JRI Resources Sdn Bhd

On the court record

The vehicle for a landmark Federal Court determination on whether the binding Shariah Advisory Council mechanism in Islamic finance is compatible with the constitutional vesting of judicial power.

JRI Resources Sdn Bhd appears in the reported judgments as the party at the centre of a landmark Federal Court (Mahkamah Persekutuan) decision on the constitutionality of the Shariah Advisory Council mechanism in Islamic finance. Its dispute with a financing bank became the vehicle for a constitutional challenge of general importance to the Malaysian Islamic-banking sector.

The core question was whether sections 56 and 57 of the Central Bank of Malaysia Act 2009 are unconstitutional and void. Section 57 makes a ruling of the Shariah Advisory Council binding on the court, and the company contended that this had the effect of vesting judicial power in the Council in contravention of the Federal Constitution — engaging Article 74 read with the Ninth Schedule, Article 121 which vests judicial power in the courts, and Article 8 in so far as a litigant was said to be denied substantive due process. The challenge also invoked the doctrine of separation of powers, asking whether Parliament could establish a legislative mechanism requiring the court to refer questions of Islamic law to, and be bound by the ruling of, the Council, and whether the court could admit and consider expert evidence on Shariah matters relating to Islamic financial business.

The proceedings placed the company in several procedural characters — applicant, appellant and defendant — as the constitutional question was framed and answered, with the President of the Association of Islamic Banking Institutions Malaysia and the Central Bank of Malaysia intervening. The significance of the matter lies well beyond the parties: the decision determined how the ascertainment of Islamic law is allocated between the specialist Council and the civil courts, and whether that allocation is compatible with the constitutional vesting of judicial power. For that reason the company's name is associated with one of the more consequential constitutional determinations affecting the Islamic-finance industry, rather than with an ordinary commercial recovery.