No Implicit Requirement of Sharia Mediation or Arbitration

"Movants ... argue[] that Plaintiff's complaint fails to state a claim because the 'loan documents reflect the parties' agreement that Sharia law would govern their contractual relationship' and that '[p]ursuant to age old Islamic principles, parties are to pursue the alternative dispute resolution processes of mediation or arbitration before seeking adjudication of their quarrels.'"

From Malayan Banking Berhad v.  Park Place Dev. Primary LLC, decided Monday by Justice Francis Kahn, III of the New York trial court:

This is an action to, inter alia, foreclose on two mortgages … [with a total amount of $174 million] …. Movants … argue[] that Plaintiff's complaint fails to state a claim because the "loan documents reflect the parties' agreement that Sharia law would govern their contractual relationship" and that "[p]ursuant to age old Islamic principles, parties are to pursue the alternative dispute resolution processes of mediation or arbitration before seeking adjudication of their quarrels."

No said, the court:

That the parties structured the disputed transaction to comply with Sharia law does not ipso facto require the agreement be interpreted in accordance with same. The parties expressly agreed in Article 21.16 of the Building Facility Agreement that "matters of construction, validity and performance, this agreement, the notes and the other facility documents and the obligations arising hereunder and thereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such state (without regard to principles of conflicts of laws)" [emphasis added]." The parties also expressly and unconditionally waived "any claim to assert that the law of any other jurisdiction governs this agreement, the notes and the other facility documents."

Also contained in the Building Facility Agreement was a merger clause that provided the "… [o]bligor agrees that it has not and will not rely on any custom or practice … or on any course of dealing … unless such matters are set forth [in writing] …." Had the parties intended to be bound by some other law or the determination of a religious tribunal they could have specifically agreed to same.

Further, nothing in the agreement provided that arbitration or mediation was a condition precedent to litigation. It is established that, "an agreement to arbitrate 'may not be implied or depend upon subtlety for its existence.'" Although New York law recognizes "[i]mplied or constructive conditions … those [are only] 'imposed by law to do justice.'" Here, the parties were sophisticated business entities, dealing at arm's length and represented by prominent counsel. These circumstances do not justify resort to equitable principles or the implication of significant unbargained for contractual obligations.

Accordingly, the branch of Movants' motion to dismiss the complaint for failure to state a claim based upon a failure to seek arbitration or mediation pursuant to Sharia law is denied….

Comments

[The Margrave of Azilia]

If they *had* agreed to Sharia-based arbitration, then I presume it would have been fine - so long as the right to arbitrate is the same for all religions and is based on voluntary, not coerced agreement.

If this was a family-law dispute, the secular courts ought to have more of a meddling role if the rights of children are involved, but this seems to have been a business dispute.

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

Not really clear to me (IANAL) how much sharia law was agreed to. This summary says only that the parties "structured the disputed transaction to comply with Sharia law", but that sure seems incompatible with later express requirements to follow New York state law and to "not rely on any custom or practice … or on any course of dealing … unless such matters are set forth [in writing]".

The contract as described in this summary of the judge's summary seems pretty inconsistent, but unless the "sharia structuring" was a lot clearer or explicit than the parts about New York law, it is just meaningless twaddle to provide a religious fig leaf.

[The Margrave of Azilia]

"If they *had* agreed to Sharia-based arbitration" etc.

I was specifically proceeding on the assumption that hypotheticals can be more fun than getting tied down to the mundane facts.

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

You're right. Did not mean to hijack your hypothetical!

[ReaderY]

Why does the state have a greater right to meddle in private family matters than it does in the disputes of publicly transacting businesses?

Your prioritization would seem to turn a century of clear Supreme Court law on its head. Roe was an epiphenomenon of the idea that the state should seek to avoid interfering in family matters, especially where religion is involved, not rush to do so. The idea itself preceeded it by half a century, to cases like Pierce v. Society of Sisters.

[The Margrave of Azilia]

What's this about rushing? Suppose the arbitrator wants the children shuttled among the four wives?

And I think it's euphemistic to make Roe (now overruled) about family life.

[ReaderY]

If you want your dispute to be adjudicated according to Shariah law and arbitrated by a Muslim tribunal, you need to say in your contract that disputes are to be adjudicated according to Shariah law and arbitrated by a Muslim tribunal