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This fatwa acknowledges that within society and shari'a financial institutions there has emerged a need to trade in commodities in a shari'a-friendly manner.

The fatwa dictates that commodities must be halal, legitimate, physically transferrable, be in the possession of the trader or their agent, and that all dealings must be executed pursuant to the agreement between the trader and purchaser. The fatwa also requires the Jakarta Futures Exchange to create shari'a-friendly commodities trading mechanisms, as well as facility for physical trades to be made.

This fatwa acknowledges that the need to return a portion of tabarru' funds has already become prevalent in the insurance industry for those insurance holders who discontinue their policies before the term of their policy ends. The fatwa defines tabarru' funds as fees/bequests in the form of membership funds provided by individual shari'a insurance holders to insurance holders collectively (Tabarru' Pooling Fund). It defines returning tabarru' funds as returning a portion of tabarru' funds to insurance holders individually because they have discontinued their policies prior to the term of their policy ending.

The fatwa precludes shari'a insurance holders from individually requesting the return of tabarru' funds already paid to the insurance company as a representative of the insurance company collectively. Shari'a insurance companies, in their capacity as a representative of insurance holders, are not authorised to return tabarru' funds. However, shari'a insurance holders collectively, as recipients of tabarru' funds, have the authority to draft regulations regarding the utilisation of such funds, including their return to insurance holders individually who opt out of their policies prematurely. These regulations must cover the management of tabarru' funds, including their return to those opting out prematurely.

This proceeding was unable to proceed owing to the absence of the plaintiff, but more importantly, the plaintiff's legal advisor, to whom the plaintiff had granted power of attorney. The plaintiff was ordered to pay costs of IDR 671,000.

The appellant sought to challenge the decision of the Cilegon Religious Court (lower court) on the grounds that:

1. the lower court had erred in considering documentary evidence prodcued by the respondent;
2. the lower court had incorrectly evaluated documentary evidence produced by the appellant; and
3. the lower court had incorrectly evaluated the relationship with certain evidentiary elements, contrary to art 1365 of the Civil Code (Kitab Undang-Undang Hukum Perdata).

The Court re-examined all that went before the lower court, noting that the appellant alleged the respondent had unlawfully cancelled its provision of investment financing to the plaintiff for IDR 3.3 billion, via a letter dated 8 May 2013. This allegedly contradicted a previous letter, dated 26 February 2013, in which the respondent had acceded to the appellant's request for financing from 20 November 2012. As a result, the appellant claimed he had suffered IDR 220 million in special damages, and IDR 1 billion in general damages.

The respondent refuted the allegation, saying that after it had conducted a review of the appellant approaching the transaction, it had realised that the appellant had changed where it would allocate the financing, inconsistent with its original plan. Accordingly, the respondent cancelled the financing facility via the 8 May 2013 letter.

The Court concurred with the lower court, finding no causal connection between the conduct of the respondent and the loss the appellant claimed to have suffered. Moreover, it found nothing unlawful about the respondent's decision to renege on its initial offer.

The 12 plaintiffs claimed that they were prospective cooperative members that had deposited money into a futures fund with Koperasi Serba Usaha Syari'ah Baitul Maal Wat Tamwil Islam Sejahtera (BMT ISRA) for family reasons that may emerge in the future. The plaintiffs alleged that the first and second defendants, the Director and Chairperson of BMT ISRA respectively, did not implement a cooperative system, viz. cooperative funds or capital sourced from a principal pool of funds and obligatory funds from cooperative members. Rather, the plaintiffs alleged that the defendants had sourced funds from customers who were members of the cooperative, prospective members of the cooperative, as well as those who were neither. The defendants did, though, obtain a share of profits (nisbah), and in their management of the funds, used a shari'a-style system that did not involve interest (riba).

Initially, the plaintiffs received their share of the profits promptly, but when their profit share for November 2010 did not materialise, the plaintiffs sought to bill the defendants for it, and to retrieve their futures investment. BMT ISRA, however, had closed. The plaintiffs had learned from news circulations that it was not only the Brebes branch that had closed, but almost all BMT ISRA branches. They had also learned that the first and second defendants, as director and chairperson, were legally implicated. The plaintiffs alleged that the defendants had shown a lack of good faith with respect to them, and collectively sought from the defendants IDR 282 million in initial funds not yet returned, as well as IDR 62,286,3000 in unpaid profit share (total: IDR 344,286,300).

In addition to dismissing the plaintiffs' claim in its entirety, the second defendant argued that the court was precluded from adjudicating the matter as the plaintiffs had deposited monies in Brebes, not Bantul. Moreover, both the first and second defendants objected on the grounds that they were not director and chairperson respectively, according to the deed of establishment of BMT ISRA, and that Koperasi Serba Usaha Syariah Baitul Maal Wat Tamwil Islam Sejahtera was not included in the deed. The defendants also maintained that they themselves had not entered into an agreement with the plaintiffs.

The court dismissed the second defendant's objection, finding it was authorised to adjudicate the case. It also found that the parties had indeed entered into an agreement together, pursuant to which the plaintiffs were entitled to the return of investment funds already paid (IDR 193 million), but not the resulting profit share (IDR 38,693,700). Neither were they entitled to the IDR 79 million not yet paid and resulting IDR 23,592,600 in profit share.

The court cited Fatwa No. 7 of the National Shari'a Board - Indonesian Council of Ulama, noting that a Mudhorobah financing agreement entails the shari'a financial institution financing 100 per cent of the project, while the customer(s) acts as the enterprise manager. Moreover, that the parties to the agreement are to agree on when funds are to be returned, and when profit shares are to be distributed, and that the shari'a financial institution is to bear all financial losses resulting from the agreement, except for that resulting from the customer's fault (intentionally or negligently) or contravention of the agreement. With regards to profit sharing, the Fatwa dictates that it must be divided between the two parties, and the percentages of the proportions to be divided must be included in the agreement. Unfortunately for the plaintiffs, as their agreement did not adhere to the latter point, the court could not order the defendants to pay to them the IDR 38,693,700 in resulting profit share.

On 30 July 2008, the first plaintiff and his wife, the second plaintiff, entered into a cooperative agreement with the second defendant, the agent of which was the third defendant. Pursuant to the agreement, the term of which was 36 months, the plaintiffs leveraged the deed of title to their property. The parties also agreed that the second defendant would provide monthly income portions from the agreement of IDR 1,616,800 to the plaintiffs. The second defendant agreed to:

1. ensure the security of the plaintiffs' property;
2. not allow the deed of title (original or photocopy) to change hands;
3. not use the deed of title, except for purposes relating to the provision of income portions; and
4. return to the plaintiffs the deed of title if the agreement came to an end.

The plaintiffs agreed to:

1. accept a portion of the profits, as agreed to by both sides;
2. be provided with a security guarantee for the deed of title provided to the second defendant; and
3. have the deed of title returned if the agreement came to an end.

The plaintiffs submitted that the second defendant had fulfilled its obligations to the plaintiffs by providing them with IDR 1,616,800 per month until April 2010, when the second defendant defaulted on this part of the agreement. The plaintiffs then filed a civil claim against the second, third and fourth defendants (as first, second and third defendants), and first defendant (as fourth defendant) with the Sleman State Court on 28 January 2011, with the decision being handed down on 16 August 2011.

Initially, the security guarantee over the second plaintiff's property had been with the first defendant pursuant to a Mudharabah agreement between the second defendant as debtor and the first defendant as creditor (dated: 27 December 2007), with an arrears of IDR 1.5 billion, with security in the form of several other deeds of title. The plaintiffs submitted that, as a result of subterfuge on the part of the first and second defendants, the security over the deed of title of a property belonging to a Prof. Dr Kuswandi was removed by the second defendant, working together with the first defendant, and replaced by the deed of title belonging to the property of the second plaintiff. Moreover, that the first and second defendants then coerced the plaintiffs into assenting to the inclusion of an addendum to the initial agreement, the contents of which were the inclusion of the second plaintiff's property, by threatening that the plaintiffs would not receive any dividends. In actual fact, the plaintiffs never received any dividends, regardless.

On 20 September 2010, the first defendant wrote to the second defendant instructing the second defendant to pay to the first defendant arrears owed pursuant to their original agreement. Failure to make payment would result in the auctioning of the property. The first defendant made an application to auction the property, but a lack of interest from prospective bidders prevented the property from being auctioned. Regardless, the plaintiffs submitted that such conduct on the part of the first plaintiff was illegal.

The Sleman State Court had, on 16 August 2011, ordered the second, third and fourth defendants to pay to the plaintiffs IDR 450 million in damages. The plaintiffs, however, filed an application with the Bantul Religious Court for, what it perceived to be, breaches of shari'a law (muamalat law) on the part of the defendants. The plaintiffs sought orders from the court that:

1. the defendants not auction the second plaintiff's property;
2. declare the Sleman State Court's decision to be legally binding;
3. declare the Mudharabah agreement between the first and second defendants contrary to shari'a law principles and, therefore, null and void;
4. declare the addendum null and void;
5. the defendants pay damages, pursuant to the decision of the Sleman State Court; and
6. declare the first defendant's conduct vis-a-vis the deed of title of the second plaintiff's property unlawful.

The court declined to pass judgment, however, acceding to the first defendant's objection that the parties to the dispute had agreed to resolve all disputes before the National Shari'a Arbitration Body.

This fatwa acknowledges the emergence of concerns in society as to the shari'a-compatibility of equitable stock exchange mechanisms in regular stock exchange markets in capital markets. The fatwa seeks to provide traders and investors with a set of guidelines to ensure that their trade activity in this field is shari'a-compliant.

This fatwa acknowledges that shari'a banking customers and shari'a financial institutions require products that utilise qardh agreements as transactional facilities, such as mortgages (rahn), hajj arrangement financing, shari'a charge cards, debt transfer products, and shari'a credit cards. The fatwa defines qardh as a fund-channelling agreement executed by a shari'a financial institution in a customer's favour, repayable to the shari'a financial institution at a time agreed upon by both parties. The fatwa acknowledges that there exist two types of qardh agreements:

1. stand-alone qardh designed for social purposes, and not as a facility for another transaction designed to garner profit;
2. qardh executed as a facility for another transaction designed to garner profit.

The fatwa states that type 1 qardh agreements may not utilise customer funds, whereas type 2 may utilise customer funds.

This fatwa defines a giro as a banking product, which enables the withdrawal of money at any time via a cheque, giro ticket, other financial order facility, or overbooking. The fatwa acknowledges that not all giros are shari'a-compliant, and that a set of guidelines are necessary for the implementation of giros in shari'a banking. Moreover, it notes that there are two types of giro:

1. those that are not shari'a-compliant, insofar as they are based on interest calucations; and
2. those that are shari'a-compliant insofar as they are based on Mudharabah and Wadi'ah principles.

This fatwa acknowledges the increasing demand among society to utilise banking services, including savings accounts, to store its wealth. It notes that withdrawals from a savings account can only be made pursuant to certain, agreed-upon conditions, not via cheque, giro ticket, and/or other means. It also notes that not all savings account practices are shari'a-compliant and, accordingly, a set of guidelines are necessary to ensure shari'a-compliant savings account practices.

The fatwa acknowledges that there are two types of savings accounts:

1. those that are not shari'a-compliant, insofar as they are based on interest calucations; and
2. those are are shari'a-compliant, insofar as they are based on Mudharabah and Wadi'ah principles.

This fatwa acknowledges the increasing demand among society to utilise banking services, including deposit facilities. It notes that withdrawals of deposits can only be made at certain times based on an agreement between the customer and the bank in question. It also notes that not all deposit practices are shari'a-compliant and, accordingly, a set of guidelines are necessary to ensure shari'a-compliant deposit practices.

The fatwa acknowledges that there are two types of deposits:

1. those that are not shari'a-compliant, insofar as they are based on interest calucations; and
2. those are are shari'a-compliant, insofar as they are based on Mudharabah and Wadi'ah principles.

This fatwa acknowledges that the sale-purchase of items by placing an order and pre-paying for those items, pursuant to certain conditions (known as salam), now involves banks. In order that these types of transactions are shari'a-compliant, the fatwa acknowledges the need for a set of guidelines for shari'a financial institutions.

The fatwa mandates a set of conditions for the purchase of an item, the quality therein, as well as the need for the specifications of the item to be clear, and how the purchaser may deal with the item prior to reaching and agreement with the vendor, as well as prior to receipt of the item.

This fatwa defines an istishna' agreement as a sale-purchase agreement whereby the purchaser (mustashni') places an order with the vendor (shani') to have a certain item made pursuant to certain criteria and conditions agreed upon by both parties. The fatwa also acknowledges that shari'a financial institutions are already implementing istishna' agreements, and that the Board believes a set of guidelines is necessary to ensure that such agreements are implemented in a shari'a-compliant manner.

Among other guidelines, the fatwa states that the quantity, form, specifications, and any other relevant information pertaining to the item must be clear, and that it may not be in the form of discharging a debt.

This fatwa acknowledges the need for business investment, often via musyarakah financing, viz. financing based on joint ventures between two or more parties for a certain business, where each party provides a financial contribution on the condition that profit and risk are shared equally, pursuant to the agreement in place. The fatwa also acknowledges that shari'a financial institutions are already implementing musyarakah financing agreements, and that the Board believes a set of guidelines is necessary to ensure that such agreements are implemented in a shari'a-compliant manner.

More specifically, among other requirements, the fatwa dictates that statements of consent and accedence must be made by all parties to show their willingness to be a party to an agreement, ensuring offer and acceptance is explicit, and that it is carried out at the time the agreement is executed. Moreover, all parties must have legal standing (cakap hukum), they must participate and contribute, however, their contributions need not be of the same magnitude.

This fatwa acknowledges that in order to obtain benefit from an object, often an ijarah (rental) agreement is necessary. The fatwa mandates that consent and accedence are required from both parties to the agreement, either verbally or in another form. The benefit of the object or service must be given a financial value and be practical to implement. The fatwa also sets out the obligations of shari'a financial institutions and customers as parties to such an agreement.

This fatwa acknowledges that parties may need to implement a wakalah agreement, viz. devolve authority to another party in matters where proxies are permissible. Moreover, it acknowledges that this practice is offered by shari'a financial institutions as a banking service for customers, and that to ensure shari'a-compliance, shari'a financial institutions require a set of guidelines.

More specifically, among other requirements, the fatwa dictates that statements of consent and accedence must be made by all parties to show their willingness to be a party to an agreement, and that a wakalah agreement may not be terminated unilaterally.

This fatwa acknowledges that persons conducting a business enterprise often require insurance from another party via a kafalah agreement, viz. a gurantee provided by an insurer (kafiil) to a third party to fulfil the obligations of a second party or an insured. To meet these needs, shari'a financial institutions are obligated to make available an insurance (kafalah) scheme based on shari'a principles. The fatwa asserts that to ensure shari'a-compliance, shari'a financial institutions require a set of guidelines pursuant to which they can implement kafalah agreements.

More specifically, among other requirements, the fatwa dictates that:

1. statements of consent and accedence must be made by all parties to show their willingness to be a party to an agreement;
2. insurers may accept nominal fees; and
3. kafalah agreements for a fee are binding and may not be terminated unilaterally.

This fatwa acknowledges that some persons not able to repay debts directly may opt to transfer those debts to a third party via a hawalah agreement. The fatwa notes that shari'a financial institutions are already implementing such agreements and, therefore, would benefit from a set of guidlines to ensure their implementation is shari'a-compliant.

More specifically, the fatwa mandates that a hawalah agreement be between a muhil (party who is in debt and owed), muhal/muhtal (owed by the muhil), and muhal 'alaih (in debt to the muhil and indebted to the muhal), and that the agreement show clearly each party's willingness to be a party to the agreement.

This fatwa acknowledges the reality that shari'a financial institutions may need to request advance payments from customers to assure themselves during the execution of a murabahah financial agreement. The fatwa states that in order to prevent loss on the part of one of the parties, as well as to ensure shari'a-compliance, a set of guidelines for shari'a financial institutions are required.

More specifically, the fatwa permits a shari'a financial institution to receive an advance payment from a customer, on the condition that the parties agree to the sum of money. The monies can then be used in the event the customer terminates the agreement or the shari'a financial institution incurs some other form of financial damages.

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.