The phrase ‘legal maxims’ often connotes a ‘well-established legal idea, proposal, or doctrine, generally expressed in Latin’. Legal maxims exist in Islamic law as well and are rooted in the principles of Shariah law. In the world of finance, legal principles and maxims serve as the cornerstone of stability, providing guidance and clarity in a complex and ever-evolving industry. In this blog post, we discuss some of the fundamental legal maxims that underpin Islamic finance.

Qawaid Fiqhiyyah/Islamic legal maxims have retained a distinctive place in jurisprudence for all time and will continue to do so. Legal maxims are typically accepted as the foundation for developing Shariah opinions by jurists from all schools. This is particularly true if these maxims are founded on the Holy Quran and the traditions of the Prophet SAW. These maxims provide an accessible summary of laws that are connected to one another and supported by the Qur’an and the Sunnah while some are direct citations from Hadiths of the Prophet PBUH. For instance, the maxim “There shall be no harm nor any reciprocation of harm.”

Some legal definitions offered for al Qawaid al-Fiqhiyyah include:

  • Al-Suyti for instance defines Qawaid as “a general rule which applies to all its particulars.”
  • Al-Burnu defined it “as a universal legal ruling or proposition from which are understood the particular legal rulings that are derived from it.”
  • Sheikah Mustafa al-Zarqa defines Qawaid as “the root maxim of fiqh dedicated in its concise text with regulatory nature, containing general rules of Law on these issues which transpired under its theme”.
  • Al Hamawi defined it as “the predominant ruling which is applied to the greater part of its particular”.

Islamic finance is governed by Shariah law, which consists of primary sources like the Quran and Sunnah as well as secondary sources like ijma (scholarly consensus), qiyas (analogical reasoning), and legal maxims. Legal maxims play an important role in interpreting and applying Shariah principles to contemporary financial practices. Here are some key legal maxims relevant in Islamic finance:

  1. Matters are determined according to intentions/ Al-‘Aqd yata’amal bi ‘Umum al-lafz wa khusus al-maqasid – In agreements, emphasis is placed on intent and significance rather than on language and form. The intended meaning should always take precedence over the literal phrase of an expression where there is a contradiction between them. This implies that we should prioritise a transaction’s economic above its formal characteristics when assessing its legality.
  2. There shall be no initiation of harm, nor any reciprocation of harm/La zarar wa la dirar – All damaging and destructive acts must not only be avoided in all circumstances, but they must also be prevented. The implication is that in Islam there is an emphasis on ensuring good and avoiding harm. It proves that harm prevention, eradication, and minimization are the goals of the law.
  3. Custom is a basis for judgment/ Al-‘adah muḥakkamah – Customs are established practices of any community over a typically longer period of time. According to this maxim, the shariah acknowledges and respects the social customs of society in terms of their words and deeds in the absence of textual injunctions, provided they don’t violate the Quran or Sunnah or any shariah principle; the custom is applied consistently and is prevalent in the community; was applicable at the time the activity or transaction took place; and the contractual parties have not stipulated a condition that runs counter to custom at the time of the activity or transaction.
  4. The origin of all rules is permissibility/ Al’asl fi al’ashya’ al’iibaha – Using this maxim as a general guideline, it can be said that Islamic financial practices are initially permitted unless there is proof that they contain aspects that are forbidden, in which case the original judgment is effectively changed. Also, tand wide room for innovations for different financial tools and instruments for financial transactions. These innovations must however not conflict with the Quran or Sunnah.
  5. Reward begets risk/ Al-Kharaj bi al-daman – According to this maxim, no one can expect to succeed in their endeavours without taking on some level of risk or loss.
  6. Ambiguity cannot coexist with certainty/ La yubaru ma’al-Gharar – According to this maxim, a contract or transaction that includes ambiguity or uncertainty cannot be deemed valid. It highlights the requirement for precision and clarity in contractual provisions in order to promote justice and prevent exploitation.

The legal maxims discussed are just a few that are applicable to Islamic finance, intended to situate the role and impact that they have on modern applications. These legal maxims are still actively guiding the practice and growth of Islamic finance.

The UKIFC will be introducing Project Tayyib at the largest Islamic and ethical finance event at COP28 – Unlocking Islamic Finance Summit.