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The Court considered questions of venue for a case related to Islamic financial instruments. The defendant, Dar al-Maal al-Islami Trust, petitioned the Court to compel the plaintiff, Vinewood Capital, to follow the arbitration clause of a profit-sharing (mudaraba) agreement. The Court determined that there was no single agreement listing both parties as signatories, and it thus refused to uphold the arbitration clause.

The defendant, Dar al-Maal al-Islami Trust, sought to enforce the terms of an arbitration clause, which required arbitration in the Bahamas upon disputes surrounding an Islamic financial profit-sharing arrangement known as a mudaraba agreement. The Court found that the clause was not enforceable, as Vinewood Capital was not a signatory party to the agreement. This decision was affirmed in 2008 by the U.S. Court of Appeals for the Fifth Circuit.

At issue is this case is an Islamic financial instrument called a mudaraba agreement, by which a bank enters into a profit-sharing arrangement with a borrower. The Agreement at issue includes a clause stating that any disagreements are to be settled through arbitration in the Bahamas. The Court refused to uphold the Agreement because Vinewood Capital was not a signatory to the agreement, and thus denied the motion to compel arbitration of Vinewood’s claims. In May of 2011, the Court dismissed the appeal and closed the case.

On December 26, 2008, Mariam Ayad ("Wife") and Ayad Hashim Latif ("Husband") got married.  They executed a prenuptial agreement ("Islamic Prenuptial Agreement") on the same day, which the wife alleges she considered to be a customary marriage certificate, not a contract conferring substantive rights and limitations on the Husband and the Wife, respectively.  The couple have a son.  Their marriage started deteriorating in 2020, at which point the Wife alleges she learned for the first time about the existence of the Islamic Prenuptial Agreement and the fact that she had executed it on the day of her marriage with her Husband.  On January 25, 2021, the Wife filed for divorce.  The Husband countersued for divorce and filed a motion to have the Islamic Prenuptial Agreement enforced, which provides that all divorce-related matters, including spousal support, child support, alimony, and marital property division, shall be resolved through the ruling of a fiqh panel to be convened.  The trial court, in rejecting the Wife's arguments regarding the invalidity and unenforceability of the Islamic Prenuptial Agreement, which the Wife had argued based on her assertion that she had thought she was signing a cultural document at the time of signing and that she was not given an opportunity to read and understand the terms, ruled in favor of the Husband and held that the prenuptial arrangement be enforced. 

The Wife appealed to the appellate court seeking relief from the order of referral to arbitration of the trial court.  In her submission to the appellate court, the Wife made four separate arguments:

1. The Islamic Prenuptial Agreement is void on grounds of contravening public policy, as the agreement clearly disavows Texas law and the laws of the United States, and replaces those with Islamic Law, which, according to the Wife's submission, "limits the rights of a woman to obtain a divorce," in violation of Equal Protection, the Establishment Clause, and Due Process, given the different weights assigned by Islamic law to official testimony from women compared to men.

2. The Islamic Prenuptial Agreement is void as a matter of Texas contract law because the agreement was involuntarily executed.

3. The trial court abused its discretion in finding that the Islamic Prenuptial Agreement stipulated to arbitration, as the agreement does not contain evidence of a meeting of the minds as regards an intent to arbitrate.  The agreement's mention of a "fiqh panel" or a "Muslim court" cannot unequivocally be read as an agreement to arbitrate.

4. Relatedly, the trial court also abused its discretion in referring the dispute to arbitration without allowing the Wife to present meaningful evidence refuting the existence of an alleged agreement to arbitrate.

The case is pending before the Texas appellate court.

The plaintiffs submitted that they had entered into a shari'a credit loan agreement with the first defendant for IDR 2 billion, leveraging six properties in their names as a shari'a credit guarantee. The plaintiffs maintained that they had met their financial repayment obligations to the first defendant, and had always acted in good faith towards the first defendant. The plaintiffs referred to this good faith because they sought to novate the terms of the shari'a credit loan agreement through the Magelang Religious Court, and were concerned that the first defendant would auction the properties, or several thereof, in response, without first going through the court. Indeed, the plaintiffs submitted, the first defendant, through the second defendant, had unilaterally auctioned the plaintiffs' properties, contrary to law, justice and humanity, especially in terms of the shari'a economy. Moreover, that in order for the conduct of the first and second defendant to be legal, they first needed to obtain the recommendation of the interested co-defendant. The plaintiffs submitted that as the first and second defendant had failed to do so, they should be ordered to pay to the plaintiffs IDR 7 million per day for every day they failed to carry out the orders of the Mageland Religious Court. The novation of terms of a contract, the plaintiffs submitted, was regulated in art 180 of the Herziene Inlandsch/Indonesisch Reglement (HIR).

The defendants submitted that a clause in the original agreement stated that any dispute arising would be settled before the National Shari'a Arbitration Body (Badan Arbitrase Syariah Nasional), pursuant to art 59(1) of Law No. 48 of 2009 on Judicial Authority, and arts 2 and (4)(1) and (2) of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution. The court noted that, pursuant to art 49(i) of Law No. 3 of 2006 on the Religious Judiciary, and art 55(1) and (2) of Law No. 21 of 2008 on Shari'a Banking, the religious courts have the absolute competence to resolve shari'a banking disputes, provided the agreement in dispute does not specify otherwise. As the parties had specified otherwise, the court found that art 1338(1) of the Civil Code (Kitab Undang-Undang Hukum Perdata), which states that all contractual agreements are to be treated as statutes for the parties that make them, applied. In shari'a law, the court stated, this concept in muamalah (commercial and civil law) is known as asas al-sufiah, al-muamalah al-ibahah. Accordingly, the court found that it was precluded from adjudicating the dispute.

The applicants claimed that, since 2003, the first applicant had been a customer of the first respondent, via its shari'a Bukittinggi branch (PT. Bank Bukopin Cabang Syari'ah Bukittinggi). Prior to becoming a customer of the first respondent, the first applicant had been a debtor of PT. Bank Rakyat Indonesia (BRI) Cabang Bukittinggi, to which it owed IDR 483,2333,530 as at June 2003. At that time, the first applicant's business was experiencing financial difficulties, leading the first applicant to apply to the first respondent for a financial loan for financial support, as well as to pay his debts with PT. BRI Cabang Bukittinggi. After examining the relevant securities documents, the first respondent agreed to enter into an Al-Murabahah (sale-purchase) agreement with the first applicant. Once the relevant documentation was executed, the first respondent provided to the first applicant IDR 500 million, with which it paid its debt to PT. BRI Cabang Bukittinggi. The first respondent then took from PT. BRI Cabang Bukittinggi the deed of title of a property in the name of the second applicant (the second applicant was already an authorised guarantor pursuant to the agreement between the first applicant and first respondent).

In the Al-Murabahah agreement document the first respondent had agreed to make available items for the first applicant to the value of IDR 500 million, and the first respondent was to sell those items to the first applicant for IDR 794,816,460. (In an Al-Murabahah agreement there is an absolute requirement that there be items for sale subject of the agreement.) As there were no items purchased by the first applicant from the first respondent, the agreement had no legal authority. The agreement was further prohibited, according to the applicants, because it allowed the first applicant to borrow from the first respondent a sum of money, secured by a stationary object (the property) for a period of five years, with an additional payment for the first respondent which, according to Islam, constituted riba (usur or interest).

The Supreme Court, in the first instance, declared that the relationship between the first applicant and first respondent was one based on borrowing a sum of money, secured against a stationary object. Furthermore, that profit instalments provided by the first applicant to the first respondent were to be treated as payment instalments against the debt it owed to the first repsondent, because providing additional payments outside the scope of the principal to the lender would be contrary to shari'a. The other relevant documents, including the debt notice, the applicants claimed, were also null and void.

In addition, another Al-Murabahah agreement had been made by, and before, the first co-respondent, tying the first applicant and first respondent to the sale and purchase of items valued at IDR 581,230,044, with a sale price of IDR 350 million, and a murabahah profit for the first respondent of IDR 231,230,044. This was to be paid in instalments over 60 months, tied to a debt notice and mortgage deed, both of which were prepared by, and before, the first co-respondent, secured by the same property. Similarly, however, this agreement had no object for sale or purchase.

The total of both agreements resulted in the first applicant being in IDR 850 million debt to the first respondent. After the first applicant had paid to the first respondent IDR 363,611,240, the remainder owing, it claimed, was IDR 486,388,760. However, while the first applicant had originally owed PT BRI Cabang Bukittinggi no more than IDR 500 million, it now claimed the first applicant owed IDR 1,376,046,504 (this was the principal debt combined with interest). The first applicant maintained, however, that he had paid to the first respondent IDR 363,611,240 in instalments up until March 2006.

The Bukittinggi State Court had already issued a notice stating that the property held as a security would be auctioned on 16 August 2006. The first applicant, upon becoming aware of the fact that the two Al-Murabahah agreements were null and void, sought to prevent the first respondent from auctioning the property. Despite being made aware of, and reading, the notice, the second respondent went ahead with the auction. Accordingly, the applicants claimed that the auction should have no legal authority, and pursuant to art 49 of Law No. 3 of 2006 on the Religious Judiciary, the civil courts were precluded from resolving shari'a economy-related matters anyway.

The applicants also objected to the conduct of the third respondent, the purchaser of the property and a staff member of the legal team of the first respondent. The applicants alleged that the third respondent knew the auction reserve price and therefore only had to pay a little bit over the reserve to secure the property.

The applicants sought damages for actual loss, as well as pain and suffering. They claimed that the land was worth IDR 2.5 billion, and yet the third respondent had only paid IDR 993,600,000 as the purchase price. Moreover, they sought IDR 500 million in damages for the stress and emotional strain incurred from the entire ordeal.

The Bukittinggi Religious Court (lower court) had declared the two Al-Murabahah agreements null and void, and declared the relationship between the first applicant and first respondent a financial loan (Al-Qardh). The IDR 850 million debt owed by the first applicant to the first respondent was reduced to IDR 486,388,760, taking into account the instalments paid by the first applicant totalling IDR 363,611,240. The first respondent had also been ordered to transfer to the applicants the profit from the auction, minus the remaining debt of IDR 486,388,760, leaving the respondents owing the applicants IDR 447,595,240.

On appeal to the Padang Religious High Court, the decision of the lower court was overturned. The Padang Religious High Court found that the lower court was not authorised to adjudicate the case. Moreover, the Supreme Court, in the first instance, rejected the applicants' cassation appeal, upholding the decision of the Padang Religious High Court.

The applicants used their last avenue of appeal before the Supreme Court (reconsideration or peninjauan kembali) claiming that the Supreme Court's judgment, at cassation level, was erroneous. The applicants asserted that the Al-Murabahah agreements contained an arbitration clause whereby the parties had agreed to resolve any legal disputes before the Indonesian Islamic Civil and Commercial Arbitration Body (Badan Arbitrase Muamalat Indonesia), designating the Bukittinggi State Court registrar's office as the appropriate venue. Whereas, in actual fact, the respondents had submitted their request to seize the property to the Bukittinggi State Court. Moreover, the applicants claimed that the Al-Murabahah agreements failed to meet the following shari'a requirements:

1. interest (riba)-free;
2. the sale-purchase items may not be forbidden (haram);
3. the bank is to finance some or all of the items, pursuant to the agreed-upon classification;
4. the bank is to purchase the items in its own name;
5. if the bank makes representations to the customer that it is purchasing the items, the agreement is executed once the items the bank is purchasing become the property of the bank; and
6. the bank provides all information relating to the items, including cash or credit purchases.

The Supreme Court found that the two reasons submitted by the applicants did not fall under any of the reasons for review (peninjauan kembali) contemplated by art 67 of Law No. 14 of 1985, as amended by Law No. 5 of 2004 and Law No. 3 of 2009. Accordingly, the appeal was dismissed.