is most of the time not relevant, since they believe that it is only through fiqh – the scholars’ efforts – that they may reliably learn of Sharia. But even for them the distinction resurfaces periodically, such as when they encounter stark contradictions between the views of two scholars, both of whom they respect. I shall use all three terms with these meanings throughout the book – ‘Sharia’ as the divinely revealed law, ‘fiqh’ as scholars’ ijtihad-derived opinions about Sharia rulings on particular acts, and ‘Islamic law’ as both at once. As will be described further in section 3.2.2.1, several centuries after the death of the Prophet, the legal opinions of scholars converged into schools of law (madhhab, plural madhāhib). The process continued, in the Sunni branch of Islam that is our concern in 20

The Saudi Legal System 2.1.2 this book, until only four schools survived – the Hanafi, the Maliki, the Shafi`i, and the Hanbali schools (the last-named being the one favoured in Saudi Arabia past and present).3 Increasingly as time progressed, it became rare for scholars to reach opinions independent of or outside any school. Instead they used their ingenuity to systematise what had already been done and find ways within their own school to innovate and modulate to meet the needs of changing political and social conditions. The schools usually fielded several views on any issue, attributed to earlier scholars in the school, but at any one time scholars of the school would designate a single view as dominant or preferred. Still, they did not abandon the other views entirely, so that they could turn back to them if circumstances made them useful; even new views could be contrived using reinterpretation, shifting the meanings of terms, asserting new grounds to make exceptions, or combining views.4 Thus, schools’ views developed over time, making it increasingly necessary for their practitioners to consult the schools’ most recent compilatory works and, beyond that, to follow the guiding opinion or fatwa of the predominant contemporary scholars of the school in their own locality. In section 3.2, on Saudi legal and judicial reasoning, we shall see that analogous processes have operated in modern Saudi Arabia, though carried on now in ways reaching beyond the confines of any single school and with the use of new legal conceptions, methods of interpretation, institutions, and institutional processes. For present purposes, what is vital to note is that this process of law-making, as so far described, relies wholly on texts, scholarly interpretations, and customs and institutions within the body of scholars, rather than on the instrumentalities of a state. In my earlier book, I emphasised a particular point about this scholarly law: how the above scholarly process of interpretation is intended, given its ultimate justifications and methods, to issue in rulings for acts, not just in opinions or even general rules. In other words, its process is intended to issue in a ruling on the religious-legal status of a particular, concrete act, whether this is the act of an individual (in the past or future), or a specific concrete dispute or controversy that needs to be adjudicated before a judge. Fiqh generates general rules and principles as well, but these are not considered final or binding until brought down to the concrete case. Most legal systems understand law as a set of general norms binding on all who are subject to its sovereignty, which individuals and civil entities ‘apply’ to their actions and which instrumentalities of law enforcement, including courts, ‘enforce’ in particular cases. But in Islamic law, in its pure theory, law inhabits the particular, the concrete. The miracle of the revelation is that it offers a moral-legal value for every human act for all time, and ijtihad (the interpretative method mentioned above) is the religiously sanctioned method for gleaning that guidance. Legal values (aḥkām) are not only the legal ones of lawful and unlawful or valid and invalid. They are more universal, encompassing five categories – prohibited, reprehensible but valid, indifferent or permitted,

3 For studies of the development of Islamic legal schools of law, see Christopher Melchert, The Formation of the Sunni Schools of Law, 9th–10th Centuries CE (Leiden: Brill, 1997); Peri Bearman, Rudolph Peters, and Frank E Vogel, The Islamic School of Law: Evolution, Devolution, and Progress (Cambridge, MA: Islamic Legal Studies Program, Harvard Law School, 2005). 4 See, as showing a radical late doctrinal change adapting to changed circumstances achieved within the Hanafi school by interpretive methods, Baber Johansen, The Islamic Law on Land Tax and Rent: The Peasants’ Loss of Property Rights as Interpreted in the Hanafite Legal Literature of the Mamluk and Ottoman Periods (London: Croom Helm, 1988).

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2.1.2

Saudi Legal System: Constitution, Laws, and Courts

recommended, and obligatory. Every specific act has one of these values, determinable through ijtihad. I described this particularising trait of Islamic legal theory as ‘microcosmic law-making’. Such a form of law-making as the ideal fortifies the position of scholars as founts of the divine law, making Sharia all the more a jurists’ law. Did Islamic legal systems have no ‘macrocosmic law-making’ – no setting down of general rules to guide this-worldly collective groups or institutions, including state legal systems? Of course, Islamic legal systems needed predictable general rules by which individuals, entities, and states could guide their behaviour in ways that would probably earn both religious approval and legal validity. In fact, the importance of such rules for the daily affairs of individuals and institutions overwhelmed the ideologically more pristine microcosmic model of law-making. But scholars made sure that this other form of lawmaking remained subordinated ideologically, institutionalised largely in ad hoc fashion. In the spheres governed closely by religious law – mostly those of private law – it was the informal ordering of rulings through the legal schools that performed most of the work of macrocosmic law-making, thus avoiding interference by the state. The fiqh that remains in the realm of opinion, not yet applied as a ruling in action, can be found in countless books by scholars over the ages. Fiqh also affords advice for action through the giving of fatwas. A fatwa is an opinion of a reputable scholar expounded so that, if credited as authoritative, it may be put into action.5 While the opinions in the fiqh books are essentially fatwas, the term is more properly used for the opinion of a contemporaneous scholar or scholarly body, often solicited by believers, on some specific real-world issue. The fatwas of the Standing Committee of the Saudi Board of Senior Scholars referred to in this book issue in response to requests from individuals. Fatwas never bind anyone; they are only advisory. Even judges are guided by them, and I shall often cite fatwas in the descriptions and case studies of Saudi law to follow. The ideal of ijtihad requires that its fully qualified practitioner – called a mujtahid – be free of any constraint other than God’s command itself in choosing the law applicable to the situation. He must form his conscientiously best opinion of what God’s judgment is on the situation, based on all indications in the revelation. Ijtihad can be practised only where God’s law is not already clear, that is, where an unambiguous text of the Quran, an authenticated, explicit hadith of the Prophet, or an explicit consensus of earlier scholars (meeting the requirements the particular scholar has for consensus to be binding) has not already decided the matter. Precisely because the arbiters of final truth – the texts of the revelation and past scholars’ consensus – have not resolved the matter, ijtihad is only probable, and a different mujtahid may well reach a different conclusion. Therefore, while one qualified scholar may declare the view of another qualified scholar to be wrong, such differences remain ultimately matters of opinion, since neither can produce incontrovertible proof of error. Given the difficulty of the task, God punishes neither for error. A hadith states: ‘If a judge (ḥākim) judges, and practices ijtihad, and attains the truth, he has two rewards. If he practices ijtihad and is in error, then he has one reward.’6 It is even said that ‘every mujtahid

5 Muhammad Khalid Masud, Brinkley Messick, and David S Powers (eds), Islamic Legal Interpretation: Muftis and Their Fatwas (Cambridge, MA: Harvard University Press, 1996); Jakob Skovgaard-Petersen, Defining Islam for the Egyptian State: Muftis and Fatwas of the Dār al-Iftā (Leiden: Brill, 1997) 59. 6 Bukhari, Muslim, Abu Dawud, Tirmidhi, Nisa’i, Ibn Maja.

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The Saudi Legal System 2.1.2 is correct’ (kull mujtahid muṣīb) – in the sense, at least, that a qualified scholar practicing a sound methodology is not religiously at fault if in error.7 This extends, for example, to a Muslim alone in a remote place who uses his best effort to determine the direction for prayer but chooses a wrong one – he need not repeat the prayer. Since, lacking unambiguous proofs, truth lies beyond the human capacity to know, what is enjoined on humans is their best effort. Even though ijtihad remains only ‘opinion’ (ẓann), that opinion gains the status of certainty, becomes unquestionable as the best humans can do under the circumstances, when it is acted upon – when either the individual believer chooses to act following a scholar’s fatwa, or when a judge issues a judgment enforcing a legitimate opinion; again, this occurs only microcosmically, for each unique act. As a saying has it, ‘the judgment of the judge renders certain (yaqṭa`) [literally cuts] the difference of opinion’.8 As long as a judge has not ruled, the evaluation of an action may vary across several possible ijtihads; but once the judge has acted, his ruling becomes for the litigants as much a religious obligation as if that ruling were known to a certainty by revelation. For ijtihad to have these effects the judge and the individual both must exert their best effort – in the case of the individual, to investigate which scholar or mujtahid ought religiously to be followed,9 and in the case of the judge, himself to be capable of ijtihad and then to do it diligently. Three of the four schools declare the appointment of a judge invalid if he is not qualified to conduct ijtihad, that is, is not a mujtahid. Given the high qualifications expected of the mujtahid, this was recognised as more idealistic than practical. But, in Saudi Arabia at least, the ideal has been maintained to the extent that every judge is required to exercise the methods of ijtihad to the best of his ability. He is not to ask a scholar or another judge what the best view is and then apply it unthinkingly; if he does consult another, he is supposed to know at a minimum something of the revealed basis for that ruling.10 A reported saying of the Prophet is ‘Judges are three: two are in hell and one is in heaven.’11 One version of the hadith explains that, of the two judges in hell, one is the judge who decides even though he is ignorant of God’s law.12 Also, ijtihad does not apply merely to determine the fiqh rule for a case, but also to operate soundly the means of proof to determine the facts correctly and then to give those facts their proper legal construction. All these points about the centrality of ijtihad are particularly emphasised in the so-called Salafi strain of religious and legal practice, a trend that seeks to follow the model of the earliest Muslim generations, ignoring later accretions. As an ideology and method within fiqh, Salafism reaches back at least to the jurist Ibn Taymiyya (d 1328) who has had immense

7 Taken in any more literal sense, however, it is not the majority view, which is that only one view is correct, the others in error. See Vogel (n 2) 39 and n 11. 8 The principle is mentioned in a recent collection of general rules decided by the Saudi Supreme Court. Ministry of Justice-Principles of Highest Courts-2016, No 1971. 9 See Mohammad Fadel, ‘“Istafti qalbaka wa in aftāka al-nāsu wa aftūka”: The Ethical Obligations of the Muqallid between Autonomy and Trust’ in Robert Gleave and A Kevin Reinhart (eds), Islamic Law in Theory (Leiden: Brill, 2014) 105–26. 10 Vogel (n 2) 62–81. 11 Abu Dawud, Tirmidhi, Ibn Maja. 12 ‘Judges are three: two in the Fire, and one in Paradise. A man who has knowledge, and judges by what he knows – he is in Paradise. A man who is ignorant, and judges according to his ignorance – he is in the Fire. A man who has knowledge, and judges by something other than his knowledge – he is in the Fire.’ `Umar al-Ṣadr al-Shahīd (d 1141), Sharḥ Adab al-qāḍī lil-Khaṣṣāf (Baghdad: Wizārat al-Awqāf, 1977) 1:163–64.

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2.1.2

Saudi Legal System: Constitution, Laws, and Courts

influence on the Wahhabi movement – the ideological movement that spurred the creation of the first Saudi empire starting from the eighteenth century – and on its characteristic strain of legal thought. Ibn Taymiyya held that even laypeople, let alone judges, are obliged to determine the teachings of the Quran and Sunna for their own acts, to the best of their ability. If they fail at this, they fail at conscientious obedience to God’s command. Another saying, ‘Ijtihad is not annulled by its like’ (al-ijtihād lā yunqaḍ bi-mithlih) affirms that once a decision reached through ijtihad according to a sound methodology has been acted on, neither an individual scholar nor a judge, nor any other person, may reverse it as incorrect. Thus, if two parties consult a mufti – a qualified legal scholar who pronounces fatwas – and then take action on his advice, their action cannot properly be questioned later, even by a judge who does not share the mufti’s opinion. In the traditional fiqh conception, no appellate process existed, for the reason that no one possessed authority to reverse a valid ijtihad.13 The only ground for reversing a judgment based on the honestly reached ijtihad of a qualified judge is if despite the judge’s honesty and learning a miscarriage of the process had occurred – an indisputable error in the ruling or the procedure. Such errors occur more frequently than that description would indicate; for example, a judge may misconstrue facts and thereby apply a sound ijtihad but in the wrong context; or he may make a practical error in exercising an otherwise sound form of proof.14 As discussed in section 3.2.6.2, a principled reluctance to reverse ijtihad can still be observed in Saudi Arabia, despite it now having a full system of appellate courts. This emphasis on ijtihad in Saudi legal ideology causes its judges to oppose anything that would constrain the conscience of the judge as he carries out the interpretative process to decide, however fallibly, God’s judgment for the concrete case before him. Clearly, obedience to a statute determined by the legislature for application in all cases of a certain type – ie ‘macrocosmic law-making’ – falls short of the microcosmic ideal of ijtihad. Judges accustomed to their freedom of ijtihad feel that statutes reduce them to a mere machine, estranged from the moral context of the real case. It interrupts the process of consistently returning to the original divine guidance as the practice of the courts adapts to ever-changing times and customs; it interrupts the evolution of fiqh on its own terms, replacing it with a new process of interpreting the positive law using different methodologies. Indeed, from the Saudi perspective, opposition to state legislation goes beyond this: ceding the power to make law to a legislature, even if the codes it passes makes reference to fiqh as a residual source of law, is to accept that the state, not God, is sovereign over law. The former head of the legal system, Muhammad bin Ibrahim (d 1969), described judging by positive, manmade law (qānūn waḍ`ī) as nothing less than denial of the true faith (kufr).15 As we shall see in section 2.1.4.1-b below, for nearly a century the jurists of Saudi Arabia have rebuffed proposals by the government to codify the laws.

13 Ways were found in various medieval legal systems to impose a degree of discipline on trial courts. David S Powers, ‘On Judicial Review in Islamic Law’ (1992) 26(2) Law & Society Review 315–41; Rossitsa Gradeva, ‘On Judicial Hierarchy in the Ottoman Empire: The Case of Sofia from the Seventeenth to the Beginning of the Eighteenth Century’ in Muhammad Khalid Masud, Rudolph Peters, and David S Powers (eds), Dispensing Justice in Islam (Leiden: Brill, 2006) 271–98. 14 These exceptions as applied in the general courts of Saudi Arabia are explored in Vogel (n 2) 97–117. 15 Muḥammad bin Ibrāhīm Āl al-Shaykh, ‘ Taḥkīm al-qawānīn’, http://islamway.com/?article_id=2292&iw_ a=view&iw_s=Article, accessed 1 August 2019.

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The Saudi Legal System 2.1.3

2.1.3. Traditional Constitutional Law Under Sharia and Fiqh In this section I address the second basic point I wish to draw (in extreme summary) from my 2000 book, which is the recognition that what everyone, Muslim and non-Muslim, first thinks of as Islamic law – namely, the accumulated extrapolations from the Quran and Sunna by scholars throughout the centuries, the substantive scholarly rulings governing everything from ritual to family to civil transactions to crime to international relations to war – is only part of Sharia. As acknowledged by the scholars themselves, Sharia includes also a constitutional fiqh, one that establishes institutions to determine and apply the religious law. In addition to developing rules to uphold and govern ijtihad as a method of determining the law and applying it, scholars also developed rules to establish and regulate another law-making and -applying authority, that of the ruler (walī al-amr, imām, sulṭān, ḥākim) and the institutions of the state dependent on him. These theories are often gathered under the name of siyāsa shar`iyya, meaning ‘governance in accordance with Sharia’.16 It is thus to the state that fiqh generally delegates authority over the macrocosmic dimensions of upholding Sharia. In this section I shall discuss only the traditional legal doctrines on this subject, and cover their application to Saudi Arabia in a separate section below, section 2.1.4. Siyāsa shar`iyya doctrine captures a late stage in the scholars’ response to the undeniable fact, often these days forgotten, that Sharia cannot be upheld through the learning of scholars and the consciences of believers alone. The injunctions of the Quran and Sunna address also the state, especially its courts and administration, and announce rulings and objectives that govern not just the private lives of Muslims but also the communal, social, economic, and collective dimensions of Muslim societies. Guided by the commands of the Quran, the Prophet himself headed a state performing all these functions, and through his lived example created precedents for rulers and their multiple agents after him to follow. His successors, the caliphs, sought to emulate him and to rule as he would have in the changing circumstances they faced – and indeed for a long time it was they who did the most to frame the emerging Islamic law. Gradually, however, as the charisma of the caliphate itself waned, scholars wielding texts assumed authority over matters of the religious law, convincing Muslims that the objective record of the Prophet and the earliest pious generations should be the criterion of law and that the law as they declared it should rule the state, rather than the state ruling the law. Many of the decisions and actions of the earliest generations of rulers entered the body of the Sunna and thus could be applied further by analogy, but the authority they had to determine the religious law passed into the hands of the scholars. With this development emerged an essential dualism in Islamic states – the ruler exercising sole power and discretion in execution and the scholars dispensing religious and legal authority and legitimation. The ruler’s power (termed siyāsa) loomed largest in public matters, while the scholars’ authority was greatest in the private sphere. Even in

16 See for further discussion of siyāsa shar`iyya, Frank E Vogel, ‘Siyāsa Shar`iyya’, Encyclopaedia of Islam (new edn) (Leiden: Brill, 1960–2004); Felicitas Opwis, ‘Siyāsah Shar`īyah’, in The Oxford Encyclopedia of Islam and Politics (Oxford: Oxford University Press, 2014). For my views on the origins of the doctrine, see Frank E Vogel, ‘Tracing Nuance in Mawardi’s al-Ahkam al-Sultaniyya: Implicit Framing of Constitutional Authority’ in A Kevin Reinhart and Robert Gleave (eds), Islamic Law in Theory: Studies on Jurisprudence in Honor of Bernard Weiss (Leiden: Brill, 2014) 331–59.

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2.1.3

Saudi Legal System: Constitution, Laws, and Courts

the revelations of the Quran and Sunna, detailed rulings are found in much higher concentration on the private matters of religious practice, followed by individual morality, family matters, and worldly ‘interactions’ (mu`āmalat), including contract, tort, and property. They then markedly decrease in density and detail as one enters into the matters where the state takes the lead rather than the individual or even the community, such as administration, including the establishment of courts and enforcing their judgments, taxes, war, and international affairs. Reflecting this spectrum found in the textual sources of law, as well as scholars’ obvious impotence qua scholars to exert power, a spectrum of legal authorities also emerged – with the scholars’ law and their personal authority dominant at the pole of private law matters, and the ruler’s authority nearly unchecked at the other pole of public law matters. Scholars did step forward to perform legal functions within the state, as appointed by the ruler, most often as judges – though a rich tradition of stories has recounted how a number resisted such appointment, fearing the threat that awe of power would pose to their piety and that a possibly faulty opinion they might reach would earn God’s wrath when forcibly enacted. In a celebrated work entitled Siyāsa shar`iyya, Ibn Taymiyya relies on a dualism between scholars and rulers as the foundation for the Islamic polity. Referring to the Quranic verse 4:59: You who believe, obey God and the Messenger, and those entrusted with authority among you. If you are in dispute over any matter, refer it to God and the Messenger, if you truly believe in God and the Last Day: that is better and fairer in the end.

Ibn Taymiyya says: There are two categories of people ‘entrusted with authority’: princes and scholars. If they are sound in what they do, the people are sound. They are obliged to seek in whatever they say or do obedience to God and His Prophet and compliance with the Book of God.

He declares that the two categories of leaders are complementary and that only by each assisting the other can Sharia be upheld. Along with his student Ibn Qayyim al-Jawziyya (d 1350), Ibn Taymiyya has greatly influenced Saudi scholars and their predecessors in earlier Saudi states, particularly in their ideological stances on law, constitution, and the prerogatives of the scholars vis-à-vis the ruler. The theory of siyāsa shar`iyya and of its precursors17 and successors18 under other names delegates authority to the state, or specifically to the ruler, to carry out legal measures, including legislation, as long as these measures meet two requirements: they serve the public welfare or utility (al-maṣlaḥa al-`āmma) and they do not fundamentally conflict with the Islamic law.19

17 Vogel, ‘ Tracing Nuance’ (n 16); Patricia Crone, God’s Rule: Government and Islam (New York: Columbia University Press, 2004) ch 16 (summarises current scholarship about Muslim theories of government prior to Ibn Taymiyya). 18 Uriel Heyd, Kānūn and Sharī`a in Old Ottoman Criminal Justice (Jerusalem: Israel Academy of Sciences and Humanities, 1967); Haim Gerber, State, Society, and Law in Islam: Ottoman Law in Comparative Perspective (Albany : State University of New York Press, 1994). 19 `Abd al-Wahhāb Khallāf (d 1956), al-Siyāsa al-shar`iyya fī al-shu’ūn al-dustūriyya wa-al-khārijiyya wa-al-māliyya (Kuwait: Dār al-Qalam, 1988) 20–23.

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The Saudi Legal System 2.1.3 The first half of this test is its positive part, as it were, identifying what should be the source of siyāsa regulation, namely public welfare or utility. This utility, it is repeatedly stipulated, is not only worldly but also moral and religious, with an eye to the benefits reaped in this world and the next from a life of pious obedience to God. Despite this caveat asserting the value of religion even at the public level, it remains the fact that much of the everyday operation of an Islamic legal system is not regulated by fiqh at all, except as to highly general principles; the ruler is largely free to act at his discretion to advance utility. Indeed, in many matters outside private law the scholars look to rulers to supply all the detailed rules, since Sharia has very little to say. General principles do apply – for example, that property is sacrosanct, a person is presumed innocent until proven otherwise, the privacy of individuals in their homes is respected, officials should act in the public, not their private, interest, and hundreds of others. But in many other matters, especially those such as the conduct of war or peace, miscellaneous taxes, administrative structures, market regulation, and public works, matters left to siyāsa greatly dominate. The second test is the negative one, so to speak, fixing a limit or boundary to the first: it enjoins that legislation not offend Sharia. But what constitutes offence? It cannot mean that no fiqh opinion may be contradicted, since these are multifarious and often in contradiction to one another. It also cannot mean that the ruler must act in every instance as a judge, employing ijtihad to determine his course of action from the texts of the Quran and Sunna, since, as mentioned, these texts mostly do not address the specific issues to which siyāsa applies. What is meant are more fundamental aspects of Sharia, not just fiqh rules, as a limit on the ruler. Perhaps not surprisingly, scholars have refrained from giving this test any final statement, leaving it vague, adjustable to the circumstance. Obviously, the test must include any act opposed to an explicit command found in the Quran, the authenticated Sunna, or the unanimous consensus of the scholars. Beyond that, often mentioned are the basic principles of Sharia, the qawā`id, which are, if not themselves texts of the Quran and Sunna, generalisations about fiqh rules drawn inductively from across the body of fiqh, which thereby gain greater authority than the individual opinions from which they are drawn (these are described further in section 3.2.2.4-a). Sometimes scholars also mention the ‘clear analogy’, qiyās jalī, meaning logically compelling deductions from revealed texts. A classic example of such a qiyās is that when God declares it wrong to say an impolite word to one’s parents,20 one may not abuse them in a worse way. A useful illustration of this test of legitimacy is the Islamic criminal law. Matters of crime fall toward the middle of the spectrum described above, in the sense that fiqh offers many rulings and principles about crime, but suppressing crime inherently depends on forceful means possessed only by the state. In addition, fiqh acknowledges that the changing circumstances of a society should affect how individual crimes are punished, sometimes augmenting punishments to deter similar acts; this overall perspective on the collective utility is possessed only by the ruler. As a result, criminal law was historically often separated into two parts: one where fiqh governed, administered by courts staffed by (scholar) judges; and another where siyāsa ruled under courts of a military or police character. The core jurisdiction of the first sphere concerned those crimes the punishment of which, as well as most of the elements of the crime itself, are considered categorically fixed (ḥadd (plural ḥudūd))

20 Quran

17:23.

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2.1.4

Saudi Legal System: Constitution, Laws, and Courts

by the revealed texts of the Quran and Sunna, such as the crimes of theft, adultery, and apostasy. The second administered punishments for crimes that fall under the rubric of ta`zīr (literally moral censure), defined as all acts of intentional disobedience to God’s commands. Fiqh itself acknowledged that in crimes of ta`zīr, the appropriate punishment, within broad limits, is determined at the discretion of the ruler. After articulating the precepts of siyāsa shar`iyya just described, did the scholars work to establish positive institutions or procedures by which to ensure that rulers complied with these precepts in fact – in the manner, say, of the checks and balances of the modern separation of powers? Scholars took few steps in that direction. Worldly power remained entirely in the ruler’s hands; he was, in terms of all practical decisions, beyond questioning by other institutions. The scholars’ authority, however, though intangible remained consequential, since rulers depended upon it for their own legitimation as upholders of Sharia. Rather than attempting to compete with the ruler through positive constitutional means, scholars chose to strengthen their intangible authority through informal institutions within their own sphere, such as the legal schools. In this way the essential dualism in the Islamic constitution did afford a form of constitutional checks and balances.

2.1.4. The Saudi Arabian Constitution In 1992 King Fahd issued a ‘Basic Nizam of Government’ (al-niẓām al-asāsī li-al-ḥukm) covering most of the matters that in other modern countries are covered by constitutions.21 (As will be explained just below, in Saudi Arabia a statute issued by decree of the King is called niẓām, ‘regulation’; I will use the Arabic term since I use it so often.) On examination, however, the Basic Nizam immediately reveals itself to be less than a constitution. First, it issued merely by decree of the King, to be replaced or amended at any time by another royal decree. Second, it states, in its first article, that it is not the constitution of Saudi Arabia. Article 1: The Kingdom of Saudi Arabia is a sovereign Arab Islamic State. Its religion is Islam. Its constitution is Almighty God’s Book, The Holy Quran, and the Sunna of the Prophet. … Article 7: Government in the Kingdom of Saudi Arabia derives its authority from the Book of God and the Sunna of the Prophet …, which are the ultimate sources of reference for (ḥākimān `alā) [ie ruling, or sovereign, over] this Nizam and the other laws of the State.

What does it mean to have the Quran and the Sunna as a constitution? In Saudi Arabia, this is not a question that any contemporary ruler decides, but one decided according to the doctrine of siyāsa shar`iyya. Siyāsa shar`iyya is in fact the constitutional system of Saudi Arabia. As stated in the Basic Nizam: Article 55. The King shall undertake the governing (siyāsa) of the nation in accordance with siyāsa shar`iyya in fulfilment of the rules (aḥkām) of Islam. He shall oversee the application of the Islamic Sharia, the nizams, the general policy (siyāsa) of the state, and the protection of the nation and its defence.

21 Basic Nizam-1992. The translations of it appearing here build on one posted by the Saudi Embassy to the United States: www.saudiembassy.net/basic-law-governance, accessed 1 August 2019. I have altered that translation where needed for present purposes.

28

The Saudi Legal System 2.1.4.1 The Basic Nizam lays out, in apparently conventional fashion, three branches of government: the executive, the judicial, and the legislative. Yet anyone who looks more closely, especially at the laws that constitute those branches of government, will find that the King retains rights of ultimate decision over each branch, however far their institutionalisation has been elaborated. This has led most outsiders to conclude that Saudi Arabia is an autocracy. As the Basic Nizam itself says, in Article 44, ‘The King is the ultimate arbiter (marji`)’ for all three branches of the government. Regardless of the truth of this when we consider only the formal structure of the government, we must also take into account the real constitution of Saudi Arabia, the siyāsa shar`iyya. Under it, the scholars remain a meaningful ‘branch’ of government, a check on royal power, even if by means and through channels not captured by the King’s own Basic Nizam. As we shall see even in the matters of business law examined in this book, the scholars’ constitutional privileges have enabled them to hold their own against royal power in many matters throughout the history of the Saudi states. The power given to the scholars under the unwritten constitution does find some reflection in the texts of the Basic Nizam as to the judiciary: Article 46. The judiciary is an independent authority. No one shall have power or authority over the judges in their adjudication other than the authority of the Islamic Sharia. Article 48. The courts shall apply in cases brought before them the rules of the Islamic Sharia in accordance with what the Quran and the Sunna indicate (mā dalla `alayhi al-kitāb wa-al-sunna), and the nizams issued by the ruler that do not contradict the Quran and the Sunna. Article 50. The King and his delegates shall be concerned with the enforcement of judicial judgments.

These faithfully reflect the scholars’ age-old position that Sharia is to be known by scholarly interpretation from the ‘indications in the Quran and Sunna’, and that any legislation by the ruler under siyāsa shar`iyya not ‘contradict the Quran and Sunna’. Also, nizams constitutive of the judiciary do include many formal guarantees of judicial independence.22

2.1.4.1. The Legislative Power in Non-Fiqh Matters: The Nizam a. Nizams The Basic Nizam’s provisions on the legislative power follow the same lines, reflecting less a modern constitution than the siyāsa shar`iyya doctrine stated in modern terms. To begin with, the Nizam refers to the power itself not as legislative, in modern Arabic tashrī`ī, but as tanẓīmī, ie concerned with the making of nizams. From the perspective of Saudi Arabia, it is striking indeed that law-making, even by a wholly secular state, is called tashrī`, literally the making of Sharia, the term for the divine law.23 This term and that for code or statute, qānūn, are both scrupulously avoided in Saudi Arabia. Nizam, stemming from the word for system or order, refers to the utilitarian legislation that the King and his two legislative

22 Of the three ‘branches’, the King’s powers are the most trammelled as to the judiciary. Nizam of the Judiciary-2007, Arts 1–4, 6, 44, 46–50, 55–70; Nizam of the Judiciary-1975, Arts 1–4, 51, 55–57, 69, 71–85. 23 On the generation of the term in the nineteenth and early twentieth centuries, see Gianluca P Parolin, ‘Introduction: Comment parle-t-on du “droit” en Egypte?’ (2015) 112 Études Arabes 1.

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2.1.4.1

Saudi Legal System: Constitution, Laws, and Courts

councils (the Council of Ministers and the Consultative Council) may adopt within the sphere left to them by siyāsa shar`iyya doctrine, understood as supplementing the Sharia. As to the legislative (tanẓīmī) branch, the Basic Nizam states: Article 67. The legislative authority shall have jurisdiction to enact laws and regulations in order to attain welfare (maṣlaḥa) and avoid harm (mafsada) in the affairs of the state, in accordance with the general principles (qawā`id) of the Islamic Sharia.

This is a fair restatement of the constitutional test of siyāsa shar`iyya stated above. It and Article 48 as to the judiciary (‘The courts shall apply … the rules of the Islamic Sharia …, and the nizams issued by decree of the ruler that do not contradict the Quran or the Sunna’) capture the essential duality of legislation in Saudi Arabia: on the one hand, the uncodified God-given ‘law’, and on the other, the man-made ‘regulations’ issued by the King to supplement the fiqh where needed for the general utility. With the rapid modernisation of Saudi Arabia starting in the 1950s, nizams become utterly essential on many fronts to regulate legal issues and institutions arising only in modern times. Hundreds of nizams have been issued over the decades. The system of nizam laws has undergone some systematisation at the hands of officials alert to the civil-law inspired legal systems of Arab countries. Efforts have been made to regularise the complex structure of decrees (singular marsūm), orders (singular amr), regulations (singular lā’iḥa), decisions (singular qarār), and instructions (singular ta`līm) issued by a plethora of actors, from both the legislative and executive branches, including the King, the council of ministers, individual ministers, and administrative agencies of many kinds. Until recently, it was often impossible, even for Saudi lawyers, to obtain copies of these varied legal materials, but this problem has been greatly alleviated by the internet, particularly the websites of the Bureau of Experts of the Council of Ministers and those of the various ministries and agencies. What has been outlined so far presents the constitution of Saudi Arabia as more settled on the question of the King’s legislative powers than it has proved in practice. While the doctrine faithfully echoed in the Basic Nizam is accepted by the legal scholars in theory, in practice they have always been too jealous of their prerogatives to completely accept the wave of nizam-making that came after the 1950s. They made little objection to nizams on matters that inhabited the parts of the spectrum discussed above where scholars had always ceded the initiative to the ruler – such as in matters of government administration, public works, social services, economic regulation, and the criminalisation of various acts. Problems arise, however, when nizam-making has ventured into areas of law that are extensively treated by fiqh – those that tend toward the private end of that spectrum. As scholars well know, it is simply unlikely that legislative provisions can be framed in any such subject area – however much they may appear to address conditions novel in modern times – without coming into tension with not just some specific fiqh rule but also one or another deeper seated Sharia principle. (And in some cases the conflict with Sharia principles is stark, as in the case of banking transactions, discussed in section 2.2.4.2-a below.) Scholars dispute the necessity for such provisions, and, even if they are needed, say that they can be developed from Sharia sources through ijtihad, thus bringing fiqh ever more up to date. A constantly quoted maxim states, ‘Sharia is suitable for all times and places’ (al-sharī`a ṣāliḥa li-kull zamān wa-makān). In fact, this strong opposition to many nizams among scholars and judges, colliding with the state’s need for nizams to achieve modernisation and development, led 30

The Saudi Legal System 2.1.4.1 fatefully to the creation of special tribunals to apply such nizams, circumventing the normal courts; this dualism in the judicial branch of government, mirroring the dualism in legislation, is discussed in section 2.1.4.2 below. If one reviews the body of nizams that have issued, it is clear that scholarly opposition has succeeded in limiting their scope. Most are short, often rudimentary, and cover discrete and narrow topics. The Companies Nizam of 1965, a relatively elaborate nizam, has only 233 articles; it was issued in revised form in 2015 with 227 articles. The Labour Nizam of 1969, another fundamental nizam, has 211 articles; it was succeeded by a new nizam in 2005 with 245 articles. A new (2018) commercial bankruptcy nizam has 231 articles. When issuing nizams, the state typically exercises caution to create the least conflict with Sharia, certainly at the level of principles and even at the level of particular fiqh doctrines. For example, the Explanatory Memorandum of the Companies Nizam of 1965 states, ‘[The regulation] confirms that the rules of the true Sharia are a basic principle from which it is not permissible to depart’;24 its main purpose was to legalise the formation of and to regulate modern companies with limited liability, negotiable shares, unlimited duration, and the like – features lacking in Sharia. Accordingly, the Memorandum explains: In fact, all the types of companies in the draft, in their various types and rules, differ from the companies that were known in the past only in a few particular details that do not touch on the general principles for transactions laid down by Sharia and without making illicit what is licit or making licit what is illicit, or contradicting any Quranic text, prophetic Sunna or scholarly consensus.25

Article 4 of the Labour Nizam of 2005 states, ‘When implementing the provisions of this nizam, the employer and the worker shall adhere to the provisions of Sharia.’26 Until recently, no nizam resembled anything like the comprehensive law codes found in civil and common law countries. It was not until 2001 that comprehensive civil and criminal procedural codes were finally issued.27 But even these codes do not capture the immense body of fiqh procedural law and operate mostly to favour more modern alternatives among old opinions. When they supplement the old approaches, they seem to operate within the constraints of the siyāsa shar`iyya tests. Indeed, several medieval scholars, including the revered Hanbali Ibn Qayyim al-Jawziyya, supported giving judges more flexibility in procedure on the ground of siyāsa shar`iyya.28 A respected conservative scholar has written a commentary on the codes.29 Even in their latest form, issued in 2013, they are not very extensive: the general procedure law has 242 articles, and the criminal nizam has 222. b. Proposals to Codify the Rules Applied by Courts Besides successfully restraining nizams, the scholars can claim another great victory, though it occurred wholly behind the scenes. As the country modernised, scholars faced a challenge 24 This is my translation from the ‘Explanatory Memorandum (al-Mudhakkira al-Īḍāḥiyya)’ in Niẓām al-sharikāt, 4th printing (Riyadh: 1394 (1974)) 8. 25 Ibid. 26 Niẓām al-`amal, Royal Decree No M/51 dated 23/8/1426 (27 September 2005). 27 Years before, in 1987, similar codes were issued but silently rejected by the leading scholars, ignored by the courts, and within a year retracted. 28 Vogel (n 2) 144–45. See also section 3.1, especially text at nn 5, 18. 29 `Abd Allāh Āl Khunayn, al-Kāshif fī sharḥ niẓām al-murāfa`āt al-shar`iyya al-sa`ūdiyya, 2nd edn, 2 vols (Riyadh: Maktabat al-`Ubaykān, 2008).

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2.1.4.1

Saudi Legal System: Constitution, Laws, and Courts

not only of multiplying nizams, but of a series of official projects to codify Sharia law itself, the Islamic legal rules applied in the courts. Every other Arab state and nearly every Muslim country has adopted codes covering most or all its laws. Whatever claims the drafters made about these codes remaining in conformity with Sharia, clearly adopting them has stretched the doctrine of siyāsa shar`iyya to a breaking point. It must be said that Muslims generally remain unconvinced of these claims and continue to distinguish between the divine law and the law of their own state, considering their national law to be perhaps influenced by Sharia but still far from it, particularly outside the sphere of family law. It goes without saying that Saudi scholars, generally more conservative than scholars elsewhere, tend to find the siyāsa shar`iyya justifications for these codes unconvincing. Saudi rulers have attempted multiple times to launch projects to codify the rules of Sharia applied in the courts.30 The first attempt was by the founder of modern Saudi Arabia, King Abdulaziz (known as Ibn Sa`ud) in 1926. Further attempts were made by Faysal, both in 1962 as crown prince, in a declaration of his intentions for government reform, and in 1973 as King, when he asked for approval of the step from the Board of Senior Scholars, the highest fatwa body, to which the government itself goes for Islamic legal advice. The Board issued an opinion in which a majority opposed codification (that opinion was not published until 1991). Finally, in 2010 King Abdullah obtained a more favourable opinion from the Senior Scholars,31 but this opinion has not been published, and about it only rumours circulate. One of the rumours I heard was that the Board approved that the judicial authorities themselves prepare and publish a ‘compilation’ (tadwīn) of rulings for application by the courts, without involvement by the legislative bodies. In 2014, several years after obtaining this opinion, King Abdullah issued an order appearing to command just such a compilation.32 The order reads in part: We, Abdullah bin Abdulaziz Al Saud, the King of the Kingdom of Saudi Arabia, … Following perusal of the Decision of the Board of Senior Scholars No 236 …, Order the following: First: The formation of a Sharia Committee to prepare a draft of the ‘Compilation of Judicial Rulings’ (tadwīn al-aḥkām al-qaḍā’iyya) on those Sharia-related subjects for which the judiciary has a need. … … Third: The committee shall strictly comply with the texts and principles (qawā`id) of the true Sharia and shall adopt the religious-legal methodology (al-manhaj al-`ilmī) in deciding which of the opinions of scholars should be preferred. No article is to be included in this draft compilation unless it is supported by evidence from revealed Sharia texts or the sayings of the most discerning of the scholars. Fourth: This Committee reports directly to us, and no entity or individual has the right to interfere in its work. … The Committee shall submit the draft to us within a period not to exceed 180 days from the date of our order. …

30 For

codification in Saudi Arabia, see Vogel (n 2) 286–87, ch 8. No 236 dated 19/2/1431 (3 February 2010). 32 Order A/20, dated 7 Safar 1436 (29 November 2014). 31 Decision

32

The Saudi Legal System 2.1.4.1 This order shows much deference to the sensitivities of the scholars concerning anything that resembles codification, in: first, leaving the compilation’s authorship to the scholars’ themselves; second, providing for derivation of its rules using the canonical fiqh methodology; third, leaving unsaid whether the compilation – once created – would be issued as a royal decree or by the judicial hierarchy itself; fourth, leaving open how comprehensive the draft would be (‘subjects for which the judiciary has a need’); and, fifth, not addressing whether the codification would be binding on judges and if so in what fashion. The order’s very short deadline of six months was not met. On reviewing the press for the last few years, one finds only a few opinion pieces urging the completion of the initiative. A 2016 article, reflecting what appears to be the most recent press release from the Ministry of Justice about the effort, mentions a code of about 3,000 articles organised according to the sequence of subjects in the books of fiqh, which will serve as ‘an authoritative judicial source (marji`)’.33 I was unable to learn much about the project despite asking a number of individuals during the years after the order through 2016. One scholar close to the compilation project told me in June 2015 that the work on the project was nearly complete, but also that several highly influential scholars had set themselves against it. More recently, others have told me that the codification is now complete and about to be issued. It could either issue any time or be postponed indefinitely. It should be remembered that the codification, and much of the controversy about it, do not concern business law alone, or even primarily. The concerns that push it periodically to the fore in the public sphere have more to do with criminal law, particularly the power of judges to assign punishment within wide limits for any act they consider a clear violation of Sharia (ta`zīr), and with family law where there are a few well-known divergences in judicial positions. Of the hypothetical 3,000 articles, many will concern marriage, divorce, child custody and guardianship, inheritance, and criminal punishments. As mentioned, even if a draft is produced, it could take various forms, each having a different effect on the legal system. In my 2000 book on the Saudi legal system, I analysed many of these forms, ranging from a binding comprehensive law covering entire fields of law in the manner of codes in civil law jurisdictions, issued by the King and his legislative councils, on the one hand, to a purely hortatory list of discrete rulings of the Supreme Court or Supreme Judicial Council, on the other hand.34 If the compilation that has been drafted is ambitious either in shifting the content of the law away from current fiqh doctrines, comprehensively restating those doctrines, or binding the lower courts, then it will meet greater opposition and be less likely to emerge. In case studies in this book the reader will often observe Saudi judges and scholars adjusting fiqh doctrines and practice to meet present challenges while still maintaining continuity with a millennium of juristic thought and centuries of Hanbali, Wahhabi, and Saudi legal practice. An ambitious codification could break this continuity, crystallise rulings, even those now still in flux, and shift judicial creativity into interpreting and evolving (and finding ways around) the code. 33 ‘Āl al-Shaykh wa-al-Ṣam`ānī yaṭalli`ān `alā al-marāḥil al-nihā’iyya li-murāja`at mudawwant al-aḥkām’, al-Madīna, 25 December 2019, www.al-madina.com/article/485454, accessed 1 August 2019. 34 Vogel (n 2) 311–12.

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2.1.4.2

Saudi Legal System: Constitution, Laws, and Courts

It is perhaps worth noting, though it hardly qualifies as hard data, that on interviewing many scholars and judges over the years, both at the top of their hierarchies and much lower down, I note now much less resistance to codification, a stance that implies a fortiori less resistance to nizams. Some general court judges in recent years told me that they believe codification to be a necessity. At the time of my original research in the 1980s, several of the highest judges of the general court system stated to me, for quotation, their strong opposition to codification and the reasons for it. In contrast, Dr Muhammad al-Issa, Minister of Justice from 2009 to 2015 and President of the Supreme Judicial Council from 2012 to 2015, during his tenure publicly endorsed codification, as well as adoption by the Supreme Court of binding ‘judicial principles’ and treating published court decisions as binding precedents. In the 1970s the Board of Senior Scholars opposed codification altogether; in 2010 they appear to have approved of it at least as a compilation of favoured rulings made by the judicial branch. The climate has definitely shifted, but has it shifted enough for the fateful step to be taken? While the project of compiling rulings has been proceeding, the general court system has taken three other significant steps that seem meant to serve some of the same purposes as the proposed compilation. The first is the publication of court decisions. As noted in section 1.2.1.1, about 10,000 court decisions have by now been published by the two major court systems, ie the general courts and the Board of Grievances. The second initiative is the preparation and publication of ‘judicial principles’ by the Supreme Court in 2017, a list of 2,323 short maxims elicited from decisions of the highest court in the general court system, which are not binding but only meant to guide the courts. One wonders whether these are a full or partial substitute, or just a dress rehearsal, for the compilation project just discussed. The third initiative is the attempt to strengthen a mechanism created by statute as long ago as 1975, but neglected thereafter at least in the general courts, which makes principles established by decisions of an appellate court binding on that court and on courts beneath it. The details and the significance of all three of these recent developments for judicial reasoning and the predictability of court judgments are explored in the next chapter.

2.1.4.2. The Judicial Power as to Non-Fiqh Laws: The Specialised Tribunals The success of the scholars in constraining the state from creating the body of legislation that would otherwise be expected in a modern state, and above all from codifying the Islamic law itself, came at a price. Since the general court judges opposed nizams and resisted applying them, another means had to be found to apply them. The King’s solution to the problem lay in taking action elsewhere on the fiqh-to-siyāsa spectrum, where his constitutional legal authority was greater. Throughout history, the ruler has had the authority to organise the courts, decide their jurisdictions, and appoint their office holders. Therefore, Saudi kings shifted in that direction and created special tribunals to apply the nizams. In fact, the practice grew up of including in all major nizams a provision for a ‘committee’ or ‘board’ – I will call them ‘specialised tribunals’ – to apply that nizam. Well over one hundred of these tribunals persist today, each related to one of at least 27 administrative entities throughout the executive branch; indeed, they are still being created on the same pattern. These are described in section 2.2.4 below.

34

The Saudi Legal System 2.1.4.2 Efforts were simultaneously made to divert all cases assigned to these specialised tribunals from the general courts. As we shall see in section 2.2 below, this was not always successful, and conflicts of jurisdiction did arise. Until recently (as discussed below), the only nizams that were entrusted to the general courts for application were ones that scholars themselves would concede arguably fall within the siyāsa shar`iyya authority of the ruler, primarily administrative, criminal, and to some extent procedural statutes. Before engaging in the details, one should appreciate the oddity of the result in comparative terms. It is somewhat as if US courts resisted applying any law but common law, and thus, for almost every statute it passed, the US Congress had to create a special administrative body to apply the statute. Tribunals have been a sore point for the scholars throughout the ninety years since the first ones were created. They have protested them on grounds overlapping with their opposition to nizams as man-made laws supplanting the Sharia. They object to the specialised tribunals because they not only implement such laws, but do so through judges who lack Sharia training and will neglect Sharia’s complex rules in both substance and procedure. Most specialised tribunals are staffed mostly or entirely by experts in statutory law (qānūn) or in the subject-matter being adjudicated, rather than in Sharia. Scholars also make the argument, more modern sounding, that the tribunals lack constitutional status and structural guarantees of independence. Similar criticisms of the tribunals are not hard to find even among those trained in modern and constitutional law, who point out that the tribunals lack guarantees of judicial objectivity and independence, and, in many cases, offer no right of appeal to a judicial body. It is undeniable that these tribunals represent a sort of constitutional black hole in the Saudi legal system. None of the nizams constituting the legal system refer to them, including the Basic Nizam. They report to no one entity, while their organisation, procedures, and staffing are not regulated by any common nizam. They can, in all fairness, be described as ad hoc. Since all are aware of this glaring constitutional discrepancy, both scholars and the ruler favour eliminating it by merging the jurisdictions of the specialised tribunals back into the general courts. Just as initiatives to codify the laws have come repeatedly from the rulers, counter-proposals to re-unify the courts have been put forward by the scholars. But the King has always required, as a condition for such a step, that the scholars assure that judges in the general courts will apply the nizams. This bargain was explicit in an order of the Council of Ministers in 1981 requiring the creation of a new branch of the general courts hearing commercial, labour, and traffic cases: it provided that the branch shall decide cases in accordance with ‘the nizams and instructions issued by the King which do not conflict with any text of the Quran, the Sunna, or the ijmā`’. Studies were performed pursuant to the order, but otherwise nothing came of it.35 As we shall see below, the very step unsuccessfully ordered in 1981 has now been taken. These same tribunals – for traffic, labour, and commercial cases – are now being merged into the general courts. This represents a major reform of the judicial system, and a shift to an entirely new phase in acceptance of statutes among scholars and judges.

35 Council

of Ministers Resolution No 167 (1981). See Vogel (n 2) 304–05.

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2.2

Saudi Legal System: Constitution, Laws, and Courts

2.2. Court System of Saudi Arabia 2.2.1. General Remarks A detailed description of the past and present administrative structure of the individual courts of Saudi Arabia is not needed for the purposes of this book. But an overview of the courts is necessary, if only to assess the decisions of the various courts that are discussed throughout the book. The following overview is divided into four main sections (sections 2.2.2–2.2.5). Each of the first three covers one of the three main branches of the judicial system, namely, the general courts, the Board of Grievances, and the specialised tribunals. Within each section I take up, first, the present organisation of those bodies, along with brief impressions of their general function and personality; and, second, their specific jurisdictions. In the fourth section I describe the major reorganisation of the court system ordered by King Abdullah in 2007, which included new nizams for both the general court system and the Board of Grievances as well as new procedural codes. Some of the steps he ordered were extremely ambitious and complex, with the result that some still are awaiting completion twelve years later. I mention some aspects of this reorganisation in the first three sections, but review its full significance only in the fourth section.

2.2.2. The General Courts 2.2.2.1. Organisation and Character The general courts, often called ‘Sharia courts’, are the original courts of the Kingdom and hold its general and residual jurisdiction. These have full constitutional status, as recognised in the Basic Nizam. Article 49: Without prejudice to the provisions of Article 53 of this law [concerning the Board of Grievances], the courts shall have jurisdiction to decide all disputes and crimes.

And, as cited above, Article 48: The courts shall apply in cases brought before them the rules of the Islamic Sharia in agreement with indications [mā dalla `alayhi] in the Quran and the Sunna, and the nizams issued by the ruler that do not contradict the Quran or the Sunna.

Two bodies operate at the pinnacle of the general court system but are outside the hierarchy of courts – the Supreme Judicial Council and the Ministry of Justice. The Council is assigned the function of hiring, promotion, transfer, and dismissal of judges, which is meant to serve as a guarantee of judicial independence and impunity from official pressure: Article 51: The composition of the Supreme Judiciary Council and its functions shall be specified by nizam, as well as the hierarchy of the courts and their functions. Article 52: Judges shall be appointed and relieved by royal decree, based on a proposal of the Supreme Judiciary Council, in accordance with provisions of nizam.

36

Court System of Saudi Arabia 2.2.2.1 Before the 2007 judicial reorganisation, the Supreme Judicial Council served also as the highest court, but in 2007 its two functions were separated with the creation of the Supreme Court. The Ministry of Justice is charged with supporting the judiciary administratively. Over the decades Saudi Arabia has moved toward a civil law style model of judicial administration, to meet international standards for judicial independence. A flaw in the present arrangement from that point of view is that, since 2012, the same individual has served as both Minister of Justice and President of the Supreme Judicial Council. Under the former 1975 Judiciary Nizam, the three levels of the court hierarchy were the trial courts, the appellate courts, and the Supreme Judicial Council. The trial courts were divided into two branches: general courts and summary (juz’iyya) courts. In the new Nizam of 2007, the branches of the trial courts are divided into ‘general courts’ of general jurisdiction, ‘family law courts’ (maḥākim al-aḥwāl al-shakhṣiyya), and criminal courts (maḥākim jazā’iyya), as well as two new branches – commercial courts (maḥākim tijāriyya) and labour courts (maḥākim `ummāliyya) – whose merger in the general court system has only taken place in 2018, as discussed in section 2.2.5 below. After the issuance of the Enforcement Nizam (niẓām al-tanfīdh) in 2012, special circuits, or in the larger cities self-standing courts, have been created to execute judgments and enforceable instruments, whether domestic or foreign, including decisions of specialised tribunals.36 For this book I will be examining cases of the general courts chiefly from the courts’ general and criminal divisions. The judges of the general courts are Sharia-trained. Article 31(d) of the Judiciary Nizam (2007), similar to Article 37 of the former nizam, requires them to meet the requirements for a judge set by Sharia (which, as discussed in section 2.1.2 above, include, according to late Hanbali and Wahhabi thought, the ability to consider the original sources of Sharia when choosing a ruling) and to hold a degree from a Sharia college in the Kingdom or, if they pass a special examination, ‘any equivalent degree’. Article 33 (Art 39 of the former nizam) further specifies a requirement of high grades in courses on Sharia. Articles 35, 36, and 43 (Art 41 of the former nizam) provide that one can accelerate one’s advancement among the ranks of judges by obtaining various academic degrees at Saudi colleges of Sharia or at the High Judicial Institute of the Imam Muhammad University in Riyadh. Articles 35–41 (Arts 41–47 of the former nizam) equate years spent teaching Sharia with years of experience as a judge. In the new nizam, in a nod to the importance of knowledge of the nizam system of laws, a master’s degree from the Institute of Public Administration, a program created to give graduates of Sharia colleges sufficient knowledge of the nizam system, is given weight equivalent to degrees in Sharia. Because the enforcement of nizams has largely been diverted to special tribunals, work in the general courts has not usually obliged a judge to know of, follow, or enforce nizams of a substantive character. Only recently has there been an attempt to give those studying at the Sharia colleges more exposure to the system of nizam laws. Most of the education in the Sharia colleges consists of gaining a thorough grounding in fiqh. This curriculum equips students with a great deal of substantive knowledge as well as good legal skills – skills of analysis, conceptualisation, distinction, generalisation, and analogy. For many students of Sharia, this legal education comes on top of serious religious education throughout their youth, including memorising portions of the Quran and exposure to Prophetic hadith, dogmatic works, and the history of the Prophet and the revered earliest generations. 36 Royal Decree M/53 dated 13/8/1433 (3 July 2012) issuing the nizam specifically includes the specialised tribunals.

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2.2.2.2

Saudi Legal System: Constitution, Laws, and Courts

Working alone as a single judge (three in cases of potential capital punishment or amputation), general court judges face a plethora of types of cases, brought by people of all classes, very often unrepresented by professional attorneys.

2.2.2.2. Jurisdiction The general courts have general jurisdiction, or rather they hold the residual jurisdiction, in the sense that they must try any case for which the King has not assigned jurisdiction elsewhere. For a long time, the idea has been mooted, by both the courts and the King, that the general courts may hear any case, regardless of the King’s assignments of disputes to other jurisdictions. As a saying has it, ‘the seeker of Sharia is not turned away’. In 1961, for example, King Saud issued an order that general courts have jurisdiction over any civil case brought before them. A 1975 decision of the Supreme Judicial Council required any case brought before both a tribunal and the general court to be consolidated before the general court, even if by nizam that court had no jurisdiction.37 The Committee charged with disputes under the Labour Nizam has stated as a principle that it shall decline jurisdiction if a case has been brought before the general courts.38 In more recent years, however, the general courts seem to have accepted the limits to their jurisdiction. One no longer hears of general courts and tribunals competing over jurisdiction. Among the cases published by the Ministry of Justice are several showing a general court declining jurisdiction in favour of specialised tribunals. In one, this occurred even though the case involved bank loans, presumably with interest.39 The latest Nizam of Sharia Procedures,40 issued in 2013, specifies the civil jurisdiction of the general courts in detail, in the form intended for it after all the transfers of jurisdictions ordered in 2007 are complete. I discuss the changes the Nizam makes to the general court jurisdictions below in sections 2.2.3.2-e and 2.2.5. The 2013 Nizam of Criminal Procedures41 says little about jurisdiction. It states in Article 128 that the ‘criminal court’ shall have jurisdiction over all crimes ‘without prejudice to the jurisdictions of other courts’.

2.2.3. Board of Grievances 2.2.3.1. Organisation and Character The second main division of the judiciary is the Board of Grievances (Dīwān al-Maẓālim), which also has constitutional status, both in Sharia terms and under the Basic Nizam. The Basic Nizam reads: Article 53: The nizam shall specify the hierarchy of the Board of Grievances and its functions.

37 Vogel

(n 2) 293. No 964/2/431, 1 Supr-Bd-Labour-Disputes 1431 189 (Supreme Board for Settlement of Labour Disputes, 1431 (2009)). 39 Decision No 3436706, 28 Gen-1434 86 (Riyadh, 1434 (2012)) (bank transactions); Decision No 34408552, 15 Gen-1434 196 (Jedda, 1434 (2012)). 40 Nizam of Sharia Procedures-2013. 41 Nizam of Criminal Procedures-2013. 38 Decision

38

Court System of Saudi Arabia 2.2.3.1 The original Board of Grievances arose around 750 CE in late Umayyad or early Abbasid times, as a proto administrative-law court, a forum at which the ruler himself received complaints from his subjects about injustices (maẓālim) done them by state officials.42 The institution became a symbol of a ruler’s sovereignty, since it reflected his supreme power over all others, as well as his devotion to doing justice (`adl) to all. The institution was incorporated into the classical statements of fiqh constitutional law.43 The Kingdom’s founder, King Abdulaziz, reportedly made himself available to hear claims of wrongs committed by his government. When in 1955 the courts were reorganised nationally, the ancient name was revived for a new administrative court on the model of the Egyptian Council of State (Majlis al-Dawla), itself modelled on the French Conseil d’État. The Board was reorganised in 1982 and again in 2007.44 Throughout, and explicitly in Article 9 of the 1982 Nizam and Article 14 of the 2007 Nizam, the Board of Grievances has been barred from questioning the decisions of the general courts. As a court for hearing complaints of government malfeasance or misfeasance, the Board of Grievances has its age-old pedigree. But in Saudi Arabia it has also served the purpose, shared with the specialised tribunals, of a venue to which to divert particular types of cases away from the general courts, due to the Board’s relative willingness to apply nizams. In 1982 enforcement of foreign judgments, civil-service disciplinary actions, and bribery and forgery prosecutions, all previously adjudicated by specialised tribunals or ad hoc boards, were transferred to the Board. In the years thereafter, it acquired other miscellaneous jurisdictions, such as handling prosecutions under nizams defining various crimes and hearing appeals from various specialised tribunals. But the largest accretion of jurisdiction came in 1987 when the Board assumed the commercial jurisdiction, previously under a specialised tribunal; this is discussed later in this section. Finally, the most recent change to the Board’s jurisdiction – this time by subtraction – was ordered in 2007, with the transfer of the commercial and various other jurisdictions to the general courts. The Board of Grievances has had separate benches of judges, at the trial and appellate levels, for administrative, until 2018 criminal and commercial, and until 2014 foreign judgment enforcement cases. The judges of the Board of Grievances have a training and outlook identical to the general court judges, including as to their fidelity to Islamic legal rules and principles. In fact, the qualifications of judges and prerequisites for their advancement are explicitly linked in Article 11 of the 1982 Board of Grievances Nizam to those for the general court judges, with only small variations, while in Articles 16–17 of the 2007 Board of Grievances Nizam, judicial qualifications are made identical to those stated in the new Judiciary Nizam. Many Board judges have taken the trouble to augment their Sharia educations with knowledge of modern ‘positive’ law and nizams, such as by taking a master’s degree from the Institute of Public Administration. In the Board of Grievances, cases are heard at the trial level by a panel, called a ‘circuit’ (dā’ira), usually consisting of three judges. Their work generally does not involve engaging with people of all walks of life, but rather

42 Mathieu Tillier, ‘ The Mazalim in Historiography’, in Oxford Handbook of Islamic Law (Oxford: Oxford University Press, 2018) ch 10. 43 `Alī ibn Muḥammad al-Māwardī (d 1058), Ordinances of Government: Al-Aḥkām al-Sulṭāniyya wa’l-Wilāyat al-Dīniyya, trans. Wafaa H Wahba (Reading: Garnet Publishing, 1996) ch 7 (redress of wrongs). 44 See Board of Grievances Nizam-1982; Board of Grievances Nizam-2007.

39

2.2.3.1

Saudi Legal System: Constitution, Laws, and Courts

with parties of relative sophistication, usually represented by professional advocates, litigating over relatively large sums. In a vital difference from the general courts, the judges of the Board of Grievances are called on constantly to apply substantive nizams, and, as a corollary, show far greater willingness to apply nizams in general. But at times resistance to nizams does surface. One example is the commercial circuits’ opposition to the 1996 Nizam on Settlements Preventative of Bankruptcy:45 I heard reports, including from a Board judge, that the Board simply does not apply it because it purports to compel creditors to accept rescheduling of a distressed creditor’s debt – a result difficult to justify under Sharia. Furthermore, one should not assume that judges of the Board of Grievances will always be less conservative than general court judges, or less jealous of Sharia principles. Examples will be found in the case studies to follow. A simple, discrete example is a decision from the branch of the Board that formerly enforced foreign judgments. Saudi Arabia is a party to a treaty of the Arab League for enforcement of judgments of member countries. A petition was brought before the Board to enforce an Egyptian judgment against a Saudi firm for payment for musical recordings imported from Egypt. One circuit refused to enforce the judgment, and when this result was reversed on appeal, another circuit took it up. That circuit reached the same result, giving as its sole reason that enforcement would offend texts of the Quran and Sunna and principles of Sharia that categorically prohibit musical entertainment, musical instruments, and the like. (The defendant, not the court, argued that enforcement fails also under the ‘public policy and public morals’ exception to the treaty.) The court acknowledged that some contrary opinions about music exist among scholars, but argued that such opinions can have no standing given the clear prohibitions in revealed texts; moreover, the circuit’s own ijtihad ‘ends the difference of opinion’, and cannot be questioned by the appellate court. It liberally cited the Basic Nizam to the effect that in Saudi Arabia the Quran and Sunna are the ultimate test of all legitimacy. Even if the practice in Saudi Arabia is to the contrary, such practice must be disregarded in the face of the Sharia prohibition. The case was affirmed, and moreover published.46 Another example is the following: at one point the General (ie en banc) Board of the Board of Grievances decided that, as a general principle to be followed by judges, no trademark may be respected in Saudi Arabia that includes representations of living beings. The prohibition of such representations is a strict but highly conservative Sharia tenet, which, like a ban on music, is pervasively ignored in present-day Saudi Arabia. In 1984 this decision was reversed, by another en banc decision that offers extensive argument from Quran and Sunna texts but also points to Saudi Arabia’s treaty obligations.47 These examples are at the extreme of conservatism. They certainly show one cannot count on enforcement of judgments or arbitration awards that entail an outcome considered against Sharia. Certainly, judgments that include interest for extending credit or for 45 Niẓām

al-taswiya al-wāqiya min al-iflās, Royal Decree No 16 dated 4/9/1416 (25 January 1996). No 17, 6 BG-Adm-1430 3557 (Adm C No 24, Riyadh, 1429 (2008)). 47 Decision No 9 year 1424 (2003) in Board of Grievances, Qarārāt hay’at al-tadqīq mujtami`a (Riyadh: Maktab al-Shu’ūn al-Fanniyya, 1435 (2013)) 246. I was told that the original decision concerned the Starbucks logo, to which the morals police (muṭṭawi`ūn) had objected. On the process by which the appeals court resiles (`udūl) from early decisions stating principles to be applied by Board judges, see Muḥammad al-Khālidī, ‘al-`Udūl `an al-mabādi’ al-qaḍā’iyya: dirāsa muqārina’ (Masters, High Judicial Institute, Imam Muhammad University, 1421 (2000)). 46 Decision

40

Court System of Saudi Arabia 2.2.3.1 delay in satisfying a debt or judgment offer a stark contradiction to Sharia principles, and have been denied enforcement. As practitioners confirm, the Board of Grievances has earned a reputation for not showing favouritism to Saudi citizens and entities over foreigners. The published cases often reflect this – such as in litigation between foreign suppliers and local commercial agents, where, according to my non-scientific impression after reading many cases, the foreign entity is the victor in the great majority of them. One is struck by the willingness of Board circuits to accept the religious exculpatory oath (yamīn) of Buddhist foreigners as conclusive against the claim of Muslim nationals.48 Another factor influencing the character of the Board of Grievances is that its chief function has been that of administrative court. In what follows, I often cite decisions of the administrative circuits of the Board, if only because of those circuits’ vital function in government contracting, one of the largest sectors of business in the Kingdom. One needs to remember, however, that administrative law often follows rules that are specific to administrative cases and do not apply in civil matters; such specialised rules are common in both the European civil law systems that have shaped much Saudi administrative law, largely through Egypt, and in traditional fiqh. As for traditional fiqh, the state enjoys greater flexibility of legal rules due to its siyāsa shar`iyya authority – in a sense its own, utilitydriven source of law. Also, fiqh in the administrative law arena can draw on precedents from the Quran and Sunna that concern acts of the state, and that are not usually generalised to civil acts. Despite this, the administrative jurisprudence of the Board of Grievances has had a large effect on the commercial jurisdiction. In the Board’s early days its judges naturally consulted the most advanced Arab-country jurisprudence in administrative law, that of Egypt, and many norms and practices of Egyptian positive law made their way into the Board’s administrative law jurisprudence. When the commercial jurisdiction of the Board of Grievances was created in 1987, judges from the administrative circuits carried over to the commercial circuits some of these conceptions and habits. The influence of one branch on the other seems, however, to have waned over time, as many judges fresh from Sharia educations have been seated in the commercial circuits. The most important jurisdiction of all for the purposes of this book is that of the Board of Grievances over commercial cases, lasting 31 years, from 1987 to 2018. In my earlier book on Saudi Arabian law, I have described in detail the history of Saudi commercial courts starting from their origins in the Hijaz (the western province of Saudi Arabia including Mecca and Medina) under the Ottoman Empire before the Saudi conquest.49 Even in Ottoman times, it was not believed expedient to entrust jurisdiction over commercial transactions, many of which had taken on forms imported from the West that were novel to Sharia, to courts applying Sharia. After his conquest of the Hijaz, in 1926 King Abdulaziz created a commercial court for the Hijaz, always the most commercial of Saudi regions. Soon after, in 1931, he formalised this court under a new statute, titled qānūn, the Commercial Court Nizam,50 closely modelled on an Ottoman statute. Parts of this nizam remain in force today. The nizam

48 See

three cases cited in Chapter 3 n 61. On the oath, see section 3.1.1.3-d. (n 2) 302–06. 50 Royal Decree No 32 dated 15/1/1350 (2 June 1931). 49 Vogel

41

2.2.3.2

Saudi Legal System: Constitution, Laws, and Courts

specified the membership of the court as seven: six experts in modern commercial law and one Sharia-trained jurist. In 1955, when the Hijaz was being incorporated legally into the rest of the country, the commercial jurisdiction was cancelled at the behest of scholars of Najd, the central province, with the result that commercial cases were heard by the general courts as in the rest of the country. This lasted ten years, to 1965. After reported difficulties with some decisions, King Faisal restored the specialised commercial jurisdiction as two, soon three, ‘Boards for the Settlement of Commercial Disputes’ (hay’āt ḥasm al-munāza`āt al-tijāriyya) under the aegis of the Ministry of Commerce. These Boards consisted of three members each, of whom one at first, then soon two, members were Sharia-trained; there was one bench in each of the three major commercial cities. They held sessions only in evenings so that sitting general court judges could serve as members. When this arrangement proved inadequate to meet the pressure of rapidly increasing and ever more complex commercial litigation, in 1987 a new solution was found, when King Fahd turned to the Board of Grievances and assigned the commercial jurisdiction to it ‘temporarily’.51 This solution had the advantage of involving an established court in solving these cases, the judges of which, while strong in Sharia training and outlook, were at the same time willing to apply the nizams of the state. It was hoped that out of this new jurisdiction would emerge a generation of judges who found ways to reconcile devotion to Sharia with the demands of modern business. This hope is about to be tested, as the 2007 reorganisation, shifting the jurisdiction back to the general courts, is now entering into force. The Board of Grievances has also been assigned over the years the duty of enforcing a set of other nizams on diverse commercial matters. Among them are the nizams for trade names (1999), trademarks (2002), commercial advertising (2002), commercial records (2002), commercial pledges (2004), commercial fraud (2008), and others.52 These jurisdictions have been undertaken by the administrative branch of the Board rather than the commercial branch, though it appears that this will change with the 2007 reorganisation. The long-awaited Bankruptcy Nizam, issued in 2018, falls into the jurisdiction of the new commercial courts of the general court system, since the bankruptcy of merchants had belonged to the commercial courts from the time of the Commercial Court Nizam of 1931. The Board had its own procedural nizam in 1989,53 long before one was issued for the general courts in 2000. This nizam was updated in 2013. In February 2018 a project was launched by the Minister of Justice to develop a new procedural nizam for the new commercial branches of the general courts.54

2.2.3.2. Jurisdiction Except where noted, the following describes the jurisdictions of the Board of Grievances before the 2007 reorganisation which is still, twelve years later, being slowly executed.

51 `Imād al-Najjār, al-Iddi`ā’ al-`āmm wa-al-muḥākama al-jinā’iyya wa-tatbīquhumā fī al-Mamlaka al-`Arabiyya al-Sa`ūdiyya (Riyadh: 1997) 209, quoting the explanatory memorandum of Board of Grievances Nizam-2007. 52 Muḥammad al-Dawsarī, ‘al-Qaḍā’ al-tijārī bayn al-māḍī wa-al-ḥādir wa-al-mustaqbal’ (25 October 2014) 17–18 (copy of a speech obtained informally). The author is a former chief justice of the Supreme Administrative Court. 53 Board of Grievances Procedures-1989. 54 Minister of Justice Decision No 1705 dated 25/5/1439 (9 February 2018).

42

Court System of Saudi Arabia 2.2.3.2 a. Administrative (Idārī) The original and enduring jurisdiction of the Board of Grievances is over cases brought by or against the government, which in Saudi Arabia is called the administrative jurisdiction. Appeals from Specialised Tribunals Within the administrative branch of the Board falls also the jurisdiction to hear appeals from various specialised tribunals. Examples are appeals from the committees on the medical profession, real estate offices, instalment sales, and others. Such jurisdictions were assigned to the Board of Grievances in ad hoc fashion as the various nizams were issued, making reference to a provision in the 1982 Board of Grievances Nizam giving it jurisdiction over any matters assigned to it by law. It is not clear whether these appeals are to shift from the Board of Grievances under the reorganisation; it is likely that that they will not, since I have found no mention of their removal to the general courts. b. Enforcement of Foreign Judgments In 2012 the Board was relieved of responsibility for the enforcement of foreign judgments, in favour of the new Enforcement Court of the general court system.55 From the viewpoint of foreign judgment creditors, the Board had a poor record in enforcing foreign judgments, if only because it subjected them to review for compliance with Sharia norms, such as with principles forbidding interest in any form. The new Enforcement Nizam states this requirement only as one of non-contradiction with ‘the rules of public order in the Kingdom’ (aḥkām al-niẓām al-`āmm fī al-Mamlaka),56 but practitioners uniformly interpret that as non-contradiction with Sharia. The Nizam also requires a showing of reciprocity in enforcement in the foreign state from which the judgment issued, this regardless of any applicable treaty.57 The Court’s jurisdiction extends equally to the enforcement of foreign arbitration awards, with the same conditions.58 c. Criminal (Jazā’ī) The criminal jurisdiction of the Board of Grievances covers forgery (which includes bank instruments but otherwise applies only to official documents), bribery of public officials, embezzlement of public funds, and various other crimes assigned to the Board by nizam or royal order. In 2007 this jurisdiction was reassigned to the general courts and has recently been transferred. d. Disciplinary (Ta’dībī) Under this heading falls disciplinary actions against government employees filed by the Bureau of Control and Investigation (Hay’at al-Riqāba wa-al-Taḥqīq), the body that investigates and prosecutes infractions by public sector employees. 55 Enforcement

Nizam-2012, Art 96. Nizam-2012, Art 11(5). 57 Enforcement Nizam-2012, Art 11. 58 Enforcement Nizam-2012, Art 14. 56 Enforcement

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2.2.3.2

Saudi Legal System: Constitution, Laws, and Courts

e. Commercial (Tijārī) This jurisdiction has only recently, in 2018, transferred to the general courts. But since the legal practice described in this book relates to the former jurisdiction under the Board of Grievances, I position its discussion here and not under the section on the general courts, and divide the discussion into two parts, first the just-changed former jurisdiction and then the jurisdiction as defined for the new commercial court within the general court system. I go into the commercial jurisdiction of the Board in detail, since it explains why in the past certain commercial cases have been heard by the general courts and not the Board, and enables us to ask how the recent merger of all these cases into the commercial court of the general courts may affect future outcomes. Before the Reorganisation The commercial jurisdiction has, since 1987, been the one major civil jurisdiction assigned to the Board of Grievances. The scope of the jurisdiction was fixed originally by the Commercial Court Nizam of 1931. There are two major branches to the commercial jurisdiction for our purposes: commercial disputes between merchants and disputes involving commercial companies. The first branch stems from the Commercial Court Nizam, Article 443(a), which assigns jurisdiction to the court over any dispute that meets a double test: it is between ‘merchants and those who have with them a commercial relationship’, and it ‘concerns problems and disputes arising from purely commercial matters’. The term ‘merchant’ (tājir) is defined in Article 1 of the law as ‘a person engaged in commercial transactions, making such engagement his profession’. A ‘merchant’ may be an individual, an unincorporated ‘establishment’ (mu’assasa), or a commercial company. The requirement of ‘purely commercial transaction’ was in 2002 amended to include also matters that are not themselves commercial but are ‘corollary to’, ‘subordinate to’, or ‘contingent on’ (bi-al-taba`iyya) commercial matters.59 A former president of the Supreme Administrative Court has explained the latter term as meaning ‘acts that the merchant undertakes not for the purposes of commerce but for the purpose only of supporting his trade, such as buying a car for distributing his goods and the like’.60 A doctoral dissertation gives a longer explanation: They are acts that are basically civil but gain a commercial character because they issue from a merchant for commercial purposes. The basis for classifying this type [of act] to be commercial is the profession [that the merchant] undertakes, which has effects on actions corollary to it causing those actions to acquire its characteristic. To be considered a corollary commercial act, an act must meet two conditions: (1) that the one undertaking it is considered a merchant; and (2) that the act is dependent on the needs of his commerce or arises from obligations between merchants.61

The term ‘commercial matters’ is not so much defined as left as a residual category after many exceptions from it. Excepted from it have been disputes related to the

59 The

amendment to the latter article was by Council of Ministers Order No 261 (1423 (2002)). (n 52) 14. 61 Aḥmad al-`Ubūdī, ‘Ṭuruq al-ithbāt fī al-qaḍā’ al-tijārī wa-taṭbīqātuhā fī al-Mamlaka al-`Arabiyya al-Sa`ūdiyya’ (Doctorate, High Judicial Institute, Imam Muhammad University, 1433 (2011)) 65. 60 al-Dawsarī

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Court System of Saudi Arabia 2.2.3.2 following: construction contracts if the contractor does not also supply materials;62 land, even for the purpose of investment or real estate partnerships;63 sale of agricultural products by the producer;64 professions such as medicine, architecture, medicine, engineering, law, or guiding pilgrims;65 brokerage or acting as a go-between (wisāṭa, samsara, wakāla) for a non-merchant;66 advertising;67 social clubs;68 supply of labourers;69 sale of one’s own intellectual work product;70 guaranties not for commercial purposes;71 disputes among shareholders of foreign companies;72 construction work on a building belonging to one of the parties;73 and matters assigned to semi-judicial tribunals like disputes concerning banking transactions, labour contracts, insurance, capital-market transactions, finance companies, commercial paper, foreign investment in a Saudi company, and many others. The second major branch of the commercial jurisdiction for our purposes stems ultimately from Article 443(e) of the Commercial Court Nizam, which assigned to the Commercial Court it created disputes among partners in partnerships and companies. That article was superseded on the issuance of the Companies Nizam of 1965 which in Article 232 endowed the Boards for Settlement of Commercial Disputes with jurisdiction to enforce that law in all respects. It assigned to these Boards jurisdiction over disputes involving not only the modern commercial companies it created, but also all partnerships formed under the traditional fiqh, such as muḍāraba, `inān, and others to be discussed in section 6.2.3.2. The entire jurisdiction of these Boards passed to the Board of Grievances in 1987. After the Reorganisation For convenience, I will discuss here, rather than in section 2.2.5 below on the 2007 reorganisation, certain changes to the jurisdiction of the commercial courts scheduled to occur at the time that that jurisdiction moves to the general courts. Since that transfer has happened only recently, our only guide to the future practice is the relevant statutory text, Article 35 of the 2013 Nizam of Sharia Procedure: Commercial courts shall have jurisdiction to consider the following: (a) all original and corollary (bi-al-taba`iyya) commercial disputes between merchants; (b) lawsuits filed against a merchant due to his original and corollary commercial activities; (c) disputes between partners in partnerships (sharikāt) [which includes statutory companies and traditional fiqh partnerships];

62 Decision

No 153, 1 BG-Com-1430 32 (Com C No 4, Riyadh, 1429 (2008)). No 68, 1 BG-Com-1431 37 (Com C No 15, Dammam, 1431 (2009)); Decision No 92, 1 BGCom-1429 9 (Com C No 15, Dammam, 1428 (2007)); Decision No 112, 1 BG-Com-1429 5 (Com C No 5, Riyadh, 1428 (2007)). 64 Decision No 35, 1 BG-Com-1429 166 (Com C No 27, Riyadh, 1428 (2007)). 65 Decision No 197, 1 BG-Com-1429 145 (Com C No 8, Jedda, 1428 (2007)); Decision No 323, 1 BG-Com-1428 83 (Com C No 8, Jedda, 1427 (2006)). 66 Decision No 244, 1 BG-Com-1429 111 (Com C No 12, Jedda, 1428 (2007)); Decision No 36, 1 BG-Com-1430 21 (Com C No 14, Jedda, 1429 (2008)); Decision No 100, 1 BG-Com-1430 16 (Com C No 30, Mecca, 1429 (2008)). 67 Decision No 23, 1 BG-Com-1408–1423 212 (Com C No 9, Jedda, 1421 (2000)). 68 Decision No 416, 1 BG-Com-1429 120 (Com C No 4, Riyadh, 1428 (2007)). 69 Decision No 121, 1 BG-Com-1429 117 (Com C No 10, Jedda, 1428 (2007)). 70 Decision No 8, 1 BG-Com-1429 117 (Com C No 2, Riyadh, 1429 (2008)). 71 Decision No 157, 1 BG-Com-1429 169 (Com C No 15, Dammam, 1428 (2007)). 72 Decision No 1436, 1 BG-Com-1429 178 (Com C No 14, Jedda, 1429 (2008)). 73 Decision No 33, 1 BG-Com-1408–1423 166 (Com C No 2, Riyadh, 1413 (1992)). 63 Decision

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2.2.4

Saudi Legal System: Constitution, Laws, and Courts

(d) all lawsuits and violations relating to commercial nizams, without prejudice to the jurisdiction of the Board of Grievances; (e) claims of bankruptcy and imposition of interdiction on bankrupt persons or its removal; and (f) other commercial disputes.

It is clear from this text that some commerce-related jurisdictions previously exercised by the general courts are now shifting to new sibling commercial courts within the general court structure. First, cases between a merchant and a non-merchant formerly had to be brought before the general courts, resulting in cases between consumers and such entities as retail outlets or construction firms constituting a good part of the general courts’ case load. Now those cases will join cases between merchants in the commercial court, which seems likely to yield efficiencies and greater consistency. Second, cases where a contractor does not provide materials but only work may now come to the commercial court. The article leaves unclear at least three other points about possible transfers of jurisdiction from the Board of Grievances to the new courts. The first concerns disputes under nizams relating to commerce, that up to now have been assigned to the Board and tried by its administrative branch, as noted above in section 2.2.3.2-a. The text of paragraph (d) of the article would seem to transfer these responsibilities to the general courts, except for the phrase ‘without prejudice to the jurisdiction of the Board of Grievances’. The second point is whether in paragraph (f) ‘other commercial disputes’ implies the transfer to the general courts of the many commercial jurisdictions now assigned to specialised committees. As is mentioned below,74 in 2007 King Abdullah announced his intention to transfer all but a few specialised jurisdictions to the general courts. Perhaps paragraph (f) simply reflects that intention. The third point left unclear is whether the new court will honour the Board’s past interpretations of the term ‘commercial’, such as those from the cases cited above excluding professional services, social clubs, and others. Perhaps even transactions in land are meant now to be brought within the commercial court, especially since King Abdullah’s order launching the reorganisation repealed a clause of the old Commercial Court Nizam excluding land transactions from the jurisdiction of that Court.75 Since practice will probably soon clarify all these points, I have not attempted to solicit opinions on them from the officials concerned.

2.2.4. The Specialised Tribunals 2.2.4.1. Organisation and Character in General To describe the third main division of courts, the specialised tribunals, would be a major task, considering, as mentioned above, that they number more than 100 and are distributed among at least twenty-seven arms of the executive branch. I will describe them only in general, giving details only as to four of them. The bodies are usually titled ‘committee’ (lajna) or ‘board’ (hay’a). As a group, they are referred to as ‘semi-judicial’ (shibh qaḍā’iyya) committees, or ‘administrative committees

74 See

text at nn 100–03 below.

75 See also Nizam of Sharia Procedures-2013, Art 31(a), assigning even real estate partnerships to the general, not

commercial, courts.

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Court System of Saudi Arabia 2.2.4.2 with judicial authority’ (lijān idāriyya li-ikhtiṣāṣ qaḍā’ī). Each of them adjudicates disputes within a single narrow subject area, typically the scope of a particular nizam – indeed, most are created by the very nizam they are charged to apply. At first these tribunals were formed as arms of particular ministries or administrative agencies, and they reported to the heads of their host entities, with no other form of appeal. More recently, the more important tribunals have been created, or reorganised, as structurally independent (meaning that they report to no one but the King) and are provided with a single appellate level after which their decisions are considered final (such as the Appellate Committee for Banking Disputes and Violations, created in 2012); from many of them, appeal lies to the administrative division of the Board of Grievances. For some, however, the only appeal still lies to the head or supervising official of the administrative agency to which they belong. Some of the committees – listing only some of the more important for business purposes – include (using their most up-to-date titles and giving the year they were first created): the Banking Disputes Committee (1986), the Committee for the Settlement of Financial Securities Disputes (2011), the Committee for the Settlement of Finance Violations and Disputes (2012), the Commissions for the Settlement of Labour Disputes (1969), the Customs Committees (1952), Commercial Papers Committee (1982, now mostly superseded by the enforcement (tanfīdh) circuits of the general courts), various appeal committees within the General Authority of Zakat and Tax, and several insurance committees. I discuss the first four of these below.

2.2.4.2. Four Specialised Tribunals in More Detail: Organisation and Jurisdiction a. Banking Disputes Committee Organisation and Character Scholars protest against some specialised jurisdictions not only because they derogate from the general jurisdiction of the Sharia as applied by Sharia-trained judges, but also on the ground that they enable practices that the scholars consider to be in violation of Sharia. Of these, the clearest example is the Banking Disputes Committee, which daily issues judgments obligating the payment of interest. Every Saudi knows that, certainly under Sharia as understood in Saudi Arabia, loans on interest are prohibited, ḥarām. That very awareness caused many Saudis, even long after the Kingdom began rapid economic development, to avoid engaging with banks, and, if they held bank deposits, to forgo interest on them. The same impulse led to the rapid embrace of ‘Islamic’ banks, and even of ‘Sharia-compliant’ banking transactions when arranged by conventional banks, to the point that experts in the field estimate that 90 per cent of retail banking in the Kingdom is now conducted in this way. Throughout these travails, Saudi Arabia has boasted a successful well-regulated conventional (and Islamic) banking sector, leading many international banks to create Saudi subsidiaries. How have the courts handled the issue of non-Sharia-compliant banking? For a long time the issue remained largely mute, perhaps because it concerned only knowing businessmen willing to settle out of court, while the general population remained largely unbanked. But in the economic downturn of the 1980s, the clash between the decades-old practice of 47

2.2.4.2

Saudi Legal System: Constitution, Laws, and Courts

commercial banking and the courts flared up, as distressed debtors turned to the courts to delay or reduce their obligations. Courts dealt with these cases either by disregarding the interest as unlawful, crediting past interest payments to principal, or by requiring the debtor to pay all interest to the public treasury.76 Originally, Article 443(b) of the 1931 Commercial Court Nizam specified that transactions involving banks fell within the commercial jurisdiction. But some cases still ended up in the general courts, since at that time discipline in observing the King’s jurisdictional assignments was weak, and many believed that the general courts had jurisdiction over any case that was brought before them. The government needed a solution. After a false start in 1985 when the Minister of Commerce assigned bank transactions to a committee within his Ministry, a measure that was never implemented,77 a second attempt was made in 1987, with a royal order creating a specialised jurisdiction under the umbrella of the central bank, the Saudi Arabian Monetary Authority (SAMA).78 The new entity bore the name ‘Committee for the Settlement (taswiya) of Banking Disputes’. Article 1 of that order formed a committee of three specialised persons to ‘study cases between banks and their customers in order to settle differences and find appropriate solutions between the parties in accordance with the agreements executed by them’. This language portrays the purpose of the committee as only settling disputes by persuading the parties to stand by what they had originally agreed, a sort of ad hoc solution to what otherwise had become an intractable problem. But this is little more than a euphemism, since the same royal order allowed the Committee to punish parties that resisted ‘settlements’ proposed by the Committee with administrative penalties such as travel bans and black-listing; it also, however, left the door open for a litigant who was willing to brave these penalties to bring his suit to the regular courts. When other courts questioned whether the decisions of these committees were final judgments deserving enforcement, King Fahd issued a series of royal orders in the mid-2000s confirming that they were.79 Even after that, in 2011 a famous Board of Grievances decision declared the banking committee not a court, so that its decisions could not be enforced as judgments (unfortunately I do not have a copy of that decision). The decision reportedly relied chiefly on the fact that the Committee was charged only to reach settlements. The decision was reversed. An earlier judgment, in 2009, now published,80 had gone the other way, after litigating some of the same issues. It declares that the plaintiff ’s complaint that he was never asked to agree to the ‘settlement’ proposed by the committee is a point that must be raised with that committee. The court notes, but does not respond to, an argument that res judicata cannot apply given that the banking committee is not a court under the Basic Nizam. In any event, the uncertainty about the jurisdiction over bank disputes now seems to be cleared up. That it has taken nearly 20 years since the Committee was created is itself

76 The view of the general courts toward interest-bearing transactions still appears in a 2017 compilation of rules decided by the highest-level general courts. These rules call for confiscation of interest to the state so that the borrower does not benefit twice from his illegal act, ie taking out an unlawful loan and then escaping liability for the consideration he had agreed on to get that loan. The rules also prohibit the registration of mortgages for such loans. Ministry of Justice-Principles of Highest Courts-2016, Nos 84, 85, 90. 77 Frank E Vogel, ‘Banking Disputes in Saudi Arabia: An Analysis of Decision 822’ (1986) 9(4) Middle East Executive Reports 21–24. 78 Royal Order No 729/8 dated 10/7/1407 (10 March 1987). 79 See eg Royal Decree No M/5857 dated 4/8/1427 (28 August 2006). 80 Decision No 18, 1 BG-Com-1430 127 (Com C No 27, Riyadh, 1428 (2007)).

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Court System of Saudi Arabia 2.2.4.2 testimony to the sensitivity of the subject. A royal order by King Abdullah in 2012 decisively moved to shore up the Committee, probably in response to the 2011 Board of Grievances decision.81 First, the order changed the name of the committee to ‘Banking Disputes Committee’, perhaps to put behind it the idea that the Committee only arranges settlement (taswiya) between the parties. Second, it created a new appellate committee, the decisions of which are final, required that one member of the trial-level committee be Sharia-trained, and augmented the Committee’s powers of enforcement using administrative penalties.82 To enhance the appearance of independence, the Banking Dispute Committee, along with its linked appellate committee, are now lodged outside the Monetary Authority in an independent organisation called the Committee for Banking and Financial Disputes and Violations, where they are joined by two other tribunals, the Committees for the Settlement of Finance Violations and Disputes and a tribunal overseeing credit reporting. Jurisdiction As stated by the committee itself in 2006, the jurisdiction of the banking committee applies if two elements exist: one of the two parties is a bank, and the claim is related to banking business per se.83 The jurisdiction was expanded in 2012 to include transactions that are ancillary (bi-al-taba`iyya) to banking transactions. Reportedly, one purpose of this addition was to eliminate doubt as to whether Sharia-compliant transactions were covered.84 In 2006 the Committee published a volume of summaries of many of its decisions.85 Some of these summaries reflect its practice of enforcing the payment of interest in accordance with the parties’ agreement in the amounts accrued up to the time of default.86 b. Committees for the Settlement of Financial Securities Disputes Organisation and Character The Capital Market Nizam, issued in 2003,87 created the Saudi Capital Market (al-sūq al-māliyya al-sa`ūdiyya) and the Capital Market Authority (hay’at al-sūq al-māliyya) to supervise it. The same Nizam, in Article 25, created the Committee for the Settlement of

81 Royal

Order No 37441 dated 11/8/1433 (1 July 2012). Law Firm, ‘SAMA Committee Restructuring’, July 2012, available at www.aljadaan.com/files/file/ SAMA%20Committee%20Restructuring%20Briefing%20Note.pdf, accessed 1 August 2019. 83 Saudi Arabian Monetary Authority, al-Munāza`āt al-maṣrafiyya: Ijrā’āt al-taqādī amāma lajnat taswiyya al-munāza`āt al-maṣrafiyya wa-al-mabādi’ allatī qarrarathā (Riyadh: Saudi Arabian Monetary Authority, 2006) Nos 6–46. 84 Al-Jadaan Law Firm (n 82). See, as an example of a Board of Grievances case rejecting jurisdiction over an Islamic bank transaction, despite the claim that it was a trade deal and not a banking transaction, Decision No 107, BG-Com-`Ajlān-collection (Com C No 4, Riyadh, 1422 (2001)). 85 Saudi Arabian Monetary Authority (n 83). 86 Ibid, Nos 563–67. Perhaps, in terms of an Islamic legal justification for the result, the Committee would argue that, from the viewpoint of justice or equity parties benefiting from loans should not escape the burdens they accepted when taking these loans; that alternatives such as punishment or forfeiture of the interest to the state are impractical; or that necessity compels Saudi Arabia to acquiesce in financial practices followed worldwide. In pure fiqh terms, arguments are also available but have not yet been endorsed by any authority in Saudi Arabia  – such as that bank loans are a novel transaction falling outside the purposes of the usury (ribā) proposition, or that the prohibition of ribā should be confined to the so-called ‘pre-Islamic ribā’ (ribā al-jāhiliyya). On ribā, see section 4.4.2. 87 Niẓām al-sūq al-māliyya, Royal Decree No M/30 dated 2/6/1424 (31 July 2003). 82 Al-Jadaan

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Financial Securities Disputes (lajnat al-faṣl fī munāza`āt al-awrāq al-māliyya). The article specified that the members of the committee were to be ‘legal (qānūniyyūn) advisers specialised in the fiqh of transactions and capital markets, with experience in commercial and financial cases and in securities’. Article 25 also provides for an appellate-level committee, which was duly created in 2005.88 The appellate committee is composed of three members, representing the Ministry of Finance, the Ministry of Commerce and Industry, and the Bureau of Experts at the Council of Ministers. Its decisions are final. Before the issuance of the Capital Markets Nizam, the trading of shares of publicly listed companies was generally handled by the commercial banks, which maintained trading rooms. As a result, civil disputes arising from securities trading brought by or against banks were heard before the Banking Disputes Committee.89 Jurisdiction The Committees (trial and appellate) have jurisdiction over all disputes related to the Authority, the Capital Market, and securities trading on them, whether these disputes are administrative, criminal, or civil in nature. In the case of civil claims, jurisdiction exists only if one of the parties is a broker licensed by the Authority. Disputes involving joint stock companies (sharikāt al-musāhama), the form of commercial company that allows for public listing of its shares, may fall under the Committees and not the commercial courts if the subject matter is one regulated by the Capital Authority.90 The Committees have published a number of their decisions, some reached over a decade ago.91 c. Committees for the Settlement of Finance Disputes Organisation and Character In 2012 King Abdullah announced an ambitious package of three nizams designed to create a new industry of financial leasing using transaction types already long employed by the Islamic finance industry.92 It was meant to serve important public policy goals, including awakening new dynamism in the private sector, relieving a severe housing crisis, and making it easier for newer generations to afford homes. It was first proposed much earlier, at a time of both financial downturn within the Kingdom and enthusiasm everywhere else for the securitisation of mortgages and other debt instruments. Though interest in this initiative diminished after the global financial crisis of 2008–09, the package of nizams was nonetheless adopted. The initiative relied heavily on the modern Islamic-finance contract of hire-purchase, al-ijāra al-muntahiya bi-al-tamlīk (literally ‘the lease that culminates in ownership’), which can be made to mimic closely a mortgage on real estate or an instalment purchase of personal property secured by that property, and moreover is potentially securitisable within a pool of similar investments. The idea was that, since this mode of finance claims to be 88 Council

of Ministers Resolution No 222 dated 22/8/1426 (26 September 2005). Saudi Arabian Monetary Authority (n 83) No 33. 90 Council of Ministers Resolution No 30 dated 27/1/1437 (9 November 2015) issuing the new Companies Law. 91 See www.crsd.org.sa/ar/ResolutionsCommittee/Decisions/Pages/default.aspx, accessed 1 August 2019. 92 Royal Decrees Nos 48, 50, 51 all dated 13/8/1433 (3 July 2012). 89 See

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Court System of Saudi Arabia 2.2.4.2 Sharia-compliant, making it available would help overcome the reluctance of the Saudi middle classes to borrow, other than from government programs that had long subsidised home purchases. But the credential of this transaction as Sharia-compliant has faced challenges among scholars not already committed to Islamic finance methods, and among judges. The debate about the Sharia legality of the transaction in the courts and among scholars is the subject of a case study in section 4.4.4. When issuing the nizam package, King Abdullah chose to create two new committees – a trial-level committee and an appellate committee – to enforce the provisions of the nizams, rather than to assign this enforcement to the commercial court. Indeed, he went further and identified these committees as among the committees ‘exempted’ from eventual merger into the general courts.93 Jurisdiction The royal order issuing the Nizam on Supervision of Finance Companies defined the jurisdiction of the new committees as follows: 1.

… 1.

2.

3. 2.

Deciding on violations and claims of public and private right arising from the application of the rules of the Nizam on Supervision of Finance Companies and the rules of the Financial Lease Nizam, their implementing regulations, and the principles and instructions related to them; Deciding appeals from persons affected by relevant decisions of the Saudi Arabian Monetary Authority as long as the complaint is within 60 days of the date of the notice of the decision; …

The following are not included in the jurisdiction of the Committee: 1.

2.

Decision of disputes arising from real estate finance contracts concluded between beneficiaries and real estate financing entities, and financial lease contracts if the basis for the dispute is a real right in real estate; Decision of securities disputes arising from financing activity.94

Clearly the last two clauses are meant to exclude both disputes related to, first, rights in real estate, a jurisdiction jealously guarded by the general courts – though the Committee still has jurisdiction over disputes concerning real estate financing agreements themselves; and second, financial securities traded on the capital market and therefore within the jurisdiction of the Committee for the Settlement of Financial Securities Disputes. The Committees have not, to my knowledge, published any of their decisions. d. Commissions for the Settlement of Labour Disputes Organisation and Character These tribunals shifted to the general courts in October 2018, where they form a new branch of those courts called the Labour Courts (al-maḥākim al-`ummāliyya). Originally instituted

93 Royal 94 Royal

Decree No M/51 dated 13/8/1433 (3 July 2012), Paragraph Three, No 10. Decree No M/51 dated 13/8/1433 (3 July 2012), Paragraph Three.

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2.2.5

Saudi Legal System: Constitution, Laws, and Courts

in 1969, the Commissions operated within the Ministry of Labour to apply the Labour Nizam. From the start they possessed an appellate level, which issued final judgments. A nizam to regulate the labour relationship was one of the first nizams issued as Saudi Arabia launched a major wave of legal modernisation in the 1960s. Some provisions in the former (1969) and present (2005) Labour Nizams95 could potentially provoke criticism from scholars, but most of their provisions could probably be rationalised as a siyāsa-shar`iyyabased measure governing the terms of employment relationships in the public interest. Jurisdiction Article 34 of the Nizam of Sharia Procedure states the present jurisdiction of the labour courts as at their transfer to the general courts mid-2018: Labour courts shall have jurisdiction to consider the following: a) b) c) d) e)

f) g)

disputes relating to work contracts, wages, rights, work injuries, and compensation therefor; disputes relating to disciplinary measures imposed by the employer on the employee or requesting exemption therefrom; lawsuits filed for imposing punishments provided for in the Labour Nizam; disputes arising from termination of employment; complaints made by employers and employees whose objections to any decision issued by any competent department of the General Organisation for Social Insurance relating to mandatory registration, contributions, or compensation have been refused; disputes relating to employees governed by the provisions of the Labour Nizam, including workers employed by the government; and disputes arising from the application of the Labour Nizam and Social Insurance Nizam, without prejudice to the jurisdictions of other courts and the Board of Grievances.

Many of the Commissions’ decisions have now been posted on their website.96

2.2.5. The 2007 Court Reorganisation The final section of our overview of the Saudi judicial system concerns King Abdullah’s 2007 court reorganisation. The reorganisation took the form of an entire package of nizams and orders, including a new Nizam of the Judiciary97 and Nizam of the Board of Grievances.98 It ordered many changes in the legal system, some still awaiting completion. The new Nizam of the Judiciary, applying to the general courts, further developed existing features, for example by transforming the prior highest level of the judicial system, the Supreme Judicial Council, into two bodies by creating a new Supreme Court. The new Nizam of the Board of Grievances, in turn, assigned two former functions of the ‘General Board’ of the Board of Grievances (the en banc gathering of all appellate judges) to two new bodies: a new Supreme Administrative Court and a new Administrative Judicial Council as

95 Niẓām al-`amal wa-al-`ummāl, Royal Decree No M/21 dated 6/9/1389 (17 September 1969); Niẓām al-`amal, Royal Decree No M/51 dated 23/8/1426 (27 September 2005). 96 See www.labordisputes.gov.sa/single/decision, accessed 1 August 2019. 97 Nizam of the Judiciary-2007. 98 Board of Grievances Nizam-1982.

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Court System of Saudi Arabia 2.2.5 the counterpart to the Supreme Judicial Council. The Presidency of the Board of Grievances is now the counterpart of the Ministry of Justice, handling administration of the courts. The new nizams brought the nomenclature and structures of the general and administrative judiciary into parallel. But the reorganisation’s most important change, certainly for our purposes, is that it returned to the project of merging the specialised jurisdictions into the general courts. The jurisdictions singled out for the transfer are those of the Labour Commissions; the commercial division of the Board of Grievances; the criminal division of the Board that has handled various crimes defined over the decades by nizam, such as official embezzlement, official bribery, and forgery; and the Boards for Traffic Violations (these Boards are now within the Ministry of Interior; the transfer probably concerns only appeals from their decisions). Ordering these mergers represents a strong vote of confidence on the part of King Abdullah on two major points. The first is that judges of the commercial branch of the Board of Grievances have grafted the Kingdom’s commercial nizams onto traditional fiqh successfully, creating a body of rulings sufficiently meeting the needs of modern business. Presumably the King concluded that if, on top of this, those same judges were to migrate with the jurisdiction to the general courts, as has now happened, the commercial jurisdiction will be carried on with equal success in its new setting under the discipline of the Ministry of Justice. The second point is that the judges of the general courts have demonstrated a willingness to follow and enforce nizam rules sufficient for them to be entrusted with regulating the labour contract and taking over many additional nizam-based criminal jurisdictions from the Board of Grievances. The transfer of one of the four jurisdictions occurred promptly – the criminal jurisdictions of the Board. The transfer of the two largest jurisdictions, the Labour Commissions and the commercial jurisdiction, took longer, both occurring only in 2018. I will not attempt to describe either of these mergers in this book, since more time will be needed before their effects can be seen. The transfer of jurisdiction over traffic offences has not yet been announced. Notably, the effect of the reorganisation is to restore the Board of Grievances to its function purely as an administrative court, by shifting its commercial and penal jurisdictions into the general court system. It remains to be seen whether there will be any change in the character of commercial law adjudication due to its shift from the atmosphere of the Board of Grievances, where for decades nizams have been respected and enforced, to that of the general courts, where judges have had to deal with few substantive nizams outside administrative, criminal, and procedural spheres. Since the entire body of the Board of Grievances – commercial judges, cases, and files – has been transferred to the new entity, perhaps little will change. But if there is an influx of general court judges into the new commercial court, as seems inevitable, there may be a period of adjustment, perhaps even a new normal. This reorganisation applies to only three of the dozens of specialised committees. But some of the royal orders accompanying the reorganisation showed that King Abdullah intended to go much further – and again show his confidence that the time had come for the general courts to assume the enforcement of the generality of the nizams of the Kingdom. This emerges first in his order entitled ‘Mechanism for Implementing the Judiciary Nizam and the Nizam of the Board of Grievances’, issued along with the new Nizam of the Judiciary

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and the Nizam of the Board of Grievances in 2007.99 In it he announced that ‘the jurisdictions of the semi-judicial committees, which consider criminal cases or civil or commercial disputes, shall transfer to the general courts’, but at an unspecified time in the future and after completion of studies of the legislative steps that would be needed to achieve this.100 The order set relatively short deadlines for these studies to be completed, which have all expired. I do not know whether the studies were done, but no action to achieve the stated goal has been announced. Five years later, in 2012 when issuing the Enforcement Nizam (niẓām al-tanfīdh), King Abdullah reiterated his intention that ‘committees with semijudicial jurisdiction’ would join the general courts.101 Notably, however, in 2007 the King ‘exempted’ from the proposed general transfer three jurisdictions, those over banks, the capital market, and customs (jumruk),102 confirming this in 2012 when he added to this list the new committee for finance disputes.103

99 Āliyat al-`amal al-tanfīdhiyya li-niẓām al-qaḍā’ wa-niẓām dīwān al-maẓālim, Royal Decree No M/78 dated 9/9/1428 (1 October 2007), s 1, para 9; s 3; s 2. 100 The King also ordered a study and proposal concerning ‘semi-judicial committees that consider administrative disputes the decisions of which are subject to review before the Board of Grievances’. 101 Royal Decree No M/53 dated 13/8/1433 (3 July 2012). 102 It is a possibility that the customs committee was exempted not because it involves specialised knowledge – since many of the committees do – but because the scholars have in the past opposed the imposition of any taxes (maks) other than those ordained by the Sharia. 103 Royal Decree No M/51 dated 13/8/1433 (3 July 2012), Paragraph Three, No 10.

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3 Saudi Judicial Process: Procedure and Reasoning 3.1. Procedure and Evidence ......................................................................................................55 3.1.1. Civil Procedure and Evidence ...............................................................................57 3.1.2. Criminal Procedure and Evidence .......................................................................68 3.2. Legal and Judicial Reasoning ..............................................................................................70 3.2.1. Sharia and Fiqh .......................................................................................................71 3.2.2. Ijtihad, the Effort to Derive Law from the Revelation, and the Four ‘Roots of Fiqh’ ..................................................................................72 3.2.3. How a Judge Uses Fiqh Works to Develop his Ruling .......................................87 3.2.4. New Methods and Institutions Influencing Fiqh Interpretations ....................90 3.2.5. Judges and Legislation or Nizams .........................................................................95 3.2.6. Judges and the Appellate Process..........................................................................96 3.2.7. Novel Efforts to Make Judicial Outcomes More Predictable and Stable .......100 In this chapter I offer two introductions into the internal workings of Saudi courts and judges that will be helpful in appreciating the descriptions of business law to follow. The first concerns procedure and evidence, the second legal and judicial reasoning.

3.1. Procedure and Evidence Although procedural law falls outside the scope of this book, I offer this introduction into it primarily for three reasons. First, some aspects of Saudi procedural law crop up in the discussions to follow which will be unfamiliar to the reader. Second, as we shall see repeatedly in later chapters, rules of procedure and evidence appear throughout the substantive chapters of fiqh works, often because they implement – and reveal – rules and principles specific to those chapters. In such cases, they are in a sense rules germane to the subjectmatters of those chapters, and for that reason I shall be referring to them below. Third, neither Saudi nor fiqh civil procedure is a subject treated extensively in English.1 Several 1 See Mohammad Fadel, ‘Proof and Procedure in Islamic Law’ in Oxford International Encyclopedia of Legal History (Oxford: Oxford University Press, 2009) (based on the author’s unpublished dissertation on Maliki legal process); Brinkley Messick, ‘Commercial Litigation in a Shari’a Court’ in Dispensing Justice in Islam: Qadis and Their Judgments (Leiden: Brill, 2006) 195–218 (reviewing trial process based on a 1956 court decision in Yemen). An early general treatment is JND Anderson, ‘Muslim Procedure and Evidence’ (1949) 1(4) Journal of African Administration 176. Similarly, in French, see Robert Brunschvig, ‘Le Système de la preuve en droit musulman’ in Études d’islamologie, 2 vols (Paris: G-P Maisonneuve et Larose, 1976) vol 2, 201–17 (particularly useful on origins and influences from Quran and Sunna). There are some articles on procedures in Ottoman courts drawing on court records. See eg Ronald C Jennings, ‘Limitations of the Judicial Powers of the Kadi in 17th C Ottoman Kayseri’

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works by Saudi scholars discuss the subject, reporting on what could be known up to the time before the court decisions were published in great numbers.2 My discussion will focus particularly on forms of evidence and proof. Based on their reading of classical fiqh texts, Western writers have described the Islamic law of procedure as rigid, idealistic, and impractical.3 But in the hands of contemporary Saudi judges Islamic procedural law surprises, by exhibiting the opposites of these traits. All means of proof in traditional law – not only the claimant’s witnesses and the defendant’s admission or exculpatory oath, which are the pillars of the traditional doctrine, but also other oaths, written evidence, expert testimony, circumstantial evidence, rebuttable presumptions, and allocations of the burden of proof – are deployed flexibly. A watchword for Saudi procedure and evidence in all its phases is that the judge enjoys a power of discretion in deploying all of the processes and methods that fiqh affords in establishing the facts of his case.4 Many of the judicial practices observed – both the specific evidentiary methods used and the manner in which they are used – find only scattered support in the fiqh writings on evidence. One has to search across several schools of law for explicit fiqh support for them. How did they become standard parts of Saudi fiqh practice? Based on what authority? Three possibilities come to mind at once, all of potential interest to comparative lawyers and legal historians. The first possibility is that these methods and manners are emulations of modern rules of procedure, learned from the writings of the Arab civil law jurists. This is unlikely, since in Saudi Arabia these practices are not matters of explicit doctrine but engrained in the practice, and found even in the general courts relatively distant from foreign influence. Rather, I suspect they trace to techniques of Sharia courts handed down from generation to generation. If this is true, then one of the two remaining possibilities will apply. The choice among these depends on how far back some of these relatively unwritten characteristics of Saudi practice can be traced. A study comparing Saudi doctrine and practice as to court procedure and process with the comparable doctrine and (to the extent it is known from court records) practice of Mamluk, Ottoman, and other courts would be useful. In the Mamluk era (especially the fourteenth and fifteenth centuries), several scholars wrote treatises advocating that Sharia courts adopt some of the flexibility in court procedure and evidence known to courts organised by the ruler under his siyāsa powers. Famous in this

(1979) no 50 Studia Islamica 151–84, esp 171–81. On criminal procedure: Rudolph Peters, Crime and Punishment in Islamic Law: Theory and Practice from the Sixteenth to the Twenty-First Century (Cambridge: Cambridge University Press, 2005) 8–19, 79–92 (Ottoman context); Mohamed Selim El-Awa, ‘Confession and Other Means of Evidence’ in MA Abdel Haleem (ed), Criminal Justice in Islam: Judicial Procedure in the Sharī`a (London: IB Tauris, 2003) 111–29. 2 `Abd Allāh Āl Khunayn, al-Kāshif fī sharḥ niẓām al-murāfa`āt al-shar`iyya al-sa`ūdiyya, 2nd edn, 2 vols (Riyadh: Maktabat al-`Ubaykān, 2008). This is a two-volume commentary on the Nizam of Sharia Procedures-2000. A recent thesis, likely to be published, discusses procedure in commercial cases. Aḥmad al-`Ubūdī, ‘Ṭuruq al-ithbāt fī al-qaḍā’ al-tijārī wa-taṭbīqātuhā fī al-Mamlaka al-`Arabiyya al-Sa`ūdiyya’ (Doctorate, High Judicial Institute, Imam Muhammad University, 1433 (2011)). On criminal procedure, see Muhammad Sa`ad al-Rasheed, ‘Criminal Procedure in Saudi Arabian Judicial Institutions’ (University of Durham, 1973). 3 Anderson (n 1); NJ Coulson, A History of Islamic Law (Edinburgh: Edinburgh University Press, 1964) 124–27. Coulson describes the idealism and impracticality of the methods of evidence as a major reason why Sharia courts lost a great deal of their jurisdiction to ruler-established courts. 4 Anderson (n 1) considers fiqh procedure and evidence to lack all or most of the traits I ascribe to them in this paragraph, or considers these traits to be adaptations outside of or contrary to fiqh.

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Procedure and Evidence 3.1.1.1 respect, and often referred to in Saudi Arabia by scholars and courts, is the work by the Hanbali Ibn al-Qayyim (d 1350), al-Ṭuruq al-ḥukmiyya.5 Therefore, the second possible explanation for these Saudi practices is that they are a response to these texts. In that case the issue remains: are they a uniquely Saudi response, or one reflecting a legacy of judicial experience developing from further back, even Mamluk times? The third possibility is that many of these traits of court procedure are coeval with Islamic law itself, but little known to all but scholars and judges due to superficial comprehension of the fiqh itself, particularly when it is applied to real cases. Some of these practices may be no more than a judge’s natural responses to the practical necessities that he faces on taking the classical system of evidence seriously. That they are not discussed at length in fiqh texts may be simply because traditional fiqh scholars, realising the diversity of fact patterns judges confront in practice, intended that judges deploy such practices in their discretion. In what follows I take up first civil procedure, particularly as to evidence (section 3.1.1), and then supplement this with a few remarks about criminal procedure (section 3.1.2).

3.1.1. Civil Procedure and Evidence The following description draws on my knowledge of fiqh law, on my months-long observations of trials in various courts over a period of four years in Saudi Arabia during the 1980s, on my reading in recent years of many hundreds of Saudi court decisions, and on the new nizams of procedure issued in 2013. Of the latter, two of the procedure codes are relevant in civil matters: the Nizam of Sharia Procedures,6 applying to all trials unless superseded by more specific provisions elsewhere, and a shorter, specific nizam for the Board of Grievances.7 The first of these nizams is also often applied by specialised tribunals.

3.1.1.1. Functions of the Judge and of Parties In its general functioning, a trial conducted according to fiqh doctrines will seem familiar to visitors from common or civil law systems. The judge is under many injunctions – religious, moral, and legal – from both Sharia and nizam, to be an objective, neutral party, to treat litigants equally and with respect, and to ensure their rights fairly to be heard, to present their cases, and to seek redress if they feel the outcome was unjust in some way.8 The Islamic judge is the sole arbiter of fact and law; there is nothing like the common law conception of a jury. Also, compared to common law systems, the Saudi court process is more inquisitorial than adversarial, more like the civil law process.9 While it is up to the 5 Muḥammad Ibn Qayyim al-Jawziyya, al-Ṭuruq al-ḥukmiyya fī al-siyāsa al-shar`iyya, ed. Muḥammad al-Fiqī (Cairo: Maṭba`at al-Sunna al-Muḥammadiyya, 1373 (1954)); Baber Johansen, ‘Signs as Evidence: The Doctrine of Ibn Taymiyya (1263–1328) and Ibn Qayyim al-Jawziyya (d 1351) on Proof ’ (2002) 9(2) Islamic Law and Society 168–93. 6 Nizam of Sharia Procedures-2013. 7 Nizam of Board of Grievances Procedures-2013. 8 Frank E Vogel, Islamic Law and Legal System: Studies of Saudi Arabia (Leiden: Brill, 2000) 151–52. 9 The classical Islamic law in itself does not suggest an inquisitorial role for the judge. Whether the present Saudi practice is original or adopted after the Mamluk era would be part of the historical study proposed above.

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3.1.1.1

Saudi Judicial Process: Procedure and Reasoning

parties to present and then prove their claims and defences, the judge remains the active party. For example, he is the one who puts any questions to witnesses following their statements, though he may allow the parties to suggest or even ask questions. The judge also possesses considerable discretion in demanding various forms of proof, allocating forms of proof among the parties, shifting the burden of proving various points at issue, arranging for testimony of experts or as to facts outside the court, and composing the contents of oaths to be taken by the parties. The judge’s role is enhanced due to the absence in Islamic law of any notion that lawyers play an intrinsic role in the proceedings, are ‘officers of the court’. For a long time in modern Saudi Arabia lawyers were the exception, not the rule, particularly in the general courts, but they have become a common feature in the last few decades. Nizams governing the functions of attorneys under the aegis of the Ministry of Justice date back to 2001, but a system to license lawyers started long before. While the judge takes the lead in court, in another sense the parties play a larger role in the proceedings than in other legal systems. They bear more responsibility than in other modern systems to produce evidence for their claims or defences, whether that evidence is witnesses, documents, or real evidence. This is for three major reasons. First, in both Islamic law and Saudi law, the power of subpoena of witnesses does not exist.10 The witness must appear voluntarily; this is seen as necessary for his credibility. A second reason is that the court has few powers to compel discovery of evidence in the hands of the other party or third parties. The new Nizam of Sharia Procedures does attempt some modernisations in this respect, but they are not far-reaching. In traditional law, the process of questioning the parties beyond their respective pleadings was not made a standard feature, but judges in the past may well have practised it; even before procedural nizams were adopted, commercial court judges did so.11 In any event, in the new Nizam of Sharia Procedures, Articles 104 and 105, the judge is empowered to question (istijwāb) the litigants in person if present in court, and to call litigants for such questioning, on his own motion or on the request of the other party. If the litigant called fails to appear or to respond, the judge is permitted to draw his conclusions therefrom. If a litigant does not respond to questions and has no other evidence, he is treated as one who refuses (nākil) to answer a claim, a result that permits the judge to find facts or even issue judgment (depending on the point at issue) in favour of the opponent. A judge can even turn this provision into a means to obtain discovery of relevant documents the questioned party has been shown to possess.12 The Nizam endorses two other mild forms of discovery, not mentioned in the standard fiqh treatments. One is for the judge to pose questions to witnesses as well as to accede to requests by litigants to pose such questions (Art 125); and the second is to use the power of the court to obtain needed official documents from government agencies or even third parties, though, in the latter case, such parties may offer excuses not to comply (Art 149). Among producible government records are any filings or financial reports which nizams require merchants to file. In the case of trials involving merchants, another nizam, dating back to 1989, requires a merchant to keep business records, and these are producible

10 Nizam

of Sharia Procedures-2013, Arts 121, 126. No 62, 9 BG-Com-1408–1423 30 (Com C No 9, Jedda 1409 (1988)). 12 Decision No 62, 9 BG-Com-1408–1423. 11 Decision

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Procedure and Evidence 3.1.1.2 in litigation at the request of either party. If the party fails to produce such documents when so ordered, the court may draw inferences about the truth of the facts sought to be proved by those records.13 The third reason why parties bear greater responsibilities of proof than elsewhere is that a party may not testify in his own cause. This is because of a general principle, to be discussed below, that a proposed witness is disqualified if his testimony would serve some interest of his own in the proceeding itself or if he has other cause of bias in favour of the party by whom he was called. In fact, even a party’s employees or agents are disqualified as witnesses in his behalf, an outcome appearing frequently in the published decisions. Any statement by a party before the court, whether orally or in writing, is considered in the manner of a pleading. Insofar as it asserts facts or legal positions against that party’s interest, these become irrevocable admissions. If instead they are in his interest, and the other party in his court statements or filings fails to reject or question them, they may become accepted as admitted by the other party. But otherwise each party must prove facts by other evidence.

3.1.1.2. General Conduct of a Trial The first step in the sequence of a trial is that the plaintiff presents her14 claim. This claim must be muḥarrar, meaning that it states a claim sufficient to justify a litigation. The judge will question the plaintiff as needed to determine the sufficiency of the claim, whether the plaintiff has standing (ṣifa) to present it, and similar matters (Art 66 of the 2013 Nizam). Thereupon the defendant will be asked his response. If he refuses to respond or to offer evidence, he may lose the case outright as nākil (Art 67). If he responds with a simple or partial denial, but no affirmative defence (ie, a defence acknowledging some or all of the facts alleged by the plaintiff but legitimating the defendant’s position; for example, in a suit for payment, the defence that he has paid the plaintiff ), then the trial shifts to the next phase, proof of the plaintiff ’s claim.15 From this point the proceedings are governed by a maxim reported as a hadith of the Prophet: ‘[Producing] evidence is the obligation of the one who asserts and the oath is the obligation of the one who denies’ (al-bayyina `alā man idda`ā wa-al-yamīn `alā man ankara).16 This means that, to prove an assertion, one must produce evidence (bayyina), ideally two male Muslim eyewitnesses of good character, and to disprove an assertion (except in criminal cases), one must swear an exculpatory oath (yamīn). Accordingly, to win her case the plaintiff must produce her bayyina, or evidence sufficient to prove her claim.

13 Niẓām al-dafātir al-tijāriyya (Commercial Records Nizam), Royal Decree No M/61 dated 17/12/1409 (10 July 1989), Art 10. 14 In this instance it is convenient to use female pronouns, to distinguish the parties. Also, it allows me to represent, for once in this book, that in most settings women have formal legal rights under Islamic law identical to those of men. 15 In my 1980s observations in the general courts, typically the judge pursued settlement (ṣulḥ) at every opportunity during civil trials, and the great majority of cases ended by settlement. Vogel (n 8) 153–60. The decisions now published reflect only judgments on the merits. Conversations with judges of the general courts indicate that, in those courts at least, most cases still end in settlement. The Ministry of Justice has created administrative structures to encourage and conclude settlements before cases go before the courts. 16 Bayhaqi. In slightly different or partial forms, Tirmidhī, Bukhārī, Muslim.

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(What bayyina consists of besides two male eyewitnesses is discussed in the next section.) If she succeeds in doing so, and the defendant is still not heard to offer an affirmative defence (which he has not already surrendered or controverted by his answer), she wins her case. If she fails to offer bayyina that fully proves her case, the defendant has not yet won, since ‘the oath is the obligation of the one who denies’. At this point the court will ask the plaintiff if she wants the defendant to take an exculpatory oath (yamīn). If she chooses not to request it, she loses. If she does request it, the judge will frame an oath that categorically denies the facts at issue (eg ‘I swear by God that I do not owe money to the plaintiff ’) and propose it to the defendant. If he takes that oath, he wins outright. If, after being warned three times of the consequences of doing so, he refuses (nākil) to take the oath, he loses. Or he may instead be given the opportunity to ask the plaintiff to take an oath in favour of her suit; on this there is a difference of opinion discussed below. If the defendant instead of denying the claim outright had offered an affirmative defence, then as to that he takes the position of a plaintiff, and the above sequence holds with the roles reversed. Saudi trials tend to take the shape of many sessions, trials being repeatedly adjourned until all pleadings and evidence have been submitted and each party declares his case complete, whereupon the judge issues his opinion, generally at a later session. After the judgment is read, the parties are asked whether they are satisfied with it. The loser typically states his dissatisfaction, and is informed of the requirements and time limits for filing for review before the higher courts. If he does appeal, his petition is first filed with the trial court which may take that opportunity to hold further hearings and even amend its judgment (Art 189). If the court declines to do so, it forwards the case file to the next higher court.

3.1.1.3. Proof and Evidence in General a. Witnesses In the traditional law the paradigm of evidence is the testimony of two male adult sane eyewitnesses of sound religious practice and upright moral character (`adl). But many exceptions to that ideal apply, such as, in property cases, when two women of the same characteristics may replace one of the males.17 In fiqh law this two-male-witness ideal standard summed up the concept of evidence to the point that bayyina became synonymous with it. But here Saudi courts embrace the views of the fourteenth- and fifteenth-century fiqh scholars mentioned above who argued for greater flexibility in evidence, most importantly the Hanbali Ibn al-Qayyim. For Ibn al-Qayyim, ‘bayyina is whatever clarifies the truth and makes it evident’, and includes a wide range of forms of evidence besides the canonical two male witnesses, including, among others, the testimony of women.18

17 Decision No 34207046, 2 Gen-1434 230 (al-Ahsa’ 1434 (2012)) (one man and two women provide testimony to confirm a legal right). 18 Ibn Qayyim al-Jawziyya (n 5) 24. Cited in Decision No 28, 2 BG-Com-1428 495 (Com C No 9, Jedda 1428 (2007)). Ibn al-Qayyim further argued that the two-male-witness standard is meant for certifying facts for later proof at court (as in the case cited in n 17 above), and not as a general constraint on judges: Muḥammad Ibn Qayyim al-Jawziyya, al-Ṭuruq al-ḥukmiyya fī al-siyāsa al-shar`iyya, ed Nāyif Ḥamad (Mecca: Dār al-`Ālam al-Fawā’id, 1428 (2007)) 1:359. Cited in Decision No 34171137, 2 Gen-1434 118 (Riyadh 1434 (2012)). I do not observe in the cases any policy of rejecting women’s testimony where relevant – or restricting it such as by requiring the same testimony from another woman and a man.

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Procedure and Evidence 3.1.1.3 Drawing on traditional rules as to witnesses, the Saudi practice is as follows. A witness’s good character can be proved either by the judge’s knowledge of him or by the testimony of two other, unattested, witnesses (singular muzakkī); the opposite party may always offer witnesses or other proof to impugn the character of a witness.19 A witness must also not have a personal interest in the proceedings20 or other reason to be biased for the party calling him or against his opponent. Bias is presumed if the witness has any of the following relationships with the party calling him: employee,21 agent (with respect to his delegated tasks),22 director (mudīr),23 or close relative.24 Bias is also presumed if the person has enmity towards the opposing party.25 All these points may be raised by the opposing party, with witnesses if necessary. It seems from court decisions that the court often hears the testimony first, and then turns to the opposing party, leaving it to him to impugn the testimony. If grounds emerge for rejecting the testimony, the court then disregards it. The testimony must refer to facts not opinions, be plausible, and report what the witness directly experienced. Much of the time Saudi courts end up rejecting witness testimony after hearing it based on its content alone, declaring it ‘not relevant’ (ghayr mūṣil). Even though the traditional law requires that the testimony of witnesses, once found acceptable as meeting all the conditions of testimony, not be questioned by the judge, Saudi courts seem free to retain a degree of doubt. For example, a court may require the opposing party’s oath in denial, even as to matters putatively proved by witnesses.26 Or it may require plaintiff to take an oath in support of the evidence (istiẓhār, one of the forms of oath discussed in section 3.1.1.3-d below) or look for other proof such as circumstantial evidence.27 But it is possible that this happens only when the testimony fails to cover every aspect of the party’s case. As noted below, witnesses may also be expert witnesses or witnesses who view and evaluate presently existing facts, by means of whom much real and circumstantial evidence can enter the court.

19 Decision No 39/5, 3 Gen-Collection-1428 96 (Abu `Arish 1428 (2007)) (one who planned a robbery lacks good character); Decision No 165, 1 BG-Com-1430 222 (Com C No 30, Jedda 1429 (2008)) (one who has disputes with the government or worked as private contractor while a government employee (presumably against civil service rules) may still be of good character). Muzakkī witnesses are rarely mentioned in the cases, suggesting a possible contrast with my experience in the 1980s in the general courts where they appeared frequently. 20 Decision No 8, 9 BG-Com-1408–1423 211 (Com C No 12, Jedda 1419 (1998)); Decision No 39/5, 3 Gen-Collection-1428. 21 Decision No 363/10, 1 Gen-Collection-1428 96 (Riyadh 1425 (2004)); Decision No 163, 5 BG-Com-1434 2713 (Com C No 5, Jedda 1433 (2011)); Decision No 126, 3 BG-Com-1408–1423 181 (Com C No 9, Jedda 1414 (1993)). 22 Decision No 34248488, 15 Gen-1434 330 (al-Khobar 1434 (2012)); Decision No 188, 2 BG-Com-1428 423 (Com C No 3, Riyadh 1427 (2006)). 23 Decision No 363/10, 1 Gen-Collection-1428, 10; Decision No 309, cited in al-`Ubūdī (n 2) 630 (Com C No 2, city unknown 1430 (2008)); Decision No 163, 5 BG-Com-1434. 24 Decision No 34259015, 9 Gen-1434 279 (Gen Appellate Ct, al-Ta’if 1434 (2012)) (son’s testimony for father and against mother accepted but not conclusively); Decision No 278/31, 1 Gen-Collection-1428 150 (Riyadh 1425 (2004)) (son’s testimony excluded); Decision No 57, BG-Com Unpub (Com C No 5, Riyadh 1429 (2008)) (son’s testimony excluded); Decision No 62, 1 BG-Com-1429 448 (Com C No 10, Jedda 1428 (2007)) (fiqh does not disqualify a brother’s testimony). 25 Decision No 128, 2 BG-Com-1433 1100 (Com C No 1, Medina 1433 (2011)). 26 Decision No 32, 3 BG-Com-1430 1103 (Com C No 6, Riyadh 1429 (2008)). Defendant raised defences that plaintiff controverted by two qualified eyewitnesses. Even with these two witnesses, the court offered defendant the plaintiff ’s oath. This may be an instance of istiẓhār in that the issue was duress (ikrāh); on istiẓhār see section 3.1.1.3-d below. 27 Decision No 142, 9 BG-Com-1408–1423 121 (Com C No 2, Riyadh 1414 (1993)); Decision No 34293933, 4 Gen-1434 72 (Jedda 1434 (2012)).

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b. Writings, Documents, Records In the traditional law, little is said about written evidence. It is generally understood as a mere simulacrum, if fully attested as authentic by two other witnesses, for oral evidence. For example, two parties may agree on a contract, describe the agreement to two or more witnesses, write that account on paper, and have the witnesses sign the paper as recording what they heard. These witnesses then can appear later in court to establish the truth of the account. In practice, even in centuries past, written evidence was used widely, and means were found, such as pre-qualified court witnesses (`udūl) available to authenticate documents, to make their use easier.28 In any case, in modern times, and certainly for modern commercial transactions, the use of documents as evidence in and of themselves has become indispensable. For merchants to arrange always to have two qualified non-employee witnesses available to observe and later testify to all the intricate facts of a commercial case, or to the accuracy and authenticity of a document, is unthinkable.29 In practice, Saudi courts rely to a very great extent on documents. Evidence in the form of witnesses has become the exception, and in very few cases does witness testimony serve as the basis for a successful claim.30 A senior Saudi judge once opined to me that if a claim for a very large sum of money were brought before him with proof consisting only of witnesses, rather than a document, he would be inclined to disqualify the witnesses’ testimony on the grounds that it offended custom and reason. Several Saudi cases cite the statement by the Shafi`i scholar `Izz al-Din bin `Abd al-Salam (d 1262), from his book on general legal principles (qawā`id): The principle (qā`ida) in reports, claims, testimonies, acknowledgements, and other matters is that what reason disbelieves or allows but custom considers impossible is rejected. As for what custom considers remote but without impossibility, that has a rank between weak and strong possibility, on which people may differ.31

How is documentary evidence authenticated and admitted in court? Occasionally parties do use the traditional method of having witnesses attend the execution of a contract, as a means later to authenticate the document in court.32 But far more commonly parties rely, as in other modern legal systems, on signatures or seals entered by the parties on the document. If a signed or sealed document is offered in court, then the other party must either acknowledge its authenticity (the usual case) or claim that it was forged, whereupon the court carries out procedures to obtain expert evaluation of the signature or seal.33 If unsigned or

28 Jeannette A Wakin, ‘Introduction’ in The Function of Documents in Islamic Law: The Chapters on Sales from Ṭaḥāwī’s Kitāb al-Shurūṭ al-Kabīr (Albany : State University of New York Press, 1972) 1–72; Boğaç A Ergene, ‘Evidence in Ottoman Courts: Oral and Written Documentation in Early-Modern Courts of Islamic Law’ (2004) 124(3) Journal of the American Oriental Society 471–91. 29 For an example of how proof by witnesses and unattested documents can fail, see Decision No 467, 3 BG-Com-1431 1481 (Com C No 9, Jedda 1430). 30 Decision No 34293933, 4 Gen-1434; Decision No 34227273, 4 Gen-1434 336 (al-Ta’if 1434 (2012)); Decision No 142, 9 BG-Com-1408–1423; Decision No 32, 3 BG-Com-1430; Decision No 159, 3 BG-Com-1430 995 (Com C No 5, Riyadh 1430 (2008)); Decision No 278/31, 1 Gen-Collection-1428. 31 `Izz al-Dīn Ibn `Abd al-Salām al-Sulamī, Qawā`id al-aḥkām fī maṣāliḥ al-anām, ed Ṭāhā `Abd al-Ra’ūf Sa`d (Cairo: Maktabat al-Kulliyyāt al-Azhariyya, 1968) 2:125. Cited in Decision No 34306282, 3 Gen-1434 35 (Jedda 1434 (2012)); Decision No 34489, 6 Gen-1434 340 (Jedda 1434 (2012)). 32 Decision No 32, 3 BG-Com-1430. 33 Nizam of Sharia Procedures-2013, Arts 142–46, sets up a process for deciding claims of forgery.

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Procedure and Evidence 3.1.1.3 unsealed documents bear indicia of authenticity (a type of qarīna,‘circumstantial evidence’), the court tends to shift the burden of proving their inauthenticity to the party who seeks to exclude them. As mentioned, business records kept in the ordinary course are generally accepted as evidence both for and against the merchant who keeps them, this on grounds of custom and nizam.34 But unless benefiting from this special rule, a document produced by a party and offered in his own case has the same status of any other unilateral statement he makes; it requires further proof to support it.35 Because of the custom, both judicial and commercial, of relying on documentary evidence in business, and due to the burdens on parties generally to produce acceptable evidence, Saudi businessmen make it a point to keep meticulous records. One observes Saudi businessmen taking the precaution of obtaining signed acknowledgements of debts, other obligations, receipts of goods, etc, from their commercial counterparts. These, like all other writings signed or acknowledged by a party, become admissible evidence, unless that party can prove forgery or alteration. c. Expert Testimony An important form of evidence in traditional fiqh practice and in contemporary Saudi Arabia is the testimony of experts (ahl al-khibra).36 By means of these witnesses are proved facts objectively knowable outside the courtroom – such as prevailing customs, the value of property, the circumstances of a traffic accident, or the condition of land. Even a single expert may prove such a fact. Saudi Arabia has made expert testimony a vital mechanism in the trial of commercial cases, by innovating use of experts to examine the evidence of a case in the light of the parties’ positions and prepare a report giving conclusions even on essential elements of the litigation, such as on the fact of a breach of contract or the amount of contractual or tort damages. Parties may object to the expert’s report, and the court is not obligated to follow it,37 but judging by published decisions the expert report is generally adopted by the court. Experts are also frequently called for more traditional functions, such as to determine whether property purchased was defective38 or whether a bailee exercised the customary level of care.39 In fact, as to such matters a judge is at fault if he fails to rely on experts.40 It appears that expert witnesses are chosen in a number of ways, depending on the subject-matter. For some common issues, the government maintains a body of accredited experts. Courts sometimes call on the Chambers of Commerce for expert opinion. Other times the parties, singly or by agreement, identify an expert to testify.

34 Decision

No 89, 2 BG-Com-1408–1423 307 (Com C No 9, Riyadh 1409 (1988)). No 45, 8 BG-Com-1408–1423 274 (Com C No 2, Riyadh 1419 (1998)); Decision No 274, 2 BG-Com-1428 863 (Com C No 5, Riyadh 1427 (2006)). 36 For the premodern judicial practice, see Ron Shaham, The Expert Witness in Islamic Courts: Medicine and Crafts in the Service of Law (Chicago: University of Chicago Press, 2010) ch 2. 37 Decision No 87, 4 BG-Com-1432 1756 (Com C No 9, Jedda 1431 (2009)). 38 Decision No 34194877, 2 Gen-1434 91 (Riyadh 1434 (2012)). 39 Decision No 33431666, 6 Gen-1434 21 (`Ar`ar 1433 (2011)). 40 Supreme Court-Inspectors’ Observations-2014, No 146; Decision No unknown, cited in al-Ḥamad, ‘al-Khuṣūma fī tamalluk al-`aqār’ 540 (Supreme Judicial Council, Standing Committee 1420). 35 Decision

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3.1.1.3

Saudi Judicial Process: Procedure and Reasoning

d. The Oath (Yamīn) Witnesses do not swear to their testimony (shahāda) using words connoting religious or moral obligation as done in common law countries,41 but nonetheless it is a sin, as well as a potential crime and civil liability, to give false testimony. A greater religious sanctity surrounds the taking of the oath, yamīn. This method of proof – even though its effectiveness would seem to rest solely on pious fear of God’s punishment for the false oath – appears to serve very well in practice.42 Parties seem to take the oath seriously. In many published cases, a party chooses not to take the oath himself, and thereupon loses his case. Still more frequently, a party declines the opportunity to demand the oath from her opponent, even though, were the opponent then to refuse to take the oath, she would win her case. Saudi civil procedure also demonstrates how the oath can be used in ways other than the one mentioned in the Prophet’s hadith above,43 in which the defendant is offered the exculpatory oath if the plaintiff fails to present evidence sufficient to prove her case.44 First, a judge may allow a party whose oath is demanded and who refuses it to shift or return the oath (radd al-yamīn) to his opponent who then, if she swears it, wins. Ibn Qudama (d 1223) in his al-Mughnī discusses this oath, noting two opinions reported from Ibn Hanbal for and against its use; he prefers the opinion against it45 and his view is followed in Buhuti (d 1641).46 This is reputed to be the opinion also of the Hanafi school, whereas the Shafi`i and Maliki schools require the oath to be returned. Ibn Taymiyya (d 1328), followed by Ibn al-Qayyim, argued that the difference in the views – and in the source texts from which they derive – has to do with the facts at issue: is the plaintiff in a position to know the relevant facts; if so, he should be obliged to take the oath, and if not, he should not.47 Among Saudi judges all three positions are respected as legitimate.48 Published cases from both the general courts and the Board of Grievances show that courts sometimes return the oath.49 An interesting question is whether the same judge may choose to follow one opinion or the

41 It is sometimes allowed under Islamic law to administer the oath to witnesses. Decision No 166, 2 BG-Com1432 1674 (Com C No 18, Abha 1432 (2010)). 42 Vogel (n 8) 148–49. Ronald Jennings, in his close examination of court records from Ottoman courts in sixteenth- to seventeenth-century Cyprus, notes that the oath appears in relatively few cases, and only as the exculpatory oath. He notes that refusals to take the oath are very rare. Ronald C Jennings, ‘The Use of Oaths of Denial at an Ottoman Sharia Court Lefkosa (Nicosia), 1580–1640’ (1996) 20 Journal of Turkish Studies 13–23. 43 See text at n 16 above. 44 As to various uses of the oath there are strong similarities between fiqh and Jewish, Roman, and European civil law, including the Civil Code of France. The topic is explored in Guy Bechor, God in the Courtroom: The Transformation of Courtroom Oath and Perjury between Islamic and Franco-Egyptian Law (Leiden: Brill, 2012). 45 Muwaffaq al-Dīn Ibn Qudāma, al-Mughnī (Cairo: Maktabat al-Qāhira, 1388 (1968)) 10:211–12. 46 Manṣūr al-Buhūtī, Kashshāf al-qinā` `an matn al-Iqnā`, 6 vols (Beirut: Dār al-Kutub al-`Ilmiyya, nd) 6:338–39. 47 Muḥammad Ibn Qayyim al-Jawziyya, al-Ṭuruq al-ḥukmiyya fī al-siyāsa al-shar`iyya (Damascus: Dār al-Bayān, nd) 76, 77, 85, 102–04. 48 That a Saudi judge may hold any of these opinions is acknowledged in Supreme Court-Inspectors’ Observations-2014, 212; and in, eg, Decision No 34183132, 8 Gen-1434 40 (Riyadh 1434 (2012)). The Nizam of Sharia Procedures-2013, Art 113(2), mentions returning the oath as one of the options allowed a defendant called to take the oath, leaving undiscussed the role of the judge in offering the defendant that option or not. Al-`Ubūdī (n 2) 249 observes that most commercial circuits do not practice the return of the oath. 49 Decision No 30, 2 BG-Com-1428 706 (Com C No 12, Jedda 1428 (2007)); Decision No 40, 2 BG-Com-1428 460 (Com C No 21, Jedda 1428 (2007)); Decision No 33364368, 1 Gen-1434 304 (city unknown 1433 (2011)); Decision No 34183132, 8 Gen-1434.

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Procedure and Evidence 3.1.1.3 other on the question of this oath according to the utility of the oath in the circumstances (as suggested by Ibn al-Qayyim) or even his assessment of the strength of the plaintiff ’s case. A second type of oath, known classically and accepted by the Hanbali school, arises when a plaintiff who is unable to produce conclusive evidence (bayyina) for his case is allowed to offer his oath to complete that proof. In present-day Saudi Arabia, this oath seems to be standard practice. It is often referred to as yamīn mukammila or mutammima, meaning ‘complementing oath’.50 Published cases reveal a third type of oath, the yamīn istiẓhār (demonstrative oath, also referred to as istīthāq), which may be required by the judge of a party in situations where that party has an adequate bayyina, generally to rule out possibilities not addressed by the evidence.51 One situation where it is commonly used is when the opposing party is unable to offer his own defence, as in judgment against a dead or absent person or one lacking full legal capacity.52 Another is when the plaintiff seeks to regain her property and gives proof of ownership but is asked to give an oath that she never alienated the property subsequently. All schools allow it in various circumstances.53 The complementing and demonstrative oaths are administered to a party in the discretion of the judge, without the judge first offering that party’s opponent the choice whether to demand that oath. Finally, as a fourth additional use of the oath, I observed published cases where one party, outside all the above procedures, asks for the other party (or one of his employees, etc) to be given the oath, offering to concede the case if that party or person does so, and the court agrees to this approach.54 Resuming a point made above,55 one gets the impression upon reviewing many cases that it is not common for a party to win based on the testimony and documents she submits alone, without the court asking either her or her opponent for an oath. This is despite the fact that the traditional law suggests that, if a defendant offers only a blank denial, the plaintiff wins immediately on producing a bayyina proving her claim. Rather, in the Saudi cases

50 See Qari-Majalla, Arts 2365–69 for rules about this form of oath, calling it the mukammila. Interestingly the term mukammila or mutammima does not appear in Hanbali works, even the late works typically summarised by Qari. It is mentioned in Supreme Court-Inspectors’ Observations-2014, No 213. The term mutammima can be found in Maliki works. Abu `Abd Allāh Muḥammad Kharshī (d 1690), Sharḥ Mukhtaṣir Khalīl, 8 vols (Beirut: Dār al-Fikr, nd) 7:206. It is also used for the Egyptian form of the oath probably inspired by the Civil Code of France (serment supplétif). Bechor (n 44) 265. 51 Supreme Court-Inspectors’ Observations-2014, No 212–13. See also al-Lā’iḥa al-tanfīdhiyya li-Niẓām al-murāfa`āt al-shar`iyya [implementing regulation for Nizam of Sharia Procedures-2013], Minister of Justice Decision No 39933 dated 19/5/1435 (20 March 2014) confirming the right of judge to direct this oath to either party ‘in case of need’ (`inda al-iqtiḍā’). A party refusing the istiẓhār oath loses. Eg Decision No 188, 2 BG-Com1428 423 (Com C No 3, Riyadh 1427 (2006)). 52 Decision No 33251132, 1 Gen-1434 124 (Tabuk 1433 (2011)). 53 For Hanbali views, see `Alī al-Hindī, ‘Yamīn al-istiẓhār: dirāsa taṭbīqiyya’ (Masters, High Judicial Institute, Imam Muhammad University, 1434 (2012)); Ibn Qayyim al-Jawziyya (n 5) 145–46; Ibrāhīm Ibn Mufliḥ (d 1362), al-Nukat wa-al-fawā’id al-sanniyya `alā al-Muḥarrar li-Majd al-Dīn Ibn Taymiyya, 2 vols (Riyadh: Maktabat al-Ma`ārif, 1404 (1983)) 2:351. For other schools, see Muḥammad al-Zuḥaylī, Wasā’il al-ithbāt fī al-sharī`a al-islāmiyya (Damascus: Dār al-Bayān, 2007) 358–62. 54 See eg Decision No 74, 2 BG-Com-1428 509 (Com C No 15, Dammam 1428 (2007)) (plaintiff requests oath of former manager of the defendant; plaintiff loses his case when the manager takes the oath); Decision No 171, 3 BG-Com-1408–1423 197 (Com C No 10, Jedda 1416 (1995)) (defendant asks oath of plaintiff; the court calls this procedure istiḥkām; plaintiff refuses to take oath). 55 See text at nn 26–27 above.

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oaths can play a part even when the evidence on the claimant’s side seems overwhelming.56 Again, this may be because, in today’s complex cases, particularly commercial ones, it is very difficult to produce evidence probative of every element of one’s case. Also, it is rare for a defendant not to raise an affirmative defence, even if he is unable to prove it; if it is unproved, he has the right to ask the plaintiff to swear an oath denying that defence. Another point emerging from many cases is that, as decisions sometimes state,57 the judge must exercise considerable discretion on when, from whom, and on what issues to demand the oath, even if the fiqh texts themselves do not refer to that discretion. Inevitably, the judge must reach preliminary assessments of the facts before he can even apply the fiqh rules governing oaths. Moreover, the fiqh manuals reveal differences of opinion on when and how oaths are used, making even the governing rules a matter that the judge may decide. Courts seem divided on who should take the oath for commercial companies. Some require that the officer of the company who legally represents it in the lawsuit swear the oath;58 some do the same, but requiring the official to swear only to that of which he has knowledge, not as to absolute fact;59 others require the oath from whatever person within the company has knowledge of the facts.60 Courts seem routinely to accept the exculpatory oath of a non-Muslim foreigner as conclusive against the claim of a Muslim national, as in three published cases involving Buddhists, one of which cites Hanbali authority for doing so.61 56 See eg Decision No 109, 3 BG-Com-1430 1109 (Com C No 21, Medina 1429 (2008)). Faced with overwhelming proof that the person with whom plaintiff had contracted had been authorised to act on the defendant’s behalf and in his name, the defendant claimed that that person, though operating under his name, owned the business for his own account. At this point the court could have taken – but did not – any of the following three courses of action: find that the defendant’s response was so lacking in basis that it constituted a blank denial, and give judgment for the plaintiff; find that the plaintiff ’s proof was lacking in some essential element, and offer the plaintiff the right to ask for the defendant’s oath in denial; or find that the defendant’s response raised a legitimate affirmative defence, and give the defendant the right to ask the plaintiff for an oath in denial of that defence. Instead the circuit asked the plaintiff to take the istiẓhār oath, which by definition applies only to confirm a bayyina that is already complete. It worded the istiẓhār oath not as denial of the defendant’s defence, but as merely confirming the justice of the claim. After that oath was given, the defendant claimed prior payment by the agent, and asked for and received the plaintiff ’s oath specifically in denial of that defence. 57 Decision No 99, BG-Com Unpub (Com C No 16, Dammam 1430 (2008)). A party’s claim was so full of contradictions that the court refused to offer him the right to demand his opponent’s oath. The court stated that the judge has a power of ‘discretion and inquiry’ to make such determinations. 58 Decision No 28, BG-Review Board Unpub (BG Review Bd C No 4 1418 (1997)) (oath asked of person representing the company in the lawsuit); Decision No 117, BG-Com-`Ajlān-collection (BG Review Bd Com C No 4, Riyadh 1415 (1994)) (manager of company required to take the oath, not accountant who has knowledge). The same approaches may be used for commercial establishments which lack legal personality. Decision No 133, 5 BG-Com-1408–1423 285 (Com C No 9, Jedda 1413 (1992)) (manager of establishment says he has no knowledge, and when required to take the oath, refuses). 59 Decision No 220, 3 BG-Com-1408–1423 312 (Com C No 10, Jedda 1416 (1995)). This is the traditional rule for giving an oath concerning the act of another. Qari-Majalla, Art 2375. 60 Decision No 2, 3 BG-Com-1408–1423 316 (Com C No 18, Asir 1416 (1995)) (Palestinian worker must give oath, not owners); Decision No 35224352, 1 Gen-1435 156 (Jedda 1435 (2013)) (one who handled the contract takes the oath). 61 Decision No 150, 5 BG-Com-1408–1423 302 (Com C No 2, Riyadh 1413 (1992)) (Japanese Buddhist; oath administered ‘by God Most Great’); Decision No 269, BG-Com Unpub (Com C No 2, Dammam 1434 (2012)) (oath of Korean Buddhist; ‘it is established in fiqh and judicial practice that it is permissible to administer the oath to an unbeliever (kāfir) like a Muslim [citing Buhuti], and to augment the oath by administering it by God in creating what he exalts and reveres’); Decision No 74, 2 BG-Com-1428 (plaintiff requested oath of defendant’s Japanese ex-manager; court agreed: ex-manager took oath and defendant won; the exact form of the oath is not stated).

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Procedure and Evidence 3.1.1.3 e. The Burden of Proof This is another large topic, which I cannot handle at depth here. An easily overlooked feature of fiqh law, one with pervasive influence on actual outcomes, is the issue of allocation of the burden of proof between the parties. Which party should be put to her proof, and which should have the advantageous position of simply denying the claim and swearing an oath to his non-liability? Judges pay much attention to this point, and provisions on it are found throughout the chapters of fiqh manuals. One way this issue is stated is by the question: ‘whose word prevails?’ (fī man al-qawl qawluh?), a phrase to which is often appended ‘with his oath?’ (ma`a yamīnih?). Scholars make clear that the answer to this question rests ultimately on one consideration: whose position in the dispute is the ‘stronger’ (al-aqwā)? Saudi courts frequently mention this as a general principle (qā`ida). The strength of one party’s position may be because it is originally or ordinarily true (using, seemingly for both concepts, al-aṣl, lit., the root). This logic can be found in a passage from the Hanbali Ibn Qudama: [T]he oath was laid down on behalf of one whose truthfulness is the more apparent and whose position is the stronger. It is the right of one who is in possession [of property] because of the strength of his position due to [the possession], and it is the right of the one who denies because of the strength of his position [based on the maxim that] ‘the original principle is non-liability’ (al-aṣl barā’at al-dhimma).62

Regardless of the question of whose position is the aṣl, a party’s side may gain in strength from facts particular to the dispute with the result that the burden of proof shifts to the opposite party. This happens commonly for one of three reasons. First, fiqh manuals lay down default rules for where the burden of proof falls for a great many fact situations. For example, an agent ‘is believed’ when he claims that harm to the property of the principal in his possession occurred for a reason other than his own wrong; in other words, the owner bears the burden of proving that the agent wrongfully caused the harm. Second, as fiqh manuals acknowledge, a known general custom (`urf, `āda) can shift the burden. An example of such a custom in contemporary Saudi Arabia is that an employee in a shop is not authorised to trade on credit; therefore if the owner of the shop denies the employee’s authorisation, he is believed along with his oath.63 Third and finally, the burden of proof can be allocated based on circumstantial evidence (qarā’in) in the particular case, if that evidence makes the position of one or the other of the parties the ‘stronger’.64 For example, if party A deals with B through C believing that C is B’s agent, ordinarily A, in a suit against B, has the burden of proving C’s agency. But if the circumstances show that A and B had previously transacted through C as B’s agent, then the judge may shift the burden of proof to B to show he had revoked C’s agency. Multiple cases on these lines appear in a case study on authority in section 6.3.

62 Ibn Qudāma (n 45) 10:134. The context of the quotation is his explanation of why a plaintiff with only one witness is allowed to supplement his proof with the oath – this is because with his own witness his side becomes the ‘stronger’. 63 Decision No 61, 2 BG-Com-1432 544 (Com C No 21, Jedda 1431 (2009)). See discussion of this fact pattern in section 6.3.1.1-c. 64 Supreme Court-Inspectors’ Observations-2014, No 167.

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f. Circumstantial Evidence (Qarā’in) Circumstantial evidence (qarīna, pl. qarā’in, lit. connection, association, context) can, in itself and not just as a factor for allocating burden of proof, help prove a party’s case.65 Reliance on qarā’in has been gaining strength in Saudi Arabia for many decades, for many reasons including the scientific advancement in evidence such as DNA samples or electronic records.66 The International Academy of Islamic Fiqh (introduced below) has issued a fatwa generally supporting judicial reliance on qarā’in.67 Many published Saudi cases accept circumstantial evidence to complete proof that would otherwise be incomplete. As one general court states: ‘If qarā’in join together they can equate to a witness and are completed by the oath.’68 The Nizam of Sharia Procedures (2013) has a chapter endorsing reliance on circumstantial evidence, which includes: Article 156: A judge may draw one or more qarā’in from the facts of the case, the discussion by the litigants, or the witnesses to serve as a basis for his judgment or to complete an incomplete evidence proved before him, so that by means of the two together he forms a conviction that the right to a judgment is established. Article 157: Each litigant may rebut the presumption inferred by the judge; in that case, the presumption loses its value as proof.

3.1.2. Criminal Procedure and Evidence Since this book deals with criminal matters far less than civil ones, the discussion here is very brief, focusing on aspects of the system that an outsider to it may find surprising, or which a business person is more likely to encounter.69 The Nizam of Criminal Procedures (2013) states provisions that apply specifically to criminal trials, otherwise incorporating by reference provisions of the Nizam of Sharia Procedures.70 Thus, it provides in Article 102, as required by fiqh, that the oath is never demanded of a criminal defendant (this because of the principle that ‘the original condition is innocence’, al-aṣl al-barā’a).

3.1.2.1. Criminal and Civil Causes of Action Arising from Crime One aspect of the Saudi legal system that will strike those not familiar with Islamic law is the emphasis in criminal matters on the rights of the victim. Of course, in all legal systems

65 Qari-Majalla, Arts 2286–98 collects instances where what is apparent, the ẓāhir, may lend support to one or another assertion in the absence of other proof or when proofs are in balance. Art. 2291 reads ‘What is apparent does not establish rights; it only lends weight to one claim over another.’ 66 Vogel (n 8) 147–48. 67 OIC-Academy, ‘al-Ithbāt bi-al-qarā’in wa-al-amārāt (al-mustajiddāt)’, Decision No 194 (Decision No 9 of Session No 20, Year 2012) www.iifa-aifi.org/2364.html, accessed 1 August 2019. 68 Decision No 238/31, 1 Gen-Collection-1428 110 (Riyadh 1425 (2004)). 69 Vogel (n 8) ch 6 discusses Saudi criminal law in the general courts, both as to Islamic law doctrines and as to the practice in the 1980s and earlier. It covers some aspects of criminal procedure and evidence. 70 Nizam of Criminal Procedures-2013, Art 218.

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Procedure and Evidence 3.1.2.1 a criminal act, once proven, can give rise not only to a punishment exacted by the state but also to liability to the victim for civil damages. Saudi law, drawing here on Islamic law, construes these in terms of two separate rights arising from some (but not all) criminal acts – the ‘private right’ (al-ḥaqq al-khāṣṣ) and the ‘public right’ (al-ḥaqq al-`āmm), respectively. But in Islamic law the private right can include not only a claim for damages but also a right to see punishment done. This interest of the victim may be recognised in other legal systems as the right to bring a criminal complaint or as victims’ rights. But in Saudi law it gains emphasis from the provision in the Quran and Sunna, drawing on ancient Arab customs, for the victim or his heirs, in cases of murder or intentional bodily injury, to demand that the state inflict talion (qiṣāṣ, retaliation, an eye for an eye) on the offender, and, if the death or injury is unintentional or exact retribution is impossible, claim blood-money (diya) in quantities specified in the law. Islamic law carefully regulates and moderates the principle of retaliation to stem tribal blood feuds, an evil still not wholly extirpated in Saudi Arabia. But the principle that retaliation or blood-money is the right of the victim means that, for these crimes in particular, the chief punishment is one instigated by the victims in a civil lawsuit, not a criminal one. As a consequence, if the claimants forgive the offender – an act that the Quran encourages as religious charity71 – or fail to assert their rights, the offender may avoid suffering any this-worldly consequences from his unlawful act.72 Throughout Islamic history, however, the state and the scholars have not wholly acquiesced in that state of affairs; fiqh laid down that for some exceptional criminal acts, the perpetrator will still face punishment even if the victim forgives him; and the state may in any case invoke its siyāsa shar`iyya authority to punish the perpetrator for the breach of peace he caused regardless of the civil penalties. Under Saudi law, every crime that impacts private parties and not just the general peace involves the private right. Thus, for example, a businessman suing an employee civilly for embezzlement is understood thereby to claim a private right not only for civil damages but also to secure the offender’s punishment. In a case of prosecution for slander, a general court combined the public right – lashes pursuant to a Quranically prescribed punishment (ḥadd al-qadhf, for imputation of unchastity) and a fine in enforcement of a nizam – with a term of imprisonment as the private right of the complainant.73 Indeed, Saudi law goes so far as to endow individuals personally harmed by a crime with a right, part of their private right, to prosecute that crime themselves, unless and until the public prosecutor – an agency established as a separate arm of the Saudi judicial system74 – involves itself. This is reflected in the Nizam of Criminal Procedures (2013), Article 16. Indeed, again as in Islamic law, many criminal cases cannot even be filed unless the victim brings a private-right complaint,

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5:45, 4:92. See Vogel (n 8) 156. on Quran 4:92, a killer also must perform expiation, kaffāra, a religious obligation not enforced by the state or the court. 73 Decision No 3459216, 23 Gen-1434 65 (Gen Criminal Ct, Medina 1434 (2012)). See Nizam Combating Crimes of Information, Royal Decree No M/17, dated 8/3/1428 (27 March 2007), Art 3(5). The defendant had slandered the plaintiff via the internet. In another general court case, the defendant shaved the head of her twelve-yearold ex-stepdaughter without her ex-husband’s permission; the court sentenced her to a fine of 3000 SR (approx US$800) as private right, along with a ta`zīr punishment of thirty lashes and fifteen days imprisonment as public right. Decision No 14, 1 Gen-Collection-1428 364 (al-Da’ir 1427 (2006)). 74 Bureau of Investigation and Public Prosecution established by Niẓām Hay’at al-Taḥqīq wa-al-Iddi`ā’ al-`Āmm, Royal Decree No M/56, 24/10/1409 (29 May 1989). 72 Based

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even only for damages (Art 17). It is the norm for a single court to hear both types of claim, and to give judgment on both simultaneously (Art 181).

3.1.2.2. Failure to Pay When Due as a Crime In Islamic law, the delay (mumāṭala) of a solvent person to pay an amount when due without excuse is a sin and crime. As stated in two Prophetic hadiths, ‘delay (mumāṭala) by a solvent person is injustice (ẓulm)’, and ‘delay by one with means makes it lawful to dishonour and punish him’.75 The punishment historically was to administer lashes or imprisonment at the discretion of the judge until either the debtor proves that he is insolvent (mu`sir), whereupon he is released and, as required by the Quran itself (2:280), granted forbearance from his creditors until his financial situation should improve; or he is found solvent (mūsir) and he either pays or (though some scholars dissent) the state forcibly liquidates his assets to meet the debt. Comparable rules are codified in the 2012 Enforcement Nizam (niẓām al-tanfīdh).76 Besides multiple provisions for direct execution against the debtor’s property, the Nizam provides for the investigation of a debtor who claims insolvency and his imprisonment if the judge has proof that he is concealing assets, this extending up to five years (Art 78). As to companies created under the Companies Law, a director or manager (mudīr) of a company is treated, in many respects, as its alter ego, since ultimately only a mudīr can represent the company. This has led to the imprisonment of mudīrs when companies unjustifiably evade payment.77 Such imprisonment is explicitly provided for under the Enforcement Nizam (Arts 71, 86).

3.2. Legal and Judicial Reasoning As the second of two introductions into the inner workings of Saudi courts, let us consider the methods of legal reasoning followed by Saudi scholars and judges. Hopefully this discussion will enable the reader better to appreciate the descriptions of the business law to follow. Again, I offer only an overview of this subject. A fuller treatment – not possible given space constraints to begin with – is unlikely to be useful, for two reasons. First, many scholars have described in English the traditional hermeneutical methods followed by fiqh scholars to derive rulings from the canonical sources of the Sharia, and such studies can be consulted by those interested.78 Admittedly, most of these studies concern the methods by

75 Both hadiths appear in numerous hadith collections, the first in both Bukhari and Muslim. `Abd Allāh al-Manī`, ‘Maṭl al-ghanī ẓulm yuḥill `irḍuh wa-`uqūbatuh’ (1409 (1989)) no 2 Majallat al-Majma` al-Fiqhī al-Islāmī 195. 76 Enforcement Nizam-2012. 77 Decision No 15, 5 BG-Adm-1428 2181 (Adm C No 9, Jedda 1427 (2006)). The manager argued that it was the company that was liable, and hence his imprisonment was unjust and he deserves compensation for it; the court rejected his plea on two grounds: one, that he was a manager (mudīr) and thus obligated to take steps to cause the company to pay its debts; and, two, that he was, as general partner, liable jointly and severally with other partners for the company’s debts. 78 There are many basic introductions to Islamic law in English, including Coulson (n 3); Mohammad Hashim Kamali, Shari`ah Law: An Introduction (Oxford: Oxford University Press, 2008); Wael B Hallaq, Sharī`a: Theory,

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Legal and Judicial Reasoning 3.2.1 which scholars generate legal doctrines at relatively high levels of abstraction, and not how scholars and judges use these methods and others in relation to concrete issues, either as mufti in giving a contemporaneous legal opinion (fatwa) on a specific real-world issue, or as a judge in issuing a binding ruling in a real-world case. On reasoning at this more practical level, little is available in English. As a step to remedy this last gap, and as a second reason for not offering a lengthy treatment here, it is expected that the case studies to follow will exemplify for the reader the methods of the judges and muftis of Saudi Arabia. In what follows I will under each topic or subtopic first discuss its general aspects, with regard to Islamic law as a whole, and then remark on its specifically Saudi aspects.

3.2.1. Sharia and Fiqh Since the time of the Prophet, Muslims have understood that the means by which the believer earns God’s favour, and with it salvation, is through obedience to the divine command as conveyed for all time in the words of the Quran, the divine book, and the Prophet’s Sunna, or example. The latter is also taken as revealed, since God corrected the Prophet whenever he was in error. The Sunna became embodied in a great many written reports (individually or in English collectively called ‘hadith’) about the Prophet’s words and deeds, many contested as to their authenticity. Thus the Sunna, like the Quran, ends up as a written text, though much more diffuse and variable in both content and authenticity than the Quran. From these two texts Islamic jurisprudence arises by interpretation. I noted in section 2.1.2 the distinction between the perfect, immutable Divine Law itself as revealed in the Quran and the Sunna, called Sharia (literally ‘Way’), and the sum of human efforts to apprehend that law, some of which may be in error or dispute, called fiqh (literally ‘understanding’). Many schools of thought see little point in differentiating between the two, since they believe that fiqh is the only valid means to know the Sharia and that any apparent flaws in it are divinely intended. Yet the distinction remains useful and valid. The outsider who wishes to comment on Islamic legal phenomena in history without questioning the truth of Muslim beliefs may find it indispensable. Generally the Islamic law we refer to in this book is fiqh, not the Sharia. As noted in section 1.4.1.1, I use the term ‘traditional law’ to refer to fiqh as known from the immense corpus of legal writings by religious scholars from the eighth to the eighteenth century, up to the time of widespread Westernising transformations in the legal systems of Muslim countries. This law provides a constant, in the sense of being authoritatively knowable. But I also discuss modern fiqh, ie modern interpretations and applications of the Sharia. By using the term ‘traditional law’ I do not imply that this law is a matter of tradition, not law, or that it is out of date. It is undeniable, however, that contemporary fiqh often differs from

Practice, Transformations (Cambridge: Cambridge University Press, 2009). References particularly concerned with ijtihad and hermeneutical methods include Bernard Weiss, ‘Interpretation in Islamic Law: The Theory of Ijtihad’ (1978) 26 American Journal of Comparative Law 199–210 (a short introduction); Aron Zysow, The Economy of Certainty: An Introduction to the Typology of Islamic Legal Theory (Atlanta, GA: Lockwood Press, 2013); Bernard G Weiss, The Spirit of Islamic Law (Athens: University of Georgia Press, 1998); Wael B Hallaq, A History of Islamic Legal Theories: An Introduction to Sunnī uṣūl al–fiqh (Cambridge: Cambridge University Press, 1997). Many of the points made in this section are considered in more detail both as to Saudi and Islamic law in Vogel (n 8) chs 1–4.

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traditional fiqh. Clearly it does so in content, in discussing matters such as heart transplants or commodities options. As for the scholarly process for deriving the law, as will be discussed below, new freedoms to reinterpret, perhaps even new methods of interpretation, have entered the picture. In Saudi Arabia, unlike most other Muslim countries, the law and legal system experienced no clean break, no sudden rupture, between traditional and modern fiqh. As elsewhere in the Muslim world the age-old enterprise of fiqh continues, but in Saudi Arabia it does so with more continuity than anywhere else, certainly in terms of the law applied in practice. This continuity is a matter of deliberate training and practice, carried on from one generation of scholars to the next. Nevertheless, even in Saudi Arabia, there have been major shifts in the nomenclature, institutions, and even methods of derivation and application of fiqh laws, such that we need to distinguish modern Saudi fiqh from traditional fiqh. How great are these shifts, these dislocations? This is one of the questions that drove the research and writing of this book. I hope that even the reader previously unacquainted with Islamic law will have insight into the answer to that question after reading some of the case studies to follow.

3.2.2. Ijtihad, the Effort to Derive Law from the Revelation, and the Four ‘Roots of Fiqh’ In section 2.1.2, I briefly explained ijtihad, the name given to the effort, by one seeking to know the divine ruling for a particular act, to derive that ruling from the revealed sources of the Quran and Sunna. The method by which ijtihad is properly performed is studied in the science of uṣūl al-fiqh, ‘the roots of fiqh’. Again, ijtihad and its method have been abundantly explained in books in English.79 I shall discuss only Sunni uṣūl al-fiqh, since only the Sunni sect of Islam is relevant to Saudi business law practice. Sunni scholars reached agreement that the ‘roots’, meaning sources, for deriving fiqh opinions are four. The Quran is the ultimate source. It is considered the direct word of God, its authenticity – the accuracy of the received text as that revealed by God to the Prophet Muhammad – unquestionable. Only a small proportion of the Quran lays down enforceable legal rules. Medieval scholars attempted a count of the verses that concerned the legality of actions (āyāt al-aḥkām), reaching numbers between 150 and 500, and these include matters of ritual. Many verses are quite concrete and specific – such as laying down rules of inheritance in detail – while others are general, such as the command ‘do not wrongfully consume each other’s wealth’ (4:29) or ‘Fulfil all covenants’ (5:1). Others declare certain actions prohibited or obligatory in general terms, such as the drinking of wine or the paying of alms-tax. The second source is the Sunna of the Prophet Muhammad. Sunna means ‘path’ or ‘practice’. While initially this conception took other forms, over time the Sunna came to mean the historical record of the Prophet’s doings and sayings, and to some extent the doings and sayings of his companions and early followers. The historical record consisted of hadiths about the Prophet (and early generations), each authenticated by a listing of the 79 See

n 78.

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Legal and Judicial Reasoning 3.2.2 sequence of narrators who have passed on the story (‘C reported that B reported that A said that the Prophet did …’). A vast scholarly enterprise arose around the collection of hadiths and the sifting and verification of their chains of narrators. Scholars rank hadiths according to their authenticity, from universally corroborated, to sound, to weak, on down to rejected. Since hadiths, as historical accounts about the Prophet, are rarely of incontestable veracity, their value as revelation is less than that of Quranic verses. But, from the viewpoint of law, since it reports so many diverse legal dicta and judgments issued by the Prophet and his followers, the Sunna is more legally copious and complex, more productive at the level of detail, than the Quran. If the legal revelation were a landscape, the Quran would fix the general lay of the land and a few prominent points, and the Sunna supply all else. Because so many texts on law in the Quran and Sunna are, if they are not very general, rather concrete and specific, scholars decided not to assume that God’s law consisted of general rules of which these events were only examples. Taking such an approach would, in the views of almost all scholars, introduce too great a human element into the divine message. God’s reasoning and purposes rather supersede the human – and that is the very reason for a revelation of law in the first place. So instead scholars strove to take the literal rulings as the divine law, and to minimise the role of fallible human reasoning in elaborating and applying them. How to do this awakened much controversy in early centuries, but in the end scholars settled on reasoning by analogy (qiyās) as the most defensible legal method. Qiyās then constitutes the third source or root of the fiqh. As defined by the scholars, qiyās requires, in order to apply the divine ruling to a new case, that a feature (`illa) found in the case decided by revelation, generally one relatively concrete and specific, is also found in the new case. Thus, from the ‘roots’ of Quran, Sunna, and qiyās scholars discover ‘branches’ (furū`), the term for all fiqh’s myriad derivations from the four sources. This method results in a casuistic law – ie one elaborated as a series of rulings for each known or imagined case – rather than in a rational or hierarchical system of rules. For example, from the Quranic ban on drinking ‘grape wine’, various scholars selected the following traits as the basis (`illa) for analogies: grape beverage; grape, date, or raisin beverage; drink from steeping fruits; drink after fermentation and settling; intoxicating liquid. Only a few scholars identified as the ground for analogy the one which is most general and most rational: intoxicating substance. All this the scholars felt was necessary if they were to submit genuinely to a law revealed by God. The last of the four roots of fiqh is ‘consensus‘ or ijmā`, meaning the agreement of the scholars. If an agreement meeting the prerequisites for an ijmā` occurs, then the ruling agreed upon becomes categorically certain, elevating that particular fiqh ruling from status as merely probable. But the theoretical prerequisites for a true ijmā`, one accepted by all scholars and schools, are stringent, meaning that the doctrine lends certainty to relatively few rules, leaving almost everything no more than probable.80 Indeed, the Hanbali school,

80 Schools’ and scholars’ constructions of ijmā` differ. Strictly speaking, only an ijmā` that meets the requirements of all schools is utterly binding. Claims of consensus among scholars that meet only less stringent standards bind only those who hold with those standards, leading to the possibility of an ijmā` accepted only within a particular school. For example, some, including the Hanbalis, hold that no qualified scholar’s view can ever be overridden by the agreement of a later generation, whereas Hanafis accept that it can. See Muwaffaq al-Dīn Ibn Qudāma, Rawḍat al-nāẓir (Riyadh: Maktabat al-Ma`ārif, 1404 (1983)) 1:376–77.

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the school most followed in Saudi Arabia, has particularly high prerequisites for ijmā`.81 In practice, however, for centuries past until today, scholars accord presumptive truth to propositions according to the degree that the reported opinions of scholars of the past agree on them. Modern scholars constantly mention whether a ruling is one on which two, three, or four of the schools agree (according to the preferred opinion of each), or whether it is one on which the majority (jumhūr) of all past scholars agree. One of the most important functions of ijmā` is to consecrate old opinions as potentially true. If an esteemed scholar from the past can be cited to have held an opinion, then no fully canonical ijmā` exists against that opinion.82 This explains in part why scholars of today, when confronted with a difficult dilemma, such as a need to adopt a position different from the one that their own school or even others schools would traditionally would adopt, set out on searches among past minority views of schools or even the opinions of single scholars. In the case studies to follow, we shall often see such opinions, previously disfavoured, seized on as a legitimate fiqh answer to a contemporary legal dilemma. These four sources or ‘roots’ are considered the foundation of Sunni fiqh since they were agreed on (in principle) among the four Sunni schools of law. But medieval scholars also deployed other interpretative methods outside these four. Some survive as legitimate methods within particular schools: for example, istiḥsān, or scholarly preference, often used to legitimate popular practice, characteristic of the Hanafi school of law; istiṣḥāb, the idea that matters remain the same until reason is given to change them, considered characteristic of the Shafi`i school; the normativity of the practice of the people of early Medina, characteristic of the Maliki school; and istiṣlāḥ, or the invoking of utility (maṣlaḥa) as a makeweight in analogical deductions, also characteristic of the Maliki school. Most of these make an appearance in the deliberations of Saudi scholars and judges that we review in the case studies to follow. One interpretative method, that of argumentation from maṣlaḥa, appears much less frequently in Saudi court judgments than one would expect given that two Hanbali scholars deeply respected in Saudi Arabia, Ibn Taymiyya and his student Ibn al-Qayyim, characteristically gave it much weight in forming their opinions.83 It would appear that Saudi courts consider that explicit use of this form of argumentation is inappropriate in their written judgments, and more proper for the issuance of fatwas by scholars or as justifying siyāsa acts, like nizams, by the king.84

81 See Ibn Qudāma (n 80) 1:331–88. This work of Ibn Qudāma is used in instruction in the Sharia colleges. The particular edition just cited is usefully accompanied by the commentary Nuzhat al-khāṭir al-`āṭir by `Abd al-Qādir Ibn Badrān (d 1927), a Syrian Salafi scholar. 82 This follows from the Hanbali view mentioned in n 80 above. Another aspect of ijmā` is that it rules out adopting an opinion on any point of law already considered by an earlier generation if that opinion cannot be reconciled with one or more of the opinions adopted in that generation. Ibn Qudāma (n 80) 1:377. But, again, few ijmā`s even of this type – ijmā`s against views contradicting those of an earlier generation – can be shown to meet the stringent technical prerequisites to be considered utterly binding. 83 Ibn Taymiyya opposed the unrestrained use of maṣlaḥa as an independent source of law, but argued for it as intrinsic to sound ijtihad drawing on Sharia sources. Aḥmad Ibn Taymiyya, Majmū` al-fatāwā, ed `Abd al-Raḥmān bin Qāsim (Medina: Majma` al-Malik Fahd li-Ṭibā`at al-Maṣḥaf al-Sharīf, 1416 (1995)) 11:344–47. See Felicitas Opwis, Maṣlaḥah and the Purpose of the Law: Islamic Discourse on Legal Change from the 4th/10th to 8th/14th Century (Leiden: Brill, 2010) 181–99. 84 For how maṣlaḥa has been understood as a source of law in Saudi Arabia, see Vogel (n 8) 343–46. As I was told in the 1980s, and as a conversation with a senior general court judge in 2014 confirms is still the case, judges sometimes invoke maṣlaḥa to justify choosing among alternative fiqh opinions according to the equities of the case before them.

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Legal and Judicial Reasoning 3.2.2.1 As mentioned above, ijtihad does not lead to certainty as to the divine ruling. Only authentic explicit revealed texts or canonical ijmā` directly applicable to the unique facts of an action can produce that. Ijtihad is always linked with opinion, and therefore an assessment (ẓann) of probability of truth. In a publication of advice to judges about judicial errors observed by court inspectors, the Supreme Judicial Council advises judges to reject a party’s demand for ‘the ruling of God’, because ‘The judge does not know whether his judgment attains to the judgment of God or not. For he practices ijtihad in his judgment, and it may agree with the Sharia of God, or it may not.’85 In Saudi Arabia, independent ijtihad even by the ordinary qadi remains the ideal – and ideology – of the scholarly establishment, fortifying its claim to serve, as explained in section 2.1.3, as a constitutional check and balance on the state. Ijtihad by the judge, ‘microcosmic law-making’ in my phrase, still stands as a check on legislation and other legal actions by the state. Judges still think of their efforts in terms of determining to the best of their ability the true Sharia rule for their case, even if they tend to follow in the end whatever view is currently most accepted among them. We should recall that a judge practices ijtihad not just in the choice of an abstract legal ruling but also in the process by which he finds from evidence presented before him the facts of a dispute and gives those facts legal meaning,86 and he may consider both these efforts – deciding the law and finding the facts – as one whole. What elsewhere may be considered merely ‘applying the law to the facts’ may well be understood by a Saudi judge as religiously – and legally and constitutionally – more momentous than that.

3.2.2.1. The Four Schools of Islamic Law As noted in section 2.1.2, every ijtihad, if by a knowledgeable scholar following the canonical methods, deserves equal deference. Not only this, but the methods of uṣūl al-fiqh are so expansive (not much confined even by ijmā` if ijmā` is taken strictly) as to tolerate an immense diversity of opinions. The early Muslim community did indeed experience a wide disparity of views. When, however, in the ninth century CE, the caliphate began to turn to the scholars and their law to provide the actual law of states, scholars promptly found ways to deliver greater predictability and uniformity in the law. Rather than invite or permit the state to step in and accomplish these goals, the scholars developed their own non-positive, informally institutionalised system for achieving them. Around the same time, scholars began to practice following the view of a scholar more learned than they, even when they themselves did not know that view’s religious justification; this practice is called taqlīd. Taqlīd had previously been confined to those with no pretensions to religious learning, and as such dated from the beginning of Islam. Adopting this principle, scholars began to align behind a few notable scholars, coalescing into ‘schools of thought’ (madhāhib, sing. madhhab). Each legal school developed its own coherent corpus of laws, thus ensuring a much greater degree of predictability and stability in interpretations. After about the thirteenth century, in the Sunni branch of Islam only four schools survived, in effect four discrete streams of interpretation of the revealed Sharia. The four were the Hanafi, Maliki, Shafi`i, and Hanbali schools, all named after scholars living in the period between 700 and 850. Each of these

85 Supreme 86 Vogel

Court-Inspectors’ Observations-2014, No 477. (n 8) 137–50. The point was also touched on in section 2.1.2.

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schools of law offers a comprehensive and detailed body of rules covering all subjects of law, from ritual through to law as nowadays understood, including procedural matters such as adjudication, evidence, and the like. Each school tended to spread through large contiguous geographic areas, with a great deal of overlap among them on the boundaries of those areas. Although each school has its individual character and some unique rules, the four schools agree on most of their basic principles, including the four sources of law. But perhaps even more consequential for uniformities among them, the four schools shared many basic legal conceptions and principles, particularly those that had been framed in centuries before the schools even emerged. As ijtihad theory requires, each school’s jurisprudence is considered not divine law per se, not Sharia, but fiqh – the accumulation of scholars’ efforts over the centuries to learn God’s law from the Quran and Sunna. Because attempts at truth may be multiple, Muslims accept all the four schools equally as legitimate interpretations. The Muslim layperson has always dealt with this diversity by following the rules traditionally followed in his or her family (usually the regionally dominant school) on ordinary matters, and by consulting the scholar he or she most respects on special or difficult issues. Certainly for scholars, no school ever enforced complete uniformity. In every age eminent scholars continued to practice ijtihad, whether they or their contemporaries acknowledged it or not, and many scholars declared, against the trend, that ijtihad is a perennial duty for all who possess learning. As proper ijmā` doctrine requires, all views on which there is no contrary ijmā` remain technically available and unrefuted. In recognition of this, and in order to make the record for ijmā`, each school carefully preserved and handed down the opinions of earlier scholars, even when these had been abandoned in favour of other views. Each school developed mechanisms to invoke weaker, abandoned, or minority views as alternatives to the standard views, usually when the resurrected view accorded better with custom or the general welfare. One result of this complex evolution was that the term ‘ijtihad’ was extended to mean not only absolute (muṭlaq) ijtihad – ijtihad drawing directly from divine sources independent of other influences – but also ijtihad of lesser degrees of independence or ambition. Even a scholar already committed to a school will face the need to find rulings for new issues or changed conditions. The term ‘ijtihad with the school’ reflects a very real practice – one of accepting some school discipline, particularly as to the school’s interpretive methods, but still drawing rulings directly from the canonical four sources. Even those scholars who do not claim to use the original four sources at all, and consider only the universe of legal views and reasoning within a single school, still need great knowledge and sophistication to develop the school further to meet changing conditions and novel issues, by choosing among past views, drawing new analogies from them, and extrapolating more detailed rules from more general ones. So far we have described fiqh and ijtihad as they emerged from premodern times. In modern times Islamic law has undergone many changes in outlook. For one thing, the long-standing controversy over ijtihad and taqlīd has drastically shifted ground. Nowadays most scholars agree with the medieval critics of taqlīd and insist that independent ijtihad is a perennial duty. Indeed, contemporary scholars do not think it necessary to belong to a single school, in the sense of invariably following its precepts (although most have a single school in which their training was concentrated and in which they are most skilled). They argue that a scholar may adopt whatever opinion of whatever school seems best on the grounds of its proof. 76

Legal and Judicial Reasoning 3.2.2.2 As a result of all the above, one can find in modern Saudi Arabia scholars who, in their own and others’ view of their abilities, occupy all these ranks – from independent mujtahid (at least as to particular issues) down to one who operates solely within a single school of law. Actually, both of these extremes are relatively rare; the great majority would put themselves somewhere in between.

3.2.2.2. Is the Fiqh Applied in Saudi Arabian Courts Hanbali? Or Do Judges Practice Ijtihad Within and Beyond that School of Law? Most outsiders with awareness of Saudi law assume that the Saudi legal system applies only one school – the Hanbali. Historically that school was dominant in the Najd or central Arabian region, and it was strongly favoured by the reformist religious movement launched by Ibn `Abd al-Wahhab in the mid-eighteenth century which has served as the inspiration and ideology for a succession of Saudi states down to the present. But the Wahhabi movement (as it is called by non-adherents) is also Salafi, by which term I mean a strain of thought, dating back centuries, urging Muslims of every age to follow the example of the earliest generations, ignoring any later accretions unless they can be justified by that example.87 Wahhabis consider Hanbalism to be, of the four schools, the most Salafi in its methodological precepts. It is also the school associated with the most articulate spokespersons for Salafism, particularly Ibn Taymiyya whose thought greatly influenced Ibn `Abd al-Wahhab. Part of Salafi ideology is resistance to taqlīd, in the sense of following without question the views of any human other than the Prophet. As noted in section 2.1.2, Ibn Taymiyya was a strong advocate for continued ijtihad. Even as a legal school among the four, Hanbalism is famous for continually carrying forward multiple views on a single issue when these can be attested to the earliest generations; indeed very often more than one opinion on an issue is attributed to Ibn Hanbal himself. Even in the most important works responsible for shaping the teachings of the Hanbalis into a coherent school qualified to compete with the other three earlier schools, the works of Muwaffaq al-Din Ibn Qudama, one sees a wider, more ijtihad-centred. and less school-bound perspective than found in other schools’ manuals of that era. In his al-Mughnī, Ibn Qudama constantly passes in review the views of a multiplicity of early scholars and judges, including the founders of the other schools of law, before announcing the view that Ibn Qudama considers the best (‘our view’). Given the pre-existing affinity between Hanbalism, Salafism, and Wahhabism, the Wahhabi movement reserved most of its reforming fervour for religious practice, not law,

87 I am not referring to Salafism in the sense in which that term was invoked by Muslim reformers of the late nineteenth and early twentieth centuries, now only of historical interest. See W Ende, ‘Salafiyya’ in Encyclopaedia of Islam (Leiden: Brill, 2004). Rather, I refer, as do Saudis, to the traditional meaning of the term, referring to a set of characteristic views as to both theology (uṣūl al-dīn, `aqīda) and law. Bernard Haykel, ‘On the Nature of Salafi Thought and Action’ in Roel Meijer (ed), Global Salafism: Islam’s New Religious Movement (New York: Columbia University Press, 2009) 33–57; Henri Lauzière, ‘The Construction of Salafiyya: Reconsidering Salafism from the Perspective of Conceptual History’ (2010) 42(3) International Journal of Middle East Studies 369–89. On the history of the Saudi embrace of the term, see David Commins, ‘From Wahhabi to Salafi’ in Bernard Haykel, Thomas Hegghammer, and Stéphane Lacroix (eds), Saudi Arabia in Transition: Insights on Social, Political, Economic and Religious Change (New York: Cambridge University Press, 2015) 151–66.

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and in matters of legal practice was generally content with Hanbalism. But as the learning of scholars in the Wahhabi-controlled areas of what is now Saudi Arabia grew, their willingness to adhere to Salafi rigour in law increased as well, and they claimed to practice degrees of ijtihad not only within Hanbalism but outside it. In my research in the 1980s I found the leading judges and scholars of the system advocating rigorous Salafi methods, encouraging ijtihad beyond the school even for the judges in everyday practice.88 It is a common misconception, heard even today, that adherence to the Hanbali school is mandatory throughout the Saudi legal system, this by royal order or some other binding legal principle. Shortly after his conquest of Hijaz, in 1928 King Abdulaziz did issue such an order to the judiciary in the Hijaz province, previously governed by the Ottomans and where followers of many schools resided, to bring the Hijaz into uniformity with the rest of his kingdom, and no doubt also by way of imposing Wahhabi beliefs. But that order lapsed on the unification of the Kingdom in 1957, and in other regions of the country no such rule ever applied.89 What will be observed even in this book is that the school of law that best accords with Saudi practice is the Hanbali school in the form it had adopted by early modern times. In the past Saudi judges were trained, whether in formal education or in informal tutoring and training by older scholars, in Hanbali works of that era, in the law that had for several centuries been applied as the majority school in the province of Najd. But in modern Saudi Arabia, while the Sharia colleges do teach from Hanbali texts, they also make it a point where possible to teach students the differing views of the other Sunni schools and the methods by which one may choose one of those views over the other. As I observed as long ago as the 1980s, Saudi general court judges were free to prefer minority views within the Hanbali school, to adopt a view from another school, or even to argue for a novel position of their own, as long as that position could claim sound fiqh support, judged by the criteria of ijtihad. Now, in research for this book, encompassing also the Board of Grievances, I find that the tendency to exercise these freedoms is if anything greater. Scores of published judgments from both the general courts and the Board of Grievances show the judges (and panels of judges) following a view held only in a school other than the Hanbali, often Hanafi or Maliki.90 Some of these judgments figure in the case studies to follow. Other published decisions pass in review the views of several schools, often starting with others and mentioning the Hanbali view last.91 Some judges even adopt modern theories of law, reaching results outside fiqh precedents.92

88 Vogel

(n 8) 62–137. (n 8) 93–97. 90 Eg Decision No 176/4, 3 Gen-Collection-1428 86 (Buraida 1425 (2004)). 91 Decision No 164, 2 BG-Com-1428 441 (Com C No 15, Dammam 1427 (2006)); Decision No 347286, 4 Gen-1434 145 (al-Qatif 1434 (2012)); Decision No 198/9, 3 Gen-Collection-1428 232 (Gen Superior Ct, Medina 1409 (1988)); Decision No 147, 1 BG-Com-1432 170 (Com C No 10, Dammam 1432 (2010)). One finds few decisions where the judge (or circuit) announces that he is performing ijtihad. One is Decision No 55, 1 BG-Com-1430 171 (Com C No 15, Dammam 1429 (2008)) (court examines different fiqh views on a point of law and chooses one, mentioning that its choice also agrees better with both statute and custom in Saudi Arabia). 92 A general court judge citing revealed texts adopts the modern ‘theory of risks’ to hold an employer responsible for the acts of his employees. Decision No 64/1229/13, 3 Gen-Collection-1428 144 (Medina 1427 (2006)). The case is discussed in Chapter 9, the case study on respondeat superior, text at n 91. 89 Vogel

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Legal and Judicial Reasoning 3.2.2.3 In the general courts, the freedom of the judge to use his own ijtihad powers to choose a view where scholars have differed is a fully accepted point. The collection recently published by the Supreme Judicial Council listing errors observed by the inspectors of judges states: What is correct is ijtihad to choose the better view (tarjīḥ) in matters where ijtihads differ in cases tried before the judge. If neither view seems stronger to him, he should take the best-known (mashhūr) view in the school of the Imam Ahmad ibn Hanbal [the Hanbali school]. … Practice in the courts in this country – may God protect it! – observes judgment according to the texts of the Quran and Sunna, as is stated in Articles 7 and 8 of the Basic Nizam, Art 1 of the Nizam of Sharia Procedures, and Art 1 of the Nizam of Criminal Procedures. As for issues where ijtihads differ, there shall be followed the best-known view of the Hanbali school, unless it is clear to the judge that another view is preferred (rujḥān), in which case he decides according to it, after giving the reasons for his ruling and offering the proofs for it.93

Not only individual courts, but the system as a whole has accepted the views of schools other than the Hanbali. Categorical proof of the point abounds in the case studies to follow, particularly the one on the supply contract, where I bring out how the system as a whole has considered, and then either adopted or not adopted, rulings held only by one of the other schools. Going even further, one can observe in these case studies profound ijtihads being practised not by individual judges or scholars but, as it were, by the body of them collectively. Education in the Saudi Sharia colleges, and in the High Institute for the Judiciary at Imam Muhammad Islamic University, encourages students to research why it is that the schools differ on any point (perhaps one school accepts a certain hadith as valid while another does not), and to reach their own opinion about which view is preferable and why, employing for this purpose the methods of uṣūl al-fiqh.94 Working with many students of Sharia colleges during this project, I have been impressed, as mentioned in section 2.2.2.1, with the training they have received. They seem not only to know a great deal of fiqh, but also to appreciate some of its inner structure. They are not afraid to interrogate and evaluate the opinions of traditional fiqh.

3.2.2.3. Hanbali School Sources Most Consulted in Saudi Arabia The law of the late Hanbali school, the form of the school most influential in Saudi Arabia, is best and most easily known by consulting works by Mansur al-Buhuti (d 1641), particularly two: Kashshāf al-qinā`, published in five volumes, and Sharḥ muntahā al-irādāt, published in three volumes. These books are often quoted in decisions. The main works of the Hanbali school date much farther back, and these are also often relied on. Most important for framing the views of the school as a whole are the works of Ibn Qudama, referred to above. The writings of Ibn Taymiyya and Ibn al-Qayyim have greatly influenced Saudi Arabian fiqh and legal practice, not so much in shaping the ordinary views of the school as on

93 Supreme

Court-Inspectors’ Observations-2014, No 480.

94 It seems they are taught uṣūl al-fiqh as practised by the Hanbalis, and not, for example, the methods associated

with other schools, such as istiḥsān or the practice of the people of Medina.

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justifying certain specific departures from them, on issues both great (such as the obligation of continued ijtihad, for judges, scholars, and even others; harmonising fiqh outcomes with legitimate worldly utilities; widening the freedom of contract) and small (such as allowing sales at a future market price). Many other Hanbali works are consulted in Saudi Arabia on a daily basis. On studying the works of Buhuti one often finds shifts from the doctrines worked out earlier by Ibn Qudama and his successors. By the time of Buhuti, one sees how the later school – or perhaps Buhuti himself – has woven into the views of Ibn Qudama’s time the views of later scholars, notably those of Ibn Taymiyya, although with modifications to make the whole consistent. Buhuti’s works are marvels of subtlety and conciseness. While covering the full scope of the school’s accepted views, he still finds space to refer often to the revealed basis for views and some of the most important alternative positions, even those from other schools. Contemporaries have an invaluable aid for consulting the two main works of Buhuti. In the early years after the Saudi conquest of the Hijaz, and in response to an early order by King Abdulaziz calling for the codification of fiqh drawing on all the four schools, a Meccan scholar, Ahmad al-Qari (d 1940), set out to restate the views of the late Hanbali school in code form, titling his work Majallat al-aḥkām al-shar`iyya, or ‘Collection of Sharia Rulings’.95 Qari modelled his code on the Majallat al-aḥkām al-`adliyya, ‘Collection of Legal Rulings’, the famous summary of the Hanafi school’s late views that served from 1877 as the code of civil obligations of the Ottoman Empire, discussed below in section 3.2.4.1-b. (I shall be referring throughout to both these codes – the official Ottoman and Hanafi one as the ‘Ottoman-Majalla’ and the unofficial Saudi and Hanbali one as ‘Qari-Majalla’.) The Qari-Majalla brilliantly summarises the late school, rarely – to my knowledge – deviating from Buhuti’s own views, and even then mostly to give them a more efficient formulation. As edited and published by two contemporary Saudi scholars, each code article is footnoted to the relevant pages in the most-used editions of Buhuti’s main two works, making consulting both texts relatively easy. The Qari-Majalla is not in as much use as it might have been, because reliance on it was discouraged by leading scholars, probably because it is a step in the direction of codifying the fiqh. Even graduates of Sharia colleges are not in the habit of using it. But I have noticed it cited occasionally in Board of Grievances decisions,96 and lawyers are known to cite it in their briefs, despite the prejudice against the work. The transfer of thousands of the most important fiqh texts to electronic form allowing text searches is a major change in the nature of Islamic legal scholarship in the contemporary age. This greatly facilitates research of any kind, and allows research in modes never possible before.97

95 Aḥmad al-Qārī, Majallat al-aḥkām al-shar`iyya, ed `Abd al-Wahhāb Abū Sulaymān and Muḥammad Ibrāhīm `Ali (Jedda: Tihāma, 1981). 96 Decision No 120, 1 BG-Com-1430 342 (Com C No 7, Riyadh 1430 (2008)); Decision No 66, 3 BG-Com-1431 1209 (Com C No 30, Jedda 1430 (2008)); Decision No 332, 4 BG-Com-1432 1793 (Com C No 2, Riyadh 1430 (2008)); Decision No 187, 2 BG-Com-1432 956 (Com C No 17, Dammam 1432 (2010)). 97 An important source for this study, and one in constant use by Saudi students, scholars, and judges, is the al-Shamela library, a free online database of hundreds of fiqh works.

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3.2.2.4. Some Methods of Derivation of Rulings which Rely Not on Original Derivation from the Sources but on Fiqh Regularities Discovered by Induction a. General Legal Principles (Qawā`id, sing. Qā`ida) As noted above, the canonical methodology of ijtihad, the science of the ‘roots of the law’, ordained a process that derives rulings from usually quite specific, even concrete, legal determinations by God, the Prophet, or the early generations by analogies based on equally concrete commonalities (singular `illa) between the new and the revealed case. Such a process does not rely on general rules or theories, but only discrete analogies between two cases, one the matter at hand and the other a ruling by a revered authority. It is, in other words, casuistic, deriving one unique case from another unique case. It is worlds away from a process by which the scholar contemplates the revealed rulings to distil from them by intellectual effort higher and higher levels of rules and principles, which then become the true law, to be applied by deductive logic to countless concrete events – in the manner in which European scholars of Roman law distilled from its casuistic corpus and later local practices more and more general principles, culminating in the French Civil Code. Reflecting the ideology and practice of analogy, fiqh works, even late ones, consist of a series of seemingly unrelated exemplary cases. If one opens Buhuti’s work to the start of its chapter on the tort of ‘destruction’ (itlāf), after a few lines of definition it dives immediately into details: that the destruction of ritually impure property need not be compensated, nor property destroyed by antagonists in war; that one under duress is not liable, while the one exerting duress is; one who incites another to destroy property and leads him to it is liable – and all this within only eight lines of text.98 But this apparent jumble of particular rulings belies the presence under the surface of these works of a great deal of intellectual structuring. The jurisprudential foundations for this structuring date from the very beginnings of fiqh, even before it was assembled into books or shaped into schools. As the earliest lawyer-scholars plumbed the meanings of the texts of the Quran and Sunna using analogical reasoning, fundamental legal conceptions and higher-order principles began to emerge from the welter of analogies, and began to guide their steps. And upon these were built other concepts and coherencies. Since the logic generating this structure was man-made, without explicit support in revelation, it remained implicit and unstated. But some generalisations could be easily articulated in a sentence or two, and entered more and more into currency. Sometimes general principles came readymade, found among the reported sayings of the Prophet, this entailing a somewhat different intellectual process; but it is notable that scholars of hadith often found these sayings difficult to authenticate, indicating possible later provenance. Scholars sometimes acknowledge that attribution of this or that statement to the Prophet is most likely false, but they often also claim that, regardless of the statement’s authenticity, its content has gained the authority of ijmā` by its universal acceptance.99

98 al-Buhūtī

(n 46) 4:116. example, the alleged hadith that ‘Every loan that attracts a benefit is prohibited usury (ribā).’ It is considered false as a hadith, but as a point of law it is considered incontestable because of scholars’ agreement upon it (ijmā`). 99 For

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These implicit underlying regularities – at least when given a verbal statement by an authoritative scholar – came to be known as ‘fiqh principles’ (qawā`id fiqhiyya, sing. qā`ida fiqhiyya, hereafter referred to as qawā`id).100 A traditional definition of this term is ‘a general rule with which many particular cases (juz’iyyāt) agree, whose legal determinations can be understood from it’. Some scholars use the term ḍawābiṭ, sing. ḍābiṭ, meaning ‘controlling principle’ or ‘general rule’, to distinguish from qawā`id those regularities that apply only within particular subject-matter areas of law, not across many. (I shall use the term qawā`id for both types.) The authority of qawā`id – apart from those with support in a verse of the Quran or authenticated hadith – rested on the idea that innumerable particular rulings by scholars have converged on them. While each ijtihad using analogy may be wrong, yet, when these ijtihads do converge, the principles themselves gain an authority stronger than individual ijtihads, partaking of some degree of ijmā`. As we saw in section 2.1.3, even constitutionally, according to the doctrine of siyāsa shar`iyya, the qawā`id figure among the limits on the ruler’s constitutional authority to seek utility, ranked just under the explicit rulings of the Quran, the Sunna, and the ijmā`. Besides presenting them implicitly or sometimes explicitly in their general books on fiqh, scholars made the qawā`id themselves a subject of study, creating a special genre of fiqh works.101 In these works a scholar identifies a principle and then explores the cases that demonstrate its application and those that do not. Although scholars emphasise how authoritative qawā`id are, considering them multiply evidenced by their support throughout the corpus of fiqh laws, scholars also have always treated these principles as mere guidance to judges and scholars, and not as binding rules in and of themselves. This is not only because they have exceptions at the level of detail or have complex boundaries and overlaps with other qawā`id. It is instead mostly the result of their very generality. In fact, often the more general qawā`id are, the more incontrovertible they are – but also the less useful they are for deciding actual cases. An example of a basic principle in tort and contract law – which is reported as a saying of the Prophet – is ‘No harm and no reciprocating of harm’ (lā ḍarar wa-lā ḍirār).102 (A qā`ida based on that is often recited with it, ‘Damage is removed’ (al-ḍarar yuzāl).)103 Another principle in contract

100 Although using the term qawā`id unmodified, I am not mean to address another form of qawā`id within Sharia, qawā`id uṣūliyya, meaning qawā`id that concern fiqh interpretive methodologies. Other terms for the form of qawā`id I am considering, in themselves illuminating as to their nature as deriving from analogies, are ‘similarities and comparables’ (asbāh wa-naẓā’ir) and ‘distinctions’ (furūq). The latter term refers to cases which resemble each other but nonetheless have a different ruling due to a distinction (farq). 101 Wolfhart Heinrichs, ‘Qawa’id as a Genre of Legal Literature’ in Bernard Weiss (ed), Studies in Islamic Legal Theory (Leiden: Brill, 2002) 365–84; Wolfhart Heinrichs, ‘Structuring the Law: Remarks on the Furūq Literature,’ in Ian Richard Netton (ed), Studies in Honour of Clifford Edmund Bosworth, vol 1: Hunter of the East, Arabic and Semitic Studies (Leiden: Brill, 2000) 334–44; Mohammad Hashim Kamali, ‘Legal Maxims and Other Genres of Literature in Islamic Jurisprudence’ (2006) 20(1) Arab Law Quarterly 77–101; Khaleel Mohammed, ‘The Islamic Law Maxims’ (2005) 44(2) Islamic Studies 191–207; Luqman Zakariyah, Legal Maxims in Islamic Criminal Law: Theory and Applications (Leiden: Brill, 2015) ch 2; Intisar A Rabb, Doubt in Islamic Law: A History of Legal Maxims, Interpretation, and Islamic Criminal Law (New York: Cambridge University Press, 2015) 348–57. Heinrichs states in both his articles that the study of the literature and function of qawā`id and furūq down to modern times has been neglected by those outside the tradition. This is confirmed by Robert Gleave, ‘Deriving Rules of Law’ in Rudolph Peters and Peri Bearman (eds), The Ashgate Research Companion to Islamic Law (Farnham: Ashgate, 2014) 57–71 at 67. 102 Ibn Maja, Daraqutni, Malik. 103 This is even considered among the handful of indisputably universal and categorical qawā`id.

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Legal and Judicial Reasoning 3.2.2.4 law is the Prophetic hadith, ‘Muslims act according to their stipulations’ (al-muslimūn `alā shurūṭihim).104 Another is ‘Sharia permissibility negates liability’ (al-jawāz al-shar`ī yunāfī al-ḍamān). Clearly none of these would suffice to decide real-world cases of tort or contract. Other qawā`id are much more specific and therefore more helpful in deciding specific cases. For example, ‘To exempt usufructs when transferring a concrete property in a commutative transaction is allowed if they are clearly defined, while in a gratuitous transaction such a transfer is allowed whether [the exempted usufructs are] for a known period or an unknown one’, this from a summary of qawā`id by the Saudi jurist `Abd al-Rahman al-Sa`di (d 1956).105 Many qawā`id works address the opinions of only one school of law. The most important work of qawā`id in the Hanbali school is that of Ibn Rajab.106 It is a great aid to understanding Hanbali fiqh at depth. But full benefit from it requires prior knowledge of the detailed fiqh rulings from which he draws his deeper insights. It takes up regularities of outcome that are not addressed as such in the texts, but of which instances can be found scattered throughout fiqh works of many genres. It usually does not attempt to give a thumbnail statement to any principle, but instead sums it up in as many words as are necessary. It then plunges into listing particular opinions from the Hanbali scholars in diverse areas of the law, noting which agree or disagree with the principle. For example, it begins Principle No 60 with: Revocation of a contract revocable at will (jā’iz) is not permissible if it involves harm to one of the contracting parties or anyone else connected with the contract. It is not enforceable unless it is possible to redress the harm by compensation or otherwise. In that form it is permissible.107

Examples follow from the fiqh subjects of legacy, mortgage, unilateral offers of reward, various agricultural contracts, usurpation, partnership, and agency, all instances where Hanbali scholars reach outcomes that either conform or do not conform to the proposed qā`ida. It is the internal regularities of fiqh, both those that are recognised as qawā`id by reputed scholars and those that remain implicit, that lend the fiqh – and the Saudi law applying it – that trait of internal cohesiveness mentioned in section 1.1.4 that makes its results predictable and resistant to facile change. We will see throughout the case studies in this book how powerful a role these inherent regularities play in fiqh deliberations. One could set out to compare the schools with regard to how consistent their results are with their own inherent logical structure – how predictive are their qawā`id. I am hardly the person to attempt so difficult a task, but it may be fair simply to report my impression from decades of study of fiqh. My impression is that the Hanbali school would fare well in such a comparison. Other schools, especially the Hanafi, have a reputation of relying on legal opinion or reasoning, called ra’y, whereas others, particularly the Hanbalis, are known

104 Abu

Dawud, Tirmidhi, Nasa’i, Ibn Hanbal, Hakim. al-Raḥman bin Nāsir al-Sa`dī (d 1956), al-Qawā`id wa-al-uṣūl al-jāmi`a wa-al-furūq wa-taqāsīm al-badī`a al-nāfi`a (Riyadh: Maktabat al-Ma`ārif, 1985) Qā`ida No 42. 106 `Abd al-Raḥmān Ibn Rajab (d 1393), al-Qawā`id fī al-fiqh al-islāmī (Cairo: Maktabat al-Kulliyāt al-Azhāriyya, 1971). Another, though different in character, is Aḥmad Ibn Taymiyya, al-Qawā`id al-nūrāniyya (Dammam: Dār Ibn al-Jawzī, 1422 (2001)). See Kamali (n 101) 98. 107 This issue is discussed in sections 6.1.1 and 6.3.1.3. 105 `Abd

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for relying on discrete events reported from the Prophet and his Companions, the hadith.108 Despite this, possibly because it was the last school to systematise its opinions, the Hanbali school seems to deliver fewer shocks to consistency at the level of detailed rules than other schools, again particularly the Hanafi, the first school to form. In other words, my experience has been that, when one seeks out the internal regularities of Hanbali doctrine and then extrapolates outward from them, one is usually not frustrated by a series of anomalous exceptions. In the hands of a scholar or judge learned in the minute details of past fiqh doctrines, the qawā`id are invaluable for maintaining his bearings when he confronts unfamiliar or unprecedented fact situations. Using them he is guided to analogies from revealed texts that do not strain other established fiqh outcomes; they are a means for assuring that his ruling is consistent with his school, or even with all the Sunni schools if his reach and that of the qawā`id extend so far. Keeping in mind all alternative principles that touch on the issue before him, he gains confidence that he has discerned the correct fiqh ruling. As the Maliki al-Qarafi (d 1285) states at the beginning of his work on qawā`id: Qawa’id are important and of great utility in fiqh. The extent to which the scholar has grasped them determines the greatness of his rank. They reveal and make known the splendour of the fiqh. The methods of fatwas become clear and revealed. Scholars strive against each other to excel in them. To one who tries to derive rulings from particular cases without the comprehensive qawa`id, rulings (furū`) will be contradictory and in disagreement, and his ideas will waver and become confused. His soul will feel constrained thereby and despair. He will need to memorise the particulars which are never-ending. … One who apprehends the fiqh by its qawa’id does not need to memorise many particulars to bring them within the universals, and what seems contradictory to others will be in conformity to him.109

The published Saudi court decisions frequently mention qawā`id. In fact, many decisions give pride of place to one or another highly general principle, such as the four mentioned just above. Seeing a principle used this way, one wonders what its mention indicates about the judge’s reasoning process. Three possibilities come to mind. One is that the court’s legal reasoning has relied on the qawā`id alone, while avoiding any closer fiqh analysis. One might compare a decision that engages in close fiqh reasoning110 with one where analysis, even of relevant points, is missing and one or more qawā`id alone appear.111 A second possibility is that the judge mentions qawā`id only to lend their prestige to a result otherwise reached and to avoid laying out the complexities and uncertainties of the judge’s actual

108 Jeanette

Wakin and Aron Zysow, ‘Ra’y’, Encyclopaedia of Islam (Leiden: Brill, 2004). Ibn Idrīs al-Qarāfī, al-Furūq aw Anwār al-burūq fī anwāʼ al-furūq (Beirut: Dār al-Ma`rifa, nd) 1:3. 110 Decision No 34193570, 8 Gen-1434 209 (Mecca 1434 (2012)). 111 Decision No 7, 6 BG-Adm-1428 2633 (Adm C No 21, Medina 1428 (2007)) (court declares that an agency’s conditional acceptance of a contract was valid under Sharia even without a stated time limit – a surprising result given Sharia rules on gharar – but offering as argument only principles that no one can be forced to fulfil a contract without consent, and that what one has conceded cannot be regained); Decision No 63, 2 BG-Com-1434 1094 (Com C No 4, Jedda 1434 (2012)) (in deciding whether the buyer of vehicles under a contract later invalidated owes the seller compensation for their use, court relies on two principles: the party who is negligent bears the responsibility, and what is built on a void thing is also void). `Abd al-Laṭīf al-Qarnī, ‘al-Naẓariyya al-sababiyya bayn al-fiqh wa-al-qānūn: dirāsa ta’ṣīliyya wa-taṭbīqiyya muqārina’ (Doctorate, High Judicial Institute, Imam Muhammad University, 1433 (2011)) 227–29, criticises several decisions in the area of criminal participation as relying excessively on general qawā`id and neglecting fiqh exceptions applying to that specific area of law. 109 Aḥmad

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Legal and Judicial Reasoning 3.2.2.4 reasoning before the parties. It has been, after all, a practice of Saudi muftis to crown their brief responses with the recitation of one or another revealed text, so that the reader was reminded of his duty, and afforded the opportunity, to obey the Quran and Sunna directly. A third possibility is that the judge recites qawā`id to signal that his detailed reasoning has the virtue of serving a fundamental policy of Sharia, the one that the principle represents, and that he was guided by it in choosing his result. Throughout the Muslim world interest in qawā`id has burgeoned in modern times.112 It may be traceable to a desire to show that Islamic law accommodates a style of legal reasoning, a genus of legal truths, congruent with those of European civil law systems, where legal truths appear as general code articles and where scholars and judges present specific rulings as interpretations of them, descending from them; of course, in the Islamic law case, the code-like provisions of the qawā`id follow, not precede, individual doctrinal rulings. In any event, even in modern Saudi Arabia where no civil-law-styled legal system has ever been imposed, scholars have been fascinated by qawā`id, and have generated a literature on them in both traditional and modern styles. Scholars in Saudi Arabia have authored important works in the field, such as Sa`di, who was just mentioned, and Muhammad Sidqi Burnu, a retired professor at the Imam Muhammad University. Students in the Sharia colleges study the subject for at least two semesters. b. The Innate Divine ‘Objectives’ of the Sharia (Maqāṣid al-Sharī`a) Another source of law capable of guiding rulings is maqāṣid al-sharī`a, or the ‘objectives of the Sharia’. This source parallels the qawā`id, in being again knowledge gained by induction from study of fiqh itself, seeking the deeper regularities underlying the fiqh as produced over the centuries. Since scholars consider the process of ijtihad to be divinely sanctioned, these regularities have the potential, many scholars have argued, to reveal God’s own intent hidden in his revelation. The science of maqāṣid or ‘objectives’ looks beyond the regularities themselves to ask what those regularities reveal about God’s own purposes for the Sharia – what objectives Sharia is to serve for the Muslim nation (umma) and mankind. The science of the ‘objectives’ emerged after the study of qawā`id, from about the eleventh to the fourteenth centuries.113 Prominent scholars took part in its development – including al-Juwayni (d 1085), al-Ghazali (d 1111), Ibn `Abd al-Salam (d 1262), and Ibn Taymiyya. Although the doctrine developed late, scholars claimed for it ancient authority – that of the earliest companions of the Prophet, who indeed are often recorded as favouring upholding the Prophet’s purposes over literal adherence to either the Quran or the Sunna. But no proponent gave the theory a complete, coherent statement until al-Shatibi (d 1388), a Maliki scholar of Granada, made the theory his life work. Following Shatibi, the theory got little development until, in modern times, Shatibi’s work al-Muwāfaqāt fī uṣūl al-sharī`a was published in Tunis in 1883, attracting the attention of a series of important modernist

112 The

Ottoman-Majalla begins with 99 qawā`id. This is mimicked in the Qari-Majalla, listing 160 qawā`id.

113 On the history and nature of maqāṣid al-sharī`a as a source of law, see Mohammad Hashim Kamali, ‘“Maqāṣid

al-Sharī`a”: The Objectives of Islamic Law’ (1999) 38(2) Islamic Studies 193–208. For contemporary approaches, see Felicitas Opwis, ‘New Trends in Islamic Legal Theory: Maqāṣid al-Sharīʿa as a New Source of Law?’ (2017) 57(1) Die Welt des Islams 7–32.

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Islamic scholars, such as Rashid Rida (d 1930) in Egypt and Ibn `Ashur (d 1973) in Tunisia. Ibn `Ashur published a pioneering study of the objectives doctrine in 1946. The popularity of the theory has continued to grow since, now peaking among both scholars and lay commentators on Sharia, even in quite conservative circles. The subject is taught in the Sharia colleges of Saudi Arabia. Referring to the objectives sounds fully orthodox to the contemporary Saudi. If even the qawā`id can be general to the point of at most guiding, but not determining, legal outcomes, this is even more true for the maqāṣid. The first finding of the science is that the whole of the law is motivated by God’s mercy, meaning his desire to be benevolent to mankind – to help mankind achieve its good both in this world and beyond. Thus, human benefit is God’s overarching ‘objective’ in revealing the law. Looking in more detail, scholars find nested within this overarching divine purpose a hierarchy of ‘objectives’ becoming more and more specific as they descend. At the most general level, God’s law is dedicated to upholding five essentials of human life – which are specified as religion, life, reason, progeny, and property; later scholars have added to this list. Going beyond ‘essentials’ another two steps, God’s purposes include first ‘needs’ and then ‘enhancements’, that is, interests that serve to defend and strengthen the essentials. Besides all these maqāṣid, particular fields of law – such as contract or criminal law – have their own objectives. Arguments are made that the maqāṣid found by induction are incontrovertible as truths about the Sharia – but, again, as in the case of the qawā`id, this authenticity of attribution to God usually comes with a cost, in that they become more general and abstract. Another characteristic unique to maqāṣid reasoning is that it directs the scholar’s attention not just to his ruling’s sources in the revelation but also toward their real-world consequences: will those consequences in actual practice serve God’s larger objectives that have been revealed in his Sharia? Also, such a method impels scholars to plumb even the revealed texts beyond their literal meanings, inquiring into their purposes, guided therein not by mere human reasoning but by the inductive discoveries scholars have drawn from the Sharia itself. In my impression, the practical importance of the maqāṣid line of thought is to guide the making of exceptions to outcomes otherwise dictated by fiqh logic, such as when fiqh outcomes collide with undeniable realities, making obedience to fiqh costly in terms of other values and goals of the believer or society. Despite these developments, I have noticed only one explicit appeal to maqāṣid in Saudi court judgments.114 In larger fiqh debates in Saudi Arabia, which I have not canvassed broadly, my impression is that reference to maqāṣid is by way of invoking Sharia ideals and values generally, rather than as a methodological tool. Yet I do not think that reasoning in the nature or at the level of the maqāṣid is in fact lacking or absent among Saudi scholars and judges. Rather, it seems to me that it is at that level that some of the knottiest fiqh issues facing the legal system are being resolved, as I argue in my conclusion to the case study on the supply contract, section 5.4.2, or will ultimately be resolved.

114 This in a strikingly bold decision, mentioned at n 92 above in another context, and discussed in Chapter 9 in text at n 91. Not surprisingly, some courts do assert that the ruling they have chosen serves justice or the public good or accords with the universal practice in the Kingdom. See eg Decision No 164, 2 BG-Com-1428; Decision No 298, 1 BG-Com-1431 102 (Com C No 12, Jedda 1430 (2008)).

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3.2.3. How a Judge Uses Fiqh Works to Develop his Ruling As noted above, fiqh works (of the main genre – those that teach the basic law) present the law not in the form of logical structures of generally stated principles and rules but rather casuistically, ie by listing multiple simple hypothetical examples with their outcomes. The judge seeking to apply these books (in other words, one who is not, as yet anyway, aspiring to any form of ijtihad within or outside his school) can simply review these examples to decide which is closest to the case before him – a task analogous to that of common-law judges and lawyers in deciding which of many concrete judicial precedents should govern the case before them. (There are of course large differences between fiqh examples and reported common law judgments, such as that the precedents of fiqh are hypothetical, offer few factual details, and usually lack discussion of their reasoning.) I suspect that outsiders studying Islamic law may have assumed that fiqh books are written the way they are because of the casuistic nature of the ‘roots of the law’ method, working by discrete analogy from revealed case, often quite fact-specific, to equally specific outcome. And much of their organisation and content is fixed by tradition in each school. But I wonder whether observers of the tradition have sufficiently considered how the design of these books can be made to serve functions of the author’s own time. An author, even if a commentator, still needs to choose and edit the examples he treats, and possibly add new ones. Perhaps the author chooses and refines cases not only for comprehensiveness of coverage but also to impart, however implicitly, each subject’s underlying regularities, the deeper structures of the analogies that the judge is to draw. No doubt the authors expected their works to be applied by many without deep learning, and for such readers teaching the law through exemplary concrete cases may have been ideal. But for those more educated or studious, these books can offer coded suggestions about the deeper structure of each topic. For all readers, fiqh books achieve the communication of a highly complex network of legal rulings in a small space. It is obvious that fiqh books do not attempt to cover all legal issues. What they attempt instead is to provide suitable examples from which all questions can be answered by some exertion of effort and thought. Certain sets of examples get refined as the centuries progress so as to cover more and more of the questions that will be asked of them. For example, in al-Hidāya by Marghinani (d 1196), a famous Hanafi work still relied on in Afghanistan, Pakistan, and India, a major part of the law of tort is laid down in terms of accidents on the highways.115 It is clear that, when studied below their surface, a fiqh manual is designed with an eye to a reader who will draw analogies from the cases offered, and in various directions. Analogy is the ruling spirit of fiqh works – not just analogy from revelation, but also analogy from exemplary cases to generate rulings on questions within and even beyond the chapter or section in which the original cases appear. Often a chapter of a fiqh work defines a particular act, transaction, or other legally significant event in a more or less precise way, giving its ruling, perhaps accompanied by several variations of it with their outcomes, often with

115 `Alī al-Marghīnānī, al-Hidāya: sharḥ Bidāyat al-mubtadī, 4 in 2 vols (Cairo: Muṣtafā al-Bābī al-Ḥalabī, 1975) 4:191–95.

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explicit or implicit suggestions of rationales. The very specificity of the event suggests that it should be extended by analogy to the myriad of similar types of events left unaddressed. A similar expectation of extension by analogy seems to apply even to the definition of terms. Definitions seem accordion-like, not black-and-white but shading off in all directions in diminishing tones of grey. A clear example that will appear often in the case studies to come is that of usurpation (ghaṣb). In the chapter of fiqh works devoted to it, it is defined in a way that suggests a brazen seizure of the property of others without colour of right, virtually robbery in broad daylight. But then that very conception does duty, both in that chapter and elsewhere throughout the fiqh, in many cases of unauthorised uses of property, even unintentional or accidental ones. Sometimes that the conception is applied analogically is made explicit, as when a situation is said to be ‘like usurpation’ (ka-al-ghaṣb) or ‘treated as if it were usurpation’ or ‘constructive ghaṣb’ (fī ḥukm al-ghaṣb). But other times a factpattern, though outside the definition of usurpation, may be declared usurpation itself. And in none of these cases is it certain whether all or only some of the rules of usurpation are to be applied. Another example is the second of the major forms of tort, itlāf, with the literal meaning of ‘destruction’. It is explained using examples of destruction of physical property or injury to persons; but the tort is applied also to pecuniary losses not involving physical destruction. A third example is the term ta`addī, meaning literally aggression or transgression with the suggestion of intentional wrong. Despite this meaning, the term was long ago extended to cover any wrongful act, intentional or not, including negligence; and yet one constantly finds the phrase ta`addī aw tafrīṭ, meaning ‘transgression or negligence’.116 In all these cases, it is possible that the legal term in question is used only metaphorically, as a signal that one or more of the rules associated with that term are being applied by analogy; or alternatively, the definition of the term is being tacitly broadened. Whichever it is – whether it is metaphor or tacit ad hoc amendment to the definition – seems to make little difference in practice. (These points about ghaṣb, itlāf, and ta`addī are covered in more detail in section 7.1.) Fiqh books implicitly provoke analogy between entire branches of law when they fail to treat some subjects that are dealt with under an analogous subject. Sometimes the reader is referred to that other subject, but often he is not. The coverage of partnership in fiqh books needs to be completed by study of the chapter on agency; the chapter on agency requires awareness of the chapter on deposit; the chapter on lease and hire (and chapters on other commutative contracts as well) rely heavily on the chapter on sale; the chapter on destruction (itlāf) needs supplementation from the chapter on retribution (qiṣās) and blood-money (diya) for bodily injury; chapters about various crimes and torts interact with each other, completing each other’s rulings. Since fiqh works obviously intend that exemplary cases be applied beyond their specific terms by analogy, this fact obliges anyone using these texts to learn general fiqh doctrine to ask why each such case is included, what nuances of analogy it means to exclude or allow, why it specifies certain relevant facts but leaves others unstated. For example, an author narrates a case in which one who digs a pit in a public street is liable if a passer-by falls into the pit. What analogies does the author wish to allow to the case? Presumably, digging in the

116 Another example, discussed in section 7.1.2.4, is the term mubāshir meaning direct, immediate, referring to a type of causation.

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Legal and Judicial Reasoning 3.2.3 public street suggests it is meant to cover one who harms another by an unlawful, negligent, or careless act, as well as, a fortiori, one who harms another with intent. The author then adds a second case on top of the first: a second person places a stone on the edge of the pit dug by the first; if a passer-by trips on the stone and falls into the pit, the placer of the stone alone is liable.117 What does the author wish to convey by juxtaposing the two cases? What different analogies does the author intend the reader to draw from the second case? That the second actor acted with intent to do harm? Or only that his act is the more proximate cause of the harm? It is only by constant and thoughtful review of these texts that a scholar or judge acquires the subtle skills needed to know the law reliably. Not surprisingly, the various legal schools formally or informally ranked their scholars according to how profoundly they had grasped the complex inner web of rulings and principles that knits together each school’s apparent cacophony of rulings. For example, in modern Saudi Arabia, a scholar highly esteemed for his grasp of the Hanbali school’s inner workings, who taught and wrote in the Hanbali tradition, was Shaikh Muhammad bin Salih al-`Uthaymin (d 2001), whom I often cite in this book and whose opinions are referred to in court decisions down to today. In fact, `Uthaymin was so thoroughgoing in his adherence to Salafi and Wahhabi theories of interpretation, such as those advocated by Ibn Taymiyya and Ibn al-Qayyim, that he freely disagreed with the Hanbali school if he found another view better grounded in the revelation. While I have used the term ‘analogy’ for the process by which a scholar or judge employs the fiqh manuals, by that term I do not mean to allude to the canonical fiqh interpretative method of qiyās, by which the ruling of a present case is decided according to whether it shares a specific feature (`illa) found in a revealed ruling. Qiyās is the process for deciding a rule not by reference to existing fiqh but directly from the revelation. What I describe is more often referred to in Arabic as takhrīj (literally extraction), meaning also deduction, inference, or interpretation. The term is technically defined as the eliciting of a more general principle from particular rulings of an existing school (or from the opinions of its founder or founders), which is then used to decide other cases, on the premise that this is how the exemplars of the school would have decided them. This function pertains to a scholar or a judge who for any reason restricts his activities to deciding only within his own school, not working directly from the revealed sources themselves. Takhrīj was the theory on which the comprehensive manuals of each individual school were built up from the record of the rulings of the founder of that school and its early exponents. As such it is intrinsically related to the intellectual process which issued in the qawā`id literature mentioned above, and no doubt the qawā`id, particularly the ones that operate within specific areas of law (ḍawābiṭ) or on particular issues of law, are of constant utility in carrying out particular exercises of takhrīj. But a judge may often have to conduct takhrīj by detecting an apparent regularity or principle too minute or obscure to have ever been captured as a qā`ida. He would not refer to his theorem as a qā`ida, leaving the identification and defence of such principles to greater scholars than himself, and usually those of centuries past. A Saudi judge these days is reluctant, given his education and the current Saudi fiqh ideology influenced by Salafi tenets, to describe his activity as that of merely applying the

117 Ibrāhīm Ibn Ḍūyān (d 1934), Manār al-sabīl fī sharḥ al-dalīl, ed. Zuhayr al-Shāwīsh, 4th printing, 2 vols (Beirut: al-Maktab al-Islāmī, 1399 (1978)) 2:233–34.

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Hanbali texts, in the manner I have described in this section. Yet, given that the Hanbali texts remain influential, and far better reflect the practice of the courts than those of any other school, any Saudi judge will still engage in this effort, at least as a starting point. He may go on to compare the ruling deriving from Hanbali texts with what would be reached within other schools, and then choose among those views on various grounds sanctioned by the science of uṣūl al-fiqh. The most idealistic ground for making this choice would be to identify, among the revealed texts that support the contrasting opinions, the particular revealed texts he considers more germane (eg more specific than another others) or more sound (eg as in one hadith being better authenticated than another), and choose among rulings the one most strongly supported by those texts. Although such a judge may name these revealed sources as the basis for his choice of view, yet the alternatives among which he chooses are manifestly framed by the principles or regularities of the existing fiqh, either of the Hanbali school alone or that plus several others. Although he may well be reluctant to acknowledge being bound to the Hanbali school, he would also be reluctant, and ordinarily far more so, to presume a power to practice ijtihad outside the network of past school views.

3.2.4. New Methods and Institutions Influencing Fiqh Interpretations 3.2.4.1. Modern Interpretative Methodologies and Legal Conceptions a. Scholarly Restatement of Fiqh in Relation to Western Laws A number of twentieth-century scholars with learning in both Islamic and Western laws have expended great effort in explaining how Islamic legal doctrines compare to the laws of Western legal systems, particularly those of France which have been widely emulated throughout the Middle East from the time of the Ottoman Empire. Important names in this field are `Abd al-Qadir `Awda (d 1954), `Abd al-Razzaq al-Sanhuri (d 1971), Chafik Chehata (d early 1970s), Muhammad Abu Zahra (d 1974), Émile Tyan (d 1977), Ali al-Khafif (d 1978), Subhi Mahmasani (d 1986), Mustafa al-Zarqa (d 1999), Wahba al-Zuhayli (d 2015), and others, some of whom are cited frequently in this book. Works of these scholars are invaluable aids to any outsider to the tradition, not only for their comparisons with Western law but also for their summaries of, and comparisons among, the various schools of Islamic law (since they address the holdings of all four major schools). For Saudis these works have a similar utility, though in reverse – for acquainting those knowledgeable about Islamic law with its Western-law analogues. Although Saudi Arabia never experienced any major legal transplant from the West, as did all Arab countries outside the Arabian Peninsula, Saudis constantly encounter Western legal ideas. Modern legal knowledge is written about in Arabic with pervasive reference to Arab codes strongly influenced by European civil law. Western forms of law reach the courts through international business transactions and foreign parties. Accordingly, Saudi scholars, judges, and practitioners do consult these comparative works, even though their authors are not Saudis and do not specialise in Hanbali law. Saudi court decisions sometimes cite such scholars.118 118 Decision No 77, 4 BG-Com-1434 2323 (Com C No 1, Abha 1433 (2011)); Decision No 137, 4 BG-Com-1434 2329 (Com C No 1, Abha 1433 (2011)); Decision No 175, 2 BG-Com-1431 995 (Com C No 18, Abha 1430 (2008))

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Legal and Judicial Reasoning 3.2.4.1 Indeed, the far-reaching need for Saudis to carry out deep comparative studies of modern Western-law-derived legal institutions or conceptions is shown by the simple fact that all of the case studies to follow in this book bear such institutions or conceptions as their labels (supply contract, respondeat superior, apparent authority, hire-purchase, etc). I chose these case studies for this book because in them we see Saudi judges and scholars working through difficult issues important in practice. It turns out that these issues pose difficulties because they deal with legal forms common in international commerce that are being forced on Saudi businessmen by the needs of this commerce and that happen to strain traditional fiqh principles, rules, or conceptions. Besides mere comparison, these comparatist scholars also had other ambitions. Among them was advocating for the survival of Islamic law in its contest with other modern laws. All of them, though in varying degrees, show the somewhat contradictory tendencies of, first, showing how Islamic law largely accords with modern legal notions, and, second, proving that Islamic law is also better than those other laws. To achieve such goals, these scholars set out to derive from the diverse, casuistically derived rulings of fiqh overarching highly general structures of legal theory comparable to those achieved by the civil law systems of Europe, and thus to generate from the old multifarious fiqh a framework for a thoroughly modern, unified, hopefully even pan-Islamic, law.119 In this book we shall encounter various artefacts of this theory-making. The most important of them is the scholars’ assertion of a general Islamic theory of obligation, meant to afford comparatists and code-drafters a hopefully Islamically grounded counterpart to the major division devoted to obligations in European civil codes.120 Deriving such a general theory on fiqh precedents faced many obstacles, given – as will become clear in Chapter 7 – the very different Islamic legal construction of both tort and contract. Yet, through synthesis of and abstraction from diffuse fiqh rules, and through further forced evolution of the Islamic legal framework, these scholars largely succeeded in this project. In the decades since, Saudi scholars have been deeply influenced by this general theory of obligation, and as we shall see in section 7.3, even Saudi judges have embraced it – indeed, they have boldly extrapolated from it in some respects – though all this is more as to theory than as to practice. Throughout this book we shall see indications of a subtle competition, played out in Saudi practice, between two of the modern and Westernising methodologies just discussed, namely comparison and general theory building, on the one hand, and, on the other hand, two other more traditionally rooted interpretative methodologies mentioned in section 3.2.2.4 above, namely general legal principles or qawā`id and divine objectives or maqāṣid al-sharī`a. All of these methodologies purport to generalise from the multifarious outcomes of fiqh, but do so in very different ways, at different levels, and with differing impacts on actual outcomes.

(all citing Zuḥaylī); Decision No 348978, 3 Gen-1434 141 (Jedda 1434 (2012)) (citing `Awda); Decision No 94, 3 BG-Adm-1427 1544 (Adm C No 11, Jedda 1426 (2005)) (citing Khafīf). 119 For a thorough study of the motivations, intellectual, political, and religious, of their work, and its historical context, see Leonard Wood, Islamic Legal Revival: Reception of European Law and Transformations in Islamic Legal Thought in Egypt, 1875–1952 (Oxford: Oxford University Press, 2016). 120 Ibid, ch 10.

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b. Arab Codes and Jurisprudence Another modernising and Westernising influence on Saudi legal interpretation comes from the modern legislation of Arab countries and the jurisprudence – in the sense both of scholarly interpretation and court practice – that stems from them. To understand codification in the Arab world, one must return to the reforms of the Tanzimat era in the Ottoman Empire beginning in 1839, many of which saw application in what were then Arab provinces of the Empire. In these reforms the Ottoman state adopted codes borrowed from or drawing on French counterparts, among them a commercial code in 1850. In the field of civil obligations, the signal achievement of the Tanzimat was the Majallat al-aḥkām al-`adliyya (referred to in this book as ‘Ottoman-Majalla’), in force from 1877, which drew on late Hanafi opinions but organised and presented them in the form of a Western civil code.121 Although the Ottoman-Majalla was repealed in 1926 as one of the consequences of the end of the Ottoman Empire, it remained in force in a number of Arab countries that emerged from the Empire as separate states, such as in Syria until 1959, in Iraq until 1953, and in Jordan until 1976. Egypt, on the other hand, as early as 1883 (for national courts) adopted not a codification of Islamic law but a code drawing heavily on the Napoleonic Code civil. Under Western colonial control or influence, and even after becoming independent, Arab states carried on with Westernisation of their laws and legislative and judicial systems, continuing intensively through to about the 1950s. Throughout this process, it was French civil law that was most influential in shaping Arab laws and legal systems. But a major redirection in the course of modernising Arab laws was achieved by the Egyptian jurist Abd al-Razzaq al-Sanhuri, the author of the new Egyptian Civil Code of 1948.122 Despite the application in Egypt for more than a half-century of thoroughly French-inspired laws, Sanhuri sought to create a truly Egyptian code, one compatible with its history and character. This meant including Islamic law in its formulation. But to do so he did not turn to fiqh as received from the past; rather, he considered Islamic law only after subjecting it to forced ‘evolution’ under a ‘scientific’ process inspired by the legal history and legal science of Europe. Claiming to have ‘adopted from the Sharia all that we could adopt, having regard to sound principles of modern legislation’,123 he otherwise focused on choice among the most advanced provisions of contemporary European codes, inspired by, among other things, the ‘spirit’ of Sharia as he understood it. A number of countries adopted codes close to Sanhuri’s, even authored by him (as in Iraq, Libya, Syria, and Kuwait).124

121 In Turkish, Mecelle-i ahkam-i adliye. Two English translations exist, neither satisfactory: CA Hooper, trans, The Civil Law of Palestine and Trans-Jordan (Jerusalem: Azriel Printing Works, 1933–36); CR Tyser et al, trans, The Mejelle (1901; reprinted, Lahore, Pakistan: Law Publishing Company, 1980). 122 See Enid Hill, ‘Al-Sanhuri and Islamic Law: The Place and Significance of Islamic Law in the Life and Work of `Abd al-Razzaq Ahmad al-Sanhuri, Egyptian Jurist and Scholar, 1895–1971’ (1988) 3(1) Arab Law Quarterly 33–64; Enid Hill, ‘Al-Sanhuri and Islamic Law: The Place and Significance of Islamic Law in the Life and Work of ’Abd al-Razzaq Ahmad al-Sanhuri, Egyptian Jurist and Scholar, 1895–1971 [Part II]’ (1988) 3(2) Arab Law Quarterly 182–218; Guy Bechor, God in the Courtroom: The Transformation of Courtroom Oath and Perjury between Islamic and Franco-Egyptian Law (Leiden: Brill, 2012) 75–89; Guy Bechor, The Sanhuri Code, and the Emergence of Modern Arab Civil Law (1932 to 1949) (Leiden: Brill, 2007) 37–57. 123 Hill, ‘Al-Sanhuri, Part II’ (n 122) 185. 124 Iraqi (1951), Syrian (1949), and Libyan (1954) civil codes and the Kuwaiti Commercial Code (1961).

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Legal and Judicial Reasoning 3.2.4.2 Beginning in the 1970s, however, all countries, including Egypt, began to experience a cultural pendulum-swing away from Westernisation of their laws toward restoring Islamic law to pride of place. For example, a new Egyptian constitution of 1971 included an Article 2 making Islamic law ‘a’ (and in 1981 ‘the’) ‘major source of legislation’. In the 1970s an Arab League committee charged with unifying Arab laws declared Islamic law, not the Civil Code of Egypt, the basis for that unification. More recent Arab codes, while drawing heavily on the Egyptian and other Arab codes, hew more closely to traditional fiqh, such as the civil codes of Jordan (1976) and UAE (1985). Generally in Saudi Arabia any claims that the Arab codes represent Islamic law are disregarded, and they are treated as ‘man-made’ or ‘positive’ law (qānūn waḍ`ī). They are rarely referred to in decisions.125 But as represented in Arab legal doctrinal writings and jurisprudence the codes have far-reaching influence on Saudi legal thought, certainly on those attending the schools of law (kulliyāt al-ḥuqūq), but even on those who attend the Sharia colleges. The concepts found in the codes and Arab jurisprudence are needed to make sense of many of the modern legal issues confronted in Saudi cases. I have mentioned how the administrative court system and jurisprudence of Egypt has influenced the Board of Grievances from the time of its founding in 1955.

3.2.4.2. Modern Fiqh Institutions I described in section 3.2.2.1 above the chief worldly institution created by medieval Islamic law scholars to administer their multiple scholarly, judicial, and legislative enterprises – the legal school or madhhab. As mentioned, in modern times the schools have lost most of their real-world influence, and survive chiefly as intellectual traditions. Fiqh scholars as such – certainly outside Saudi Arabia – have lost many of the powerful institutional roles, official and unofficial, in Muslim states and societies that they had enjoyed for centuries. What institutions and institutional functions have scholars created to take the place of ones now diminished or dismantled? To focus only on those that influence legislation, adjudication, and legal practice, the most important are various bodies charged with issuing fatwas, ie authoritative but non-binding fiqh opinions, meant to guide the faithful and sometimes states as well. Some of these are created by international organisations, some by governments, and a great many others are informal – many of them today functioning as websites. What is innovative about many of these fatwa-giving bodies, at least the official ones, is the idea of group ijtihad. Lacking the old hierarchies, whether official or informal, that ranked scholars and promoted their leaders into positions of power and influence, present-day scholars sense that they need to act in groups to command some of the same respect. The most important fatwa bodies for contemporary Saudi scholars and judges are those created either by international organisations or by the Saudi government. To start with the international ones, the most important, and the most cited in Saudi court decisions, is the International Academy of Islamic Fiqh (Majma` al-Fiqh al-Islāmī al-Duwalī) formed in 1981 under the auspices of the Organisation of Islamic Cooperation

125 We observed several that do: Decision No 9, 5 BG-Com-1433 2076 (Com C No 4, Riyadh 1433 (2011)); Decision No 51, 4 BG-Adm-1434 2106 (Adm C No 1, Jedda 1432 (2010)).

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(OIC) and headquartered in Jedda, Saudi Arabia. The members of the Academy are scholars appointed by Member States of the OIC. The Academy itself appoints a number of consultants, among them scholars of Islamic law as well as specialists in areas relevant to decisions, such as the natural sciences, law, medicine, economics, and finance. In advance of the meetings, members and experts prepare studies for subjects on the agenda, which they then present. After debate, a decision by majority vote of those present states the Academy’s legal opinion or fatwa on the issue. The reports and debates, as well as the fatwas, are published in the journal of the Academy,126 and are cited in this book. I shall refer to this Academy as the ‘OIC-Academy’. A second major international fatwa body is the confusingly similarly named Islamic Fiqh Academy (al-Majma` al-Fiqhī al-Islāmī) founded in 1978 under the auspices of the Muslim World League, headquartered in Mecca. Despite the League being strongly associated with Saudi Arabia (and therefore considered less independent and international), this academy is much less often cited in Saudi court decisions. I shall refer to it as the ‘MWL-Academy’. The Saudi government has created its own fatwa institutions.127 The General Presidency of Scholarly Research and Ifta (the latter term means the giving of fatwas) is the umbrella body for them. They include the Board of Senior Scholars (Hay’at Kibār al-`Ulamā’) and the Standing Committee (al-Lajna al-Dā’ima), both of which are chaired by the Grand Mufti (al-Muftī al-`Āmm). Fatwas of these two bodies figure often in this book. The Standing Committee offers responses to actual requests from Saudis and other Muslims for guidance, and these are published on the Presidency’s website. These fatwas are too brief and simple to much influence judges; they are useful chiefly in revealing the opinion of some of the most influential scholars in the Kingdom. The Standing Committee also prepares in-depth studies preparatory to the issuance of fatwas by the Board. The fatwas of the Board of Senior Scholars are highly authoritative in Saudi Arabia. Sometimes the Board’s fatwas are at the request of the king, such as the two fatwas it has issued on the question of codification of fiqh rulings that were mentioned in section 2.1.4.1-b. On particular fiqh questions, the Board has single-handedly shifted the law of Saudi Arabia on several occasions, such as in legitimating the penalty clause in contracts (sharṭ jazā’ī)128 and the capital penalty for certain crimes.129 In my experience, judges follow the Board’s determinations. I have not seen the current General Mufti of Saudi Arabia Abdulaziz Al al-Shaikh, in office since 1999, cited in published cases. His predecessor Shaikh Abdulaziz Bin Baz (in the office from 1993 to 1999) is rarely cited in the business law cases reviewed for this book. But the former mufti Muhammad bin Ibrahim Al al-Shaikh (d 1969, the office of mufti remaining vacant thereafter until Bin Baz assumed it) is quite often cited down to today, though that may be due to his having served simultaneously as head of the judicial system. A number of his fatwas and decisions are mentioned in this book.

126 Majallat

Majma` al-Fiqh al-Islāmī. for more detail on the institutions and the scholars who have served in them, Muhammad K al-Atawneh, Wahhabi Islam Facing the Challenges of Modernity: Dār al-Iftā in the Modern Saudi State (Leiden: Brill, 2010). 128 This clause and the Board’s opinion on it are discussed in Chapter 4, text at nn 72–8 and in section 8.5.5. 129 See Vogel (n 8) 115–16, 253–58. 127 See,

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3.2.5. Judges and Legislation or Nizams Due to the doctrine of siyāsa shar`iyya, as discussed in section 2.1.3, all judges in Saudi Arabia, whether in the tribunals created to apply nizams, the general courts, or the Board of Grievances, must apply laws derived by ijtihad from the Quran and Sunna, but also uphold legal measures promulgated by the ruler if they do not offend the constitutional test of siyāsa shar`iyya. This test gave rise to a formulation in the Basic Nizam: Article 48: The courts shall apply in cases brought before them the rules of the Islamic Sharia in accordance with what the Quran and the Sunna indicate and the nizams issued by the ruler that do not contradict the Quran and the Sunna.

This language is repeated in Article 1 of each of the current Sharia, criminal, and Board of Grievances nizams of procedure. I explained in section 2.2 how the systems of courts and specialised tribunals differ both in how central nizams are to the law they apply – how often they are called on to apply nizams – and in the degree of the deference of their judges to those statutes, their readiness to adjust traditional fiqh teachings to accommodate statutory rules. How does the judge in daily practice reconcile nizams with the Sharia? Even on the part of judges who are willing to follow nizams and enforce them, the practice of Saudi judges differs somewhat from that of judges in other legal systems. Even in Anglo-American systems, it is not the case that a statute overrules the common law only to the extent of its explicit provisions, or that if the statute comes into conflict with basic principles found in the common law, either generally or in the particular case, it is the common law that must be followed. But this is essentially what transpires in Saudi Arabia. The day-to-day relationship of a nizam to Sharia occurs in one of three modes. First, as to any matter not governed by the nizam’s provisions, as to which it has gaps, judges, practitioners, and the nizam itself assume that these gaps will be filled by Sharia as the general law. Second, in the event any judge perceives a contradiction between Sharia and a provision of a nizam, whether in general or as applied in the specific case, then, as required even by the Basic Nizam, the judge is obliged to apply the former. As noted in section 2.1.3, siyāsa shar`iyya tests of contradiction vary – from the narrowest (direct conflict with an explicit text of Quran, Sunna or ijmā`) through to broader ones (conflict with qawā`id). Lastly, even while applying a nizam as written, the Sharia has force since application and interpretation of the nizam must harmonise with surrounding Sharia rules and norms, this again expected and intended by its drafters. Reading cases in the two main court systems, one forms the impression that courts rarely rely on a nizam without at the same time presenting Sharia arguments to bolster their ruling. For example, a court will often offer a lengthy fiqh justification for its ruling while mentioning the nizam that obligates the same outcome only in passing.130 In certain situations, courts may treat the violation of a nizam as a matter for administrative enforcement or prosecution, while still upholding the Sharia substance of the action.131

130 Decision No 51, 12 BG-Com-1408–1423 171 (Com C No 1, Riyadh 1416 (1995)); Decision No 70, 5 BG-Adm1429 2230 (Adm C No 2, Riyadh 1429 (2008)); Decision No 34168504, 8 Gen-1434 221 (Jedda 1434 (2012)); Decision No 55, 1 BG-Com-1430 171 (Com C No 15, Dammam 1429 (2008)). 131 See Chapter 4, text at nn 46–9.

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3.2.6. Judges and the Appellate Process 3.2.6.1. Resolving Difference in Rulings through Adopting Judicial ‘General Rules’ (Mabādi’ `Āmma) As noted above and in section 2.1.2, in proper fiqh theory judgments are reversible only if the ijtihad on which they are based – as to either law or facts – is itself invalid; if the result falls within the legitimate scope of ijtihad, itself very broad, the judgment is not reversed. In my research in the 1980s, this result was justified on Sharia principles, and formed the ideological stance of Saudi judges at the highest level.132 We discuss in the next section the extent to which the current practice of the Saudi appellate courts agrees with this position. But even before the 1980s, the King and Council of Ministers had introduced into the Nizam of the Judiciary – the statute that establishes and governs the system of general courts – an institutional process intended to foster greater uniformity in general court judgments. Its basis was the idea that the appellate level circuits would monitor the cases they reviewed on appeal for any variation from any ‘ijtihad’ any circuit of the appellate court had previously adopted. In case of such variation, the appellate circuit would forward the issue to an en banc session of all the appellate circuits for approval of that variation; if no such decision is taken, the matter was to be referred to the Supreme Judicial Council as part of its authority to promulgate ‘general Sharia rules’ (mabādi’ `āmma shar`iyya). The Council could thereupon adopt the variation as one of these ‘general rules’, which in turn, lower courts would then be obliged to follow.133 This provision would have been daunting to carry out, given the very large number of opinions on law, uniform or varying, presented to the appellate courts. But in any event, in the 1980s the leading members of the Supreme Judicial Council told me that they did not apply the provision as part of review of trial court judgments; they instead attested the traditional rule that all valid ijtihads must be upheld, certainly on substantive law.134 However even at that time the highest appellate body did avail of its authority to issue general rules, but doing so on non-substantive matters, such as administration or procedure. On interviewing senior general court judges in 2014, there was some difference of opinion whether the provision had ever been applied as to substantive rules. It does appear that the mabda’ mechanism was applied in criminal cases involving punishments ordered by the king on siyāsa shar`iyya grounds.135 One judge said the mechanism also saw some application within each separate appellate court, but rarely nationwide. As for the Board of Grievances, its procedural nizam of 1982 contained a similar provision for promulgating ‘general rules’,136 and this has seen greater application. At times new issues brought before the Board have attracted study and decision as ‘general rules’ by the general meeting of the appellate level of the Board, though this was mostly not in substantive

132 Vogel

(n 8) 107–15. of the Judiciary-1975, Arts 8(1), 14. See also Art 89(5) tasking a technical office of the Ministry of Justice to review judgments to identify matters suitable for issuance of ‘general rules’ by the Supreme Judicial Council. 134 Vogel (n 8) 85–107. 135 Concerning these punishments, see Vogel (n 8) 250–51. 136 Board of Grievances Nizam-1982, Art 40. 133 Nizam

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Legal and Judicial Reasoning 3.2.6.2 law but in procedure. One senior judge told me that such meetings occur about three to four times a year. In any event, in both judicial systems, judges and officials admitted to me that no method was put in place by which such ‘general rules’ adopted by the higher courts were made accessible to the lower courts in any systematic or continuing manner. It was up to the diligence of the individual judge to collect the necessary information, either by obtaining copies of documents or inquiring with other judges. They mentioned that it was always open to a judge to argue that a ‘general rule’ did not apply to his particular case, that his own case was distinguishable. In section 3.2.7.1 below we discuss initiatives by both major court systems to make these general rules better known and effective. The currently applicable nizams on judicial organisation and process in both the general courts and the Board of Grievances have a somewhat revised version of this same ‘general rule’ approach.137 The chief change, as to the general courts, is to replace references to the circuits of the appellate court with references to the circuits of the Supreme Court, and similarly replace the Supreme Judicial Council with the en banc assembly of the Supreme Court. It also replaces the term ‘ijtihad’ with ‘general rule’ (mabda’). The new Board of Grievances Nizam simply makes conflict with a ‘judicial general rule’ decided previously by the Supreme Administrative Court a ground for appeal before that Court. These provisions were only prospective at the time I conducted my interviews of senior judges of both judicial systems on this subject. I suspect that the practice as to maintaining the court system’s adherence to past appellate ‘general rules’ in the new Supreme Courts, whether administrative or general, is still forming, and attention is mostly given to other efforts to enhance uniformity and stability, to be discussed next.

3.2.6.2. Do Appellate Circuits Seek to Alter or Unify Lower Court Practice by Means of Reversing Judgments? To what extent do appellate courts try to direct the practice of the lower courts toward a preferred view, or even to unify the courts on a single view and then prevent deviation from that view, by means of reversing decisions divergent from that view – and this without going to the extent of adopting a ‘general rule’? We know from published decisions that whatever guidance or unification the appellate courts have attempted has not been exhaustive. Evidence of this is afforded wherever the law of either court system is shown in the published cases to be unsettled – since only cases that have been affirmed are published. On this question in general, there does seem to be a distinction between the two main court systems, with the Board of Grievances trial courts relatively more likely to conform to the views of their appellate courts. Let us take up the general courts first. In them, as noted in section 2.1.2, in the 1980s judges of the Supreme Judicial Council held strongly to the ideology of individual judge ijtihad, foreclosing (in proper theory at least) their own power to reverse a lower court’s ijtihad unless it failed of the conditions for a valid ijtihad. They recited the saying ‘Ijtihad is not annulled by its like’ (al-ijtihād lā yunqaḍ bi-mithlih). The procedural nizams currently

137 Nizam

of the Judiciary-2007, Arts 13–14. Board of Grievances Nizam-2007, Art 11.

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governing the general courts do not take a strong position on the issue. Both the 2000 and 2013 procedural nizams provide: If the court of appeals … determines that the judgment as enunciated (manṭūq al-ḥukm) is consistent with respect to its outcome with its original Sharia sources (muwāfiqan min ḥayth natījatih li-uṣūlih al-shar`iyya), it shall affirm the judgment.138

One judge stated to me that this provision intends only that a judgment should not be reversed merely because of a flaw in the manner of its expression, an interpretation somewhat at odds with the language. In any event, there is no other provision that states criteria for reversal. In the 2013 Nizam (Art 193(1)) appeal may be made to the Supreme Court on grounds, among others, of ‘divergence from rulings (aḥkām) of Sharia or from nizams issued by the head of state that do not conflict with [Sharia rulings]’. The 2001 Nizam of Criminal Procedures took a very narrow view of appellate powers, allowing for affirmance unless the trial court’s decision deviated from a ‘explicit rule (naṣṣ) in the Quran, Sunna or ijmā`’.139 But the 2013 Nizam of Criminal Procedures adopted the same standards as in civil cases (Art 198(1)). Reviewing these provisions, it seems they avoid taking a position on the issue of the rule against ijtihad reversal; if anything, they lean toward interpretations that favour the rule. As to practice also, the general courts present an ambiguous picture. In 2014 general court judges reported that the appellate level now does not hesitate to reverse lower courts on matters of ijtihad if they wish to. But until today, as shown by published reports, appellate circuits may affirm a divergent judgment if well reasoned. An example is afforded by a decision where a form of contractual stipulation controversial in Saudi Arabia was addressed. The trial court upheld the stipulation as valid and gave judgment applying it; the appellate court remanded the judgment, forcefully arguing the opposite doctrinal position; the trial court insisted on its ijtihad; and the appellate court affirmed.140 Appellate courts affirm judgments where the outcome opposes the prevailing Saudi legal practice outside the courts.141 As confirmed to me by a senior appellate judge, appeals courts may be particularly accommodating of trial court opinions otherwise seeming deviant if the judgment arguably does justice in the particular case or serves the litigants’ utility (maṣlaḥa), though, as noted above,142 the trial court will not usually mention this explicitly as an explanation for its result. As a result of all this, general court judges cannot know for certain whether affirmance of a decision on appeal implies that the appellate circuit agrees with the particular ijtihad or whether it accepted it as a valid alternative ijtihad or even on the grounds of the case’s individual facts. In this respect, the microcosmic ideal of judge ijtihad described in section 2.1.2 is still relevant. In the Board of Grievances, on the other hand, it appears that fastidiousness about trial court ijtihad has never been the case, and that whenever the appellate level of the Board

138 Nizam

of Sharia Procedures-2013, Art 191; Nizam of Sharia Procedures-2000, Art 185. of Criminal Procedures-2001, Art 201. 140 Decision No 33251132, 1 Gen-1434. 141 See eg Decision No 34200144, 2 Gen-1434 165 (Mecca 1434 (2012)). The trial court held that a practice followed widely in Islamic finance in the Kingdom is invalid (a form of constructive possession). This engendered a back-and-forth between the appellate court and the trial judge, but in the end the latter’s view prevailed. 142 See text at nn 83–84. 139 Nizam

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Legal and Judicial Reasoning 3.2.6.3 has wished to, it has required judges to comply with its preferred views. Board judges and officials have stated to me their view that the rule against ijtihad reversal applies only to the final appealed and affirmed judgment, not that of the first-instance court. In other words, for them it is more a rule of res judicata than one protecting the duty and freedom of the judge to exercise ijtihad. The Board’s 1989 procedural nizam had no provisions at all restricting grounds for reversal by the appellate court. Its 2007 procedural nizam repeats the grounds for appeal found in the general court nizams, ie ‘divergence from Sharia rulings and from nizams issued by the head of state that do not conflict with [Sharia rulings]’, but adds to this ‘or error in their application or interpretation, including divergence from a judicial general rule (mabda’) decided in an earlier judgment of the Supreme Administrative Court’ (Art 11). This text is much less accommodating to the ideal of trial court ijtihad. One sees in published cases indications how compliance with past appellate decisions has been the norm in the Board of Grievances for many years.143 It seems, therefore, that the rule against ijtihad reversal has no role in the Board’s appellate practice. Nevertheless, as will be observed many times in this book, the appellate circuits of the Board have not achieved uniformity of views on many contested issues, nor do they consistently enforce generally preferred views. Even when the ruling on an issue is considered established in one region of the country, the appellate bench in another region may uphold a divergent view.144 Board appellate circuits are also known to affirm judgments contradicting widespread practice in the society at large.145

3.2.6.3. An Informal Tendency Toward Stare Decisis; Judges’ Respect for the General Opinion of their Own Court or for Prior Opinions of their Appellate Court As I learned in the 1980s, general court judges, though allowed, in theory and largely in practice, freedom to adopt and defend their own ijtihads, generally cohered in their opinions, or did so within a narrow range of divergence on particular issues. Lower court judges would consult higher-level judges in person or by telephone on difficult issues. If they were aware of a preferred opinion in the appellate court, they may choose to conform to it, rather than invite remand or even reversal from a higher court. Judges have told me a number of times, in the 1980s and more recently, that one basis on which they, in all good conscience, can justify aligning their own ijtihad with that of most or all other judges is utility, maṣlaḥa, which is an acceptable make-weight when the standard four ‘roots’ for ijtihad leave room

143 Decision No 59, 12 BG-Com-1408–1423 61 (Com C No 9, Jedda 1419 (1998)); Decision No 57, 5 BG-Adm1428 2167 (Adm C No 11, Jedda 1427 (2006)) (declaring a rule to be an established one on the evidence of a judgment of the appellate court). A thesis cites a case as a rare instance of the appellate court affirming an opinion diverging from the Board’s standard position: Decision No 241, cited in Ḥijāb al-Dhuyābī, ‘Sulṭāt al-idāra tujāh al-muta`āqid: dirāsa ta’ṣīliyya muqārina’ (BG Review Bd Adm C No 1, city unknown 1417 (1996)). 144 A judge serving under one regional branch of the Board of Grievances expressed surprise to me on learning of a divergent decision in another region, since in his region the opposite view was established. The decision held against the validity of acceleration clauses in instalment sales. Decision No 12, 2 BG-Com-1432 606 (Com C No 7, Buraida 1432 (2010)). 145 See eg Decision No 12, 2 BG-Com-1432. The trial court decision declared invalid a practice with strong establishment support and widespread application, the acceleration of instalments after delays in making payments. The appellate court affirmed.

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for choice. The argument is that the general utility is advanced when judges are unified on a view. But as we just saw, in the general courts the idealism of trial court ‘microcosmic’ ijtihad, both as to law and facts, remains alive. Appellate courts also have no expectation of consistency, even for decisions at their own level. General court judges told me that in defending their judgments with the appellate court, they may cite earlier appellate court decisions that agree with their position, but only because the appellate court may take such earlier decisions into account (al-isti’nās bi-hā). In the Board of Grievances, once again the situation differs. Board trial court judges do consider themselves bound not only by any ‘general rules’ adopted and circulated to them by the appellate level courts, but also by positions endorsed in appellate decisions of which they are aware, if these represent either reversals on grounds of legal ruling or repeated affirmances on particular points of law. Appellate decisions of reversal (naqḍ, quashing, cassation) are highly persuasive, since an act of naqḍ for reason of legal rule means that the court found the trial court ruling outright wrong. Beyond this, Board of Grievances judges become aware of many points on which the Board has adopted standard positions, which they then consider binding. Judgments abound with references to these points of law. Various terms are used to refer to them, including ‘that on which the jurisprudence of the Board has become settled’ (mā istaqarra `alayhi qaḍā’ al-dīwān, min al-mabādi’ al-mustaqirr `alayhā, etc), the ‘accepted practice’ (al-`amal `indanā, jarā `alayhi qaḍā’ al-dīwān, etc). Although our search among the cases was not focused on this aspect, it is significant that, of the cases using these phrases I did make note of, all but one were from the Board of Grievances. The one general court case that I noted referred to a former decision of the Supreme Judicial Council, calling it a ‘judicial mabda’’ and citing it among other fiqh proofs.146

3.2.7. Novel Efforts to Make Judicial Outcomes More Predictable and Stable 3.2.7.1. Activation of the Authority to Issue ‘Judicial General Rules’ (Mabādi’ Qaḍā’iyya) As noted in section 3.2.6.1 above, for years nizams of the judiciary have empowered the highest judicial authority to issue ‘general rules (mabādi’ ` āmma) on issues relating to the judiciary’.147 As noted above, for decades this authority – formerly the Supreme Judicial Council, now the Supreme Court – has issued and circulated a number of individual ‘general rules’, mostly on procedural and criminal matters. It seems these are not made public, but are not considered secret within the judiciary; informal compilations of them by judges and lawyers circulate, even on the internet. But recently, in a novel development, the Supreme Court issued in January 2018 a collection of 2,323 general rules (also called mabādi’) drawn from its past decisions and those of

146 Decision 147 Nizam

No 34266892, 26 Gen-1434 310 (Riyadh 1434 (2012)). of the Judiciary-2007, Art 13(2)(a).

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Legal and Judicial Reasoning 3.2.7.1 its predecessors covering a period from 1971 to 2016.148 The rules are said to be drawn from 20,000 decisions of various kinds, some of them ‘general rules’ but most of them distilled from judgments.149 The volume begins with introductions by the Minister of Justice, the Chief Justice of the Supreme Court, and the Director of the Centre of Studies of the Ministry of Justice. The Chief Justice notes that King Salman had issued an order requiring this compilation in 2015.150 Even the officials introducing the volume do not claim that these rules are binding on judges, but only that judges should take them into account (turā`ī)151 and may cite them in support for their judgments (jawāz al-iḥtijāj bi-hā).152 They also acknowledge that some of the rules included have been superseded,153 and since those particular rules are not marked or designated in any way, the authority of the whole is somewhat diminished. These published mabādi’ are unlikely to influence practice dramatically for one principal reason: the form which they have been given. They are stated as maxim-like, concise, highly general rules, abstracted from the facts of any case from which they were derived. Sometimes they state outcomes no one would doubt, especially when stripped of the facts of the case or cases from which they were taken: for example, ‘Contracts agreed to by the two parties are the point of reference in the event of disagreement, and the two parties are obliged to execute what appears in the contracts’ (Rule No 39); ‘The lease contract does not convey ownership, for what is contracted for is only use’ (Rule No 203). Others are more informative, but sometimes well known, such as ‘In matters of private right, judgment is not given for what [the claimant] does not demand’ (Rule No 1972). Others are definitely useful. Rule No 100 is relied on in our case study on vicarious liability: ‘A complaint is brought against the driver who has caused the accident, not against the company he works for, as long as the company had not sponsored him by a sponsorship guaranteeing his obligations.’ In any event, for purposes of this particular study on business law, only a relative handful of the rules proved of any importance. Perhaps these compiled rules will have a greater determinative effect in other areas, such as family law. But I suspect that for individual judges these rules will mostly be of use as a quotation to crown a result they reach, or would have reached, on other grounds. And many of these rules will already have been, or become, the general practice. One wonders whether the motivation behind developing these mabādi’ was to mimic articles of a civil-law-style code, as an experiment in the direction of codification. This is as to the general court system. In a somewhat similar initiative, in 2014 the Board of Grievances published many past resolutions adopted by its appellate court meeting en banc deciding judicial general principles.154 Most of these are procedural.

148 Ministry

of Justice-Principles of Highest Courts-2016. al-Ḥaydarī, ‘Muqaddimat Markaz al-Buḥūth’, in Ministry of Justice-Principles of Highest Courts2016, 13–27, 21–26. 150 Ghayhab al-Ghayhab, ‘Muqaddimat Faḍīlat Ra’īs al-Maḥkama al-`Ulyā’, in Ministry of Justice-Principles of Highest Courts-2016, 11, citing Royal Decree No 33965 dated 16/7/1436 (5 May 2015). We were unable to obtain this royal decree. 151 al-Ḥaydarī (n 149) 16. 152 Walīd al-Ṣam`ānī, ‘ Taqdīm Ma`ālī Wazīr al-`Adl,’ in Ministry of Justice-Principles of Highest Courts-2016, 6. 153 al-Ḥaydarī (n 149) 24, 26. 154 Board of Grievances, Qarārāt hay’at al-tadqīq mujtami`a (Riyadh: Maktab al-Shu’ūn al-Fanniyya, 1435 (2014)). 149 Manṣūr

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3.2.7.2. Publication of Court Judgments Since the issuance of the Nizam of the Judiciary in 1975 and the Nizam of the Board of Grievances in 1982 the government has advocated, by means of including a requirement to do so in all its nizams on the judiciary, that the general courts and the Board of Grievances regularly publish their judgments.155 As noted in section 1.2.1, during the period of application of these nizams this did not occur, except sporadically. Apart from the few scattered publications, court judgments were available only by informal sharing. Court decisions are considered confidential to the parties, and so, when published and sometimes even when shared, names and identifying information are redacted. In section 1.2.1, I noted the major development that has occurred since, it accompanying the reorganisation of the courts ordered by King Abdullah. A large quantity of selected past court decisions, all of which had been affirmed on appeal, now appear in print and on the internet, particularly from 2015, these from both the Board of Grievances and the general courts. As of 2019 they number about 10,000, and cover periods as long as – for the commercial jurisdiction – twenty-eight years. Starting in 2018 the Ministry of Justice publishes on the internet every decision of the commercial courts as it becomes final. Dr Muhammad al-Issa, the Minister of Justice at the time of the first major publication of general court decisions in 2014, in his introduction to the publication, wrote that the cases in it are ‘binding precedents’, explaining that this means that if a judge encounters a case with the same fact pattern, he must follow the precedent, but if the facts demand a different reasoning, he may ignore it.156 The Minister acknowledges that the compilation includes judgments that have been superseded by new precedents, and these are not marked or designated as such; again, as in the case of the Supreme Court mabādi’ publication, this situation diminishes whatever binding effect might be hoped for from the published cases. He explains how these decisions’ character differs from that of the Supreme Court’s ‘general rules’, which are a creature of statute, are more binding, and apply to a broader range of fact patterns. He offers fiqh arguments to counter the ideal of free judicial ijtihad – though none of those arguments would seem sufficient to overcome a thousand years of doctrinal production to the contrary. He expresses his support for King Abdullah’s project of compilation of judicial rulings. In the case of the Board of Grievances, also in 2014, several years after its new programme of publishing decisions began, I asked several senior judges about the significance of the published decisions. All believed that the selection process was accomplished by a technical staff that chose decisions that were well reasoned, but did not consistently remove any that fell outside the Board’s mainstream; therefore, none considered all of the decisions binding on judges. Also, they indicated that a single affirmance does not make a decision’s holding binding – only repeated affirmances of that holding might. Therefore, none was willing to say that the decisions bound them.

155 Nizam of the Judiciary-1975, Art 89(2); Nizam of the Judiciary-2007, Art 71(3). Both assign the task of selecting judgments for publication to a technical office within the Ministry of Justice. In the Board of Grievances nizams, the nizams have required first the President of the Board and then a technical office within the Board to classify and then publish all judgments of the Board yearly. Board of Grievances Nizam-1982, Art 47; Board of Grievances Nizam-2007, Art 21. 156 Muḥammad al-`Īsā, ‘ Taqdīm’, in Majmū`at al-aḥkām al-qaḍā’iyya (li-`ām 1434), vol 1 (Riyadh: Ministry of Justice, 1436 (2014)) 14.

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Legal and Judicial Reasoning 3.2.7.2 As of now, the effect of the publication of these decisions on the courts’ reasoning process in practice remains unclear. One can consider the issue on two levels. First, let us consider what their significance might be had the Ministry of Justice and the Board of Grievances merely made them available to judges, not to the general public, recalling that, until only recently, the generality of court decisions were not available even to judges. On that supposition, there would be three possible modes in which the judges could approach the cases: to ‘take them into consideration’ (yasti’nis bi-hā); or to consider them binding judicial principles (mabādi’); or to consider them binding precedents (sawābiq) as in Anglo-American systems, ie that their rulings bind only in cases with similar facts, so that analogies need to be drawn to them given new fact patterns. I suspect the reader of the case studies in this book, which cite and quote a great many published cases of both the general and Board of Grievances court systems, will be able to judge the decisions’ likely influence on judges. Apart from published Board decisions that are recent and announce that rulings are ‘the established jurisprudence of the Board’ or ‘the practice among us’, it seems unlikely that even Board judges, not accustomed in any event to relying on judicial precedents, would consider themselves bound by these decisions, and so would resort to the first option – to ‘take them into consideration’. As to general court judges, this outcome would be all the more likely. An underlying practical problem affecting this question is that the published judgments were not originally produced to serve as precedents in later cases. They have as a result deficiencies when used for that purpose: first, with the names redacted, it is sometimes difficult to reconstruct the facts of a case; second, judges often fail to mention facts vital to the legal analysis; third, the judges often do not respond to all of a party’s claims; and fourth, the court’s explanation of its legal reasoning (tasbīb) is often brief, inclined to rest on the most august – and usually quite general – legal argument, rather than stated in detail; its purpose seems more to convince the parties and summarise the case’s justification for purposes of review than to support an ongoing project of judicial law-making through precedent; and, of course, the judgments only rarely cite other court decisions. This is to consider these published decisions as if they had been circulated only within the judiciary itself. What about their effects on judicial reasoning given that they now have been made available at another level as well, that of the public at large? Here I only speculate, based on several observations. With this publication of decisions, an awareness of judicial practice available previously only to attorneys with long experience in the courts now is possible for all. As for attorneys, no doubt this new information will help them better prepare their cases. But Saudi trials are not built on an adversarial system, in which attorneys argue opposed legal positions in detail; attorneys may only suggest legal arguments while discharging their main duty, which is to present their client’s claims and offers of evidence. Given this past practice, attorneys may not delve into the published cases at length in their memoranda, urging them on the judge. The far greater significance of the publication will likely come in the longer term from a greater awareness of law in practice among all interested parties and the general public, as scrutiny of judicial outcomes accumulates through the press, academia, and professional writing on law. Inevitably the judiciary will be held to a higher standard of consistency, stability, and responsiveness to the social consequences of their judgments. The ideal of individual judicial ijtihad, microcosmic law-making as I termed it, has always entailed potential liabilities on precisely those points: even the traditionally minded lay person may expect that the divine law would not vary as markedly as it 103

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often has from judge to judge, or case to case, even when the facts of cases seem identical. Previously public criticism of the judiciary has sometimes been sounded along these lines, but until now the judiciary has been shielded from scrutiny on them in any detail. At least as to the new commercial court, publishing every decision as it issues, this shield has now dropped; in the other courts, much will depend on how court decisions are selected for publication.

3.2.7.3. Proposal to Codify or Compile ‘Judicial Rulings’ King Abdullah’s November 2015 order to the judiciary to prepare a ‘Compilation of Judicial Rulings (Tadwīn al-Aḥkām al-Qaḍā’iyya) on those Sharia-related subjects for which the judiciary has a need’ – often referred to as a proposal for codification – was discussed in section 2.1.4.1-b.

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4 Introduction to the Fiqh Law of Property, Crime, Tort, and Contract 4.1. Property ...............................................................................................................................106 4.2. Crime ...................................................................................................................................110 4.2.1. Criminal Liability – Two Main Categories: Ḥudūd and Ta`zīr ......................110 4.3. Tort .......................................................................................................................................112 4.3.1. Torts Against Person ............................................................................................112 4.3.2. Torts Against Property .........................................................................................113 4.4. Contract ...............................................................................................................................114 4.4.1. First Fundamental Conception Shaping Contract Law: Endorsement of Contract and Trade ..........................................................................................115 4.4.2. Second Fundamental Conception Shaping Contract Law: Usury or Ribā.......132 4.4.3. Third Fundamental Conception Shaping Contract Law: Uncertainty or Gharar ................................................................................................................135 4.4.4. Short Case Study on the Hire-Purchase Contract ............................................142

In this chapter, I set out some basic fiqh conceptions as to property, tort (or delict), and contract that underlie all the discussions to follow of business law in Saudi Arabia. As noted in section 1.1.3, in chapters like this one summarising fiqh doctrine I shall introduce fiqh law according to its own inner structure, postponing any equations with legal conceptions in other systems until after that structure is grasped. Unless one makes the extra effort to learn that inner structure, one can, I believe, never confidently predict results. For example, without knowing more about the law, one may, on learning that interest on loans is prohibited, conclude that it is also unlawful for a seller to charge more for goods sold on credit than goods sold for cash; once one learns this is false, then one may assume that if the buyer in such a sale prepays the amount owing on a credit sale, he is entitled to a refund; that would also be false. Or, on learning that Saudi courts do not award compensation for lost profits after breach of contract, one will assume that if a seller of a residential apartment building wrongfully withholds it from its buyer, he cannot be made to compensate the rental value of the building during the time it was withheld; that would usually also be wrong. Details that seem irrelevant can change results: such as whether or not the seller manufactures goods or simply supplies them; whether payment is made in advance or on delivery; whether goods were sold by serial number or only by description. It is useful to know even of the religious-legal premises of a rule of law, however much they may seem remote from the practice. As previously explained, scholars believe that the whole of fiqh is based first on the Quran, then on the Sunna, then on the agreement of past 105

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scholars. Given the Saudi ideal of ijtihad, according to which even a modestly learned judge or scholar should try to apprehend the revealed origins of a ruling, these texts do influence a judge’s thought process. We benefit therefore by learning at the outset in dealing with each subject some of the revealed texts for each subject. Although we will not, and cannot, retrace the steps a qualified scholar, a mujtahid, would follow in identifying, verifying, understanding, weighing, and extrapolating from these sources, even superficial knowledge of some of the texts can help the outsider to understand the resulting fiqh rulings, even in their details. The writings of scholars may not refer to the texts often, and usually argue at other levels. This may be because the texts and their significance for the question at hand are so well known as to need no mention.

4.1. Property The Quran and Sunna consider rights of private property matters of religious significance, virtually sacred. Consider the following passage from the Prophet’s Farewell Pilgrimage sermon: O people! Do you know what month you are in, and what day you are in, and what town you are in? They said, In a sacred day, a sacred month, a sacred town. He said, Then your persons, your property, and your honour are as sacred [forbidden] to you as the sacredness of this your day in this your month in this your town, until the day you meet Him. Then he said, Hear me, O my nation! Live together, but do not do wrong, do not do wrong, do not do wrong! For [taking] the property of a man is not permissible except by his finding it good [bi-ṭīb nafsin minhu].1

The Quran and Sunna address directly the justifications by which property is transferred from one person to another, as in the last sentence of the passage just quoted. The Quran condemns in vehement, though general, terms the unlawful taking of property: Do not consume your property wrongfully, nor use it to bribe judges, intending sinfully and knowingly to consume parts of other people’s property. (2:188)2 You who believe, do not wrongfully consume each other’s wealth but trade by mutual consent. Do not kill each other, for God is merciful to you. If any of you does these things, out of hostility and injustice, We shall make him suffer Fire. (4:29–30)3

Classical Quranic commentaries explain the term ‘wrongfully’ (bi-al-bāṭil) as all that is prohibited by the Sharia, like usury, gambling, theft, usurpation, perjury, or deception. This last verse (‘mutual consent’) and the Prophet’s words in the pilgrimage sermon (‘his finding it good’) single out the point of willing consent as a key criterion that renders the transfer of property from one person to another legitimate, as not ‘consum[ing] the property of another wrongfully’. This obviously gives strong religious sanction to the transfer of property through contract, as long as all prohibited types of transfers, such as those just mentioned, are avoided. 1 Ibn

Hanbal, Ibn Maja. English translation of the Quran throughout this book, I rely on MA Abdel Haleem, The Qurʼan (Oxford: Oxford University Press, 2004). At times I alter the translation as indicated by use of brackets or parentheses, usually just to provide in Roman transliteration the original Arabic of the Quran. 3 See also 4:161, 9:34. 2 For

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Property 4.1 One who holds the property of another is obliged to protect it from loss, and restore it undiminished: ‘Those who consume the property of orphans unjustly are actually swallowing fire into their own bellies: they will burn in the blazing Flame’ (4:10; see 4:2). The Prophet is reported to state: ‘The hand [meaning possession or control] is obliged by what it takes, until it performs [or fulfils] it.’4 This hadith has wide application throughout contract and tort. Inspired by these and other verses and hadiths, scholars early adopted several seminal conceptions about property, building-blocks on which a great deal of tort and contract law rest. The scholars defined property (māl) itself as tangible things to which human nature inclines. For something to be the subject of a contract, it must be mutaqawwim, meaning that its use is lawful under the Sharia. For example, wine is not mutaqawwim for Muslims, although it is māl, since Christians and Jews may buy and sell it. There is dispute whether uses or usufructs (singular manfa`a) are māl, since, existing only instant-by-instant over time, they arguably involve prohibited uncertainty (gharar, to be discussed in section 4.4.3 below). Hanafis require that māl be physically possessable and preservable, and hence usufructs for Hanafis are not property. They admit, however, as an exception to strict doctrine, that usufructs have legal value after that value is fixed by a lease contract. Other schools differ and consider usufructs fully māl, on the apparent ground that existence and custody of the underlying thing suffice as a token for the existence and custody of the usufruct. In modern times the issue of intangible properties arises prominently, for matters such as intellectual property, shares in companies, and rights secured by contract such as a noncompetition clause or an option to buy or sell. These pose difficulties under fiqh. In Saudi law some of these increasingly are recognised as legitimate property, usually through the mechanism of nizam legislation.5 Shares have been recognised as property on the ground that they represent an undivided share in the tangible assets of the company. Māl is either fungible (mithlī) or non-fungible (qīmī). Fungibles are defined as property ‘the individuals of which or their parts resemble each other such that it is possible that any of them can take the place of any other without any significant distinction’.6 In other words, they are goods which can be transacted in, within a commercially acceptable range of value, by description and volume, weight, number, or measure (whichever of these quanta apply depending on the type of goods). Gold, silver, and currency are fungibles, and so are wheat, iron, and fabric of particular types. Custom generally decides what may be sold by number, volume, weight, or measure without distinction, and, especially in this day of standard manufacture, may include manufactured goods.7 The key significance of this distinction, observed throughout fiqh, is that, whenever the law requires fungible goods to be transferred, or compensated for after their loss, then the recourse is not to any specific property, or to the goods’ value on the market, but to an equivalent amount of like goods.

4 `Alā

al-yad mā akhadhat hattā tu'addī. Abu Dawud, Tirmidhi, Nasa'i, Ibn Maja. Arabia protects intellectual property rights through a group of nizams issued between 1999 and 2004 covering copyright, trademarks, tradenames, and patents. It has also acceded to various international treaties protective of intellectual property. 6 Muṣṭafā al-Zarqā (d 1999), al-Madkhal al-fiqhī al-`āmm, 9th edn (Beirut: Dar al-Fikr, 1967) 3:130. See generally ibid 3:130–43. 7 Ibid 3:136. 5 Saudi

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Māl is either `ayn or dayn. `Ayn is a specific existing thing, considered as a unique object and not merely as a member of a category (‘this car’, not ‘a new sedan of type x with features y and z’). Dayn is any property, not an `ayn, that a debtor owes, either now or in the future; or it can refer to such property only when it is owed in the future. Property owed as dayn is usually a fungible, such as gold or wheat.8 Sometimes non-fungible goods, even services or usufructs, when defined only by specification and not identified as unique, ie `ayn, are treated as dayn. I shall often refer to dayn property as ‘abstract’ property, and `ayn property as ‘concrete’ or ‘specific’. Although dayn literally means ‘debt’, in fiqh it refers not to the obligation per se, but rather to the property that is the subject of the obligation. Such property is considered figuratively to be already owned by the creditor, but since such property is not yet identified (it is not an `ayn), and may not even exist, referring to dayn as present property is fictive.9 Indeed, Islamic law takes the fiction one step further, by imagining dayn property as subsisting ‘in the dhimma of the obligor’. Dhimma means literally ‘compact’, ‘bond’, ‘obligation’, ‘responsibility’, ‘protection’, or ‘security’, but is used legally for the faculty or capacity in an individual by which he accepts duty and obligation.10 Its usage often employs a metaphor of a physical place (maḥall) in the individual. Thus, if one buys property generically or abstractly, such as so many bushels of a particular quality of wheat, one is said to have title to that wheat as ‘a described thing in the dhimma of the seller (mawṣūf fi dhimmat al-bā'i`)’. I return to this point below in section 4.4.1.2-a, in making the claim that this fiction reveals how wedded fiqh is to portraying sale not as one or more obligations, but as the consenting present transfer of property. Dayn property and mithlī property can become identified, made `ayn and qīmī, by means that turn it into concrete, unique property, such as if the buyer has viewed the goods meeting the description and agreed to buy them specifically, or the coins to be used for the payment have been produced. The term for identification is ta`yīn. But until actually identified, even a present obligation of dayn property remains a dayn; for example, in a sale of a specific car to be delivered now for money to be delivered now, the money remains dayn until paid. A very important form of property, one that is almost always both dayn and mithlī, is currency or money, naqd.11 In traditional law currency occurs in two species, gold and silver, usually in coined form as dinars and dirhams, but mention is also made of a fiat currency called fals, a copper coin. Today the convention among scholars is that paper or fiat currency counts as naqd, each currency being its own species, to be treated like gold

8 Most fungibles are also consumables, ie goods that are consumed on first use, like wheat or money. The chief exception to this would be certain manufactured goods, such as pottery, metal goods, cloth, etc. al-Zarqā, ibid 3:143–47, gives a useful analysis of the concept of the ‘consumable’ and its place in fiqh contract law. One indication of its importance is that leases are possible only for non-consumables. 9 Muḥammad Tahānawī (d after 1745), A Dictionary of the Technical Terms Used in the Sciences of the Musalmans, 2 vols (Calcutta: WN Lees Press, 1862), calling the application of the term dayn to property metaphorical, since it leads to property only in the future. `Ayn has several antonyms: genus, dayn, fungible, and ‘in the dhimma’. Another usage opposes `ayn as the thing itself (Latin, res) with usufruct (manfa`a). 10 Edward William Lane, An Arabic–English Lexicon, ed Stanley Lane-Poole, vol 8 (London, 1863) entry on (dh-m-m). 11 Interestingly, while money is dayn almost par excellence, one word for ‘coin’ is `ayn. This may be an indication of how important in practice, at a time when coins could vary in quality and authenticity, was the step at which money becomes identified as so many specific coins.

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Property 4.1 and silver. Indeed, scholars have gone further and agreed that electronic records from bank accounts and the like can equate to present paper currency, and can even become identified and specific property (mu`ayyan, `ayn).12 In all forms, money is the form of property most closely regulated by the rules surrounding ribā or usury, as discussed below in section 4.4.2. The conceptions of `ayn, dayn, and dhimma will appear repeatedly throughout this book, and the outcomes of certain contracts depend crucially on them. One reason behind this is that property sold as dayn or ‘in the dhimma’ poses fewer risks or uncertainties (gharar) as to its existence and characteristics, since property that is specified only by description is often replicable somewhere in the market, while unique property (`ayn) is innately liable to unavailability, destruction, and loss. For example, a hadith of the Prophet forbids the sale of property the seller does not own, due to the uncertainty that surrounds whether he can acquire it; but such a sale is allowed for property sold by description (bi-al-ṣifa, mawṣūf) in the dhimma, ie sold as dayn, because the risks of not acquiring such property are diminished. In another example, it is possible to buy goods that are generically described (eg so many bushels of a specific grade of wheat) as long as one pays in full for them at the time of the contract; but if one attempts instead to specify the goods more concretely (eg wheat from a particular farm), the sale is void. On the other hand, dayn property is more likely to fall subject to certain other fiqh prohibitions arising from rules on usury (ribā, see section 4.4.2 below) and other forms of uncertainty (gharar, see section 4.4.3 below). The distinction of fungibles versus non-fungibles often overlaps with that of dayn versus `ayn, since, again, most goods transacted in as dayn are fungibles. We shall observe that these distinctions may be losing some of their significance in present-day Saudi Arabia. Courts can differ on whether certain properties are fungible or not.13 A finding that property owing or to be compensated is fungible, and therefore must be compensated in kind, not by money, can be of consequence if the value of the goods has changed from the time liability arose until the time of judgment. Also, if manufactured goods, which are often identical to each other and sold by number, weight, measure, and the like, were considered fungible goods, as fiqh theory would seem to require, then, given the frequency of transactions in them, one would expect to encounter many judgments requiring payment in like goods, instead of in money, but one does not. In contrast, one finds that courts do highlight the rules about fungibility and strictly honour them when the transaction at issue is denominated in gold, since such transactions are subject to strict ribā rules about compensation other than in gold.14 Similarly, courts seem often to ignore the distinction between a performance that is specified only by description (dayn or mawṣūf) and one that is unique or identified15 – and this can have even greater effect on outcomes, as will be made clear in the next chapter. 12 Senior-Scholars-Standing-Committee, No 4721: al-Taḥwīl bayn al-`umal’, in Fatāwā-Collection-1, vol 13, 448–49, www.alifta.net/fatawa/fatawaDetails.aspx?View=Page&PageID=4969&PageNo=1&BookID=3&language name, accessed 1 November 2018. 13 For example, a general court case treats shares in a public company as fungible: Decision No 3447287, 26 Gen-1434 228 (Riyadh 1434 (2012)), while the Committee for Securities Disputes does not: Decision No 20/LS/2007, cited in `Ubayda al-Shuqfa, ‘Aḥkām al-ta`wīḍ `an akhṭā’ wasīṭ al-ashum’ 90 (Committee Securities Disputes 2007). See Aḥmad al-Khamīs, Munāza`āt al-wasīṭ wa-al-mustathmir fī tadāwul al-awrāq al-māliyya (Riyadh: Maktabat al-Qānūn wa-al-Iqtiṣād, 1434 (2012)) 202–05. 14 See eg Decision No 431, 3 BG-Com-1431 1220 (Com C No 9, Jedda 1430 (2008)). 15 Decision No 146, BG-Com Unpub (Com C No 7, Buraida 1432 (2010)): a lease of fifty trucks by description (which the lessor then would purchase and supply) was voided on the ground that the lessor did not own what

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4.2

Introduction to the Fiqh Law of Property, Crime, Tort, and Contract

4.2. Crime We are not interested particularly in criminal law in this book, but it does become relevant in discussing torts, since under Islamic law tort and crime are closely linked. Any tort committed intentionally with knowledge of its wrongfulness is potentially prosecutable as a crime. Crimes causing material harm to individuals can give rise to a civil claim by the victim, as well as a criminal prosecution. For these reasons, we need to discuss criminal law briefly.

4.2.1. Criminal Liability – Two Main Categories: Ḥudūd and Ta`zīr Crimes, in the sense of acts prosecuted by the state seeking punishment, are divided into two types according to the nature of the punishment contemplated for them: ḥudūd and ta`zīr. Both were mentioned briefly in section 2.1.3. The first type, the ḥudūd, are the famous severe punishments laid down explicitly in the Quran and Sunna, for adultery, theft, wine-drinking, apostasy, accusation of infidelity, highway robbery, and rebellion. The ḥudūd are not applicable to our study. The second type of crimes are those subject to ta`zīr or discretionary punishment. Any act in disobedience to a definitive requirement of Sharia (a sin, ma`siya) is a crime punishable at the discretion of the ruler or by judges to whom he delegates this authority. Ta`zir literally means moral censure. I treated both these categories of crime in terms of doctrine, historical practice, and then-current application in Saudi Arabia extensively in my 2000 book.16 In most modern legal systems, the expectation is that crimes will be defined legislatively before being punished, and the idea that some acts are malum in se, innately criminal, is fading. In Anglo-American jurisdictions, ‘common-law crimes’, crimes regulated by court decisions rather than by statute, are now the rare exception, many jurisdictions having declared them obsolete. While in most jurisdictions, therefore, the presumption is that no act is a crime unless prohibited by statute, in Saudi Arabia this is not the case. Rather in Saudi Arabia statute-defined crimes are the exception, while crimes defined by the Sharia are the rule – the Sharia, as it were, in the place of the common law, and the criterion as well for what is malum in se. As noted in section 2.1.3, constitutionally authority over ta`zīr belongs to the head of state, for the reason that questions of social utility and power to compel punishment figure in it so greatly. Unless the ruler assigns jurisdiction to specialised criminal courts outside the regular courts – as rulers in past Muslim systems generally did – the judges of the general Sharia courts determine crime and punishment, acting as the ruler’s delegates. Fiqh

he leased; this is to ignore the possibility of a lease by description, allowed under Hanbali law. Decision No 368, 3 BG-Com-1430 940 (Com C No 27, Riyadh 1430 (2008)) (translated in the Appendix): the court without discussion treats a contract to purchase forty-nine cars as a contract in `ayn goods, with a major impact on the remedies given. Compare a decision upholding the sale of three cars by description, treating them as mawṣūf: Decision No 34227273, 4 Gen-1434 336 (al-Ta’if 1434 (2012)). 16 Frank E Vogel, Islamic Law and Legal System: Studies of Saudi Arabia (Leiden: Brill, 2000) ch 6.

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works say relatively little about ta`zīr, beyond fixing the basic requirement that the act be a sin prohibited by Sharia beyond doubt, excluding anything subject to interpretation or ijtihad, and setting general limits on the quantum and type of punishment. But ta`zīr crimes can be also be created by the ruler, since to disobey a lawful command of the sovereign is also an act categorically against Sharia. Hence one finds in Article 38 of the Saudi Basic Nizam-1992: There is no crime or punishment except on the basis of a text (naṣṣ) [indicating in the case of the Sharia an incontrovertible tenet] of the Sharia or of a nizam, and no punishment shall be imposed except for actions occurring after the entry into force of the nizam text.

That ta`zīr applies to sins, not acts merely unlawful, imports the element of criminal intent, or mens rea. As in other legal systems, criminal intent means consciously to perform an act that one knows (or is presumed to know) is against the law, here the Sharia and nizam, or to neglect to perform an act that is obligatory under the law.17 But it must be acknowledged that such requirements of intent often do not require plumbing the perpetrator’s subjective mental state, since fiqh usually relies on objective circumstances as indicators of mental state. Fiqh works teach the law of tort by means of exemplary cases that, to an extent outsiders to the system find surprising, leave unstated whether acts are performed merely carelessly or with wrongful intent.18 As two examples, a killing may be adjudged intentional murder (qaṭl `amd) if the killer used means that ordinarily kill;19 intent to breach trust (khiyānat al-amāna) can be established by proof that a depositee refused to return the deposit without objective reasons not to do so, or by selling what was placed in his hands as a deposit.20 As discussed in section 3.1.2.1, in the general courts a judge is empowered to try both civil and criminal claims in the same lawsuit. Judges may choose to notify the public prosecutor when the facts proved before them indicate the commission of a crime.21 Combining in one proceeding both the public and private rights inevitably raises issues of whether the legal burden of proof for the two claims differs. In Anglo-American law, for example, the standard of proof for crime is higher than for civil claims (eg clear and convincing evidence versus mere preponderance of the evidence). In Saudi Arabia, however, the situation can be the reverse. Since ta`zir is considered a form of disciplinary chastisement, it can attach even to acts proved only by strong suspicion but where chastisement seems warranted to the judge; uncertainty of guilt is a factor, however, that a judge considers in fixing the penalty. In one case, the court said explicitly that the evidence was not sufficient to support a civil claim, but was sufficient to support a ta`zir sentence of two years imprisonment and 200 lashes.22

17 `Abd al-Qādir `Awda (d 1954), al-Tashrī` al-jinā’ī al-islāmī: muqārinan bi-al-qānūn al-waḍ`ī (Cairo: Dār al-Turāth al-`Arabī, nd) 1:409–10. As in other legal systems, some acts can be crimes without criminal intent, such as forms of criminal negligence. `Awda, ibid 1:83–84. 18 See discussion of fiqh’s ‘objective tendency’ in Chapter 6, n 88 and Chapter 7, n 14. 19 Ibrāhīm Ibn Ḍūyān (d 1934), Manār al-sabīl fī sharḥ al-dalīl, ed Zuhayr al-Shāwīsh (Beirut: al-Maktab al-Islāmī, 1399 (1978)) 2:317. Rudolph Peters, Crime and Punishment in Islamic Law: Theory and Practice from the Sixteenth to the Twenty-First Century (Cambridge: Cambridge University Press, 2005) 43. 20 Muḥammad Shāfi`ī, Khiyānat al-amāna fī al-fiqh al-jinā’ī al-islāmī al-muqārin (Cairo: Dār al-Salām, 2011) 232. 21 Nizam of Criminal Procedures-2013, Arts 17, 29; Board of Grievances Procedures-1989, Art 29. 22 Decision No 34266892, 26 Gen-1434 310 (Riyadh 1434 (2012)).

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4.3. Tort With this we pass to harmful acts considered in their civil aspect, as potentially giving rise to private claims for compensation or other remedies. Even here we confront two major categories: torts causing personal injury or death, and torts causing harm to property. The term jināya potentially covers both, but in fiqh it generally refers to torts against persons. Buhuti defines jināya as follows: Jināya … lexically means transgression (ta`addī) against body [ie person] or property. In Sharia it means transgression against persons … obligating retaliation (qiṣāṣ), property [ie diya, arsh, or amounts paid to avoid qiṣāṣ], or kaffāra [an act of religious atonement]. [Fiqh scholars] call jināya against properties ‘usurpation’ (ghaṣb), ‘snatching’ (nahb), ‘theft’ (sariqa), ‘breach of faith’ (khiyāna), and ‘destruction of property’ (itlāf).23

4.3.1. Torts Against Person Torts against persons, even when they are also crimes or intentional acts of battery or murder, are treated primarily as civil claims. The primary remedy the law affords, even for these acts considered as crimes, is a claim by the victim or his heirs for either exact retribution (qiṣāṣ) inflicted by the state, available if the death or injury was intentional, or blood-money (diya), awarded in lieu of qiṣāṣ where the victim accepts it or if qiṣāṣ is inapplicable or unavailable. The importance of this category to us is chiefly because many of the basic rules of tort are worked out using examples from personal injury cases. Usually, whether the harm caused is to the person or to property makes no difference to the question of liability. The only difference is as to the remedy, since for personal injury or death special problems arise in quantifying damages. How can the concrete damage to a human person be quantified with sufficient certainty? The solution dates back to the time of the Prophet himself, and draws heavily on notions of tribal law prevailing at the time of the revelation. If qiṣāṣ is not applicable, then the victim is compensated by blood-money, or talion, called diya or arsh. Diya is, properly speaking, the compensation for the destruction of a human life, whereas arsh is the compensation for injury. In Saudi Arabia diya equals 400,000 Saudi riyals (US$106,666) for murder (qatl `amd) and homicide (shibh `amd), and 300,000 Saudi riyals (US$80,000) for accidental deaths (khaṭa’).24 For injuries less than death, arsh is determined according to a fixed schedule of compensations, usually defined as a fraction of the diya. For example, loss of one eye or of one hand is compensated by an arsh equalling one half of the diya. Nonetheless, the full diya is awarded for some serious injuries, such as loss of smell, speech, hearing, both eyes, or both hands. It is possible for the various arsh payments for multiple injuries to total to more than a single diya.25 As to injuries that fall outside the standard list

23 Manṣūr al-Buhūtī (d 1641), Kashshāf al-qinā` `an matn al-Iqnā`, 6 vols (Beirut: Dār al-Kutub al-`Ilmiyya, nd) 5:503. 24 Royal Order 43108 dated 2/10/1432 (13 August 2011) agreeing to Supreme Court Decision No 2 dated 14/7/1431 (26 June 2010). In the case of accidental injury or death, the diya is paid by the `āqila or male relatives of the offender. 25 Decision No 344087, 10 Gen-1434 5 (Mecca 1434 (2012)).

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Tort 4.3.2 given in the law books, experts estimate a suitable recovery (called ḥukūma) in terms of fractions of the diya. It seems it has become an open question in Saudi Arabia whether the diya or arsh is meant to compensate for all damages stemming from an injury, including pain and suffering, moral damages, loss of income, and medical expenses.26 The traditional fiqh answer was that all such damages are subsumed in the diya or arsh.

4.3.2. Torts Against Property We reviewed in section 4.1 above texts of the Quran and Sunna conveying a preoccupation with the sacredness of property rights and whether transfers of property from one person to another are just and legitimate. Discussed in sections 4.4.2 and 4.4.3 below are revealed texts that convey the divine condemnation of exchanges of property involving an unlawful and unjust addition or usury (ribā, literally meaning ‘increase’), or involving gambling-like, aleatory, transfers of values that are unknown or uncertain to occur (gharar). More specific to torts are the many Quranic verses that condemn taking or giving more than one’s fair deserts or making one person bear another’s share: ‘God does not burden any soul with more than it can bear: each gains whatever good it has done, and suffers its bad’ (2:286), ‘Each soul is responsible for its own actions; no soul will bear the burden of another’ (6:164; see also 17:15, 35:18, 39:7, 53:38). Seminal statements attributed to the Prophet include ‘No harm and no reciprocating of harm’ (lā ḍarar wa-lā ḍirār).27 Together these and other divine injunctions instil the law of tort with characteristic preoccupations, of which three seem particularly determinative: first, to ensure that only the person whose wrong truly causes the harm is held responsible for it; second, to require that person to compensate the victim for the harm in full by restoring what was lost; and third, at the same time not to overcompensate, since any excess may be tainted by ribā, gharar, or otherwise ‘consuming property wrongfully’. In the common law it is normal to talk of ‘causes of action’, particular forms of claim consisting of particular ‘elements’ and affording, upon establishing all those elements, particular types of remedy. The approach of fiqh books in laying out certain types of claim in detail, often in chapters dedicated to them, first defining them and then offering exemplary cases showing acts falling within the definition and the remedies for them, leads a user of the fiqh books to think of such claims as self-contained causes of action. But this approach can be misleading. As noted in section 3.2.3, when fiqh books describe a particular type of claim under a particular technical term, even defining that term more or less precisely, the authors of those books seem to have intended that that claim serve as a model for analogies in cases beyond the defined limits of that claim. That this is their intent is shown when the books do not work out such details for multiple other types of claim, some of which have equal importance in real life. Tort claims offer perhaps the clearest example of this.

26 See `Abd Allāh al-Muṭlaq, ‘Mas’ūliyyat al-jānī `an `ilāj al-majnī `alayh wa-ḍamān ta`aṭṭulih `an al-`amal’ (1424) no 70 Majallat al-Buḥūth al-Islāmiyya 287–327. 27 Ibn Maja, Daraqutni, Malik.

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4.4

Introduction to the Fiqh Law of Property, Crime, Tort, and Contract

Given their own chapter headings and worked out in detail are two particular torts, usurpation (ghaṣb) and destruction (itlāf), both described at length in section 7.1. Ghaṣb, loosely speaking, concerns acts of aggression by which property is taken without colour of right. But throughout fiqh, situations that fall outside that definition may be dealt with by analogy to ghaṣb. In fact, ghaṣb turns out to be the essential model for remedying all forms of taking of property without right (ḍamān al-yad, one of the three essential types of liability in Islamic law, discussed in section 7.2.3.1). As such it can be relevant to some degree over a vast spectrum of cases – from robbery and theft right through to the use of another person’s property accidentally falling into one’s possession. Similarly, itlāf, the tort for an act causing physical destruction wrongfully, whether by negligence or intention, becomes the model for deciding compensation for all wrongful acts causing another physical or pecuniary harms (ḍamān al-itlāf, another of the three essential types of liability). Itlāf also serves as the source of justification Islamically for a modern general theory of civil liability for both tort and contract upheld in Saudi Arabia (see section 7.3.1). Meanwhile, other torts, such as theft, embezzlement, breach of trust, and fraud, even if they are only briefly mentioned in fiqh books, or are worked out in detail on some of their aspects, leave many questions about their elements and remedies unanswered, with the implicit suggestion that the user of the fiqh books consult the ghaṣb and itlāf chapters for solutions. If an act falls within the strict definitions of ghaṣb and itlāf appearing in the books, one might conclude that to it all the prescribed elements and remedies will be applied; but for other torts, which of those rulings will be applied remains a question to be determined by the user of the text.

4.4. Contract Among the most fundamental conceptions shaping contract law are the revealed texts of the Quran and Sunna concerning property discussed in section 4.1 above. I now introduce three other fundamental conceptions, also rooted in the Quran and Sunna: first, the revelation’s endorsement of contract and trade; second, its prohibition of usury (ribā); and third, its prohibition of sale of gharar (uncertainty, risk). These three are so related to each other, and to the conceptions about property, that they cannot be discussed separately; but we nonetheless attempt it. But to sum up some of their multiple interactions, let us note that, while the first offers vigorous support for contract – both the obligation to uphold contract and the lawfulness of property rights obtained through contract – this broad endorsement is then multiply hedged about by the other two principles, usury and uncertainty. One might almost assert that the sole restrictions on the lawfulness of contract, once free consent of the parties and the lawfulness of the subject-matter of the contract are established, are the rules about ribā and gharar. The great Andalusian philosopher and jurist Ibn Rushd (Averroës, d 1198) stated that the causes for the invalidity of sale intrinsic to the concept of sale are four: illicitness of object of sale (eg wine); ribā; gharar; and ‘those terms that conduce to one of the last two or some combination of them’.28

28 Muḥammad bin Aḥmad Ibn Rushd, Bidāyat al mujtahid wa-nihāyat al-muqtaṣid (Cairo: Muṣtafā al-Bābī al-Ḥalabī, 1981) 2:123–24.

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In the next few sections I introduce these three foundational conceptions of contract. For each I will first review the basic revealed texts from the Quran and Sunna for the reason given in section 3.2.2, namely that all later fiqh claims to be nothing but the exposition of such texts through ijtihad, scholarly reasoning guided by the science of the ‘roots of the law’. Then I will lay out some of the earliest and most basic of the results reached through the ijtihad of scholars – conceptions that are almost entirely held in common among the four schools of Islamic law, given that those schools emerged only after these fundamental conceptions had become shared.

4.4.1. First Fundamental Conception Shaping Contract Law: Endorsement of Contract and Trade 4.4.1.1. Foundational Texts in Quran and Sunna: Contract and Trade In section 4.1 above we noted the emphasis in the Quran and Sunna on consent as a means by which property lawfully transfers from one person to another. The Prophet declared rights of person, property, and honour ‘as sacred to you as the sacredness’ of the pilgrimage day. Then he said, ‘[taking] the property of a man is not permissible except by his finding it good (bi-ṭīb nafsin minhu)’. And, as we saw, the Quran relates this legitimating consent with the concept of trade: ‘You who believe, do not wrongfully consume each other’s wealth but trade by mutual consent’ (4:29–30). The Islamic law of contract is marked by a preoccupation that consent sanction the alienation of property. To give two examples: the law requires that the parties to an exchange be able to know exactly the nature and quantum of their exchange at the time of agreeing to it, so that their consent is meaningful; second, once the parties have agreed, the law then holds each of them to the countervalue he had consented to, not supplanting it with any other value he now argues is more just. Shifting to the notion of contract per se, one finds in the Quran and Sunna emphasis on fulfilling contracts and undertakings. The Quran states: ‘O you who believe! Fulfil all covenants (`uqūd)!’ (5:1). The term here used, `uqūd (singular `aqd), covers contract, obligation, or entering into an obligation. The initial address of the verse to ‘those who believe’, indicates that fulfilment of contracts is part and parcel of faith. The Sunna reiterates the point: ‘The Muslims are bound by their stipulations’ (al-muslimūn `alā shurūṭihim).29 Other Quranic verses obligate the fulfilment of pledges: ‘Honour your pledges (singular `ahd): you will be questioned about your pledges’ (17:34), and ‘Fulfil any pledge (`ahd) you make in God’s name and do not break oaths after you have sworn them (`ahadtum), for you have made God your surety: God knows everything you do’ (16:91). And, ‘God commands you to return things entrusted to you to their rightful owners’ (4:58). The term `ahd means injunction, pledge, vow, compact, contract, obligation, promise. A hadith condemns one who breaks a promise or a covenant as a hypocrite: ‘If he makes a promise (wa`d) he breaks it, and if he makes a compact (`ahd) he acts treacherously.’30 But

29 Abu Dawud, Hakim, Ibn Hanbal; Tirmidhi, Nasa'i. More literally, ‘Muslims act according to their stipulations’. 30 Bukhari,

Muslim, Abu Dawud, Tirmidhi, Nasa'i.

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Introduction to the Fiqh Law of Property, Crime, Tort, and Contract

another hadith suggests that the promise is not the equal of a contract: ‘If a man makes a promise (wa`d) intending to fulfil it, and then does not do so, no blame attaches to him.’31 Trade also gains approval in the Sunna. ‘Asked “What form of gain is best?” [the Prophet] said, “A man’s work with his hands, and every legitimate sale”.’32 Another hadith relates the statement of the Prophet: ‘The truthful, honest merchant is with the prophets … and martyrs.’33 And, perhaps most revealingly, [The Prophet gave one of his Companions] a dinar to buy for him sacrifice animals or a ewe. He bought with it two ewes, then sold one of them for a dinar. He brought him a ewe and a dinar, and [the Prophet] invoked God’s blessing for him in his trade. ‘For were he to buy dirt he would make a profit in it.’34

This hadith suggests that, if consent is present, the law will not examine the fairness of the parties’ exchange; there is here no norm, as in medieval Christianity, of fair price.

4.4.1.2. Related Basic Conceptions in Fiqh Common to all the schools, and traceable to the jurisprudence of the earliest scholars, are many basic ideas about contract. a. Commutative Contracts Understood as Bilateral Present Conveyances Let us take up first a basic conception applying to all commutative contracts – contracts involving an exchange of considerations. In what follows we shall use sale as the model for all such contracts, as indeed does Islamic law itself. The basic conception in Islamic law for such a contract is that of a mutual conveyance of property, not as either the exchange of promises or the transfer of property in return for a promise. This point has pervasive influence throughout the law, and will figure often in this book, most dramatically in Chapters 7 and 8. (The probable reasons for this position lie rather deep, and emerge in the discussion below of the sales of dayn for dayn.35) How could such a conception apply to executory contracts, contracts for which performance occurs in the future, on one or both sides of the transaction? It would seem to those accustomed to contract law in other legal systems that, in such cases, the conveyance of property can be accomplished at most only on one side, while the performance in return for it can be no more than a promise. But in Islamic law such transactions are not so understood. Let us consider two hypothetical cases. In the first, X and Y conclude a contract by which Y buys X’s car for 10,000 Saudi riyals payable at once, with the car to be delivered later. In most legal systems this would be analysed as an exchange of promises, to pay money and to deliver the car. Islamic law does not; instead it deploys one of the basic conceptions of property defined above – the pair dayn and `ayn. When property is `ayn – ie specific, identified, and concrete, such as X’s car – and that property is to be delivered under the contract

31 Abu

Dawud. Hakim. 33 Tirmidhi. 34 Bukhari, Muslim, Abu Dawud, Tirmidhi. 35 See below text at nn 136–43. 32 Tirmidhi,

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at a date in the future, whether that date is stipulated in the contract or simply arises from delay in performance, then title to that property passes to the buyer at the time the contract is made, just as if the delivery were made at the time of the contract. Detailed rulings govern the liability of the seller and the buyer for various changes or mishaps occurring to the property in the custody of the seller. As a second hypothetical case, X and Y conclude a contract by which Y buys X’s car, which is immediately delivered, in return for 10,000 Saudi riyals to be paid in one month. In this case the delayed performance is dayn, meaning property – here money – described in the abstract, not yet rendered specific or identified. In such a case ownership of the car is conveyed, as before, at once; but the transfer of ownership of any actual money is delayed. Is this not a promise? It is not so understood; rather, the money, defined abstractly, is treated as if it had been conveyed, using the fiction of the dhimma, meaning the capacity of a person who accepts the obligation. X is said to own 10,000 riyals ‘in the dhimma of Y’. Thus, in both hypotheticals, neither party is seen as making a promise, but rather only as conveying either an `ayn property (whether delivered now or later) or a dayn property owned ‘in the dhimma of the buyer’. Since (as we shall see below) a fiqh tenet bars the exchange of considerations when both are dayn, in fiqh a binding contract requires at least one party to transfer an `ayn property at the start of the contract, either actually or constructively by automatic transfer of title. Given all this, one can see how under Islamic law the grounds for enforcing a contract or awarding damages for non-performance rest ultimately not just on the notion of fulfilling promises, but also on claims of unjust enrichment and reliance. We noted above36 that, in the hadiths of the Prophet, a distinction is made between upholding contracts and fulfilling promises, with lesser weight given to promises not only legally but morally. While performing one’s contracts is a religious obligation for all believers, breaking one’s promise is termed only a form of hypocrisy if done with prior intent, and as forgivable if done without prior intent. The position in law is that mere promises are binding at most in religion or morally (diyānatan), not legally (qaḍā’an). This basic conception – that contract is construed as a mutual conveyance and not as an exchange of promises – has practical importance in helping us understand Islamic legal doctrines on contract and to anticipate their results. But it does not mean that, by reason of this conception alone, commutative contracts written in the manner used elsewhere will meet any special obstacles. Largely, what other systems denominate as a promise Islamic law construes otherwise but to similar effect, unless other substantive problems of the type discussed throughout this book – particularly ones arising from ribā and gharar – arise. Also, the issue of terms, conditions, or stipulations made part of otherwise binding bilateral contracts is unrelated to this question about promises – that issue is discussed below.37 For these reasons, the lessened weight that Islamic law assigns to the promise, in distinction to other systems, affects practical outcomes (as opposed to contract law doctrines) chiefly with respect to situations that other systems treat under the heading of unilateral promises, promises without consideration, or letters of intent or agreements to agree. The doctrine of the promise, wa`d, in traditional law saw some further development in recent decades, largely under the impetus of the Islamic finance industry. ‘Islamic banks’

36 See 37 See

above text at nn 30–31. below text at nn 61–85.

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and other financial entities seek to transact without offence to Sharia rules, particularly by avoiding interest lending. Early in the development of Islamic banks a transaction was invented to permit such banks to finance their customers’ purchases of particular goods. The bank would, at the request of a customer, purchase goods desired by the customer, pay the supplier with cash, and then resell the goods to the customer for payment over time with a mark-up. This transaction, called murābaḥa li-al-āmir bi-al-shirā’ or ‘mark-up sale at the request of the buyer’, builds on a traditional form of sales contract called murābaḥa, in which the sale price is fixed in terms of an agreed ‘mark-up’ over the seller’s own cost of acquiring the property. But this transaction faced the problem that the bank would not undertake to purchase the desired property for resale to its customer unless it could rely on the customer following through and purchasing those particular goods from the bank. As we shall see in next chapter on supply contracts, Islamic law principles do not allow the customer to enter into a contract to purchase the goods from the bank with delayed payment unless the bank already owned the property as an `ayn. The question arose: could a unilateral ‘promise’ by the customer to purchase the goods after the bank had taken possession solve the problem? The question was brought before the OIC-Academy, the body responsible for many of the fatwas on which the Islamic finance industry has been constructed. In studies commissioned by the Academy, scholars found scattered precedents in the traditional literature where promises are enforced in situations where the promisee had acted on the promise to his detriment. Relying on these precedents, the Academy issued its fatwa38 that in the murābaḥa li-al-āmir bi-al-shirā’ context promises are binding, not in the sense that the promisor can be forced to perform,39 but in the sense that, if he defaults, he will be liable to compensate losses justifiably incurred by the promisee in reliance on the promise. Moreover, the promise must be constructed as unilateral, not as consideration for a return promise from the bank, since bilateral promises would equate to a contract in which performance on both sides is stipulated only for a future time – which fall within the prohibition to be discussed below of contracts with a dayn obligation on both sides. Islamic finance has since solved other difficulties using the unilateral promise model, such as for constructing a clause to transfer ownership at the termination of a hire-purchase contract (see section 4.4.4 below), and for arranging leases in which future rentals adjust periodically according to an index or percentage.

38 OIC-Academy, ‘al-Wafā’ bi-al-wa`d, wa-al-murābaḥa li-al-āmir bi-al-shirā’’. Decision No 40–41 (Decision No 2–3 of Session No 5, Year 1988), www.iifa-aifi.org/1751.html, accessed 1 August 2019. The OIC-Academy gave further consideration to the problem of binding promises in fatwas in the years 2000 and 2007; these fatwas are discussed in section 5.3.2.3. Other scholars have more broadly examined the issue of promises and concluded that they should be legally binding under all circumstances. `Abd Allāh al-Manī`, ‘al-Wa`d wa-ḥukm al-ilzām bi-alwafā’ bih diyānatan wa-qaḍā’an’ (1992) no 36 Majallat al-Buḥūth al-Islāmiyya 129–61; Sāmī Ḥumūd, al-Adawāt al tamwīliyya al-islāmiyya li-sharikāt al-musāhama (Jedda: Islamic Research and Training Institute, 1996) 62–67; see various studies prepared for the Academy in Session No 5 (1988) 2 Fiqh Academy Journal 753–929. Such a result when applied literally makes it possible to construct transactions that otherwise would be void under Islamic law – such as agreements to exchange currency in the future at a particular rate. Islamic finance mechanisms sometimes deploy promises in situations where the promisor (the bank or the customer) will likely perform in any event, whether or not under Islamic law promises bind, this either because the transaction will be enforced under non-Islamic laws or because the promisor is likely to either gain a benefit or avoid a detriment by performing. On Islamic finance uses of the promise, see Karim Ginena and Jon Truby, ‘Deutsche Bank and the Use of Promises in Islamic Finance Contracts’ (2013) 7(4) Virginia Law & Business Review 619–49. 39 As is possible under the US law doctrine of promissory estoppel. Restatement (Second) of Contracts § 90(1).

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Saudi scholars, who often find the fatwas of the OIC-Academy persuasive, have applied its fatwa even outside the Islamic finance context. The chief area where the issue of promises versus contracts arises in court decisions is that of letters of intent or agreements to agree.40 In the case study on supply contracts we encounter another effort to deploy promises as a means to evade practical problems created by the conflict between the Islamic law of contract and contemporary practice, this time by construing the supply contract as not a contract but an exchange of promises (muwā`ada). See section 5.3.2.3. b. Lack of Requirements of Form in Contracts: Writing, Integration, Parol Evidence, Amendment Seemingly because of the revealed emphasis on consent as the criterion for the moral and therefore legal validity of transfer of property and of trade, Islamic law, especially in the Hanbali school, does not impose requirements of outward form on those concluding contracts. Traditional Hanbali law, followed fully in this respect by modern law including Saudi law, contemplates the formation of contract by practically any means conveying mutual assent, including implication from behaviour, such as gestures or the wordless exchange of considerations.41 It engages in analysis of the stages of offer (ījāb) and acceptance (qabūl) in ways that seem familiar and sensible to those accustomed to other legal systems. Islamic law has also never made the writing of a contract a necessity. It sees writings instead as merely useful records of agreements that must be proved by other means, usually by eyewitnesses to the making of the contract, by admission of the opposing party, or by having been formally acknowledged in an officially maintained record. But, as noted in section 3.1.1.3-b, one cannot conclude from this basic doctrinal approach to writings that in Islamic legal systems of the past, and in Saudi Arabia today, the use of writings in commercial and contractual settings was not important and common – to the contrary, it always has been. The power and convenience of a writing in formally fixing an agreement’s terms to avoid dispute, in preserving it from distortion or loss due to failing memories, and in providing convincing evidence of its existence, have always been recognised. Indeed, these values receive lengthy recognition in the Quran itself (2:282–83). Hence, in Saudi Arabia, almost as much as anywhere else today, commercial contracts are normally memorialised in writing. But this is required, if at all, by commercial custom, not by doctrine or theory. Multiple cases affirm that contracts, even ones involving large sums, need not be in writing as long as circumstances (qarā’in) indicate the existence of a contract.42 But cases also

40 Decision No 168, 1 BG-Com-1432 340 (Com C No 6, Riyadh 1431 (2009)); Decision No 54, 6 BG-Adm-1429 2976 (Adm C No 19, Jedda 1428 (2007)); Decision No 129, 2 BG-Com-1428 922 (Com C No 4, Jedda 1427 (2006)); Decision No 4, 8 BG-Com-1408–1423 376 (Com C No 18, Abha 1411 (1990)); Sulaymān al-Dāmigh, ‘al-Ijrā’āt wa-al-mufāwaḍāt al-sābiqa li-ibrām al-`aqd’ (Masters, High Judicial Institute, Imam Muhammad University, 1435 (2013)). 41 Qari-Majalla, Arts 39, 229–30. 42 Decision No 53, cited in Walīd al-Ṣam`ānī, al-Sulṭa al-taqdīriyya li-al-qāḍī al-idārī 2:338 (Adm C No 18, Abha 1428 (2007)); Decision No 250, cited in Ma`mar bin `Abd al-Raḥmān al-`Umarī, ‘`Aqd al-ashghāl al-`āmma’ 358 (BG Review Bd C No 1 1410 (1989)); Decision No 142, 9 BG-Com-1408–1423 121 (Com C No 2, Riyadh 1414 (1993)); Decision No 166, 2 BG-Com-1432 1674 (Com C No 18, Abha 1432 (2010)); Decision No 112, 4 BG-Com-1431 1802 (Com C No 4, Riyadh 1430 (2008)); Decision No 53, 6 BG-Adm-1428 2703 (Adm C No 18, Abha 1428 (2007)).

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recognise that, in some situations, by custom contracts are written, leading the court to view alleged oral agreements with scepticism.43 Nizams at times impose additional requirements of form in particular areas such as government contracting, commercial agency, or banking. Does Saudi law employ special rules for interpretation of contracts formalised in a writing as opposed to agreements proven or represented by other means? Given the opposition to form in Islamic law, it is not surprising to find that there is no parol evidence rule in Saudi Arabia. No doubt, given the common commercial practice of putting many contracts in written form, Saudi judges do treat writings with respect, but this is a question of interpretation not form.44 c. Validity of Contract Substantively Apart from the issue of form, what are the prerequisites of a valid contract under Islamic and Saudi law? Which contracts and terms are invalid (fāsid or bāṭil), and what are the consequences of invalidity? Unlawful Purpose or Subject-Matter One clear case under Islamic law is that of the contract which has an unlawful subjectmatter, such as a contract for the sale of wine to a Muslim, a sale of goods subject to a pledge or mortgage, or sale of goods one has usurped. Contracts affected by ribā or gharar will be discussed in sections 4.4.2 and 4.4.3 below. Courts often need to consider whether a contract containing an illegal term itself must fall because of that illegality, or whether the term alone can be struck from the contract. This seems to be a matter decided in the court’s discretion for each case.45 Consideration is not a formal or substantive requirement for the contracts to which it would apply (not including, for example, gifts or gratuitous loans), but other doctrines combine to ensure that such contracts cannot proceed without consideration. ‘Cause’, the concept analogous to consideration in the civil law, reappears in modern Islamic law translated as sabab, and plays a role in discussions of legal conceptions borrowed from other legal systems, such as unjust enrichment, translated as al-ithrā’ bi-lā sabab, ‘enrichment without consideration’. As discussed in section 7.4.2, the substance of unjust enrichment doctrine is amply present in Islamic law though under other names. A contract made in disobedience of a legitimate command of the ruler is also unlawful, since Muslims are religiously obligated to obey such commands. The Supreme Court, in its 2018 collection of general rules, declares that in cases where parties have made contracts prohibited by statute, courts may still protect the rights of the two parties.46 The Supreme 43 Decision No 30, 2 BG-Com-1432 920 (Com C No 9, Dammam 1432 (2010)); Decision No 112, 4 BG-Com1431; Decision No 112, 3 BG-Com-1431 1332 (Com C No 9, Mecca 1430 (2008)); Decision No 306, BG-Com Unpub (Com C No 2, Dammam 1434 (2012)). 44 In one case the trial court took witness evidence of an oral stipulation absent from the written contract, despite that it was implausible both in logic and custom. The appellate court said it would have been ‘more appropriate’ for the trial court simply to apply the written contract, though the point was moot, since the trial court had rejected the claimed stipulation as unproved. Decision No 3424705, 5 Gen-1434 337 (al-Ta’if 1434 (2012)). 45 Decision No 187, 2 BG-Com-1432 956 (Com C No 17, Dammam 1432 (2010)); Decision No 33388994, 2 Gen-1434 72 (Dammam 1433 (2011)); Decision No 3414350, 7 Gen-1434 366 (Jedda 1434 (2012)). See also discussion of stipulations at nn 61–85 below. 46 Ministry of Justice-Principles of Highest Courts-2016, No 27.

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Court approved of enforcing the rights of a non-Saudi who conducts business without having the regulatory right to do so, since taking away such rights was not laid down by the king as one of the punishments for offending regulations.47 A related situation arises when parties use simulated (ṣūrī) contracts to evade nizam rules. The Supreme Court declares these unlawful, and that one who confesses to their use should be referred to criminal prosecution.48 But several published cases show how courts will still protect the rights of the parties that were hidden behind the false contract, considering these rights from the standpoint of Sharia, not nizam.49 In such cases we see how judges and scholars may respect and uphold nizams as compulsory, but still view them only as administrative measures serving the general good, while rights under Sharia are enduring and often inalienable. Defects in Consent Given the emphasis placed on consent in the revelation, one might expect that elaborate rules would protect against vices of consent such as mistake, fraud, and duress. But it turns out that this is not the case, and the scope for application of these objections to contract validity is narrow. Two factors operate to bring this about. The first is the broad application of another mechanism than invalidity to ensure the genuineness of the parties’ consent – that of the liberal ‘options’ to annul, to be discussed in section 6.2.1.1-a. The option mechanism protects the soundness of the parties’ mutual consent by rendering that consent provisional in a sense, subject to easy reversal for a period adequate for the parties to verify that their agreement is as anticipated. The second factor is fiqh’s striking tendency, already mentioned above,50 toward deciding questions of consent, knowledge, intent, or other mental states by objective evidence rather than by seeking proof of actual subjective states. This is despite a Prophetic hadith of pervasive importance in religion and also fiqh, ‘Actions are only according to their intentions (niyyāt, sing. niyya)’,51 and the statement in the Quran, ‘man will only have [is held accountable only for] what he has worked towards’ (53:39). But such texts are not controverted by the judge’s reliance on objective proof, since the texts’ main purport is as to the inner religious merit or demerit of an act, whether it is in obedience or disobedience to the divine command. A vital distinction in Islamic legal application is between this inner evaluation of an act – referred to as diyānatan (as to religion) – versus its effect in the worldly affairs, including the courtroom – called qaḍā’an (as to outward binding effect). A related distinction is between an act’s status in its inner reality (bāṭin) and its outward appearance (ẓāhir). The ultimate evaluation of an act is God’s, while humans doing worldly

47 Ministry of Justice-Principles of Highest Courts-2016, No 203. It holds that a contract’s violation of nizam does not necessarily lead to invalidating the contractual relationship or disregarding every consequence of the contract. 48 Ministry of Justice-Principles of Highest Courts-2016, Nos 35, 1416. 49 Decision No 238/31, 1 Gen-Com-1428 110 (Riyadh 1425 (2004)) (parties placed the ownership of business in name of a Saudi, due to requirements of the nizam, but the business is in fact owned by two non-Saudis; simulated (ṣūrī) contract showing the Saudi as the owner is not given effect); Decision No 37, BG-Com Unpub (Com C No 15, Dammam 1429 (2008)) (because one party was a government employee, a simulated contract shows his nephew’s name on a certificate of shares; court rejects the nephew’s claim of ownership, saying what matters is the parties’ intent, not their words). 50 See text at nn 18–20 above. 51 Innamā al-a`māl bi-al-niyyāt. Bukhari, Muslim, Tirmidhi, and others.

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justice among parties must rely on the apparent facts. A point of fiqh procedural law that contributes to this tendency to credit objective evidence is that the parties’ own allegations in court do not constitute evidence, so proof of intent must come from other sources. Duress (ikrāh) in matters of contract – where one party forces or compels another to enter into a contract or agree to a term – in all legal schools can excuse the party subjected to it. What forms of harm or threat of harm constitutes such duress differs from school to school. For the Hanbali school, a credible threat by a person capable of it of various severe consequences, including loss of a large sum of money, suffices to void a contract or term.52 In a number of published cases the claim of duress is raised but is nearly always rejected.53 Islamic law has little doctrine specifically remedying mistake as a vice of consent invalidating a contract. It mostly arises when a contract fails to be made because the parties’ respective declarations fail to conform with each other due to a mistake or mistakes of one or both parties, or when the sale object turns out not to exist. As a Ḥanafī example of the last case, the parties point to a piece of glass while stating an agreement to sell ‘this jewel’.54 By way of contrast, if the parties agree to the sale of a particular ‘stone’, one or both of them believing the stone a valuable jewel, the sale would be valid because the declarations objectively coincide with each other and with their object.55 Fraud (ghurūr, taghrir, ghishsh, khidā’, tadlīs) was mentioned above as one of the many grounds for tort claims in itlāf. But Islamic law does not see it as a means to avoid a contract, unless accompanied by gross disparity or unfairness in the exchange of considerations, called ghubn fāḥish (similar to Roman laesio enormis). Indeed, each school seems to treat fraud chiefly as a concomitant, more or less essential, to asserting an option for lesion, describing the option interchangeably as one for ‘fraud’ or for ‘lesion’ (ghubn).56 Terms Unlawful under Sharia Freedom of Contract As we shall see in section 6.2, the restrictions on free contract entailed by the revealed prohibitions of ribā and gharar in contracts led early fiqh scholars to work out the terms of all the basic forms of contract needed by the society of their time in detail, deriving these by means of analogy from contractual practices of the earliest generations while carefully ensuring that the prohibitions were avoided. Thereafter, any question about the validity of other contracts was judged by analogy to the exemplary rulings for the

52 `Alī bin Sulaymān al-Mardāwī (d 1480), al-Inṣāf ma`a al-Sharḥ al-kabīr `alā matn al-Muqni`, ed `Abd Allāh al-Turkī, 30 vols (Cairo: Hajar, 1415 (1994)) 22:155. 53 Allowed: Decision No 38, cited in Walīd al-Ṣam`ānī, al-Sulṭa al-taqdīriyya li-al-qāḍī al-idārī 2:355 (BG Review Bd Adm C No 1, Riyadh 1421 (2000)) (duress allowed in setting aside contractor’s agreement discounting his claim, on the ground that the government had long delayed payment of amounts due). Denied: Decision No 5, 9 BG-Com-1408–1423 304 (Com C No 10, Jedda 1412 (1991)); Decision No 21, 3 BG-Com-1424–1427 574 (Com C No 12, Jedda 1424 (2003)); Decision No 111, 3 BG-Com-1430 895 (Com C No 27, Riyadh 1428 (2007)); Decision No 148, 3 BG-Com-1430 1047 (Com C No 11, Jedda 1429 (2008)); Decision No 177, BG-Com Unpub (Com C No 2, Riyadh 1433 (2011)). 54 This is if the difference is substantial. If only in attribute (a ‘red jewel’ that is yellow), then the sale can still be avoided by option of ‘description’ (see section 6.2.1.1-a). ME Hamid, ‘Does the Islamic Law of Contract Recognize a Doctrine of Mistake? (1972) 4 Journal of Islamic and Comparative Law 7. 55 Hamid, ibid 7. 56 Yvon Linant de Bellefonds, Traité de droit musulman comparé, vol 1, Théorie générale de l’acte juridique (Paris, La Haye: Mouton et Cie, 1965) 355–70, 379. The lesion option is discussed further in section 6.2.1.1-a.

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contracts already dealt with. The end result was, therefore, similar to that in Roman and earlier civil law, where contract law consisted of the law of a series of separate contracts, the ‘nominate contracts’. Traditional fiqh scholars rarely discussed the idea of contractual freedom outside the standard contract types.57 The traditional scholarly method was, thus, not amenable to the idea of contractual freedom or the innovation of new contract types. As in other legal systems the leap to free contracting depends on developing a general theory of contract, something uncongenial to fiqh method. Traditional scholars may also have been largely silent about new contracts because the prescribed contract types met their needs. This picture of the issue seems supported by the fact that the few new contracts that did emerge in traditional times (eg bay` al-wafā’, sale subject to redemption) arose not from scholarly theory but from popular custom or practice. The scholars vetted these contracts in the usual way, emphasising analogy to the standard contracts and, if this failed, to revealed precedent. They were not named in later fiqh works among the basic contract types. While the need for innovation thus did occasionally lead to new contracts, more often it forced the practice either into the old forms or outside legitimacy altogether, or as the third possibility, into a middle ground employing clever legal artifices (ḥiyal) that, while appearing lawful, in fact evade fiqh restrictions. Some scholars opposed this restrictive approach, such as famously the Hanbali Ibn Taymiyya (d 1328) who argued that, since the basic principle in worldly human interaction is that everything is permitted unless prohibited by God, the starting point should be that every contract is valid unless specific proof can be produced to the contrary: The underlying principle in contracts and stipulations is permissibility (ibāḥa) and validity. Any [contract or stipulation] is prohibited and void only if there is an explicit text (naṣṣ) [from the Quran, the Sunna, or the consensus] or an analogy (qiyās) (for those who accept analogy [as a source of law]) proving its prohibition and voiding.58

Ibn Taymiyya often professes strikingly liberal, almost modern, positions on contract law, taking issue with all the four schools.59 Traditionally his unique positions found favour usually only with his students, foremost among these Ibn Qayyim al-Jawziyya (d 1350). With respect to the current issue of freedom of contract, as in many other cases, Ibn Taymiyya’s flexible approach remained traditionally a minority view. Only in modern times have his views on contract been widely accepted. We shall see several instances of this in subsequent chapters. Contemporary Saudi law as a matter of principle aligns with Ibn Taymiyya, repeating the principle that in transactions everything is permitted until shown to the contrary by a proof from the Quran or Sunna.60 But the mechanics of Islamic legal method still restrain free contracting, even in Saudi Arabia, compared to the situation in other legal systems.

57 ME

Hamid, ‘Islamic Law of Contract or Contracts’ (1971) 3 Journal of Islamic and Comparative Law 1–11. Ibn Taymiyya, al-Fatāwā al-kubrā (Beirut: Dār al-Ma`rifa, nd) 3:474; Aḥmad Ibn Taymiyya, al-Qawā`id al-nūrāniyya, ed M. al-Fiqhī (Cairo: al-Sunna al-Muḥammadiyya, 1951) 112; Aḥmad Ibn Taymiyya, Naẓariyyat al-`aqd (Beirut: Dār al-Ma`rifa, nd) 226. 59 See, for his description of those schools on the issue of contracting freedom, Ibn Taymiyya, al-Fatāwā al-kubrā (n 58) 4:470ff. 60 See Ministry of Justice-Principles of Highest Courts-2016: No 24: ‘ The basic principle in contracts is validity. A contract is not held void except upon proof of its invalidity’; see also No 11 quoted in text at n 67. 58 Aḥmad

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It cannot be denied that a wide web of rulings and principles, deriving from the bans on gharar and ribā, runs within and across the rulings on the traditional contract types, much of it considered confirmed by ijmā` or past scholarly consensus. Few new contracts can wholly avoid this legal web. If a new contract redresses some basic constraint on the old ones, it might well fall foul of a standard rule or principle of the law, even under Ibn Taymiyya’s test, and not be accepted. Despite these lingering restrictions, many innovative contract forms have survived fiqh review in Saudi Arabia and entered into daily use, most of these as responses to novel challenges under modern social or economic conditions. Examples from Saudi Arabia include some contracts that were innovated entirely (such as the contract for utilities charged by actual use), others that combine earlier contracts to create something new (such as the ‘commercial agency’, wakāla tijāriyya), or some that adopt old forms but adjust them almost beyond recognition (such as the modern corporation developed from the Islamic law partnership, sharika, or the construction contract, muqāwala, developed from the contract to commission manufacture, istiṣnā`). Stipulations in Contracts In traditional law, debates concerning freedom of contract mostly did not concern new contracts, but rather when standard contracts could be varied from by adding extra terms called shurūṭ (singular sharṭ) or combined. A number of hadiths restrict stipulations. Among them is: ‘Illicit are a loan and a sale (salaf wa-bay`), or two stipulations in a sale, or sale of what you do not have.’61 As Saudi courts sometimes recite, stipulations are of three types: (i) condition (ta`līq, literally ‘suspending’), the conditioning of a contract on a future event; (ii) extension (iḍāfa), delaying the beginning of the contract until a future time; and (iii) concomitance (iqtirān), adding to or varying the terms of the contract.62 In all cases, if the law finds the stipulation void, the contract may or may not be void also: the results vary from case to case. As to conditions, the Hanafis prohibit them in contracts conveying property, but the Hanbalis are of two views, one of which allows conditions in contracts that transfer ownership, citing an opinion of the school’s founder.63 Ibn Taymiyya supports this last position categorically.64 As for extensions, the Hanbali school allows them only for contracts such as lease or agency, where property transfers only over time, if at all, and not for contracts of present transfer, such as sale.65 The rules for both these types of stipulation are primarily motivated by the ban against gharar, to be discussed in section 4.4.3 below. As to concomitant stipulations, all legal schools first consider whether the stipulation agrees or conflicts with an ‘entailment’ (muqtaḍā), an essential term, of the contract. Examples of entailments are that the buyer pay the price and that the seller convey full title. Not surprisingly, all the legal schools permit stipulations that coincide with an entailment,

61 Abu

Dawud, Tirmidhi, Nasa’i, Ibn Hanbal, Daraqutni. al-Razzāq Aḥmad al-Sanhūrī (d 1971), Maṣādir al-ḥaqq fi al-fiqh al-islāmī: dirāsa muqārana fi al-fiqh al-gharbī, 6 vols (Cairo: Dar Iḥyā al-Turāth al-`Arabī, 1967) 3:134–72. 63 Ḥasan `Alī al-Shādhilī, Naẓariyyat al-sharṭ fī al-fiqh al-islāmī (Cairo: Dār al-Kutub al-Jāmi`ī, 1981) 94–104. 64 Ibn Taymiyya, Naẓariyya (n 58) 227–29; Muḥammad Ibn Qayyim al-Jawziyya, I`lām al-muwaqqi`īn `an rabb al-`ālamīn, 4 vols (Beirut: Dār al-Jīl, 1973) 3:338–40. Cf for a Maliki view, Ibn Rushd (n 28) 2:158, allowing sale of runaway slave with payment conditional on recovery. 65 Muwaffaq al-Dīn `Abd Allāh Ibn Qudāma (d 1223), al-Mughnī wa-yalīh al-Sharḥ al-kabīr, 15 vols (Beirut: Dār al-Kitāb al-`Arabī, 1972) 6:6–7; al-Buhūtī (n 23) 4:6; Qari-Majalla, Art 537. 62 `Abd

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and they all forbid stipulations that contradict an entailment, such as a stipulation that the buyer never resell the object. All schools allow a third type of concomitant stipulation, one that supports fulfilling the contract such as a requirement that the buyer pay on day X, pay in certain coins, or provide a pledge as security. The type of stipulation that poses problems is one by which one of the parties obtains an additional benefit (maṣlaḥa), as when a seller of a house stipulates a right to live in it a year without rent. On these the schools differ, the Hanafis, for example, allowing such stipulations only when sanctioned by custom, and the Hanbalis allowing one such stipulation but no more than one (due to the hadith quoted above forbidding ‘two’ stipulations). For all these types of stipulations, the Hanbali Ibn Taymiyya adopts a liberal position, rejecting only those stipulations which contradict a clear provision of either the Quran, the Sunna, or the scholarly consensus, or which contradict the very object of a contract, nullifying it; he does not appear to discuss numerical limits on stipulations.66 In Saudi Arabia, on stipulations scholars and judges once again align themselves with Ibn Taymiyya’s view. Here their admiration for him appears to be translated fully into practice. The Supreme Court in the general court system has announced ‘The basic principle in stipulations is validity as long as they do not differ with a [revealed] text (naṣṣ) [including ijmā`] or a basic principle (qā`ida) of Sharia.’67 Scholars and judges accept contracts on their face, without scrutinising each of their terms unless some issue is raised as to it; and they certainly do not reject stipulations if there are more than one. They support this position not only by citing Ibn Taymiyya, but in other ways. Some simply cite the saying of the Prophet, ‘Muslims are bound by their stipulations.’ Some mention the saying often heard, which in fact is from an article of the Egyptian Civil Code of 1948: ‘The contract is the Sharia of the contracting parties’ (al-`aqd sharī`at al-muta`āqidīn).68 This saying implies that the default position before the courts is that a contracting party is religiously and legally bound by whatever term he has agreed to. An example of a concomitant stipulation traditionally rejected and now accepted is the stipulation by a landlord against the sublease of his property. In traditional law this was considered a term against a muqtaḍā or essential term of the contract of lease. Courts now generally, but not uniformly, uphold it.69 The Standing Committee has issued a fatwa in support,70 and the Supreme Court included in its 2018 collection of general rules three

66 Sanhūrī

(n 62) 3:172. of Justice-Principles of Highest Courts-2016, No 11. 68 Egyptian Civil Code, Art 147; compare French Civil Code, former Art 1134: ‘Agreements lawfully entered into take the place of the law for those who have made them.’ A party relied on this statement to try to defeat a claim of a subsequent waiver by his agents of a term in a written contract. The court stated that the saying does not exclude evidence of any such implicit later agreement. In other words, the clause does not operate to make any one form of the parties’ agreement immune from question as to completeness or later modification. Decision No 90, BG-Com`Ajlān-collection (BG Review Bd Com C No, Circuit No 3, Riyadh 1418 (1997)). 69 Decision No 94, 5 BG-Adm-1427 2236 (Adm C No 15, Dammam 1425 (2004)); Decision No 33415126, 6 Gen-1434 54 (Dammam 1433 (2011)); Decision No 33415126, 6 AM 1434 54 (Dammam 1433 (2011)). Contra Decision No 144, 2 DM TI 1433 960 (Com C No 5, Jedda 1433 (2011)); Decision No 34251380, 7 AM 1434 280 (Yanbu` 1434 (2012)). 70 Senior-Scholars-Standing-Committee, ‘No 19702: Ta’jīr al-musta’jir’ in Fatāwā-Collection-1, vol 15, 87–88, www.alifta.net/Fatawa/FatawaDetails.aspx?languagename=ar&View=Page&PageID=5519&PageNo=1&BookID= 3#P88, accessed 1 November 2018. 67 Ministry

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provisions allowing lessors to stipulate limitations on their lessees’ rights to sublet or allow others to use the property.71 One concomitant stipulation pervasively practised and universally upheld in Saudi Arabia is actually difficult to legitimise given ribā and gharar principles: the stipulation for a financial penalty due upon a party’s default, the sharṭ jazā’ī, meaning ‘penalty stipulation’. By stipulating in advance a fixed sum for damages that inhabit the future, are wholly unknowable, and after the event need not even be proved clearly challenges the preoccupations surrounding compensation for property loss mentioned above in section 4.3.2. Obviously also, if the stipulated damages were made payable for late payment of a debt (dayn), such payment would resemble a cardinal form of ribā, ‘pay or increase’, to be discussed below.72 Despite these potential objections, judges have for many years uniformly upheld the stipulation simply because very early – in 1974 – it was endorsed by the Board of Senior Scholars.73 The Board’s fatwa mitigates the boldness of its position in one respect: it requires the judge to consider the claimant’s actual damages, and ‘if the penalty stipulation is great as a matter of custom, … then it must be restored to what is just and fair according to the use-value that was lost or the damages suffered’. This proviso – and impliedly along with it the legality of the stipulation – has been recently reinforced by the Supreme Court in its 2018 publication of general rules.74 In 2000 the OIC-Academy also issued a fatwa approving of the stipulation, but making explicit the exception that it is unlawful when the performance it secures is for payment of a dayn, including money – since in that event the stipulation would constitute ribā.75 Saudi decisions after the OIC-Academy fatwa often refer to it as support. The stipulation is pervasively used in construction contracting, and the practical need for such a clause in the early stages of the development of the Kingdom may have impelled the fatwa of the Board of Senior Scholars. In the case of prime contracts with the government, the stipulation takes the form of a nizam-enjoined lateness fine (gharāmat al-ta’khīr). Courts usually, but not always, hold that this fine is lawful to the government even without a showing that the government suffered damages from the contractor’s delay.76 In private contracts, the court usually does require a showing that the claimant did suffer actual damages,77 and will adjust the amount of the penalty to bring it in some reasonable relationship to those damages.78

71 Ministry of Justice-Principles of Highest Courts-2016, Nos 189–91. See Fahad al-Muṭayrī, ‘`Aqd al-ijāra min al-bāṭin: dirāsa muqārina’ (Masters, High Judicial Institute, Imam Muhammad University, 1422 (2001)). 72 See text at n 107 below. 73 Hay’at Kibār al-`Ulamā’, ‘Ḥukm al-sharṭ al-jazā’ī’, Majallat al-`Adl, no 6 (Riyadh: Wizārat al-`Adl, 1421 (2000)). 74 The Supreme Court’s general rules collection limits the penalty to what is ‘within the limits of what is reasonable by custom’. This may include judicial custom. Ministry of Justice-Principles of Highest Courts-2016, No 59. 75 OIC-Academy, ‘al-Sharṭ al-jazā’ī’, Decision No 109 (Decision No 3 of Session No 12, Year 2000) www.iifaaifi.org/2059.html, accessed 1 August 2019. See Decision No 37, 2 BG-Com-1429 971 (Com C No 8, Jedda 1429 (2008)). 76 Decision No 57, cited in `Abd al-Majīd al-Zāḥim, ‘`Aqd al-tawrīd al-idārī’ 96 (BG Review Bd C No 1, city unknown 1409 (1988)). Compare Decision No 47, 5 BG-Adm-1435 2772 (Adm C No 1, Jedda 1435 (2013)). See Ḥijāb al-Dhuyābī, ‘Sulṭāt al-idāra tujāh al-muta`āqid: dirāsa ta’ṣīliyya muqārina’ (Doctorate, High Judicial Institute, Imam Muhammad University, 1428 (2007)) 35, 40, citing cases. 77 Decision No 108, 6 BG-Com-1408–1423 45 (Com C No 9, Jedda 1416 (1995)); Decision No 191, 2 BG-Com1432 839 (Com C No 15, Dammam 1432 (2010)). Its potential use as a means to recover lost profits, not considered ‘actual damages’, is discussed in section 8.5.5. 78 Decision No 39, 6 BG-Com-1408–1423 289 (Com C No 10, Jedda 1419 (1998)); Decision No 154, BG-Com`Ajlān-collection (BG Review Bd Com C No, Circuit No 3, Riyadh 1423 (2002)); Decision No 185, 2 BG-Com-1429

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Another widely used concomitant stipulation is one by which payments by instalment become accelerated, ie all the future instalments become due immediately, upon a specified event, usually the debtor’s default in meeting one or more instalments. This clause is commonly used in sale and even lease in Saudi Arabia. Scholars have taken opposite positions. In 1990–91 the Standing Committee of the Board of Senior Scholars declared such a clause void, though the fact situation it addressed involved a particularly draconian clause – one allowing acceleration upon a delay of a mere ten days in a single payment.79 The Committee stated that such a clause contradicts the essential purpose (muqtaḍā) of the contract, which, it stated, is to extend payment against an added consideration. It recognised the potential unfair effect of such clauses on a purchaser when the default is only of one or two instalments or is for excusable reasons, and yet results in the loss of part of his credit premium; it is especially harsh when the default falls early in the sequence of payments. At around the same time the OIC-Academy issued a fatwa declaring permissible a term that allows the seller to accelerate instalments upon the buyer’s delay in making ‘some’ of them.80 Saudi court decisions have split on whether fiqh permits these clauses, and that split persists until today in Saudi Arabia. This is despite the fact that reportedly the volume of cases of instalment sales in the general courts (cases between companies and ordinary sellers) is large. Two published decisions, both recent, one in each of the general courts and the Board of Grievances commercial branch, invalidate this clause in suits brought by the sellers to enforce it.81 Having stricken the clause, these courts proceed to give judgment only for already due instalments. In support they both cite the fatwa of the Standing Committee, but also appeal to the essential unfairness of the clause: that on exercising it the seller gains unearned the consideration he extracted from the buyer in return for extending credit. In contrast, another four published cases, also recent and from both court systems, order the clause enforced as written.82 (In one of these cases, the appellate court sought to convince the trial court to void the clause, but failed, and ended by affirming its judgment.83) Finally, cases reveal that a third position has been put forward but so far not accepted: this is that the buyer, who has already paid the accelerated sum, obtains a refund of that portion of his purchase price that reflects the unearned cost of credit extended to him. The one published case we found that addresses this last position rejects it,84 though scholars can be found who advocate it.85 It is interesting that, despite all this debate, insofar as I can see, no court 979 (Com C No 7, Riyadh 1428 (2007)); Decision No 70, 2 BG-Com-1432 1127 (Com C No 17, Jedda 1432 (2010)); Decision No 129, 2 BG-Com-1432 999 (Com C No 11, Jedda 1432 (2010)). Compare Decision No 187, 4 BG-Com1431 1643 (Com C No 5, Riyadh 1430 (2008)); Decision No 35370500, 4 Gen-1435 6 (Jedda 1435 (2013)). 79 Senior-Scholars-Standing-Committee, ‘No 18796: Sadād al-duyūn (ta`jīl al-aqsāṭ)’ in Fatāwā-Collection-1, vol 13, 182, www.alifta.net/fatawa/fatawaDetails.aspx?languagename=ar&BookID=3&View=Page&PageNo=6&P ageID=4727, accessed 1 November 2018. 80 OIC-Academy, ‘al-Bay` bi-al-taqsīṭ’, Decision No. 51 (1990), www.iifa-aifi.org/1785.html, accessed 1 August 2019. 81 Decision No 12, 2 BG-Com-1432 606 (Com C No 7, Buraida 1432 (2010)); Decision No 3425012, 5 Gen-1434 220 (Ha`il 1434 (2012)). 82 Decision No 574, 2 BG-Com-1432 813 (Com C No 10, Dammam 1432 (2010)); Decision No 33251132, 1 Gen-1434 124 (Tabuk 1433 (2011)); Decision No 34200144, 2 Gen-1434 165 (Mecca 1434 (2012)); Decision No 35197874, 1 Gen-1435 127 (Medina 1435 (2013)). 83 Decision No 33251132, 1 Gen-1434 124. 84 Decision No 34328427, 2 Gen-1434 278 (Unayza 1434 (2012)). 85 Muḥammad Taqī al-`Uthmānī, ‘Aḥkām al-bay` bi-al-taqsīṭ: wasā’iluh al-mu`āṣira fī ḍaw’ al-fiqh al-islāmī’ (1412 (1992)) 2(7) Majallat Majma` al-Fiqh al-Islāmī 7:605ff. A similar position is adopted by nizam in the context of the hire-purchase contract. See n 149 below.

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mentions a 2005 nizam that purports to dictate the acceptable content of the instalment sale contract. That nizam permits a clause for acceleration upon a buyer’s default in making ‘two consecutive payments at least’ (Art 8). Perhaps the courts consider the nizam to be addressed only to companies licensed by the Ministry of Commerce to conduct the business of sales by instalment (Art 9), but not to the judges of the regular courts – this even though the latter, as the nizam itself provides, are to hear disputes between those firms and their clients (Art 11). Combinations of Contracts Another crucial issue as to contract validity is when one can make one contract conditional on another, or connect them in some other way. Here the crucial text is the hadith: ‘The Messenger of God forbade two sales in one (bay`atayn fi bay`a).’86 And the hadith quoted above: ‘Illicit are a loan and a sale (salaf wa-bay`) ….’87 Combinations of contracts are open to many objections, chiefly that they confuse the price of the individual contracts and complicate awarding remedies in the event of default, thereby opening a door to ribā and gharar. Again, Ibn Taymiyya is the most liberal authority: he objects only to combinations of onerous and gratuitous contracts, such as sale (bay`) and loan (qarḍ, or as in the hadith salaf), since by such combinations parties can easily hide an illegal compensation for the loan.88 Modern scholars do not seem ready to embrace so liberal a view. Scholars can still be seen to object to combinations even of two onerous contracts, such as sale combined with lease or hire, citing the hadith against ‘two sales in one’.89 Yet many modern contracts implicitly involve combinations of contracts, such as sale and hire in commercial agency or distributorship relationships. Perhaps more predictive of scholars’ objections is an assessment of whether the combination in question results in undue uncertainty over contract terms or causes a clash of the remedies entailed by the two contracts on various scenarios. The fiqh objection to combining contracts has led in present-day Saudi Arabia to considerable dispute, even within the courts, on a widely used contract, hire-purchase. I include a short case study on the hire-purchase contract at the end of this chapter, in section 4.4.4, to illustrate this and other issues of contract law raised in this chapter. An easy alternative to combining contracts formally, one much used in practice in historic times as well, is to combine contracts informally, without legally conditioning one on the other. Tawarruq, for example, is a transaction whereby a needy person buys something on credit and then immediately, in a separate transaction with another party, sells it for cash. Most scholars declared this permissible.90 Such a ruling reflects the fact that behaviour such as this cannot be regulated by law but only by moral injunction.

86 Ibn Hanbal, Nasa'i, Tirmidhi. Another version forbids ‘two bargains in one’ (ṣafqatayn fī ṣafqa). Zayla`i, Bazzaz. 87 Abu Dawud, Tirmidhi. 88 Ibn Taymiyya, Qawā`id (n 58) 142–48. See Decision No 104, 2 BG-Com-1431 835 (Com C No 6, Riyadh 1431 (2009)) (sale of shares conditioned on later extension of credit held a void contract). 89 The Standing Committee in 1990 rejected a contract of instalment sale conditioned on the buyer’s services. Senior-Scholars-Standing-Committee, ‘No 6880: Yabī`uh sayyāra bi-al-taqsīṭ wa-yashtariṭ `alayh an ya`mal `indah’ in Fatāwā-Collection-1, vol 13, 195–96, www.alifta.net/Fatawa/FatawaChapters.aspx?languagename=ar& View=Page&PageID=4741&PageNo=1&BookID=3, accessed 1 November 2018. 90 Wizārat al-Awqāf, ‘ Tawarruq’, al-Mawsū`a al-fiqhiyya (Kuwait: Wizārat al-Awqāf, 1404–27 (1983–2006)). The term is a Hanbali one; others refer to it as a type of `īna or double-sale. Ibn Hanbal considered it permissible for the

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d. Interpretation of Contracts It would be difficult to construct a full taxonomy of Saudi cases as to questions of interpretation. One basic reason is that most court decisions do not sufficiently reproduce the words of the contracts being interpreted or reinterpreted, so as to enable the reader to appreciate the choices made by the judge. Besides, as is probably the case in all legal systems, actual contract interpretation follows more of a case-by-case logic. Legal systems all seem replete with legal maxims a judge may cite to support his decision, but, as has been observed, such maxims often occur in pairs opposing each other.91 For an example from fiqh of such contrasting maxims, one of the most basic principles of Saudi and Hanbali law about interpretation of contracts reads ‘The basic principle in contracts is purposes and meanings, not expressions and forms’ (al-aṣl fī al-`uqūd al-maqāṣid wa-al-ma`ānī lā al-alfāẓ wa-al-mabānī).92 But one also finds cited the maxim ‘no significance is attached to what is understood in the face of a literal expression’ (lā `ibrata li-al-mafhūm amāma ṣarīḥ al-manṭūq).93 The French scholar Yvon Linant de Bellefonds has analysed differences among the schools on matters of contract interpretation.94 The Shafi`i school is known for its formalism, and for claiming to enforce contracts according to their external expression rather than their actual intent or purpose. The other schools hold the opposite. The Hanbali school is considered the most devoted to the principle, favouring determining the force of legal acts by the actors’ actual intentions insofar as these can be known from all available indications. This is emphatically stated in some of the Hanbali writings most influential in Saudi Arabia, such as in the al-Mughnī of Ibn Qudama (d 1223)95 or the I`lām al-muwaqqi`īn of Ibn al-Qayyim. Indeed, Ibn al-Qayyim devotes hundreds of pages of his book to establishing the full ramifications of the principle, as he describes it, that ‘intentions change the legal status of legal acts’, and that ‘rulings do not follow the literal sense’.96 Despite this general principle of Hanbali law, strongly supported by some of its most revered scholars, I doubt that anyone reading the Saudi published cases will find Saudi courts to be more inclined than courts in other legal systems to seek out and credit the

needy. al-Buḥūtī (n 23) 3:186. Controversy attaches to this transaction in the modern day, when it has been operationalised by modern Islamic banks as a form by which to imitate interest-lending. Both the OIC-Academy and the MWL-Academy have issued fatwas critical of ‘organised tawarruq’. OIC-Academy, ‘al-Tawarruq: ḥaqīqatuh, anwā`uh (al-fiqhī al-ma`rūf wa-al-maṣrafī al-munaẓẓam)’, Decision No 179 (Decision No 5 of Session No 19, Year 2009) www.iifa-aifi.org/2302.html, accessed 1 August 2019; MWL-Academy, ‘al-Tawarruq kamā tujrīh ba`ḍ al-maṣārif fī al-waqt al-ḥāḍir’, Majallat al-Majma` al-Fiqhī al-Islāmī, Session No 17, Decision No 2, Year 2003, no 17 (2004) 287–88. Regardless of controversy, however, the transaction is ubiquitous in the practice of Islamic finance in Saudi Arabia. The regular courts have not had to face the issue thereby posed, since cases involving institutionalised tawarruq are brought before the Committee for Banking Disputes, not the commercial courts. 91 Karl Llewellyn, ‘Remarks on the Theory of Appellate Decision and the Rules or Canons About How Statutes Are to Be Construed’ (1949) 3 Vanderbilt Law Review 395. 92 Ministry of Justice-Principles of Highest Courts-2016, No 3; Ṣubhī Maḥmaṣānī (d 1986), al-Naẓariyya al-`āmma li-al-mūjibāt wa-al-`uqūd fī al-sharī`a al-islāmiyya, 2 vols (Beirut: Dār al-`Ilm li-al-Malāyīn, 1972) 2:284. It was famously stated in the Ottoman-Majalla in Art 3; see also Art 2: ‘Matters are judged according to their intentions, ie, the ruling that applies to a matter is according to what was intended by that matter’. 93 Decision No 2, 7 BG-Com-1408–1423 358 (Com C No 2, Riyadh 1416 (1995)). 94 Yvon Linant de Bellefonds, ‘Volonté interne et volonté déclaré en droit musulman’ (1958) 10 Revue internationale de droit comparé 510–21. 95 See eg the commentary by Shams al-Dīn Ibn Qudāma (d 1283) in Ibn Qudāma (n 65) 4:6. 96 Ibn al-Qayyim (n 64) 4:99–403.

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parties’ undeclared subjective intent. At most, if the principle so declared frees the courts from too rigid an adherence to the literal words of contracts, nevertheless, once freed, the courts tend to turn to the parties’ words and actions alongside the formal contract to determine the parties’ actual agreement.97 Many other principles of interpretation are mentioned and applied in Saudi courts, though they may not take the form of maxims. One principle, often attributed to Ibn Taymiyya, requires judges to interpret contracts threatened with full or partial invalidity under Sharia so as to make them effective. As one court puts it: The judge in his interpretation of the will of the two contracting parties is not restricted to the expression which the parties chose. … Rather, he has the right to seek guidance from aspects of the revealed texts of the Sharia and ruling principles (qawā`id) to the end that the judge elicits by means of them the parties’ intention and by it executes the contract and gives it effect, … this in accordance with what is the accepted rule both in doctrine and court practice.98

This approach is endorsed by the Supreme Court in its published general rules: ‘One does not turn from validating [contracts] to rescinding them unless it is impossible to implement them’, and ‘Validating contracts is preferable to voiding them.’99 We shall see just such an approach invoked in the case study on the hire-purchase contract in section 4.4.4 below, where courts, faced with a contract they consider invalid as written, give it another construction (takyīf) and enforce it. Another principle cited to justify reforming contracts is ‘To give effect to language is preferable to ignoring it’ (i`māl al-kalām awlā min ihmālih).100 Yet another method of interpretation invokes the parties’ practice subsequent to the contract, their course of performance, to interpret its meaning.101 Mentioned above in section 4.4.1.2-b is the principle that the courts give no special force to writings, as opposed to other indications of intent. Despite this stance, however, if a claimed oral agreement conflicts with a subsequent writing, the judge will be inclined to credit the writing. But he does so not because of doctrine but because of observed custom and his own common sense and experience. His purpose remains to find out from all credible evidence what the parties’ genuine intent was. As just stated, he may readily hear evidence of the parties’ oral agreements, negotiations, and conduct, whether these arose before or after a written agreement was executed.102 I also have found no mention of cases upholding a term in a written contract barring any subsequent amendments, modifications, or waivers of that contract not in writing. In light of the lack of

97 Decision No 90, BG-Com-`Ajlān-collection, 14. The court declares that a written contract may be supplemented by proof of circumstances indicating additional terms. 98 Decision No 187, 2 BG-Com-1432. 99 Ministry of Justice-Principles of Highest Courts-2016, Nos 38, 40. Fiqh works offer a number of qawā`id with similar meanings. See Ḥamad al-Khuḍayrī, al-Ijrā’āt al-qaḍā`iyya: dirāsa naẓariyya taṭbīqiyya (Unpublished, nd) 145, 179. 100 Decision No 147, 1 BG-Com-1432 170 (Com C No 10, Dammam 1432 (2010)). 101 Decision No 113, BG-Com-`Ajlān-collection (BG Review Bd C No 4, Jedda 1412 (1991)). 102 Decision No 112, 3 BG-Com-1431 1332 (Com C No 9, Mecca 1430 (2008)) (existence of oral agreement, implied from parties’ behaviour, accepted if circumstances indicate it); Decision No 30, 2 BG-Com-1432 at 931 (a certain agreement must be in writing, because custom so requires).

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special consideration given to writings, apart from the weight assigned them by custom, the judge will consider the question of excluding oral terms one of interpretation, not of rigid rules. The above, except perhaps the lack of any privilege accorded writings, will seem not dissimilar to courts’ practices in other jurisdictions. Another factor may distinguish Saudi courts, and it may indeed be the most important principle of contract interpretation in commercial practice. This is interpretation in light of custom (`āda, `urf), especially custom among merchants. Given the idealism of Islamic law and the normal remoteness of the fiqh manuals from the current practice at any one place or time, fiqh refers frequently to custom to give its general provisions specific content.103 Thus, in interpreting contracts courts give great weight to custom, as a source for norms to govern matters that the parties failed to address, and to justify choices among competing interpretations as to matters that the parties did address. Here qawā`id, general principles, are often quoted, including ‘Custom is like a stipulation’ (al-ma`rūf `urfan ka-al-mashrūṭ sharṭan),104 and ‘custom is made the arbiter’ (al-`āda muḥakkama).105 Courts frequently reject claims of contract terms that offend custom, and interpret contracts to accord with custom. Again, an opposing principle is cited as well, that custom must give way before an explicit term.106 If in doubt, custom is proved by the testimony of experts, which in Saudi Arabia can mean referral to the Chambers of Commerce to provide a report. A last source for the interpretation of contracts is the fiqh itself, since its general principles, principles governing categories of contracts, and its rulings for specific types of contracts all operate as presumptive terms in contracts, such that the court will deem them included unless the contract itself overrules them. Some of these background fiqh principles and rulings can be varied or excluded by the parties’ agreement, but many cannot. When fiqh does make such terms obligatory, tensions often arise when modern contract forms deviate from them, giving rise to fiqh controversies. Examples of such questionable terms are exculpatory clauses; waivers of rights to options (khiyārāt), such as for defects in the sold object; fixing a term for partnerships; in hire contracts, defining the exact task to be performed while also fixing a term for its completion; and making performance conditional on future events. Courts may strike such terms, leaving the remainder of the contract in place, or interpret them as not binding. In some cases they hold that such a term invalidates the contract itself.

103 For a useful discussion of custom as a source of law in fiqh, see Gideon Libson, ‘On the Development of Custom as a Source of Law in Islamic Law’ (1997) 4(2) Islamic Law and Society 131–55. The article is mostly concerned with custom as a formal source for deriving fiqh doctrine, and less with custom in the forms observable in this book, as a source of objective norms where fiqh makes no provision and where yet legal determinations must be made, among these determining the parties’ agreement as here, or supplying presumptions in evidence as in section 3.1.1.3. We observe throughout this book how broad and deep is fiqh’s reliance on custom for this latter purpose, and this in the Hanbali school which reputably more than the other schools opposes custom as a source for deriving formal doctrine. 104 It is cited in Decision No 271, BG-Com Unpub (Com C No 15, Dammam 1429 (2008)). 105 Ottoman-Majalla, Art 36. This is considered one of a handful of universal qawā`id in fiqh. 106 Decision No 27, BG-Com Unpub (Com C No 57, Buraida 1431 (2009)); Decision No 52, 1 BG-Com-1431 387 (Com C No 15, Dammam 1430 (2008)).

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4.4.2. Second Fundamental Conception Shaping Contract Law: Usury or Ribā Let us move on to the second of the fundamental conceptions shaping contract law, the prohibition of ribā. The Quran forbids ribā, meaning literally ‘increase’ or ‘excess’, but usually translated as ‘usury’, in the harshest terms: Those who take usury will rise up on the Day of Resurrection like someone tormented by Satan’s touch. That is because they say, ‘Trade and usury are the same,’ but God has allowed trade and forbidden usury. Whoever, on receiving God’s warning, stops taking usury may keep his past gains – God will be his judge – but whoever goes back to usury will be an inhabitant of the Fire, there to remain. God blights usury, but blesses charitable deeds with multiple increase. … You who believe, beware of God: give up any outstanding dues from usury, if you are true believers. If you do not, then be warned of war from God and His Messenger. You shall have your capital if you repent, and without suffering loss or causing others to suffer loss. (2:275–79; see also 4:160–61, 30:39) You who believe, do not consume usurious interest, doubled and redoubled. (3:130)

This last verse arguably refers to the so-called ‘pre-Islamic ribā’ (ribā al-jāhiliyyah), a form of ribā prevailing in the Prophet’s time and before it. It is summed up in the saying ‘pay or increase’, referring to the choice given the debtor when a debt was due either to pay on time or to face an increase in the principal. Ahmad Ibn Hanbal stated that it is the only ribā the prohibition of which is beyond dispute.107 What explains the ribā prohibition? Why, if such transactions meet with the consent of both parties (tarāḍin), are they divinely disapproved? So far we have only the Quranic text opposing ribā to charity, and Sunna reports condemning the extortionate practice of ‘pay or increase’. Apart from this, what do the revealed texts say about what ribā is, and why it is wrongful? The Quran asks this very question, but in a more penetrating way – why is sale not like ribā? – and gives the emphatic, if obscure, answer that God has allowed the one and prohibited the other. Given the question and the response, it becomes morally urgent to be able to distinguish ribā from ordinary trade. What sorts of ‘increase’ or inequality in exchange transform lawful commercial gain into condemned usury, despite both parties’ consent? In what circumstances does the desire for gain become perverted and corrupt? Unfortunately, the answers to these vital questions have never been easy. The second caliph `Umar reportedly lamented that the Prophet never spelled out the full scope of ribā: [`Umar said,] The last verse revealed was the verse of ribā, and [then] the Messenger of God was taken [in death]. He had not explained it to us. So leave ribā and doubt (rība).108

The Sunna is no less emphatic and inclusive in denunciations of ribā. One report has the Prophet declaring, ‘Ribā is of 73 types …’.109 Another states: ‘The Messenger of God cursed the one who consumes ribā, the one who makes it be consumed, its inscriber, and its two witnesses.’110

107 Ibn al-Qayyim (n 64) 2:153–54. The term ‘pay or increase’ is attested by a report of Zayd bin Aslam of the second Muslim generation. Malik. 108 Ibn Maja. Others dispute the late timing of the ribā prohibition. 109 Ibn Maja, Hakim. 110 Muslim. Bukhari has something similar.

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The Sunna does offer more guidance as to the meaning of ribā when in several hadiths it describes specific instances of it in loans and sale, without however confining ribā to these cases. Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, equal for equal, hand to hand. If these types differ, then sell them as you wish, if it is hand to hand.111 Every loan (qarḍ) that attracts a benefit is ribā.112

The fiqh rules about ribā are far-reaching. But for our purposes it is sufficient to note various outcomes, all of which can be traced to these two hadiths. As for the first hadith, about ‘gold for gold’, from it the scholars derived three key results, all concerned with sales. The first result is that only certain commodities engage ribā prohibitions in sales. These commodities are called ribawī. The schools differ in the way they define ribawī commodities, all drawing on this one hadith. For the Hanbalis and the Hanafis, they fall into three separate genera – currencies, commodities sold by weight, and commodities sold by measure. For the other schools, the genera involve currencies and fungible foods. The second result – actually, three rules under the heading of ribā al-faḍl, or ribā of excess – concerns sales of one ribawī commodity for another ribawī commodity. The three rules are: (a) a ribawī commodity cannot be sold for the same commodity unless the exchange is mathematically equal (in weight or measure) and it is not delayed: eg iron (which is weighed) cannot be sold for more or less iron, and in no case with a delay; (b) a commodity from one ribawī genus may be sold for any quantity of a different commodity within that same genus, but only if the sale is conducted hand-to-hand: eg wheat can be exchanged on the spot for any quantity of barley; and (c) commodities of differing ribawī genera can be exchanged as one likes, such as barley for gold. The third result – covering the rules of ribā al-nasī’a or ribā of delay – concerns when transactions may involve delay. As just seen in the rules for ribā al-faḍl, commodities must be sold without delay, hand-to-hand, if they are the same species or fall within the same ribawī genus, eg gold for gold, gold for silver, wheat for wheat, or wheat for barley. Thus, the contract of ṣarf or currency exchange, one ribawī for another within the same genus, must be conducted hand-to-hand, and any delay, ribā al-nasī’a, is prohibited. But, as also seen under the last heading, if the genera differ, eg barley for gold, or iron for wheat, the sale may involve delay. Hence even ribawī goods may be sold for money with delay.113 The second of the two hadiths covers the point of loans. A loan, qarḍ, is the gratuitous loan of a fungible, consumable good. Islamic law requires that such a loan be gratuitous, and this without regard to genera or type of goods. If the lender stipulates any benefit for making such a loan, it is prohibited ribā. Clearly, the lending of money for interest is prohibited. 111 Muslim. 112 This hadith, not in any of the six chief collections, is related by the most respected scholars only on the authority of Companions, not the Prophet. As a prophetic hadith scholars reject it as false. See Muḥammad al-Shawkānī (d 1839), Nayl al-awṭār: Sharḥ muntaqā al-akhbār min aḥādīth Sayyid al-Akhyār 9 vols (Cairo: Muṣṭafā al-Bābī al-Ḥalabī, 1952) 5:262. Its content is, however, universally upheld by fiqh schools, making it a candidate for ijmā` status. 113 Another prohibition – that of sale of dayn for dayn – sets other limits on such sales. These are covered in text at nn 135–43 below.

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Islamic law scholars across the ages meticulously carried out the revealed ban on ribā in all these forms throughout the entire body of law, even where the ribā element was implicit or hidden. To give examples, all of which have implications for contemporary business transactions, the law forbids taking compensation for extending a guaranty (kafāla, ḍamān) of a money debt, since that would entail compensation for a possible extension of credit were the guaranty to be called; it forbids a partnership to pay a fixed sum as compensation to its partners, as opposed to a percentage of the partnership’s net profits, since a fixed sum would resemble interest on the partners’ shares in the partnership’s capital; it forbids selling an obligation to a party not the debtor, since that could involve an element of interest; it forbids selling goods and lending money in a single transaction, since the pricing of the goods may involve an element of interest on the loan. One of the further explorations by scholars of the implications of the ribā prohibition is summed up in a maxim attributed to the Prophet himself, ‘Gain accompanies liability for loss’ (al-kharāj bi-al-ḍamān).114 This maxim holds that gain is morally justified only when one faces risk to secure it, while riskless gain is unjust. For example, when an investor puts his capital into property capable of producing yield, such as land or a donkey, he may or may not reap a profit, but his capital is exposed to danger of loss: a crop may fail; the donkey may sicken and die. The maxim declares that in such situations the investor is entitled to his gain, if any. In an interest-bearing loan, on the other hand, the borrower bears the liability for loss of the capital (ḍamān), while the lender is shielded from the risk of losing either his profit or his capital – at least as a matter of the borrower’s contractual undertakings – and therefore gain to the lender is immoral. This argument is closely linked to an observation that most loans not only shield the lender from risk, but they also involve consumables, goods which yield benefits only through being consumed. Unlike a donkey or a farm, wheat or money has no use-value, produces no fruit or yield (kharāj) while subsisting, and is in that sense sterile. A lender who gets compensation beyond exact restitution of his goods is exacting gain from someone in return for nothing, and is therefore unjustly enriched.115 Gain can fairly be derived from money only when one invests it in property that does yield tangible gain, such as the donkey or the land. So far the maxim has declared that one who does not bear the risk of loss or ḍamān may not take the gain. The maxim also entails that one who takes no gain from property may not bear the risk of loss. Thus, in a lease (ijāra), since the user has to pay a rental in return for reaping any benefits from property, the owner, receiving gain, continues to bear the risk of loss. Thus the maxim ‘rent and liability for loss do not coincide’.116 In agency, deposit, and pledge, one person, the agent, the bailee, the pledgee, holds the property for the benefit of the owner, and is permitted no gain from it. Therefore, the holder not having the profit also does not bear the risk of loss, and is liable only for damage to the property he wrongfully causes. The maxim al-kharāj bi-al-ḍamān will come up repeatedly in the chapters to follow. Turning to what can be learned from the available Saudi cases about the practice of the courts as to ribā, we find that the doctrine appears far less in decisions than one would

114 Abu

Dawud, Tirmidhi, Nasa'i, Ibn Maja. Bakr al-Kāsānī (d 1191), Badāʼi` al-ṣanāʼi` fī tartīb al-sharāʼi` (Beirut: Dār al-Kitāb al-`Arabī, 1982) 7:395–96 (recognising that for consumables the thing itself represents the usufruct; hence to exact interest is to take a compensation for nothing). 116 Ottoman-Majalla, Art 86 (al-ajr wa-al-ḍamān la yajtami`ān). 115 Abū

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expect, given the foundational importance of the concept – and much less than the third fundamental fiqh principle covered next, gharar. The main reason for this is that overt instances of ribā confronted in practice chiefly occur within the banking industry, over which the jurisdiction has been shifted to the Banking Disputes Committees, as explained in section 2.2.4.2-a. What are left are rules that may be motivated by ribā, but do not refer to it specifically, such as the requirement that capital in a partnership be compensated not by pre-agreed sums but by a pre-agreed percentage of actual profits. Examples of cases which do decide outcomes specifically on the basis of ribā rules include the following. A number of cases involve an apparent practice of giving gold to shops on condition of return of the gold later fashioned into jewellery. In the event of disputes between the parties, the courts declare the practice unlawful, and require the gold to be returned in kind, in the exact weight in which it was originally provided, as required by the rules of ribā al-faḍl.117 Other cases enforce the requirement that a guarantor cannot charge for issuing a guaranty.118 A great many cases reject the payment of damages for late payment of money obligations; this is declared pure ribā. Some courts, however, declare their openness to claims of actual out-of-pocket losses caused by non-payment, particularly in government contracts. This is the large topic of damages for mumāṭala, procrastination, of the solvent debtor, much debated among scholars in Saudi Arabia and in the Islamic finance industry. But the concept has seen as yet no significant application in the courts as a ground for compensation for late payment. The subject is discussed in section 8.3.3.

4.4.3. Third Fundamental Conception Shaping Contract Law: Uncertainty or Gharar119 This final foundational idea forming Islamic contract law, operating to limit what would otherwise be a general endorsement of whatever parties freely agree, is the prohibition of the sale of gharar, meaning risk or uncertainty. Gharar is prohibited by the revelation in less emphatic terms than is ribā, and, as we shall see, allows for more exceptions in practice. Indeed, the Malikī school, and many contemporary scholars, emphasise the point that gharar can never be eliminated, and so in practice it can be tolerated when it is minor (yasīr), not gross (fāḥish). Despite all this, the rules of gharar have, in my observation, a far more pervasive influence on contract law than does ribā. The revealed texts on which the prohibition rests are also more complex than those for ribā. The Quran itself does not address the concept of risk or uncertainty, gharar, in contract but only a much more objectionable form of trading in uncertainty – gambling.

117 Decision No 265, 3 BG-Com-1430 1007 (Com C No 16, Dammam 1430 (2008)); Decision No 262, 3 BG-Com1408–1423 191 (Com C No 11, Jedda 1414 (1993)); Decision No 141, 2 BG-Com-1432 979 (Com C No 31, Riyadh 1432 (2010)); Decision No 25, BG-Com Unpub (Com C No 15, Dammam 1431 (2009)). 118 Decision No 16, BG-Adm Unpub (Adm C No 5, Riyadh 1420 (1999)). As mentioned in this decision, an exception applies if the customer provides on account full cover for the guaranty, in which case administrative costs are permissible. 119 Some passages in this section concerning the spectrum of gharar prohibitions and the precepts on bay` al-dayn are borrowed from a longer treatment of these subjects in Frank E Vogel and Samuel L Hayes III, Islamic Law and Finance: Religion, Risk, and Return (Boston, MA: Kluwer Law, 1998) 63–64, 87–93, 114–25, which can be consulted for more detail. My thanks to Brill, the current copyright holder, for permission to use these passages.

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You who believe, intoxicants and gambling [maysir], idolatrous practices, and [divining with] arrows are repugnant acts – Satan’s doing – shun them so that you may prosper. With intoxicants and gambling, Satan seeks only to incite enmity and hatred among you, and to stop you remembering God and prayer. Will you not give them up? (5:90–91)120

Particularly noticeable here is that the revelation offers a reason for the gambling prohibition – that gambling, maysir, invokes enmity and distracts the faithful from worship. The Sunna takes this prohibition much further, in condemning not only gambling but also sales of gharar, a word meaning peril, risk, or hazard.121 The Messenger of God forbade the ‘sale of the pebble’ (bay` al-ḥaṣāt) [sale of an object chosen or determined by the throwing of a pebble], and the sale of gharar.122 Do not buy fish in the sea, for it is gharar.123 The Messenger of God forbade the [sale of] the covering [copulation] of the stallion.124 The Prophet forbade sale of what is in the wombs, sale of the contents of their udders, sale of a slave when he is runaway, … and [sale of the] stroke of the diver (ḍarbat al-ghā'iṣ) [sale in advance of the yield of a diver’s dive, whatever it was].125 Whoever buys foodstuffs, let him not sell them until he has possession of them.126 He who purchases food shall not sell it until he weighs it.127 The Prophet forbade the sale of grapes until they become black, and the sale of grain until it is strong.128

It is notable that it is not gharar or risk that is itself prohibited, but the sale of it, ie to transact in a value that is subject to gharar. Again, as with ribā, a legal preoccupation with gharar emerges, driven by the urge for moral security in transactions and for divine sanction of the property rights gained thereby. If commercial gain is lawful, despite the risk and uncertainty intrinsic to it, what is the added element that turns gain into condemned gharar? When is the parties' ready consent no longer a talisman, presumably because it is corrupted by some human moral weakness and blindness, such as a passion for unearned gain, for tempting fate, or carelessness about injustice to others? On these vital questions the revelation says little beyond what can be gleaned from the texts above. As with ribā, fiqh scholars have been unable to define the exact scope of gharar or reach full agreement among themselves concerning it. Taking only the above hadiths as representative of the revealed doctrine on gharar, we can arrange the transactions prohibited in them along a spectrum, according to the extent that risk is at the core of the transaction.

120 Commentators on this verse describe a complex game played in the Prophet’s time, by which lots were drawn for parts of a slaughtered camel, with those who lost paying for all its cost. Most declare the term maysir to refer to gambling generally. 121 The term gharar does not appear in the Quran. Etymologically related words meaning ‘delusion’ do appear. 122 Muslim. 123 Ibn Hanbal relates it, but indicates that its most correct version is handed down on the authority of Ibn Mas`ud, not the Prophet. 124 Bukhari. 125 Ibn Maja, Daraqutni. 126 Bukhari. 127 Muslim. 128 Bukhari, Muslim, Abu Dawud, Tirmidhi.

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The pure speculation. The hadiths describe a few transactions that seem intentional gambling, being final sales of wholly unknown values: the ‘stroke of the diver’ or whatever a stone lands upon. Also in this category are other obscure pre-Islamic transactions prohibited by the Sunna which, on one set of interpretations at least, seem rudimentary, playful forms of gambling indulged in by merchants: an example would be to sell for a fixed price whatever goods (unexamined) the buyer touches (mulāmasa). But very little is known about these pre-Islamic contracts beyond their names, with the result that varied interpretations of their nature are offered. The uncertain outcome. A second group of hadiths describes contracts where the countervalue is not only of uncertain value, but may not be realised at all, eg the sale of a fish in the sea or a runaway slave. Presumably, the sale of goods not yet owned falls in this category. Risk here is less than in the previous category, since it is less essential to the transaction. For one thing, it can be easily avoided by making the sale conditional on the relevant risk being eliminated (the fish caught, the goods obtained, etc). The unknowable future benefit. Other hadiths describe transactions with still less initial risk, since they transfer valuable benefits which are precisely known and defined, but whose future benefit to the buyer is unknowable, such as the ‘covering of the stallion’ and arguably the ‘stroke of the diver’. Such a transaction could be infected with the evils of gambling, especially if the buyer had false hopes or paid too much; in other circumstances, perhaps where the contract has become customary and occurs between informed parties, such contracts could become wholly innocuous and indeed indispensable. Inexactitude. A final set of hadiths pose the least element of gambling or risk. They seem only concerned with insufficiency of knowledge – jahāla, an idea profoundly linked to gharar – such as in sales of goods before they are weighed. Here again, such sales may involve deliberately blinding oneself to risks, or alternatively may be thoroughly mundane and practical, such as a sale of a heap of goods where both parties simply go by an estimate (juzāfan), neither of them weighing or measuring, or a sale by the pound. How do traditional scholars interpret these gharar hadiths? Before describing fiqh rules, let us consider the possibilities. The reason for these prohibitions would not be avoidance of risk per se, since incurring commercial risks – those of the market or supply and demand – is elsewhere approved and even encouraged. Hadiths permit a contract (called salam) in which one pays a year in advance for so many bushels of wheat at harvest time – certainly a risky transaction as to price. But they also forbid such a contract if tied to the crop of a particular tree or field. As the rules of this contract suggest, a possible interpretation of the gharar hadiths is that they bar only risks affecting the existence of the object as to which the parties transact, rather than just its price. In the hadiths, such risks arise either (1) because of the parties’ lack of knowledge (jahāla) about that object; (2) because the object does not now exist; or (3) because the object evades the parties’ control. Therefore the scholars might use one of these three characteristics, not risk itself, to identify transactions infected by gharar. With such a reading, scholars would insist that valid sales (and by analogy other binding contracts) exhibit two features: knowledge, ie the parties’ full knowledge of all aspects of the sale, including the object itself; and existence, ie a concrete sale object capable of production (treating (3) above as a special case of (2)). The absence of one of these features cannot be compensated for by the other, and price cannot compensate for the absence of either one. 137

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Introduction to the Fiqh Law of Property, Crime, Tort, and Contract

Certainly, such a reading of the texts would ignore the modern custom129 (especially after the advent of insurance) to see risk, however dire, as merely one factor affecting price.130 Such a conception of gharar, scholars might argue, is needed to achieve the mutual consent (tarāḍin) demanded by the Quran. How can parties consent to the transfer of that which may not exist, or that of which they have no knowledge? They could do so only if risk itself is part of the object of the sale. But to prohibit such sales is arguably the precise intent of the Prophet’s rejecting ‘the sale of gharar’. Therefore, the consent needed for tarāḍin is rendered more stringent: it must relate to the specific goods transferred, and be based on certain knowledge. Agreement to risk is excluded, since this is not true consent. The schools differ somewhat in the strictness or formalism of the manner in which they approach gharar restrictions. The Maliki school often distinguishes itself as the most liberal, and often reiterates that gharar is allowable if ‘mild’.131 An example of a traditional ruling, shared with the Hanbali school, where this is applied is permission for the sale of a pregnant camel, even if the pregnancy augments her price, while the sale of an unborn camel foetus is prohibited. Another example, from Hanbali law, is a requirement that grants of authority to an agent not be excessively vague: Agency is not valid for that in which the uncertainty and liability is great, such as if he names him to a general agency for every large and small thing, or he appoints him agent for every legal transaction permissible to him. But if the uncertainty is small, the agency is valid, such as if he appoints him agent to sell all his property or to sell what he wishes of it, or to demand all his rights or what he wishes of them, and such like.132

This ruling is the basis for the Saudi practice by which notaries public reject, and courts refuse to enforce, some powers of attorney considering them too general or vague. The Hanbali school lies in the middle of the schools. In characteristic fashion it systematically applies general principles that derive from the revealed texts. But Saudi Arabia also benefits in the case of gharar from the views of Ibn Taymiyya. Here again, as above as to stipulations and contract freedom, Ibn Taymiyya took an independent stance. He argues that rendering the gharar rules as barring non-existence and lack of knowledge restricts contractual freedom too much, resulting in blind legalism and undue obstacles to people’s welfare. For him, rather, gharar is that which leads to the evils of maysir enumerated in the Quran. Seeking to return gharar to the meaning of ‘risk’, he renders it as that which ‘hesitates between soundness and destruction’. Sale of such gharar is prohibited since such sales truly involve maysir or gambling. Gharar is a question of degree: uncertainty cannot be wholly eliminated from contracts, so if a contract involves only minor gharar, it should

129 Probability theory easily determines the value of a gambling contract (expected value is possible gain times chance of winning). All contracts binding someone to a future performance can be seen as performing an insurance function, shifting risk for a price. Fiqh acknowledged and permitted contracts to serve this function as to many risks (eg market fluctuations, credit risks in sale), but not others (eg wagers, sale of non-existent or unknown objects). 130 Also, by seeking out the assured existence of a concrete thing, and distinguishing the risks affecting that existence from risks of price, this reading ignores how market disasters can wipe out value completely. 131 As noted by Ibn Taymiyya, Qawā`id (n 58) 122–23. See eg Ibn Rushd (n 28) 2:147ff.; Muḥammad Ibn Juzayy (d 1340), Qawānīn al-aḥkām al-shar`iyya wa-masā’il al-furū` al-fiqhiyya (Beirut: Dār al-`Ilm li-al-Malāyīn, 1979) 282. This position is held all the more strongly by Ibn Taymiyya, as in Qawā`id (n 58) 133. 132 Qari-Majalla, Art 1200. See al-Buhūtī (n 23) 3:483–84.

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stand. If people want to sell goods ‘at the market price’ or ‘at so much per kilo’, without specifying exact total quantity or price, what is the harm?133 If a non-existent object is sold with a condition that the sale will be cancelled if the object does not come into existence, the uncertainty is minor. In fact, he upholds contracts with conditions in general, terms suspending the validity of the contract on contingent future events.134 In conjoining and forcefully advocating all these positions, Ibn Taymiyya draws apart from nearly all other traditional scholars, who in varying degrees use ignorance and non-existence, and not risk at all, as the touchstones of gharar. Some of his positions but not all have been adopted by Saudi scholars and judges. In the case of ribā, we saw how the revealed prohibition of ribā operates deep within fiqh in ways captured by principles such as ‘gain accompanies liability for loss’, thereby affecting many areas of law seemingly remote from ribā itself. Similarly for gharar – the scholars have extrapolated from outcomes seemingly remote from gambling and risky transactions a profound principle (qā`ida) influential throughout the fiqh of transactions: the prohibition of sale of dayn for dayn. While the principle is not itself attested to the Prophet, a similar principle, supporting many of the outcomes, does take the form of a hadith, though one only weakly attested. This is the hadith by which the Prophet condemns the sale of al-kāli' bi-al-kāli', meaning literally the exchange of two things both ‘delayed’, or the exchange of a delayed (nasī’a) countervalue for another delayed countervalue.135 But even apart from this hadith, the principle against sale of dayn for dayn is said to have near-universal application, and thus to have earned canonical authority as ijmā`, or unanimous consensus. This principle will resurface throughout this book, particularly in the next chapter, the case study of the supply contract, and so I introduce it here.136 This principle concerns limits on when obligations (either to perform some action or to pay money or other property) may be delayed, and when such obligations may be bought, sold, or otherwise transferred.137 As explained in section 4.1, property is either a specific existent object (`ayn) (eg ‘this house’) or an object defined generically or abstractly by an obligation (dayn) (eg to ‘pay $1000’; to ‘deliver 100 bushels of #1 winter wheat’). In sale (and similar contracts) parties may exchange either type of property. One can therefore subdivide sale according to the types of property being exchanged. One may exchange `ayn for `ayn, `ayn for dayn, or dayn for dayn.138 The first, `ayn for `ayn, is barter. `Ayn for dayn

133 Ibn Taymiyya, Qawā`id (n 58) 115–33; Ibn Taymiyya, Naẓariyya (n 58) 220–29; Ibn Taymiyya, al-Fatāwā al-kubrā (n 58) 3:415ff. 134 Ibn Taymiyya, al-Fatāwā al-kubrā (n 58) 3:474ff. 135 On the authenticity and authority of this hadith, see Ḥammād, Bay` al-kāli’ bi-al-kāli’ (bay` al-dayn bi-aldayn) fī al-fiqh al-islāmī (Jedda: King Abd al-Aziz University, 1994) 9–13. Ibn Taymiyya argues that the prohibition of sale of kāli’ for kāli’, and not of sale of dayn for dayn, alone is supported in the revelation, and alone has been accepted and followed universally by scholars. Ḥammād, ibid 24. Ibn Taymiyya seeks also to diminish the force of the maxim against sales of dayn for dayn by claiming that the ijmā` supporting it is narrower than is usually assumed. Ibn Taymiyya, Naẓariyya (n 58) 235; Aḥmad Ibn Taymiyya, Majmū` al-fatāwā, ed `Abd al-Raḥmān bin Qāsim (Medina: Majma` al-Malik Fahd li-Ṭibā`at al-Maṣḥaf al-Sharīf, 1416 (1995)) 20:512. 136 As noted in n 119 above, the following draws on my fuller treatment in the book Islamic Law and Finance (n 119) 114–25. The latter is in turn in large part a restatement and analysis of material from the discerning book by Nazīh Ḥammād (n 135). 137 These are limits independent of and going beyond those occasioned by rules on ribā covered above in section 4.4.2. 138 Ibn Rushd (n 28) 2:125; Kāsānī (n 115) 5:134.

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is the most common, and has several subcases, depending on whether either or both of the two countervalues, the `ayn or the dayn, is delayed (nasī’a). The most basic sale is of a present `ayn, ie a present, inspected thing, for a present dayn in the form of cash on hand. The money price here is dayn, even if it is paid promptly, because the contract specifies it abstractly and not as so many unique coins. The buyer gains immediate title to the sold `ayn, ie it becomes his property, and he usually demands it at once from the seller. The seller also immediately ‘owns’ the price ‘as a dayn in the buyer’s dhimma’, ie as an obligation owed by the buyer. If the contract fixes a term for payment, the seller cannot demand the price until then. The third subdivision of sale is the sale of dayn for dayn (bay` al-dayn bi-al-dayn), and it to these that the principle mentioned above applies. The widespread respect accorded this principle suggests major insights into the Islamic law of contract. As a first insight, the principle helps explain why the contract of sale is understood as an immediate exchange of title.139 As we saw in section 4.4.1.2-a above, in every sale titles to the countervalues are exchanged at once, in at least the fictive sense that the creditor ‘owns’ any delayed sum ‘in the dhimma’ of the debtor. But the principle requires more than just this imagined transfer. Scholars derive from it two additional rules.140 The first of these rules prohibits exchanges where the contract specifies delay terms for both countervalues, with no performance occurring at once, even by transfer of title. This is termed al-nasī’a bi-al-nasī’a, ‘delay for delay’, or, as the Malikis term it, ibtidā’ dayn bi-dayn, ‘initial dayn for dayn’; it is the transaction that is covered literally by the Prophet’s hadith against the sale of kāli’ for kāli’. So interpreted, the principle prohibits exchanges contractually delayed on both sides even if one or both of the goods are `ayn – eg it would forbid not only the exchange of abstract wheat on date X for a described length of cloth on date Y, but also the exchange of a clock on date X for a horse or money on date Y. Thus the principle excludes the purely executory or future sale – no doubt the most common contract of sale today – ie a contract in which the parties exchange only promises or obligations, with the actual sale occurring only when these obligations are satisfied. The second rule prohibits the exchange of dayn for dayn, now interpreting dayn in the sense of abstract property, whether that property is due now or later. This rule applies (here diverging from the first rule) even when one or both of the two dayns is due presently. Thus, it is forbidden to sell a dayn, whether due now or later, for another dayn due now or later.141 An example would be a sale of wheat due now for a described length of cloth due now. To make this lawful one must produce the actual goods owed on at least one side of the transaction. All this covers cases where both of the countervalues are contractually delayed or where both are dayn in any other sense. Accordingly, if two conditions hold – (i) at least one of the countervalues is `ayn; and (ii) one (and only one) of the countervalues is contractually delayed – then the principle would have no application. The ordinary credit sale is therefore

139 Aron Zysow suggests that the reason is a pre-Islamic notion of sale. Aron Zysow, ‘ The Problem of Offer and Acceptance: A Study of Implied-in-Fact Contracts in Islamic Law and the Common Law’ (1985) 34(1) Cleveland State Law Review 75. 140 These two extrapolations from the maxim are not unanimously agreed upon by scholars, although such an agreement is often claimed. Ḥammād (n 135) 14, 24. 141 One clear case comprised within this is ribā al-jāhiliyya mentioned in text at n 107 above. Ḥammād (n 135) 24–27.

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lawful: one may sell a particular horse now for money due later.142 In credit sale, because one side is `ayn, the second rule’s requirement that one countervalue (here the horse) actually be delivered or paid immediately has no application. It is enough if the delivery is presently due, such that, if not paid, the creditor may resort to the courts for enforcement. If, on the other hand, the creditor chooses to overlook the delay in payment, or delays in getting enforcement, the validity of the contract and the parties’ various rights continue unaffected. Note that in this last situation neither party performs at once, but this results more from fact than law. One can distinguish this type of delay in contract performance as ‘delivery delay’ versus ‘contractual delay’. It seems that the more basic objection to sales of dayn for dayn is not riba but gharar. For example, gharar easily accounts for the ban on the bilateral delayed sale. First, such contracts encourage speculation, since with little or no capital investment one takes a position as to future prices. With immediate delivery, in contrast, at least one countervalue is delivered on terms then acceptable to both parties and those goods are removed from further market risks. The price calculation becomes complicated by the fact that one party gains the current use of the property and assumes its current risk. Lacking these factors, sales with simultaneous delays are likely to leave one party feeling the loser, creating the ‘enmity’ which the Quran associates with gambling. Second, the purchase of generic goods that may not exist or be owned introduces gharar on one side of the transaction. If a similar risk were allowed on the other side, the transaction arguably becomes too unstable.143 What aspects of the above analysis of delay in sale most affect modern transactions? First, generically defined goods are vastly more common in modern commercial society than they were in premodern times. Nowadays far fewer items are sold as unique. Most goods are to some degree standardised and fungible, and are purchased by description, not identification. This means that Islamic law’s degree of tolerance for delay, largely confined to sales of `ayn, may prove inadequate in today’s society. Second, the bilateral executory transaction is fundamental to the operation of modern economies. Through contracts, parties expect to be able to gain security for a future performance without paying fully for that performance in advance. Even with no advance payment or performance, modern laws build a reciprocally secure arrangement; the parties mutually undertake either to perform or to pay damages equating to performance. Modern law would see an advance payment requirement as unfair in denying the paying party the ability to refuse performance if the other party should default. But Islamic law, as summed up in the kāli' principle

142 Schools differ as to whether it is possible to sell an `ayn as of a future date against money due now. Ibn Rushd (n 28) 2:156. Ibn Taymiyya, al-Fatāwā al-kubrā (n 58) 3:371. 143 Shams al-Dīn Muḥammad al-Ramlī (d 1596), Nihāyat al-muḥtāj ilā sharḥ al-Minhāj fī al-fiqh `alā madhhab al-Imām al-Shāfi`ī (Cairo: Muṣṭafā al-Bābī al-Ḥalabī, 1967) 4:184 makes precisely this argument. In traditional law three other arguments are made for the ban. First, an executory transaction charges ‘two dhimmas’ without any benefit to either party, not even of the usufruct of one of the considerations (Ibn Taymiyya, Naẓariyya (n 58) 235). Note that this wholly ignores the value to parties of securing an enforceable obligation to perform in the future, so essential to the intricate workings of modern economic life. Second, even contracts with advance payment on one side, such as salam, are objectionable for inherent gharar and potential for exploitation. They are allowed because producers of goods such as crops need advances, and if there were no salam, would have to turn to loans at interest or sharecropping. Third, salam and salaf, the names used for forward purchases in the time of the Prophet, both mean ‘advance’ or even ‘loan’. Nazīh Ḥammād, `Aqd al-salam fī al-sharī`a al-islāmiyya (Beirut: al-Dār al-Shāmiyya, 1993) 15–16.

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(forbidding sale of ‘delay for delay’), systematically opposes this logic. Third, the rules inhibit the liquidity of financial assets, or assets denominated in money or other generic goods. At best, these can only be sold for a differently denominated asset and with immediate payment. How fundamental to Islamic contract law are these various outcomes? To what extent could they be changed by reinterpretation? As for the sale of delay for delay, the principle rests partly on a claimed hadith of the Prophet. The principle against sale of dayn for dayn generally, though lacking explicit revealed support, remains redoubtable because its rule is upheld so pervasively throughout fiqh; its authority stems not from hadith but from a claim to ijmā` or consensus of the scholars, an august source of law in its own right. If diminishing its force becomes imperative, scholars will therefore need to exercise their maximum powers of reinterpretation. The next chapter is a thorough description of just such an exercise, an analysis of the Islamic validity of a contract which, though long ubiquitous in Saudi Arabia, yet in most of its forms directly offends the prohibitions on the sale of kāli' for kāli' and of dayn for dayn.

4.4.4. Short Case Study on the Hire-Purchase Contract But before turning to that lengthy case study, I place here a much shorter one, on an issue that engages the questions raised above about the lawfulness of combining contracts and of adding certain stipulations to them, but now with the benefit of the above discussion of gharar. This case study concerns the controversy in present-day Saudi Arabia over a form of hire-purchase contract developed within the Islamic finance industry called ‘lease terminating in transfer of ownership’, al-ijāra al-muntahiya bi-al-tamlīk (hereafter ‘the IMBT contract’). The topic deserves a fuller case study than this, but to do one might require empirical research into the extrajudicial facts of actual disputes, since outcomes in the courts may be influenced by the terms of the particular IMBT contract at issue – there are many variants – and the practical situation parties find themselves in, aspects of cases not sufficiently revealed in court decisions. Also, the judicial response to this issue is in flux, and may be tending to a resolution, probably by some method of urging judges toward a single standard, whether this is through the long-awaited codification, a new fatwa from the Board of Senior Scholars, or a ‘judicial general rule’ mabda’ qaḍā’ī, from the Supreme Court. The story of the IMBT contract begins with the Islamic finance industry, which early turned to leases as a conventional method of finance potentially compatible with Sharia. Not only do leases generate a return that is not interest, they also have the advantage of built-in security, in that the lessor remains the owner of the property until the end of the lease. A third advantage is that the financier’s interest in such contracts can be sold and pooled with other leases and securitised. The IMBT contract works essentially as follows. A consumer (or business) wishes to finance the purchase of property that is of a type suitable for leasing.144 He enters into a contract requiring monthly payments that reflect both rent in return for his use of the

144 Since finance companies do not own the goods, the transaction is set up like the ‘mark-up sale at the request of the buyer’ mentioned in section 4.4.1.2-a above – the lessee promises to lease goods of certain specifications, and the finance company acquires those goods.

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property and an instalment toward paying the purchase price, though these components are ordinarily not separated out or identified as such.145 A term in the contract provides that, at the end of the lease, on condition that the lessee/purchaser has met all his monthly payments, the lessor/seller shall transfer to him ownership of the property, usually for a nominal price or for free. The lessor/seller’s obligation to transfer may be formulated in many ways, all conditioned on the lessee/purchaser having fully performed: alternatives include the sale or gift of the property, the lessor/seller’s promise to make such a sale or gift, or an option to purchase. Long after Islamic banks had begun employing this contract, the question of its validity reached the fatwa-giving bodies. The first (among the bodies authoritative in Saudi courts) to opine on the contract was the OIC-Academy. In 1988, in a preliminary opinion,146 the Academy recommended replacing the IMBT contract with either an instalment sale with security or a lease with an option at the end to the lessee to purchase the property at its then market price. The Academy reserved for further study all other issues raised by the IMBT contract. The next major fatwa to issue was from the Saudi Board of Senior Scholars, whose opinions are generally followed by Saudi judges. In a fatwa in 1999,147 the Board decided by a majority that the contract is invalid. It is worthwhile to quote the fatwa in full, because it sums up the issues that have concerned the Saudi judiciary ever since: This contract is not permissible under Sharia for the following reasons: First: It combines two contracts into one, without basing itself on either of them. The [two contracts] differ legally in mutually contradictory ways. Sale obligates transfer of the property (`ayn) with its usufructs to the buyer, in which case the contract of lease of the sold property is invalid, because it is already the property of the buyer. Lease obligates transfer to the lessee of the usufructs of the property only. [In sale,] the risk of loss (ḍamān) of the specific property sold and its usufructs falls on the buyer, without any recourse against the seller. In lease, however, the risk of loss of the property and its usufructs falls on its lessor, unless the loss was caused by the wrongdoing or negligence of the lessee. Second: An annual or monthly rental is determined in the amount of an instalment determined by the value of the property contracted for. The seller considers the instalment to be a rental in order to gain security for his rights, since then the buyer cannot sell the property. For example, if the value of the property contracted for is 50,000 riyals, and the monthly rental is one thousand ordinarily, the rental becomes two thousand. This in reality is an instalment on the price. If he is unable to pay the final instalment for example, the property is repossessed from him, since it is leased, and nothing is refunded to him on the ground that what he paid was rental. The injustice of this, and the duress exerted to borrow money to meet the last instalment, is obvious.

145 But see n 149 below, concerning a regulatory requirement on licensed lease-finance companies to do so. A comparable outcome follows when the finance agreement takes, instead of lease, the novel form of partnership called the ‘diminishing partnership’ (mushāraka mutanāqisa). I have not seen this mentioned in Saudi cases. Under it, with each monthly payment the partner/buyer makes, he is credited with an increased share in the ownership of the property, with the result that his monthly payments are progressively applied less to rent and more to principal; by the end of the contract term, the price has been fully paid in. 146 OIC-Academy, ‘al-Ījār al-muntahī bi-al-tamlīk’, Decision No 44 (Decision No 6 of Session No 5, Year 1988) www.iifa-aifi.org/1760.html, accessed 1 August 2019. 147 Hay’at Kibār al-`Ulamā’, ‘al-Ījār al-muntahī bi-al-tamlīk (Decision No 198)’, 1999. We were unable to find this opinion on the website of the Board or in published collections of its fatwas.

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Third: This contract and its like make it easier for the poor to become indebted, with the result that many fall under crushing obligations. Perhaps it will lead to the bankruptcy of some of the creditors because of the defaults by the poor. The Board is of the opinion that the contracting parties should take the correct path, which is to sell the thing and take a pledge on it as security, by retaining the contract document, the title of the automobile, or the like.

Next, in 2000, twelve years after its initial opinion, and after commissioning studies by many scholars, the OIC-Academy – again, the most important body for declaring Sharia norms for the Islamic finance industry – issued its final fatwa on the IMBT contract. It notes that the fundamental objection to the contract is that it consists of two contracts with contrasting effects operating on a single property at the same time. It recommends either the formalistic solution (often used in Islamic finance for contract combinations) of drawing up the contract of sale separately and signing it after the contract of lease, or to use a promise instead of a sale. The Academy enters more specifically than the Board of Senior Scholars into a problem the Board raised, by requiring that the risk of loss in IMBT contracts should fall on the lessor, unless the lessee causes the loss by his wrongdoing. In a point not covered by the Board, the Academy requires that the lessor bear non-routine maintenance expenses, a requirement deriving from the same duty of the lessor to bear the risk of loss. That the risk of loss and the duty to do major repairs should fall on the lessor is generally considered, even by scholars in the Islamic finance industry, an essential term (muqtaḍā) of the lease contract, one that cannot be varied by agreement. The fatwa then gives its views on the forms of the IMBT contract that are prohibited and those that are permissible. Prohibited forms include formulating the conditional transfer at the end of the lease either as an automatic transfer of ownership or as a sale agreed to occur in the future (the unlawful ibtidā’ dayn bi-dayn mentioned in the preceding section), since either of these approaches unlawfully combines a sale and a lease in a single contract. The Academy asserts that it is these types of IMBT contract that earlier fatwas, specifically naming the Board’s fatwa, prohibit. It then proceeds to describe various ways by which an agreement – which it recommends be framed as a separate agreement associated with but not conditioned on the lease – can achieve the desired transfer of ownership at the end of the lease if the lessee/purchaser duly performs. These include a gift or unilateral promise to give, future sales at the thenmarket price, or future sales at a price to be then agreed by the parties. The Academy cites its own fatwas and views of scholars upholding the use of conditions in gratuitous contracts such as gifts, since for gifts gharar rules apply far less strictly. The fatwa explains that the contract should be administered as a lease up to the time of transfer of ownership, and thereafter as a sale. Thus the Academy leaves wholly unaddressed the issues of fairness that the Board fatwa raised – that on default in a payment the lessee/ purchaser loses all the surplus he had already paid, over and above a normal rent.148

148 In 2002 the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), an international organisation dedicated to accounting and legal standards for Islamic banking and finance, issued its own standard on the IMBT contract. AAOIFI, ‘Shari’a Standard No 9: Ijarah and Ijarah Muntahia Bittamlieek (Decided 16 May 2002)’, in Shari’a Standards for Islamic Financial Institutions (Manama: AAOIFI, 1432 (2010)) 137–59.

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By this time, the year 2000, the use of the IMBT contract in Saudi Arabia was spreading, though facing an uncertain fate in the courts. The government was then looking for ways to alleviate a housing crisis, and was enabling and encouraging the population to access finance, including by Islamic finance tools if necessary. After research and debate among many sectors of society and in the Consultative Council starting as early as 2007, in 2012, as mentioned in section 2.2.4.2-c, the King decreed a package of nizams which launched a lease-finance industry. Included in the package was a nizam, the Finance Lease Nizam, that sets out the terms of finance leases – essentially IMBT contracts – permissible for use by businesses licensed to offer lease financing. The nizam endorses terms for IMBT contracts that are more liberal than those of the OIC-Academy fatwa. For example, it does not discuss separate contracts; it permits a transfer term that simply transfers ownership on condition of the lessee/purchaser fully performing; it allows, if the parties agree, the responsibility for major repairs to be shifted to the lessee/purchaser; it permits the lessor/seller to stipulate a right to cancel the contract on lessee/purchaser’s default. It also provides that by regulation a method will be specified to ensure fairness to the lesser/purchaser in the event of premature termination, repossession, or damage or destruction of the leased property not the fault of the lessee/purchaser. (In fact, such a method thereafter was laid out in the implementing regulation to the nizam.149) The package of lease-finance nizams also assigned the jurisdiction over disputes between customers and licensed finance companies not to the regular courts, such as the commercial courts which now (after the reorganisation noted in section 2.2.5) hear disputes between companies and their customers, but instead to a specialised committee, the Committees for the Settlement of Finance Disputes, these described in section 2.2.4.2-c. Given this background of fatwas by authoritative fatwa bodies and of statutes, what has been the practice of the regular courts? (Obviously, cases before these courts concern only leases that either predate the new system of nizams or are issued other than by licensed leasefinance firms, since otherwise the new specialised jurisdiction would be deciding them.) We have collected and analysed about nineteen cases which face the issue of the validity of the IMBT contract, including about eleven from the general courts (cases between businesses and individuals) and eight from the commercial branch of the Board of Grievances (cases between businesses). As noted, an analysis that addresses the actual terms of the contracts involved in these cases is impossible, since the decisions do not go into those details. But one can observe that the decisions fall into four groupings, and that none of them as yet seems to be winning the day, since one finds relatively recent cases in each grouping. The first group of cases follows the fatwa of the Board of Senior Scholars in its logic and outcome, ignoring any refinements to the contract to enhance Sharia compliance that may have been adopted after that fatwa or even after the OIC-Academy fatwa. For judges in this group, the IMBT contract is void, and must be disregarded. The remedy on voiding a contract is to restore the parties to their position ex ante as far as possible. This normally means judgment against the purported lessee/purchaser to, first, pay the fair or market

149 al-L ā’iḥa al-tanfīdhiyya li-Niẓām al-ījār al-tamwīlī, Saudi Arabian Monetary Authority Decision No 1/M Sh T dated 14/4/1434 (24 February 2013) Arts 6, 9, 10, 11 requiring specification of the portion of each monthly payment dedicated to purchase as opposed to mere use, and making provision for a fair accounting for hirer/ purchaser’s investment in the case of various events affecting the contract.

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rent for the period he used the property, set off against whatever he had already paid; and, second, return the property to the lessor.150 The second group agrees that the contract is void, chiefly for the reason that it innately combines two transactions with differing entailments at various stages of performance into one contract. But this group instead reconstructs (takyīf) the contract as not a lease at all, but as a sale combined with the pledge (ie mortgage) of the property sold. In doing so they call in support principles, qawā`id, that encourage courts to uphold contracts to the extent possible, and even to construe contracts according to the parties’ actual intent rather than the words they use. The result in these cases is to treat the property as owned by the lessee/ purchaser from the time the IMBT contract was signed.151 The third group, including only three decisions (one translated in the Appendix), holds that the transaction, even though claimed by one or both of the parties to be an IMBT contract, should be construed as a pure contract of lease.152 This approach may result either from the judge ignoring or striking as invalid any terms about transfer of the property at the end of the lease, or because the lease contract does not contain any term about the transfer. The fourth group is that of cases where courts declare their readiness to uphold the IMBT contract as written. But in few, if any, of these was there a need to face and decide the really problematic issue, the term to transfer ownership. Most prescribe the same remedies as would apply were the contract an ordinary lease. But in one of the cases, which happens to be the earliest case in the collection (from 2003–04), the court ordered the lessee/purchaser to pay the remaining instalments, but omitted making any order concerning possession of the equipment, suggesting perhaps that the lessee/purchaser had already gained ownership.153 These differing choices by the courts entail that very different results are reached even in similar fact situations. For example, if the case is one where the property was destroyed but without any fault on the part of the lessee/purchaser, holding that the contract is a lease puts the loss on the owner, while construing it as a sale puts the loss on the lessee/purchaser. Or, if the case is one where the lessee/purchaser has defaulted, the property has been repossessed and resold against the debt, and the lessor/seller is suing for outstanding instalments, declaring the contract a lease leads to dismissal of the claim, but if it is considered a sale, the lessee/purchaser may owe any excess price not realised from the resale. Or, if the lessee/ purchaser is separated from the property for any reason not his fault, such as needed repairs, then, if the contract is a lease he does not owe rent; if a sale, the obligation to pay instalments continues. Or, if a lessee/purchaser who defaulted and lost possession is suing for

150 This group includes, from the Board of Grievances, only one decision, unpublished and given to us by one of the judges on the case. It is recent, decided in 2013. Decision No 49, BG-Com Unpub (Com C No 1, Buraida 1434 (2012)). A senior general court judge Ḥamad al-Khuḍayrī reports, apparently writing as of about 2013, that this position is the one most commonly followed in the general courts. Ḥamad al-Khuḍayrī, al-Ijrā’āt al-qaḍā`iyya: dirāsa naẓariyya taṭbīqiyya (unpublished, nd) 178. It is interesting that Khuḍayrī does not even mention as options the positions of the third and fourth group of cases. 151 See eg Decision No 52, BG-Com Unpub (BG Review Bd C No 3, Riyadh 1425 (2004)). This was issued by an appellate panel including Shaikh Muḥammad al-Dawsarī. A recent Board case is Decision No 47, 2 BG-Com-1436 982 (Com C No 1, Ha’il 1435 (2013)). From the general courts, we found only one undated case: Decision No unknown, cited in Ibrāhīm al-Suḥaylī, ‘Taḥawwul al-`aqd al-mālī wa-atharuh’, 169 (Gen Trial Ct, city unknown no year). 152 Decision No 35386344, 3 Gen-1435 (Yanbu` 1435 (2013)); Decision No 594, BG-Com Unpub (Com C No 10, Dammam 1432 (2010)); Decision No 34240533, 7 Gen-1434 137 (al-Khobar 1434 (2012)) (translated in Appendix). 153 Decision No 72, 2 BG-Com-1424–1427 982 (Com C No 21, Medina 1424 (2003)).

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recovery of payments made in excess of a fair rent, holding the contract void altogether affords him his desired remedy, while any other result (sale or lease) leads to dismissal of his suit. Because these results so differ, the equities of a suit may be influencing judges in their choice of one position or the other. What lessons can be drawn from this case study? One lesson is an obvious one, that the standards of Islamic validity observed by the Islamic finance industry and those observed by the courts differ. A transaction that has been routinely used for decades in the industry, and is considered relatively pristine Islamically, faced a rough reception when brought before the Saudi courts. This may be because the Saudi court applies the entirety of fiqh law to the transaction, while in Islamic finance contexts enforcement is often entrusted to a body unlikely to do so. A second lesson is a difference between two contexts – the context in which a fatwa-body gives fatwas to financial institutions on the sheer permissibility of a transaction, the context of the OIC-Academy, versus the context where an Islamic law court decides actual disputes under those transactions. We note how the OIC-Academy honoured formalistic means to legitimate a transaction (use of separate agreements), while the Saudi courts, following here the Board of Senior Scholars, seize on the substantive reality of the IMBT contract. They see at once that it is intrinsically both a sale and a lease, however much the sale aspect of it is disguised. Also, Saudi courts and scholars (and the Board which advises them) are prepared to discuss the basic fairness of the transaction in practice, while the OIC-Academy neglected that aspect. A third lesson is that the criteria for Sharia validity for purposes of a statutory scheme of finance, as in the Financial Lease Nizam, differ from those of the uncodified fiqh as applied by a general or commercial court judgment. Probably for this reason, King Abdullah concluded, on issuing his lease-finance nizams in 2012, that, despite his hopes to merge all jurisdictions into the general courts, the jurisdiction over finance-lease disputes needed to be permanently assigned to a specialised tribunal.154 A fourth lesson is that, as anticipated by the discussion in section 3.2, courts in Saudi can differ categorically on points of doctrine, even ones of everyday importance. We saw above155 a similar situation in instalment sales. Usually these differences of opinion are well known among judges and lawyers, as is the case for the IMBT contract; sometimes they are also known to the general public, such as on issues of family law. When these divergences exist, the attention of scholars and judges, and of the government, is drawn to finding a way to reduce them. But, at least for matters of law intimate to the traditional fiqh and distant from areas regulated by the King’s legislative power (siyāsa), the government’s means to do so are limited. This is the very situation that gives rise to calls for codification. A fifth lesson, to be made all the more clearly in the case study in the next chapter, is that Saudi law is far from embracing a notion advocated by some, that contracting remains free subject only to categorically clear prohibitions found in the revelation. Rather, the validity of specific contracts remains governed by the many internal fiqh principles (qawā`id, ḍawābiṭ) that knit together the detailed rulings of the fiqh on contract – including especially the principles that were introduced in this chapter. Other conclusions about the court practice on IMBT contracts, ones, for example, mapping the courts’ doctrinal positions according to the varying forms of the contract and in varying fact situations, await a deeper study.

154 Royal 155 See

Decree No M/51 dated 13/8/1433 (3 July 2012), Paragraph Third, No 10. above text at nn 79–85.

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5 Case Study of the Supply Contract 5.1. Is the Contract Administrative or Commercial? ...........................................................149 5.2. Characteristics of the Goods and Time of Payment of the Price .................................151 5.2.1. Goods Owned by the Seller at the Time of the Contract ..................................153 5.2.2. Seller to Secure Manufacture of the Goods ........................................................155 5.2.3. Tawrīds Where the Seller Neither Owns the Goods Nor Arranges their Manufacture..........................................................................158 5.3. Possible Scholarly Justifications for Observed Saudi Practice......................................160 5.3.1. Narrowing Focus to ‘Delay Tawrīds’ ....................................................................161 5.3.2. Justifications by Analogy to Traditional Fiqh Precedents .................................161 5.3.3. Justification as a Temporary Exception from General Principles Compelled by Necessity .......................................................173 5.3.4. Justifications that Do Not Rely on Analogies to the Past but Make Arguments at a General Theoretical Level ...............................................174 5.4. Conclusions.........................................................................................................................177 5.4.1. Conclusions as to Enforceability of Tawrīd Contracts in Saudi Arabia ..........177 5.4.2. Conclusions Concerning Saudi Judges’ and Scholars’ Legal Reasoning .........178 5.5. Epilogue: What About the Many Tawrīd Contracts that Do Not, as of the Time the Contract Is Made, Fix Price or the Nature or Quantity of the Goods? ......................................................................................................................181

This chapter addresses, as a case study, the ‘contract of supply’ or `aqd al-tawrīd. This case study is fundamental in showing how the Saudi judiciary deals with a contract that has been universally practised for decades in Saudi Arabia and also, in many of its forms, in conflict with basic principles deriving from traditional fiqh. Of course, we have seen the same basic dilemma, in starker form, in the case of interest-based banking transactions, for which any term imposing interest as a price of extending credit is void and unenforceable; for those, as we saw, the solution has been to channel the resolution of disputes away from the courts altogether to a specialised committee that enforces such transactions according to their terms. No special jurisdiction like this is possible for supply contract disputes since they occur in so many forms between so many types of litigants that no group of cases or litigants can be easily diverted to another venue. The issue on which this case study focuses is the simple question – whether, under Saudi law as applied by Saudi judges, the modern supply contract, or one or another particular form of it, is void by reason of offence to basic principles of Islamic contract law, just as interest terms in loan contracts are void for offence to the prohibition of ribā under Islamic law. In discussing this topic, we focus on the Board of Grievances, since it holds (until its 148

Is the Contract Administrative or Commercial? 5.1 2018 transfer to the general courts) the exclusive commercial law jurisdiction, and issues about the tawrīd contract tend to arise in that setting only. In any event, we found very few general court decisions that touch on the relevant issues. As our working definition of the tawrīd contract, let us say it is any contract by which the parties exchange a fixed quantity of goods of a particular type or specification (not real estate or other unique goods), for a fixed price in money, with delivery of the goods to be made at a specified time or times in the future, not at the time the contract is made. Typically, a buyer under this contract uses it to ensure the supply of goods it needs to resell to its own customers, or for materials for further manufacture or other process it is engaged in. (We ignore contracts for supply of services.) Many variations of contract, according to various parameters, fall under this broad definition, and some of these parameters are crucial in determining the validity of the contract under Saudi law. The parameters that we shall consider are: •

•

Public or private, or in Saudi terminology: ○ Administrative (idārī – a contract by which a government entity procures goods from a commercial private party) ○ Or commercial (tijārī, between two private parties)? Characteristics of the parties’ performances: ○ The goods: – Are the generically-described goods covered by the contract in existence, though not yet specifically identified? • If so, does the supplier own them? – Or are the goods non-existent (or their existence unknown)? • If so, will the supplier manufacture them? ○ The price: – Is the price to be paid simultaneously with the making of the contract? – Or later, such as at the time of delivery of the goods?

By defining tawrīd at this stage as a contract that, as of the time it is entered into, fixes both parties’ future performances, we leave out supply contracts that allow either or both of these performances to be determined in the future, such as by the buyer’s demand or the seller’s supply, fluctuations in the market price, the parties’ later agreement, or other criteria. We look at such contracts briefly at the end of the case study, and at that time shall consider: •

If the quantity of future considerations is variable: ○ Is the quantity of the goods variable, for example in accordance with the needs of the buyer (requirements contract)? ○ Is the quantity of the price to be determined later, such as by the market price at time of delivery?

5.1. Is the Contract Administrative or Commercial? The supply contract offers an example of two vital facts about the Saudi legal system one must appreciate from the start. 149

5.1

Case Study of the Supply Contract

The first is that, as is common in other legal systems, the doctrinal standard applied to the acts of the government, even when contracting with private parties, differs from that applied to individuals. As noted in section 2.2.3.1, in Islamic fiqh itself, sometimes specific rulings, developed from the uṣūl in the same way as other rules, apply when the state or one of its agents is an actor. And the involvement of the state can change rules in another way – through the state’s authority to take legal acts, even to legislate, without necessarily being bound by the details of fiqh law. As explained in section 2.1.3, under Islamic constitutional law as understood in Saudi Arabia, the doctrine of siyāsa shar`iyya permits the state to act in its discretion, as long as that action meets two conditions: that it serve the general welfare (maṣlaḥa), and it not offend basic principles of the Sharia, these determined according to criteria themselves somewhat flexible. Judges enforce this standard in individual cases, when they are called on to decide on official acts. One vital form of such legal acts are statutes, in Saudi Arabia called nizams, issued by the ruler. But beyond this, judges may invoke such a standard even when judging individual sovereign acts outside the statutory scheme. Courts differ in the stringency with which they conduct the latter test. The Board of Grievances, both by common reputation and as I have observed in the cases, is more willing than the general courts to presume the Islamic-law propriety of government acts, whether statutes and regulations or acts in specific cases. Since it is the Board of Grievances, in its administrative branch, that hears all contract cases where one of the parties is a government agency, we would expect its judges to overlook any Islamic-law-based doubts about various terms in government procurement contracts if a statute or regulation already dictates those terms. It turns out that most, if not all, of the terms of tawrīd contracts that raise doubts under Islamic law have already been accepted into government procurement practice, and indeed already enshrined in the Nizam for Government Procurement and regulations under it.1 The second vital fact about the Saudi legal system relevant to the administrative versus commercial divide in tawrīd practice is that administrative law has exerted much influence on the general contract law. We shall see instances of this below. If this were a history of the Saudi legal system, very likely at this point would appear a chapter explaining how judges on the Board of Grievances in the early days of the Kingdom’s economic development (roughly, from the 1950s up the 1970s) dealt with contracts between the Saudi government and foreign parties. In those decades, the judiciary of Saudi Arabia was less sophisticated, and, given the flexibility of siyāsa shar`iyya doctrine and the importance of government contracting and procurement in a process of development spearheaded by the state, early courts readily followed the example of existing Arab, particularly Egyptian, administrative and civil law jurisprudence and upheld tawrīd and other contracts without raising Islamic law objections. Then, when the commercial law jurisprudence was assigned to the Board of Grievances in the year 1987, the judges assigned to the commercial branch of the court included many who were already accustomed to enforcing such contracts. Even apart from prior experience, judges might reasonably wonder how, as a practical matter, the standards for commercial supply contracts could differ in any major way from those applying to government ones, when the latter still dominated the economy and many private contracts arose as subcontracts to public ones.

1 Niẓām al-munāfisāt wa-al-mushtariyāt al-ḥukūmiyya, Royal Decree No M58 dated 4/9/1427 (27 September 2006) Arts 38, 63.

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Characteristics of the Goods and Time of Payment of the Price 5.2 For the above reasons, we need to observe whether differences exist between the practice of the administrative branch of the Board of Grievances versus the commercial one. I cite and differentiate the two types of cases throughout this chapter. Is the administrative branch more likely to overlook traditional fiqh objections to supply contracts, or do both branches consider them overcome? Or perhaps the influence flows the other way: has the administrative branch become more critical of even the government supply contract – at least where an issue is not decided by statute?

5.2. Characteristics of the Goods and Time of Payment of the Price In Islamic fiqh two variables in tawrīd contracts – characteristics of the goods and time of payment of the price – are crucial for the contracts’ validity. Fiqh’s difficulties with tawrīd are entirely due to Sharia’s fundamental concern with gharar or uncertainty, explained in section 4.4.3. To begin with revealed texts, there are three hadith texts particularly relevant to this discussion. First, the Prophet’s prohibition of the sale of ‘what you do not have’ (mā laysa `indak).2 According to the reasoning of later scholars, this prohibition, interpreted as the sale of what one ‘does not own’, arises due to uncertainty as to whether the seller will be able to acquire what he has already sold. The second crucial hadith is the Prophet’s prohibition of the sale of a delayed obligation for another such obligation (bay` al-kāli’ bi-al-kāli’). This hadith was discussed in Chapter 43 noting how it is poorly attested, but so widely accepted as to claim a high degree of scholarly consensus on it (ijmā`). This hadith bars the bilateral executory contract, a common contract in other legal systems: the contract where neither party is committed to perform until some specified time in the future (as in the supply contract). Such a contract in fiqh is called `aqd muḍ āf ilā al-mustaqbal or ibtidā’ dayn bi-dayn. The implicit logic of this prohibition, as scholars explain it, is that if both considerations in a commutative contract are subject to future contingencies, whether affecting price or risks of default, then the inherent gharar of the contract becomes too great. The third hadith is that by which the Prophet ordained a particular form of the contract of sale, called salam or salaf: ‘Let one who advances (aslafa, makes a salaf of) money for dates do so by a known volume or a known weight for a known time period.’4 Salam is thus a contract for later delivery of generic goods, a forward purchase. This hadith interacts importantly with the first two hadiths. As for the first hadith (requiring the sold object to be both concretely existing and owned by the seller), scholars understood salam as an intended exception to it, ie salam allows sales of goods that may not be owned by the seller, or even exist. Far from requiring the goods to be unique as in the first hadith, scholars deduced that they should rather be the opposite, wholly generic; thus scholars outlawed salam for sale of

2 Abu

Dawud, Ibn Maja, Nasa’i, Ibn Hanbal, Bayhaqi, Hakim, Daraqutni, Ibn Hajar, and others.

3 Chapter 4, text at nn 135–36. There the broader principle against sale of dayn for dayn is also explained, which

prohibits the exchange of obligations that are defined abstractly or generically, whether or not it is due at once. 4 Bukhari, Muslim.

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5.2

Case Study of the Supply Contract

the produce of a particular farm. The goods are to be described only to a degree that allows, in commercial custom, fixing a price at the time of the contract within an acceptable range of deviation.5 If the property is left generic in this way, risk, gharar, is reduced by another mechanism than by existence and uniqueness – because they are generic, the goods are subject only to risks of market scarcity, not outright destruction. Many goods that can be so defined are fungibles (mithlī), but this is not a requirement. As for the second hadith above (the one prohibiting the exchange of two contractually delayed goods), scholars took it as requiring that, for salam to be valid, the price be paid over in full at the time the contract is made. Scholars have extended the contract of salam beyond its prime use, the forward purchase of fungible goods, usually from their producers. According to the Hanbalis and other schools, if the parties can define the goods in a manner sufficient to fix a market price, even if the goods are not fungible (mithlī) but unique (qīmī), then they may be sold by salam as long as the other requirements of salam are met – non-concretisation of the sale object and payment in full in advance. Hanbalis call this generalised form of salam the ‘sale of an obligation to deliver a described thing’ (bay` mawṣūf fī al-dhimma), or, less literally, ‘sale by which the seller assumes an obligation to deliver a sale object known only by abstract characteristics’; the two terms, salam and bay` mawṣūf fī al-dhimma, are sometimes used interchangeably. Bay` mawṣūf fī al-dhimma can encompass sales of objects by description even without a specified delay. Buhuti (d 1641) sums up the Hanbali rules for the mawṣūf fī al-dhimma sale: Sale is not valid of property that the seller does not own or have permission to deal in, unless it can be described by the descriptions of salam, not uniquely identified. Then the sale is valid because it is valid for him to assume liability [in his dhimma] for the transaction. This is, however, on condition that the buyer take delivery of the sold object, or the seller take delivery of the price, during the session in which the contract is entered into. If neither of the countervalues is delivered in that session, then the contract is not valid, because it is a sale of dayn for dayn, which is prohibited.6

Other schools have similar rules, but may impose restrictions on present sales of goods by description. Thus, unanimously among the schools, fiqh has chosen to draw from these three precedents attributed to the Prophet strict rules about how property known or identified by various means may be transacted in – all to avoid the cardinal evil of gharar. These rules are so pervasively observed that they constitute fundamental principles, qawā`id, and are difficult for scholars to ignore in any situation. Some of the resulting preoccupations of fiqh scholars align with those of modern lawyers trying to balance the interests of buyers and sellers using supply contracts. But others of the fiqh scholars’ preoccupations do not so align and throw into doubt transactions that are routinely practiced worldwide. Rather than discuss these limiting rules in the abstract, let us engage at once with how fiqh scholars, Saudi and otherwise, and Saudi judges have dealt with the tawrīd contract.

5 Manṣūr al-Buhūtī (d 1641), Kashshāf al-qinā` `an matn al-Iqnā`, 6 vols (Beirut: Dār al-Kutub al-`Ilmiyya, nd) 3:292. 6 Manṣūr al-Buhūtī, Sharḥ Muntahā al-irādāt al-musammā Daqāʼiq ūlī al-nuhā li-sharḥ al-Muntahā (Beirut: `Ālam al-Kutub, 1993) 2:9.

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Characteristics of the Goods and Time of Payment of the Price 5.2.1

5.2.1. Goods Owned by the Seller at the Time of the Contract Let us take the case of a tawrīd contract in which the seller owns certain existent goods, though they are warehoused outside Saudi Arabia. The first question is – how does the contract specify or define the goods sold? Saudi standards as to what counts as a legally sufficient description may vary from those in other legal systems. A Saudi court decision, for example, declares that one cannot validly sell animal hides by generic description.7 Under fiqh, no final sale can be concluded for such goods until the buyer can inspect them. Or, the parties may conclude such a sale, but under Islamic law the buyer would have an option to reject the goods and reclaim any price paid when he inspects the goods on receipt (this is called ‘the option of inspection’ or khiyār al-ru`ya). The seller may naturally be hesitant to conclude such a sale, and may wish to have the buyer waive this option, but – in a result significant for exculpatory clauses in general – fiqh and apparent Saudi practice both negate any such waiver, even if one were agreed.8 But let us say that the goods owned by the seller are susceptible to a description that does meet Saudi commercial standards. For example, let us take a case where a distributor (but not manufacturer) of air-conditioning units sells certain units it owns abroad, specifying their serial numbers, to a Saudi retailer. Here since the goods are concrete and identified (mu`ayyan), and even owned by the seller, the sale need not take the route of salam to be valid. For such goods Islamic law provides that title passes from seller to buyer immediately at the time of the contract, even if actual delivery must occur later, and the buyer may even resell the goods before taking delivery of them. In a somewhat counterintuitive result, such a transfer of title renders the seller’s side of the transaction, the delivery of the goods – even though it has not actually happened – not an outstanding obligation, not a ‘dayn’. Therefore, the remaining countervalue, the price, may be a dayn, ie it may be delayed and even contractually postponed. Thus, a house, a horse, or a car belonging to the seller, adequately described in the contract, may be sold for a price to be paid at a later specified date, whether in a lump sum or in specified instalments – and this even if the actual delivery of the house, horse, or car takes place much later. For most schools, this result applies only to goods that are known to both parties. But in the Hanbali school it is possible also for goods owned by the seller that the buyer has never seen and of which he knows only their description. Again, it is required that such goods be

7 See Decision No 106, 2 BG-Com-1429 609 (Com C No 8, Medina 1428 (2007)). al-Buhūtī (n 5) 3:289–91 and Qari-Majalla, Art 486 name skins as among the forms of goods that cannot be sold by salam because they cannot be adequately described. 8 In traditional fiqh, a term in a contract of sale by which the buyer waives his later right to khiyār al-`ayb – the option to return goods if after taking delivery a latent defect appears, discussed in Chapter 6, text at nn 18 – is void. This is the majority opinion of the Hanbali school and of traditional fiqh generally; Abu Hanifa, however, allowed it. Wizārat al-Awqāf, ‘Khiyār al-`ayb’ in al-Mawsū`a al-fiqhiyya (Kuwait: Wizārat al-Awqāf, 1404–27 (1983–2006)); Decision No 34193570, 8 Gen-1434 209 (Mecca 1434 (2012)) (waiver in contract of buyer’s option void); OICAcademy, ‘`Aqd al-muqāwala wa-al-ta`mīr: ḥaqīqatuh, takyīfuh, ṣuwaruh’, Decision No 129 (Decision No 3 of Session No 14, Year 2003) www.iifa-aifi.org/2118.html, accessed 1 August 2019 (similar holding for construction contracts); see generally `Abd al-`Azīz al-Ḥujaylān, ‘al-Bay` bi-sharṭ al-barā’a min al-`ayb’ (1418 (1997)) no 52 Majallat al-Buḥūth al-Islāmiyya 279–336. The buyer’s right to reject unique goods on first inspection would seem even less susceptible to waiver in advance.

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5.2.1

Case Study of the Supply Contract

of a nature that, by commercial custom, can be priced based on their description alone. As Buhuti explains it – using the rather extreme example of a particular slave: The sale of a unique object by description only (al-mawṣūf al-mu`ayyan), such as ‘I sell you my slave so-and-so’ – [the seller] describing him in great detail – ‘for such-and-such a price’ – is valid. The seller may transact in the slave at once, before delivery either of the slave or his price, just as in the case of a sale of property present at the contracting session.9

The Hanbalis deny the buyer any right to rescind the sale on inspecting the goods (khiyār al-ru’ya). His only option to rescind is if, when they are presented, the goods do not conform to the description (khiyār al-khulf bi-al-ṣifa); in other words, if the seller has breached that term of the contract.10 Now, to return to the tawrīd contract, which typically involves sales of multiple goods of a similar nature, which are suitable for description (and much more so than a slave), the rules just stated by Buhuti for the sale of unique goods will apply, provided that the goods are identified, existent, and owned by the seller, and can be, by commercial custom, bindingly sold by mere description. So, in the case of certain specific air-conditioning units, identified and sold only by their description, a supply contract can be valid even if – as is usually the case – the contract does not stipulate payment at once, on the signing of the contract. So we, by some effort, have arrived at one result where, under Saudi and fiqh rules, a tawrīd contract will operate largely as would be expected elsewhere in the world.11 There are published Saudi decisions that indicate embrace of this position, indirectly, by voiding contracts involving future deliveries of goods without immediate payment of the price, because the seller did not own those goods.12 Let us now vary the hypothesis, and assume that the air-conditioning units are not identified specifically at the time of the contract using their serial numbers, but are only described generically; while the seller owns a great many of these units, he does not bother to identify the actual units to be delivered until some later time, perhaps when arranging for their delivery. On this exact point, the selling by description of goods owned by the seller but not yet identified by even the seller, I was unable to detect the Hanbali rule. Since Hanbali law allows for the sale of wheat as present and inspected even when sold from a much larger heap (juzāf) of wheat, and since Buhuti allows the binding sale even of a slave solely by description, it would seem that sale of unidentified units from a larger group of identical units owned by the seller presents no problem of gharar. Similarly, one would 9 al-Buhūtī

(n 6) 2:9. (n 5) 3:164. 11 One Saudi scholar, Abd al-Wahhāb Abū Sulaymān, argues that, of all the contracts found in the Islamic fiqh, this contract – the sale of owned specific goods by description – offers an analogy sufficiently close to the tawrīd contract to justify that contract in general. I do not discuss his position in detail because to accept it is to override two of the basic principles with which we started this discussion, both considered established across all the schools. It requires one to ignore, first, the distinction between goods that are owned versus not owned by the seller, and, second, the distinction between existent, specific goods (`ayn, even if these are sold only by description) versus generic goods that may not exist and are not yet identified (dayn). These two distinctions go to the heart of the discussion. There is a plausibility to Abū Sulaymān’s argument no doubt: the parties to a tawrīd are generally unconcerned about whether the goods are owned or not owned by the seller, or whether they now exist or not. But Islamic law, stemming from its interpretation of Prophetic sayings, has cared profoundly about those two considerations, and framed a great many rules around them. `Abd al-Wahhāb Abū Sulaymān, ‘`Uqūd al-tawrīd: dirāsa fiqhiyya taḥlīliyya’ (1421 (2000)) 2(12) Majallat Majma` al-Fiqh al-Islāmī 335. 12 See n 35 below. 10 al-Buhūtī

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Characteristics of the Goods and Time of Payment of the Price 5.2.2 expect, as long as the goods are owned by the seller, no Saudi judge to balk at arriving at the same result for such a case as in the previous hypothetical. In fact, one case does so decide implicitly, by not inquiring into whether the generic goods owned by the seller were identified to the contract.13

5.2.2. Seller to Secure Manufacture of the Goods Now let us vary the hypothetical further, and assume that the air-conditioning units the subject of the contract do not now exist, but are to be manufactured by the seller. In fiqh law as applied in Saudi Arabia up to only decades ago, the rules applying to such contracts were those of salam and bay` mawṣūf fī al-dhimma. In other words, even if this contract involved manufacture, it was considered no more or less than the sale for delivery at a specified time in the future of goods known only by description (mawṣūf). If the air-conditioner contract were so construed, it would require not only a description sufficient for the contract of salam  – a standard most goods made by hand could not meet14 – but also payment in full at the time of the making of the contract; otherwise, it would be void. Combinations of contracts may have been used to achieve a similar outcome: the Hanbali school permitted a buyer to contract to purchase the materials needed for the manufacture (eg a specified piece of cloth) from the seller, conditioning the purchase on another contract, a hire contract obligating the seller to carry out specified services (to tailor the cloth into a specified garment).15 The latter alternative allows for delayed payment, but only on condition that the materials are, at the least, both owned by the seller and clearly specified. The use of such a construct in modern tawrīd contracts – the purchase of the air-conditioning units – would be complex if not impossible to carry out, and would probably end up as a mere artifice (ḥīla) or fiction, a superficial cover over a different economic reality. The other main Sunni schools have similar rules, except for the Hanafis. The Hanafis recognised the contract of istiṣnā`, literally meaning ‘the seeking of a manufacture’, as an independent contract not analogised to salam. For them, this contract, considered an exception to conclusions that would follow by analogical reasoning from fiqh precedents, in most respects treated the goods to be created by the seller as specific, unique goods (`ayn), despite the fact that anomalously they did not yet exist.16 According to the majority view of the 13 Decision

No 137, 2 BG-Com-1408–1423 236 (Com C No 15, Dammam 1416 (1995)). bin Ṣāliḥ al-`Uthaymīn (d 2001) and Mūsā bin Aḥmad al-Ḥajjāwī (d 1560), al-Sharḥ al-mumti` `alā Zād al-mustaqni`, 15 vols (Dammam: Dār Ibn al-Jawzī, 1422 (2001)) 9:61. 15 Ḥasan al-Shādhilī, ‘al-Istiṣnā` wa-mawqif al-fiqh al-islāmī minh fī ṣūrat `aqd istiṣnā` aw `aqd al-salam’ (1412 (1992)) 2(7) Majallat Majma` al-Fiqh al-Islāmī 425, 485. See also Mūsā al-Ḥijāwī, al-Iqnā` fī fiqh al-imām Aḥmad bin Ḥanbal, ed `Abd al-Laṭīf al-Subkī, 4 vols (Beirut: Dār al-Ma`rifa, nd) 2:66–67. 16 `Alī ibn Abī Bakr al-Marghīnānī (d 1196), al-Hidāya sharḥ Bidāyat al-mubtadī, ed Muḥammad `Adnān Yūsuf (Beirut: Dār Iḥyā’ al-Turāth al-`Arabī, nd) 3:77 (‘the non-existent thing may be considered as existent in effect, and the thing contracted on is the `ayn’); Muḥammad Amīn Ibn `Ābidīn (d 1836), Radd al-muḥtār `alā al-Durr al-mukhtār, 2nd edn (Beirut: Dār al-Fikr, 1412 (1991)) 5:225 (‘bay` `ayn mawṣūf fī al-dhimma’, ie sale obligating future delivery of a concrete thing known by description); Muḥammad bin Maḥmūd al-Bābartī (d 1384), al-`Ināya sharḥ al-Hidāya (Beirut: Dār al-Fikr, nd) 7:115. In the Hanbali school, an `ayn if it is to be sold must be an existent good owned by the seller. This is not to say that for Hanafis the manufactured good was considered in every respect an `ayn: for one thing, for a true `ayn, ownership transfers at the time of the sale, not at delivery as in istiṣnā`. For a Saudi case discussing some of these points, see Decision No 53, 1 BG-Com-1435 207 (Com C No 3, Jedda 1435 (2013)). 14 Muḥammad

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Case Study of the Supply Contract

Hanafis, advance payment is not required, but the contract does not bind either party until the goods are produced and presented to the buyer, whereupon the manufacturer becomes bound. Even then the buyer enjoys an option to reject the goods as unsatisfactory – and this even if they agree with the description given in the contract. A minority view of the Hanafis exists, however, attributed to one of the co-founders of the school, Abu Yusuf, according to which an istiṣnā` sale becomes binding on both parties from the time of the contract.17 This minority view became enshrined in the Ottoman-Majalla, the late Ottoman codification of Islamic civil law which came into effect in 1877, though, somewhat inconsistently, the Majalla kept open the right of the seller to sell to a third person up to the time the buyer had taken delivery of the goods.18 This view of the Majalla, at least as to the contract’s binding force, has been the view favoured in modern times, given its greater conformity with the worldwide conventions for the sales of manufactured goods. The Majalla also allowed for – and sometimes required – the parties to leave the time of performance implicit, determined by custom.19 It is important to note that the Hanafi justification for istiṣnā` does not gainsay the significance of the three hadiths with which we began the chapter, or of the principles derived from them. It was adopted instead under the Hanafi methodological or hermeneutical principle of istiḥsān, literally ‘considering a thing preferable’, by which a scholar may uphold a practice that Muslims have adopted, even if it offends qiyās, meaning that it is arguably inconsistent with the implications of revealed rulings. As the central Hanafi authority Marghinani (d 1196) stated: If he buys [a thing which people by custom transact in by istiṣnā`], it is permitted by juridical preference (istiḥsān) because of this established unanimous custom. According to analogy (qiyās) it would not be permitted because it is the sale of what does not exist. The correct view is that it is permitted as a sale and not [a mere] promise, the non-existent thing being considered as in effect existent.20

Over the last few decades, it seems that the Hanafi istiṣnā` contract has become broadly accepted by fiqh scholars of all schools. For one thing, it has served the Islamic finance industry well – as a common method for financing businesses’ purchases of manufactured goods. The OIC-Academy – which has taken a leading role in issuing the fatwas needed to support modern forms of transaction that play important roles in Islamic finance – has addressed the contract of istiṣnā`. After debating complexities and variations of contracts for securing manufactured goods across the schools, in 1992 the Academy endorsed istiṣnā` in its form as adopted by Ottoman-Majalla, but yet further evolved – it requires the time of performance to be specified, and did not mention the seller’s right to sell the goods to a third 17 Ibn `Ābidīn (n 16) 5:223–25 (this author, the most respected Hanafi scholar of his time, reflecting the state of the school as of a half-century before the Ottoman-Majalla went into force (1877), does not mention Abū Yūsuf ’s view, and portrays a view that istiṣnā` is binding before presentation of the goods as erroneous); Muḥyī al-Dīn `Alī al-Qurrat Dāghī, Buḥūth fī al-iqtiṣād al-islāmī (Beirut: Dār al-Bashā’ir al-Islāmiyya, 2009) 150 (disputes with Ibn `Ābidīn showing that Abū Yūsuf ’s view, though a minority view, was followed by some in the school throughout, and knowingly adopted by the learned editors of the Majalla); `Ādil Bin Shāhīn, `Aqd al-tawrīd: ḥaqīqatuh wa-aḥkāmuh fī al-fiqh al-islāmī, al-Ṣundūq al-khayrī li-nashr al-buḥūth wa-al-rasā’il al-`ilmiyya 53 (Riyadh: Dār Kunūz Ishbīliyā, 2011) 302. 18 Ottoman-Majalla, Arts 388–92. 19 See Maḥmūd ibn Aḥmad al-Marghīnānī (d 1219), al-Muḥīṭ al-burhānī fī al-fiqh al-Nu`mānī, ed `Abd al-Karīm Sāmī, 9 vols (Beirut, 2004) 9:136. 20 al-Marghīnānī (n 16) 3:77.

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Characteristics of the Goods and Time of Payment of the Price 5.2.2 party instead.21 It defines istiṣnā` as a ‘contract relating to [the assuming of] an obligation [to perform] work (`amal) and [to deliver] a specific property (`ayn)’, and provided that it is permissible in such a contract to delay payment of the price in full, in part, or as instalments.22 Eight years later, in 2000, the Academy reiterated its position in Decision No 107 on the tawrīd contract: ‘If the subject of the tawrīd contract is a commodity that requires manufacture, then the contract is an istiṣnā` to which are applied the rules of [istiṣnā`]’, referring back to its 1992 Decision.23 In Saudi Arabia opinion – even outside the Islamic finance industry – has moved in the last few decades toward accepting the istiṣnā` contract. Shaikh Muhammad bin Ibrahim Al al-Shaikh (d 1969) declared the istiṣnā` contract void, enforcing that view in the courts in his role as the ultimate level of appeal in the judicial system.24 More recently, however, the private scholar and mufti `Uthaymin (d 2001), who many considered the leading Saudi fiqh scholar during his lifetime, embraced the istiṣnā` contract. He wrote, in a comment on the word ‘tailoring’ in a traditional text: He means ‘tailoring a robe.’ On this his view is that one who tailors for me a robe of specifications so-and-so is entitled to a known payment for his services. The cloth is from the man [the customer], not the worker [the tailor]. This is permissible. As for when the piece of cloth comes from the worker, this is called among the scholars ‘istiṣnā` of the goods’ (istiṣnā` al-sil`a) and there is a difference of opinion about it. Some say, it is not permitted, because it is not salam, because in salam there must be a specified delay, and the goods are not specific existing goods but owed in the future, and [in the tailoring case] the description may not be adequate. The correct view, however, is that [this contract] is permitted, because it can be sufficiently specified by a description, and because the practice of the people is in accordance with it, both now and of old.25

With this shift of scholarly opinion, supported by the revered `Uthaymin and more recently the Standing Committee,26 contemporary Saudi courts as well as merchants have embraced the istiṣnā` contract. This represents a notable advance of the Saudi commercial law system toward conformity with the otherwise universal international practice. In current Saudi practice, if the seller is also a manufacturer or producer of the goods, the contract is enforced even with delayed payment.27 Four published Saudi court decisions, all of them from the commercial branch of the court, explicitly invoke the doctrine of istiṣnā`.28 21 OIC-Academy, ‘`Aqd al-istiṣnā`’, Decision No 65 (Decision No 3 of Session No 7, Year 1992) www.iifa-aifi. org/1852.html, accessed 1 August 2019. 22 OIC-Academy, ‘`Aqd al-istiṣnā`’. The Decision also declared that a penalty clause is allowed in istiṣnā` contracts, which further reveals how scholars do not see the manufactured item as a dayn. If they did, paying a penalty for delaying its delivery would be unlawful, as a form of ribā. See OIC-Academy, ‘al-Sharṭ al-jazā’ī’, Decision No 109 (Decision No 3 of Session No 12, Year 2000) www.iifa-aifi.org/2059.html, accessed 1 August 2019. 23 OIC-Academy, ‘`Uqūd al-tawrīd wa-al-munāqaṣāt’, Decision No 107 (Decision No 1 of Session No 12, Year 2000) www.iifa-aifi.org/2053.html, accessed 1 August 2019. 24 Muḥammad bin Ibrāhīm Āl al-Shaykh, ‘No 1556: Bay` al-mawṣūf fī al-dhimma …’ in Fatāwā wa-rasā’il Samāḥat al-Shaykh Muḥammad bin Ibrāhīm bin `Abd al-Laṭīf Āl al-Shaykh, 13 vols (Mecca: Maṭba`at al-Ḥukūma, 1399 (1978)) 7:46. 25 al-`Uthaymīn and al-Ḥajjāwī (n 14) 10:348. 26 Senior-Scholars-Standing-Committee, ‘No 22592: Yattafiq ma` maṣna` li-ṣun` maṭbakh wa-fī nafs al-waqt yabī`ah `alā zabūn’ in Fatāwā-Collection-3, vol 2, 144–45. 27 Decision No 35321776, 4 Gen-1435 20 (Ha’il 1435 (2013)). This is a general court case enforcing a contract for ‘taṣnī` wa-tawrīd’, manufacture and supply, even without payment in advance. The court also enforced a penalty clause. 28 Decision No 53, 1 BG-Com-1435 (no advance payment, contract called istiṣnā`); Decision No 147, 2 BG-Com-1433 774 (Com C No 27, Riyadh 1432 (2010)) (clear holding that, specifically because the supply

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5.2.3. Tawrīds Where the Seller Neither Owns the Goods Nor Arranges their Manufacture So far we have two scenarios in which under fiqh rules the tawrīd contract works essentially as expected under international standards – where the goods are already owned by the seller and where the seller is to manufacture or produce them. But the next set of hypotheticals reveal the true problems with tawrīd contracts under fiqh rules. Let us take the case of a Saudi aluminium smelter, which arranges through a long-term contract with a supplier for periodic deliveries of its raw material, bauxite, from the international market, with payment to be made only with each delivery.29 At this point we face the full difficulties of reconciling the fiqh rules of salam with the international practice of not requiring full payment in advance. In the following paragraphs I use the term ‘salam rules’ to refer to the requirements placed by all schools on sales of salam (and also in the Hanbali school on bay` mawṣūf fī al-dhimma): namely, that the object sold is of a nature tradable commercially when identified only by abstract characteristics (singular ṣifa), not as an identified unique object; that under the contract the object sold remains generic, not to any degree concrete or specific; and that its price must be paid in full at the time of contracting. Clearly, as Saudi Arabia has undergone rapid development from the 1930s, it is fair to assume that salam rules have rarely been observed in tawrīd contracts, whether these are public or private contracts. Interest banking as well prevailed though much of the economy from the time Saudi Arabia engaged commercially with the rest of the world. But in the case of banking, until now the formal courts have never countenanced interest-based contracts, or blessed them with enforcement. How do contemporary Saudi judges handle tawrīd contracts that do not meet the exceptional circumstances already discussed? A first observation is that many court decisions, in both the administrative and commercial circuits of the Board of Grievances, uphold tawrīd contracts even when they are apparently subject to, and in violation of, salam rules, usually without offering any explanation or comment concerning those rules. In very many cases,30 the court’s disregard of salam issues seems to follow from the fact that the plaintiff, the supplier, has already performed, and is suing merely for payment for goods delivered. Under fiqh, enforcing the demand of such plaintiffs could be justified in various ways, even were the court to declare

contract required the seller to manufacture, there is no requirement of advance payment; the contract is not subject to salam rules, but is called istiṣnā`); Decision No 414, 2 BG-Com-1429 773 (Com C No 4, Riyadh 1428 (2007)) (since the contract involved manufacture by the seller, the contract is an istiṣnā`, and for that reason allows delayed payment); Decision No 46, 4 BG-Com-1408–1423 142 (Com C No 5, Riyadh 1420 (1999)) (similar result); contra Decision No 13, 3 BG-Com-1431 1421 (Com C No 27, Riyadh 1430 (2008)) (although the supplier was a ‘factory’ ‘producing’ the reinforcing steel that was the subject of the contract, the court does not refer to istiṣnā`, declares the contract salam, and insists on advance payment; the case is discussed further below, at nn 36, 79). As will be mentioned in later chapters, the Saudi system has also universally accepted the characterisation of the construction contract, the muqāwala, as an istiṣnā` contract. 29 See Decision No 187, 2 BG-Com-1432 956 (Com C No 17, Dammam 1432 (2010)). 30 Decision No 152, 2 BG-Com-1435 1035 (Com C No 4, city unknown 1434 (2012)); Decision No 223, 4 BG-Adm-1435 2660 (Adm C No 1, Riyadh 1435 (2013)); Decision No 121, 3 BG-Com-1434 1365 (Com C No 2, Jedda 1433 (2011)); Decision No 143, 2 BG-Com-1434 1005 (Com C No 4, Riyadh 1434 (2012); Decision No 179, 4 BG-Adm-1434 2330 (Adm C No 4, Riyadh 1433 (2011)); Decision No 142, 4 BG-Adm-1432 1409 (Adm C No 27, Riyadh 1429 (2008)); Decision No 39, 2 BG-Com-1429 720 (Com C No 4, Riyadh 1429 (2008)); Decision No 8, 4 BG-Com-1408–1423 31 (Com C No 9, Jedda 1412 (1991)). Decision No 13, 3 BG-Com-1431, enforces delivery of goods that had been paid for, applying salam rules.

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Characteristics of the Goods and Time of Payment of the Price 5.2.3 the parties’ tawrīd contract void. The court could construe the defendant buyer’s acceptance of the goods as concluding an implied sale contract between the parties incorporating the terms stated in their earlier tawrīd agreement, or alternatively construe the tawrīd contract itself as an exchange of promises to make sales in the future, which, though non-binding prospectively, makes each individual sale under it binding.31 But there are also cases, in not only the administrative but also the commercial benches of the Board of Grievances, where neither side has yet performed, and yet the court upholds a tawrīd contract that would be problematic under fiqh rules.32 In two other decisions, one administrative and one commercial, the court directly refers to one or another aspect of the salam rules, and yet upholds contracts that appear to offend those rules, usually because they do not stipulate payment in full at time of contracting.33 In some of the cases upholding tawrīd despite salam rules, there may even have been an obligation on the seller to carry out some manufacture, but the court does not even raise that point, much less define the contract as one of istiṣnā` not salam, which would have helped justify the court’s result as a matter of fiqh.34 These are all cases enforcing tawrīd. I am aware of only four cases – all in the commercial branch of the Board – where judges declined to enforce tawrīd contracts offending the salam rules. In three of these cases, in the years 2006, 2009, and 2013, the contracts were sales of goods sold by description, and thus along the lines of salam, but with delay in the payment of the price. In each the court invalidated the contracts without referring to salam rules except implicitly, giving instead as its reason that the supplier did not own the goods at the time the contract was made.35 In the earliest of these three decisions it appears that the supplier was also the manufacturer of the product, yet the court made no reference to this fact or to the contract of istiṣnā`.36 The fourth case, issued in 2009, is the only one I have found that explicitly invokes the salam rules when invalidating a contract. It involved a contract with a manufacturer of reinforced steel (a contract that quite clearly could have been construed as an istiṣnā` contract). The court insisted, among other things, on exact advance determination of quantity and also payment in full at the time of contracting, neither of which the contract required.37

31 Apart from such solutions presupposing new contracts, voiding the tawrīd contract itself would entail restoring to the plaintiff the goods he transferred, in the form, if fungibles, of their equivalent, and otherwise the goods themselves if they exist unchanged, or, failing that, their fair market value. As to the enforcement of promises, see section 4.4.1.2-a. See also Decision No 84, 2 BG-Com-1435 1013 (Com C No 3, Riyadh 1434 (2012)), where the court construed a tawrīd contract as an exchange of promises from which the defendant buyer withdrew before performance. 32 See eg Decision No 30, 2 BG-Com-1432 920 (Com C No 9, Dammam 1432 (2010)) (supplying ‘iron’); Decision No 73, 5 BG-Adm-1429 2441 (Adm C No 18, Abha 1428 (2007)) (supplying water). 33 Decision No 223, 4 BG-Adm-1435 (in contract for ‘hotel and hospitality equipment’ the court declares that one of the most important obligations of the tawrīd contract is payment at the time of delivery, but notes that the Qur’an requires believers to fulfil their contracts); Decision No 187, 2 BG-Com-1432 (court cites sections of the Buhūtī treatise on salam while enforcing a contract for raw material (bauxite) with delayed payment). 34 Decision No 143, 2 BG-Com-1434 (carpentry equipment, machinery); Decision No 106, 2 BG-Com-1429 (tanning of hides). 35 Decision No 84, 2 BG-Com-1435 1013 (Com C No 3, Riyadh 1434 (2012)); Decision No 347, 3 BG-Com1431 1437 (Com C No 13, Jedda 1430 (2010)); Decision No 129, 2 BG-Com-1428 922 (Com C No 4, Jedda 1427 (2006)). The courts in these cases may have had additional reasons to reject the contracts: in the first and third of these cases, court named grounds to reject the contract as never formed; in the second case, a clause in the contract specified that the seller owned some or all of the goods, while he did not. 36 Decision No 129, 2 BG-Com-1428 (product was ‘soft wax’, and the supplier a refinery). 37 Decision No 13, 3 BG-Com-1431.

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5.3. Possible Scholarly Justifications for Observed Saudi Practice If we step back and look at all these cases dealing with tawrīd, we notice that few of these courts explicitly, or in a systematic way, applied the rules described thus far to explain why they do or do not enforce tawrīd contracts. For example, we do not observe the courts ticking through key fact issues (whether the seller already owns the goods; whether the contract arranges for manufacture of the goods; whether the buyer paid in full at the time of contracting; etc). Of course, a minority of the cases did highlight one or more of these issues as the crux of its decision – namely, the decisions that construed the tawrīd contract as an istiṣnā` or as a salam contract or insisted that the seller own the goods. But, in the majority, the courts seem to be operating from a prior conclusion that the tawrīd contract is a routine contract – one the validity of which does not crucially depend on issues such as these. Certainly this is incumbent on the judges of the administrative branch of the Board of Grievances, who generally enforce nizams, since nizams governing government contracting with the private sector presume the legality of tawrīd and even dictate the terms of government supply contracts. We do notice that all of the cases justifying or questioning the legality of tawrīd contracts from the fiqh perspective, whether explicitly or tacitly, were from the commercial branch. Why is the courts’ treatment of tawrīd contracts – nearly unanimously accepting – so different from the same courts’ position as to interest-based banking? For both tawrīd contracts and interest-based banking, practical circumstances have long compelled Saudi Arabia to conform to worldwide commercial practice. Despite this, the regular courts have refused to enforce interest transactions, leading to the creation of a special tribunal to do so. Even in administrative cases, the system is arranged in such a way that Board judges are not asked to give judgment on transactions openly involving ribā. But in the case of tawrīd contracts, the courts are expected to rule on tawrīd contracts constantly, and they do so willingly, and generally by upholding the contracts. So there is a difference here that needs explanation. One basic point helps explain this difference. Although the prohibitions of ribā, which bars interest banking, and of gharar, which throws many tawrīd contracts into question, are often paired as the most important principles giving unique shape to the Islamic law of contracts and torts, fiqh recognises an order of importance between them. The ribā prohibition is more absolute. This is for many reasons, starting with the doctrinal difference that ribā is prohibited in the strongest terms by the Quran itself, while gharar prohibitions stem mostly from the Quranic prohibition of gambling, together with deductions from various specific legal rulings of the Prophet. Another difference arises from sheer worldly reality: gharar can never be wholly eliminated. For example, if one buys a property such as a house, there is much about the house that remains hidden and unknown. Therefore, as the Malikis are famous for holding explicitly, gharar is prohibited only when it is excessive (fāḥish), not when it is insignificant (yasīr). Perhaps this difference led to the result that, as we shall see below, fiqh allowed certain contracts with similarities to the modern tawrīd, despite the fact that they offended general principles. But even taking into account the lesser rigour of the gharar prohibition, many – perhaps most – of modern tawrīd contracts do starkly offend long-standing, pervasive principles

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5.3.2.1

of fiqh. We still need an explanation of how the judges of the Board of Grievances, the standard-bearers of fiqh in the commercial sphere, can almost uniformly enforce such contracts. Given the consistency of their devotion to fiqh principles, we must assume that one or more fiqh theories exist to justify the observed relative contemporary acceptance of tawrīd contracts. But, strikingly – a point I return to in section 5.4.2 below – the published decisions do not make these theories explicit. Therefore, we need to seek such justifications in the writings and fatwas of scholars. So the next task is to review the authoritative fatwas and the writings of respected contemporary scholars, including student theses, to learn what justifications may be influencing the judges. But again, for none of the possible justifications to follow are we able to cite a Saudi decision that explicitly relies on it.

5.3.1. Narrowing Focus to ‘Delay Tawrīds’ As we set out to review scholarly opinions, let us narrow our focus to a subgroup of tawrīd contracts, those with the most importance for our purpose. Again, the modern term tawrīd or ‘supply contract’ is a broad one, lacking any single definition even in international commercial practice. Worse, coming as it does from non-Islamic laws, its definition does not relate to fiqh categories. Let us narrow the focus, therefore, to tawrīd contracts – which I shall refer to as ‘delay tawrīds’ – where all of the following apply: (a) the seller does not own the goods at the time of the contract; and (b) the buyer contracts to pay the contract price in part or in full at a specified future time or times; but (c) other requirements of a valid contract under fiqh rules are met, including clear specification of both parties’ performances at the time of contracting, excluding any doubt or uncertainty as to quantities, times of performance, and the like.

5.3.2. Justifications by Analogy to Traditional Fiqh Precedents 5.3.2.1. Accepting Istiṣnā` as Valid May Be Influencing Outcomes One possible reason for the broad Saudi acceptance of the delay tawrīd, though a rather vague or atmospheric one, may be the effect on scholarly and judicial logic of the recent embrace of the late Hanafi doctrine of istiṣnā`. Given this doctrine, as we have seen, many delay tawrīds become lawful – those where the seller arranges the manufacture of the goods supplied. Under the traditional Hanbali school, such transactions were not given special treatment, but considered bay` mawṣūf fī al-dhimma, or arranged using a contract of hire. Given that the Hanbali school generally exhibits internal consistency of its major principles, for it to shift from defining a sale of future manufactured goods as salam to defining it as something else strains the fabric of the school. For a Saudi judge or scholar to accept the Hanafi istiṣnā` is to accept as legally relevant certain characteristics of the istiṣnā` contract that scholars previously were aware of but chose to ignore, insisting on the use of salam or other contracts instead. Among these characteristics are the following. First, istiṣnā` requires not just the delivery of conforming goods at a particular time in the future, disregarding their source, as in salam, but also commissions the manufacture of those goods and

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makes the seller responsible for that manufacture. In other words, a particular performance of work is required that goes beyond simply obtaining and delivering the required goods on time, a task that every seller undertakes. In the Hanbali school of old, such an element – the commissioning of work as opposed to supplying goods – required a different contract, that of hire or ijāra. Second, in istiṣnā`, one makes the future sale dependent on a particular manufacturer or manufacturing process, while in salam this is not allowed: for example, one cannot buy wheat while stipulating that it be the produce of a particular farm. The purpose of this requirement in salam is to allay gharar concerns, by making irrelevant the risk of destruction or loss that besets any unique object, process, or source. Explicitly istiṣnā` engages such risks. Third, in istiṣnā` the buyer and seller implicitly accept not only these risks pertaining to a unique source, but also other risks from contracting for goods to be manufactured to the customer’s unique requirements. In the paradigm case of istiṣnā`, the customer seeks a good entirely unique – in the classic example, shoes in the buyer’s size and preferred style; whereas in salam, the paradigm subject-matter is wholly generic goods available in the market at the time of performance. Perhaps for the reason that it entails these additional risks, the istiṣnā` contract allows the seller to delay his payment until the goods are delivered and accord with their specifications.38 Fourth, istiṣnā` introduces a nuance into what the Hanbalis consider dayn or fī al-dhimma. Here something known only by description is implicitly – and often explicitly – being treated as an `ayn, or unique existent object, even though it is obviously not one, but only a future good known by description, what the Hanbalis call dayn. The logic seems to be that if goods are narrowly specified, or linked to something concrete such as a particular manufacturing process, then they should take on some, but not all, of the character of an `ayn, not a dayn. As we have seen,39 Saudi judges, embracing the Hanafi istiṣnā`, do enforce contracts on the ground that they meet the requirements of istiṣnā`, even if payment is postponed. But going beyond such easy cases, could the novel embrace as legally relevant of the above characteristics of the Hanafi version of istiṣnā` predispose a Saudi judge to think differently about all delay tawrīds? For example, what if a buyer specifies a certain make of television or washing machine, with particular specifications, but makes his contract not with the manufacturer itself but only with its distributor? It would seem that few, if any, of the just-mentioned characteristics of istiṣnā`, which distinguish it from salam and presumably justify its special treatment, are profoundly affected by this change. These are questions that, in the cases we have reviewed, judges pass over in silence. Hypothetically, the shift in the premises of their legal reasoning entailed by accepting istiṣnā` could inspire Saudi judges and scholars to forge a new, more coherent complex of rules to govern tawrīd contracts, one that makes sense of this new factor. Perhaps that complex would take into account other factors as well, such as changes in modern times in the character of manufactured goods, or whether, judging from worldwide experience, gharar, the ultimate evil of which is declared to be that it engenders disputes between parties, is increased or diminished in tawrīd contracts if payment is made on delivery and not at the time of contracting. But, typically, Saudi judges and scholars do not engage legal questions at such a high level of abstraction.

38 Abū 39 See

Sulaymān (n 11) 367ff. text at nn 27–28 above.

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At less abstract levels, one does observe authors attempting to draw broader lessons from allowing the contract of istiṣnā` in Saudi practice. One Saudi scholar Saud al-Thubayti suggests as the reason why istiṣnā` should enjoy an exemption from salam rules is not that the seller arranges manufacture but rather that the goods being sold have been manufactured, by the seller or someone else. In an oral exchange among OIC-Academy fiqh experts leading up to Decision No 107 of the Academy on tawrīd in the year 2000, mentioned above,40 Thubayti, after first discussing tawrīd contracts for goods that are owned by the seller, goes on to say: If the subject-matter of the contract [of tawrīd] is something into which manufacture enters [mā tadkhuluh al-san`a] – and that is mostly what tawrīd contracts involve – things like equipment and foodstuffs involving manufacture and clothing – all this falls under the heading of istiṣnā`. The Academy has previously issued a fatwa on istiṣnā` that permits delay of payment or paying by instalments. … There remains one matter, and this concerns things into which manufacture does not enter and are not specific things sold by inspection or description: namely, things that are weighed or measured into which manufacture does not enter. To these it is obligatory to apply the contract of salam and its prerequisite – namely, that the goods not be sold except with advance payment. Otherwise, we have closed the door of salam and obliterated it from Islamic fiqh.41

These discussions among experts served as part of the basis for the Academy’s Decision No 107, which, as noted above, allows treatment of a contract as istiṣnā` if the goods sought ‘are a commodity that requires [tataṭallab] manufacture’. The Academy’s formulation seems not to follow Thubayti’s suggestion, though its language could, with some force, be construed to agree with it. It is easy to imagine how a scholar might criticise a position such as Thubayti’s. If it were the fact of manufacture alone that mattered, then why did all the four schools provide that existing manufactured commodities (maṣnū`āt) are, if susceptible to accurate description, goods sold by salam? Indeed, in modern times manufactured goods may be the safest goods to sell by description alone. The redoubtable Saudi scholar `Uthaymin himself so opined, noting that they serve better for this purpose than the agricultural goods that traditionally were the paradigm case of salam goods.42 In 2007 an individual asked the Saudi Standing Committee whether his business in which he takes orders from his customers for goods which he then obtains in the market met Sharia requirements; the Committee declared that all such transactions needed to meet the salam rules, this regardless of whether or not the goods he supplied were manufactured goods.43 It is true that, considering the logic of gharar that underlies the regime of salam, whether the generic goods that are being sold by description in salam had once been manufactured does not seem relevant. A second point weighing against Thubayti’s approach is scholars’ frequent emphasis on the point that istiṣnā` is a contract based on both goods and labour, a concept found in 40 See

n 23 above. in which scholars exchange views on tawrīd contract]’ (1421/2000) 2(12) Majallat Majma` al-Fiqh al-Islāmī 515, 550–51. Whether fruits sold by number may be sold by salam is debatable. Qari-Majalla, Art 486. 42 al-`Uthaymīn and al-Ḥajjāwī (n 14) 8:149. See also OIC-Academy, ‘al-Salam wa-taṭbīqātuh al-mu`āṣira’, Decision No 85 (Decision No 2 of Session No 9, Year 1995) www.iifa-aifi.org/1990.html, accessed 1 August 2019. 43 Senior-Scholars-Standing-Committee, ‘No 20582: al-Ittifāq ma` sharika `alā tawrīd sila` lahā’ in FatāwāCollection-2, vol 11, 126–27, www.alifta.net/fatawa/fatawaDetails.aspx?languagename=ar&View=Page&PageID= 14510&PageNo=1&BookID=3, accessed 1 November 2018. 41 ‘[Session

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Hanafi sources. As noted, the OIC-Academy defined istiṣnā` as a contract that arranges not only goods but also the seller’s work to produce those goods. Salam, in comparison, does not tie the goods to the seller at all, except to require him to deliver them at the specified term. On the other hand, even for the Hanafis, istiṣnā` did not require the seller himself to perform the manufacture. Several authoritative works state that, while istiṣnā` involves both work and an `ayn, it is the latter that is the object of the sale. Therefore, if the seller delivers a good that has already been manufactured, by himself or another, even before the istiṣnā` contract was made, then, if the buyer accepts them upon their delivery, the sale is lawful.44 Given the requirement that the buyer accept the goods, it seems that the offered goods represent a non-binding substitute performance, not performance of the istiṣnā` itself. Thus, it remains the case that, for a binding istiṣnā`, it is required that the goods in question not already be manufactured, and their manufacture factually be the result of, and contractually linked to, the demand created by this particular contract; in other words, that securing their actual manufacture is the responsibility of the seller. Perhaps inspired by the suggestion of the Hanafi texts, today’s scholars, particularly those in Islamic finance, allow a seller to subcontract to another person the actual production, even by means of another, ‘parallel’, istiṣnā` contract. This concept is in wide use in Islamic finance: an Islamic bank, in order to finance its customer’s acquisition of an airplane, may enter into an istiṣnā` with its customer for payments over time, whereupon the bank enters into a sub-istiṣnā` to purchase the airplane for cash from its manufacturer. Another Saudi scholar, Dubyan al-Dubyan, the author of a twenty-volume work on modern financial transactions under fiqh, takes a different approach than Thubayti in drawing lessons for tawrīd from accepting istiṣnā`. For him the important element in the istiṣnā` contract theoretically is not that the goods are or will be manufactured, but rather that the contract links the future sale with an obligation on the seller to perform a specific work (`amal). He argues that tawrīd is similar: In my opinion, the tawrīd contract is a contract based on both an obligation to do a work (`amal fī al-dhimma) and an obligation to deliver a commodity known by a description (ṣil`a mawṣūfa fī al-dhimma). It is not a mere sale. The contract is based on a work and a sale. In such a case, paying the price in the contracting session is not obligatory; rather, it allows for delay of both countervalues. One example is the contract of istiṣnā`. Another example is the independent contractor (ajīr mushtarak)45 in that the contractor is not entitled to his hire unless he has completed the work, and this despite the fact that, at the time of the contract, he enters into an obligation to perform the work in the future (`amal … muta`allaq fi dhimmat al-ajīr). In other words, the countervalues are both delayed [ie both the work and its price are future obligations or dayn]. This is the view of the Hanafis and the Hanbalis and one view of the Shafi`is. The work of the supplier is an essential element in tawrīd. It consists of obtaining and delivering the commodity or the service to the buyer, and from this arises the contract’s name. … The work of the seller is sometimes securing manufacture (istiṣnā`), and then the seller is a manufacturer. This presents no difficulty as to delaying the two countervalues, based on the Hanafi school.

44 Ibn `Ābidīn (n 16) 5:223 (quoting Ḥaṣkafī (d 1088)); Ottoman-Majalla, Art 388: ‘ The sale object in istiṣnā`` is the specific object, not the labour of the manufacturer-seller (ṣāni`). Accordingly, even if the ṣāni` comes to the buyer with a sandal manufactured by him or by another before the istiṣnā`, and the buyer accepts it, it is valid.’ 45 The independent contractor, ajīr mushtarak, is discussed at length in section 9.4.2.2.

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5.3.2.2

And sometimes the work is not to secure manufacture, but rather to transport the good from country to country, to arrange the shipping to the buyer, to resort to the guaranteeing bank and submit a group of documents to the bank to receive the payment. … By so deriving the ruling [for tawrīd], I have not broken the fiqh principles and postulates that forbid the sale of dayn for dayn.46

As we have seen, the OIC-Academy did not take this approach. Dubyan’s proposal has the obvious flaw that, both now and at all past times, merchants have needed to perform services to make and carry out sales, and so this justification could stretch far and wide. Indeed, the paradigmatic salam involved duties similar to those Dubyan lists.

5.3.2.2. The Maliki Istijrār Contract (Advance Purchase with Payment on Account) To justify delay tawrīds contemporary scholars have mined traditional fiqh works for other useful precedents. Traditional sources do record views, in several schools, upholding various forms of sale contract where neither party performs at the time of contracting. Referring to these, scholars are able to argue that the principles behind the salam rules do allow for exceptions, and that some of these exceptions may play a role in the field of contemporary tawrīd contracts. One of these is a little-known contract fully endorsed by only one of the schools, the Maliki, called istijrār, a contract by which a customer of a shop or business arranges to buy goods ‘on account’. Malikis adopted it on the ground that the people of Medina in the earliest eras were known to practise it, and the ‘practice of the people of Medina’ is a source of law for the Malikis. Indeed, the istijrār is sometimes called ‘the sale of the people of Medina’. The early sources describe it with a certain lack of precision, leading later scholars to identify many possible variations of the contract, some or all of which may be hypothetical. Here is one rendering of how istijrār was practised, this being a form of it that Malik, the founder of the school, is reported to have approved: In purchasing meat, we would take each day two or three raṭls [a measure of weight], with the price postponed till a [known time]. … Malik said, ‘I don’t see any harm in this, if the food is known [viz in type and quantity]. If the price is delayed for a period, I see in it no harm.’ The [description of the practice] indicates that it was well known among them. … Malik and his companions allowed it, on the authority of the practice of Medina, on two conditions: first, that [the buyer] begin taking some of the goods he is giving salam for, and second, that the goods be from the stock-in-trade [aṣl] of the one to whom the salam is given. … Because it is not pure salam [perhaps because the seller ordinarily has the goods in stock and subject to inspection], it is allowed to postpone payment of [the price] for it. And because [nonetheless] it is not the purchase of anything concrete or identified in fact, it was allowed that the delivery of the entirety of the goods be postponed, as long as he began by taking the first part of it.47

46 Dubyān al-Dubyān, al-Mu`āmalāt al-māliyya: aṣāla wa-mu`āṣira, 2nd edn, 20 vols (Riyadh: Maktabat al-Malik Fahd al-Waṭaniyya, 1432 (2010)) 8:496. 47 Abū Walīd Ibn Rushd al-Qurṭubī (d 1126), al-Bayān wa-al-taḥṣīl wa-al-sharḥ wa-al-tawjīh wa-al-ta`līl li-almasā’il al-mustakhraja, 2nd edn (Beirut: Dār al-Gharb al-Islāmī, 1408 (1987)) 17:207; Muḥammad ibn Aḥmad `Illaysh (d 1882), Minaḥ al-jalīl sharḥ `alā Mukhtaṣar al-`allāma Khalīl (Beirut: Dār al-Fikr, 1989) 5:384.

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Another report of this early practice specifically states that no one in Medina ‘considered it sale of dayn for dayn’.48 In later Maliki commentaries, scholars insisted on an interpretation by which the contract required specification of the exact quantity to be taken each day and in total (a point left ambiguous in the early reports – ‘two or three raṭls’); otherwise, they submit, the contract would not be binding, and the parties would be bound only after each actual exchange.49 Other authorities elicit from the early reports other conditions for this type of istijrār, including that the seller be one who ‘works continually’ in providing the goods in question, such as the baker or butcher, and that the times before the first delivery, between the remaining deliveries, and before paying the final price, be of a length not considered by custom as ‘delays’, such as a month or more, but only short postponements that can be overlooked. For contemporary scholars concerning themselves with tawrīd, the interest in this hoary precedent is that it sanctions a contract closely analogous to the modern delay tawrīd, with only one major reservation – that it requires that the intervals before the buyer starts receiving shipments and between subsequent shipments not be considered by custom in the nature of contractual delays, but only insignificant postponements. However, schools other than the Maliki did not embrace this precedent, at least not in the form of a binding contractual prearrangement, and did not exempt it from rules about salam and sale of dayn bi-dayn.50 For example, the Hanbali school does not use the term at all, as shown by a computer search of many authoritative Hanbali works. The school does allow some parallel arrangements, such as sales where the goods are already owned by the seller and can be chosen by the buyer in advance. One Hanbali scholar, Ibn al-Qayyim (d 1350), stood apart from the school by not only embracing an istijrār-like contract, but adding a feature making it even more challenging to fiqh norms.51 Ibn al-Qayyim was the chief disciple of the famed scholar Ibn Taymiyya (d 1328) and on many topics the main expositor of Ibn Taymiyya’s views, defending them with a characteristic vigour, even vehemence. As previously noted, some of his and Ibn Taymiyya’s views, but far from all, became incorporated into the later Hanbali school, and modern Saudi scholars, while they deeply respect both scholars, do not uniformly adopt their positions. We saw in Chapter 452 that various of these two scholars’ views on contract have enjoyed a wide reception in modern times in Saudi Arabia and elsewhere. Ibn al-Qayyim argues strenuously for the validity of a practice whereby a person makes a contract with a merchant who deals in a particular commodity according to which he takes from the merchant a fixed quantity of that commodity daily, at each day’s prevailing market price, promising to pay for the goods taken at the end of the month. In this contract, the overall quantity may be known, but the total price is not known, nor is it paid in advance. While not saying so explicitly, it is clear that Ibn al-Qayyim considers this contract binding

Walīd Ibn Rushd al-Qurṭubī (n 47). (n 47) 5:384. Another commentator suggests that a competing report, whereby Mālik disapproved the practice as dayn for dayn, concerned such poorly defined arrangements. Muḥammad bin Aḥmad al-Dasūqī (d 1815 CE), Ḥāshiyat al-Dasūqī `alā al-Sharḥ al-kabīr, vol 4 (Beirut: Dār al-Fikr, nd) 3:216–17. 50 `Abd al-`Azīz al-Shabīb, ‘Bay` al-istijrār wa-taṭbīqātuh al-mu`āṣira’ (Masters, High Judicial Institute, Imam Muhammad University, 1431 (2009)) 149–50. 51 Muḥammad Ibn Qayyim al-Jawziyya, I`lām al-muwaqqi`īn `an rabb al-`ālamīn (Beirut: Dār al-Kutub al-`Ilmiyya, 1411 (1990)) 4:5. 52 See Chapter 4, text at nn 57–90. 48 Abū

49 `Illaysh

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on both parties. He notes that many scholars reject this contract, considering it void, and for such scholars the only valid approach is for the buyer to negotiate separately, each day, for that day’s purchase. He leaves unsaid that this would mean that the buyer would also be negotiating each day for credit to be extended to him until the end of the month, something the seller may choose not to grant, or grant only in return for a higher price. Ibn al-Qayyim identifies another alternative – he calls it an ‘artifice’ (ḥīla) – that critics of his approach would also accept. In it the buyer negotiates a loan of the month’s full quantity in advance, taking delivery of it bit by bit each day. Such a loan has to be repaid in kind, since the goods (he assumes) are fungibles. But rather than pay in kind, at the end of the month the buyer instead reaches an agreement with the seller to ‘purchase’ the loan for cash, since such a purchase is permissible if agreed directly between the debtor and the creditor.53 But Ibn al-Qayyim points out a flaw in this artifice, arising from the fact that the settlement cannot be done in advance, and occurs only after the sales have happened. The flaw is that if the price at the time of settlement has gone down or up (compared to the average market price of the month past), then the disadvantaged party may insist on delivery in kind, shifting his loss to the other party. Ibn al-Qayyim does not bother to mention a third, impractical, alternative, which many scholars would accept: that the buyer make a salam contract with the seller, allowing for deliveries each day of a month, paying the price in advance.54 Ibn al-Qayyim castigates those who reject this contract (who would seem to include all who would follow the mainstream view in any of the four schools): They consider the taking of possession invalid, as not transferring title, analogous to what is seized by usurpation, because it is a delivery under an invalid contract. But all of them, except those who are particularly strict with themselves, do this, and find no alternative to it, the while they give fatwas as to its invalidity. … … [Ibn Taymiyya] said, those who forbid [stipulating the price of a contract by a future market price] cannot avoid it. Rather, they fall into it. There is nothing in the Book of God, the Sunna of His Prophet, the consensus of the Community, a statement of a Companion, or a valid analogy that forbids it.55

The passage exhibits some common traits of Ibn Taymiyya’s positions on contract law and civil transactions, as vigorously articulated by Ibn al-Qayyim. One trait is Ibn Taymiyya’s support for practices that, in practical terms, achieve the Sharia-sanctioned interests (maṣāliḥ) of the people, while not offending Sharia principles in any way other than in some narrow technical sense. In his view, such technical questions need to be decided holistically with an eye to the balance between the benefits (maṣāliḥ) and the detriments (mafāsid) occasioned by the practice. Scholars who would deny those practices err in not taking fully into account such larger Sharia values. In adopting his opinion Ibn al-Qayyim is in effect endorsing the istijrār contract of the Malikis discussed above, since his proposed contract meets its requirements. The difference is that he goes even further, providing that the price be determined by each day’s market price. (The latter aspect of his opinion I discuss further in section 5.5 below.) 53 Such

an arrangement is mentioned by the late Hanafi Ibn `Ābidīn (n 16) 4:516. doubt affects this contract, since salam ordinarily requires a longer delay. In a much later work, Buhūtī nonetheless allows this arrangement because ‘need calls for it’. Manṣūr al-Buhūtī and Mūsā bin Aḥmad al-Ḥajjāwī, al-Rawḍ al-murbi` sharḥ Zād al-mustaqni` (Beirut: Dār al-Mu’ayyid Mu’assasat al-Risāla, nd) 358. 55 Ibn Qayyim al-Jawziyya (n 51) 4:5. 54 A

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In this instance, as in many others, the later Hanbali school was not swayed from the school’s position by Ibn Taymiyya or Ibn al-Qayyim. Buhuti mentions something very similar to Ibn al-Qayyim’s model, but leaving unsaid whether it involves a prior contract between the parties, much less one that would be binding.56 In another context, in accordance with the accepted long-held view of the school, he rejects as void for uncertainty (jahāla) the idea of binding sales based on a price left unnamed but to be determined in the future according to some criterion (ma yanqaṭi` bi-hi al-si`r), such as market price.57 Permitting such sales is one of Ibn Taymiyya’s most famous divergences from the school.58 Some contemporary scholars have put forward the Maliki istijrār as the key basis on which to argue for the general acceptance of the delay tawrīd. Wahba al-Zuhayli (d 2005), a Syrian scholar famous for his concise modern compilations of Sunni fiqh rulings and who is read and respected in Saudi Arabia, describes the tawrīd contract as merely a framework agreement within which multiple individual sales are conducted. He says that the tawrīd contract is in fact a mere first agreement between the beneficiary and the party that offers these services. It is an agreement that in the end resolves into repeated individual contracts. Every time the supplier presents an invoice for goods sold, and names the price, then the party who benefits from this performance presents an acknowledgement of this action and pays the price to him for this transaction which was presented.

In such deals he sees no difficulty, since what is to be bought is known by description in advance, and the overall contract resolves itself into so many individual particular transactions, as goods are presented and accepted by the buyer over time. Indeed, he claims that this corresponds exactly to a particular istijrār-like contract that the Hanafis upheld. In his words: This is not a story of goods that are unknown or a price that is unknown. The uncertainty is removed in practice by the descriptions. It is the sale of something described, and there are exact specific descriptions of what the supplier provides, by means of the general agreement, the general framework, that is made with the other party. Therefore, in the result the agreement turns into a specific and exact sale. This is what the Hanafis affirm as bay` al-istijrār. There is no need to enter into a lot of complications although I do respect the great and profound study of His Eminence Shaikh Muhammad Taqi al-Uthmani [to be discussed in the next section]. This is a controversy which we have entered into. We find that those who transact desire matters to be simpler than the complexity we find at the level of fiqh. Therefore, the contract of tawrīd is in fact one of the sales that are recognised and whose content is agreed upon. There is no difficulty in it from the point of view of Sharia. The scholars affirmed it under the flag of what they call the sale of istijrār.59

Zuhayli does not, however, explain whether a tawrīd contract according to his conception – a framework pre-agreement not a true sale – would bind the parties to its terms throughout the contract’s life. Without such a binding effect, what he proposes would not model the modern tawrīd contract. And indeed, according to the late Hanafi scholars who mention it,

56 al-Buhūtī

and Mūsā bin Aḥmad al-Ḥajjāwī (n 54) 427.

57 Ibid 427. This position would seem reconcilable with the one in the prior footnote only if in fact Buhūtī consid-

ers the latter non-binding. 58 Muḥammad Ibn Qayyim al-Jawziyya, Bidā’i` al-fawā’id, 4 vols (Beirut: Dār al-Kitāb al-`Arabī, nd) 4:50–51. 59 ‘[Session in which scholars exchange views on tawrīd contract]’ (n 41) 535–36.

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the Hanafi form of istijrār to which Zuhayli refers is such a mere framework arrangement; scholars specify that, in situations where the seller does not already own the goods and the buyer has not viewed them, the istijrār has no binding effect, while only the individual transactions conducted according to it do become binding.60 In that sense they are said not to uphold the istijrār contract as the Malikis do. For contemporary scholars faced with the contemporary tawrīd contract, therefore, the lesson to be drawn from views such as the Malikis’ and Ibn al-Qayyim’s on istijrār is that fiqh does know situations, besides the Hanafi istiṣnā`, where goods may be sold by description only, in advance, for a known (or knowable) price, and, most important, without payment of the price at the time the contract was made. But istijrār does have drawbacks as a general justification for the modern tawrīd contract. First, istijrār tends to incorporate the idea, implicitly and sometimes explicitly, that the seller already owns the goods in question, which is usually not true of tawrīd contracts, and which we have assumed is not true for delay tawrīds, the contracts we are now considering. Second, the status of istijrār as an exception seems to depend on an idea that the individual periodic deals made under its auspices occur between parties who view present goods and approve of them at the time, and perhaps even approve of their price. For the Malikis and Ibn al-Qayyim, it was enough if the contract was conducted in such a way that these two presumptions were often the case, without insisting on them in fact; for them, the initial istijrār agreement could itself bind the parties, as to duration, price, and quantity. But in the view of all the other schools, and for some scholars even in the Maliki school, the starting point was to doubt those assumptions, and hold that the istijrār itself was not binding, while only the individual deals made under it were. To hypothesise about past commercial practice from scholars’ remarks about how commonly the transaction called istijrār was practised (but no other proof), it seems, in practice, parties’ behaviour may never have lived up to strict compliance under either of these two heads (the seller’s prior ownership or the buyer’s right to approve), and yet the contracts were tolerated and perhaps even enforced, and this probably under all the schools. Those scholars who do make the two assumptions just named, including both the Malikis and Ibn al-Qayyim, suggest that they do so because the contract meets an essential need of the people, and is widely practised without resulting in injustice. But as far as serving for a precedent in strict fiqh for upholding the modern tawrīd contract, istijrār does have these drawbacks. It is worth noting that istijrār partly overlaps with istiṣnā` for those who accept the latter. Typical cases of istijrār involve loaves of bread or butchered meat, in both of which an element of manufacture is involved. But istijrār is often mentioned for goods not manufactured, such as the daily supply of vegetables or fruits. The Maliki view on istijrār was, like the Hanafi view on istiṣnā`, only narrowly supported in traditional fiqh. If we compare the authority of these two precedents in traditional fiqh, the form of Hanafi istiṣnā` today relied on arguably claims less authority than the Maliki istijrār – it enjoyed only minority support within one school, becoming the favoured view of that school only late; in contrast, the Maliki istijrār had the status of preferred view of the Maliki school since its earliest times. But, interestingly for our purposes, despite this the

60 Ibn

`Ābidīn (n 16) 4:516.

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modern scholars have not embraced the Maliki istijrār to the degree they have accepted the Hanafi istiṣnā`.

5.3.2.3. Tawrīd as Muwā`ada, an Exchange of Promises Another early precedent to which contemporary scholars turn in their efforts to provide fiqh grounding for modern delay tawrīds is the notion of mutual promises (muwā`ada) as a substitute for a true contract. In section 4.4.1.2-a I discussed the subject of when under fiqh promises are considered binding, noting how they ordinarily are not binding except religiously, and how contracts are never construed as the exchange of promises, as they are in most legal systems, since such an exchange (muwā`ada) would offend rules against contracts where both performances are not due until the future – an instance of the sale of dayn for dayn (bay` kāli’ bi- kāli’, ibtidā’ dayn bi-dayn, `aqd muḍāf ilā al-mustaqbal).61 Again, in the fiqh conception, usually in every contract one performance is accomplished immediately on the contract’s conclusion, even if only in legal theory – such as by the immediate transfer of title in a contract of sale, even if actual delivery may be somewhat delayed. In section 4.4.1.2-a I also mentioned the OIC-Academy fatwa in 1988 (Decision No 40–41) that sought to find in the conception of the promise a solution to difficulties posed for the murābaḥa financial transaction heavily used in the Islamic finance industry. The Academy advocated holding promises binding in certain situations. It is useful in the present context to review the actual language of the fatwa: 1.

2.

[In fiqh] a promise … is binding on the promisor religiously, absent any excuse, and it is binding legally if it stipulates a [return] consideration [sabab, cause] and the promisee incurs a detriment (kulfa, cost or inconvenience) as a result of the promise. What the obligation entails in this case is either the execution of the promise or compensation for the damage occurring in fact by reason of the non-performance of the promise absent an excuse. The mutual promise (muwā`ada) – that which issues from both parties – is permitted … on stipulating an option to the promisors, both of them or one of them. If there is no option, then it is not permitted, because the binding mutual promise … resembles the sale itself.62

In their search for a solution for delay tawrīd – a delay tawrīd being also in effect a contract to exchange performances in the future – some scholars have resorted to the idea that, rather than consider tawrīd as a contract, an `aqd, binding parties in the future, it be explained instead as a framework understanding, an exchange of mere promises, to cover the future sales. The chief proponent of this solution has been the Pakistani scholar Muhammad Taqi al-Uthmani, a leading scholar in the field of Islamic finance. Like Thubayti and Zuhayli, quoted above, he contributed a study to the OIC-Academy prior to its issue of Decision No 107 on tawrīd in 2000, mentioned above. In a transcribed oral discussion among experts, `Uthmani explained: The basis of my construction of contracts of tawrīd is that they are a binding mutual promise (muwā`ada) between the two sides, not a definitive contract. I took this position only from

61 See

text at n 3 above, and Chapter 4, text at nn 135–43. ‘al-Wafā’ bi-al-wa`d, wa-al-murābaḥa li-al-āmir bi-al-shirā’, Decision No 40–41 (Decision No 2–3 of Session No 5, Year 1988) www.iifa-aifi.org/1751.html, accessed 1 August 2019. 62 OIC-Academy,

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the standpoint that the great majority of legal scholars across the centuries have agreed on the impermissibility of the sale of what does not exist and the impermissibility of the sale of al-kāli’ for al-kāli’. Rather than for us to bring in an opinion that differs with the great majority of scholars, it is easier for us to opine that it is a mutual promise agreed upon by the two parties to execute a contract at a later date, requiring an offer and acceptance at that later date. The only difficulty in this construction is that our esteemed Academy has issued a decision that, if a promise is from one party only, then it can be considered binding, but if it is from both sides, becoming a mutual promise, then it is not possible for it to be binding.63

In this discussion and in an article submitted to the Academy, `Uthmani argues that when the Academy set this last stricture, that mutual promises cannot be made binding, a key step in its reasoning was incorrect – the presumption that such a mutual promise equates, or nearly equates, to the very contract it seeks to replace, one which would bind parties to both transfer goods and pay the price at a time in the future. Instead, `Uthmani argues, there is no such similarity, since the consequences of a mutual promise are different from those of a sale contract. In a sale contract in fiqh, the minute the contract is made, title to the property transfers to the buyer, and the price becomes a debt he is liable for. But neither of these effects occur on entering into a mutual promise to make a sale in the future. Rather each promisor is bound only either to enter into that contract or else to pay the actual damages occasioned to the other promisor from his failure to do so.64 To comment briefly on this point of `Uthmani’s, it seems that he does no more than rely on the differences, in theory and sometimes in consequences, between the contract of sale as it is known in most legal systems, where the actual payment of the price and delivery of the goods are only promised in the future, versus the contract of sale in Islamic law which in theory is an exchange of conveyances, only one of which can take the form of a future obligation. `Uthmani does not discuss why the first type of contract was never endorsed or practised in Islamic law, and what made Islamic law insist that contracts not be exchanges of promises. It is not clear why an argument that points out the differences in the event of enforcement between a binding exchange of a type that Islamic law consciously rejected, on the one hand, and the contract that Islamic law embraced, on the other hand, should be an argument for validating the former, reversing the law’s age-old prohibitions. Also, as other scholars pointed out, it seems illogical that `Uthmani declares a delay tawrīd involving manufacture to be a binding and valid as such, while he reconstructs one that does not involve manufacture as a muwā`ada.65 Another objection could be pointed out – that one does find the Hanafi scholars referring to the concept of mu`āwada in their analyses of tawrīd-like contracts, ones similar to istiṣnā` or istijrār. But they make use of the concept specifically to analyse the parties’ interactions in those cases where the contracts fail to be binding; they do not use it as an argument for making those arrangements binding. In any event, the Academy in its 2000 decision on tawrīd did not embrace `Uthmani’s proposal. In reference to tawrīds not involving manufacture, for which payment is not made in advance, it characterised them as mere mutual promises or muwā`ada. But, rather than

63 ‘[Session

in which scholars exchange views on tawrīd contract]’ (n 41) 519–20. in Anglo-American legal theory, reliance damages. See section 7.2.3.2-c. They would not include damages for expectation, such as lost profits. 65 ‘[Session in which scholars exchange views on tawrīd contract]’ (n 41) 532–33 (`Abd al-Salām al-`Ibādī). 64 Ie

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declaring them binding as did `Uthmani, it declared them unenforceable, unless they are drafted in a way that leaves at least one party not bound: The contract is not valid if the buyer does not pay the price in its entirety at the time of making the contract, because then it is based on a binding mutual promise between the two parties. In Decision No 40–41 of the Academy, it is stated that the binding mutual promise approximates the contract itself, and the sale in this case is a sale of al-kāli’ for al-kāli’. If the mutual promise is binding on only one of the two parties, or on neither of them, then it is permissible on condition that the sale occurs by a new contract or by delivery.

Clearly, such a solution as this is inadequate to support the international practice of tawrīd contracts which necessarily bind both parties, and do so in advance of any actual transfers of goods or their price. Yet this Decision in 2000 turned out not to be the Academy’s final one on the contract of tawrīd. In 2007 the Academy issued a third major fatwa, Decision No 157, this time on the general question of when mutual promises may be considered binding.66 The Academy first repeats, as the basic principle, that bilateral promises are binding only religiously (diyānatan), not as a matter of law (qaḍā’an). But it then adopts Uthmani’s proposal, but only as an exception in special circumstances – circumstances that arguably cover most tawrīd contracts: 3.

4.

5.

In the cases where it is impossible to carry out a contract of sale because of the non-existence of the sale object in the ownership of the seller, this along with the existence of a general need (ḥāja `āmma) to bind the two parties to carry out a contract in the future, either because of the legal rule of a statute or something else, or because of a rule of international trade custom, such as the opening of a documentary letter of credit to import goods, then it is permissible to make a mutual promise binding on the two parties, either by legislation by the government or by the two parties agreeing to a term in the agreement making the mutual promise binding on both parties. The binding mutual promise in the situation mentioned in the third article is legally not a sale referred to the future (muḍāf ilā al-mustaqbal), because the ownership of the object does not transfer to the buyer, nor does the price become the debt of the buyer. The contract of sale does not occur until at the time agreed upon, by offer and acceptance. If one of the two parties to the mutual promise, in the cases mentioned in the third article, defaults on what he promised, then he is compelled judicially to carry out the contract or to bear the actual, realised loss which the other party incurs by reason of his breach of his promise (without lost opportunity).

Clearly, this decision incorporates one new element not mentioned in either Decision 40–41 on enforcing promises in murābaḥa contracts in 1988 or its Decision 107 on tawrīd in 2000. This is that mutual promises may be made enforceable as an exception to fiqh principles on the basis of a general need for them. In this the Academy may be relying on a single sentence discovered and cited by `Uthmani from the Hanafi scholar Qāḍī Khān (d 1196): ‘It may occur that muwā`ada is binding, for it is made binding because of the need [ḥāja]

66 OIC-Academy, ‘al-Muwā`ada wa-al-muwāṭa’a fī al-`uqūd’, Decision No 157 (Decision No 6 of Session No 17, Year 2006) www.iifa-aifi.org/2214.html, accessed 1 August 2019. In this fatwa it considers mutual promises in general; in its earlier Decision No 40–41 it considered them with respect to a particular Islamic finance contract, the murābaḥa.

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of the people.’67 The Academy is explicit in pointing to international trade customs and the requirements of positive law as possible reasons for this necessity. In other words, the OIC-Academy shifted over time from rejecting to embracing a reconstruction of tawrīd as a binding muwā`ada. Perhaps this occurred – it would need verifying – just because of Qāḍī Khān’s statement, which provided a historical precedent for `Uthmani’s solution, but only if a need compels. Lacking such early authority, perhaps `Uthmani’s reconstruction too much resembled the contrivances now the staple of Islamic banking which are also framed up from traditional materials but are in fact utterly novel, especially when considered in actual use (such as murābaḥa li-āmir bi-shirā’ and ijāra muntahiya bi-al-tamlīk, as discussed in the last chapter68). As a final note about this solution, raising points that will become fully clear only after the discussions of remedies for breach of contract in the next three chapters, the fall-back solution embraced here by the Academy, the muwā`ada, offers as a remedy on the seller’s default a remedy that, from the viewpoint of international practice, is not worse but better than that afforded by salam or bay` mawṣūf bi-al-dhimma. The latter allow the disappointed buyer only the choice between rescission and waiting; the former allows the buyer compensation for losses caused by the breach, which is the international remedy. There remains a critical difference with the latter, however: the remedy under muwā`ada extends only to losses from the buyer’s having relied on the contract, and not to his expectation losses such as lost profits or opportunities.

5.3.3. Justification as a Temporary Exception from General Principles Compelled by Necessity So far in our search for the tacit basis of the current Saudi practice upholding delay tawrīds we have considered efforts to analogise tawrīd to traditionally accepted contracts. Another highly traditional approach – arguably even more traditional – would be to adopt tawrīd on the grounds of a temporary necessity compelling the doing of what is otherwise prohibited. This is to invoke the utterly canonical principle of ‘ḍarūra’ or necessity, stemming from the Quran itself. On the question of carrion, prohibited as food, the Quran states: ‘[I]f anyone is forced to eat such things by hunger, rather than desire or excess, he commits no sin’ (2:173). Scholars have elaborated the doctrine beyond the simple case of life-or-death necessity. They introduced the term ḥāja, need, for a utility that does not rise to so dire a level, but which, if it affects all in general, also excuses prohibited acts. Indeed, this conception became so widely accepted as to be declared a legal principle (qā`ida): ‘The general need (ḥāja) equates to the necessity (ḍarūra) of the individual.’69 Hanafi sources take this one step

67 Muḥammad Taqī al-`Uthmānī, ‘`Uqūd al-tawrīd wa-al-munāqaṣa’ (1421 (2000)) 2(12) Majallat Majma `al-Fiqh al-Islāmī 311, 315. 68 See Chapter 4, text at nn 38–40 and section 4.4. 69 Al-ḥāja al-`āmma tanzil manzilat al-ḍarūra al-khāṣṣa fī ḥaqq āḥād al-nās. Muḥammad bin `Abd Allāh al-Zarkashī (d 1370), al-Manthūr fī al-qawā`id al-fiqhiyya, 3 vols (Wizārat al-Awqāf al-Kuwaytiyya, 1405 (1984)) 2:24.

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further, providing that the ‘need’ of only a defined group, such as the practitioners of a craft or the residents of a town, equates to ‘necessity’ for the members of that group.70 Based on this old Sharia principle, Saudi judges could uphold tawrīd on the grounds of the necessities faced by Saudi merchants participating in the global economy. The Saudi scholar Usama al-Lahim adopts this as view, declaring it the best supported position.71 Nazih Hammad, a leading non-Saudi scholar in the field of the modern fiqh of transactions including banking, has the same view.72

5.3.4. Justifications that Do Not Rely on Analogies to the Past but Make Arguments at a General Theoretical Level Given the above, it must be acknowledged that the search for a justification in traditional fiqh for delay tawrīds not involving manufacture has not been entirely successful. At the level of the most prestigious international fiqh academy, it has ended with endorsing as a substitute construction of tawrīd a form of contract that, scholars acknowledge, traditional fiqh deliberately rejected on grounds of settled principle, doing so as an exception on the ground of common need. Another solution reaches a similar result, reasoning that the need of merchants temporarily compels a practice that otherwise would violate basic principles of Sharia. Recognising the weakness of these arguments from fiqh precedents, some scholars have simply abandoned the effort to justify tawrīd by relying on past fiqh rulings and conceptions, and turned instead to justifying tawrīd contracts afresh from first principles of the Sharia. I will take up three ways that this has been tried.73

5.3.4.1. Tawrīd as a Contract Novel in Modern Times The first of these is to argue that tawrīd is an entirely new contract, unprecedented in fiqh,74 and therefore independent, making rulings of the past tangential if not irrelevant. Two Saudi theses, one a masters degree and the other a doctorate, both state their preference for this outcome.75 I will skip over this argument, for two reasons: first, most of the proponents for this view define the contract on which they are opining to be non-binding, even revocable, and therefore not comparable to the tawrīd contract to start with; and second, since the

70 Nazīh Ḥammād, Bay` al-kāli’ bi-al-kāli’ (bay` al-dayn bi-al-dayn) fī al-fiqh al-islāmī (Jedda: King Abd al-Aziz University, 1994) 29. 71 Usāma al-Lāḥim, Bay` al-dayn wa-taṭbīqātuh al-mu`āṣirah fī al-fiqh al-islāmī (Riyadh: Mayman, 1433 (2011)) 593. 72 Ḥammād (n 70) 29. 73 A fourth way is to question the status of the very principle forbidding sale of kāli’ for kāli’, doubting the authenticity of the Prophet’s saying to that effect, and asserting that the exceptional contracts of istiṣnā` and istijrār, and others, indicate that the principle is not fully established. I do not take this up since few Saudi scholars, with their greater respect for the established qawā`id of the traditional law, are likely to go this far. 74 See Abū Sulaymān (n 11); Shaykh `Abd al-Salām al-`Ibādī in ‘[Session in which scholars exchange views on tawrīd contract]’ (n 41) 532ff. 75 `Abd al-Majīd al-Zāḥim, ‘`Aqd al-tawrīd al-idārī’ (Masters, High Judicial Institute, Imam Muhammad University, 1427 (2006)) 51–55; Bin Shāhīn (n 17) 2:483–85.

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argument seems to depend on pointing out differences between tawrīd and other contracts, while these differences traditionally were among the very reasons why tawrīd was prohibited. To claim that a contract is wholly new is always a difficult argument to make, since the constituent parts of most ‘new’ contracts are analogous to one or another ‘old’ contract within the scope ordinarily allowed to analogy in Islamic law. Moreover, in this instance, while giving opinions on the various contract forms we have discussed, traditional fiqh scholars cannot be said to have omitted any of the Sharia-relevant elements of tawrīd. Indeed, those elements seem to have received a great deal of attention in traditional fiqh. So, it would seem that arguments that contracts are wholly new need to not revisit aspects of these contracts already examined in the past, but rather to argue from claims of fundamental change in the nature of economic, financial, and commercial relations. Such an argument was tried in the case of bank deposits and loans, and Islamic-law scholars never embraced it.

5.3.4.2. People’s Needs or Maṣlaḥa as Guiding Ijtihad A second approach turns again to the point that the need (ḥāja, maṣlaḥa) of the people for the contract of tawrīd requires it. But this time the argument is not put forward as a grudging exception to the rules, but rather as motivating a new ijtihad, one that is not stale and artificial but responds to the needs of the moment. The Saudi scholar Ibrahim al-Tanam makes such an argument, usefully citing in its favour his Hanbali forebear Ibn Taymiyya who is known for precisely this form of reasoning. After frankly acknowledging that under normal fiqh rules delay tawrīds without manufacture are impermissible, Tanam describes the practical necessity that forces nearly every merchant in Saudi Arabia, large or small, to engage in multiple delay tawrīds, and the practical advantages this type of contract confers on them. The need (ḥāja) of the people to transact with this form of tawrīd is obvious and widespread. Most traders try to enter into sale contracts of this type because of the uses and benefits both buyer and seller reap from it. There is in it no fraud (ghubn), uncertainty (gharar), or suspicion of usury (ribā). Declaring this contract void would cause the people severe difficulty, and cause a slump in the markets and unavailability of goods, not to mention losses which would fall on purchasing merchants in the event their suppliers fail to perform.

He then brings in aid statements of Ibn Taymiyya and other famed past scholars celebrating fiqh’s flexibility in the face of proven benefits or detriments experienced by the people in practice. He argues, quoting Ibn Taymiyya, that Sharia seeks justice, while many of the particular derivations of fiqh scholars are simply wrong: It is clear that transactions of pecuniary exchange run on one legal principle: that the Sharia is proportionate and moderate. It treats likes alike, and unlikes unlike. It is also clear that these complicated conditions for sales have no basis in any of the Quran, the Sunna, the example of the Companions, analogy, or practice of the Muslims of old or now, and they afford no sound benefit. Therefore, the people will be annoyed by and avoid anyone who subjects them to them.

Tanam notes that artificial strictures on transactions are particularly inappropriate when their purported ground is only gharar. This is again to invoke Ibn Taymiyya, known for inveighing against stringency in gharar; as in Ibn Taymiyya’s statement: If the evil of the sale of gharar is that it is the occasion for enmity, anger, and unlawful gains, then, as is well known, if this evil is overbalanced by a benefit (maṣlaḥa), the benefit is given preference.

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Just as in racing with horses, … where it offers a Sharia-recognised benefit, it is permitted even for reward. … [He gives other examples.] It is known that the harm to people from forbidding these transactions is greater than the threat of mutual hatred or unlawful gain. This is because the gharar in them is small (yasīr) … and the need (ḥāja) for them is pressing. The minor gharar is overcome by the great need. The entire Sharia is built upon the principle that if the evil that requires prohibition is opposed by a greater need, what is prohibited is allowed. Then what about something the evil of which is miniscule?76

Paraphrasing other passages from Ibn Taymiyya, Tanam argues: Harshness with the people in prohibiting what is not prohibited, or prohibiting something when necessity requires altering its ruling, causes people to turn to artifices and tricks with Sharia, or makes them do that very thing, even while believing it wrong, because of their need for it. This is to fall short of one of the great objectives (maqāṣid) of Sharia legislation, that it be put into effect by the Community and respected by all, for the benefit intended from it cannot be achieved in its completeness with its being put into effect and respected.77

Arguments may, of course, be made against considering the current need for tawrīd as one deserving Sharia consideration. Lahim, when surveying arguments for and against validating tawrīd on grounds of need, records such a viewpoint: What is mentioned as the need for tawrīd can mostly be met through salam. The only thing that distinguishes tawrīd from salam is that it does not require advance payment. This need is not anything lawful in Sharia, because the reason it arises is that suppliers can meet their needs for finance through ribā loans, leaving as the sole purpose of the contract to fix a price for their commodity [ie instead of relying on salam to finance their operations, as of old, suppliers now can get loans on interest]. Scholars have declared that ‘leniency does not derive from sin.’ … The same result should apply to general needs that arise from non-Sharia customs and conditions. Moreover, if, for such needs, one opens the door for diverting from principles on which consensus has been reached and which fiqh has followed consistently for centuries, this will lead to legitimating many contracts that the capitalist system has innovated and which are void, such as futures contracts.78

5.3.4.3. Referring to the ‘Objectives of the Sharia’ The third approach to justify tawrīd by transcending the details of traditional doctrine is similar in its purpose to the last. It is to invoke the ‘divine objectives of the Sharia’ (maqāṣid al-sharī`a), discussed in section 3.2.2.4-b. Although I have found no Saudi or other scholar relying on this ground alone in the case of tawrīd, nothing, even in conventional Saudi thought, would seem to bar invoking it. Relying on it, a Saudi scholar (or judge) could re-evaluate textually derived rulings in the light of their likely outcomes in practice, so as to choose that ruling that has the best outcomes in terms of what fiqh as a whole teaches are objectives sought by the divine legislator. Perhaps, after conducting an inquiry into the outcomes given tawrīd, a scholar might conclude that to follow the internationally standard commercial practice of tawrīd would, despite apparent offence to certain textual rulings on

76 Aḥmad

Ibn Taymiyya, al-Qawā`id al-nūrāniyya (Dammam: Dār Ibn al-Jawzī, 1422 (2001)) 190–91. al-Tanam, al-Imtiyāz fī al-mu`āmalāt al-māliyya wa-aḥkāmuh fī al-fiqh al-islāmī (Riyadh: Dār Ibn al-Jawzī, 1430 (2008)) 472–74. 78 al-Lāḥim (n 71) 591–92. 77 Ibrāhīm

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gharar, better fulfil, in today’s Saudi Arabia, the Sharia-sanctioned maqāṣid for commercial law than to do without it. This perspective might also direct attention to corrective measures other than invalidating the contract itself, such as regulation by the state.

5.4. Conclusions 5.4.1. Conclusions as to Enforceability of Tawrīd Contracts in Saudi Arabia To recall what the published cases reflect about tawrīd enforcement, we can conclude, with high confidence, that at least five types of tawrīd contract will be enforced by the Board of Grievances (and, we expect, its successor in the commercial jurisdiction, the commercial courts), despite any concerns about the fiqh principles on salam and sale of what one does not own. The first group are tawrīd contracts where the government is one of the parties, ie administrative contracts. In effect, the government long ago decided this outcome, and the scholars and the administrative courts seem not to oppose that result. Next, progressing to cases between private parties, the second group of enforceable tawrīd contracts are those where the buyer has made payment in full at the time of making the contract, fulfilling the salam rules. A third group are those where the seller owns the goods at the time of the contract. The fourth group are tawrīd contracts that call for the seller to manufacture, or arrange the manufacture, of the specific goods supplied. This follows because not only a number of Board of Grievances decisions, but also seemingly all contemporary scholars, have embraced the Hanafi doctrine of istiṣnā` as a legitimate basis for validating such tawrīd contracts, even with delayed payment. It must be admitted, however, that this conclusion is somewhat undercut by the fact that judges in many Saudi cases, even recent ones, ignore the issue of manufacture even when it exists, on their way either to upholding or (in several relatively early cases) rejecting the validity of a tawrīd contract. The fifth group of cases in which enforcing the tawrīd contract seems secure are those where one of the parties has already performed in full. In sum, any tawrīd contract falling within these five types will quite likely be enforced on its terms, even if payment of the price is contractually delayed. If we now turn to tawrīds that do not fall into any of these five types – and these are probably the majority of tawrīd contracts – we found that most the Saudi decisions we analysed enforced even such tawrīd contracts, but here the results are not uniform. A number of courts considered such tawrīds valid contracts, and some even did so while citing the salam rules which, on the stated facts, the contracts they enforced appeared to offend. But other decisions dissented, refusing to enforce such tawrīds. Only one case did so explicitly because of the salam rules. Three other cases did so at most implicitly: they voided tawrīd agreements on the ground that the seller did not own the goods at the time of contracting – even though the facts appeared suitable for invoking salam or istiṣnā` as possible constructions of the parties’ understandings, whereupon the question of the seller’s ownership or not would not be definitive. So, as to such tawrīd contracts – not administrative, where neither party has performed, where the seller is not responsible for the manufacture of the goods, where the seller does not already own the goods, and where the buyer pays only with delay – it seems one can still expect such tawrīd contracts to be upheld, but cannot be entirely sure. Even then, since we 177

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found only one judge ready to cite the salam rules when invalidating the contract, it is clear that, whatever opposition Saudi judges feel toward this contract, they are not prepared to take a strong stand on it. This takes us to the next heading.

5.4.2. Conclusions Concerning Saudi Judges’ and Scholars’ Legal Reasoning What can we learn from this case study about the legal reasoning of Saudi scholars and judges, both as to tawrīd contracts and generally? A difficulty is that, as noted, the Board of Grievances judges who oppose tawrīd do not offer the full fiqh reasoning that lies behind their decisions; and the judges who uphold tawrīd contracts do not do so either. As mentioned in section 3.2.7.2, this is characteristic of this legal system, where – at least until recently – court decisions are not a source of law, and therefore do not offer extended legal analyses situating their ruling within the web of other sources of law. Over the last few decades, as increasingly has been demanded by the court system they serve, judges have been much more scrupulous about including in their decisions brief explanations of their ‘reasons’ (asbāb), but these tend to offer reasoning that is either close to the facts or highly general. This situation required us, therefore, to plumb the actual sources of law (scholarly opinion and state legislation) for further guidance on judicial reasoning. To review what we have found, let us consider the situation of a Saudi judge (or panel of judges) facing a dispute between two private parties to a tawrīd contract involving neither owned goods nor goods to be manufactured for the contract, and in which neither party has fully performed. Since these are private parties, and since the matter concerns the fiqh ‘common law’ of contract, there are no statutes that play a role. As for scholarly opinion, the most significant traditional and modern fiqh views have been reviewed above, with many of their intricacies. Faced with such a contract, the judge confronts at once the principle, which most say is established by the formidable proof of an age-old consensus of the scholars, against the sale of debt for debt (bay` dayn bi-dayn), or more specifically sale contracts that bind both parties and specify delays for both performances (bay` kāli’ bi-kāli’). The judge could rule immediately according to that principle, as most judges a few decades ago would have done, at least in non-administrative cases. But let us assume that this judge has doubts about whether this is the proper outcome, given that tawrīd has been so long and so pervasively practised in the Kingdom. We notice how this judge has no official authority to turn to – not a binding ruling from an appellate court (all the judgments about tawrīd cited above have been affirmed on appeal), nor a fatwa from a Saudi mufti or fatwa body that would constrain his opinions (as once the views of Shaikh Muhammad bin Ibrahim Al al-Shaikh might have). I can locate no Saudi fatwa of a type bearing particular weight, such as from the Board of Senior Scholars or even the Saudi-led and -funded MWL-Academy. But this situation is just what the Saudi legal system affirms as its ideal – that the judge find his own ruling, based on the power of ijtihad he constitutionally is credited with. And by his ijtihad he is not only to decide what ruling on tawrīd he may prefer in the abstract (ijtihād fī al-ḥukm) and to make the proper legal construction of the facts before him (ijtihād fī al-wāqi`), but also, combining both of

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these, to reach a final judgment that, in his opinion, is the best outcome under Sharia for the specific case before him. Despite this ideal, no competent Saudi judge would ever – however much that may be the ideal – turn to the texts of the Quran and Sunna without first learning the fiqh most applicable to his case. Saudi judges are modest about their abilities in ijtihad and seek to avoid any appearance of stark innovation. This means in practice that the judge will seek the opinions of scholars more learned than himself as guidance. After reviewing traditional fiqh texts, a scholar may next seek out fatwas. Fatwas in this sense take the form either of formal fatwas (from those holding themselves out as giving advice to individuals or appointed to do so by the state), decisions of fatwa bodies (such as from the modern Academies practicing group ijtihad), or the opinions of any scholar or judge the judge respects. Opinions from all these sources, since they are purely abstract, are not binding on the judge, since he alone confronts the specific facts and issues the actual judgment. Now returning to tawrīd, most or all of the opinions the judge would garner from his survey have been discussed above. Reviewing them overall, we see that none offers the judge an easy answer. For tawrīds of another type, those which secure the manufacture of goods, Saudi scholars and judges did find a ready solution in traditional fiqh, the istiṣnā`. It seems, however, that merely finding an analogous traditional contract in another school is no magic solution, because, if that were so, then in the case of tawrīds without manufacture scholars could simply have adopted the Maliki istijrār, and evolved and streamlined it just as scholars have for istiṣnā`. Yet they have not chosen to. Although Saudi scholars seem to have been convinced that the unique characteristics of manufacture justify the contract of istiṣnā`, clearly they have not been convinced that istijrār justifies tawrīd; perhaps this is because istijrār’s plausibility stems only from approximating a series of sales of concrete, owned goods inspected by the buyer at each delivery. Judging from Saudi scholarly writings and judicial opinions, it does not seem as if they rely on any argument from istijrār in deciding on the validity of tawrīd generally. The next alternative would be to argue that tawrīd falls outside the old fiqh prohibitions; that it is a mistake to bring them to bear on it. This is in a way the approach of the OIC-Academy and Taqi `Uthmani, arguing that tawrīd should be viewed as a binding muwā`ada, evading the prohibitions of sale of dayn for dayn. Others argue that tawrīd is a novel contract, unknown in premodern times. But such positions are difficult ones to maintain, given how minutely the traditional fiqh has considered and evaluated the exact terms of the modern tawrīd. So, in my opinion, it seems these are also unlikely to be the ground on which Saudi judges proceed. So, if our hypothetical Saudi judge finds in all these approaches no ready answer for the problem of tawrīd, as appears to me to be the case, then what remains to him is only to draw back a step and consider the contract before him at a level where arguments do not evade, but face and then overrule, the admittedly fundamental objections to it. We saw above three such alternative arguments: a temporary exception on the ground of compelling need; an ijtihad of a nature advocated by Ibn Taymiyya consulting the contemporary needs of the people and balancing the evils (mafāsid) of the contract against its legitimate benefits (maṣāliḥ); or an invocation of the doctrine of the objectives of the law (maqāṣid al-sharī`a). In my opinion our hypothetical judge would be most likely to turn to one of these arguments. But then, with three such principled explanations available as to why

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tawrīd contracts – even with price delayed and without manufacture – should be permitted, why do we find Saudi judges not giving one of these as their reasoning, openly and emphatically? There are a number of reasons we can assign for this. First, all three of these remaining theories – need (ḥāja), a utility-guided new ijtihad, and upholding Sharia objectives – are challenging ones for an individual judge to assert. Deploying them presupposes not just legal knowledge but also a specialised, even sociological, awareness of the commercial sphere of the society. What are the advantages and drawbacks of particular commercial practices? Are merchants indeed compelled to adopt a particular practice, or are there alternatives? Historically, such determinations were made by the leading mufti or muftis in each jurisdiction, their fatwas considered authoritative or even binding for judges. Even in Saudi Arabia, in the middle decades of the last century, Shaikh Muhammad bin Ibrahim performed such a function. Second, the ‘need’, ‘utility’, or ‘objective’ that arguably legitimates tawrīd is not after all some physical necessity but a legal one – that non-Islamic rules prevail worldwide and Saudi entities engaged in international trade need to conform to them. To acknowledge such a need as a necessity raises a thousand questions about not just commercial law disputes, but also other non-Saudi legal expectations – from interest banking to women’s rights. As we shall see multiple times in coming chapters, the Saudi legal system has not bowed to the expectations of those engaged in international commerce on many other points. Why should it do so this time and not others? This raises the stakes of whatever ijtihad the judge is inclined to make. Third, even apart from whether a judge can face these stakes and can deploy the systemwide awareness and authority that this ijtihad seems to demand, the ijtihad demanded in this instance – to set aside a fundamental principle of centuries-long application – will be subtle and complex. Again, Saudi judges, though theoretically all mujtahids, are loath to claim mujtahid status. Many points made above in the course of reviewing possible arguments lend weight to one main point, that for tawrīd – unlike many other situations where Saudi laws clash with international legal customs – fiqh principle should give way. These include: that the bar to transacting in gharar can never be absolute but only relative and is often waived to secure other compelling interests; that traditional law has already accepted such waivers in the case of istiṣnā` and istijrār; that some traits of istiṣnā` that helped distinguish it from salam apply also to tawrīds, such as that manufactured goods are often more like specific goods than generic ones; that the tawrīd contract is often not a simple sale, but more of a relationship between parties continuing over multiple transactions like istijrār; and others. But an ijtihad that marshals these factors toward a conclusion remains a difficult one. So one has to appreciate that, for the individual judge, to be the first or second judge to openly, with full and explicit reasoning, validate delay tawrīds without manufacture would be a bold step. I end this discussion with two final observations. First, it seems that the Saudi legal system has already transitioned to a state where tawrīd contracts will generally not be invalidated on the grounds of sale of dayn for dayn. This means that some such ijtihad as the one just described has been accomplished, though without anyone claiming to author that ijtihad. If I had to guess, I suspect it is one along the lines of Ibn Taymiyya’s method, accepting that tawrīd, like istiṣnā` and istijrār before it, though involving gharar, affords benefits that, in the contemporary setting, outweigh its evils. 180

Epilogue: Variable Quantity or Price 5.5 Whatever ijtihad it is, it has emerged systemically, though the operation of a quiet, non-compelled consensus among judges. Notably, this transition was not achieved through some opportunistic or euphemistic ‘ijtihad’. Although scholars, Saudi and non-Saudi, have proposed a number of easy ways to validate all tawrīds, the system did not avail of them. They could have done so: compare the case of tawrīds involving manufacture, where the courts openly embraced the Hanafi contract of istiṣnā`. Second, as we shall see in other case studies and as can be observed in areas outside business law, it seems that the Saudi system’s most difficult ijtihads – such as ones that embrace views accepted in other schools but long rejected by the Hanbali school, require subtle recalibrations or combinations of old views, reach rulings unprecedented within the tradition, or concede principles in the face of compelling circumstances – are often adopted only mutely, without a full explanation of their basis in Sharia and sometimes without even acknowledging that they diverge from traditional law.

5.5. Epilogue: What About the Many Tawrīd Contracts that Do Not, as of the Time the Contract Is Made, Fix Price or the Nature or Quantity of the Goods? At the outset we limited discussion to tawrīds where both performances, the supply of goods and the payment of price, are fully defined in the contract when first made, without allowing for future variations. If we broaden out to include the no doubt numerous tawrīds that do not make such provision, then we once again encounter the issue of gharar, but in a different way and heightened degree. The issue becomes not just gharar from exchanges of performances both due only in the future (bay` al-dayn bi-al-dayn), but rather gharar in its raw form: that one party – or both – ‘sells’ a performance that cannot be known or may never exist (bay` al-gharar). Supply contracts with performances to be determined in the future in ways that cannot be fully predicted present difficulties in all legal systems, often obliging judges to imply additional contractual terms or enforce general contractual norms such as ‘good faith’.79 Various reported decisions involve contracts that did not fix in advance either quantities, prices, or both. We found only one decision that invalidates such a contract on the ground specifically of forbidden gharar. In it, the Board, in the commercial branch, declares that the contract was valid only for the quantity stated specifically, while a term allowing a variation from that quantity of up to 30 per cent according to the buyer’s ‘demand and requirements’ was void.80 This case is among the few mentioned above81 that upheld a tawrīd contract despite it specifying delayed payment, and this even while acknowledging fiqh’s salam rules. But despite taking this bold position, the court balked at the variation clause. One oddity of this decision is that, pursuant to the government procurement law (2006), a term allowing up to a 20 per cent variation as permissible in government contracts if in the public interest 79 James Gordley, The Enforceability of Promises in European Contract Law (Cambridge: Cambridge University Press, 2001) 193–218. 80 Decision No 187, 2 BG-Com-1432. 81 See n 33 above.

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is routinely practised, and is upheld in the court.82 Two other commercial decisions disallow contracts involving such variations, but on other grounds as well.83 A fourth commercial decision declares that a manufacturing contract for an ‘estimated quantity’ represents a mere promise to buy, and does not bind the buyer beyond what he had actually bought.84 Following the pattern observed above for contracts where parties have already performed, however, the court does not declare the contract void ab initio. It enforces its terms, including the agreed price, with respect to the parties’ past dealings. Most cases go the other way and allow variation of quantity, at least when the quantity is governed by some objective factor. Five published Saudi decisions – three administrative and two commercial – uphold contracts to supply goods in a quantity determined according to the buyer’s requirements. Two administrative decisions uphold contracts by which a contractor supplied meals to meet the needs of a hospital, with payment determined at per-meal price;85 one of these analogises this aspect of the contracts to the fiqh precedents of istijrār and istiṣnā`.86 The third administrative case involved a contract to supply a number of public schools their entire demand for water for a total price unvarying according to the quantity of water supplied. The agency cancelled the contract before the end of its term, and the plaintiff supplier sued for the full contract price. The court holds for the plaintiff, requiring the agency to extend the contract term so that the plaintiff could complete his performance. The court rejects the agency’s defence that the contract is void because the quantity of the water was never defined. It notes that the quantity of the water was determined by the actual need of each school – an amount which the agency could if it wished have estimated in advance – and thus does not involve uncertainty sufficient to render the contract void.87 The first of the two commercial decisions involved a contract by which the defendant supplied bottled water to the plaintiff so that, in turn, the plaintiff could meet the water needs of a group of government offices. An issue in the case is whether the defendant had successfully terminated the contract or whether it remained in force; because

82 See ‘Government Tenders and Procurement Law’, Royal Decree No M/58 dated 4/9/1427 (27 September 2006), Art  36 (nd). allowing 20 per cent increase and 10 per cent decrease in the contract quantity. See also Implementing Regulations of Government Tender and Procurement Law, Minister of Finance Decision No 362 dated 20/2/1428 (10 March 2007) Arts 58–61. The government tends to enjoy greater flexibility in contracts, since it is assumed to be pursuing the public interest, not any private interest. Art 58 of the Implementing Regulations sets as a condition for such a variation that it ‘shall serve the interest of the facility, provided that this does not result in violation of the terms and specifications or in a change in the nature of the contract or its financial equilibrium’. See eg Decision No 3, BG-Adm Unpub (Adm C No 3, Riyadh 1418 (1997)), holding that the government agency breached its contract by making a 40 per cent reduction. 83 Decision No 13, 3 BG-Com-1431; Decision No 129, 2 BG-Com-1428. 84 Decision No 78, 4 BG-Com-1408–1423 176 (Com C No 15, Dammam 1421 (2000)). The contract stated that its amount of ‘about 300 tons’ was estimated, and could be doubled. The court interpreted another term of the contract as requiring delivery of 140 tons, and, since 160 tons had been delivered by the time of the lawsuit, the court declared this term met. The court further stated that, even on the supposition that its interpretation were incorrect, then the buyer in any event made only a non-binding promise, and could not be held to complete the 300. 85 Decision No 138, 5 BG-Adm-1433 2445 (Adm C No 1, Dammam 1433 (2011)); Decision No 222, 4 BG-Adm1432 1485 (Adm C No 1, Dammam 1432 (2010)). 86 Decision No 138, 5 BG-Adm-1433, 2452. 87 Decision No 73, 5 BG-Adm-1429. This contract may bear analogy to a special group of both commercial and administrative contracts, those for subscriptions to utilities, which clearly have long since been accepted in Saudi law. Acceptance of them was referred to, in discussions I had with judges in the 1980s, as an instance of good practical ijtihad by judges.

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Epilogue: Variable Quantity or Price 5.5 it took up this issue, it seems the court accepts the contract as prospectively enforceable. It does not address the effect of the quantity terms of the contract on its validity.88 The second commercial case treats as a contract, not a mere promise, an istiṣnā` contract which stated quantities for the supply of goods in two lots of slightly different specifications, but with the added words ‘more or less’.89 Also, the manufacturer committed to produce the goods only to the extent of the raw material it had access to. The court excuses the manufacturer’s total failure to supply one of the two lots of goods, though this was unrelated to lack of raw material, on the ground that the seller committed only to provide the goods to the extent of its capacity. The judge construes the contract as implicitly incorporating a ‘stipulated option’, khiyār al-sharṭ, a traditional mechanism by which a party may reserve a right, for a period following the making of the contract, to ratify or abandon it.90 If we can generalise from this small set of decisions, it seems that Saudi judges are willing to uphold as binding contracts of variable quantity but predetermined price, as long as some objective criterion, not the mere subjective choice of one or both of the parties, is specified as determining the quantity. They can refer in this context (and one judge spoken to informally did) to the Sharia concept of ‘what eventuates in knowledge’ – aylūla ilā al-`ilm. In some situations, the Hanbali school upholds, as not involving an undue degree of gharar, contracts the terms of which will become known, even if they are not at the time of making the contract. This position is particularly associated with Ibn Taymiyya. For contracts that refer to such an objective later determinant, judges, as in the case just cited, may bring in also the khiyār al-sharṭ, or option to rescind, to legitimate the variation as the outcome of an agreed option – and this anomalously even for increasing the amount of the contract, not only reducing it.91 As for pricing in particular, many tawrīd contracts contemplate payment for goods at prices that may be set in the future, such as a list price or even market price. I found no published case involving precisely that issue. As noted above,92 Ibn Taymiyya has argued strenuously for the validity of sales with price defined only as the fair or market price (thaman al-mithl), and, going further, Ibn al-Qayyim advocated for a binding istijrār at such prices. Less ambitiously, as we saw above,93 Buhuti allowed a buyer to take goods periodically at the then-market price and settle for them later, and this without any prior binding arrangement. Perhaps these precedents afford a sufficient basis for a Saudi judge to treat a tawrīd with varying future prices as binding prospectively on both parties. This seems possible given that we see the judges accepting a variation in quantity when the variation is shaped by objective criteria. Given the above, it seems fair to conclude that courts have accepted as valid contracts in which one or both parties reserve a power to vary the contract quantity or price, as long as this variation is referred to an objective determinant, whether a party’s capacity,

88 Decision

No 130, 2 BG-Com-1435 1108 (Com C No 1, Abha 1435 (2013)). the terms used, taḥt al-`ajz wa-al-ziyāda could mean ‘subject to inability and increase’, this is a forced interpretation, given the incongruity of the linkage with ‘increase’. See also Egyptian Civil Code, Art 434 where the phrase `ajz wa-ziyāda refers to the problem of sold goods slightly varying in quantity. 90 Decision No 53, 1 BG-Com-1435. On the khiyār al-sharṭ, see Chapter 6, text at nn 24–26. 91 The khiyār al-sharṭ is not allowed in contracts of salam, according to the Hanbali school. Qari-Majalla, Art 398. This is yet another indication that contracts of tawrīd are no longer treated by analogy to salam. 92 See text at nn 53–8 above. 93 See text at n 58 above. 89 While

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its requirements, or the market price. I hasten to say this is not the explicit justification offered, but rather a deduction from the results as detailed above. It seems judges are satisfied that reference to such criteria sufficiently reduces the inherent gharar to a manageable proportion. In contrast, contracts that vary without such an objective marker, but simply at one or both party’s option, seem, based on results above and general principles, likely to be considered mere non-binding exchanges of promises, enforceable only retrospectively to the extent of the opposite party’s completed performance. This pattern also has traditional fiqh support: for example, as seen above in this chapter,94 many Hanafis understood both istiṣnā` and istijrār not as binding but as framework agreements that became binding only with respect to each partial performance. In sum, we see in this result another relatively bold ijtihad – again, probably motivated by the sheer necessity of upholding contracts pervasively found in the actual practice of merchants. Here judges and scholars do not, however, need to invoke necessity to set aside old rules, but may rather extrapolate from traditional precedents – particularly the Maliki istijrār, including Ibn al-Qayyim’s variation of it; the notion of ‘what eventuates in knowledge’; Ibn Taymiyya’s defence of the market price; and, most importantly, the principle that gharar may be tolerated in lesser degrees.

94 See

text at nn 59–60 above.

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6 Contracts: General Categories and Specific Types 6.1. Two Conceptions Applying Across Many Contracts ....................................................186 6.1.1. Binding versus Revocable Contracts, Lāzim versus Jā’iz .................................186 6.1.2. Relationship to the Property of Another that One Holds by Contract: Amāna and Ḍamān .............................................................................187 6.2. The Nominate Contracts, or the Contracts Regulated in Detail by the Traditional Law.......................................................................................189 6.2.1. Commutative, Synallagmatic, Mutually Onerous Contracts ..........................189 6.2.2. Gratuitous Contracts ............................................................................................194 6.2.3. Accessory Contracts .............................................................................................196 6.3. Case Study on Consequences for Third Parties of the Saudi Law and Practice of Agency and Representation ...................................................................208 6.3.1. Solutions in Fiqh Doctrine ..................................................................................209 6.3.2. Solutions through Local Administrative Mechanisms ....................................217 6.3.3. Some Conclusions.................................................................................................221

In this chapter, I introduce the forms of contract that were worked out in detail in the traditional fiqh, and which remain even today the models against which new contracts are tested for conformity with Sharia.1 Almost any contract one can conceive of in a business context will overlap with one or more of these contracts, and thus inevitably engage analogies to the rulings that apply to these model contracts. It is always possible for scholars to argue that a business context and the contracts it generates are unprecedented and require novel ijtihad from fiqh’s original sources, and should not be judged solely by analogies to these contract forms. Scholars can invoke the principle that in human interactions (mu`āmalāt) permissibility is the original state (al-aṣl), and prohibition must be specifically proved. But, as with supply contracts discussed in the previous chapter, in matters of business and finance generally such arguments have rarely succeeded, at least among those committed to fiqh as an enterprise in continuity with its past – and this throughout the Muslim world. Elaborating on, not replacing, the traditional fiqh of contracts has certainly been the norm in Islamic finance. And it is the norm in the business law of Saudi Arabia. 1 This discussion draws in part on Frank E Vogel, ‘ The Contract Law of Islam and of the Arab Middle East’ in International Encyclopedia of Comparative Law, vol VII, ch 7 (2006) paras 100, 101, 117–19 and Frank E Vogel, ‘Islamic Law of Contract’ in Frank E Vogel and Samuel L Hayes III, Islamic Law and Finance: Religion, Risk, and Return by (Boston: Kluwer Law International, 1998) 97, 112–14.

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6.1. Two Conceptions Applying Across Many Contracts Before introducing these traditional forms of contract, it is useful first to explain two conceptions, themselves the outcome of fundamental principles undergirding fiqh contract law, which repeatedly crop up in explanations of specific contracts.

6.1.1. Binding versus Revocable Contracts, Lāzim versus Jā’iz As a fundamental categorisation of contract types, scholars distinguish between contracts that are lāzim, meaning ‘binding, irrevocable’, and those that are jā’iz, meaning literally ‘permissive’, but technically ‘not binding, revocable at will’. If a contract is jā’iz as to a party, that party may terminate the contract prospectively at any time. A jā’iz contract is so by its very nature (ie this trait is an ‘essential term’ or muqtaḍā), meaning that any attempt by the parties to stipulate instead that the contract is binding is invalid. The lāzim contract, on the other hand, binds the parties both retrospectively and prospectively. Again this characteristic is innate in the conception of such a contract; attempts to make lāzim contracts revocable by one of the parties by a contractual term, except within narrow limits (see the khiyār al-sharṭ below2), generally offend gharar rules (see section 4.4.3) and fail. A contract may be jā’iz as to one or both of the parties. Contracts that are jā’iz as to both parties include partnership (sharika, all forms), agency (wakāla), deposit (wadī`a), loan of non-consumable3 property (i`āra, `āriya), and reward (ji`āla). Others, including gift (hiba), loan (qarḍ), and pledge (rahn), are jā’iz for both parties until delivery of the subject-matter property and then jā’iz for only one party. Still others are jā’iz for one of the parties, such as guaranty (kafāla) by the creditor. Lāzim contracts include sale (bay`), lease and hire (ijāra), compromise (ṣulḥ), assignment (ḥawāla), and rescission (iqāla) – generally those where there is an exchange of valuable considerations. That so many basic contracts are treated as jā’iz, and that this trait in a contract cannot be modified, shows once again how in Islamic law the parties’ consent is the basis for legitimacy. Jā’iz contracts require more than agreement at the moment of contracting; they demand the parties' continued consent. Otherwise, the scholars tell us, these contracts would be void, since many of them involve inherent uncertainty or gharar. Conversely, scholars allow greater futurity and indefiniteness in jā’iz contracts, because once the terms of the contract become better known a party may withdraw at will. Many striking examples exist – such as permission for highly general powers of attorney in agency, or the contract of reward (ji`āla) where the services to be provided are not quantified. Contracts that are lāzim are instead those where gharar is not tolerated, since they involve the final exchange of one or more considerations. In fact, as discussed in section 4.4.1.2-a, commutative contracts, in their nature lāzim, are conceived of as the immediate bilateral transfer of property or rights – though one of the transfers may be only conceptual as

2 See

text at nn 24–26 below. are goods that are consumed on first use, such as wheat or money. Muṣṭafā al-Zarqā' (d 1999), al-Madkhal al-fiqhī al-`āmm, 9th rev edn (Beirut: Dār al-Fikr, 1967) 3:143–47, explains the concept of the ‘consumable’ and its importance in fiqh contract law. 3 Consumables

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6.1.2

‘a dayn in the dhimma’. Parties to such contracts must know sufficiently the terms on which they contract. When these are known, and consent is forthcoming, then a number of Quranic and Prophetic strictures enjoin enforcement. The deal being complete, at least in conception, no issue of continuing consent could arise. That a contract is jā’iz often creates problems from the perspective of modern practice, such as for agency – how can modern business rely on the apparent agency of representatives of businesses given that only actual concurrent authority matters? This problem is considered in a case study at the end of this chapter, section 6.3 below.

6.1.2. Relationship to the Property of Another that One Holds by Contract: Amāna and Ḍamān Another conception – this one extending beyond contract to property and tort as well – is that of two alternative forms of liability for property applying whenever one party holds possession of the property of another person. While I treat questions of liability mostly in Chapter 7, it is necessary to introduce this particular concept here because it serves also as a schema for categorising contract types and for defining parties’ rights and duties within contract. It also surfaces in the case study at the end of this chapter. The two alternative forms of liability are called amāna (literally trust) and ḍamān (literally guaranty, responsibility). The person subject to these liabilities is called amīn (literally trusted person) or ḍāmin (literally guarantor), respectively. These concepts are fundamental, almost axiomatic, concepts in the Islamic law of contract, tort, and property under all Islamic legal schools.4 Various circumstances can determine whether the one holding the property of the other is considered an amīn or a ḍāmin. Status as an amīn can arise outside contract, such as when a person finds and holds lost property, has custody of a deceased’s property before his heirs are known, or holds property blown onto his land from neighbouring land.5 In contract, some contracts, called ‘contracts of amāna’, always or often involve assuming amāna custody of the property of another, such as deposit, agency, pledge, and lease and hire. Examples of contracts of ḍamān are sale, loan, and guaranty. In contracts of both types, amāna and ḍamān may alternate at various stages of the contracts’ execution; for example, amāna and ḍamān are used in the contract of sale to regulate the risk of loss of the sale object up to the time it is delivered to the buyer. Ḍamān for the property of another arises chiefly in three situations. The first is when a person lawfully holds the property of another but for his own benefit, not the owner’s, without compensation. In contracts, an example (for the Hanbali and Shafi`i schools) is the contract of i`āra, the gratuitous loan of usable property (eg a house or animal). The second is when one person gains possession of the property of another by unlawful means, such as by tortious acts such as usurpation (the case usually discussed), theft, or embezzlement, or, in contracts, such as when one party denies the contract and takes the property for oneself. The third situation is when one person has had an amāna relationship with the property but breached the duties of an amīn whereupon he ‘becomes a ḍāmin’. 4 For

mentions in late Hanbali works, see eg Qari-Majalla, Arts 699–703, 704, 717, 1019, 1265, 1359. Nāṣir, Khiyānat al-amāna wa-atharuh fī al-`uqūd al-māliyya fī al-sharī`a al-islāmiyya (Amman: Dār al-`Ilmiyya al-Duwaliyya, 2001) 26–27. 5 Muḥammad

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The key distinction between the two statuses is their differing exposure to liability for loss or harm to the property. One who enjoys status as an amīn, ie who holds property as an amāna, is liable for the loss of the property only if he is found to have committed ta`addī (literally overstepping, transgression), and is not otherwise liable for losses or harm to the property however caused, such as by acts of God or third parties. Ta`addī is a broad term encompassing any act prohibited by Sharia in the circumstances. In the context of amāna contracts, it means that the amīn may not either breach any agreement he has with the owner as to care or use of the property or fail to exercise care of the property that is conventional in the situation. If he commits ta`addī, he ‘becomes a ḍāmin’. Ḍamān liability, on the other hand, is a liability equivalent to that of an owner – the ḍāmin bears any loss occurring to the property, however caused, even by acts of God or third parties, and thus, when the property lost is that of another, he must make good the property’s value or, if it is a fungible, to return its equivalent. I postpone further discussion of the responsibilities of the amīn and the ḍāmin to the next chapter, especially section 7.2.4.2-b. A point about this area of law needs emphasis, unfolding from an aspect of fiqh reasoning noted in section 3.2.3 – that definitions of terms and exemplary cases given in the fiqh books are often extended beyond their apparent limits through the operation of analogy; that the definitions and exemplary cases are offered not as strictly limiting potential rulings, but as a base for analogy and to indicate deeper underlying juristic principles. Judges applying the exemplary cases in fiqh manuals enjoy significant flexibility in tailoring the definitions and the rulings to the facts before them. With respect to amāna/ḍamān doctrine we can observe both fiqh works and judicial practice, through such a process of reasoning, extending the doctrine in three dimensions. First, while the relationships of amāna/ḍamān are always presented as comprehensive and mutually exclusive, capturing the only two possible responsibilities that a person can face toward property he holds for another, in practice this is not the case; the duties of care of amāna can vary from case to case, and the liability of ḍamān, while described as absolute liability for the property, can vary as well. For example, an agent who is negligent in caring for his principal’s property may be held liable only for losses caused by his negligence, not for harm to the property from other causes; thus, though as a defaulter his status is called ḍāmin, a judge may not hold him to the full liability that that term requires. The second dimension is that, while the basic rules of amāna are always explained in the fiqh books in terms of concrete property, in practice, and as revealed in exemplary cases throughout chapters of fiqh, amāna duties can extend not only to such property but also to pecuniary interests generally. For example, to take the case of agency, if an agent is entrusted to run his principal’s business, liquidate all his assets, or prosecute all his lawsuits (all of which are permissible delegations6), then the scope of his duties toward his principal’s pecuniary interests will need to be measured accordingly. Moreover, agency is validly created to pursue material interests that do not involve concrete goods or their custody, or aren’t even predominantly economic, such as contracting one’s marriage or declaring one’s divorce.7 In all these situations the agent remains under the duty of care of an amīn – though in some of them assigning pecuniary value to the harm suffered

6 See

eg Qari-Majalla, Arts 1200, 1202. Art 1202.

7 Qari-Majalla,

188

Contracts Regulated in Detail by the Traditional Law 6.2.1.1 by the principal may prove difficult. The last dimension into which fiqh extends the terms and exemplary cases of amāna is beyond losses caused specifically to property actually in the amīn’s possession toward pecuniary losses of the owner in general caused by the agent’s fault or ta`addī. For example, if the owner of land employs someone to guard a crop in his field, and the employee is negligent in doing so, causing the loss of the crop, the employee can be held liable for the crop.8

6.2. The Nominate Contracts, or the Contracts Regulated in Detail by the Traditional Law In the following pages we do little more than define the chief individual contracts and mention some of the more significant of the rules that govern them. (We exclude contracts that fall outside Western contract law, such as marriage and appointment to office (wilāya).)

6.2.1. Commutative, Synallagmatic, Mutually Onerous Contracts 6.2.1.1. Sale (Bay`) Sale, the prototype contract, is dealt with much more extensively in fiqh writings than other contracts, which are presumed to be regulated by analogy to it where appropriate. Sale is at root understood as the transfer of ownership of some lawful (mutaqawwim), specific, known property for a fixed price (which may be money or other known property), both countervalues present and delivered immediately. Variations from this pattern, such as delay in payment of a countervalue, are handled as special cases. As mentioned in section 4.4.1.2-a above, the right to the countervalues vests in each party at the time of sale, even if actual payment or delivery is delayed by stipulation or otherwise. The rules on which one can delay delivery or payment were discussed in Chapter 4.9 Some types of sale have acquired their own names. The forward purchase, or salam, discussed at length in Chapter 5,10 is the contract by which fungible goods defined abstractly by specification (ie as dayn) are purchased for delivery at a later specified time, and which requires payment of full price before the parties separate. It is called the ‘sale of the penniless’, since it can serve the purpose of financing production, usually for agricultural goods. Ṣarf, or currency exchange, is stringently regulated due to ribā rules. In this contract, both parties must exchange the currency during the session in which the contract is concluded. In istiṣnā` or commissioned manufacture, a doctrine chiefly found in the Hanafi school, one party purchases manufactured goods from another, fixing the goods by description. This contract was also discussed in Chapter 5.11 The `arbūn contract is an option contract, by

al-Khafīf (d 1978), al-Ḍamān fī al-fiqh al-islāmī (Cairo: Dār al-Fikr al-`Arabī, 2000) 17–18. Chapter 4, text at nn 135–43. 10 See Chapter 5, text at nn 4–6. 11 See Chapter 5, especially text at nn 16–28. 8 `Alī 9 See

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which the buyer makes a non-refundable deposit against the price, reserving a right either to confirm or rescind the sale. In certain special sales, the price is fixed in relation to the sale object’s cost to the seller: sale at cost (tawliya), sale at percentage discount (waḍī`a), and sale at a percentage profit (murābaḥa). The law regulates carefully the expenses permitted to be included in the seller’s cost for calculating the price. a. Voidability: Powers to Annul (Khiyār) In sale contracts, and by extension other commutative contracts such as ijāra, by operation of law the parties retain rights to annul or rescind the contract on various grounds. These are called ‘options’, khiyārāt (singular khiyār). The provision for such options stems from hadiths of the Prophet. For example, one hadith states that the purchaser of an animal that had been left unmilked to give it an appearance of productivity ‘has an option of three days’.12 In another the Prophet tells one deceived in sales to specify ‘no deception (khilāba)’.13 Others require of Muslims fairness in commercial dealings. The Messenger of God passed by a heap of foodstuffs. He thrust his hand into it, and his fingers felt dampness. He said, ‘What is this, owner of the foodstuffs?’ He said, ‘Rain has stricken it, O Messenger of God.’ He said, ‘Why do you not put it at the top of the heap, so that the people may see it? He who deceives is not of me.’14 Do not meet al-jalab [ie meet outside the town and hence outside the marketplace those who drive animals from one place to another for sale]. The master of the one who is met, and is purchased from, has an option when he comes to the market.15

Fiqh has elaborated a number of options addressing situations where the consideration sought by a party from the contract falls short of his fair expectation. These options are (with the exception in the Hanafi school of the option for defect) not waivable by stipulation, but are considered ‘essential’ terms, innate to the contract (singular muqtaḍā).16 These options allow the purchaser to rescind the agreement against full refund of the price if the terms for invoking the option are met. The option for defect (khiyār al-`ayb) operates to give the acquirer of property an option for any hidden defect unknown to the purchaser existing before the contract is concluded. Defect is not defined from the subjective viewpoint of the purchaser, but objectively as a trait that ordinarily reduces the value of the thing on the market. The option has no fixed term, and is lost only if circumstances indicate that the beneficiary has acquiesced in the defect after knowledge of it, or when the state of the goods becomes changed, such as by subsequent injury or destruction. Most schools require the beneficiary to choose between rescinding the sale or keeping the goods without compensation; the Hanbali school is alone

12 Muslim. 13 Bukhari,

Muslim.

14 Muslim. 15 Muslim. 16 See

discussion of waiver of the option of defect in Chapter 5, n 8.

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Contracts Regulated in Detail by the Traditional Law 6.2.1.1 in allowing for part restitution of the price in compensation for the defect.17 The others consider such a remedy an invasion of the sanctity of the parties’ agreement on the price. Courts may extend the option for defect quite far. The Supreme Court in one of its 2018-issued general rules endorses placing a duty on the buyer to disclose reasons he assigns value to his purchase when these reasons are unknown to the seller, and allowing the seller an option to rescind on discovering that the buyer failed to do so.18 This is an inversion of the usual option for defect. Other options applying by law are those for inspection (khiyār al-ru’ya) and description (khiyār al-waṣf) which ordinarily apply when the purchaser has not viewed property previously, and which allow him to reject goods of which he does not approve (al-ru’ya) or which fail to meet their agreed description or lack a benefit stipulated by a party in his own favour (in the Hanbali school khiyār al-khalaf fī ṣifat al-mabī`, khiyār fawāt al-sharṭ). If the purchaser has viewed the property previously, and on delivery he finds changes in its condition, he has a right to annul.19 In the Hanbali school, again, some of these options allow the purchaser to confirm the sale and demand compensation for the difference in price. If the price is unfair to an unacceptable degree (ghubn fāḥish; compare the Roman law and modern civil law laesio enormis) the schools – though with varying preconditions – grant the victim an option to rescind (khiyār al-ghubn or al-ghabn).20 The schools define what is ‘excessive’ in two major ways: what exceeds either a prescribed percentage of disparity (such as one-third) or the customary price among traders (proved if necessary by experts); the latter is the most common and the late Hanbali view. Hanbalis allow rescission for excessive price disparity if the disadvantaged party can establish that he had the status of mustarsil (literally ‘person relying’ or ‘giving oneself up to something’), legally defined as one ignorant of the price or unskilled in bargaining.21 Whereas the Hanafis award the option only where the advantaged party actively engaged in deception or fraud (taghrīr), the Hanbalis make no such condition; yet, by their language, they do betray an assumption that severe price disparity involves some form of ‘deception’ (khidā`), whether by the advantaged party or someone else. In implementing these doctrines, Saudi court decisions put considerable weight on whether the person disadvantaged is such a mustarsil, typically denying rescission for ghubn fāḥish if the buyer is knowledgeable.22 One who successfully invokes the option must choose between rescission and maintaining the contract without adjusting the price;

17 The Maliki school does so also for minor defects. Yvon Linant de Bellefonds, Traité de droit musulman comparé, vol 1, Théorie générale de l’acte juridique (Paris, The Hague: Mouton et Cie, 1965) 334. For two Saudi cases on the question, see Decision No 126, 3 BG-Com-1431 1276 (Com C No 13, Jedda 1431 (2009)); Decision No 33466823, 1 Gen-1434 145 (Dammam 1433 (2011)). 18 Ministry of Justice-Principles of Highest Courts-2016, No 57. 19 See Qari-Majalla, Arts 459–66. 20 Manṣūr al-Buhūtī, Kashshāf al-qinā` `an matn al-Iqnā` (Beirut: Dār al-Kutub al-`Ilmiyya, nd) 3:211–13; Wizārat al-Awqāf, ‘Khiyār al-ghubn’ in al-Mawsū`a al-fiqhiyya (Kuwait: Wizārat al-Awqāf, 1404–27 (1983–2006)); Linant de Bellefonds (n 17) 355–70. 21 There are also two related options, sometimes considered, together with the mustarsil, to be three forms of the option for ghubn: for one who sells before coming to the market (talaqqī al-rukbān) and for sales at prices exaggerated by false bidders or by the seller exaggerating what he paid to acquire the item for sale (najash). See Decision No 117, 1 BG-Com-1430 193 (Com C No 10 Jedda 1429 (2008)). 22 Decision No 67, 11 BG-Com-1408–1423 187 (Com C No 9, Jedda 1414 (1993)); Decision No 117, 1 BG-Com1430. Decision No 5, 2 BG-Com-1431 842 (Com C No 9, Jedda 1431 (2009)); Decision No 33481760, 2 Gen-1434 43 (Jedda 1433 (2011)); Decision No 35264296, 1 Gen-1435 213 (Mecca 1435 (2013)).

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a second Hanbali opinion allows for that person to demand compensation in the amount of the shortcoming in value or price, in analogy to the option for defect.23 The duration of the option is regulated similarly to the option for defect. A party (or both parties) may stipulate an option to rescind, called the ‘stipulated option’ (khiyār al-sharṭ).24 The option must have a fixed duration, the schools differing over whether the limit of that duration is three days, what is fixed by custom, or, as the Hanbalis and Saudi courts hold, whatever the parties agree.25 The option can be lost by implication if a party enjoying the option transacts in the property gained by the sale. In the Hanbali school, during the option neither party is obliged to perform, but nonetheless title to both of the countervalues transfers at the time of contract. Possession of one or both of the countervalues may also be exchanged if the parties consent. Since the stipulated option does suspend at least contractual performance, it could readily lead to evasions of the ribā prohibitions or be used for speculation. Thus, the Hanbali school provides that the option is invalid in sales involving two ribawī countervalues, in advance purchase (salam), and whenever the intent is to profit on a loan.26

6.2.1.2. Lease and Hire (Ijāra, Kirā’, Iktirā') Ijāra is the sale of usufruct or use-value (manfa`a). The term ijāra, somewhat awkwardly, covers both hire of persons and lease of property. Leases are possible only on property that is not consumed by its use. For Hanafis, whose definition of property or māl excludes usufructs, lease is an exception to general legal principle, permitted only because of the people’s need and the Prophet’s example.27 Hanafis therefore view leases rather strictly; for example, leases terminate on the death of either party and either party may rescind if a subsequent event diminishes his subjective value in the usufruct (eg a lessee rents a shop but later changes his profession; a lessor suffers financial setbacks requiring him to liquidate property). For Hanbalis, in contrast, leases are more stable: eg termination is allowed only if the leased object itself has a defect impairing the lessor’s enjoyment of it.28 Yet even this latter criterion may be broad by modern estimation: the Hanbali Ibn Taymiyya (d 1328) upholds reduction or elimination of a lessee’s rental obligation when land leased for agriculture receives less

23 al-Buhūtī

(n 20) 3:212. generally Linant de Bellefonds (n 17) 312–23. 25 Wizārat al-Awqāf, ‘Khiyār al-sharṭ’ in al-Mawsū`a al-fiqhiyya (Kuwait: Wizārat al-Awqāf, 1404–27 (1983–2006)); Qari-Majalla, Art 679; Muḥammad bin Ibrāhīm Āl al-Shaykh (d 1969), ‘No 1590: Muddat khiyār al-sharṭ’ in Fatāwā wa-rasā’il Samāḥat al-Shaykh Muḥammad bin Ibrāhīm bin `Abd al-Laṭīf Āl al-Shaykh, 13 vols (Mecca: Maṭba`at al-Ḥukūma, 1399 (1978)) 7:82–83. Abu Hanifa held to the three-day limit, but his two companions differed, allowing any number of days; the latter view is adopted in Ottoman-Majalla, Arts 300, 313; see Salīm Rustum Bāz, Sharḥ al-Majalla (Beirut: Dār Iḥyā’ al-Turāth al-`Arabī, 1986) 14. 26 Qari-Majalla, Art 398. An example would be a sale of land, where the purported buyer is actually a lender. If he reserves an option, the law provides that he has title to the land, if not possession, and thus gains both collateral and separable increases in the property, such as fruit borne after the contract. If he then exercises his option just before it terminates, he receives back the full price. The interest element lies in the produce of the land. 27 See eg Ottoman-Majalla, Art 15. The problem is a genuine one, given gharar rigour. How can the parties fairly sell the unknown future benefit of a leasehold? 28 Noel J Coulson, Commercial Law in the Gulf States (London: Graham & Trotman, 1984) 83–87; Qari-Majalla, Art 697; Muwaffaq al-Dīn `Abd Allāh Ibn Qudāma (d 1223) and Shams al-Dīn `Abd al-Raḥmān Ibn Qudāma (d 1283), al-Mughnī wa-yalīh al-Sharḥ al-kabīr (Beirut: Dār al-Kitāb al-`Arabī, 1972) 6:25–33. 24 See

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Contracts Regulated in Detail by the Traditional Law 6.2.1.3 rain than usual and its crop fails.29 Such precedents can serve as part of the justification for the modern doctrine of excuse in contract arising from frustration, commercial impossibility, imprévision, supervening circumstances (ẓurūf ṭāri’a), or impairment of the contractual balance (al-tawāzun al-`aqdi).30 Both countervalues in these contracts, the usufruct and the rent payment, must be specified precisely, or else gharar renders the contract invalid. In a lease, the owner of the property must pay for its upkeep and maintenance, since otherwise the tenant’s obligation becomes indeterminate and the contract void.31 It is a fundamental term (muqtaḍā) of all leases that the lessor bears the risk of loss or destruction of the leased object (ḍamān), while the lessee is a trusted person (amīn). Stipulations in contracts that attempt to shift this burden are, in traditional law at least, void. In the event of significant harm or destruction of the object, the lessee has the right to terminate the lease. Hire contracts (between the employer, musta’jir, and the employee, ajīr or `āmil) define the scope of the contract either by specification of the task to be completed or by duration of employment. In the latter case, whether the employer puts the employee to work or not does not affect the obligation to pay the hire, since the employee contracts only to make himself available. A key distinction among types of hire-contracts is between the worker who contracts his time to a single employer, the ajīr khāṣṣ, versus one who works for more than one person at a time, the ajīr mushtarak, whose work is by the task. The prototypical ajīr mushtarak is a tradesman or craftsperson, who takes in work from the public. The scheme of duties and liabilities – including as to which pecuniary interests the hiree is ḍāmin, and as to which he is only an amīn – differs considerably in the two cases, as explained in section 9.4.2.2 in the case study on respondeat superior.

6.2.1.3. Reward (Ji`āla) In reward the quantity of the work and often the identity of the worker are unknown. Examples are ‘I'll give you 1000 riyals if you return my stolen car’, or ‘I'll pay you $10,000 to develop a plan for this new information system.’ Most scholars hold that the contract is not binding on either party until the work is completed. If the promisor revokes, some scholars, including Hanbalis,32 require him to pay for the worker’s prior services at a ‘fair wage’. The Malikis bind the promisor to the contract. The Hanafis, characteristically hesitant in upholding contracts in usufructs, invalidate the contract and pay the worker merely a fair

29 Aḥmad Ibn Taymiyya, Majmū` al-fatāwā, ed `Abd al-Raḥmān bin Qāsim (Medina: Majma` al-Malik Fahd li-Ṭibā`at al-Maṣḥaf al-Sharīf, 1416 (1995)) 30:257–59. 30 See Ibrāhīm al-`Abd al-Laṭīf, ‘Naẓariyyat al-ẓurūf al-ṭāri’a wa-atharuhā fī al-`uqūd al-zamaniyya fī al-fiqh wa-al-niẓām’ (Masters, High Judicial Institute, Imam Muhammad University, 1418 (1997)); Zakariyyā al-`Ajlān, ‘al-Ṣu`ūbāt al-māddiyya ghayr al-mutawaqqa`a fī al-`uqūd al-idāriyya’ (Masters, High Judicial Institute, Imam Muhammad University, 1431 (2009)); Ma`mar bin `Abd al-Raḥmān al-`Umarī, ‘`Aqd al-ashghāl al-`āmma’ (Doctorate, High Judicial Institute, Imam Muhammad University, 1434 (2012)). A great many published administrative court decisions award compensation to government contractors on such grounds, this being an instance of early borrowing from French administrative law. Under fiqh, unanticipated changes of circumstances lead not to compensation but to termination (faskh) of the contract, as under the doctrine of frustration under English law. 31 Ottoman-Majalla, Arts 529, 561; Qari-Majalla, Art 542. 32 See Manṣūr al-Buhūtī, Sharḥ Muntahā al-irādāt al-musammā Daqāʼiq ūlī al-nuhā li-sharḥ al-Muntahā (Beirut: `Ālam al-Kutub, 1993) 2:468–71.

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wage for his time, up to the amount of the reward.33 Ji`āla clearly pushes the limits of gharar rules, and scholars note that it is valid only because it is revocable (on at least one side), and because it is needed in practice.34 In Saudi Arabia, the contract of ji`āla is frequently referred to as the model for contracts of brokerage or intermediation (samsara, wisāṭa, sa`y, dilāla) for a commission, such as in real estate transactions or in arranging contracts or commercial relationships.35

6.2.1.4. Other Other mutually onerous contracts include compromise or settlement (ṣulḥ), rescission (iqāla), offset (maqāṣṣa), and partition of shared property (qisma).

6.2.2. Gratuitous Contracts 6.2.2.1. Gift (Hiba) Before actual delivery of the object, a gift is revocable and does not transfer title.36 Offer and acceptance or their implied substitute are still required. A gift may be rescinded in certain circumstances, involving gifts between family members.37 Because it is gratuitous, the contract permits a greater degree of uncertainty, gharar, in the specification of its terms.

6.2.2.2. Loan (I`āra, Qarḍ) Two types of gratuitous loan exist, i`āra (or `āriya) and qarḍ. I`āra is the gift of a usufruct or use-value (manfa`a) of property that is not consumed on use.38 It is like a gratuitous lease, except that the obligations of the parties are regulated differently from lease, for example in being terminable at will by either party and (for Hanbalis and Shafi`is) in imposing risk of loss (ḍamān) on the borrower. Qarḍ is the loan of fungibles, such as money.39 A qarḍ is repaid with goods of identical description, rather than with the very goods originally borrowed. Ribā rules require that it be free of any form of compensation, even in-kind

33 `Alī al-Khafīf (d 1978), Mukhtaṣar aḥkām al-mu`āmalāt al-shar`iyya, 3rd edn (Cairo: Maṭba`at al-Sunna al-Muḥammadiyya, 1950) 199–201. 34 Ibn Qudāma and Ibn Qudāma (n 28) 6:350–52. 35 There are many cases, often concerning what result earns a broker or intermediary his commission. See eg Decision No 147, 1 BG-Com-1432 170 (Com C No 10, Dammam 1432 (2010)); Decision No 33449382, 8 Gen-1434 57 (Riyadh 1433 (2011)). For an early decision citing a fatwa of Muhammad bin Ibrahim and fiqh texts on ji`āla, see Decision No 164, cited in `Abd Allāh al-Sayf, ‘al-Wisāṭa al-`aqāriyya wa-taṭbīqātuhā al-qaḍā’iyya’ (High Judicial Institute, Imam Muhammad University, 1433 (2011)) 238 (Gen Superior Ct, Mecca 1376 (1956)). See also `Abd al-Majīd al-Shuwayhī, ‘al-Shurūṭ al-ja`liyya fī `aqd al-ji`āla wa-taṭbīqātuhā al-mu`āṣira’ (Masters, High Judicial Institute, Imam Muhammad University, 1430 (2008)); `Abd al-Raḥmān al-Aṭram, al-Wisāṭa al-tijāriyya fī al-mu`āmalāt al-māliyya (Riyadh: Dār Ishbīliyā, 1416 (1995)). 36 For an extended analysis, see Chafik Chehata, Études de droit musulman, vol 2: La notion de responsabilité contractuelle, le concept de propriété (Paris: Presses Universitaires de France, 1971) 61–67. 37 See eg Qari-Majalla, Arts 931–39. 38 Qari-Majalla, Arts 1278–1315. 39 Qari-Majalla, Arts 723–54.

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Contracts Regulated in Detail by the Traditional Law 6.2.2.3 or services. It is a praiseworthy act; indeed, the Prophet reportedly declared it more meritorious than outright charity, since a borrower is clearly in need.40 Often, to emphasise that a qarḍ is made gratuitously, Muslims use the term ‘qarḍ ḥasan’, or ‘good loan’ (see Quran, eg 2:245). It is now well accepted that a bank or public lending institution may charge a borrower for actual administrative costs, including overhead, incurred in extending the loan but not including the time-value or opportunity costs of the money lent. In qarḍ the ownership of the goods ‘lent’, not the usufruct, transfers. (Goods that are consumed on use, as most fungibles are, can have no usufruct.) Title transfer occurs only on delivery, and until then the contract is not binding. Even thereafter, the lender may demand repayment at any time, and any attempt to fix a term is futile.41 The borrower also may terminate at any time. Repayment is required in the exact quantity lent, regardless of changes in market value. Some scholars forbid even a provision that the loan be repaid in another city. Where repayment of the same type of goods is impossible, then the goods’ value is to be paid, determined, for the Hanbalis, as of the date of unavailability.

6.2.2.3. Deposit or Bailment (Wadī`a) Deposit or bailment is the gratuitous safekeeping of property. Although charges for out-ofpocket costs in providing safekeeping are permitted, use of, or taking any benefit from, the deposit without the depositor’s permission is not. The contract may be terminated at any time by either party. Along with agency (wakāla), deposit is one of the most important models for explicating rules of amāna. Indeed, deposit offers sometimes the clearest examples, since deposit involves nothing other than amāna – it is mere custody of property. In comparison, agency can be compensated, and may involve using the property for purposes of achieving profit for both parties, meaning that interests of the parties other than custody itself play a role in the analysis. Besides that, deposit takes on somewhat of an idealistic cast, as a situation where the probity of the deposit-holder is tested. To repeat the saying of the Prophet: ‘The hand [meaning possession or control] is obliged by what it takes, until it delivers it.’42 For example, fiqh holds that a deposit-holder (or bailee) may not use the deposit for his own benefit. If he does so, he commits ta`addī, the contract is cancelled, and he is liable to the depositor for any loss.43 A question arises: what if, having committed such ta`addī, the deposit-holder returns the deposit to its place of safekeeping with the intention of resuming his obligation of trust (amāna)? The Hanbali ruling is that: [H]e is not released from the obligation of ḍamān. … Our view is that he is liable for ḍamān because of his transgression (`udwān), and the trust placed in him (isti’mān) is cancelled, as if he denied the existence of the deposit and thereafter admitted to it.44

40 Ibn

Maja. Maliki school differs. al-Khafīf (n 33) 181. 42 `Alā al-yad mā akhadhat hattā tu'addīh. Abu Dawud, Tirmidhi, Nasa'i, Ibn Maja. 43 Muwaffaq al-Dīn `Abd Allāh Ibn Qudāma, al-Mughnī, ed `Abd Allāh bin `Abd al-Muḥsin al-Turkī (Riyadh: Dār `Ālam al-Kitāb, 2010) 9:279. 44 Muwaffaq al-Dīn `Abd Allāh Ibn Qudāma, al-Mughnī (Cairo: Maktabat al-Qāhira, 1388 (1968)) 6:452. See also al-Buhūtī (n 20) 4:176. 41 The

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In contrast, scholars state that in the contract of agency or wakāla, if the agent acts against instructions, even in his own interest, the agency relationship does not terminate, because in wakāla the relationship is not based entirely on trust as it is in deposit.45

6.2.2.4. Guaranty (Ḍamān, Kafāla) The Islamic law of guaranty is sophisticated. It is defined as the joining of one dhimma to another as to a debt, ie making an additional person liable alongside the original debtor. (Again, dhimma is the faculty in a person by which he bears liabilities.) Because it is gratuitous, like gift the contract need not be fully specified, and a relatively high degree of gharar is tolerated. Thus one may guarantee payment of ‘whatever obligations my son undertakes’.46 Traditional law has several drawbacks when called on to legitimise and regulate modern guaranties. The chief one is that guaranties in Islamic law must be gratuitous. If the rule were otherwise, one could guarantee a financial obligation for a price, later make it good, recoup one’s loss from the obligor, and thus end up with compensation for extending credit, which is usury (ribā). The law does, however, permit the guarantor to recover out-of-pocket expenses for providing the guaranty, these again not including opportunity or other costs from providing the money to meet the potential obligation.47 These expenses will likely not be proportional to the amount of the guaranty or its duration, and are certainly less than conventional banks would charge.

6.2.3. Accessory Contracts 6.2.3.1. Agency (Wakāla) Islamic law of agency or wakāla – the contract by which one party grants another the authority to act on his behalf – is highly developed, and generally corresponds closely to Western rules for agency and representation.48 It can be gratuitous or compensated, and tolerates many forms of compensation.49 It is given very wide application under Islamic law – applying even to the performance of certain acts of ritual and for concluding marriages. The agent (wakīl) is by definition an amīn as to the property or pecuniary interests of the principal with which he is entrusted. This contract forms the model for a great many rulings throughout fiqh, including as to issues of representation of another person legally (tawkīl, tafwīḍ), as to issues about contracts revocable at will or jā’iz, and as to issues of responsibility for the property of another held for the benefit of that other (amāna). All three of these sets of issues crop up often in business contexts and deserve further study. The first and the second are explored further here and in

45 Ibn

Qudāma (n 44) 5:90. Arts 1061–1125. 47 OIC-Academy, ‘Khiṭāb al-ḍamān’, Decision No 12 (Decision No 12 of Session No 2, Year 1985) www.iifaaifi.org/1604.html, accessed 1 August 2019. See also Wahba al-Zuḥaylī, ‘Khiṭābāt al-ḍamān’ (1415 (1995)) no 8 Majallat al-Majma` al-Fiqhī al-Islāmī 68–92. 48 Gamal Moursi Badr, ‘Islamic Law: Its Relation to Other Legal Systems’ (1978) 26(2) American Journal of Comparative Law 187, 196–97. 49 See eg Qari-Majalla, Art 1201. 46 Qari-Majalla,

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Contracts Regulated in Detail by the Traditional Law 6.2.3.1 a case study at the end of this chapter (section 6.3), while the third issue, explained above in section 6.1.2 and further in section 7.2.3.2-b, plays a major role in Chapters 7 and 9. In this section I discuss the contract of wakāla from the perspective only of the two parties to it, the principal and the agent. As does fiqh itself, in this section I generally neglect analysis of the doctrines of wakāla from the perspective of the party who deals with the principal through the agent – whom I shall refer to as the ‘third party’. In practice, of course, the third party’s perspective is a most consequential one – and indeed Saudi published cases concerning wakāla generally arise from litigation between the third party and the principal. I discuss the third-party perspective, and those cases, in the case study in section 6.3 below. A key issue for that case study is how results under Saudi law compare with results under the most important doctrines in other legal systems which protect the expectations of third parties who deal with purported agents – namely, doctrines of apparent or ostensible authority, to use the names given them in common law systems. These are the doctrines that, in suits by third parties against a principal, enforce authority, even when the purported agent had no actual authority, if the alleged principal by his own act or negligence ‘clothed’ the agent with an appearance of authority on which the third party reasonably relied. (I shall refer to these as doctrines of ‘apparent authority’.) a. Character as Revocable at Will (Jā’iz) As noted in section 6.1.1 above, wakāla is one of the jā’iz contracts, contracts terminable at will by any of the parties to them, without formality. This characteristic in wakāla is an essential term, not waivable by agreement of the parties. As such, agency depends for its persistence and current content on the ongoing actual agreement of both the parties to the agency relationship. As a corollary of this principle, every agent must observe precisely the scope of the concurrent actual authority with which he has been endowed by his principal, or else be held to be dealing in the property of another without consent.50 Given the concern over ongoing consent, authority under wakāla becomes fragile. For example, in the Hanbali school a principal’s revocation of agency can, even when not yet communicated to the agent, render acts of the agent no longer binding on the principal. Buhuti (d 1641) states: The agent loses his authority at the death of a principal or on his being dismissed even before the agent knows of it … because to renounce a [revocable] contract does not require the consent of the other party. It is valid without his knowledge, like repudiation of marriage (ṭalāq). The agent is liable (ḍāmin) if he transacts after the death of his principal or his dismissal.51

The agent uninformed of the revocation of his authority, as well as the third party who innocently relies on the agent’s representation of his authority, face the risk of the invalidity of their transaction, as will be explained in section 6.2.3.1-c below. Not only this, the burden of proof to show the authority of a purported agent falls, as an initial matter at least, on the third party who deals with that purported agent. According to the Islamic theory of evidentiary presumptions discussed in section 3.1.1.3-e, the presumption (root or default

50 al-Buhūtī 51 Ibid

(n 20) 3:375. 3:471; Qari-Majalla, Art 1218.

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condition, al-aṣl) as to a grant of authority is its absence, so, since therefore the denial of agency is the ‘stronger’ position, the one asserting agency must bear the burden of proof.52 Observable here are three basic tenets – that agency depends on continuous actual consent, that the third party must offer convincing proof of authority, and that transacting in the property of another is void absent consent of the owner – that render the authority of an agent to transact in his principal’s property fragile. One wonders how, given these tenets, the Islamic law of agency can be practical, certainly from the viewpoint of the third party. How can business be conducted if, from every person with whom one deals in business who claims to represent a principal, one must demand proof admissible in court that that person is in fact, at that moment, exercising due authority as granted by that principal? Again, in other legal systems the impracticality of such an outcome has been almost entirely mitigated by doctrines of apparent authority; how it is mitigated in Saudi law and practice is discussed in section 6.3 below. b. Interpreting Grants of Authority (Tawkīl, Tafwīḍ) A basic principle underlies fiqh rulings about the extent of the authority of an agent or representative of a principal, whether this arises under the form of contract that has the purpose of creating that authority, the contract of wakāla, or in some other context. That basic principle is, in Buhuti’s words, that the agent ‘must protect and seek the good fortune of his principal’.53 Drawing on this principle, fiqh manuals offer exemplary cases defining the scope of the agent’s authority under various circumstances. Let us consider some of these rulings. To start with, of course, the scholars provide that the agent is bound by any specific instructions his principal has issued, so that, if the agent breaches them, any contract he makes is void and should be rescinded, since done outside the agent’s authority. Even if a principal and agent have agreed explicitly on the authority of the agent, questions of interpretation beset the relationship throughout its life. First, the terms of the grant may have ambiguities. Second, even after an explicit grant, both parties retain the power to alter their relationship at will, since, as just explained, the contract is jā’iz. And, finally, unanticipated questions of authority can arise in practice. For answers to all questions of interpretation, Islamic law readily turns, as explained in section 4.4.1.2-d, to implicit indications of the parties’ intent – their words and acts, the circumstances of their interactions, and their course of dealing both before and after the start of the contract. Moreover, exemplary cases in fiqh works repeatedly rely on customs to interpret and complete the parties’ own agreements as to agency.54 Beyond these general principles of interpretation, fiqh works also supply many terms to decide issues often arising in the agency relationship, inserting them into the parties’

52 Decision No 230, 2 BG-Com-1429 801 and 686 (duplicates) (Com C No 8, Jedda 1428 (2007)). The court put on the claimant the burden of proving that the defendant had authorised his driver to transact. 53 al-Buhūtī (n 20) 3:476. Terms used include ṭalab al-ḥaẓẓ, manfa`a, maṣlaḥa, avoidance of ḍarar, and daf` al-ḥāja. See Ibn Qudāma (n 43) 7:243–53; al-Buhūtī (n 32) 3:521–24. 54 As Buhūtī (n 20) says, ‘A generally stated consent is construed in accordance with custom (iṭlāq al-idhn yuḥmal `alā al-`urf)’ (3:503). Compare his statement, ‘An explicit statement is preferred over an indication from custom (ṣarīḥ qawlihi muqaddam `alā dalālat al-`urf)’ (ibid 3:376).

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Contracts Regulated in Detail by the Traditional Law 6.2.3.1 agreement by operation of law, so to speak; these obtain unless it is proved that the principal set other terms or gave other instructions. Or one might say these are fiqh-supplied presumptions of fact, rebuttable by a showing that the parties stipulated otherwise. Such fiqh-supplied terms reveal also how fiqh itself conceives of the agency relationship, exposing certain general principles (qawā`id, ḍawābiṭ) that, in the view of the scholars, should guide judges in their construction and enforcement of agency contracts. Let us consider three particularly useful sets of such exemplary cases, all taken from Buhuti’s Hanbali manuals. First, what if the principal specifies sale at a particular price; may the agent sell for more than that price? Fiqh rules that he may, since the increase ‘is a benefit, not a harm’ to the principal – which again is the purpose of an agency contract – and, moreover, the principal’s implicit permission to do so is supplied by custom. Then, may the agent validly sell for less than the price the principal specified? The ruling is that he may, but he then is obligated to make good the difference between the actual price and the price specified. May the agent sell for less than the fair market price (thaman al-mithl), ie a price characterised by ghubn or lesion (the Roman laesio)? The ruling is that such a sale is proper if the ghubn is no more than what normally occurs in trade (ie since such a disparity is ‘difficult to avoid’). But if it is greater, then the agent is obliged to make good the shortfall from the market price, since the grossly disadvantageous sale represents ‘a shortcoming’ in the agent, showing his ‘failure to exercise precaution and to pursue the benefit of the one who gave him permission’ to trade.55 Notably, the remedy in all these cases is not to void the transaction but to hold the agent liable to the principal for the shortfall, if any (the third of five alternative remedies to be explained in the next section). Scholars specify that the principle behind these rulings  – laid down for the agency relationship – applies equally to other relationships where one party acts on behalf of another and in his interest, such as the guardian, custodian of a charitable endowment, and partner.56 A second set of fiqh cases falls under the heading of the prohibition of self-dealing by agents. Texts declare that an agent may not sell his principal’s goods to himself for two reasons: first, because, given customary understandings, the agency agreement between the parties implicitly forbids this; and, second, ‘because suspicion attaches to him in this’. As Buhuti writes: An agent may not sell to himself something he is deputised to sell because the custom in sale is that a man sells to someone else, and so the agency is construed as if this were explicitly stated; and because it is a matter for suspicion. … So [to do this] is unlawful just as if it were explicitly prohibited [by the principal]. [The rule applies also to purchase.] … This is unless it is with [the principal’s] permission.57

Similarly, an agent may not sell his principal’s goods to his own close relatives such as his son, father, wife, nephew, and the like, ‘because he is held in suspicion as to them, as having a tendency to neglect making an extreme effort to obtain [an advantageous] price, in the same manner as he is suspected when dealing with himself ’.58 Again, guardians, partners,

55 al-Buhūtī

(n 32) 3:522–23. See Ibn Qudāma (n 43) 7:247–48. (n 32) 3:523. 57 See al-Buhūtī (n 20) 3:473. 58 al-Buhūtī (n 32) 3:521–22. See the comparable discussion in Ibn Qudāma (n 43) 7:228–29. 56 al-Buhūtī

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trustees of endowments, and the like are under a parallel obligation.59 In all these cases a judge may choose to rescind the contract if still possible, or, if not, award compensation. As Buhuti noted in the quotation just above, it is always possible for the principal to permit such a transaction. He may also ratify it after the fact, a point covered under the heading of the unauthorised agent, the fuḍūlī, covered in the next section. A third, more general, type of exemplary case concerns acts by an agent that harm the principal. These, not surprisingly given the preceding examples, are held to fall outside the agent’s authority, this on the grounds of both the principles of amāna and custom. For example, an agent is not authorised to make a sale or lease that puts his principal’s property at risk or harms his property interests, such as a sale to a poverty-stricken person, without the principal’s specific consent.60 Or, to insert a case from partnership, which is understood as a complex of agency relationships: If … a partner says to a partner ‘Act as you think best,’ he may do any [act, listing various forms of commercial contracts] that he considers advantageous, because this permission relates to such acts, rather than to acts like giving in charity, selling at a discount, or making [interest-free] loans  … because these are not commerce, while he was delegated power to act according to his opinion only in commerce.61

Because all these fiqh-implied terms or presumptions are laid down mostly as exemplary cases, they leave much to the judge’s discretion. c. Remedies in the Event of an Unauthorised Act What are the remedies a judge may apply when it is found that an agent has engaged in an unauthorised act, ta`addī? While I take up the question of remedies for breach of contract generally only in sections 7.2 and 7.3, I advance part of that discussion here, by way of necessary background for the case study in section 6.3 below, and also because, as is usual, to review the remedies available for infractions against a legal standard yields valuable insights about that standard. This seems particularly true in this instance. The fiqh manuals imply – but not in so many words – five distinct alternatives by way of remedy. The first – and doctrinally purest – is that the act is void, being conducted without the principal’s consent, and, very often, involving property the agent does not own. Therefore, it must be rescinded, even against an innocent third party. Scholars add that any losses suffered by the principal not cured by the rescission must be compensated by the agent, since he committed ta`addī. As the Hanbali Ibn Qudama (d 1223) states: If an agent diverges from his principal’s [instructions] and purchases what he was not told to purchase, or sells what he was not permitted to sell, or purchases something other than what was specified to him, then he is liable for any loss or injury incurred by the owner, because he has departed from the condition of amāna and become like a usurper (bi-manzilat al-ghāṣib).62

59 al-Buhūtī

(n 32) 3:501–03, 3:522; Ibn Qudāma (n 43) 7:229. (n 32) 2:304 (risk); al-Buhūtī (n 20) 3:475 (harm). 61 al-Buhūtī (n 20) 3:502. 62 Ibn Qudāma and Ibn Qudāma (n 28) 7:243. A recent published case citing and applying Ibn Qudāma’s dictum is Decision No 10, 3 BG-Com-1435 1351 (Com C No 1, Buraida 1435 (2013)). 60 al-Buhūtī

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Contracts Regulated in Detail by the Traditional Law 6.2.3.1 The second alternative is to allow the transaction, though invalid, to proceed but hold the agent liable for any losses, again according to Ibn Qudama’s statement. To make this concession to reality seems to be at the discretion of the judge according to the circumstances. For some specific situations (examples appeared just above), fiqh books lay down a third alternative – to uphold the sale as valid but make the agent liable for any loss that results, again because of his wrongful act, ta`addī. A fourth alternative is sometimes mentioned, one that might be favoured by a third party disappointed when his transaction is voided due to the agent’s lack of authority; this is that the transaction binds the agent, not the principal. It is possible that this remedy is permitted only under circumstances where the transaction can be construed as carried out by the agent in his own name, as will be discussed below under the doctrine of the fuḍūlī. A fifth remedy is to suspend the transaction pending ratification by the principal when he learns of it – a possibility also governed by the doctrine of the fuḍulī. Further light is shed on the first three of these alternatives by Ibn Qudama in a revealing discussion about the case of an agent selling on credit, after which the buyer defaults. Does fiqh presume that the agent, given authority to sell, also possesses authority to sell on credit, as opposed to cash? If the general fiqh presumption is that he does not, then is the agent’s sale on credit valid or not? If it is invalid, what is the remedy – especially if the sale cannot be undone for practical reasons? If we say he has the right to sell on credit, then the sale is valid and whatever is lost of the price he is not liable for. This is unless he was negligent by sale to one who cannot be trusted or one whom he does not know, in which case he is liable for the price which was lost due to the purchaser. If we say, he has no right to sell on credit, then the sale is void, because he did that which he was not permitted to do, and it resembles the sale of a stranger (ajnabī) [ie fuḍūlī or intermeddler, discussed just below]. [He then mentions the possibility that an earlier scholar held the view that the sale is valid, and also that some scholars may hold the sale in abeyance pending the principal’s decision whether to ratify it.] In any case, the actor (`āmil) [the putative agent] is liable because the loss of the price happened by his negligence. If it is our view that the sale is invalid, he is liable for the sold object in the amount of its [market] value if it is impossible for him to reclaim it, either because of the destruction of the sold object or the refusal of the purchaser to return it to him. If we hold with its validity [ie the agent had authority to deal on credit, but did so negligently], it is possible that he is again liable for its value, because more than this was not lost by the sale, and he would not have saved anything but this had he refrained from it [the sale]. The excess of the price [over the value] happened by his negligence, and he is not liable for it. And it is possible that he is liable for the [full] price, because it became obligatory by the sale, and was lost by the negligence of the [the agent]. If [the price] is less than the value, then the obligation shifts to [the price] for the reason that if he had obtained the price, he would not be liable for anything.63

Clearly, this text contemplates a great deal of discretion on the part of the judge as to how to remedy unauthorised acts. It considers the possibility of all of the first three alternative remedies mentioned just above. Ibn Qudama adopts the third alternative – the sale is valid but the agent is liable for losses – if the agent has authority to sell on credit but does so in a negligent fashion, perhaps even if he breached instructions of his principal about how to conduct such sales. But he allows for only the first or second alternative – both holding that

63 Ibn

Qudāma (n 43) 7:147.

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the sale is void – if instead the agent lacks any authority to do credit sales. He expects that the agent will make efforts to regain, or at least consider regaining, the principal’s property, and holds the agent liable in any event for losses caused by the sale. To anticipate the case study below, let us note that in no part of this discussion does Ibn Qudama even consider the position of, or the impact of his rulings on, the third party, who may after all have dealt in good faith with a known agent of the seller, unaware that selling on credit was outside that agent’s authority. And when considering the alternatives where he does declare authority lacking, he in no way adverts to any conception that would, in the manner of apparent authority, validate the credit sale despite it being unauthorised, except to mention that another scholar may have so held. Light is shed on the fourth and fifth alternatives by a third ruling from Ibn Qudama: his treatment of a specific situation where S sells property to B, and then, when sued by B for delivery of the property, admits that he does not own the property, but O does. One possible fact pattern falling within this case is where S is acting on O’s behalf but without authority from O, and not disclosing that he is acting for O. Ibn Qudama rules that the sale is valid and S must deliver the property. This would offend the basic norm that if S did not own the property he sold, the sale must be void, except that, due to a procedural rule that S’s admission in favour of O has no effect against B, the sale is upheld. Ibn Qudama adds, in line with his general statement, in the first quotation from him above, that S is liable to O ‘for his loss (gharāmatih) because he caused him to lose it by the sale’.64 This case confirms a suggestion in the lengthy second quotation above – that a judge may enforce a transaction even when in proper theory that transaction is invalid, if circumstances make it difficult for the transaction to be rescinded – in that particular situation because the purchaser ‘refused’ to return an object sold without authority, here because O has not joined the suit to prove his ownership and claim the property. As noted, the fourth and fifth alternative remedies are governed by the doctrine of the fuḍūlī, literally ‘meddler’, meaning one who inserts himself into the affairs of another without authorisation. According to Buhuti, an established agent taking a particular action that turns out to be unauthorised is analogised to the fuḍūlī. He says, ‘Every transaction in which the agent deviates from [the instructions of] his principal is like the transaction of a fuḍūlī.’65 Although generally void as obligations of the principal, in some situations, varying among the schools of Islamic law,66 a fuḍūlī’s transactions can be considered to be suspended while

64 Quoted in Shams al-Dīn `Abd al-Raḥmān Ibn Qudāma (d 1283), al-Sharḥ al-kabīr `alā matn al-Muqni` (Beirut: Dār al-Kitāb al-`Arabī, nd) 5:323. It is mentioned also in explaining a form of judicial error in Supreme Court, Inspectors’ Observations-1436, No 143. 65 al-Buhūtī (n 32) 2:310. 66 Overall, the schools have two approaches, the Malikis and Hanafis broadly allowing, and the Shafi`is and Hanbalis narrowly restricting, the opportunity for a putative principal to ratify acts earlier taken by a volunteer. A minority view within the Hanbali school is similar to the Hanafi position. See Ibn Qudāma and Ibn Qudāma (n 28) 4:274. See, for summaries of all the schools’ positions, Ṣubhī Maḥmaṣānī (d 1986), al-Naẓariyya al-`āmma li-al-mūjibāt wa-al-`uqūd fī al-sharī`a al-islāmiyya, 2 vols (Beirut: Dِār al-`Ilm li-al-Malāyīn, 1972) 1:61–87. But such general descriptions are just the beginning. For any fact pattern one must delve deeper, determining how each school develops the logic and the implications of its positions. As a partial example, the Hanafi school, though it treats many unauthorised acts as open to suspension pending ratification, imposes many sensible conditions, such as that the principal must be informed about the transaction in order for him to ratify it, and that the object of the contract must not change its condition during the suspension. Ottoman-Majalla, Art 378; `Ali Ḥaydar (d 1918), Durar al-ḥukkām sharḥ majallat al-aḥkām, trans Fahmī Ḥusaynī (Beirut: Dār al-Jīl, 1991) Art 378. Also, the Hanafi

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Contracts Regulated in Detail by the Traditional Law 6.2.3.2 the purported principal’s ratification is sought, which, if given, validates the transaction. Under the teachings of the Hanbali school, the scope for upholding the transaction of a fuḍūlī, even assuming subsequent ratification by the principal, is very narrow. A transaction of a fuḍūlī (and by extension an agent acting outside his authority) cannot be ratified and is void, even if the principal attempts to ratify it, unless two conditions are met. These are, first, that the transaction was contracted by the fuḍūlī in his own name without mentioning the principal, but while intending that the contract should be attributed to that principal; and second, that it was contracted in return for a described future obligation or performance (fī al-dhimma) of the fuḍūlī himself, not against the transfer of the principal’s specific property (`ayn).67 In such cases if the principal chooses not to ratify the transaction, it still stands as the obligation of the fuḍūlī, which corresponds to the fourth alternative discussed above.68 These rules are understood by the Hanbalis as entailed by revealed texts, particularly the reported statement of the Prophet: ‘Do not sell what you do not have [ie own].’69 In practice, these rules no doubt will not always be followed even by judges, given the complexities of undoing void transactions;70 certainly, a principal may ignore them if in fact the fuḍūlī made him an advantageous deal. Several Saudi court decisions consider a suit against a fuḍūlī for the proceeds of the transaction to be a ratification of the transaction.71 But in these rules one notes again how strict traditional law has been in insisting on the invalidity of unauthorised sales, probably out of devotion to the revealed principles that property may transfer only with willing consent (bi-tīb nafsih) and that one may sell only what one owns. And finally, here again one can observe, in these instances at least, how fiqh does not advert to the impact on third parties of its rulings on authority.

6.2.3.2. Partnership (Sharika) There are many types of partnership (sharika), and the rules governing these types vary considerably among the schools. Different schools employ differing terms for the same type of partnership, and even the same term for differing types; some consider muḍāraba not to be a form of partnership at all, but a separate contract type. The following summarises partnership rules for the Hanbali school, which offers probably the simplest system.72 It should

school generally does not consider the unauthorised acts of existing agents as open to ratification, but rather as binding obligations of the agent himself. See eg Ottoman-Majalla, Arts 1470, 1471, 1479. 67 al-Buhūtī (n 32) 2:143–44; Ibn Qudāma and Ibn Qudāma (n 28) 4:274. 68 That the fourth alternative applies here is suggested by Ibn Qudāma himself in the passage cited in the previous note. See also Ibn Qudāma (n 43) 4:154, where this is stated explicitly. Probably for the same reason, the Hanafi school discusses this fourth alternative for cases when an unauthorised agent purchases without authority, not when he sells. See Ottoman-Majalla, Arts 1470, 1471, 1479. 69 This hadith was quoted in Chapter 4, text at n 61, and referenced throughout Chapter 5. 70 In his discussion just above about sales on credit, Ibn Qudama acknowledges that, practically speaking, void sales may not be reversible: the agent is liable to the principal for loss of the property if it is ‘impossible for him to reclaim it, either because of the destruction of the sold object or the refusal of the purchaser to return it to him’. See text at n 63 above. 71 Decision No 66, 2 BG-Com-1433 1105 (Com C No 2, Jedda 1433 (2011)); Decision No 51, 3 BG-Com-1408– 1423 240 (Com C No 4, Riyadh 1420 (1999)). 72 See Abraham L Udovitch, Partnership and Profit in Medieval Islam (Princeton, NJ: Princeton University Press, 1970) 17–39, for a description of Hanafi rules; Imran Ahsan Khan Nyazee, Islamic Law of Business Organization: Partnerships (Islamabad: Islamic Research Institute, 1999).

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be noted that the term sharika is also used for undivided co-ownership, whether arising by contract or outside contract as in inheritance; scholars distinguish the two types of sharika by referring to property ownership as sharikat al-milk, or sharika of ownership, and to partnership as sharikat al-`aqd, or sharika of contract.73 In all partnerships partners assume four basic rights or obligations: first, to assume relations of mutual agency (wakāla) and guaranty (ḍamān or kafāla), ie all partners are agents of each other and jointly and severally liable for each other’s transactions; second, to contribute work, credit, or capital, or combinations of these three; third, to share profits in predetermined percentage shares; and fourth, to bear losses in proportion to their shares of ownership of the capital. Any uncertainty about the sharing of profit invalidates the contract. A stipulation by which a partner receives a fixed sum as income regardless of profit or loss would be either void or would invalidate the contract. Each partner is personally liable to the other partners for any infraction of the terms of the mutual agencies (including instructions issued by his co-partners), for conduct deviating from customary commercial standards, or for any other wrongful act, ta`addī, causing loss to the partnership. Apart from such acts, each partner binds all his partners in his dealings with third parties. Partnerships are revocable at will by any partner, and terminate with the death or incapacity of any partner. The basic structure laid down for partnerships is dictated by the fundamental concerns of the fiqh law of contract explained in section 4.4. If partnership were not jā’iz, it would be invalid as a hire contract (ijāra) which fails to specify the wage; if all partners were not liable for losses in proportion to their capital investments, then some of the capital investors’ principal would be shielded from loss and yet earn profits, offending the ribā-based principle ‘gain accompanies liability for loss’ (al-kharāj bi-al-ḍamān); if not for the provision that revenues must be fixed by percentage of net gains, then the contract would be guilty of both ribā (in giving assured payment for credit) and gharar (in fixing the value of something inherently unknown and non-existent). There are four major types of partnership. `Inān is a partnership where each of the partners contributes both capital and work. The parties may determine profit shares, and these need not reflect precisely their respective shares of working-time or of capital, but losses must be borne in proportion to capital contributions. In muḍāraba (also called qirāḍ), some of the partners contribute only capital and the others only work. The capital owners (singular rabb al-māl), inactive in the business, are liable for all the losses, but these are limited to their capital shares. The workers (singular muḍārib, `āmil) bear no losses, except in losing their labour, unless they commit ta`addī, meaning a breach of the principal’s instructions or other wrongful act. They are liable if they create liabilities in excess of the capital pledged by the capital owners, unless that act is approved or ratified by the capital owners. Workers are not entitled to any profit until the capital owners have recouped their investment, and then only in the agreed percentage. In abdān partners contribute only work. In wujūh partners pool their credit to borrow capital and transact with it. In the last two partnerships the partners are free to agree upon their relative shares of ownership of partnership capital, but are obliged to share losses accordingly.

73 al-Buhūtī

(n 20) 3:496 (sharika fī al-māl and sharikat `uqud).

204

Contracts Regulated in Detail by the Traditional Law 6.2.3.2 These types of partnership are simple models which can be combined into more complex types. Thus, a partnership in which all partners contribute capital but only some of them work is a combination of `inān and muḍāraba. In such a case each partner who contributes work as well as capital must receive a share of profits greater than that determined by his capital contribution. In Saudi Arabia, since 1965 the fiqh law of partnership has coexisted with the Companies Nizam, which creates and regulates a number of modern commercial companies (also called sharika) with artificial personality. When the Companies Nizam issued, it provided that it in no way infringed on the traditional partnerships provided for by fiqh. It assigned jurisdiction over disputes involving the traditional partnerships to the commercial jurisdiction earlier created under the Commercial Court Nizam of 1931.74 As a result, one finds a great many cases about the traditional partnerships among the published cases of the commercial circuits of the Board of Grievances, indicating that they, particularly muḍāraba, are still widely practiced among Saudis, even outside the commercial sphere. As for the modern companies enabled by the Companies Nizam, these are ultimately French in origin, since the Companies Nizam drew on Egyptian and Ottoman commercial codes, which in turn drew on French models. The most important of the forms of company in practice are the limited-liability company (sharikat dhāt al-mas’ūliyya al-maḥdūda), the general partnership (sharikat al-taḍāmun), and the joint-stock company (sharikat al-musāhama). The characteristics and operation of these companies are extensively treated in available literature about doing business in Saudi Arabia. As quoted in Chapter 2,75 the Explanatory Memorandum accompanying the Companies Nizam of 1965 when issued states: [A]ll the types of companies in the draft, in their various types and rules, differ from the companies that were known in the past only in a few particular details that do not touch on the general principles for transactions laid down by Sharia and without making illicit what is licit or making licit what is illicit, or contradicting any Quranic text, prophetic Sunna or scholarly consensus.76

It is nonetheless the case that the provisions of the Nizam do pose tensions with fiqh rules. Saudi scholars are well aware of those tensions, and books and graduate theses deal with them. Five of the most obvious such areas of tension are, first, that the companies created under the Nizam have artificial personality, a concept unknown in fiqh formally, though analogues for it in traditional law and practice can be found (waqf or charitable trust and dār al-māl or the public treasury); second, the Nizam allows for companies of fixed duration, not open to revocation and termination at the will of any partner; third, the Nizam contemplates that a company may continue in existence even if one partner sells his share to another person or dies; fourth, it allows for the negotiability of the shares of public companies; and, fifth, it embraces the concept of limited liability for two companies, the joint-stock company and the limited-liability company. Reconciling the first four of these with the fiqh no longer poses difficult problems; contributions of scholars worldwide during

74 On

the history of the commercial jurisdiction, see section 2.2.3.2-e. 2, text at nn 24–25. 76 Explanatory Memorandum (al-Mudhakkira al-Īḍāḥiyya) in Niẓām al-sharikāt, 4th printing (Riyadh, 1394 (1974)). 75 Chapter

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the last century have largely resolved them. But the fifth still poses difficulties. In traditional law, in no form of partnership is recourse by creditors against the company limited to the company’s own assets. Individual partners who contribute capital and are not involved in management do enjoy limited liability, but the company as a whole does not – a creditor can always sue at least one partner who has unlimited liability. Throughout the decades, according to informal reports, Saudi judges have often balked at applying the rule of limited liability when overseeing the liquidation of companies, and at times held shareholders liable for amounts in excess of company assets, or compelled settlements satisfying creditors. The subject is debated in graduate dissertations in the Sharia universities, some concluding in support of the lawfulness of limited liability, others against it.77 Many modern scholars muster convincing arguments from fiqh precedents for justifying the concept – chiefly relying on the point that those who deal with limited-liability companies are forewarned of the limitation, and that fiqh earlier knew of situations where liability was limited to certain assets without recourse to any person with unlimited liability, such as the charitable trust (waqf) and the slave authorised to trade. Some endorsement of this view is found in a Supreme Court general rule dating back to 1994: ‘[P]roperty rights in some situations may attach to property and not to a personal liability (dhimma), as in the limited-liability company.’78 We were unable to find any published case relating to the question. However, it is reported that Saudi judges until recently engaged in an interpretation of the Companies Nizam that largely negated limited liability. In Article 157, the Companies Nizam of 1965 describes the partners or shareholders of the limited-liability company as ‘responsible for the debts of the company in the amount of their shares (qadr ḥiṣaṣihim)’. Article 48 has similar language as to joint-stock companies: ‘shareholders are not liable … except in the amount of their shares’. Many judges interpreted these articles as meaning that partners’ or shareholders’ liability is limited according to the percentage of their share in the total company capital, not the capital value of that shareholding, thereby largely defeating the concept of limited liability.79 As late as 2014 a senior judge of the Board of Grievances commercial branch told me that this is the correct understanding of the statute. In any event, the new Companies Nizam of 2015 has been reworded to avoid this outcome. Article 151 of the new statute provides, as to limited-liability companies: The dhimma (capacity of a person to accept liability) [of a limited-liability company] is considered independent from the dhimma as to obligations in property of every partner in it. The company alone is responsible for the debts and obligations incurred by it. No owner of it, or partner in it, shall be responsible for those debts and obligations.

Article 52 of the new Companies Nizam makes a similar change for joint-stock companies: ‘the company alone will be responsible for the debts and obligations arising from its activity’.

77 `Abd al-Muḥsin al-Zukarī, ‘Mas’ūliyyat al-shurakā’ fī al-sharika al-musāhima wa-al-sharika dhāt al-mas’ūliyya al-maḥdūda fī al-niẓām wa-al-fiqh al-islāmī’ (Masters, High Judicial Institute, Imam Muhammad University, 1414 (1993)); Su`ūd al-Shithrī, ‘al-Sharika dhāt al-mas’ūliyya al-maḥdūda’ (Masters, High Judicial Institute, Imam Muhammad University, 1420 (1999)) 100–06; Sa`ad al-Shubrumī, “Aḥkām al-ḍamān fī al-sharikāt” (Masters, High Judicial Institute, Imam Muhammad University, 1423 (2002)) 360–62. 78 Ministry of Justice-Principles of Highest Courts-2016, No 25. 79 A graduate thesis on the subject prepared in 1993 reported this as the agreed position of commercial judges, based on the author’s interviews with them. al-Zukarī (n 77) 221, 224.

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Contracts Regulated in Detail by the Traditional Law 6.2.3.3 At least as to limited-liability companies, the Companies Nizams attempt by an administrative mechanism to prevent companies with limited liability from falling further into debt than 50 per cent of their capital, and thus limit the effects of limited liability on creditors. Under the Companies Nizam of 1965, as amended in 2007, if the capital of the limited-liability company falls below 50 per cent of its stated capital, the shareholders must meet and decide either to assume liability for the debt personally or terminate the company. If they fail to meet or decide, they become liable for all the company’s debts and a third party may sue for its termination.80 With this scheme, the partners face liability for all the company debts unless they decide to immediately terminate the company. Under the new Companies Nizam, Article 181, the unlimited liability of the partners is not mentioned. Instead the partners, in the event of losses equalling 50 per cent of capital, must record their losses on the public Commercial Register, and then meet to decide whether to terminate or continue the company; in the latter case they need to pay down losses to less than 50 per cent or raise capital, publicising their decision. If they do not meet, then the company is terminated by operation of law.81 Similar provisions apply to joint-stock companies.

6.2.3.3. Pledge (Rahn) Rahn affords a sophisticated form of security for creditors. It binds only upon delivery. It may be given to secure an obligation which, though binding, may not yet be exactly determined.82 There are two major limitations on rahn. First, it requires that the creditor, or at least an independent escrow agent, take possession of the pledge. The pledgee has no right to use the pledge, except with the pledgor’s permission, and even then not when it secures a qarḍ loan. The second limitation is that, upon default, the pledgor does not have the right to sell the pledge to realise his debt without permission either from the debtor or from a court. Here again is the Quranic notion that property may not be taken without the owner’s consent. The Hanafis, but not the Hanbalis, avoid this inconvenience by permitting the pledgor to appoint the pledgee irrevocably as his agent to sell.83 In modern Saudi Arabia, means have been created by which rahn is possible without taking physical possession, using documents representing title. This has been achieved through innovative nizams and administrative measures, many promulgated only in the last few years. These cover now not only immovables, but also movable, and even intangible financial, properties.84

80 Companies

Nizam-1965, Art 180. Nizam-2015, Art 181. 82 Qari-Majalla, Arts 948, 954. 83 Ottoman-Majalla, Art 760. This is an instance of a third-party interest rendering an agency irrevocable. 84 See eg the new Commercial Pledge Nizam, Niẓām al-rahn al-tijārī, Royal Decree No M/86 dated 8/8/1439 (27  April 2018) greatly widening the scope for perfection and registration of security interests over movables, superseding Niẓām al-rahn al-tijārī, Royal Decree No M/75 dated 21/11/1424 (14 January 2004). For immovables, see Niẓām al-tasjīl al-`aynī li-al-a`qār, Royal Decree No M/6 dated 11/2/1423 (24 April 2002). 81 Companies

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6.2.3.4. Assignment (Ḥawāla) Islamic law early on developed a highly advanced form of assignment of debts. For example, according to the Hanbali school, a debtor may assign his obligation to another person, ie bindingly refer the creditor to that person for payment, without the creditor’s consent and without recourse as long as the assignee is solvent. Both debtors and creditors may employ the contract. Assignments may even be for or against third parties who are neither creditors or debtors of the assignor, in which case the transfer operates as an agency to collect a loan or as a request for a loan. The limitations on the ḥawāla contract arise chiefly from the need to avoid circumstances liable to ribā and gharar. Thus, the debt must be both determined and due, the creditor’s claim must be one for fungibles, and, most notably, both obligations must be identical in denomination and term.85

6.3. Case Study on Consequences for Third Parties of the Saudi Law and Practice of Agency and Representation We reviewed in section 6.2.3.1 above the contract of agency or wakāla, noting how the doctrines of agency pose risks for the third party conducting business with a principal through a person purporting to be the latter’s agent. We have seen that three issues in particular combine to give rise to such risks. The first issue is the jā’iz or prospectively revocable nature of agency, meaning that, in theory, it is continually dependent on the present consent of principal (and agent) as to its existence and terms. The second issue arises when an agent is determined to have acted without actual concurrent authority from his principal: Islamic law theory then insists that the transaction is utterly void, leading to its rescission ab initio and the restitution of the parties’ performances, if any. The third issue is that the third party bears the burden of proving the authority of the agent. Thus, it would seem that before dealing with a principal through an agent the third party must first obtain convincing evidence of the agent’s authority. If he should fail at this challenging undertaking, under strict law the principal would hold, in effect, an option on transactions, always able later to claim lack of authority in the agent leading to loss of all the third party’s gains. Given these aspects of the fiqh law of representation, all derived from revelation, one wonders how that law could be practicable, particularly in ongoing business relationships. Could such risks for third parties be the actual outcome under the Islamic law of agency, which otherwise seems so practical and adaptable? Clearly not – there must be answers in legal doctrine or practice for these conundrums; and the lesson of this case study, drawing mostly on published Saudi court decisions, is that there are. But deeper study is needed fully to account for these answers, by delving into more specialised fiqh works and into Saudi commercial practice outside the courts. In other legal systems this set of issues and challenges is resolved by theories of apparent authority – according to which, if an agent appears to possess authority from a principal, then third parties may rely on that appearance and the principal will be bound,

85 Qari-Majalla,

Arts 1155–85.

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Case Study on Consequences for Third Parties of Agency Law 6.3.1 but only if the principal was in some way responsible for creating the appearance and if the third party acted reasonably in relying on that appearance. As this case study will show, while Saudi Arabia has not embraced such a doctrine, and rather insists that authority, to be valid, must be actual, it nonetheless often reaches results comparable to those of apparent authority. In practice, at least as indicated by published decisions, in Saudi Arabia the solutions for the above set of conundrums are several, and inhabit two levels: first, solutions at the level of fiqh doctrine as applied; and second, solutions using regulatory mechanisms (ie extra-fiqh means legitimated under the constitutional doctrine of siyāsa shar`iyya described in section 2.1.3). I shall discuss the solutions according to these two levels. For both levels I shall intersperse examples from Saudi court decisions. The discussion is organised as follows: 6.3.1.

Solutions in fiqh doctrine 6.3.1.1. Three Sharia policies fortifying agency and representation a. First policy: Fiqh presumptions shifting the burden of proof to the principal to disprove representation b. Second policy: Authorisation is to be proved, and disproved, by outward circumstances c. Third policy: Reference to custom for granting or withholding authority 6.3.1.2. Some language in court opinions drawing toward an apparent authority rule 6.3.1.3. Controlling for revocation 6.3.2. Solutions through local administrative mechanisms 6.3.2.1. Notarised powers of attorney 6.3.2.2. Representation of commercial companies by registered managers 6.3.3. Some conclusions

I consider only the authority given by commercial entities (‘merchants’, including both individuals, unincorporated ‘establishments’, and companies), not by the government or by private parties in their personal or family matters. The decisions cited all come from the commercial branch of the Board of Grievances.

6.3.1. Solutions in Fiqh Doctrine Islamic legal doctrines on agency and representation, taken literally, raise doubts about their practicality, especially as to their impact on the expectations of third parties. But, on the evidence of the Saudi court decisions, at least three Sharia policies86 come together to render these doctrines workable in practice, at least in contemporary Saudi Arabia.

86 A

possible fourth policy of relevance is that parties may not offer their own testimony as proof.

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6.3.1.1. Three Sharia Policies Fortifying Agency and Representation a. First Policy: Fiqh Presumptions Shifting the Burden of Proof to the Principal to Disprove Representation As we saw in section 6.2.3.1-b above, fiqh works declare, with exemplary cases, the existence or absence of authority in various situations of agency (wakāla). We reviewed a number of such rulings – among them that an agent may sell goods for a higher price than that set by his principal or that an agent may not sell to himself. Scholars base such rulings on various grounds, among them revealed precedents, general principles (qawā`id), or even their own assumptions about what is the normal practice of their time, morally or by custom. Such fiqh rulings operate to protect principals, agents, and third parties by creating presumptions about authority that can only be overridden by a showing, by words, custom, or actions, of agreement between principal and agent to the contrary. These presumptions have an effect beyond their literal rulings in that they can shift the burden of proof from one party to another – for example, a presumption that authority exists may shift the burden of proof from an agent or third party who seeks to prove that authority to the principal who seeks to disprove it. In section 3.1.1.3-e I discussed the importance for substantive law of the allocation of the burden of proof, since the party relieved of the burden is in the favoured position of simple denial, though usually he has to swear an oath as well. In the same section, I reported the general fiqh principle that assigns this privilege to the party with the ‘stronger position’. Presumptions as to authority thus have the effect of rendering the position of one of the parties the ‘stronger’, which often suffices to reverse the outcome of the trial. A third party whose situation is analogous to a situation dealt with in fiqh works may find he is in the ‘stronger’ position in asserting the existence of agency, causing the burden of proof to shift to the principal to prove the absence of agency. In a published Saudi decision, the court refused to relieve a principal of a purchase that the principal alleged his agent had made without authority, on the ground that the agent paid more than the market price, thus acting against the principal’s interest. Rather, reflecting the fiqh presumption that an agent who sells at below market price does so validly but must recoup the loss to his principal, the court declared that the purchase was valid, and the principal can get recourse only against his agent; the court ignored allegations that the agent conspired with the seller.87 b. Second Policy: Authorisation Is to be Proved, and Disproved, by Outward Circumstances The remaining two Sharia policies go further than the last in protecting third parties from unfair repudiations of authority by principals. The first of these policies stems from a tendency in fiqh to decide issues of intent not by seeking to determine the actor’s actual subjective state, but by imputing to the actor whatever intent the outward, manifest facts indicate. On reading fiqh manuals, certainly on civil matters, one is struck by how rarely exemplary cases are explicit about inner states

87 Decision

No 28, 2 BG-Com-1428 516 (Com C No 27, Riyadh 1428 (2007)).

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Case Study on Consequences for Third Parties of Agency Law 6.3.1.1 or subjective criteria such as intent, knowledge, or due care. Some modern comparatists have noted, certainly in matters of contract interpretation, a marked ‘objective tendency’ in Islamic law to be content with outward manifestations of intent or knowledge, and to forego inquiry into subjective states.88 We see this tendency confirmed in the Saudi cases on representation, where courts decide questions of authority – actual authority – according to outward circumstances, and not by trying to plumb the parties’ subjective intent or knowledge.89 The following are some of the fact patterns in which Saudi decisions find authority based on outward circumstances: when a principal gives his agent the seal and business forms of his business (this is also often called a matter of ‘custom’);90 when he provides his agent with permissions he needs to represent him;91 when he puts the agent in his shop and allows him to deal;92 when the agent has dealt with the principal before with his consent;93 when the principal observes the agent dealing with his goods such that ‘custom’ would require him to object were the agent not authorised;94 when the agent had earlier signed the contract;95 when the principal is in possession of some of the goods purchased by the agent;96 when the principal has paid part of the price of the transaction;97 and when the principal has transacted in the goods.98

88 `Abd al-Razzāq al-Sanhūrī (d 1971), Maṣādir al-ḥaqq fī al-fiqh al-islāmī: dirāsa muqārana fī al-fiqh al-gharbī, 6 vols (Cairo: Dar Iḥyā al-Turāth al-`Arabī, 1967) see eg 1:77 (citing also Chefik Chehata), 6:30. Sanhuri writes: ‘[W]e shall see that this objective tendency (al-naz`a al-mawḍū`iyya) that rules the Islamic fiqh has a great influence on its fundamental principles and on the details of its rulings’. Ibid 1:77. This is not to say that Islamic considers intent or knowledge unimportant; the opposite is shown by its rejection of formalism and literalism in contracts. See Maḥmaṣānī (n 66) 2:282–85. Its objectivity seems more to do with a preference that the judge (and contracting parties) rely on what is manifest (ẓāhir) rather than what is hidden (bāṭin), leaving the latter to regulation by religious scruple and to the judgment of the Hereafter. The Prophet warned any litigant to whom he may adjudge an undeserved judgment not to take it, for it is but a ‘piece of the Fire’. Bukhari, Muslim, Abu Dawud, Tirmidhi, Ibn Maja. Thus, counter-intuitively, the fact that Islamic law is a religious law, governing both worldly and other-worldly outcomes, contributes to this tendency. For examples of the same tendency even in the area of tort and crime, see Chapter 4, text at nn 17–20. 89 Decision No 51, 3 BG-Com-1432 724 (Com C No 21, Jedda 1432 (2010)), explains why the law relies on the ‘apparent intent’ (al-`ibra bi-al-irāda al-ẓāhira). 90 See, from many examples, Decision No 152, 2 BG-Com-1435 1035 (Com C No 4, city unknown 1434 (2012)); Decision No 23, 2 BG-Com-1433 808 (Com C No 2, Dammam 1433 (2011)); Decision No 63, 3 BG-Com-1430 1067 (Com C No 15, Dammam 1429 (2008)); Decision No 317, 2 BG-Com-1429 805 (Com C No 12, Jedda 1428 (2007)). A case to the contrary rejects a claim of authority based only on such appearances (ẓāhir al-ḥāl, al-waḍ` al-ẓāhir) when a sponsored worker (makfūl) was subsequently and separately convicted of using fraudulent means to do business in the name of his sponsor (kafīl). Thus, the loss from such activities fell on the plaintiff customer who failed to get positive proof of the worker’s authority, rather than on the defendant sponsor who failed to discover that his own worker was engaged in fraud and self-dealing. Decision No 171, 3 BG-Com-1408–1423 197 (Com C No 10, Jedda 1416 (1995)). 91 Decision No 207, 1 BG-Com-1431 1911 (Com C No 5, Riyadh 1429 (2008)). 92 From many examples: Decision No 51, 3 BG-Com-1432; Decision No 57, 2 BG-Com-1435 1045 (Com C No 11, Riyadh 1435 (2013)); Decision No 35309443, 1 Gen-1435 175 (Mecca 1435 (2013)). 93 Decision No 49, 3 BG-Com-1408–1423 313 (Com C No 11, Jedda 1418 (1997)). 94 Decision No 209, 2 BG-Com-1428 450 (Com C No 12, Jedda 1427 (2006)). 95 Decision No 162, 2 BG-Com-1435 631 (Com C No 5, Jedda 1434 (2012)). 96 Decision No 109, 3 BG-Com-1408–1423 220 (Com C No 15, Dammam 1418 (1997)). 97 Decision No 49, 3 BG-Com-1408–1423. 98 Decision No 66, 2 BG-Com-1433. The last three of these examples allow for another interpretation, as the courts acknowledge: that of post-hoc ratification by the principal of an unauthorised transaction. Ratification here may be invoked in a looser sense than in the case of the fuḍūlī discussed above, where strict limits apply to ratification. Here it may be seen more as proof of an inchoate earlier authorisation. But the result is similar: the principal is bound.

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As an example of a decision rejecting a claim of authority based on outward circumstances (ẓāhir al-ḥāl), a court held that the fact that a person had paid over the plaintiff ’s initial investment in a partnership was insufficient to establish that person’s authority also to receive the plaintiff ’s share of the partnership’s profit; the court required the defendant to pay the profit a second time.99 c. Third Policy: Reference to Custom for Granting or Withholding Authority If the protection of third parties relied solely on the previous two Sharia policies, it would go only so far. Even given the objective tendency in fiqh, fiqh still conceives of authority as depending entirely on the understanding between the principal and his agent, without reference to the third party. Thus, even if circumstances evidence or imply the principal’s consent, in theory the principal would remain free to prove a contrary explicit private understanding between him and his agent – such as by a document predating the transaction that denies the agent any authority over transactions of that type. Something else seems to be needed to fortify authority vis-à-vis third parties – and to explain the actual Saudi cases, where courts neglect even to ask about agreements or grants of authority private to the principal and agent. It seems that much of the explanation of this result lies in the concept of custom (`urf or `āda; sometimes al-ghālib, meaning ‘the predominant’ state of affairs). Custom is a frequent reference point in fiqh discussions of agency, and it is pervasively mentioned in the Saudi decisions – indeed, those just cited in the previous section include references to it. Whether or not a custom exists that applies to a situation before the court is itself a question of fact to be proved to the court. If in doubt about such a fact, a court will obtain testimony as to the custom’s existence and content from experts on the relevant commercial context. In Saudi Arabia courts may call on experts from the local Chamber of Commerce. To understand a custom’s centrality to fiqh outcomes, when it is found to exist, let us take the everyday situation where a salesman stands behind the counter of a shop conducting the routine transactions of a business. It would be impracticable in the extreme for every customer to demand formal proof, admissible in court, that the principal has granted the salesman the relevant actual authority. Hence, as Saudi judges acknowledge, custom has formed that authority in such a situation is established by the circumstances into which the principal has placed his agent, and not by private agreements, documented or otherwise, between the principal and the agent. If the principal were to come forward, after a transaction had been entered into by his salesman agent, with a private document negating the agent’s authority, a court would reject the document as irrelevant; such an agreement is not – by custom – the means by which this type of authority, or its denial, is normally established. Let us note that, at least in the self-understanding of fiqh, the issue remains one of actual authority – the agreement of the principal and agent. Where customs can be identified by which, in practice, actual authority is established and negated in particular ways, fiqh upholds those customs, determining actual authority thereby. Thus, even where such customs exist (not to mention where no custom at all is identified), the reasoning process

99 Decision

No 242, 10 BG-Com-1408–1423 173 (Com C No 9, Jedda 1414 (1993)).

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Case Study on Consequences for Third Parties of Agency Law 6.3.1.1 remains distinct from that under apparent authority, since for the latter the existence or non-existence of actual authority is not the issue. It should also be noted that customs, where they are shown to apply, do not determine authority formalistically or mechanically. Even when honouring a custom, the courts do not lose sight of their substantive goal – to determine whether the principal endowed his agent with actual authority. Thus, a claim of authority based on a custom is only presumptive; the principal can still produce evidence to show the custom does not apply – for example, by showing that not he but one of his employees put the purported agent behind the counter, the employee acting outside his actual authority in doing so, or that the third party’s transaction with an employee was not in fact routine. A striking example of a custom given recognition by the Board of Grievances in its commercial branch concerns whether or not authorisation to an employee to buy and sell on one’s behalf extends, as a matter of custom, to buying or selling on credit (nasī’an or bi-al-ajal). In an opinion of reversal or cassation (naqḍ) – one of the types of higher court decision that lower Board of Grievances judges (of the same region) consider binding on them – the Riyadh commercial appellate court100 reversed a decision holding a commercial establishment liable on the basis of acknowledgements of debt signed by an employee of that establishment and sealed with the seal of the company. The appellate court observed that the plaintiff had no proof that the person with whom it dealt was authorised to purchase on credit, as opposed to cash. It stated: While transactions with workers of establishments and companies and such like are binding on the owner of the establishment or company in the case of dealings in cash or by barter, as is the custom prevailing among the people, they are not binding when the transaction is on credit, except when it is done with one who has standing (ṣifa) to transact or who has been delegated in an official manner or by acknowledgment of the establishment or company to do that transaction. Anything other than that is considered a wrongful and negligent act the consequence of which is borne by the one who commits it. He must pursue the one with whom he dealt and to whom he delivered the goods.101

The same result is reached in a number of decisions, both before and after the Review Board’s pronouncement.102 In one of them the court declared that, by custom, the plaintiff bears the burden of proving that the employee had authority to transact on credit: ‘delegation does not include transacting on credit except by an explicit statement proving it. The plaintiff did not present any document conveying [such delegation].’103 Another decision affords a different example of a custom that, like the one against transacting on credit, negates the authority of an agent whom circumstances otherwise indicate is authorised. A principal sued the customer for payment, but the customer had already paid the principal’s agent. But since the customer made payment by checks made out to the agent

100 Included in the panel was Shaykh Muhammad al-Dawsari, later to be the chief justice of the Supreme Administrative Court. 101 Decision No 23, BG-Com Unpub (BG Review Bd C No 3, Riyadh 1428 (2007)). 102 Decision No 34, 2 BG-Com-1424–1427 14 (Com C No 21, Medina 1426 (2005)); Decision No 12, 2 BG-Com1428 438 (Com C No 22, Medina 1427 (2006)); Decision No 69, 3 BG-Com-1430 926 (Com C No 6, Riyadh 1430 (2008)); Decision No 61, 2 BG-Com-1432 544 (Com C No 21, Jedda 1431 (2009)). 103 Decision No 12, 2 BG-Com-1428.

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personally, the court declared that, according to custom, an agent has no authority to accept payments in this fashion. The customer was obligated to pay again.104 Two other decisions, however, are examples of how a presumption based on custom as to authority or its absence can be overcome. In both, a third party overcomes the customary presumption against authority to deal in credit by offering circumstantial evidence that the principal implicitly authorised the transaction in question, though he now denies it. In the first decision, the defendant admitted that he gave over his gold shop to certain employees, along with his commercial records and a quantity of gold, empowering them to buy and sell – though not, he claimed, on the basis of credit. The plaintiff claimed he ‘sold’ gold to the defendant’s shop to be reworked, paying over also a fee for the labour of reworking. He obtained receipts for these sums signed by the employees. One or more of the employees thereafter embezzled the gold and fled. The plaintiff sued to regain the value of the gold and the labour fee. The shop’s records showed the receipt of the sums and even a partial repayment to the plaintiff. In his first opinion the trial judge rejected the plaintiff ’s claim (effectively obliging the plaintiff to pursue the employees for any recovery). He found that the circumstances did not overcome the commercial custom against authority to deal on credit; besides, to buy gold on credit is void for ribā, and so no valid authorisation to do so could be given in any event. The appellate court reversed the decision, holding, to the contrary, that the special circumstances indicating actual authority outweighed the custom.105 On remand the trial court gave judgment for the plaintiff, noting a statement by Ibn Taymiyya that a principal who observes his agents performing certain acts and later renounces one of those acts as unauthorised commits an aggression against the people and becomes liable.106 In the second decision, the trial court found many indications that the principal was aware of and condoned his employees trading by credit, including his receipt of some of the proceeds; moreover, no proof was brought forward that the employees were profiting personally. The appellate court twice reversed the trial court, insisting on the customary position requiring positive proof of such authority, but the trial court remained firm, and in the end its view of the case was affirmed.107

6.3.1.2. Some Language in Court Opinions Drawing Toward an Apparent Authority Rule So far all the decisions we have reviewed, even those relying on customs about authority, purport to decide only on the existence or non-existence of actual authority. Yet their results do draw close to those of a doctrine of apparent authority. This is because, in many

104 Decision

No 99, 4 BG-Com-1431 2037 (Com C No 6, Riyadh 1431 (2009)). appellate decision and the second trial decision are equivocal on what sort of transaction was indeed involved, and whether transactions of this nature in gold shops meet formal Sharia requirements. The plaintiff called the transaction a ‘sale’, which, for later payment in gold, would directly offend Sharia. But the final outcome seems not to depend on this issue, but rather on the defendant’s obligation to be aware of the nature of the business his employees were conducting, whether sale on credit or otherwise. 106 Decision No 431, 3 BG-Com-1431 1220 (Com C No 9, Jedda 1430 (2008)). In an earlier decision about a gold shop, the decisive factor was that sale of gold for later payment is void, and thus cannot be authorised. Decision No 126, 3 BG-Com-1408–1423 181 (Com C No 9, Jedda 1414 (1993)). 107 Decision No 317, 2 BG-Com-1429 805 (Com C No 12, Jedda 1428 (2006)). 105 The

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Case Study on Consequences for Third Parties of Agency Law 6.3.1.2 situations such as those of the decisions cited here, Saudi law in effect holds that the act of bestowing certain objective indications of authority on an agent – the very kind of indications that establish apparent authority in other legal systems – creates not just apparent but actual authority, and this without need for other proof of the parties’ intent or agreement. But, again, the proximity we observe here between different legal systems is in terms of results. As to doctrines a wide gap persists: one doctrine is unconcerned about whether actual authority exists; the other professes to be concerned solely with actual authority. Some Saudi cases, while deciding on one of the grounds already reviewed, sometimes include one or another justification discordant with the general theme that the court is concerned with actual authority. Four such extra justifications appear. But in all these cases, these justifications appear to be obiter dicta, not essential to the result, since the opinions also rely on arguments drawing on one or another of the three policies discussed above. The first of these four justifications resembling apparent authority is an argument that, if the principal did not actually mean to endow his employee or agent with the authority that outward circumstances show, then he was negligent (mufarriṭ) and should bear the consequence, instead of shifting it to the third party.108 (The consequence he faces is not, however, liability in tort, but being bound by the agent’s transaction.) His recourse is solely against his agent. Suggested here is a theory that upholds authority even when it does not exist, without concern for the issue of actual consent, just as in the theory of apparent authority. This reminds one obliquely of the second and third of the five alternatives mentioned in section 6.2.3.1-c above for remedying an act taken by an agent without authorisation. Under both the second and third alternative, fiqh holds the agent liable to the principal for any harm from his unauthorised act, but the transaction with the third party stands, whether or not it is in theory void. The second justification refers to the injustice of allowing a principal to create an appearance of authority in someone and then not honour it, and, reciprocally, the justice of honouring the expectations of third parties who rely on that appearance. Two cases mention this logic.109 But again, both of these cases rely on other grounds as well. A third justification, related to the last, is to cite a fatwa from Ibn Taymiyya, as did the court in a decision recounted just above.110 In this fatwa Ibn Taymiyya declares that a principal who observes his employee trading on his behalf cannot claim he did not authorise him; rather, this is a form of fraud on the public making the principal liable, as if in tort.111 But the situation Ibn Taymiyya’s fatwa addresses is one where the Saudi courts would easily find implied authority, and this is the context in which they quote him. Ibn Taymiyya’s point does resonate, however, with one of the arguments commonly raised in support of the doctrine of apparent authority, and with the second justification arguing from fairness. The fourth justification involves invoking a modern theory, chiefly Egyptian in origin, of respondeat superior, called mas’ūliyyat al-matbū` `an af`āl tābi`ih (‘the responsibility of 108 Decision No 100, 2 BG-Com-1432 984 (Com C No 28,Riyadh 1432 (2010)); Decision No 98, BG-Com Unpub (Com C No 2, Dammam 1433 (2011)). 109 Decision No 100, 2 BG-Com-1432 (2010) (court mentions that the principal’s claim involves ‘loss of rights and fleeing from responsibility’); Decision No 35, cited in Aḥmad al-`Ubūdī, ‘Ṭuruq al-ithbāt fī al-qaḍā’ al-tijārī wa-taṭbīqātuhā fī al-Mamlaka al-`Arabiyya al-Sa`ūdiyya’ 219 (BG Review Bd C No 4, Riyadh 1411 (1990)) (court mentions the right of third parties to rely on appearances contributed to by the principal). 110 Decision No 317, 2 BG-Com-1429. 111 Ibn Taymiyya (n 29) 30:69–70.

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the superior for the acts of his subordinate’). Chapter 9 provides a case study on respondeat superior in Saudi Arabia, where this theory features prominently. Twelve published decisions cite this theory when deciding the authority of an agent in the face of its repudiation by the principal; many of these decisions have already been analysed above. The factual inquiry and reasoning of the courts that do mention the theory is no different from those of courts that do not;112 courts that do mention the theory do little more than name it, never conducting a lengthy inquiry along the lines of its own criteria whatever they are. It is unclear how a theory used for deciding an employer’s responsibility for the torts of his employee – decided by very different criteria than is authority – can help in deciding authority, whether actual or apparent. Rather the theory seems to serve merely as a label for a conclusion – reached in many of the decisions reviewed above – that a principal may not evade authority established by outward circumstances.113 Perhaps in Egypt it plays a role in a doctrine like that of apparent authority. A fuller inquiry would require research on its usage in Egyptian law.

6.3.1.3. Controlling for Revocation Just as custom and the tendency to demand objective proof help protect third parties in matters of authority, they can also protect third parties from claims that an authority previously established has been revoked. For example, as noted above in sections 6.3.1.1-b and 6.3.1.1-c above, if some outward circumstance is routinely considered – by judicial practice or commercial custom – presumptive proof of authority, to the point of disregarding any private understanding the principal may have with his purported agent, then a revocation of authority will equally need to address that same circumstance. For example, if it is judicially or customarily presumed that an employee who holds the company’s seal is authorised, then it will equally be presumed that an employer wishing to revoke his authority will regain that seal from him. Similarly, custom may have formed around the need, if one wishes to revoke, to notify the agent or third parties who, the principal knows, rely on the authorisation. A Saudi case so holds.114 Such a result would overcome, through custom, the general fiqh doctrine, mentioned in section 6.2.3.1-a above, that a principal’s revocation is effective at once, even without his agent or third parties knowing of it. Generally, as we saw in section 6.2.3.1-a above, the Hanbali school strongly insists on the tenet that agency and representation is continuously liable to one-sided revocation by the principal (or by the agent). Other schools than the Hanbali may offer more pragmatic

112 It is even the case that, for many cases (we found ten) from among those that do not invoke the doctrine, the editors of the published volumes – who (one gets the impression) favour Egyptian legal conceptions – mention the theory in their superadded headnotes. 113 Decision No 23, 2 BG-Com-1433. 114 Decision No 212, BG-Com Unpub Ajlan (BG Review Bd C No 4, Jedda 1415 (1994)). This is, however, in the context of a notarised power of attorney, to be discussed in section 6.3.2.2 below, where judicial custom fortifies the obligation to inform third parties. Confirmation of such a custom, at least for notarised powers of attorney, is found in a principle extracted from a 2005 Supreme Court decision and published in Ministry of Justice-Principles of Highest Courts-2016, No 162. It reads in full: ‘The transaction of the agent remains in force against his principal as long as the fact that he is barred (man`) from transacting is not made known (ya`lun).’ Given the context in this publication, it is not clear whether this principle is meant to apply to all forms of agency (wakāla) or only to notarised powers of attorney (also called wakāla).

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Case Study on Consequences for Third Parties of Agency Law 6.3.2.1 doctrines on this point. In the Hanafi school, a revocation takes effect only on the agent’s learning of it.115 As just seen, Saudi judges may arrive at the same result by denying the existence of a revocation that does not meet customary expectations. Also, in the Hanafi school, if an agency involves the interests of third parties, it is irrevocable.116 As a general rule this view is not supported by the late Hanbali school. But it sees some application in Saudi Arabia, such as in the appointment of an agent to receive contract proceeds as security for debt. Somewhat indirectly, another ruling, found in other schools but attested in some Hanbali sources,117 operates to deter arbitrary revocations: when an agent is damaged by an unfair untimely revocation, such as a revocation occurring just before an event earning the agent a commission, a judge might choose to award the agent compensation for actual losses or expenses incurred.

6.3.2. Solutions through Local Administrative Mechanisms The preceding discussion has concerned general Sharia principles and policies, all part of the civil law and practice of Saudi Arabia, that operate to fortify authority in practice. Decades ago the Saudi Arabian legal system acted to supplement these provisions with two administrative mechanisms which parties can use to ensure the presence and persistence of authority. As we shall see, these mechanisms have undergone further evolution as commercial customs have formed around them.

6.3.2.1. Notarised Powers of Attorney The first of these two mechanisms is the notarised power of attorney. Notaries public (kuttāb `adl, singular kātib `adl), a body of officials appointed and regulated by the Ministry of Justice, have the function of reviewing for legality, authenticating, and keeping records of various legal acts including delegations of authority to others. This institution is an amalgam of the historical fiqh practice by which courts appointed so-called `adl witnesses, persons pre-certified as credible witnesses who could be called on to attest documents and court records,118 and the French notary public. According to nizam provision, a document that has been attested and recorded by a notary is conclusive proof of the authenticity of its contents, making it admissible in all courts and official settings.119 One of the documents most frequently notarised is the power of attorney. Commercial and judicial custom have adapted the notarised power of attorney into a mechanism for creating a reliable form of authority. By custom enforced by judges,120 a principal who has revoked, or wishes to revoke, the authority of his agent who holds a notarised power of attorney must not only revoke it on the records of the notary, he must also make efforts to inform his agent of the

115 Ottoman-Majalla,

Art 1523. Art 1021. 117 See `Abd al-Raḥmān Ibn Rajab (d 1393), al-Qawā`id fī al-fiqh al-islāmī (Cairo: Maktabat al-Kulliyāt al-Azhāriyya, 1971) Principle No 60. 118 See E Tyan, ‘`Adl’, in Encyclopaedia of Islam [New Edition] (Leiden: Brill, 1960–2004). 119 Nizam of the Judiciary-2007, Art 80. 120 Decision No 212, BG-Com Unpub Ajlan. 116 Ottoman-Majalla,

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termination and recover from the agent the original copy of the notarised power. He is also expected to make the revocation known by publishing his retraction in newspapers and notifying any parties that he knows are relying on the power.121 Absent such efforts, principals cannot prove the genuineness of their claimed revocations. As a result of these policies, a party that is shown an original notarised power of attorney by a purported agent the terms of which cover the transaction in question may engage with that agent with confidence that he binds the principal. This creates a zone of positive authority, limited only by the explicit terms of the power. This process has recently been further refined, using an internet database of notarised powers of attorney. For at least some powers, it is possible for the third party to instantly confirm online, through the website of the Ministry of Justice, whether the power remains in force, and to verify its current terms. Reportedly, if the third party fails to check the power’s validity in this way, that may serve as a circumstance (qarīna) suggesting that he was negligent in relying on the power. Also, as reported, if a party has registered a power of attorney online, the system will inform the agent by email immediately if the principal revokes his power. This is an example of the kind of facilitation of judicial process using the internet and modern technology which has been under way for some years, but is now greatly accelerated under auspices of the Vision 2030 program.

6.3.2.2. Representation of Commercial Companies by Registered Managers The second mechanism is somewhat similar. By statutory and regulatory means, aided by custom, a zone of positive authority is created around the acts of legally appointed and publicly registered managers of commercial companies. The Companies Nizam of 1964 and 2007 and the Nizam of the Commercial Register of 1995122 require companies to designate particular officers who shall possess sole authority to bind that company, and further make the identity of these officers a matter of positive public record. Further, these laws require that any revocation or amendment of the authority granted these officers shall have no effect against third parties unless that change is also accomplished in the same formal and public manner. The following discussion focuses on managers of general partnerships and limitedliability companies, leaving aside the other types of commercial company including the joint-stock company. The discussion describes the long-established situation under the 1965 Companies Nizam (the one to which cited cases relate). There is no indication in the text of the 2015 Companies Nizam that suggests any change in the status quo. The Companies Nizam creates the office of ‘manager’ or ‘director’ (mudīr) and defines it precisely, declaring that the manager holds all powers to represent and bind the company, with certain stated exceptions. Starting from this, partners may in the articles founding a company or by a separate agreement of partners assign specific powers or limit the authority of particular managers.123 121 See

n 114 above. al-sijill al-tijārī, Royal Decree No M/1 dated 21/2/1416 (20 July 1995). 123 Companies Nizam-1965, Arts 27, 167. General partnerships may in their articles or separate agreement of all the partners create collective boards of managers and set the rules by which they take decisions. For example, a partnership may name several managers and require them to act in certain matters as a group, such as by votes. 122 Niẓām

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Case Study on Consequences for Third Parties of Agency Law 6.3.2.2 After formation and filing of its articles, a company must apply for entry into the Commercial Registry, for which it is required to supply copies of its Articles and other documents and certifications. If any information provided in applying for a commercial registration is later amended, then the partnership must repeat this process to amend its commercial registration. Article 3 requires that this filing specify: The names of the managers of the company and the signatories on its behalf and the place and date of birth of each, his address, nationality, and a specimen of his signature, and a statement specifying the extent of their powers with respect to management and signature, and specifying the actions which they are not authorised to take (if any).

The information on a company in the Commercial Registry is available to the public. The information required to be registered has binding legal effect both for and against the company in its dealings with third parties. As the Commercial Registration Nizam, Article 13, states: The data recorded in the Commercial Register is considered a proof for or against the merchant as of the date on which it was registered. No data that is required to be recorded or registered may be used as proof against any other party, unless such an action is taken. However, such other party may use this data against the merchant or the company if that party has an interest therein.

Thus, a Saudi Arabian company may declare itself not bound – ie it may invoke the Commercial Registry ‘against’ a third party – if a third party transacted with a person who is not named as a manager of the company in the commercial register or with a manager but outside his published authority.124 This is unless the company had in fact internally designated that person as a manager or granted him the relevant powers, and the third party knew of these arrangements. This provision gives a statutorily enforced power to partners or shareholders to control exactly as to what matters their manager may represent them.125 The original conception of these laws may have been that all needed information about the identities of its managers and their authority would appear on the registry. But, whether this is true or not, commercial custom has deviated from that intent. Now, rather than rely  entirely on a commercial registration certificate (even though the information in it is binding on the company),126 the practice is that third parties dealing with a company in any significant transaction will ask the company for a copy of its articles of association and of any other document defining the authority of any individual with whom they are dealing. Then, as practitioners have repeatedly verified to me, the third party will verify, by examining the commercial registration and documents obtained from the company, that the proposed transaction falls within the stated powers of the manager. If it does not, then the third party must demand specific authorisation from the company, a step requiring the agreement of all the partners.

124 It is also not bound if the transaction in question is ultra vires, is outside the powers of the company as stated in its founding documents. Practitioners also check those powers carefully before entering into an agreement. 125 Largely parallel provisions obtain in the Companies Law of Egypt, from which the Companies Nizam was largely borrowed. In publications both in 1964 and in 2006 an authority on Egyptian commercial law confirms a parallel result, concerning collective name partnerships. Muṣṭafā Kamāl Ṭāhā, Asāsiyyāt al-qānūn al-tijārī : dirāsa muqārana (Beirut: Manshūrāt al-Ḥalabī al-Ḥuqūqīya, 2006) 352; see also Muṣṭafā Kamāl Ṭāhā, al-Wajīz fī al-qānūn al-tijārī (Alexandria: Munshaʾat al-Maʻārif, 1964) 190–91. 126 Commercial Registry Nizam, Art 13, and explanatory memorandum thereto.

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Contracts: General Categories and Specific Types

A published case affords an example. The plaintiff in the case claimed he had entered into an exclusive agency agreement orally with the ‘deputy director’ of the defendant company. The court stated: After review by the circuit of the articles of the defendant company it became clear that they lack any provision granting the deputy director the right to contract in its name with third parties. It has also not issued any decisions granting the deputy director this right, according to the report of the director. Accordingly, it is not possible for the deputy director to contract with the plaintiff as stated in the complaint. Also, the deputy director of the defendant denies that he agreed with the plaintiff [for him] to be an exclusive agent.127

What does it mean for the information in the Commercial Registry as to a manager’s powers to be used ‘against’ the Company? Another clause in Article 29 governs this point: [T]he partnership shall be bound by all acts performed by the manager under its style [ie name] and within the limits of his powers, even though he uses the partnership signature for his own account, except when the persons with whom he entered in contract had malicious intention [were in bad faith].

In other words, given that the manager’s powers are required by law to be registered and made available to the public, an act by a duly named and publicly announced manager that falls within his powers, also publicly announced, does bind the company, this unless the third party knew that the manager was acting outside his authority.128 Three published cases show the commercial branch of the Board of Grievances upholding these provisions, binding companies to acts of their managers despite their claims that the managers’ acts were unauthorised.129 So far, like the law itself, we have assumed that only lawfully designated managers acting within their powers and within the objects of the company can bind the company, such that third parties who deal with a company outside these limits do so at their own risk. But in the real world, managers obviously need to use many subordinates to whom they delegate their powers. But concerned over the possibility that the registry be invoked ‘against them’ for dealing with a non-manager, third parties take pains to ensure that, if they deal with any other officer of the company, they first obtain positive proof that that officer is acting on behalf of a registered manager (such as a power of attorney from the manager) and within the latter’s powers. They also assure themselves that the shareholders have empowered the manager to delegate his own authority to others. Alternatively, they obtain a resolution from the shareholders of the company authorising their specific transaction. They do this even in the case of officers whose titles suggest authority, such as ‘deputy manager’ or ‘branch manager’ – this as long as those individuals are not authorised through formal acts of a nature required to be filed with the Commercial Registry. While companies may sometimes dispense with these precautions relying on past practice or established relationships, they do so at their own risk.

127 Decision No 34, 2 BG-Com-1428 883 (Com C No 2, Riyadh 1428 (2007)). The company was a commercial company under the Companies Nizam but the type is unknown (this information is redacted in the published opinion). 128 The same result applies in Egypt. Ṭāhā (n 125) 350. 129 Decision No 118, 2 BG-Com-1435 797 (Com C No 3, Riyadh 1434 (2012)); Decision No 201, 12 BG-Com1408–1423 67 (Com C No 15, Dammam 1410 (1989)); Decision No 28, 2 BG-Com-1428.

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Case Study on Consequences for Third Parties of Agency Law 6.3.3 Obviously, the system for binding companies as so far described would be utterly impractical if it were applied to any but the most consequential transactions. Some means must exist by which companies and third parties can transact more freely; commercial companies in Saudi Arabia conduct hundreds of thousands of transactions daily that bind them without their customers taking any of the above steps. As to these routine, everyday transactions, the system relies on the fiqh-based system of implication or presumption of authority from circumstances and custom discussed above in this case study, which serves as the Saudi counterpart to apparent authority in other systems. For such smaller or routine transactions, evidence of a person’s authority can arise from circumstances such as those discussed above, or even from his holding an appropriate title or position within the corporate structure. In this way, for Saudi Arabian commercial companies, whether through custom or explicitly by statute, the result is, for their more substantial transactions, a relative safe haven where actual authority is presumed, surrounded by a sea where the absence of authority is presumed. Given this system, a company need not fear, or police for, major transactions by any of its agents who lack such positively proved legal authority;130 it knows third parties will come to it or its managers for further proof of authority before transacting. Conversely, a third party dealing with a non-manager in a substantial or non-routine transaction who lacks positive proof of that person’s authority knows (or is held to know) that, by custom, he risks being seen as complicit in an unauthorised act, rather than as its victim. It is important to note the extent to which the crucial determinant for all these results turns out, in the end, to be neither statute nor Sharia rules, but rather commercial custom. For example, custom has added to the originally intended statutory scheme of commercial registration, such as in requiring parties to obtain not only the registration certificate but also the company’s articles from the company. Also, as to whether a manager has delegated his authority to a non-manager, there is no specific statutory requirement as to proof of that authority, yet custom for significant transactions requires third parties to obtain positive documentary proof of it. Indeed, it seems fair to say that both of the Saudi administrative mechanisms for rendering actual authority more stable and predictable we have discussed – the system of notarised powers of attorney and the system of binding public notice of the identities and powers of managers of companies – have been overtaken by commercial custom, or that custom has absorbed them into itself. It may even be fair to say that commercial custom, working in and through the various jurisprudential and legislative mechanisms just explained, is the decisive criterion of the authority of agents of commercial companies in Saudi Arabia.

6.3.3. Some Conclusions We have reviewed authority at two levels: first, authority as established by the general fiqhbased common law of the Saudi commercial courts; and second, authority as regulated by two state administrative mechanisms. 130 See Decision No 271, 3 BG-Com-1430 1204 (Com C No 15, Riyadh 1429 (2008)). A mere employee signed an exclusive marketing agreement. The court held that the third party had failed to establish authority in the agent, because custom does not support that a transaction of such seriousness would be entered into in such a fashion.

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Contracts: General Categories and Specific Types

At the first level, a major conclusion to be drawn is the vital role of commercial custom in this aspect of Saudi business law. Fiqh declares that custom often completes the parties’ agreement, as many maxims state – such as ‘custom is like a stipulation’ (al-ma`rūf `urfan ka-al-mashrūṭ sharṭan),131 ‘permission by custom takes the place of actual permission’ (inna al-idhn al-`urfī yaqūm maqām al-idhn al-ḥaqīqī),132 and even ‘custom decides’ (al-`āda muḥakkama).133 Clearly, these maxims need to be taken quite literally. The role performed by the doctrine of apparent authority in other legal systems is clearly in the Saudi system being met chiefly by commercial custom, to the degree that those customs are generally known to businessmen and to courts, well defined, and stable. Even systems of apparent liability rely on custom,134 since otherwise their logic is circular: what would justify a third party’s relying on an appearance of authority if there were not already a custom that the appearance in question connotes actual authority? If one deals with a bank’s ‘branch manager’ and claims his authority, but by custom such officers can bind the bank only in routine transactions, the apparent authority is thus also limited. Again, the chief difference between the approaches – the Saudi approach and that of doctrines of apparent authority – may be doctrinal: whether the framework of authority upheld by customary expectations is considered actual authority or only an appearance treated as actual, disregarding whether it is or not. It is impossible to state, without empirical research in two legal systems, one Saudi and one from elsewhere, whether the Saudi solution is less reliable or comprehensive than a solution based on a doctrine of apparent authority. It does seem that the Saudi approach is more ad hoc or piecemeal, dependent on proof of specific customs that a judge will agree reflect actual authority. Another conclusion may be drawn from the case study but is less explicit, and more of an impression from the court decisions as a group. In a way it supplements other tendencies toward enforcing the appearance of authority. This is that courts now tend, as the norm in suits between a principal and a third party over an act of an agent that the principal claims was unauthorised, toward the third of the five alternative remedies for an unauthorised act discussed in section 6.2.3.1-c – namely, that, whether or not it was actually authorised, the transaction should be treated as if it were valid and the agent held liable to his principal for losses caused. But this seems to apply only if the third party can be excused of negligence in relying on appearances. The courts may simply be less interested these days in a doctrinal point which – as shown in that section – was insisted on in the traditional law: that as a matter of revealed principle an unauthorised act is void and must be rescinded if possible. If so, then it becomes less critical to decide whether authority exists in fact. In today’s climate of complex transactions difficult to unwind, and of the need to rely on agents without means easily to verify their authority, perhaps one must expect such a result. But, still, it can only

131 Ottoman-Majalla,

Art 43. Decision No 271, BG-Com Unpub (Com C No 15, Dammam 1429 (2008)). Qudāma (n 43) 6:606. 133 Ottoman-Majalla, Art 36. 134 Danny Busch and Laura J Macgregor (eds), The Unauthorised Agent: Perspectives from European and Comparative Law (Cambridge: Cambridge University Press, 2009) 189, 396 (as in ‘appointment to a position in which it is usual to have certain authority’); William Bowstead, Bowstead and Reynolds on Agency, 18th edn, ed FMB Reynolds, with the assistance of Michele Graziadei (London: Sweet & Maxwell, 2006) 364–65 (‘where it is notorious that usual authority is specially limited by trade usage, e.g., in particular markets, there may be no apparent authority’). 132 Ibn

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Case Study on Consequences for Third Parties of Agency Law 6.3.3 supplement at the margins, not supplant, the systems for determining actual authority described above; otherwise much of the protection those systems – particularly custom  – afford principals would be undone. Despite these findings of rules and practices fortifying authority and protecting the expectations of third parties, a word of caution is needed. While Saudi courts may seem ready to honour authority as it appears from outward circumstances and from custom – authority from the perspective of third parties – to the neglect of any inquiry into the private understandings of principal and agent, this tendency is nowhere stated as such. In legal principle inspired by revealed norms, and therefore also in explicit doctrine, the crucial criterion in fiqh – the criterion that alone makes the agent’s transactions legitimate – is the principal’s willing consent, the authority he actually granted. As we have seen, fiqh discussions make scant reference to the third-party perspective, and refer even to custom merely as one way among others to discover that actual authority. In published decisions we find judges discussing appearances and circumstances without distinguishing which of them the third party was exposed to or relied on. Perhaps because of these ambiguities in fiqh doctrine, and some resulting lingering insecurity of representation or agency, the Saudi system felt it necessary decades ago to adopt the two administrative mechanisms discussed above in section 6.3.2 to generate forms of authority that can safely be relied on. These mechanisms do not depend on apparent authority – rather they create safe harbours of statutorily enforced positive authority. In the case of the registered manager, the safe harbour is made all the more significant by being surrounded by a sea of legally prescribed non-authority. Until today businessmen and commercial entities, and those who deal with them, seem to feel the need for these institutionally secured means to establish, preserve, and police authority, and custom has expanded to embrace and develop them.

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7 Theories of Liability 7.1. Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts .........224 7.1.1. Ghaṣb – Wrongful Seizure of Property, Usurpation.........................................225 7.1.2. Itlāf – Wrongful Destruction of Property ..........................................................240 7.1.3. Other Named Torts: Breach of Amāna, Fraud, Embezzlement ......................249 7.2. Liabilities Arising from Breach of Contract in Traditional Fiqh .................................250 7.2.1. Specific Performance ...........................................................................................250 7.2.2. Rescission for Default ...........................................................................................251 7.2.3. Damages .................................................................................................................252 7.3. Liabilities Arising from Breach of Contract in Modern Saudi Arabia ........................261 7.3.1. Damages .................................................................................................................262 7.3.2. Rescission for Default ...........................................................................................265 7.3.3. Specific Performance ............................................................................................266 7.4. Two Forms of Liability Protecting Rights to Property ..................................................267 7.4.1. Vindication of Right to Possession (Istiḥqāq) ...................................................267 7.4.2. Unjust Enrichment (al-Ithrā’ bi-lā Sabab) .........................................................268

This chapter explains the concepts by which Saudi law remedies tort and breach of contract. The concepts set out here are put to use intensively in the two case studies to follow, on recoveries in breach of contract for lost profits and on employer respondeat superior, respectively. At the end of this chapter, in section 7.4, two basic remedies protecting property rights are discussed: first, vindication of rights to possession; and second, restitution of unlawful gains or unjust enrichment.

7.1. Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts Fiqh manuals regulate in detail two torts, ghaṣb and itlāf, making these the models for many forms of recovery. The tort of itlāf, meaning destruction, applies both harms to property and to the injury and killing of human beings. Although we discuss only harms to property, many of the rules for itlāf liability are found in fiqh chapters on harms to person, and enter into the discussion below. Ghaṣb applies almost entirely to property; a rare exception where it is applied to abduction of a free human being is explained, since it sheds some light on ghaṣb in Saudi practice.

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.1

7.1.1. Ghaṣb – Wrongful Seizure of Property, Usurpation 7.1.1.1. The Definition of Ghaṣb Usurpation or ghaṣb is defined by the Hanbali scholar Buhuti (d 1641) in Kashshāf al-qinā`, a basic work of constant reference in Saudi courts, at the beginning of the chapter dedicated to it: a seizure (istīlā’) … ie, an act considered by custom to be a seizure of the right of another, ie property (milkiyya) or a right to exclusive use (easement, ikhtiṣāṣ), by compelling means (qahran), without right (bi-ghayri ḥaqq).1

The element of seizure of possession of a property, or istīlā’, is the most important element; as Buhuti says, ‘ghaṣb does not occur without istīlā’’.2 This from the start imports the idea of (a) an act of taking possession, (b) of specific property (`ayn). ‘Seizure’ (istīlā’) does not rule out takings where the usurper already has lawful possession of the property but then asserts control over it inconsistent with that possession. An exemplary case often given in fiqh works is that of the bailee (wadī`) who ‘seizes’ the property by denying or repudiating (juḥūd) the bailment. Note that this act meets all the requirements of usurpation – it is by compelling means, against right, and open – being extraordinary only in that possession of the property passed originally with the depositor’s permission.3 ‘Istīlā’ … qahran’, or seizure by qahr, literally means the seizure of the possession of a property by compelling, overbearing, or irresistible means. Scholars use qahran as meaning what overpowers, what leaves no choice. As can be observed from multiple examples, it does not require a ‘forceful’ taking in the sense of physically overpowering the owner, or even a taking in which the owner is confronted.4 Buhuti declares that the term qahran excludes from usurpation certain other takings: ‘Sariqa, nahb, and ikhtilās are not usurpation because qahr is absent in them.’5 Sariqa or theft is a surreptitious taking of property kept in a place of protection. Ikhtilās, the modern word for ‘embezzlement’, is defined traditionally as a taking from an inattentive person and fleeing.6 Nahb is similar, meaning snatching and fleeing. The famous Lebanese scholar Subhi Mahmasani (d 1986), in his work

1 Manṣūr al-Buhūtī (d 1641), Kashshāf al-qinā` `an matn al-Iqnā`, 6 vols (Beirut: Dār al-Kutub al-`Ilmiyya, nd) 4:76; he offers same definition in Manṣūr al-Buhūtī, Sharḥ Muntahā al-irādāt al-musammā Daqāʼiq ūlī al-nuhā li-sharḥ al-Muntahā (Beirut: `Ālam al-Kutub, 1993) 2:399. See also `Abd al-Jabbār Sharāra, Aḥkām al-ghaṣb fī al-fiqh al-islāmī (np: Maktabat al-I`lām al-Islāmī, 1414 (1993)) 26–36 (definitions by various scholars and schools). 2 al-Buhūtī, Kashshāf (n 1) 4:76. 3 See Sharāra (n 1) 66–67 (refusal by a bailee or mortgagee to return property to owner on his lawful request satisfies the conditions for ghaṣb, as held by most scholars). 4 For example, the Arabic translation of the French term ‘force majeure’ in contracts is quwwa qāhira or ‘compelling (qāhira) force (quwwa)’. 5 al-Buhūtī, Kashshāf (n 1) 4:76. 6 Muḥammad Nāṣir, Khiyānat al-amāna wa-atharuh fī al-`uqūd al-māliyya fī al-sharī`a al-islāmiyya (Amman: Dār al-`Ilmiyya al-Duwaliyya, 2001) 130–31. Ikhtilās is very rarely mentioned in Hanbali law, and then mostly to define it as distinct from theft and ghaṣb. Moderns, however, argue that it is equivalent to ghaṣb as an unlawful taking, differing only in how the taking is done (for Hanbalis, not qahran). See Wizārat al-Awqāf, ‘Ghaṣb’ in al-Mawsū`a al-fiqhiyya (Kuwait: Wizārat al-Awqāf, 1404–27 (1983–2006)) 31:229. Criminally, it is very close to sariqa or theft.

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Theories of Liability

on the Islamic law of obligations, states that the requirement of qahran also distinguishes usurpation from other wrongs, such as denial of the rights of others (inkār al-ḥaqq), fraud or deception (ghishsh), and betraying trust (khiyāna).7 That qahran rules all these out – all involving either surreptitious means, deceit, or the owner’s inattention – indicates that qahran means something like an open taking. Other scholars, particularly Hanafis, make this idea more explicit by requiring that usurpation occur openly (jahran or mujāharatan).8 The term ‘without right’ (bi-ghayri ḥaqq) is understood as meaning that, as shown by objective circumstances at the time of the taking, the actor seized the property without having any legitimate grounds to do so. In fact, the grounds for taking need to be outright illegitimate on their face. One way this is expressed is by excluding takings that are with even a shubha of right or ḥaqq. Shubha literally means uncertainty, doubt, and suspicion; in this instance it means a possible but perhaps illusory claim of right, or, to use an AngloAmerican legal term, a ‘colour of right’.9 Thus, what of one who knowingly exploits a weak interpretation of a contract and takes more than what is eventually ruled his due: would he be liable for ghaṣb? No, since such a case is one of shubha; disputes that are objectively plausible at all, and require a court to decide them, fall within the shubha exception.10 Most such cases would also usually fall short of ghaṣb in lacking seizure of specific property and use of compelling means. Given these various requirements, ghaṣb is not applicable simply on a finding that one party has deprived another of a pecuniary advantage or gained a pecuniary benefit at the other’s expense – even when the act in question is clearly unlawful. Rather, such claims are ordinarily remedied under one of the other theories of civil liability to be discussed below. For example, ghaṣb is rarely invoked to remedy torts of negligence causing pecuniary loss, or breaches of contract not involving misuse of concrete property. The terms seizure or istīlā’, compelling means or qahran, and without right or bi-ghayr ḥaqq together strongly suggest an act that is done with wrongful intent, a crime, and a sin.11 But then, if such an act would ordinarily be an intentional tort, even a crime, why did the scholars not so specify when defining ghaṣb? Why did the scholars not use terms such as ‘with intent’ (`amdan), as they do when needed, for example, to distinguish murder from accidental homicide, or when allocating liability for damage caused by two actors, one acting deliberately (`amdan) and the other negligently (bi-tafrīṭ)? Indeed, it seems modern scholars of ghaṣb split into two groups on the question whether ghaṣb is always intentional or not. Some represent it as always a sin, an intentional act, entailing criminal as well as

7 Ṣubhī Maḥmaṣānī (d 1986), al-Naẓariyya al-`āmma li-al-mūjibāt wa-al-`uqūd fī al-sharī`a al-islāmiyya, 2 vols (Beirut: Dِār al-`Ilm li-al-Malāyīn, 1972) 1:156; see also Wizārat al-Awqāf, ‘Ghaṣb’ and ‘Khiyānat al-amāna’ in al-Mawsū`a al-fiqhiyya (n 6). Hanbali fiqh books rarely mention the term khiyāna. See discussion of the tort of khiyānat al-amāna in section 7.1.3 below. 8 Maḥmaṣānī (n 7) 1:157; Sharāra (n 1) 26–36. 9 This is its meaning in other contexts in fiqh, as in adultery and theft. 10 I confirmed this point, obvious enough from the absence of what would otherwise be hundreds of published cases dealing with such a theory, in an interview with a leading scholar-judge of the general courts. 11 In various hadiths the Prophet condemns the ‘taking of a hands-breadth of land without right’ (shibran min al-arḍ bi-ghayri ḥaqqih) as a great sin; in some versions ‘iniquitously’ (ẓulman) takes the place of ‘without right’ (bi-ghayri ḥaqqih). Muslim, Bukhari. These hadiths may relate only to taking done deliberately, and in themselves do not indicate that the legal concept of ghaṣb applies only to intentional acts. Buhūtī begins his chapter on ghaṣb by mentioning the lexical meaning of ghaṣb (which can differ from its legal definition): ‘taking something iniquitously (ẓulman)’. al-Buhūtī, Kashshāf (n 1) 4:76.

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.1 civil consequences,12 while others observe that traditional texts, though they generally understand ghaṣb as a wrongful act, also treat some wholly innocent acts as ghaṣb, such as obtaining property of another by innocent mistake.13 One wonders how so basic a point about ghaṣb – whether or not it requires deliberate intention – can remain unresolved, even up to modern times? Did traditional fiqh works mean to specify that ghaṣb is an intentional wrong, but somehow fail to do so? Or, to the contrary, did they fail to mention that ghaṣb covers all takings without right, whether or not wrongful? Clearly, the truth must lie somewhere else.14 This puzzle, concerning how scholars have defined ghaṣb, points toward a larger and more important point about these scholars’ treatment of ghaṣb. In my view, medieval scholars wished that ghaṣb should serve as a useful model, or source of analogies, to provide rulings to govern many diverse situations where property enters the possession of a nonowner. Many false possessions may not qualify as usurpation itself, since they lack one or another of the elements of its definition, but – given fiqh’s pervasive method of analogy, used even between separate heads of law, as discussed in section 3.2.3 – scholars still wished to apply to them some or all of the rules and remedies of ghaṣb. Thus, for example, at times some such acts may occur through intentional aggression against property rights – and those may provide the clearest examples for elucidating ghaṣb – but they may also at times occur through negligence, innocent mistake, or a third party’s deceit. If usurpation were placed explicitly in the category of intentional act and crime, its usefulness for such analogies would be diminished. Rather, the scholars objectified a sufficiently serious form of unlawful taking as a model, one suggesting intentionality in the usurper, but allowing at the same time for the application of ghaṣb rules outside the formal definition to both more extreme and less extreme versions of takings. This explanation of the fiqh treatment of ghaṣb gains indirect support when one compares the views of the four Islamic legal schools on the subject of usurpation. One notices that there is a sort of a spectrum, extending from the Hanafis on one end, through the Malikis, then the Shafi`is, and ending with the Hanbalis at the other extreme.15 The late Hanafis (and to a lesser extent the Malikis) have a very broad definition of usurpation. In the Ottoman-Majalla (the official codification of late Hanafi practice issued 1877), usurpation is defined simply as ‘the taking of property of someone and holding it without his permission’ (Art 881).16 But at the same time, as will emerge below, Hanafis appoint for usurpation relatively narrow remedies, hardly extending beyond the obligation to restore the property

12 See eg Ḥāmid al-Fiqī, Aḥkām al-ghaṣb fī al-fiqh al-islāmī (ِAlexandria: Dār al-Fikr al-Jāmi`ī, 2003) 99; Sharāra (n 1) 65–66. 13 Muḥammad Aḥmad Sirāj, Ḍamān al-`udwān fī al-fiqh al-islāmī (Beirut: al-Mu’assasa al-Jāmi`iyya, 1414 (1993)) 204–05. Wizārat al-Awqāf, ‘Ghaṣb’ (n 6). defines ghaṣb generally as a wrongful act (ta`addī), whether or not by intent, but also allows that it may occur even innocently. 14 This puzzle in part arises because of the general characteristic of fiqh already noted in Chapter 4, text at nn 18–20 and Chapter 6, n 88 discussing fiqh’s ‘objective tendency’. Scholars and judges seem to have little interest, certainly in matters of civil obligation, in seeking out the subjective motivations of actors, and rely on outward circumstances to determine the legal values to assign to acts. Outside criminal and ritual law, rules are relatively rarely framed in reference to mental states, such as knowledge, motive, or intention. 15 Wizārat al-Awqāf, ‘Ghaṣb’ (n 6). 16 See also Abū Muḥammad Ghānim al-Baghdādī (d 1620), Majma` al-ḍamānāt fī madhhab al-imām al-`aẓm Abī Ḥanīfa al-Nu`mān (Cairo: Dār al-Salām, 1420 (1999)) 1:298–305, 343.

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taken. On the other hand, the Hanbalis (and to a lesser extent the Shafi`is) have a narrower definition of usurpation but allow for it a broad and aggressive programme of remedies. Thus, for Hanafis there is readiness to apply usurpation very broadly, even in circumstances where intent is wholly lacking, since the consequences are few and natural, even when applied to one who came into possession of another’s property innocently. Hanbali scholars, because they define usurpation as worse than most other forms of unjustified possession and give it appropriately severe remedies, call for its rules to be applied to other forms of false possession only by analogy. The Hanbali approach allows judges to scale upward or downward on a series of remedies according to the characteristics of the act before them to achieve justice in individual cases.17 The authors of the Hanbali works applied in Saudi Arabia very often insert into exemplary cases and their explanations explicit suggestions to apply ghaṣb by analogy – inserting phrases such as ‘like a usurper’ (ka-al-ghāṣib) and ‘has the status of a usurper’ (fī ḥukm al-ghāṣib). Let me offer here six examples. The first three are instances of a ‘trusted person’, amīn, asserting unlawful possession of the owner’s property. The first is from the Hanbali Ibn Qudama (d 1223): Section: If the muḍārib [the active partner in a muḍāraba partnership] commits wrongdoing (ta`addi) and does what he has no right to do, or buys something he was prohibited to buy, then he is liable (ḍāmin) for the property [citing scholars in agreement]. Our view is that he transacted in the property of another without his permission, and so he is liable for it (ḍāmin) like a usurper (ka-al-ghāṣib). We do not hold with his participation in the profit.18

It may be noted that Ibn Qudama does not specify what liabilities of the ghāṣib apply to the muḍārib, leaving that to the discretion of the judge according to the circumstances of the case. The second example, from Buhuti, concerns another relationship of trust or amāna, that of employer/employee: If the worker retains the garment after his work on it against payment of his hire, and it is destroyed, he is liable for it, because he did not give it to him as a pledge and he has no permission to seize it, so he is obligated to compensate it, like a usurper (ka-al-ghāṣib).19

In this example, Buhuti addresses only an obligation to compensate harm to the property, an obligation required in any event from a breaching amīn. What does he mean to add by his analogy to ghaṣb? Is it only to refer to the rules laid down under the heading of ghaṣb on how to value properties of various types, as of what date, and so forth? More likely it is to suggest to the judge that, in appropriate cases, he has discretion to apply other ghaṣb remedies, such as rents or profits.

17 Another reason (besides the positions of the Hanafi school) why some modern scholars may have adopted an interpretation of ghaṣb as little more than false possession is that this view allows them to propose general overarching theories for claims based on property rights, theories potentially even incorporating restitution (istiḥqāq) and unjust enrichment (ithrā’ bi-lā sabab). Such theories allow for codification of Islamic law on terms more recognisable to other legal systems and facilitate analogies to, and imports from, other systems of law. Such a general theory seems to be the author’s purpose in Sirāj (n 13). 18 Muwaffaq al-Dīn `Abd Allāh Ibn Qudāma, al-Mughnī (Cairo: Maktabat al-Qāhira, 1388 (1968)) 5:39. 19 al-Buhūtī, Kashshāf (n 1) 5:395.

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.1 The third example, from Ibn Qudama, is about a borrower who makes unlawful use of the property he was lent. Although Ibn Qudama stops short of declaring this act ghaṣb per se – the borrower is called ‘the legal equivalent of a usurper’ – he nonetheless explicitly applies to it all the remedies of ghaṣb. If the borrowed property is land, he has no right to plant it, build on it, or cultivate it after the term of the loan or after the return of the property was demanded. … In this he has the legal status of a usurper (ḥukmuh ḥukm al-ghāṣib), because of the statement of the Prophet, ‘The root or stem (`irq) of the oppressor has no claim.’ He must pay rent for whatever use-value he derived from the land by aggression (`udwān). He is under obligation of removal [of any planting or building], levelling what was dug, compensating for reduction in value, and the rest of the rulings of ghaṣb, because it is an aggression (`udwān).20

The fourth example comes from Buhuti, from the law of sale, in particular the rules regulating risk of loss of the sold goods. ‘If a seller … prevents the purchaser from taking delivery of the sold property, he bears the liability (ḍamān) for it because he is like a ghāṣib.’21 The fifth example, also from Buhuti, is from the law governing lost objects. If the finder [of a lost object] takes it intending to claim it presently as his own or to hide it, … ie with the intent of treachery (khiyāna), he bears liability (ḍamān) for it if it is destroyed, even if it is destroyed without his fault, because he took property of another in a manner not lawful to him, and so he bears liability for it, like the ghāṣib.22

A sixth example from Buhuti again uses the phrasing ‘legally equivalent to usurpation’ or ‘constructive usurpation’ (ḥukm al-ghāsib): ‘One who takes the assistance of a slave … without permission of his master, the ruling on him (ḥukmuh) … is the ruling of usurpation (ḥukm al-ghaṣb) … and he is liable for [the slave’s] torts and reduction in value.’23 Other instances where ghaṣb is invoked by analogy appear in the next two chapters. While scholars thus often explicitly prompt their readers to make analogies to ghaṣb, sometimes they rely on the reader to do so. For example, to return to the case of the depositee who denies (juḥūd) he ever held a deposit, Buhuti writes: ‘If the depositee denies the deposit, such as if he says, you did not deposit with me, and he later acknowledges the deposit or it is proven by evidence, … he becomes liable by his repudiation (ḍāminan bi-juḥūdihi).’24 Here Buhuti does not even mention the term ghaṣb, saying only that the depositee is ḍāmin or liable. Yet in all the Sunni schools of law, a depositee’s denial of the fact of the deposit (juḥūd) is declared usurpation itself or at least analogous to it.25 A similar case is that of a lessee who keeps property beyond the lease term. The standard ruling against him is that of ghaṣb, or analogy to it, though often not stated explicitly.26

20 Ibn

Qudāma (n 18) 5:170. The cited hadith appears in Malik, Daraqutni, Tayalisi. Kashshāf (n 1) 3:244. 22 Ibid 4:213. 23 Ibid 4:93. 24 Ibid 4:181. 25 Sharāra (n 1) 66–67. 26 I confirmed this point in an interview with a senior Saudi general court judge, as to the point that a lessee holding over the term of his lease becomes liable for the loss of the leased property even if by act of God or third party, a liability applying only to ghaṣb or analogy to it, not itlāf. Yet I suspect that such an outcome may be sensitive to the facts before the judge, and that in some situations a judge would not so rule. 21 al-Buhūtī,

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We saw above that scholars insist that the definition of ghaṣb excludes, by the word qahran, wrongs such as theft, embezzlement, denial of the rights of others, fraud or deception, and betraying trust. Yet this does not mean that those same scholars will not regulate and remedy those very wrongs by analogy to ghaṣb when circumstances so warrant.27 I next discuss the remedies available for claims of ghaṣb. Given the frequency with which acts are analogised to ghaṣb but not considered ghaṣb per se, as we have just seen, a question constantly arising is whether all of these remedies, or only some of them, apply to such acts. Review of many primary and secondary sources reveals that often not every ghaṣb remedy is applied in these non-ghaṣb cases, indicating that Islamic law allows for discretion on the part of the judge to make analogies as appropriate to reach an equitable outcome under the circumstances.28

7.1.1.2. Remedies for Ghaṣb When ghaṣb is shown to exist, the Hanbali school imposes an almost punitive series of liabilities on the usurper, seemingly intended to accord the owner a maximal recovery of his rights and privileges as an owner. Again, the remedies prescribed by the Hanbali school tend to be the harshest of any school in their impact on the usurper. A point of particular significance – and difference among the schools – is whether the usurper not only regains his property, or its value, but also the use-value (manfa`a) of the property, which is compensated at the fair market rental value (ujrat al-mithl). To award such additional damages in a way counters a fundamental precept attributed to the Prophet Muhammad, mentioned in Chapter 429: ‘revenue accompanies liability for loss’ (al-kharāj bi-al-ḍamān). The statement is taken to mean that one who bears the risk of loss of a property (in the fashion of its owner) also enjoys its profits and benefits, and the reverse, that one who receives the profits must bear the risk of loss; and the converse of both propositions, that one who does not bear the risk of loss is not entitled to the profits and benefits. This precept stems ultimately from the ban on usury or ribā. In money-lending with interest the lender gains not only the guaranteed return of his capital (no risk of loss other than credit risk) but also earns a profit. From this arises the generalisation that to earn profits one must also accept a risk of loss of one’s investment. But the precept is applied far beyond moneylending. Thus, in lease of a property free of ribā prohibitions (eg a house or car), since the lessor is compensated for the use-value, he has to bear the risk of loss; the lessee is liable for the leased property only if he is at fault in causing its loss. In a loan of non-consumable property (i`āra), in contrast, since the owner is not compensated with rent, the borrower carries the risk of loss.30 Other contracts involving one party’s use of another party’s property are regulated in similar fashion. But when one comes to usurpation, since the property was originally seized wrongfully, this precept is disregarded – and the usurper is liable both

27 Ibn Qudama goes so far as to state, despite the constant repetition of the point that surreptitious takings do not constitute ghaṣb, that ‘theft is a type of usurpation’. Ibn Qudāma (n 18) 5:177. 28 Sometimes a fiqh work takes the trouble to list the ghaṣb remedies that apply. Ibn Qudama applies ghaṣb by analogy to one who obtains property through a void contract, and specifies that not only the property or its value, but also its use-values and fruits, are recoverable. Ibn Qudāma (n 18) 4:173. See also text at n 20 above. 29 See Chapter 4, text at nn 114–16. 30 al-Buhūtī, Kashshāf (n 1) 4:70.

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.2 for the property (its return or its value) and for its use-values and profits or accretions. It is because of this very precept that the Hanafis originally balked at obligating the usurper to pay use-values. But the results for them were, as a result, often anomalous – for example, a lessee who keeps leased property beyond the term of his lease is no longer obligated to pay rent, since he has become a usurper and liable for any losses to the property however caused. In the Hanbali and other schools, he would be liable for both the fair market rent (not the agreed rent) and for the property. The Hanafis moderated their opposition in later centuries to allow for recovery of use-values for property held for rent and a few other cases.31 The remedies for usurpation in the Hanbali school include the following: a)

Liability for the property itself – here all the schools are in basic agreement. i. The usurper must restore to the owner his actual property if still in existence (this is true for all the schools). ii. If the property is destroyed (talaf) or consumed (ustuhlak) in whole or in part, even if through no fault of the usurper, the usurper owes compensation for that loss. How is this value determined? a. If the property is fungible (mithli), it is repaid in kind, ie as an equivalent quantity of property of the same specification. b. If the property is non-fungible (qīmī), it is compensated according to its market value (or its reduction or naqṣ in the case of partial destruction or consumption), usually determined by expert testimony. In the Hanbali school the value of a qīmī property is determined as of the date of its destruction or consumption (other schools differ as to the time of valuation).

b)

Beyond this – and as to some of these the other schools of law may differ with the Hanbalis – the usurper is liable for all of: i. the value of the right to use the property (manfa`a, plural, manāfi`, utility, usevalue), which is among the rights of an owner and part of the value of property. Manāfi` are compensated by ujrat al-mithl, meaning the fair rental value of the property as determined by experts. The usurper is liable for ujrat al-mithl for the period the property was in his possession, even if he did not benefit from its use. This remedy only applies, however, to actually occurring use-values – nothing is owed for them, for example, after the property is destroyed, since in that case the use-value is non-existent. Money and other consumables have no use-value. Buhuti rules out the recovery of other forms of lost profits (due to principles to be discussed in Chapter 8 in detail): The objective of damages is to secure the owner’s right by obligating [compensation] for the measure of what he lost. … The usurper is not liable for lost profits because of withholding a commercial property from its owner for a certain period in which it was possible he could have reaped a profit from it, because this [profit] does not exist.32

31 `Alī al-Khafīf (d 1978), al-Ḍamān fī al-fiqh al-islāmī (Cairo: Dār al-Fikr al-`Arabī, 2000) 48–50; Baber Johansen, The Islamic Law on Land Tax and Rent: The Peasants’ Loss of Property Rights as Interpreted in the Hanafite Legal Literature of the Mamluk and Ottoman Periods (London: Croom Helm, 1988) 106–17. 32 al-Buhūtī, Kashshāf (n 1) 4:89.

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ii. any actual fruits or accretions accruing to the property, whether or not by the usurper’s efforts, because these constitute part of the owner’s property (again, money in itself produces no fruit or accretion); and iii. any profits the usurper actually reaped from trading in the specific property (`ayn) he usurped. The traceable profits and proceeds of such trade are considered accretions to the property, and may be recovered by the owner as his property like other accretions.33 This is the only form of ‘fruit’ or ‘accretion’ that could apply to usurped money. One may note Buhuti’s language explaining this point: If a usurper trades in a specific or concrete property (`ayn) [a term that can include specific coins] that was usurped, or in the specific property (`ayn) of its price [ie after selling the property], in that he buys or sells and there appears a profit, or he buys with it something and there appears a profit, and that profit still exists [ie is present, unused], then the profit and the goods that the usurper purchased – even if the purchase was made on credit with the intent to pay its price with the usurped property or with its price [after its sale] and he does so – belong to the owner of the usurped property and not their usurper.34

iv. On the majority Hanbali view, any expense or labour the usurper incurs, whether in using and improving the property, in reaping profits from it, or in returning the property to its owner, is not reimbursed or compensated. v. Moreover, any actual pecuniary loss to the owner caused by the usurpation may be recovered. It is clear from the above that the tort of usurpation includes at root a proprietary claim – the claim for recovery of possession of one’s specific property – but it is much more as well. It is also a claim for pecuniary losses affecting the usurped goods or otherwise caused by the act of usurpation, here paralleling exactly, or incorporating, a claim of itlāf, the next major tort to be considered. And it includes a claim for recovery, or compensation for, any actual use-value and fruits or accretions of the property that the owner was deprived of because of the usurpation, even if the usurper did not himself enjoy or benefit from those use-values or fruits. In this last point usurpation skirts close to what in other laws is called recovery of lost profits or opportunities – but with the crucial difference that usurpation compensates for actual use-values, profits, and accretions reaped by the usurper, not hypothetical ones lost to the owner. All these aspects of the tort of usurpation will re-enter the discussion in other contexts below and in following chapters. Usurpation remedies include, as perhaps their most essential element, the recovery of the specific property (`ayn) taken – ‘a) i.’ in the outline just given. As we shall see in section 7.1.1.4 below, ghaṣb rules allow the owner to recover his specific property even from innocent transferees. This and other usurpation rulings show the weight scholars give to Quranic and Prophetic texts declaring the sacredness of property rights. To give some examples, it is provided that the owner is not obliged to accept compensation instead of the return of his specific property (`ayn), regardless of the trouble or cost to the usurper of return.35

33 Qari-Majalla,

Arts 1395–96. Sharḥ Muntahā (n 1) 2:422; see also al-Buhūtī, Kashshāf (n 1) 4:113. 35 Qari-Majalla, Arts 1382, 1384. 34 al-Buhūtī,

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.2 Even if the property has undergone change, such that it is now denominated differently, such as if barley has been ground into flour, gold or silver fashioned into jewellery, or iron turned into a sword, the specific thing must be returned with compensation for any loss in value.36 (Scholars differ, even in the Hanbali school, as to whether the usurper in such cases can be compensated for any increase in the value or for his labour or expense in such transformation.)37 If a fungible good is mixed with its equal such that it can no longer be distinguished from the other, such as two quantities of wheat of the same quality, then the usurper is obligated to return the amount of that specific (`ayn) mixture equal to what he usurped, by weight or measure.38 If the usurper mixes the taken property with its like but of lower or higher quality, or with another species of property, such that the taken property can no longer be separated (regardless of the cost39), then the owner of the taken property becomes undivided co-owner of the specific mixture with the owner of the other good.40 All this applies equally to money, which traditionally included gold and silver as well as struck coins.41 Money is a fungible (mithlī) under Islamic law, but is still susceptible of being an `ayn, specified and unique, such as a specific fund of money or so many specific coins, just as would be the case for wheat or oil.42 The ordinary outcome of any transaction in or transfer of money, however, is that it is thereby ‘consumed’ (mustahlak) by use, which is treated in law as analogous to its ‘destruction’ (itlāf). Since it was thus ‘destroyed’, it can no longer be restored except in kind. In a similar fashion, money can only be restored in kind when the amount of money was never identified at all (ie it never evolved beyond being an obligation in abstract funds, ie dayn) or when one can no longer trace it or recover it in its specific form. In other situations, fiqh is willing to trace the `ayn of money through various transactions, even ones where the money was given for a return consideration. For example, if specific money is referred to as the price in a sale contract (eg specific coins viewed by the seller), it is to be treated in the same way as specific goods sold under such a contract. Then, if the purchaser pays over that specific money to some third party rather than delivering it to the seller, the transaction with the third party is void, and does not convey ownership of the money.43 As another example, in a Buhuti passage quoted just above, if a property is

36 Qari-Majalla,

Art 1385. minority Hanbali view is that he does get compensation: al-Buhūtī, Kashshāf (n 1) 4:95; Sharāra (n 1) 163–64. 38 al-Buhūtī, Kashshāf (n 1) 4:94. 39 Qari-Majalla, Art 1379. 40 Qari-Majalla, Art 1386. 41 Qari-Majalla, Arts 358, 359; Ibn Qudāma (n 18) 4:35. Historically, coins even of the same face value often differed in quality. Today a unit of money is entirely indistinguishable from another equal unit, meaning that fiqh writings may need reanalysis from this viewpoint. Even in traditional fiqh, interchangeability is sometimes referred to. Buhūtī at times states that when money is mixed with its equal, the owner’s share of the mixed money continues to exist as his property, and even can still be considered `ayn. See al-Buhūtī, Sharḥ Muntahā (n 1) 2:189 (fungible goods in hands of seller after contract); al-Buhūtī, Kashshāf (n 1) 4:177 (deposit, accidental mixing). In the usurpation context, Buhūtī suggests that only a proportion of the mixture remains `ayn, with the rest being compensated in kind. al-Buhūtī, Kashshāf (n 1) 4:94. 42 The Hanafi school believes money when used in contracts such as sale is not susceptible to identification as `ayn. But even it holds that money can be `ayn in other contexts where the identity of a property is relevant, such as in deposit. Ottoman-Majalla, Arts 358–59. Hanbalis hold that even when money is used as the price in contracts, the parties may identify that money as `ayn, just as they do for other goods. al-Buhūtī, Kashshāf (n 1) 4:176–77. 43 Qari-Majalla, Arts 359, 322. 37 A

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usurped, the proceeds obtained by trading in that specific (`ayn) property, or even trading in the specific (`ayn) money gained from selling it, belong to owner of the usurped property.

7.1.1.3. Some Examples of Saudi Cases Applying Ghaṣb Rules Let us consider some published decisions where Saudi courts have applied the rules of ghaṣb, whether because they found ghaṣb itself to be made out by the facts or because they applied ghasb rules by analogy. Among published cases under this heading, from the commercial and general courts, four are particularly useful examples.44 In the first case, the defendant wrongfully continued using fishing vessels belonging to the plaintiff, and was obligated to pay fair rental value (ujrat al-mithl) for the period he held them. Even though the plaintiff registered the vessels in the name of the defendant, the court declared the defendant a usurper. The court did not award the plaintiff the profits the defendant reaped from the use of the vessels because those could not be determined with adequate certainty. The court stated: It is settled among the scholars that the principle in holding the property of others or its use-value (manfa`a) is liability (ḍamān) [for it]. If he uses it he has the status of a ghāṣib (fi ḥukm al-ghāṣib) of it. The defendant seized (istīlā’) the property of the plaintiff and used it, so he is a ghāṣib of it. The use-values of the usurped property are compensable (maḍmūna) whether the usurper benefited from them or not. The usurper is liable for the rent-value (ujra) until the time of his return of the usurped property [provided that it is of a type] that by custom is rented.45

In the second case, plaintiff acquired a car by hire-purchase which was damaged in an accident not her fault. The car was returned to the lessor, who improperly sold it. The court analogised the case to one where leased property is usurped, an event that, according to fiqh, gives the lessee an option either to terminate or to pursue the usurper for lost usevalue. The plaintiff owed no rent for the period she was deprived of her car.46 In the third case, similar to the last, the buyer of a car returned it to the seller for repairs after an accident, and the seller improperly sold it. The court, invoking ghaṣb by analogy, required the seller to compensate the value of the car, but also suggested to the plaintiff buyer that he sue for the rental value of the car for the period the seller held it before its onward sale.47 In the fourth case, a lessee continued to use a fleet of buses after his lease on them had ended, giving as excuse that the government requisitioned them to meet its wartime transport needs. The judge makes tacit use of the doctrine of ghaṣb in holding the lessee liable for the fair rental value of the fleet of buses for the excess period, as well as the cost of repairs for all damage done to the buses. That this use was forced on the lessee by the government was held to afford the lessee no excuse from liability.48 44 Many other cases make reference to usurpation explicitly or implicitly (as in mentioning ‘taking of property without right’). Some additional cases referring explicitly to ghaṣb by analogy include Decision No 10, 3 BG-Com1435 1351 (Com C No 1, Buraida 1435 (2013)); Decision No 157, 3 BG-Com-1435 1653 (Com C No 5, Riyadh 1434 (2012)); Decision No 175, 4 BG-Com-1433 1757 (Com C No 22, Jedda 1432 (2010)); Decision No 217, 5 BG-Com-1434 2802 (Com C No 2, Jedda 1434 (2012)); Decision No 33458770, 5 Gen-1434 161 (Qaṭīf Governate 1433 (2011)). 45 Decision No 12, 2 BG-Com-1429 1036 (Com C No 22, Medina 1428 (2007)). 46 Decision No 34240533, 7 Gen-1434 137 (al-Khobar 1434 (2012)) (translated in the Appendix). 47 Decision No 3438433, 1 Gen-1434 218 (Ha’il 1434 (2012)). 48 Decision No 73, 8 BG-Com-1408–1423 240 (Com C No 2, Riyadh 1416 (1995)).

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.3 In the administrative division of the Board of Grievances we can find many cases invoking ghaṣb rules against the government, especially since ghaṣb is the basis on which government expropriation or misappropriation of private property is litigated and compensated.49 In one such decision, the facts showed that the government wrongfully closed the plaintiff ’s shop. The court declared this to be the ‘barring’ (ḥaylūla) of the plaintiff from his property. The court did not consider this to be ghaṣb, but did declare that the analogy to ghaṣb set the limit to damages, and awarded, presumably as measure of the fair use-value, the average net profits of such shops.50 As another example, an agency impounded a vehicle of a company for an alleged violation of regulations, a measure the court found to be ghaṣb. The company was compensated for the rental value of the vehicle.51 One interesting, seemingly anomalous, category of ghaṣb cases are those for damages resulting from unlawful imprisonment. Somewhat oddly, Islamic law treats unlawful imprisonment of free persons under the heading of usurpation. Since free persons are not property, as such they cannot be usurped. Accordingly, even if a person is seized or abducted, and then dies, the death does not give rise to a duty to compensate for that death52 unless the death was caused by the usurper and actionable on some other ground. But what may be usurped is the use-value of a free person, ie the value of his services, a value that he could have sold or enjoyed if he had not been abducted or seized.53 Many Saudi cases apply this rule to persons the government mistakenly or wrongfully imprisoned, evaluating the victim’s ability to earn and compensating him or her accordingly.54 Courts also cite provisions of both the Basic Nizam and the Nizams of Criminal Procedures that condemn unjustified imprisonment.55 To digress slightly to consider a second aspect of this last set of decisions, many of them go beyond the traditionally sanctioned recovery for the value of services, and award also ‘moral damages’ (al-ḍarar al-ma`nawī or al-ḍarar al-adabī).56 A conception imported via Egypt from France, moral damages are controversial in fiqh, since they appear not only to involve compensation for something not considered property (because it is utterly intangible) but also to be not susceptible of any objective measure; they therefore offend principles against both ribā and gharar.57 Such seems to be the position of the general courts and, 49 See eg Decision No 89, 4 BG-Adm-1427 1941 (Adm C No 24, Riyadh 1426 (2005)); Decision No 40, 4 BG-Adm-1427 2038 (Adm C No 6, Riyadh 1427 (2006)); Decision No 87, 4 BG-Adm-1429 2052 (Adm C No 1, Medina 1428 (2007)). Sometimes the term ghaṣb is not mentioned in such cases, but nonetheless ghaṣb rules are applied. 50 Decision No 26, 3 BG-Adm-1427 1329 (Adm C No 43, Riyadh 1427 (2006)). 51 Decision No 44, BG-Adm Unpub (Adm C No 2, Buraida 1432 (2010)). 52 If awarded, this compensation would be in the amount of the blood-money or diya – see section 4.3.1. 53 al-Buhūtī, Kashshāf (n 1) 4:78; Qari-Majalla, Art 1392. 54 The following decisions go into the Sharia basis for this result: Decision No 42, 4 BG-Adm-1427 1862 (Adm C No 4, Riyadh 1426 (2005)); Decision No 57, 5 BG-Adm-1428 2167 (Adm C No 11, Jedda 1427 (2006)); Decision No 12, 5 BG-Adm-1428 2235 (Adm C No 5, Riyadh 1427 (2006)). See also `Abd al-Karīm al-Lāḥim, ‘al-Ta`wīḍ `an al-sijn’ (1422) no 12 Majallat al-`Adl 72–101; Ibrāhīm al-Ḥaydar, ‘al-Ta`wīḍ `an aḍrār sijn al-khaṭa’’ (Masters, Imam Muhammad University, 1424 (2003)). 55 Decision No 32, 4 BG-Adm-1427 2045 (Adm C No 2, Riyadh 1427 (2006)); Decision No 144, 6 BG-Adm-1431 2210 (Adm C No 21, Medina 1431 (2009)). See Basic Nizam-1992, Art 36; Nizam of Criminal Procedures-2013, Art 2. 56 See eg Decision No 57, 5 BG-Adm-1428; Decision No 42, 4 BG-Adm-1427; Decision No 198, 6 BG-Adm-1430 3052 (Adm C No 4, Riyadh 1429 (2008)). 57 The significance of such objections will appear clearly in the case study on lost profits, in Chapter 8. See al-Khafīf (n 31) 44–46; Muṣṭafā al-Zarqā (d 1999), al-Fi`l al-ḍarr (Damascus: Dār al-Qalam, 1988) 122–24; Wahba

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based on a brief survey, the commercial branch of the Board of Grievances as well.58 But published cases of the administrative branch of the Board show it awarding such damages against the government under diverse facts and arguments. Sam`ani, in his book on judicial discretion in the administrative branch of the Board of Grievances, states that the administrative courts generally award such damages in cases where tangible damages are also shown, which to him and other modern scholars include physical pain.59 But, he says, the administrative circuits differ as to the permissibility of moral damages when claimed in isolation. The published decisions include cases awarding such damages.60 He argues in favour of such a view for administrative cases on the ground that, if the remedy in traditional Islamic law for purely moral harms is the punishment of the offender with either ḥadd or ta`zīr penalties, then, since such punishment is impossible when the offender is the government itself, compensation for moral damages should serve as the next best substitute.61

7.1.1.4. Rules for One Holding from a Usurper An owner of property that has been usurped has the right to pursue his ghaṣb remedies against any or all of the parties in the chain of transmission of his property, from the original usurper through to the last holder. This is true even against subsequent holders who came into possession without knowledge of the original usurpation.62 An owner, however, may be able to claim only part of his damages from holders subsequent to the usurper. Such holders, innocent or not, are liable only for those remedies of ghaṣb that would apply had they themselves usurped what they acquired and held, not every remedy owing from the usurper or other holder earlier in the chain of holders stemming from the usurper.63 Any holder in

al-Zuḥaylī (d 2015), Naẓariyyat al-ḍamān (Damascus: Dār al-Fikr, 1998) 29–30. Several Saudi theses address the question: `Abd al-`Azīz al-Qāsim, ‘al-Ḍarar al-ma`nawī wa-ḍamānuh bi-al-māl fī al-fiqh al-islāmī muqāranan bi-al-niẓām’ (Masters, High Judicial Institute, Imam Muhammad University, 1419 (1998)); Nāyif al-`Anazī, ‘al-Ta`wīḍ `an al-ḍarar al-adabī fī al-fiqh wa-al-niẓām’ (Masters, High Judicial Institute, Imam Muhammad University, 1419 (1998)); Khālid al-Jurayyid, ‘al-Ta`wīḍ `an al-ḍarar al-mālī wa-al-ma`nawī wa-taṭbīqātuh al-qaḍā’iyya’ (Doctorate, Imam Muhammad University, College of Shari`a, Fiqh Division, 1432 (2010)). See also `Abd al-`Azīz al-Salāma, ‘al-Ta`wīḍ `an al-ḍarar al-ma`nawī’ (1431) no 48 Majallat al-`Adl 192–200; ʻAbd Allāh Najjār, al-Ḍarar al-adabī: dirāsa muqārina fī al-fiqh al-islāmī wa-al-qānūn (Riyadh: Dār al-Murīḥ, 1995). 58 Decision No 3459216, 23 Gen-1434 65 (al-Medina 1434 (2012)); Decision No 203, 4 BG-Com-1431 2075 (Com C No 14, Jedda 1429 (2008)); Decision No 101, 4 BG-Com-1432 1989 (Com C No 30, Riyadh 1432 (2010)). 59 Walīd al-Ṣam`ānī, al-Sulṭa al-taqdīriyya li-al-qāḍī al-idārī: dirāsa ta’ṣīliyya taṭbīqiyya, 2 vols (Riyadh: Dār alMayman, 1436 (2014)) 2:273–80, 309–10. Some published cases offer examples of moral damages awarded alongside material damages: Decision No 87, 4 BG-Adm-1430 2132 (Adm C No 4, Riyadh 1429 (2008)) (award of moral and material damages from banning publication of book); Decision No 61, 6 BG-Adm-1428 2641 (Adm C No 35, Riyadh 1428 (2007)) (the government leased to the plaintiff land it did not own; the plaintiff recovers for his expenditures; because he was forced to court under guard as offender due to government’s error, he recovers for moral damage as well). 60 Decision No 282, 4 BG-Adm-1433 2269 (Adm C No 2, Jedda 1432 (2010) (a child falls into storage tank but is unhurt; the parents and the child are awarded moral damages for psychological harms);cited in al-Ṣam`ānī (n 58) 278, n 2; Decision No 19, cited in Walīd al-Ṣam`ānī, al-Sulṭa al-taqdīriyya li-al-qāḍī al-idārī 2:278 (Adm C No 4, Riyadh 1424 (2003)) n 1 (unjustified entry into and inspection of a private home frightening a family); Decision No  57, 6 BG-Adm-1435 3341 (Adm C No 20, Riyadh 1435 (2013)) (embarrassing treatment of a child of the plaintiff on an airplane). 61 al-Ṣam`ānī (n 59) 2:309–10. 62 The first two sentences of this paragraph apply to all schools. The remainder of the section pertains only to the Hanbali school, omitting any divergent rulings in other schools. See eg Wizārat al-Awqāf, ‘Ghaṣb’ (n 6). 63 al-Buhūtī, Kashshāf (n 1) 4:99.

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.4 the chain is, however, liable to the owner for all ghaṣb remedies related to the property that arise later in the chain of possessions.64 The result is a sort of telescoping set of joint and several liabilities, less and less inclusive as one proceeds further along the chain of transfers of the property. It is the owner’s choice whom he sues; generally he benefits from suing the earlier holders; but, of course, if he wishes to regain the property itself, not compensation for it, he has to sue the final holder. The question next arises: among the chain of holders of the property, if a holder subsequent to the usurper is held liable to the owner, may he seek recourse from earlier or later holders? In particular, who, among those in the chain, must bear the ultimate liability (qarār al-ḍamān) and for what? One basic rule applies in general: a holder has full recourse against holders earlier in the chain if he acquired the property innocently; if he did know of the usurpation, then he is treated as himself a usurper, and his rights of recourse against any earlier holder are limited. As one progresses into the details of various holdings, and into the varieties of property that may be usurped, the rules become complex. It is a worthwhile exercise to survey these rules, if only to show the depth, subtlety, and sophistication of the law of usurpation. One sees exemplified in these rules details of not only the ghaṣb remedies, but also fiqh rulings on liability for property and property rights in different situations, including different types of contract. I explore these rules governing recoveries from and among series of holders of usurped property by quoting a superb summary of them by Qari in his Majalla. I intersperse my own brief commentaries between Qari’s code-like articles to ease the challenge posed by Qari’s extreme conciseness. To make the explanations somewhat easier to follow, in what follows, unless otherwise stated, I include within the term ‘usurper’ also each holder of the property prior in the chain of transmission to the particular holder in question, whether or not that earlier holder practiced ghaṣb or gained the property by other means, even innocently. Buhuti does so as well, but only tacitly, leaving the point to the intuition of the reader. Section: The ruling for one to whom the usurped property is transferred Article 1413: Any person to whom the usurped property has been transferred is in the position of the usurper, and the owner may hold him liable for the property and lost benefits (al-manfa`a al-fā’ita) [of the property65].

This is the root provision, reflected in all the articles quoted next, that, innocent or not, one holding from a usurper is liable to the owner for both the property and its use in the same manner as if his own possession of the property had been by ghaṣb. In accordance with general rules stated elsewhere, if he holds the property itself, then he is liable to return it; if not, then he is liable for its value. As for his recourse against the usurper, if he is innocent, then he has rights to be explained below. If he is not innocent, then he usually has no right of recourse against even the original usurper for amounts he pays the owner, though he will be able to recover any consideration he paid to any earlier holder to gain possession of the property. Article 1414: If the usurped property is destroyed in the possession of one who, without knowing it was usurped, acquired it for consideration [ie a price], like the buyer or the donee for a 64 Ibid

4:99. that in these articles Qari implicitly covers accretions to a property under the heading of the property itself, since such accretions are considered part of it. 65 Note

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consideration,66 and if [such a person] pays compensation to the [true] owner for it, then he has no right of recourse against anyone for the value [of the property – but see this Article’s final sentence providing that he does have a claim for the property’s price]. If he paid compensation [to the owner] for use-value (manfa`a), then he has a right of recourse against the usurper for that compensation. But if he knew of the usurpation, he has no right of recourse at all for any compensation he paid. However, if the usurper paid compensation [ie to the owner], [the usurper] has no right of recourse against the acquirer except for the value of the property [ie fair market value, not value as fixed by the price; also, he may not recover from an innocent acquirer any compensation he paid the owner for use-values]. The acquirer will be given back his consideration [ie price] in every case.

This is also a central provision, covering the acquirer (for compensation) from the usurper whether the acquirer knew of the wrongfulness of the usurper’s possession, ie transacted in bad faith, or did not know, ie acted in good faith. It shows that every holder by purchase, even an innocent one, is liable to the owner for the property, to return it if still intact, or to compensate its loss if destroyed or transferred beyond reach; he is also liable to the owner for use-values. If the acquirer is innocent, he has a right of recourse against the usurper for whatever price he paid for the property as well as for amounts he paid the owner for usevalues; if guilty, he can claim only the price. If instead it is the usurper who is held liable to the owner, the usurper may get recourse from a later holder for the value of the property. As to payments for use-values, he may regain from later holders the compensation he paid to the owner, but only if they are guilty, and this only with respect to use-values relating to their own periods of possession of the property, as provided in Article 1418 below. Article 1415: If a person leases from the usurper without knowing that [the leased property] was usurped, and the leased property is destroyed in his possession without negligence (tafrīṭ) and he pays [the owner] for its loss, he can reclaim from the usurper the value of the usurped property but not the value of the benefit [use-value]. But if he knew of the usurpation or if the property was lost due to a fault (tafrīṭ) of his, he may not reclaim anything. However, if the usurper is held liable [by the owner], he [the usurper] may claim [from the lessee] only the value of the [latter’s use if the usurper had to compensate the owner for it]. The lessee will recover the consideration [ie rent] he paid in all cases.

Considering first claims for the property itself, the general rule in leases is that a tenant or lessee of a property holds that property as an amīn for the lessor, and thus bears the risk of loss of the property only if caused by his own wrong (ta`addī or tafrīṭ). Therefore, if the property was destroyed in a holder’s possession but without his fault, and he is obliged to pay its value to the owner, then he has a right of recourse against the usurper for that sum. If, however, the property was destroyed through his fault, or he knew of the usurpation, then he has no right of recourse against the usurper for any compensation he paid to the owner for the property. Second, considering claims for use-value (manfa`a) during the usurpation, if the lessee (who ‘purchased’ those use-values by his lease) is obliged to compensate the owner for that value, then the lessee may in all cases reclaim from the usurper not that value, but the price (rental) paid for it – both the rental for periods when he had the use of the property (since he had to pay over the value of that use to the owner) and also any unearned rental for periods thereafter (because that rent is not owing after the property is lost).

66 Gift

for consideration is in effect a sale. Qari-Majalla, Art 881.

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.1.4 Article 1416: If a person acquires the usurped property or its benefit [use-value] from the usurper without consideration, and does not know about the unlawfulness of the usurpation, like the donee, grantee,67 or legatee in the property itself or its benefit – or if he receives it on behalf of the transferor, like the agent or the depositee or the mortgagee, and the property is destroyed while in his possession without negligence (tafrīṭ) – and he is held liable for whatever is required, he can turn to the usurper for all [for which he was held liable]. The usurper cannot have recourse against him if he [the usurper] paid any compensation. However, if he [the acquirer] knew the circumstances [ie the usurpation], he bears the ultimate liability, and similarly the depositee, agent or mortgagee who commits a fault (tafrīṭ).

This article covers two types of transferee from a usurper. The first is one who acquires a property without consideration, such as a donee. Such an acquirer would ordinarily bear the risk of loss of the property; ie if it is destroyed or lost for any reason, the loss falls on him alone. If, however, the acquirer loses the property due to it or its value being reclaimed by an owner as usurped, then he is entitled to reimbursement from the usurper, probably on the ground that the usurper deceived him (taghrīr)68 into thinking that it was his, with the result that he accepted the property as one he could own and use; he did not anticipate a liability for its value. This is so even if the property were destroyed through the donee’s fault. The same would apply to any compensation the donee paid to the owner for use-value. The second situation is that of one who receives the property for the benefit of the usurper (or earlier holder). Such a person bears liability to the owner, without recourse against the usurper, even if unaware of the usurpation, if the property were destroyed or lost due to his own fault. This is in accordance with the standard rule of amāna possession, since such a person is an amīn and is liable for a property if at fault in causing its loss. Article 1417: If a person borrows [the usurped property] from the usurper and does not know about the usurpation, and the property borrowed perishes in his possession otherwise than by normal use and the owner holds him liable for both the property and the use-value, he can reclaim [what he paid for] use-value only. If he knew of the usurpation he would not be entitled to reclaim anything. But if the usurper is held liable for it to the owner, the usurper can reclaim both [the value of the property and its use-value] from the borrower if [the latter] knew of the unlawfulness. Otherwise he can claim the value of the property only.

In general, a borrower (without compensation) does accept the duty to compensate the lender for any loss to the property lent, regardless of the cause of the loss – even an act of God. (This is an application of the rule of al-kharāj bi-al-ḍamān, profit accompanies risk of loss: since the borrower enjoys the benefits of the property without compensation for those benefits, he also bears the risk of loss.) As was the case with the donee in the last article, however, the borrower, if innocent, is not held to so strict a standard if he loses the property because its owner reclaims it as usurped. And he can in any case recover what he paid the owner for use-values, since the usurper had agreed to provide him those without consideration. Article 1418: When the usurper from the [initial] usurper is held liable [to the owner], he may not reclaim anything whatsoever from the initial usurper. If the initial usurper pays compensation

67 Muttahib

wa-muhdā lahu – each refers to a form of gift. See Qari-Majalla, Arts 863–64.

68 This term is in frequent use when describing the ground on which an innocent person holding from a usurper

has rights of recourse against the usurper: because he deceived him (gharrarahu).

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[to the owner], he can reclaim from the [later] usurper all that he paid the owner. But the usurper of the usurper is obligated to compensate benefits [use-value] only for the period the usurped property stayed in his possession. As for the benefits arising during possession of the initial usurper, he [the initial usurper] is liable for them.

This article shows that one who usurps from a usurper (including one who gained possession from a usurper with knowledge of the usurpation) bears the ultimate burden (qarār al-ḍamān, ie liability after exhausting all forms of recourse) of compensating the owner for the property or its value, or, of course, of restoring the property itself if it still exists. As for any compensation paid to the owner for use-values, as between the usurpers, each bears ultimate liability only for the value for his own use of the property. Article 1421: The person who destroys the property usurped on behalf of [lit. by delegation from] the usurper not knowing of the usurpation and is held liable for it can recover from the usurper [what he paid], but the usurper cannot recover it from him if he [the usurper] is held liable. But if he [the delegate] knew of the usurpation, then the ultimate liability (qarār al-ḍamān) is on him. This is also the case if the usurped property is food which the usurper fed a person other than its owner.

Here the delegate of the usurper is not ultimately liable for any compensation he is obliged to pay to the owner, ie he has a right of recourse from the usurper, as long as he was unaware of the usurpation. An interesting subcase is that one whom the usurper causes to consume the usurped property: even if he is unaware of the usurpation, he is liable for its value given the benefit he derived from it.

7.1.2. Itlāf – Wrongful Destruction of Property Let us pass now to the second major tort which Islamic law makes a model for many forms of recovery in both contract and tort. Buhuti begins his chapter on itlāf with the following, serving as a form of definition: One who causes destruction (atlafa, ie, causes talaf), … even if the destruction (itlāf) is by mistake or inattention, of lawful (muḥtaram) property of another without the owner’s permission is liable for it. The one who destroys is liable for what he destroys. This is because he caused [the owner] to lose it (fawwatahu `alayhi) so he is obligated to compensate it.

Implicit in this quotation are the three elements of the claim of itlāf – tortious act, harm, and a causative connection between the act and the harm. In what follows we discuss these three elements in order. But it must be noted at the outset that the content of these elements differs, depending on which of two forms of causation of the harm apply – ‘direct’ and ‘indirect’ (mubāshir and mutasabbib, literally, ‘direct’ and ‘causative’). In the latter case it is requisite that the act be wrongful (ie be a ta`addī). The concepts of mubāshir and mutasabbib are explained in section 7.1.2.4 below.

7.1.2.1. Wrongful Act or Ta`addī Taking up first the harm caused by an indirect or mutasabbib act, fiqh imposes liability only if the act causing the harm constitutes a ta`addī (literally transgression) – a term scholars

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.2.2 define variously as an action ‘overstepping right’ (mujāwiz al-ḥaqq) as defined by Shari`a or custom; ‘without right’ (dūna ḥaqq); ‘not permitted under Shari`a’ (ghayr jā’iz shar`an); departing from the behaviour of an ordinary person or from custom; or injurious without right or legal permission.69 Ta`addī includes both intentional wrongs such as theft, battery, or fraud, and unintentional wrongs such as negligence or inadvertence. In sum, ta`addī means any act that offends the norm of conduct prescribed for the relevant situation by Islamic law, a norm that refers not only to general duties of care universally applicable but also to any duty specific to the context of the act, including customary norms of conduct. Whether ta`addī includes unintentional breaches of contract is discussed in section 7.2.3.2-d below. In his chapter on itlāf, characteristically using multiple concrete examples rather than abstract definitions, Qari defines ta`addī as follows: A prerequisite for ḍamān (liability) is ta`addī in the action by which the destruction is caused. For example, if one waters his land and the water flows onto the property of another, causing ruin, he must make good the loss if he was careless in releasing more water than is normal or was inattentive or slept while leaving the water open. Similarly, if one kindles a fire on his property and it crosses over to the property of another, he must make good what it destroys if he was careless in kindling a large fire that would ordinarily cross, by kindling it in a strong wind, or by leaving it when just kindled. As for one who waters his land without carelessness, or kindles an ordinary fire and a strong wind springs up, and the property of another is destroyed, then he is not liable.70

Authors of fiqh works intend that judges should apply such a description of ta`addī to the facts before them, using analogy and deduction. For example, if a judge confronts a case where the defendant intentionally harmed the plaintiff without any legal justification, he can, based on this text from Buhuti, logically conclude that, a fortiori, the defendant committed ta`addī. In the same context, however, we may note that the civil consequences of ta`addi are not usually affected by the mental state of the actor – on a spectrum from mere negligence to intentional harm – as long as the act is wrongful.71 But sometimes intent can become relevant in changing an innocent act into a wrongful one. Thus, one who fires a gun at a bird and frightens an animal is not to blame, unless he intended it.72 One who is ordered to do a wrongful act by his employer, such as to dig a pit on someone else’s property, is liable if he knew that the land was not the employer’s.73

7.1.2.2. Harm or Ḍarar The second element of the tort of itlāf is the occurrence of harm or ḍarar. As mentioned in section 4.3.2 and as to amāna duties in section 6.1.2, although the exemplary cases found in the fiqh works on itlāf discuss physical destruction, the tort is in fact applied widely

eg Maḥmaṣānī (n 7) 1:173–76; al-Zuḥaylī (n 57) 79. Art 1431. 71 The Ottoman-Majalla, Art 93, famously misleads on this issue, stating that mutasabbib is not liable without deliberate intent (ta`ammud). Also, Art 92 fails to make clear that the mubāshir can be liable without committing a wrong (ta`addī) at all, intentional or otherwise. See al-Zarqā (n 57) 76–78. 72 al-Zuḥaylī (n 57) 200, citing Ottoman-Majalla, Art 923. 73 Qari-Majalla, Arts 1436–38. 69 See

70 Qari-Majalla,

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throughout fiqh as the model for compensation for non-physical pecuniary losses and damages. As stated by Subhi Mahmasani (d 1986): In Islamic law, every injurious act wrongfully committed against the property of others makes the aggressor liable. This principle, which was especially applied to the destruction (itlāf) of property, was gradually broadened by the jurists to include all injuries, whether to property or persons, so that every injury was called ‘destruction’ (itlāf). This culminated in the emergence of a comprehensive theory of liability and its causes and conditions, based upon general legal maxims and embracing most illegal acts.74

As also noted in section 4.3.1, much of the law of itlāf for property and pecuniary loss is meant to be taken, by analogy, from exemplary rulings found in the chapters for physical injury to persons (often referred to also as itlāf) though such injury is compensated by retaliation (qiṣāṣ) or blood money (diya, arsh). The most important distinction between the law of itlāf and the damage rules in most other legal systems is that Islamic law defines harm or ḍarar more narrowly than other laws. Because of the basic principles of ribā and gharar discussed in sections 4.4.2 and 4.4.3, Islamic law excludes almost all forms of damages other than actually realised losses. Among forms of damage thrown into doubt by these basic principles are all forms of counterfactual or hypothetical losses such as lost profits and lost opportunities (see the next chapter), the usufructs of property no longer in existence, and damages that are difficult or impossible to value with any degree of certainty, including punitive, moral, or pain-and-suffering damages (moral damages were discussed above in this chapter75). Norms from revelation restricting the manner in which property may lawfully be transferred from one person to another – particularly, again, precepts of ribā and gharar – translate into pervasive concern at the level of detailed rules and applications over whether any damage to be compensated has been convincingly proved, both as to existence and amount. As will be discussed in the sections 8.3.1 and 8.3.2, many Saudi court decisions reject itlāf recovery altogether, even when it is clear the victim suffered some harm, when no or inadequate proof exists of its amount. Saudi courts typically require that any claim for damages be muḥaqqaq, meaning verified or established as real or true. Despite this tendency to demand convincing proof of harm, and not fully reconciled with it, fiqh itself, and Saudi cases, sometimes accept damages fixed only by estimation (juzāfan, meaning literally ‘with risk’, ‘at random’, or ‘by speculation’). Let us digress somewhat to consider this question. First, traditional fiqh sometimes countenances situations where, even outside the context of destruction or loss, values may be determined by estimation without falling afoul of gharar, such as in sale of a visually inspected heap of goods. In the case of destruction (itlāf), Ibn Taymiyya (d 1328) declared in favour of estimating damages (here referring to existing property): If the extent of the destroyed property cannot be determined, one does it through ijtihad [meaning here a diligent exercise of sound opinion], as one does in determining its value. For estimation (kharṣ) and evaluation (taqwīm) are the same thing. Estimation is ijtihad in knowing the extent of

74 Maḥmaṣānī 75 See

(n 7) 1:168. See also al-Zarqā (n 57) 60–66. text at nn 56–61 above.

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.2.2 a thing, and evaluation is ijtihad in knowing the extent of its price. But estimation is easier. Both of them are permitted in case of need.76

We find Saudi judges often citing this passage. Moving to Saudi cases, we do find Board of Grievances decisions, in both administrative and commercial branches, where courts, upon finding that damage has occurred but cannot be quantified, use estimation to determine damages.77 In a 1992 decision an administrative circuit of the Board deals with a case where the defendant agency delayed its acceptance of plaintiff ’s performance causing damage to the plaintiff, but the plaintiff could not provide proofs showing the exact nature and extent of its harms. The Board declared: The inability of the plaintiff company to prove the scope of the damage and its value by independent proofs does not mean it cannot be compensated by estimation (juzāfan). As long as the delay is of the type previously described, the company must have incurred loss, and there exists a principle which can be taken as a basis for estimating the value of the damage in a manner achieving justice, even if only in major part. This is to take the average daily value of each hospital. The established jurisprudence of the Board of Grievances is to compensate for delay by estimation by taking some percentage of the daily value of the project – seeking to do justice in estimating [the percentage] through its knowledge of the circumstances and concomitants of the case – and then multiplying the product of that percentage by the number of days of delay. The product of this represents compensation for the damages resulting from the delay, in greater part. Besides this, estimating the compensation here is based on the principle that the amount of compensation is a type of punishment imposed on the [defendant agency] because of its breach of its contractual obligations. This punishment and similar fines are among the matters which judicial bodies may estimate by approximation (juzāfan) taking into account that it here be in the amount of the damage that [the breach] has caused, by and large.78

As in this last paragraph, and as we saw above in the context of moral damages, the argument is sometimes made in administrative cases that when Sharia seeks to deter certain wrongs by criminal penalty (ta`zīr), then in the case of the government which is not susceptible to such punishment, payment of damages to the plaintiff serves as a substitute. Thus, in a case also in 1992, the Board declared in a similar context: The delay of payment of dues … without authority in the contract or regulations (niẓām) is considered a gross violation of the most important obligations in the contract. The Holy Quran and the Prophetic Sunna have both stressed in many places the necessity to fulfil covenants, contracts, and obligations. They both strongly denounced also in many places whoever gets involved in any such breach. Therefore, fulfilling contracts, covenants, and obligations is considered a Sharia obligation (wājib) that no one is permitted to neglect in any circumstance. Consequently, any breach of any

76 Quoted in Nāṣir al-Jawfān, ‘al-Ta`wīd `an tafwīt manfa`a in`aqad sabab wujūdihā’ (1425 (2004)) year 17, no 65 Majallat al-Buhūth al-Fiqhiyya al-Mu`āṣira 124. Cited in Decision No 16, BG-Adm Unpub (Adm C No 5, Riyadh 1420 (1999)), and in Decision No 93, 3 BG-Com-1408–1423 343 (Com C No 1, Riyadh 1417 (1996)). 77 Decision No 16, BG-Adm Unpub; Decision No 141, cited in `Abd Allāh al-Mutayhī, ‘Da`āwā al-ta`wīḍ al-nāshi’a `an al-mas’ūliyyatayn al-taqṣīriyya wa-al-`aqdiyya wa-taṭbīqātuhā fī al-fiqh wa-al-qaḍā’ al-idārī’ 759–60 (BG Review Bd Adm C No 1, city unknown 1412 (1991)); Decision No 171, cited in `Abd Allāh al-Mutayhī, ibid 772–74 (BG Review Bd Adm C No 1, Dammam 1412 (1991)); Decision No 152, cited in `Abd Allāh al-Mutayhī, ibid 846–47 (BG Review Bd Adm C No 1, city unknown 1412 (1991)); Decision No 3, BG-Adm Unpub (Adm C No 3, Riyadh 1418 (1997)). Among commercial cases, Decision No 68, 1 BG-Com-1435 580 (Com C No 1, Buraida 1433 (2011)). 78 Decision No 22, BG-Adm Unpub (Adm C No 2, Riyadh 1413 (1992)).

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of these shall be deemed to be unlawful (muḥarram) transgression of the Quran and the Prophetic Sunna. If this is proved, then in such a case anyone in breach of the above shall be subjected to a ta`zīr penalty, in accordance with the established Sharia principle that any unlawful act for which no fixed this-worldly penalty is available should then bear a ta`zīr punishment to be assessed by the judiciary guided by the circumstances of the case and custom.79

The court goes on to explain the suitability of fixing the penalty in the amount of plaintiff ’s damages, and of paying the penalty to plaintiff and not the state treasury. Saudi decisions state that it is the accepted jurisprudence of the administrative courts to do so up to 10 per cent of the contract value.80 A last clear instance where administrative courts indulge in free estimation of damages is that of moral damages, reviewed above.81

7.1.2.3. Causation or Tasabbub As to the third element, causation, Islamic law differs markedly from other civil liability systems in recognising two forms of causation – direct and indirect. As traditionally defined, direct causation (mubāshara, the actor is mubāshir) is that which causes harm ‘as a result of the contact of the means of destruction with its object’, while indirect causation (tasabbub, the actor is mutasabbib) occurs ‘by an act on one object that leads ordinarily (`ādatan) to the destruction of another [object]’.82 The literal meaning of the term mubāshara is mutual touching or contact, while literal meanings of tasabbub include ‘to be the cause or reason’. As to tasabbub, Islamic law requires that the causative connection between the wrong and the harm be clearly shown, involving no speculation. This stems from revealed precepts against depriving persons of their property based on gharar, here speculation. This trait in the law contributes further to results divergent from those in other legal systems, such as, again, Islamic law’s opposition to awarding damages for lost profits (see next chapter) and many other consequential damages on the ground that these involve speculating about causation, indeed about the consequences of actions that never occurred. Thus, damages allowed are typically only damages caused in fact by the wrongful act. Given the law’s insistence on a strict showing that the actor caused the harm in question, not surprisingly the indirect actor is excused if, after his act, events outside his control and not following ‘ordinarily’ from his own action break the chain of causation. A subcase of this is when his wrongful act contributing to the harm is followed by another wrongful, or direct, act that further causes or accomplishes the harm. In such cases, fiqh principles generally make the second, the later, actor liable.83 A general principle, qā`ida, holds that ‘if the mubāshir and the mutasabbib join together [in causing a harm], the judgment attaches to the mubāshir’,84 sometimes stated as ‘the direct actor is given precedence’

79 Decision

No 21, BG-Adm Unpub (Adm C No 2, Riyadh 1413 (1992)). No 152, cited in `Abd Allāh al-Mutayhī (n 77). 81 See text at nn 56–61 above. 82 This definition is given by the Hanafi scholar Abū Bakr al-Kāsānī (d 1191), Badāʼi` al-ṣanāʼi` fī tartīb al-sharāʼi` (Beirut: Dār al-Kitāb al-`Arabī, 1982) 7:165. See also Ottoman-Majalla, Art 888; al-Zarqā (n 57) 74. 83 Maḥmaṣānī (n 7) 1:226; Qari-Majalla, Art 127. This outcome seems a response to revealed precepts, as explained in section 4.3.2. 84 Ottoman-Majalla, Arts 90, 925. 80 Decision

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.2.4 (al-mubāshir awlā). Traditional examples are: one pushes another from a precipice, but before the victim hits the ground another beheads him with a sword; one holds a victim so that another person can slay him; one destroys a document proving a debt and then the debtor refuses to pay; or one digs a pit in a public way and another puts a stone on the edge of the pit, causing a third person to fall in. Certain exceptions apply, such as when a later direct actor is innocent while the first person acted wrongfully – such as, for example, when the first actor by duress forces the second, the direct, actor to commit the harm. In the Hanbali school Ibn Rajab offers a useful framework for these exceptions85 which is relied on in Saudi published decisions.86

7.1.2.4. The Distinction Between the Direct Act (Mubāshir) and the Indirect Act (Mutasabbib) It is worthwhile to explore in more detail how the direct (mubāshir) act and the indirect (mutasabbib) act are defined and distinguished. The distinction has important consequences, since, again, the direct actor is liable regardless of fault, while the indirect actor is liable only with ta`addi. The rule as to the mubāshir seems anomalous from a modern perspective: for example, it makes even persons asleep or unconscious liable for damage they cause directly.87 Some modern scholars explain such results, not as due to some primitive idea of immediate contact entailing liability, but on the ground of the clear and objective status of such an event as cause.88 Fiqh definitions of the terms mubāshir and mutasabbib offer us another example of the more general issue, raised in section 3.2.3, of how technical fiqh terms are put to use in practice. Let us consider this usage at two levels – first, at the level of the definitions for the terms offered both traditionally and in modern times; and second, at the level of the terms’ use in practice, both in exemplary cases in traditional fiqh texts and in Saudi cases. To start then at the level of definitions, let us recall the discussion in section 3.2.3 about how not only exemplary cases but also definitions undergo extension by analogy when brought to bear on actual cases. Due to a shared expectation of authors of fiqh works and of

85 `Abd al-Raḥmān Ibn Rajab (d 1393), al-Qawā`id fī al-fiqh al-islāmī (Cairo: Maktabat al-Kulliyāt al-Azhāriyya, 1971) Principle No 127. 86 Decision No 34201873, 13 Gen-1434 191 (Riyadh 1434 (2012)); Decision No 33272212, 13 Gen-1434 200 (Riyadh 1433 (2011)); Decision No 75, 6 BG-Adm-1431 2492 (Adm C No 22, Medina 1431 (2009)). 87 al-Zuḥaylī (n 57) 171, giving examples. 88 `Abd al-Laṭīf al-Qarnī, ‘al-Naẓariyya al-sababiyya bayn al-fiqh wa-al-qānūn: dirāsa ta’ṣīliyya wa-taṭbīqiyya muqārina’ (Doctorate, High Judicial Institute, Imam Muhammad University, 1433 (2011)). The effort to create a theory rationalising the mubāshir results, and unifying mubāshara and tasabbub causation, may have been the springboard for an effort, inspired by French legal thought, to present Islamic tort law as a wholly objective theory, unconcerned with fault, and requiring compensation merely upon a showing that the act caused unlawful harm. This theory makes an appearance even in several Arab codes: Jordan Civil Code, Art 257(2); UAE Civil Transactions Code, Art 283(2). It seems, however, merely to secrete the question of wrongfulness or fault under one of the other two legs of the general theory, either damage (ḍarar) or causation. An overlapping effort to unify the mubāshir and the mutasabbib is found in al-Zarqā (n 57) 78–83, where he advocates for a second meaning for ta`addī (besides its definition as an act prohibited by Sharia, ie as fault), namely invasion of the right or property of another, a stance that allows him to unite the liability of the mubāshir and the mutasabbib as both based on ta`addī. Saudi Arabia seems never to have adopted forms of the general theory that seek to sublimate any notion of fault.

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those who use them that this would take place, traditional scholars felt less need for precise definitions, since definitions only capture root conceptions which then are often extended by analogy. Modern scholars, on the other hand, often seek precise definitions capable of capturing all the variety of the old law, since they feel a need to conform to modern legal method, which, especially in its civil-law forms, depends on precise definition of terms; in particular, whenever fiqh scholars are working toward a codification of Islamic law, precise, comprehensive definitions seem essential. As for the traditional definitions of mubāshir and mutasabbib, fiqh scholars, even in the late schools, rely on the standard ‘direct contact’ definition. The Ottoman-Majalla, representing the late Hanafi school, offers the following definitions of the two terms: Art 887: Itlāf directly (mubāshara) is itlāf of the thing itself, and the one who does this is called a mubāshir.89 Art 888: Itlāf indirectly (tasabbuban) is the causation of the destruction of a thing, ie that it creates in one thing what leads ordinarily to the destruction of another thing. The one who does this is called a mutasabbib. Thus, one who cuts the cord of a hanging lamp is a cause leading to its falling to the ground and its breaking. Therefore he has destroyed the cord directly and broken the lamp indirectly (tasabbuban). Thus, if he splits a vessel containing oil and that oil is destroyed, he has destroyed the vessel directly and the oil indirectly.

Salim Baz, a commentator on the Majalla, adds as a gloss on Article 887’s definition that the direct act causes harm ‘without there intervening between the act (fi`l) of the direct actor (mubāshir) and the destruction any other act (fi`l) [[fi`l can also mean action or effect]’.90 As for the traditional definition of mubāshara in the Hanbali school, the scholars seem satisfied with the literal meaning of mubāshara as direct contact, and do not offer others.91 It may be noted that Baz’s gloss widens the scope of the direct act somewhat from the standard definition. He shifts attention from whether the contact between the actor and the thing destroyed is direct and immediate to the question whether another fi`l, ie action or effect, intervened between the act and the destruction. His definition potentially allows for one or more events to occur between the direct act and the harm as long as they do not constitute such a fi`l, and thus for a ‘direct’ act that involves no direct contact. Clearly, throughout traditional fiqh, it is clear that the voluntary act of a living being, person, or animal, qualifies as such a fi`l, since all the schools use the example of a person who digs a hole or pit in a public street into which an animal or person accidentally falls as a basic model for an indirect act causing harm. In other words, in Baz’s sense, the act of digging the pit is not direct because the act of the animal or person moving on the street is a fi`l. But there remains the question: may an act be direct if it results in harm through a chain of events that involve no act of a living person or animal? For example, may an act be direct

89 See

also al-Khafīf (n 31) 58. Rustum Bāz (d 1920), Sharḥ al-Majalla (Beirut: Dār Iḥyā’ al-Turāth al-`Arabī, 1986) 477 (Art 887). 91 Qari-Majalla, Art 1377 defines the indirect act as ‘doing that which ordinarily (`ādatan) leads to the destruction without the intervention of anything to which the judgment [of liability] can be transferred’. In this mention of intervening causes Qari is dealing with an issue different from the distinction between mubāshir and mutasabbib that concerns us here; his concern is with acts or events that interrupt the chain of events leading from the indirect act and therefore defeat liability altogether. He is paraphrasing a discussion by Ibn Qudāma (n 18) 5:226. 90 Salīm

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Liabilities Arising from Tort in Traditional and Saudi Law: Two Model Torts 7.1.2.4 if it sets in motion a sequence of physical or natural events that lead to the harm? The question seems open, suggesting that traditional scholars fostered here a deliberate ambiguity. Modern scholars have tried to overcome this ambiguity. For example, Khafif (d 1978) offers a more complex explanation of mubāshir and mutasabbib: [D]irect harm is that which is the result of the contact between the means (āla) of destruction and its object, and the caused [indirect] harm is what occurs by an action upon one object leading to another action upon another object with the possibility of absence of the second action from it, for if its absence at the harm is not possible, it is therefore direct, and the two actions are as if one action.92

According to this definition of the direct act, though it repeats the standard one requiring physical contact, it allows for two actions together to constitute a direct act, as long as the second action, not committed directly by the actor, follows not merely probably but necessarily from the first. As Mustafa Zarqa (d 1999) acknowledges,93 such a conception of direct act would entail that cutting the lamp cord (as in Art 888 of the Ottoman-Majalla) is a direct act that destroys not only the cord but also the lamp, since the action of gravity is inevitable. Indeed, as he states, some Hanafis have so held. Similarly, cutting an oilskin from which the oil then flows is an act that directly destroys the oil as well as the skin. (But, Zarqa says, this is, however, only if the oil is in a liquid state; if instead congealed by cold, and it escapes only as the sun warms it, then the destruction is indirect.94) Agreeing with Khafif, Zarqa points out that an indirect act is considered causative if ‘usually’ or ‘customarily’ (`ādatan) it leads to the harm in question.95 In contrast, if the harm has ‘necessarily’ to happen, if the ordinary case is not merely probable but inevitable (`āda aghlabiyya versus `āda muṭṭarida), then the act in question is not indirect but direct.96 These descriptions, by two modern scholars, both point to a wider definition of mubāshir, one not relying on actual physical contact. The term mubāshir is also used by modern scholars and judges in a different sense altogether, this in the context of modern Arab positive law (qānūnī) doctrine where no distinction is observed at all between the traditional mubāshir and mutasabbib. In modern Arab legal writing, the term ‘direct harm’ (al-ḍarar al-mubāshir) refers to ḍarar in the sense of harm that is not remote in the English law sense, is proximate in the US sense, or is direct in the French sense; only such harm qualifies as the basis for a claim. Article 161(b) of the Egyptian Civil Code defines legally cognised ḍarar as ‘that which is the natural result of the wrong’.97

92 al-Khafīf

(n 31) 58. (n 57) 74. 94 Muḥammad al-Marzūqī, Mas’ūliyyat al-mar’ `an al-ḍarr al-nātij min taqṣīrih (Beirut: al-Shabaka al-`Arabiyya li-al-Abḥāth wa-al-Nashr, 2009) 238, 240, 255 discusses a variety of views on the issue, including one that holds that the splitter is liable regardless of what cause (other than another tortfeasor’s act) ultimately causes the oil to pour out. 95 The conception of `ādatan excludes weak, remote, obscure, or low-probability causation. Marzūqī (n 91) 237 mentions the case of one who digs a well in a desert, where anyone is unlikely to be walking in an unguarded manner. 96 al-Zarqā (n 57) 74. 97 See al-Zuḥaylī (n 57) 56. 93 al-Zarqā

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To move to the second level, the terms mubāshir and mutasabbib as applied to practical cases, let us look first at exemplary cases cited in the fiqh manuals and then at Saudi court decisions. In the manuals we find that mubāshara as physical contact is more a metaphor than a rule. A Saudi author cites an exemplary case as holding that one who leads a person to a place where another is shooting arrows at a target, thereby causing him to be killed, is a mubāshir – interestingly, however, it is specified that the archer must not be at fault.98 This author also argues that, according to the Hanbali Ibn Qudama, a person who chases another with a sword, causing him to perish from some mishap during his flight, is a mubāshir.99 Numerous examples can also be found among numerous fiqh exemplary cases where an actor is held liable for the consequences of his act even when the facts as stated cast doubt on whether his act was wrongful. In such cases the scholars do seem to be treating the actor as equivalent, or analogous, to the direct actor, since only the latter is held liable regardless of fault.100 To shift to Saudi published decisions, we find that many Saudi cases use and apply the terms mubāshir and mutasabbib in their traditional sense,101 but others use them in broader, or metaphorical, senses. In several Saudi cases the term mubāshir is used to designate the more direct of two indirect acts, to convey the idea that, as later and also culpable, the second act breaks the chain of causation from the earlier act and therefore bears full liability. Thus, in an accident where one car moving struck the side of a stationary car, causing the death of that car’s driver, the court held that the driver of the moving car was a mubāshir and liable for the entire blood money to that driver’s heirs – this though the traffic police assigned 75 per cent of the blame to the driver of the second car.102 But we know that such terminology is only figurative, since in Saudi Arabia for many decades drivers in traffic accident cases have been treated as indirect actors, a result needed to be able to apportion recoveries among them according to their fault in causing accidents.103 In the same way, the Supreme Court in its recent compilation describes as a mubāshir the driver of a car that struck camels, holding him entirely liable even though the herder of the camels was also at fault.104 A number of Saudi cases use the term mubāshir in the modern civil-law sense, as meaning the cause that is legally recognised, that occasions liability for its doer.105

98 See

al-Qarnī (n 85) 283–84. Qudāma (n 18) 8:431. 100 al-Zuḥaylī (n 57) 172 offers a number of such cases. 101 See eg Decision No 34241641, 5 Gen-1434 317 (al-Medina 1434 (2012)); Decision No 53, 6 BG-Adm-1428 2703 (Adm C No 18, Abha 1428 (2007)); Decision No 25, 5 BG-Adm-1428 2303 (Adm C No 10, Jedda 1428 (2007)). 102 Decision No Unknown, cited in Qarnī (n 85) 227–28 (Gen Trial Ct, Riyadh 1419 (1998)). Similarly, Decision No 34215006, 14 Gen-1434 39 (Najran 1434 (2012)) and Decision No 34201873, 13 Gen-1434. 103 This result is also traditional, if analogy is made to captains and ships and to riders and the animals they ride. For an analysis of the doctrine and practice on traffic accidents in Saudi courts, see Frank E Vogel, Islamic Law and Legal System: Studies of Saudi Arabia (Leiden: Brill, 2000) 127–29. 104 Ministry of Justice-Principles of Highest Courts-2016, No 1060. 105 Decision No 102, 2 BG-Com-1430 669 (Com C No 2, Riyadh 1430 (2008)); Decision No 101, 4 BG-Com-1432. Decision No 17, cited in Qarnī (n 85) 260–63 (Adm C No 15, Dammam 1427 (2006)); Decision No 35174555, 2 Gen-1435 75 (Ha’il 1435 (2013)). 99 Ibn

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7.1.3. Other Named Torts: Breach of Amāna, Fraud, Embezzlement Another tort often encountered in the business law context is khiyānat al-amāna, literally, ‘breach of amāna’. The linguistic meanings of khiyāna include acting in bad faith or with evil intent, betrayal, faithlessness, fraud, and treachery, but also simple falling-short, neglect, and breach.106 Although the term receives mention in the Quran itself,107 khiyānat al-amāna is not a highly developed legal construct. Scholars tend to employ it in contexts where the owner of property must rely particularly on the honesty and good faith of an amīn, such as in deposit and agency.108 Because in ordinary usage khiyāna most often means deceit or betrayal, the term khiyānat al-amāna is often used to denote intentional abuse of another party’s faith or trust, but it can mean unintentional, but still wrongful, breach.109 In situations where the act of khiyāna is intentional, however, khiyānat al-amāna is a ta`zīr crime which, if the victim makes a complaint, can be prosecuted before the general Shari`a courts of Saudi Arabia and punished at the discretion of court. Khiyānat al-amāna, in legal effect, amounts to a specific type of ta`addī or wrongdoing, namely, the khiyāna or betrayal of the duty of trust or amāna. As discussed in section 6.1.2, amāna is a duty of loyalty and care borne by one person toward the property of another which, under Shari`a, applies in various relationships between the two parties, usually arising from contract but also by operation of law. Breach of amāna obligations is a form of ta`addī, leading to the possibility of damages under the tort of itlāf. If, however, a particular act of khiyāna affords analogies to ghaṣb, such as by transacting in the owner’s property without authority or consent, then the remedy may also follow some or all of the rules of ghaṣb. Fraud is referred to by a number of terms, some used synonymously, including ghurūr, taghrīr, tadlīs, ghishsh, and khidā`. Fiqh generally and as applied by Saudi judges gives none of these terms an exact definition; much less does it treat them as distinct causes of action. Observing this, modern Arab scholars have declared that under Shari`a, action for fraud may be brought as a generic tort, ie as a claim of itlāf or, in the right circumstances, ghaṣb. For example, Zarqa states: ‘[W]e do not single out fraud with an independent ruling. … [F]raud as it relates to tort … is subject to the general rules of tort.’110 This position has been adopted in a number of Arab codes, even those hewing closely to Islamic legal principles, such as the codes of Jordan and UAE that provide: ‘If one person defrauds another, he is liable for the damage resulting from that fraud.’111 Fraud is also punishable criminally, with ta`zīr. Embezzlement, or ikhtilās, also not elaborated specifically in fiqh, is treated in similar fashion, as a ta`addī actionable under itlāf rules, or, if circumstances allow it, by analogy to ghaṣb. It is also punishable as a crime.

106 Nāṣir

(n 6) 24.

107 Quran, 8:27: ‘Believers, do not betray God and the Messenger, or knowingly betray [other people’s] trust in you

(takhūnū amānātikum).’ 108 Wizārat al-Awqāf, ‘Khiyānat al-amāna’ (n 7). 109 Nāṣir (n 6) 29. 110 al-Zarqā (n 57) 94, see also 65. 111 Jordan Civil Code, Art 259; UAE Civil Transactions Code, Art 285.

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7.2. Liabilities Arising from Breach of Contract in Traditional Fiqh In this section I sum up the extent to which the remedies under traditional fiqh for breach of contract reflect or correspond to the major contract law remedies known in contemporary legal systems.112 The discussion below and in parts of other chapters shows how distinct the conceptual framework with which Islamic law addresses contract breach is from that of contemporary legal systems. To start with, in Islamic law the action for ‘breach of contract’ (ikhlāl bi-`aqd is the modern term for it) is not a fundamental conception. Perhaps the ultimate reason for this is that, as explained in section 4.4.1.2-a, fiqh approaches the commutative contract not as an exchange of promises but as a reciprocal conveyance of property, this in turn impelled by early jurists’ responses to the revealed precepts as to property, ribā and gharar. The conceptual framework fiqh does use will be made clearer in the discussion in section 7.2.3.1 below of the theory of the ‘three ḍamāns’. After summarising the traditional system of remedies, I take up in a separate section, section 7.3 below, the degree to which Saudi courts still observe all the rigours of that system, or whether they have adjusted or evolved it. In this and the following two chapters I adopt the civil law terminology of ‘debtor’ and ‘creditor’ to refer to, respectively, the one who breaches the contract and the one harmed by the breach.

7.2.1. Specific Performance Specific performance is a fundamental remedy in all legal systems, though, for historical reasons, least so in the common law, which turns to it only if a claimant can show that an action for damages would be inadequate.113 As for Islamic law, specific performance (in modern terminology al-tanfīdh al-`aynī) is considered the fundamental remedy for breach of a binding contract, and offers the clearest analogue to an action for breach of contract under traditional fiqh. But in Islamic law the logic by which performance is enforced is enforcement not of the debtor’s promise, but rather of his duty to fulfil his side of a reciprocal conveyance. Indeed, in fiqh refusal to perform is a sin and therefore a crime (ta`zīr). If the debtor’s obligation is to pay money, he is forced, by imprisonment, to perform his obligation. If he still refuses after a period of imprisonment, judicial execution may be brought against his property. If it appears that he is insolvent (mu`sir), he is released from prison and the debt is postponed, as the Qur'ān states, ‘until matters become easier for him’ (2:280). If the obligation is for the debtor to perform some specific action, such as to accomplish a specific task or deliver a specific property, the court compels the debtor to perform the action by administering punishment at its discretion, including even floggings.114

112 This section draws in part on Frank E Vogel, ‘ The Contract Law of Islam and of the Arab Middle East’, in International Encyclopedia of Comparative Law, vol VII, ch 7 (2006) paras 112–21. 113 Konrad Zweigert and Hein Kötz, Introduction to Comparative Law, trans Tony Weir, 2nd rev edn (Oxford and New York: Clarendon Press, 1987) ch 42. 114 al-Khafīf (n 31) 17.

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Whether the creditor may claim damages for losses caused by delay in performance is discussed in sections 7.2.3.2-c and -d below and in the next chapter. Of course, if the debtor cannot perform due to circumstances that have made his performance impossible, the above means of compulsion do not apply. The remedy to which the law then turns is rescission or faskh, discussed next.

7.2.2. Rescission for Default Another remedy common under modern law is that of rescission (related terms are cancellation and termination), entire or partial, upon default by one of the parties, either at the instance of the creditor or by order of a court. Islamic law in pure theory does not allow for rescission (faskh) in binding (lāzim) contracts where performance remains possible. Indeed, the remedy for such defaults when unexcused is to compel the debtor’s performance by a ta`zīr penalty of lashing or imprisonment. One complaining of default may not rescind the contract upon the default, on his own motion or even by application to a court. The creditor remains liable to perform his own obligation, though he usually can defer that performance until the debtor is prepared to reciprocate. But the traditional law knows many circumstances where rescission for default is the norm. A common such instance is where one of the parties to a commutative contract is entitled, by operation of law or explicit contract term, to one or another type of option or right to annul (khiyār). These options were reviewed in section 6.2.1.1-a. For example, in sale the law ensures the buyer of a right to annul the contract ex ante upon finding that the goods lack a characteristic, or the performance fails to produce a benefit that the creditor stipulated for himself in the sale contract (khiyār al-waṣf, khiyār fawāt al-sharṭ),115 or if the goods have a latent defect (khiyār al-`ayb). Clearly, many instances of breach of contract are remedied by this provision. Another instance is the contract of salam: on the seller’s failure to deliver on time the buyer has an option to rescind.116 Finally, a creditor who has performed in a commutative contract but not received his price has a right to rescission if the debtor becomes bankrupt; indeed, a party may recover his own countervalue from the possession of a defaulting insolvent. Otherwise the debtor must simply persist in seeking the other party’s performance.117 Zarqa sums up the fiqh position on whether a creditor may rescind upon a debtor’s delay in performance: The apparent position of the fiqh scholars in the legal schools is that protection of the creditor suffering harm in this situation is confined to giving him the right to resort to the courts to demand compelling the party in delay to perform his obligation specifically, because the task of the judge is to deliver legal rights to those entitled to them. The [creditor] has no power to rescind the contract either at his own option or by means of a court, since the contract is binding and its performance obligatory. The judge is the party responsible to compel every party in arrears to perform his obligations. This is the basic method, and it is deviated from only exceptionally, in specific circumstances.118 115 At

least in the late Hanbali school. See Qari-Majalla, Arts 459–66. Saudi court extended this to any instance of late delivery in a sale contract. Decision No 200, 2 BG-Com1432 1660 (Com C No 12, Jedda 1433 (2011)). 117 Maḥmaṣānī (n 7) 493–97. He lists a number of situations where bankruptcy affords rights to rescind. 118 Muṣṭafā al-Zarqa, ‘Dirāsa mabda’iyya fī al-`uqūd wa-faskhihā bayn al-sharī`a wa-al-qānūn’ (nd) 5, no 7 Majallat al-Majma` al-Fiqhī al-Islāmī 129. 116 A

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But, of course, specific performance is frequently impossible in the circumstances. In this event, Islamic law resorts to the remedy of rescission, ie returning the parties to their conditions ex ante, this on the ground of invalidity of the contract due to the non-existence of its subject-matter.119 This is the case even if the impossibility is due to the debtor’s breach of the contract. The situation of impossibility of performance most discussed in fiqh works is where loss befalls one or the other of the properties being exchanged, and the question arises as to which party must bear that loss – who ‘has the ḍamān for the property’. The applicable rules are those of ḍamān al-`aqd, or ḍamān of the contract, discussed below in section 7.2.3.1. Here the logic is, again, not one of enforcing promises to perform, but rather of determining which party bears the risk of loss for the particular property due to be conveyed. In the Hanbali school, for example, if a specific property (`ayn) is destroyed in the hands of its seller without his being at fault, the ḍamān is on the buyer, the sale remaining valid and the price due.

7.2.3. Damages If we shift to considering claims for damages from breach of contract, ie compensation for losses caused by contract breach, we find that Islamic law approaches this question using a framework entirely different from that of other legal systems, both contemporary and historical. This framework governs not only contract but also tort and property. In the logic of Islamic law, the relevant question is which person bears the ḍamān (literally responsibility, guaranty) for a particular property, ie who is obligated to bear the losses to that property, whether directly if it is his own property or, if not, indirectly by restoring it, or if it is destroyed, paying its equivalent or value to its owner.120 The various legal contexts in which such an issue can arise – such as contract breach, seizing of possession, or acts of destruction – are only instances of the general question. Given this situation, in what follows I explain the general framework for all forms of ḍamān, and then go on to compare the outcomes of this framework in contract settings with the remedy of damages for breach of contract as it is commonly applied in other modern legal systems.

7.2.3.1. A Traditional Schema Explaining Ḍamān Instances where ḍamān arises are found throughout fiqh works. Medieval scholars, notably those working within the genre of qawā`id or legal principles,121 developed a theoretical framework that attempts an overarching categorisation and description of ḍamān across these multifarious instances. This framework or template employs a fundamental classification of pecuniary liability, ḍamān, into three types: ḍamān al-`aqd, ḍamān al-yad,

119 Of course, rescission by the court is also commonly provided for in fiqh works where for other reasons the contract is deemed invalid or void, such incapacity of a party, an illegal term dooming the entire contract, or duress. 120 Ḍamān is also the name for the contract of guaranty, also referred to as kafāla (see section 6.2.2.4), but that is not our focus in this section. 121 As explained in section 3.2.2.4-a, these are fiqh works seeking the deeper underlying structures behind the casuistic surface of exemplary rulings in fiqh works.

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and ḍamān al-itlāf, meaning, roughly, liability arising from contract, liability arising from possession, and liability arising from damage or harm.122 In my experience, though this template is only an intellectual superstructure generated by scholars, and not the foundation on which the rules were originally erected, certainly for those new to the law it offers the best means to approach and understand actual outcomes under traditional Islamic law. I use this template in the detailed case studies that follow in the next two chapters, which I believe prove its usefulness, applying it in analysing all of contract, tort, and property claims. I note at once, however, that this template – since it is offered at a high level of generality and as a way of trying to organise inherently complex and disparate results – can differ in the manner of its use among the scholars of various schools who have advanced it. One scholar may assign a claim to one of the three types of liability, another scholar to another type, and another scholar to both of those types. For example, the liability of an amīn who breaches the terms of his amāna may be classified as either ḍamān of possession or ḍamān of destruction; and the liability of a seller for damage to the sold goods when they remained in his possession after the sale became final could theoretically be assigned to ḍamān of possession or ḍamān of contract. The variations among scholars’ views can arise for many reasons apart from differences of principle, such as differences in the fact patterns the scholars are considering, some of which are not incorporated into this high-level analysis, or the fact that a claim brought under either of two headings may have the same result (instances appear below). Given such complexities, and to avoid getting drawn into the variations of views, I choose here instead to offer a simplified version of this three-part template, as a tool useful in its own right, a heuristic device, and not as a faithful rendition or final reconciliation of the traditional positions concerning it. My definitions of these three recoveries may differ also from the traditional formulations by being more conceptual or functional. Again, rather than assign various types of claim in advance to one type of ḍamān, I would propose that particular claims be allocated to one or the other type depending on the analogies that a judge wishes to draw from their facts. For example, some scholars assign to ḍamān al-yad the liability of an offending amīn for the destruction of property with which he was entrusted, but this seems demonstrably wrong in terms of the outcomes specified in fiqh works for many factual circumstances, where instead ḍamān al-itlāf is the model. My view would put such actions under either ḍamān al-yad or ḍamān al-itlāf depending on the facts surrounding the destruction (eg did it follow an unlawful seizure?). Given these preliminaries, let me define the three branches of the template as follows. Liability arising from contract, ḍamān al-`aqd, I define as obligations that arise from contract that are remedied by either specific performance, ie forcing the defaulting party to perform specifically as promised, or rescission, ie returning to each party any performance he had already rendered. The logic of this liability does not include damages for breach of

122 See the Hanbali work by Ibn Rajab (n 85) No 89. Qari mentions this framework in the part of his Majalla devoted to qawā`id. Qari-Majalla, Art 87. Other famous fiqh scholars, including Ibn Rushd (Maliki, d. 1198), al-Qarāfī (Maliki, d 1285), al-Suyūṭī (Shafi`i, d 1505), and others, have adopted this classification or a similar one. On such scholars’ views, see ʿAbd al-Raḥmān bin Fahd al-Ḥumayyin, ‘Athar al-tasabbub fī al-ḍamān’ (Doctorate, Imam Muhammad University, College of Shari`a, Fiqh Division, 1419 (1998)) 102. Modern scholars have also employed it, such as Zuḥaylī (n 57) 63–87.

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contract. A characteristic of remedies under this heading is unwillingness to alter the valuation on their performances the parties had agreed to, to refer to any other standard; the liability is fixed in type, scope, and quantity by the terms of the parties’ agreement. Thus, if a seller fails to deliver the sold goods, he can be compelled to do so; according to the Hanafi formulation, if the goods have been destroyed, otherwise than by the purchaser’s fault, the seller is liable; in such a case, the contract is rescinded and the seller must return the price paid, not the goods’ market value. As another example, the ordinary remedy for a defect (`ayb) in a property sold is rescission at the option (khiyār) of the buyer. Here a partial exception proves the rule – the Hanbalis alone among the schools allow the buyer to confirm the sale on condition of compensation (arsh) for the diminution in the good’s price on the market due to the defect.123 Ḍamān al-`aqd rules are complex and vary among the schools. In sale, in the Hanafi school, as just noted, if `ayn goods are destroyed in the hands of the seller before delivery, without the fault of the buyer, the sale is rescinded (it is said to be not ‘complete’ until the goods are delivered); the seller bears the ḍamān. In the Hanbali school, by contrast, in such a case, the sale remains valid and the price due unless the loss is the fault of the seller. In lease, the lessor bears the ḍamān of the leased property, so that if the leased object is destroyed without the fault of the lessee, the lessee is released and regains all unearned rentals. Liability arising from destruction, or ḍamān al-itlāf, I define in accordance with the broad definition for itlāf emerging late in Islamic law described in section 7.1.2 above. It enjoins compensation for actually occurring pecuniary losses caused by the fault of another. Liability arising from taking possession, or ḍamān al-yad, I define as liability arising from the taking of possession (or exercising the rights of an owner) over property belonging to another without right. Here the model of recovery put constantly to use is the tort of ghaṣb, as described in section 7.1.1 above. As we saw, ghaṣb liability is understood fundamentally as the duty to return the property to the owner. But property involves rights beyond just the thing taken, since most property (here excepting money and other consumables) bears with it benefits that accrue over time, such as its use (manfa`a, which has its own pecuniary value) and the fruits or profits (thimār, zawā’id, namā’, arbāḥ) the property bears or can be made to bear through effort. Therefore, the taker of the property is often required to restore these benefits as well to the owner. If the property has been destroyed or consumed (terminating any further use-values, fruits, or profits as non-recoverable because only hypothetical), then liability shifts to returning the like of the property if it is a fungible, or its value if not a fungible. What actions can give rise to this type of liability? Of course, the tort (or crime) of ghaṣb or usurpation discussed at length in section 7.1.1 above. But far beyond ghaṣb itself, and instead by analogy to it, this type of recovery can apply whenever an event sufficiently resembles an open wrongful seizure, ie whenever an actor wrongfully asserts control over the property of another without any putatively lawful ground for doing so. As we saw, such applications can arise within contractual relations, such as where a lessee keeps property beyond the term of the lease, or a depositee denies the fact of the deposit. One should note that the three separate types of liability can combine or overlap in actual cases. A simple example is an ordinary claim of usurpation, which is at root a claim

123 Malikis allow the same remedy, at least for land, but only if the defect is relatively small. Wizārat al-Awqāf, ‘Khiyār al-`ayb’ in al-Mawsū`a al-fiqhiyya (Kuwait: Wizārat al-Awqāf, 1404–27 (1983–2006)).

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of ḍamān al-yad or liability from possession, but if the object usurped has been harmed or destroyed by the fault of the usurper, compensation for the object itself is decided exactly as under ḍamān al-itlāf, or liability from destruction. If the one usurped from incurs expenses regaining his property, they also are compensated under ḍamān al-itlāf. As an example from fiqh texts of how, even in a single case, the three arms of the template can combine and interact, let us revisit the rules discussed above in section 7.1.1.4 governing one who leases usurped property from a usurper and, having been sued by the owner and obliged to compensate him, brings suit against the usurper, his lessor. As before, we rely on the following article from the Qari-Majalla: Article 1415: If a person leases from the usurper without knowing that [the leased property] was usurped, and the leased property is destroyed in his possession without negligence (tafrīṭ) and he pays [the owner] for its loss, he can reclaim from the usurper the value of the usurped property but not the value of the benefit [use-value]. But if he knew of the usurpation or if the property was lost due to a fault (tafrīṭ of his, he may not reclaim anything. … The lessee will recover the consideration [ie rent] he paid in all cases.

Here the rules of ḍamān al-`aqd, the ḍamān of the contract, provide that the lessee cannot recover from the usurper the value of the use-values he acquired by his lease when these values were later ‘lost’ (by his paying compensation to the owner for them at their market value); rather he can obtain only the price he paid for those use-values, ie the agreed rental. This is because the contract is being rescinded, and ḍamān al-`aqd rules hold the parties to the price they agreed upon for the considerations they exchange, not any other valuation. Ḍamān al-itlāf rules, applied in the context of the amāna duties of the lessee, make the lessee ultimately liable for the loss of the property itself but only if his wrongdoing (here called tafrīṭ) caused its destruction; otherwise the lessor-usurper bears that liability. Finally, it is ḍamān al-yad rules that require in the first place that the lessee be held liable to the owner for the property (or its value if destroyed) with its use-values. Despite the fact that these three types of liability can interact and overlap in this way, it remains useful analytically if one can identify which type of liability one is discussing for every aspect of a claim. Each type brings with it certain fundamental precepts that help to explain outcomes in the exemplary cases in the fiqh books and in judgments by the courts. This three-part template, being closer to the categories of the traditional law, better accounts for and predicts outcomes than do theories borrowed from other legal systems. As an example, take the lease of a car, and consider four hypothetical alternative fact patterns under it and their possible outcomes in a suit between the two parties to the lease. As the first hypothetical, assume that, during the term of the lease, the car is destroyed in a traffic accident in which the lessee is determined not to be at fault. Under the principles in other legal systems, a case between the lessor and lessee would be decided under contract law principles: absent special provisions in the contract, either the contract fails and is terminated or the lessor would be obligated to supply a substitute car. Under Islamic law, the result would essentially be the same, and on similar grounds. As a second hypothetical, assume the accident were the lessee’s fault. Under other modern laws, a court would hold (absent special provisions in the lease) that the lessee breached his contract by failing to return the car at the end of the lease in its initial condition, ordinary wear and tear excepted, and so must pay breach of contract damages (at least the value of the car) for losses he caused. Under Islamic law, the same outcome would apply, but on grounds not of contract but of the tort-like claim

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for breach of the lessee’s amāna obligation to protect the lessor’s property, lease being one of the contracts regulated by the amāna/ḍamān categories, as explained in sections 6.1.2 and 6.2.1.2. As a third hypothetical, assume that the lessee keeps the vehicle beyond its term. At that point, under legal conceptions of other systems, the lessee has breached the contract by failing to return the car, and owes damages for that breach, which could be measured in various ways, including not only consequential damages but potentially also the lessor’s lost profits or lost opportunities. The normal recovery would seek to put the lessor in the same position as if the lessee had performed. Under Islamic law, as in the last hypothetical, the outcome would be determined not on the ground of breach of contract but of tort. This time, however, the tort is usurpation or ghaṣb, or rather an analogy to it. The lessee would be seen as having taken possession of the car without right, and the remedy would be to restore to the owner not only the car but also its lost utility value, ie the fair rental value of the car until returned. If the lessee derived special profits from keeping the car, potentially these could also be claimed by the lessor. The lessor could also claim any out-of-pocket losses he suffered caused by the lessee’s ‘taking’, but this would not include any counterfactual losses such as lost profits or opportunities. As a fourth hypothetical, assume that during such extended use the car was destroyed by lightning, and it is determined that the lessee had no role in causing this loss. Under other laws, as in the first hypothetical, the loss of the car would not be the lessee’s responsibility (apart from a special term in the contract) and would fall on the owner. The lessee would owe damages for failing to return the car on time, measured as in the third hypothetical. But under Islamic law the result can diverge strikingly: besides remedies as under the third hypothetical, the lessee could potentially (the matter involves exercise of analogous reasoning by the judge) be liable for the car’s full value at the time of the accident even though he was not at fault in its destruction. This would be if the judge analogises his taking of the car to ghaṣb, with the result that the lessee, as quasiusurper, is liable for loss of the property however caused. These hypotheticals afford examples of each arm of the three-part template of pecuniary liability: in the first hypothetical, liability arising from contract (ḍamān al-`aqd); in the second, liability from destruction (ḍamān al-itlāf); and in the third and fourth hypotheticals, liability from possession (ḍamān al-yad).

7.2.3.2. To What Extent Do Outcomes Under this Schema Correspond to Outcomes Under a Doctrine Awarding Compensation for Losses Caused by Breach of Contract? If we analyse how according to the above template one remedies damages caused by breach of the contract, we find that the three-part template offers no general principle requiring compensation of such damages. It ignores all the main principles of Western law on the subject – whether the European civil law theory based on lucrum cessans and damnum emergens or the Anglo-American theories of expectation or reliance damages. So, a firstorder finding is that a cause of action for damages for breach of contract is not innate to the traditional Islamic law. Yet clearly Islamic law as just described does mandate compensation for damages caused by acts that also constitute breaches of contract. In what follows we analyse out those types and compare them with remedies under other legal systems.

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a. Damage to the Subject-Matter of the Contract Let us take up damages first for the case of commutative contracts in which the object of the obligation is destroyed before it is delivered by the seller, a case governed by ḍamān al-`aqd, or ‘ḍamān of the contract’. If the object is dayn, ie fungibles in the dhimma, then destruction of any actual fungibles from which the debtor intended to satisfy his obligation is disregarded and their equivalent remains due. If the goods are `ayn, or a specific thing, then the law allocates the loss between the parties according to certain rules. In sale, if the seller is made to bear the loss, then the contract is rescinded (because the subjectmatter is retroactively declared non-existent). If instead the purchaser bears the loss, then the contract remains valid and the price is enforced (specific performance). In no case does the law undertake to evaluate the goods; it merely upholds or rescinds the terms by which the parties themselves agreed to the exchange. Note also that the allocation of the ḍamān is not decided solely by title, since title transfers immediately at the moment of the contract. These outcomes support and complement the contract’s function of transferring title and possession of the countervalues from one party to another. They are concerned solely with allocating pecuniary losses occurring to one of the countervalues. The risk of loss corresponds exactly to that of an owner, but the amount of loss equals the price, not the value (hence use of the term ḍamān ‘of the contract’). b. Damage to Property Incidental to the Contract: The Ḍamān/Amāna Pair For damage to property incidental to a contract but not one of its countervalues, such as property held by a lessee, agent, or bailee, the key conceptions are the ḍamān/amāna pair discussed in section 6.1.2. These conceptions are seen as the two fundamental forms of liability for property (once it is reduced to ownership): either ḍamān, to bear the risks of an owner or equivalent to those of an owner, or amāna, to be entrusted with someone else’s property for the latter’s benefit, and therefore assuming only a light duty of care to preserve that property. As we saw in section 6.1.2, the law governing various contracts dictates which of these liabilities apply to which party in various circumstances. Thus, on whom a loss falls is determined in the first instance not by fault and causation, but rather by the party’s status towards property as conferred by the contract: either possession as ḍāmin (qabḍ ḍamān) or possession as amīn (qabḍ amāna). If under standard contract terms the party is an amīn or trustee, no liability for loss applies; if, however, he transgresses the requirements of that status by his wrongful behaviour (ta`addī), he thereupon ‘becomes ḍāmin’, ie liable for loss. For example, a lessee of a horse is not liable, for as long as he enjoys status as amīn, for its loss or destruction. If either occurs, he may terminate the lease. But as amīn he is under a duty to protect the horse as is customary, such as by enclosing it in a fence of a customary type and by overseeing it with a customary amount of care. If he fails to meet such standards, then he ‘becomes ḍāmin’ and is liable for the value of the horse if it is harmed or lost. Alternatively, if the parties stipulate that the horse shall be used to make a particular journey or to carry a particular person, then if the horse is used in a manner in contradiction to the permission given by the lessor, then the lessee again loses his status as amīn and becomes ḍāmin, this time perhaps treated as a usurper or ghāṣib.

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We can recall the point made in the last chapter,124 that amāna duties are not limited to the destruction of concrete property actually in the amīn’s custody, but generally to pecuniary losses caused by the amīn’s ta`addī. It is obvious that the structure of these conceptions corresponds more to tort or delict than to breach of contract, to use the terminology of other modern legal systems. c. Measuring Results So Far by the Measure of Modern Rules for Recovery of Damages from Breach of Contract Our discussion of ḍamān so far has fallen far short of any general notion of a remedy compensating a party for harms caused by the other party’s breach of contract. If this is as far as Islamic damages go, much is missing by modern standards. Let us approach the question using four Anglo-American damage measures:125 (a) Restitutionary damages, ie the return of a benefit one party has conferred on the other. (b) Expenditures of the creditor in carrying out his own side of the contract, which are wasted when the debtor fails to perform (reliance damages). The reliance damage measure restores to the creditor all the (foreseeable) costs of carrying out the failed transaction with the debtor. Such damages seek to put the creditor where he was before the contract was made; they are, as it were, backward-looking. (c) Benefits lost by the creditor because of the debtor’s breach (expectation damages, the ‘benefit of the bargain’). Such damages seek to put the creditor where he would have been had the debtor performed; they are, as it were, forward-looking. These damages are usually larger than the reliance measure. (d) Consequential damages, defined here narrowly as actual, out-of-pocket losses of the creditor caused by the debtor’s breach. Imagine a case where seller S contracts to manufacture a part needed to repair a machine in buyer B’s factory. Telling S that the failure of the part had caused the machine to lay idle, B agrees with S on an early date for delivery. After installation, the part breaks; B rejects the part and demands his price back. This is restitution of his own consideration ((a) above). But B suffers other losses: (i) B expended money to ship and install the part (general reliance measure (b)); (ii) due to S’s default, B missed profits from sale of the products of the machine for one month126 and incurred costs to buy another part (less the original price of the part, already recovered), ship it, and install it (general expectation measure (c)); and (iii) when the part broke it harmed the machine (consequential damages as defined in (d)). Under Anglo-American law, B would be required to choose between the reliance measure (i) or the expectation measure (ii). Either measure encompasses the award to B of (iii), as the cost of restoring the machine to its state before the harm done by S.

124 See

Chapter 6, text at nn 6–8. the classical explanation of the three most basic forms of remedy (restitution, reliance, and expectation), see LL Fuller and William R Perdue, ‘The Reliance Interest in Contract Damages: 1’ (1936) 46(1) Yale Law Journal 52–96 and ‘The Reliance Interest in Contract Damages: 2’ (1937) 46(3) Yale Law Journal 373–420. 126 These damages are often also referred to as ‘consequential’. 125 For

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7.2.3.2

What damages would Islamic law award? First, as to reliance damages (i), Islamic law pays little attention.127 If we view contract through the lens of promise, the reliance claim has strong moral grounds: by promising, one intends others to rely on one’s word and should make good that reliance. Islamic law’s inadvertence to this measure underlines once more how, for it, the basis of a binding contract is not the wills or promises of the parties but the exchange of concrete goods or services defined in the contract. Second, a fortiori Islamic law rejects out of hand the expectation measure (ii) (except as fulfilled through specific performance). Losses to expectancy (beyond actually sustained injuries) are by definition fictional, based on the counterfactual premise that the contract was carried through without a breach; transfer of property against such uncertainties equates to sale of gharar. Additionally, no penalty for sheer delay in performance is recoverable, this prohibition resting on ribā grounds. Distilling out the outcomes so far in comparative law terms, we note that Islamic law denies expectancy damages, considering them gharar. Most notably, it denies recovery for lost profits, unrealised or future gains lost due to default. Its protection of the expectancy interest is confined to the vigorous enforcement of specific performance whenever possible. Other than by specific performance or the restitution of consideration if specific performance fails, it shows no concern for the creditor’s reliance on the debtor’s promise. The binding contract remains at root an exchange of property, not promises. d. Is There Any General Right to Compensation for Harms Caused by Breach of Contract? We have not yet addressed the question of consequential damages (d) – whether the creditor may claim compensation for actual or out-of-pocket pecuniary losses caused by the debtor’s breach that have not already been covered, or, in the case of our hypothetical example, compensation for harms to B’s machine caused by S’s failure to provide a sound part (see (iii) above). Given the three-part template for ḍamān, such a recovery logically falls under ḍamān al-itlāf, based on the ta`addī of delivering a defective part knowing it would be used in a machine – ie the logic of such a recovery is one of tort, not contract. One wonders then, if delivering a defective part justifies compensation for harm to the machine, then should it not also cover the purchaser’s (other) reliance damages (in the above hypothetical example, the costs of shipping and installing the defective part; see (i))? Going further, what if it were possible to consider breach of contract itself as a ta`addī, requiring no other showing of fault?128 In ancient common law this was the case for the action of assumpsit, which served as a bridge toward the development of the modern action for damages for breach of contract.129 Let us consider that possibility in greater detail. In the case of such damages two of the three elements of ḍamān al-itlāf are clearly met: harm and causation. But how about fault

127 Apart

from restitution (in our example of the price), which would also constitute reliance damages. for this to be the case, it would also be necessary that recovery extend beyond physical destruction of concrete property to encompass pecuniary losses in general. In my view, as supported by Maḥmaṣānī as cited in n 74 above, fiqh long ago made that transition. 129 AW Brian Simpson, A History of the Common Law of Contract, Rise of the Action of Assumpsit (Oxford: Clarendon Press, 1975) esp 199–247; John H Baker, An Introduction to English Legal History, 3rd edn (London: Butterworths, 1990) chs 18, 19. 128 But

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7.2.3.2

Theories of Liability

(ta`addī)? To answer this question we need to address two basic questions to the traditional fiqh. First, fiqh is not explicit about whether ta`addī can be established merely by a showing that contract terms were breached without showing any other fault such as negligence or intention (unless the contractual duty itself invokes such a standard), as in the AngloAmerican tradition, or instead whether showing such fault is needed, as in the European civil-law tradition.130 As noted in section 4.4.1.1, Quranic and Sunna texts obligate Muslims to fulfil their legal commitments. On this basis, as we saw in section 3.1.2.2, the refusal to do so is considered a sin and a crime. Do the verses also require compliance with contracts even in the absence of wilful or negligent wrongdoing? So, the first basic question is: does breach of contract constitute ta`addī even in the absence of other wrongdoing, particularly intent or negligence? If this is not the case, then where such wrongdoing cannot be shown, Islamic law relies only on the remedies already discussed, leaving each party to bear his own reliance and consequential damages.131 As for the second basic question, one notes that nothing explicit in the theory of ḍamān al-itlāf prevents recovery of damages caused by contract breach, at least on showing of a causative negligent or intentionally wrongful act. But, if this is the case, then why are recoveries of this sort not much more prominently found in the traditional sources? One encounters recovery for consequential and reliance damages only in diffuse discrete cases, typically faults by amīns as discussed throughout the previous chapter, and in scattered specific settings, such as compensating costs of transport to return a sale object after rescission. So, the second basic question is: given the casuistic nature of the fiqh, is it possible to induce from these many instances a general, abstractly defined cause of action analogous to damages for breach of contract in other legal systems? From what I have seen of traditional texts on the relevant subjects, to make this showing is a daunting task, one demanding an encyclopaedic knowledge of fiqh writings across many fields of law, as well as methodological daring to derive new general principles by induction from many cases. Precisely this task was among the goals that leading twentieth-century Arab comparatists set themselves to accomplish. In section 3.2.4.1-a I discussed leading scholars among this group, and their efforts to compare traditional fiqh with Western laws, chiefly those of France, and to elicit highly general restatements of fiqh law comparable to Western legal principles and suitable for inclusion into modern legislative codes of Muslim countries. One of the major achievements of this group of scholars was to evoke from Sharia and fiqh works a general theory of obligation, covering both tort and contract, that would support the drafting of Islamically justified counterparts to the subdivision of foreign codes organised under the concept of ‘obligation’.132

130 Zweigert

and Kötz (n 113) 539–46. is precisely what Sanhūrī (d 1971) concluded. In discussing outcomes where a seller defaults by selling property that later is repossessed from the purchaser by its owner, or turns out to have a latent defect, both of which lead to rescission of the sale, he writes: ‘The buyer is not compensated for more than the return to him of his price. He is not compensated for a loss he suffered or a profit he lost. This is because the theory of the harm which must be compensated in the Islamic fiqh does not extend to such a compensation.’ `Abd al-Razzāq al-Sanhūrī, Maṣādir al-ḥaqq fī al-fiqh al-islāmī: dirāsa muqārana fī al-fiqh al-gharbī (Cairo: Dar Iḥyā al-Turāth al-`Arabī, 1967) 6:140. 132 Leonard Wood, Islamic Legal Revival: Reception of European Law and Transformations in Islamic Legal Thought in Egypt, 1875–1952 (Oxford: Oxford University Press, 2016) ch 10. 131 This

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Liabilities Arising from Breach of Contract in Modern Saudi Arabia 7.3 What did these scholars discover on the question whether traditional fiqh countenances an itlāf-like claim for losses caused by contract breach? Through my own canvass of some of these scholars’ works, it appears that, with hesitations and caveats to preserve nuances of traditional fiqh, they do conclude that traditional fiqh supports the general right of a creditor to recover damages caused by the debtor’s breach of a contract term.133 To adopt this result requires them to answer the above two basic questions. As to the first question, the pressure to decide the issue is largely dissipated by the fact that French law theoretically requires fault but allows for many exceptions, such as in sale, where a stricter liability applies. The scholars seem to have taken a similar tack, allowing the distinction between ḍamān and amāna and the circumstances of each case to decide the question.134 As for the second question, a positive response, if wholehearted, represents a claim that a general principle of obligation for contract breach is not a distortion of fiqh precedents, forced by its encounter with other modern laws, but a conclusion fairly drawn from diffuse examples of the traditional fiqh, or, in other words, that it is a general norm implicit in traditional fiqh. Again, several of these scholars do take this step, though with caveats differing from one to the other. In general, this result permits these scholars to offer as Islamically sanctioned a theory of contract damages comparable, though not identical, to that of other contemporary legal systems. Thus, the Civil Code of Jordan of 1976 and the UAE Civil Transactions Code of 1985, both of which sought to move from the pattern of Sanhuri’s codes toward greater conformity with Sharia, allow for claims for damages for breach of contract in civil law fashion.135

7.3. Liabilities Arising from Breach of Contract in Modern Saudi Arabia To capture the actual practice of Saudi Arabian courts as to all forms of liability arising under contract turned out to be beyond the capacity of this study. The practice as to each of the remedies mentioned above – specific performance, rescission, and damages – has evolved and continues to evolve away from the strict traditional patterns described above, though always with the implicit assurance that the practice remains consistent with Sharia. 133 The clearest endorsement of this principle is by the most contemporary of the scholars we review, Wahba al-Zuḥaylī; see (n 57) 63–65. More reticent are Maḥmaṣānī (n 7) 492, 505–06 and al-Khafīf (n 31) 17–18. 134 al-Zuḥaylī (n 57) 65 notes that the answer in fiqh varies according to the contractual context, referring to the ḍamān/amāna distinction. Earlier in this chapter, as in text at nn 15–27, we saw how contextual the choice can be between an analogy to ghaṣb and an analogy to itlāf – a choice which has the consequence of whether a positive showing of wrongdoing is required. If the analogy is to ghaṣb, then a debtor is liable even if the harm is caused by force majeure. Also, at ibid 18–20, one sees how Zuḥaylī emphasizes in the definition of ta`addī its meaning as an act without legal basis or permission (bidūn … jawāz shar`ī or lā ma’dhūn bih shar`an), rather than its more common meaning in fiqh contexts as an act of aggression or oppression (al-ẓulm wa-al-`udwān) – hence the frequent addition to it of tafrīṭ meaning negligence. See also al-Khafīf (n 31) 17–18 where he implies that contract breach without a showing of wrongdoing may suffice (bi-lā `udhr, ‘without excuse’). Also relevant is the usual ambiguity of fiqh exemplary cases as to the subjective wrongfulness – whether intent or negligence – of acts that objectively cause harm, as mentioned in Chapter 4, text at nn 18–20 and Chapter 6, n 88 (fiqh’s ‘objective tendency’). This makes it difficult to muster strong proofs in favour of either of the alternatives here. 135 Jordan, Civil Code, Arts 246, 355, 360, and 363; UAE, Civil Transactions Code, Arts 272, 380, 385, 386, 389. But note Jordan, Art 363 and UAE, Art 389 restricting compensable harm to that which ‘has occurred in fact’. This contrasts with their position as to damages in tort, where Jordan, Art 266 and UAE, Art 292 track the Egyptian Civil Code in allowing lost profits. See the discussion of lost profits in the next chapter.

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7.3.1

Theories of Liability

Given the fact of this evolution, study of the actual practice and its justifications becomes highly complex. Further, as mentioned in sections 3.2.7.2 and 5.4.2, to understand Saudi court practice in detail faces two other obstacles. One is that court decisions, and even some scholarly writings, often do not make explicit the fiqh reasonings that enable new patterns of practice; instead, following a pattern we noticed very prominently in the case study of the tawrīd contract in Chapter 5, that reasoning remains in the background without any single scholar or court claiming its authorship. Yet, as we also see in our various case studies, this does not mean that that reasoning is not careful and nuanced. Another obstacle is that court decisions often fail to recite all the facts and circumstances relevant to the questions at issue. Given all this, in the short summaries to follow, I seek to do little more than to prove the sheer fact that remedies in practice have shifted from the traditional patterns outlined above. The only close review of Saudi contract remedies I attempt is the case study to follow in the next chapter, on compensating for lost profits. In this section I shall take up the Saudi practice as to the three contract remedies discussed above, but reversing their order: first, damages for breach of contract; then rescission; then specific performance.

7.3.1. Damages Of all three of these remedies, it is as to damages that an evolution from traditional patterns is clearest and easiest to document. It turns out that, from the tentative conclusions of the twentieth-century comparatists just mentioned, Saudi scholars and judges have drawn a much more categorical conclusion about fiqh’s position on damages for breach of contract. Here again, this conclusion forms part of a wider theory of liability, though this time not that of the three ḍamāns. Extrapolating from the work of the twentieth-century comparatists, Saudi scholars and courts proclaim a new three-part general theory of civil liability, again covering all of tort, contract, and property: namely, that any wrongful act, as defined by Shari`a, entails liability on its doer for harms or losses caused thereby. The theory has three essential elements: first, wrongful act (ta`addī, i`tidā’, khaṭa’); second, harm done (ḍarar); and third, a causal connection between the act and the harm (tasabbub, sababiyya). Clearly, given the identity of these elements with those of itlāf, this theory is a generalisation from that of itlāf by an indirect act (tasabbub). In subsuming damage remedies in tort and in contract under a single principle, this theory goes beyond what I find the leading Arab comparatist scholars endorsing. Perhaps the position closest to it is that of Wahba al-Zuhayli (d 2015), writing in the late 1960s, who states: We can define ḍamān in a manner conforming to the generality of its all-encompassing theory of liability in civil and criminal cases as follows: it is the responsibility to compensate the other person for whatever destruction (talaf) of property or loss of usufructs befell him. … Ḍamān is obligatory only … on the occurrence of two elements: transgression (i`tidā`) [synonymous with ta`addī] and harm (ḍarar).136

136 al-Zuḥaylī (n 57) 15, 17. For the general theory, see eg Maḥmaṣānī (n 7) 1:164–79, 2:492, 505–06; al-Zuḥaylī (n 57) 18–33, 63–65; al-Sanhūrī (n 131) 6:138–67.

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Liabilities Arising from Breach of Contract in Modern Saudi Arabia 7.3.1 He subsumes breach of contract, along with tort, within this theory of ḍamān.137 But mostly these scholars, including Zuhayli, while developing the notion of obligation as a meaningful category within Islamic law, continue to draw distinctions between actions in tort and in contract, and even between and among the types of tort discussed above, all by way of preserving some of the distinctions innate to the traditional theory of three ḍamāns. As we have seen, there is much more to obligation in both tort and contract traditionally than is captured by the tort of itlāf – and these scholars certainly recognise this fact, and thus refrain from stating their theory of obligation too ca