##ocation of licence, in cases, where a violation by the institution poses reputational risk that might cause an erosion of confidence and could threaten the systemic stability of the islamic financial system. the integrity and credibility of shariah governance framework in malaysia is also fundamentally supported by the role of the bank ’ s shariah advisory council ( sac ), a centralized referral body for islamic finance community, which is statutorily positioned as the highest authority in the determination of shariah matters relating to islamic finance. in preserving the sanctity of the shariah, the sac itself ensures the robustness of its rulings through a rigorous process before arriving at a decision. another essential element in developing an effective legal infrastructure is the role of an adjudication system. a supportive adjudication system in the context of islamic finance is one which can authoritatively enforce the principles of shariah in dispute settlements involving islamic financial transactions. an efficient and authoritative adjudication system helps create certainty and establishes the legitimacy of islamic financial contracts. islam places great importance on contracts and on parties to a contract. the ability of parties to enforce a contract is thus critical as it constitutes the core of maintaining the confidence of the public at large. therefore, there is a crucial need for a dispute settlement mechanism that is able and competent to dissect in a judicious manner shariah matters in contracts, so that issues of dispute in shariah interpretation could be resolved and enforced accordingly. whilst it is neither practical nor desirable to change the entire court system, a potential solution is to create a special islamic bench that deals with financial transactions undertaken in accordance with the shariah. this could be a viable option particularly for muslim majority countries, as is the case in malaysia. the use of market discipline is another option to ensure the sanctity of shariah via mandating sufficient check and balance in adherence to shariah matters including a minimum disclosure requirement, certification by the shariah committee or an external audit done on the shariah compliance aspects of an institution ’ s operations. in malaysia, we have taken the approach in ensuring that the sanctity of contracts is always paramount and enforceable in our court of law. for adjudication purposes, a dedicated judge in the commercial division of the high court in malaysia has been assigned to preside over litigations relating to islamic banking and finance. the court ’ s adjudication role in islamic finance is reinforced by the support from the

the unfolding of a new decade, islamic finance is in a position of strength to play a greater role in the global financial landscape. today, many jurisdictions are interested in islamic finance and have taken initiatives to develop the industry. the increasing interest in islamic finance is a positive development as a larger number of institutions can contribute to more rapid growth of the industry. an increasing number of jurisdictions are now taking steps to modify their legislations to cater for islamic finance. ireland earlier this year published its finance bill 2010 which introduced significant amendments that are aimed at facilitating islamic finance. france has also taken significant steps to push through changes to their tax and legal codes. australia, jordan and lebanon are all reportedly working towards reviewing their legislations to be accommodative to islamic finance. given the importance of developing a supportive legal system, these global moves augur well for sustainable global growth of islamic finance. in light of this development, i would like to make some remarks on the evolving legal framework for islamic finance. in sharing my thoughts, i will draw heavily on some of the strategies and initiatives undertaken by malaysia. one of the key determinants for successful development of islamic finance in any jurisdiction is the existence of a conducive legal framework that supports the operations and growth of the industry. given that the legal infrastructure in any jurisdiction has evolved over the centuries to cater for conventional finance, understandably, governing legislations of a country have typically required modifications to accommodate islamic financial transactions and structures. it is therefore of no surprise that jurisdictions that are able to quickly amend their legal framework have managed to achieve significant growth in islamic finance. the starting point in revising laws is therefore to ensure that the governing laws allow for the conduct of islamic finance business. a closely related goal is to consider removing elements in existing laws, including the non - regulatory laws, which may render the conduct of islamic finance business uncompetitive or inefficient. initial considerations would involve changes to ensure that islamic finance is placed on a level playing field with conventional finance. the purposes and objectives of the governing laws for islamic finance are known to be largely similar to conventional finance from the financial regulation standpoint. notwithstanding this, an ideal approach is devising a legal framework for islamic finance that sanctions the statutory obligations for shariah compliance in the governing law. this approach however, may not be feasible as preference for religions concerns can be seen to be contradictory to the principles of secularism and parity of beliefs rights in certain jurisdictions