The Islamic Uniform Commercial Code, and Why It WIll Never Work
Pursuant to the last comment (well articulated), I thought I would provide, in more detail than I have in the past, precisely what the problem is with an "Islamic Uniform Commercial Code", an idea that has been bandied about in the past decade as a means to create predictability and certainty in Islamic finance.
Superficially, the goal of the IUCC is similar to that of America's UCC. The problem America had was that there were 50 states with different laws governing aspects of commerce, and this hardly led to any sort of certainty in result. So what my mentors the Legal Realists did was create a single code, identical essentially, and get it enacted by all 50 states. That this was good for commerce in the US is not something disputed by many. And hence, the idea arose, well we in the Islamic world have a whole bunch of different Islamic institutions doing a whole bunch of different things, how about an Islamic UCC? Maybe it will be the only state law in some places, maybe in others it runs parallel to a conventional commercial system, but what better way to create uniformity in shari'a rules than a code, a uniform one, adopted as the standard of Islamicity in our times, to govern shar'ia based commercial and financial relations. To some, it has become something of the Holy Grail of Islamic commerce.
The problem lies in comparing the proposed IUCC drafting methodology with the UCC methodology. The Realists were NOT concerned with moral theory, or economic theory, or higher level notions of the state. What they were concerned with, all they were concerned with, was codifying commercial practice as it existed. Now that probably reflects moral theory, certainly it reflects prevailing economic notions in mid century America, and that's fine, but the point is, the focus was nearly exclusively on commerical practice, and everything else was more byproduct.
You could do that with an IUCC. In fact, I'd think it was a pretty good idea. Then Ibn Taymiyya goes into the rubbish bin, and we just look to see what commercial and financial actors are doing by way of shari'a based commerce and finance, and codify it. Inasmuch as it is a justificatory project, it is vindicated not through faithful adherence to shari'a as derived from any source or sources, but as practiced by the faithful, whatever Ibn Taymiyya or Ibn Baz might think about it.
But nobody wants to do that, because they want Islamic finance justified through direct reference to Sacred Text, not because Muslims happen to organize commerce a particular way. So the notion would be, of course look to commercial practice, but the real focus, the place where the disputes lie and the arguments take place, is at the level of the Islamic prohibitions. THAT's the point of the exercise, create uniform Muslim prohibitions, derived from text. I suppose the notion is that sure different jurists have different ideas, but we need one set to create a code, and the state is allowed to select among valid opinions and under some perversion of a classical theory codify one through legislative enactment (we'll accept that as true for purposes of this entry), and so away we go with one uniform version of Islamic code. So to be clear, you aren't unifying rules based on how commercial actors behave, the real focus of the effort is to make uniform the Muslim prohibitions, derived from Sacred Text, around which commercial actors must navigate. Yes that means paying attention to commercial actors, but it also means looking at what Ibn Taymiyya might have thought about their practices.
Okay, so what? Surely, it must be argued, uniformity in prohibition is going to reduce transaction costs, add to certainty in result, and predictability, surely it's not a bad thing to create one single set of rules around which sharia based commerce must operate--if it could be done (a subject for another time).
Well, yes. But the real question is, what happens when one of the prohibitions as uniformly selected turns out to be a God damned mess that isn't working? The IUCC's version of our UCC 2-207, for example? With 2-207, which has to do with how to interpret contracts with multiple forms, you just sort of look at it, decide it isn't serving commercial actors well, and think of a good revision. This has been done, though apparently the pressure to fix isn't strong enough to force the revision through, and we're still in 2-207 muck, which is great for a law professor (wonderful exam questions) and not so good for commercial actors, but they make do well enough not to clamor for a change.
But the discourse is different on the IUCC version. First, you are MUCH more likely to get a rule that does not serve commercial actors well because you aren't focussing on them as much as rules based on Sacred Text. If you are really worried about what some 16th century Ottoman thinks, chances are good you'll come up with a rule that's such an awful damned mess that it will make 2-207 look like nothing, particularly if, as here, part of the effort is to create distinction with the West based on Islamic concepts and the West is focused on actual practice.
Secondly, when you do come into that mess, then what? With the UCC, just change it, because it isn't working. With the IUCC, under this type of theory of faithfulness to classical doctrine, it's not so simple, it's a selection of God's Law. So there are two choices. One, stick with the mess, and find clever ways to interpret around it, which is to make a mockery of the law. Or two, change the rule based on a newer, more business friendly version of the IUCC, which is to make a mockery of Islam, as Islam is then really nothing more than nice rhetorical cover for actual Muslim commercial practice irrespective of what classical thought really was.
Somehow I think these guys are better off where they are. Clarity and predictability would be pretty bad news for this industry.
HAH
Superficially, the goal of the IUCC is similar to that of America's UCC. The problem America had was that there were 50 states with different laws governing aspects of commerce, and this hardly led to any sort of certainty in result. So what my mentors the Legal Realists did was create a single code, identical essentially, and get it enacted by all 50 states. That this was good for commerce in the US is not something disputed by many. And hence, the idea arose, well we in the Islamic world have a whole bunch of different Islamic institutions doing a whole bunch of different things, how about an Islamic UCC? Maybe it will be the only state law in some places, maybe in others it runs parallel to a conventional commercial system, but what better way to create uniformity in shari'a rules than a code, a uniform one, adopted as the standard of Islamicity in our times, to govern shar'ia based commercial and financial relations. To some, it has become something of the Holy Grail of Islamic commerce.
The problem lies in comparing the proposed IUCC drafting methodology with the UCC methodology. The Realists were NOT concerned with moral theory, or economic theory, or higher level notions of the state. What they were concerned with, all they were concerned with, was codifying commercial practice as it existed. Now that probably reflects moral theory, certainly it reflects prevailing economic notions in mid century America, and that's fine, but the point is, the focus was nearly exclusively on commerical practice, and everything else was more byproduct.
You could do that with an IUCC. In fact, I'd think it was a pretty good idea. Then Ibn Taymiyya goes into the rubbish bin, and we just look to see what commercial and financial actors are doing by way of shari'a based commerce and finance, and codify it. Inasmuch as it is a justificatory project, it is vindicated not through faithful adherence to shari'a as derived from any source or sources, but as practiced by the faithful, whatever Ibn Taymiyya or Ibn Baz might think about it.
But nobody wants to do that, because they want Islamic finance justified through direct reference to Sacred Text, not because Muslims happen to organize commerce a particular way. So the notion would be, of course look to commercial practice, but the real focus, the place where the disputes lie and the arguments take place, is at the level of the Islamic prohibitions. THAT's the point of the exercise, create uniform Muslim prohibitions, derived from text. I suppose the notion is that sure different jurists have different ideas, but we need one set to create a code, and the state is allowed to select among valid opinions and under some perversion of a classical theory codify one through legislative enactment (we'll accept that as true for purposes of this entry), and so away we go with one uniform version of Islamic code. So to be clear, you aren't unifying rules based on how commercial actors behave, the real focus of the effort is to make uniform the Muslim prohibitions, derived from Sacred Text, around which commercial actors must navigate. Yes that means paying attention to commercial actors, but it also means looking at what Ibn Taymiyya might have thought about their practices.
Okay, so what? Surely, it must be argued, uniformity in prohibition is going to reduce transaction costs, add to certainty in result, and predictability, surely it's not a bad thing to create one single set of rules around which sharia based commerce must operate--if it could be done (a subject for another time).
Well, yes. But the real question is, what happens when one of the prohibitions as uniformly selected turns out to be a God damned mess that isn't working? The IUCC's version of our UCC 2-207, for example? With 2-207, which has to do with how to interpret contracts with multiple forms, you just sort of look at it, decide it isn't serving commercial actors well, and think of a good revision. This has been done, though apparently the pressure to fix isn't strong enough to force the revision through, and we're still in 2-207 muck, which is great for a law professor (wonderful exam questions) and not so good for commercial actors, but they make do well enough not to clamor for a change.
But the discourse is different on the IUCC version. First, you are MUCH more likely to get a rule that does not serve commercial actors well because you aren't focussing on them as much as rules based on Sacred Text. If you are really worried about what some 16th century Ottoman thinks, chances are good you'll come up with a rule that's such an awful damned mess that it will make 2-207 look like nothing, particularly if, as here, part of the effort is to create distinction with the West based on Islamic concepts and the West is focused on actual practice.
Secondly, when you do come into that mess, then what? With the UCC, just change it, because it isn't working. With the IUCC, under this type of theory of faithfulness to classical doctrine, it's not so simple, it's a selection of God's Law. So there are two choices. One, stick with the mess, and find clever ways to interpret around it, which is to make a mockery of the law. Or two, change the rule based on a newer, more business friendly version of the IUCC, which is to make a mockery of Islam, as Islam is then really nothing more than nice rhetorical cover for actual Muslim commercial practice irrespective of what classical thought really was.
Somehow I think these guys are better off where they are. Clarity and predictability would be pretty bad news for this industry.
HAH
Wow, what a great post. Haiderian Islamic legal realism at its best. (Although I hope it's not because I don't know a damn thing about the IUCC.)
Reply to this
It must be Eid, because we agree, my dear friend Professor March.
Reply to this