ISDS, Islamic Law-Based Investment Agreements and Islamic Finance Principles

This chapter considers the ISDS mechanisms in international agreements in line with Islamic law-based investment agreements and Islamic finance principles in the GCC region and other Islamic countries. It examines the question of ISDS within the context of Sharia compliance, particularly in view of the extensive acceptance of Islamic finance and banking principles within both the Islamic and western economies and investment regimes. Can the Islamic finance principles that have created an alternative to conventional banking, act as a catalysis for innovation in ISDS awards and processes?

The chapter discusses the extent to which Islamic finance principles can be incorporated by tribunals into the application of ISDS arbitration – not only in respect of awards, but also in such issues of ratione materiae and ratione voluntatis, initially with the two leading Islamic based international arbitration agreements, notably the Arab Investment Agreement and the OIC Agreement. Not to mention the issue of “clean hands” that seem to arise in the ISDS claims under examination. It argues, for example, on the appropriateness or otherwise of the current imperative of claimants to incorporate speculative self-calculated potential long-term profits into an ISDS claim which would appear to be contrary to principles of Islamic finance and investment. It considers whether these Agreements might be appropriate vehicles for application of these Islamic principles of finance and investment. Most of all, the chapter will highlight that there is a gap in the current rules and processes for ISDS claims that are aligned, constitutionally, to the religious obligations of the GCC states