Dubai City Information Site

Understanding the Dubai Sharia Law

Hi, Sunil here to talk about Sharia law, the Quranic traditional Muslim law underlying legislation in Dubai and the UAE

If you want to do business in Dubai, or simply stay there for sometime either for work or pleasure, it is important that you understand Sharia law.

This is the basis for Dubai’s legal system (although constantly changing to meet modern needs).

When the constitution of the UAE was developed, it was then written that Isla (the predominant religion) is the state religion (unlike the USA where the separation of church and state is emphasized).

All legislation, whether civil, social, criminal, business was initially derived from the religion.

As time evolved, Sharia law became less applicable to civil cases and most commonly used in social cases like divorce.

That said, there are several components of the Sharia law which are applicable to business deals.

The important components that you should familiarize yourself with are as follows:

Interest Rate is a No No

Interest or “Riba”, or free money as seen in the Muslim world is considered “Haram”, or unearned, forbidden, cursed, however you want to put it.

Muslims do not believe in receiving income that is not “earned” or getting “free money” in other words. I personally do not get this. But then again, maybe I don’t understand the true underlying principles as much as I think I do.

Full Disclosure

All contracts must include as much detail as possible. basically there should be no surprises and both parties must have every single detail defined (values, dates, etc). In other words, there should be no uncertainty at all. This is also referred to as “Gharar” in Arabic.

Passive Investments are a No No

This ties very well with the interest issue. Basically Muslims believe that there should be no free money earned on investments. Any investment must allocate equal risk and reward to each investor involved. If you ask me, an investment is always risky because you may not get your investment capital back! So I still struggle with this point to this day.

This is just a small list and not a comprehensive one. I did not include other aspects of Sharia law which are common to most legal systems globally. For example, it is a given that all parties to a contract must be competent and not enter into a contract by force. It has to be a willing contract and both sides have to be competent.

The Dubai legal system is complicated to begin with, with different court systems for different purposes. Add to that the fact that all legal documents, contracts and court legislation (law) is written in Arabic. All court proceedings (including transcribing) is also done in Arabic.

Needless to say, this system is completely different from the Western world. As an American, it is definitely a foreign language to me. Although I will say that the underlying principles of the local law in Dubai are logical and I can understand why they are the way they are (that is once I get past the stage of reading them).

As Dubai and the UAE have evolved, so has the law. The system gets less and less confusing over the years with more published guidance issued on the various common cases affecting businesses and individuals. This progression is due to the mass expat population that works and lives in Dubai.

With the inherent complications and ever changing legislation, it is always best to hire a qualified professional to guide you through your legal needs.

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