The International Islamic Centre for Reconciliation and Commercial Arbitration for the Islamic Finance Industry has been launched in Dubai. The UAE has contributed US$250,000 to the establishment of the new centre, half of the total investment, the remaining of which was provided by the Islamic Development Bank (IDB), according to reports.
The centre to be based in Dubai, will settle financial and commercial disputes between financial or commercial institutions that have chosen to comply with the Shariah. It will also settle disputes between these institutions and third parties through reconciliation and arbitration.
Dr Ezzedine Khoja, Secretary-General of the General Council for Islamic Banks and Financial Institutions (GCIBFI), the organization, which along with the IDB, are the promoters of the centre, said at the launch that there was an urgent need for such an institution.
According to Ernst & Young, which conducted the feasibility study of the project on the basis of the promoters objectives, over the years, Islamic finance has rapidly grown from a highly specialized niche market into a multi-billion dollar global industry, estimated to have assets in excess of US$230 billion worldwide and expected to experience double-digit growth in the coming decades.
The growth and evolution of the Islamic financial services, which exist in over 75 countries, called for strong support institutions, with one of them being a framework for resolving disputes that may occur between industry participants as well as their counter parties.
Dr Khoja said that Islamic financial institutions pursue litigation for nearly 5% of their disputes, above US$30,000, while the rest of their disputes are settled out-of-court. Litigation, on average, costs nearly 20% of the value of the disputed amount and even if the decision of the court is in favour of the financial institution, only 80% of the value of the disputed amount is recovered, he said, adding that the duration of the settlement period in cases when litigation is pursued is generally in excess of five months.
The cost of an out-of-court settlement is nearly 17% of the disputed amount and in a few cases the cost of the out-of-court settlements was found to be greater than the cost of litigation.
He attributed this to the absence of institutions providing alternate dispute services specifically to Islamic financial institutions
Source: www.IslamicFinanceNews.com |
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