Saturday, October 14, 2017

How are laws made in the Caliphate?

Legislation in the Caliphate
Unlike a King or dictator, the Caliph cannot legislate laws from his own mind that suit his personal or family interests. Although the Caliph holds all executive powers within the Caliphate his powers are restricted by the shari’a. Many orientalists acknowledged this separation of powers. C.A. Nallino said:
But these universal monarchs of Islam, just like all other Muslim sovereigns, while they possessed to an unlimited degree executive power and some judicial power, are entirely lacking in legislative power; because legislation properly so called can only be the divine law itself, the shari’a, of which the ulama, or doctors, are alone the interpreters.1
Thomas Arnold said:
The law being thus of divine origin demanded the obedience even of the Caliph himself, and theoretically at least the administration of the state was supposed to be brought into harmony with the dictates of the sacred law. It is true that by theory the Caliph could be a mujtahid, that is an authority on law, but the legal decisions of a mujtahid are limited to interpretation of the law in its application to such particular problems as may from time to time arise, and he is thus in no sense a creator of new legislation.2
What is shari’a?
The linguistic meaning of the word shari’a is a non-exhaustive source of water from which people satisfy their thirst, which means the Islamic rules are effectively a source of guidance. Water is the foundation for life and the Islamic rules are an essential source for guiding this life.
Islam is not a religion like Christianity which, “Renders unto Caesar the things that are Caesar’s, and unto God the things that are God’s”.3 There is no separation between religion and politics in Islam. All spheres of life and society are governed by Allah’s guidance in the form of shari’a.
Shari’a is composed of all the rules derived from the legislative sources of Islam. These rules are not just limited to areas covering beliefs and morals but rather the Islamic rules cover every action performed by an individual or a society. Allah says:
فَرَّطْنَا فِي الْكِتَابِ مِن شَيْءٍ
“Nothing have we omitted from the book”4
When these shari’a rules are adopted by the Caliph for implementation in the state then they transfer from merely being rules to statuary laws.
Types of statuary law in the Caliphate
A statute or law (qanun) is a technical term which means a law adopted by the government for enforcement upon the people. These statutes typically command or prohibit something or declare policy.
In the Caliphate there are three types of laws.
  1. Legislative Laws
  2. Technical Administrative Laws
  3. Non-Technical Administrative Laws
All of these laws have their basis in shari’a but differ in their method of derivation and the accountability mechanisms applied to them.
Legislative Laws
The first principle of the Islamic ruling system is that ‘sovereignty is to shari’a.’1Allah says:
إِنِ الْحُكْمُ إِلَّا لِلَّهِ
The rule is to none but Allah.5
Legislation (tashree) in Islam is the divine rule (Hukm Sharii) and The Legislator (Al-Shaari’) is Allah.
The Qur’an and Sunnah contain texts that address many topics such as the stories of previous nations, the Day of Judgment, heaven, hell and others. However, the texts which specifically address the actions of human beings are referred to as Hukm Sharii.
The scholars of usul (principles of shari’a) have defined Hukm Sharii as, ‘the address of the Legislator (Allah) related to the actions of the servants.’6
وَمَا كَانَ لِمُؤْمِنٍ وَلَا مُؤْمِنَةٍ إِذَا قَضَى اللَّهُ وَرَسُولُهُ أَمْرًا أَن يَكُونَ لَهُمُ الْخِيَرَةُ مِنْ أَمْرِهِمْ وَمَن يَعْصِ اللَّهَ وَرَسُولَهُ فَقَدْ ضَلَّ ضَلَالًا مُّبِينًا
 “When Allah and His Messenger have decided something it is not for any man or woman of the believers to have a choice about it. Anyone who disobeys Allah and His Messenger is clearly misguided.”7
How are Legislative Laws made?
One of the executive powers of the Caliph is that he has the right to adopt legislation for the Islamic state. Those with a weak understanding of shari’a and the legal processes involved may claim the Caliphate is similar to the medieval Christian Kingdoms of Europe. The Christian Kings believed in the Divine Right of Kings, a belief that legitimate kings were appointed by God and so were answerable to God alone. King, James I in 1609 said:
“The state of monarchy is the supremest thing upon earth; for kings are not only God’s lieutenants upon earth, and sit upon God’s throne, but even by God himself they are called Gods.”8
The King could therefore adopt any law he wished and his decrees were seen as divine. The Caliph cannot do this.
Legislative laws are not subject to the opinion of the majority as happens in democracy where legislation is made through majority voting. The mind is not a source of shari’a. The only acceptable sources of shari’a for legislation in the Caliphate are:
  1. Qur’an
  2. Sunnah
  3. Consensus (ijma) of the Companions of the Prophet Muhammed ﷺ
  4. Analogy (qiyas)9
Legislative laws are derived through a process called ijtihad not voting. Ijtihad is where an Islamic legal expert (mujtahid) expends maximum effort in deriving a divine rule from the four sources above. If the Caliph is a mujtahid (legal scholar) then he will undertake this process as happened during the time of the Rightly Guided Caliphs. If not, then he will refer to the ulema (scholars) for this function as occurred during the Abbasid and Ottoman Caliphate.
If the Caliph is not a mujtahid then he can appoint scholars who are experts in various fields of shari’a such as economy, ruling and social issues to legislate for the state. In this case the legislative branch would be considered institutionally independent. This was the case in the Ottoman Caliphate where the Shaikh ul-Islam was effectively the legislative branch of the state. C.H. Becker said:
“The Shaikh-ul-Islam takes equal rank with the Grand Vizier and is his deputy. Though independent as interpreter of the law, he is in his position himself an official who may be dismissed. So in this way, so far as individual persons are concerned, the problem of State-control and non-interference in religion is settled.”10
An argument against the Caliph is that he could ‘pick and mix’ rules from any of the four shari’a sources that benefit him. However, Islam didn’t just define the sources of shari’a it also defined the intricate legal process to extract the laws known as Istinbat.
The Caliphate is therefore forbidden from adopting any rule that is not correctly deduced from the four shari’a sources. Furthermore, the Caliph is also restricted to the rules he has adopted and to the method of deduction (istanbat) that he has chosen for deducing the rules.11
New legislative laws will be introduced by the Caliph and his Assistants (wazir) as bills and submitted to the Majlis and the Mazalim Court for scrutiny. The Majlis will consist of various technical committees one being the shari’a committee consisting of Muslim ulema. These bills will be discussed in this committee from the viewpoint of the strength of shari’a evidence not through voting. Majority opinion has no value when it comes to deriving legislative laws. The Caliph is not obliged to adopt the opinion of the Majlis in relation to legislative laws but if a difference arose it will be submitted to the Mazalim Court for resolution.
If the legislative bill conforms to shari’a, the Caliphate’s adopted legal sources and method of deduction (istinbat), with no opposition from the Mazalim Court, then the Caliph will sign off the bill transferring it in to law.
Technical Administrative Laws
The administrative laws make up the majority of laws in modern states today. In democracy these are written by the civil servants and presented by the department ministers. They are then presented as bills to the House which votes on them and the law is passed through the opinion of the majority. Since members of parliament or congress are not technocrats they sometimes establish public bill committees where technical advisors who are experts in that particular field assist them in scrutinising the bill.
It was reported in America that most lawmakers in the US Congress do not bother to read the legislation they are passing and neither do any of their officials or staff! Instead, more often than not, members of Congress rely on summaries prepared by the bill’s authors or by special interest groups whose judgment they trust.
Republican Brian Baird, (D-Wash) writing in the Washington Post recently penned an Op-Ed titled ‘We Need to Read the Bills.’12 The op-ed at first glance reads like something emanating from Michael Moore, yet it systematically and in a serious fashion highlights a notable gap between what most people think is a painstaking and deliberative legislative process in Congress and what actually happens. Baird’s op-ed was in response to a particularly embarrassing episode, in which an anonymous individual inserted a provision into a large spending bill that was passed, allowing congressional staff to examine any individual American’s income tax returns.
The Administrative Laws whether technical or non-technical are simply styles to perform a particular task or subsidiary actions of a legislative rule, and therefore do not require a specific shari’a evidence. This is because in origin the shari’a evidence includes all subsidiary actions or styles that branch out from it unless there the shari’a also specifies the subsidiary action which happens mostly in the case of ibadat (worships) but not in mu’amilaat (transactions) like ruling and economy.
For example the legislative law of zakat is a pillar of Islam derived from the Qur’an:
وَآتُوا الزَّكَاةَ
“And pay out the Zakat”13
Since Zakaat falls under the category of ibadat (worships) it contains many subsidiary shari’a rules such as the level of wealth (nisab) which is needed before zakat is paid, the amount that is paid and is eligible to receive zakat. These are based on shari’a evidences so are not administrative or subject to changes in time and place. They are as applicable in the 21st century as they were when they were first revealed in the 7th century. However, there are other subsidiary actions which were not specified by the shari’a which do fall under the administrative laws such as how the Zakat is physically collected. So using computers to calculate zakat or asking Muslims to complete tax-returns to establish the amount of zakat to pay are all technical advancements which fall under administrative law. These administrative laws can even be adopted from western systems. This is what the second Caliph of Islam Umar bin Al-Khattab did when he adopted the diwan system for organising the treasury from the Persian Empire.
How are Technical Administrative Laws made?
New Technical Administrative Laws will be introduced by the Caliph and his Assistants (wazir) as bills and submitted to the Majlis and the Mazalim Court for scrutiny. As mentioned before the Majlis will consist of various technical committees similar to the Public Bill Committees which will call upon experts in the field to offer advice. Majority opinion has no value when it comes to deriving Technical Administrative laws as these are for the experts to offer their opinions. Presentation of these bills to the Majlis and Mazalim Court is simply a mechanism to ensure no violations of people’s rights or shari’a occur from the small print of a bill as happened in the American Congress spending bill where a clause was inserted allowing spying on the citizens which is prohibited in shari’a.
If no opposition is raised by the Mazalim Court regarding the Technical Administrative Bill, then the Caliph will sign off the bill transferring it in to law.
Noah Feldman highlights this:
“In the classical Sunni constitutional balance, the shari’a existed alongside a body of administrative regulations that governed many matters in the realms of taxation and criminal law. The Ottoman Empire had long featured thousands of such regulations, called kanun, a word whose derivation from the Latin canon testified to its origins outside the shari’a.”14
Non-Technical Administrative Laws
There is another subset of Administrative law which is the non-technical laws that are open to the opinion of the majority and not restricted to experts. The difference here is subtle because all opinions are based on some level of knowledge. However, the difference between the technical and non-technical opinions is the level of expertise and knowledge required before passing judgment. If an opinion can be reached through uncomplicated general knowledge open to the majority of ordinary people, then it would be classed as non-technical otherwise it’s technical.
An example of this type of opinion is the election of the Caliph. Mawardi mentions in Ahkam as-Sultaniyyah regarding those eligible to make the choice of Imam (Caliph) that, “they possess a knowledge by which they may comprehend who has a right to the Imamate and that they fulfil all the conditions implied by this knowledge.”15 This type of knowledge and analysing who is the best choice for the state is within the capability of all sane, mature Muslim citizens. Elections for the head of state in western countries and the ensuing debates prove this point.
Another example would be prioritisation of public services. Do we build more hospitals and offer better medical care or do we instead build more schools and improve educational standards?
How are Non-Technical Administrative Laws made?
New non-Technical Administrative Laws will be introduced by the Caliph and his Assistants (wazir) as bills and submitted to the Majlis for scrutiny. The entire House consisting of Muslims and non-Muslims will be the committee that discusses the bill. The bill is passed through majority voting and the Caliph will sign off the bill transferring it in to law.
Case Study: Health Care
To further illustrate the differences between the three types of laws in the Caliphate let us look at Health Care which has caused much debate and controversy in America over its health reforms nicknamed ‘Obamacare’.
The question of whether citizens should be given free health care like the British NHS or be forced to pay through medical insurance as happens in America, falls under the category of legislation. This is because the shari’a specifies that health care is one of the rights of the citizens. This is derived through ijtihad from the sunnah where the Prophet Muhammad ﷺ was given a doctor as a gift but he assigned him to all the Muslims. The fact that the Messenger of Allah ﷺ received a gift and did not use it, nor take it, rather he assigned it to the Muslims is evidence that healthcare is one of the interests of the people whether Muslim or non-Muslim.
The administrative aspects of managing a public health service and the most efficient methods of providing care would be referred to the medical experts and would fall under the Technical Administrative Law. The UK’s Health and Social Care Act 2012 contains many of these type of laws.
Lastly, the decision on whether to improve hospitals and healthcare services at the expense of schools and transportation links, would fall under non-Technical Administrative Laws and be decided through majority voting in the Majlis.
Law making process overview
how laws are made v2
Is the Caliph a lawmaker?
An argument brought by some modernists who seek a reformation of Islam, is that shari’a is divine and once it’s been adopted it becomes a man-made law and not shari’a anymore.
Abdullahi A. An-Na’im, Professor of Law at Emory University School of Law in America states:
‘In my view, shari’a cannot be enforced as positive legislation and remain the source of a religiously sanctioned normative system.’16
In the west members of legislative bodies are called Lawmakers because through majority voting they pass legislative laws. However, in Islam those who perform ijtihad and extract shari’a legislation are called mujtahideen not lawmakers because they do not make the law. Rather it is Allah who is The Legislator (Al-Shari) and the mujtahideen simply derive the law from the Islamic legal sources revealed by The Legislator – Allah, to His Messenger Muhammad ﷺ through the process of ijtihad. Once the hukm is derived it is adopted by the mujtahid or Caliph for enforcement on the people as law.
Can the Caliphate adopt laws from the west?
It is permitted to adopt any administrative law, policy or technological advancement from the west as long as it does not contradict shari’a. These styles and means which change throughout time are what allows Islam’s legislation and values to be applicable to all times and places.
As discussed before the second Caliph Umar bin al-Khattab adopted the diwansystem from the Persian Empire for organising the State Treasury (Bait ul-Mal). This is based on the Prophet ﷺ famous saying regarding the pollination of date palms.
Musa bin Talha narrated that, I and Allah’s Messenger ﷺ happened to pass by people near the date-palm trees. He (the Holy Prophet) said: ‘What are these people doing?’ They said: ‘They are grafting,’ i.e. they combine the male with the female (tree) and thus they yield more fruit. Thereupon Allah’s Messenger ﷺ said: ‘I do not find it to be of any use.’ The people were informed about it and they abandoned this practice. Allah’s Messenger ﷺ (was later) on informed (that the yield had dwindled), whereupon he said: ‘If there is any use of it, then they should do it, for it was just a personal opinion of mine, and do not go after my personal opinion; but when I say to you anything on behalf of Allah, then do accept it, for I do not attribute lies to Allah, the Exalted and Glorious.’17
Noah Feldman highlights this point: “The administrative regulations that covered so much of life in the classical Islamic legal world were understood by one and all to derive from the authority of the ruler that was recognized by the shari’a. A regulation could never contradict or supersede the shari’a.”18
Where is the Upper House?
In a bicameral democratic system which most democracies are today the legislature is split in to two houses, a lower house and upper house. This separation is for providing additional checks and balances. In America Congress is split in to the House of Representatives and the Senate. Both being elected houses. In Britain parliament is split in to an elected lower house called the House of Commons and a part appointed, part hereditary upper house called the House of Lords.
The Caliphate is not a democracy and the Majlis ul-Ummah is not a legislature therefore the bicameral model does not apply. Instead the Mazalim Court overseas the Majlis and will resolve any disputes between the Majlis and the Caliph. The court also checks all legislation, administrative laws and constitutional amendments to ensure they conform to shari’a.
Feldman makes a similar proposal when discussing the Islamic legislature that it “could be a court exercising Islamic judicial review to shape and influence laws passed in its shadow.”19
Enforcing shari’a
Abdelwahab El-Affendi states:
‘The central misunderstanding of current Muslim political thought is the confused belief that a state based on Islamic principles is one which forces people to live according to Islam.’20
In refutation of the above statement it is enough to refer to the words of Allah in the Holy Qur’an:
وَمَا كَانَ لِمُؤْمِنٍ وَلَا مُؤْمِنَةٍ إِذَا قَضَى اللَّهُ وَرَسُولُهُ أَمْرًا أَن يَكُونَ لَهُمُ الْخِيَرَةُ مِنْ أَمْرِهِمْ ۗ وَمَن يَعْصِ اللَّهَ وَرَسُولَهُ فَقَدْ ضَلَّ ضَلَالًا مُّبِينًا
“When Allah and His Messenger have decided something it is not for any man or woman of the believers to have a choice about it. Anyone who disobeys Allah and His Messenger is clearly misguided.”21
A state cannot exist without laws. These laws will differ depending on the type of system implemented. For the Caliphate which is an ideological Islamic state the basis of law is shari’a whereas in secular-democracies the basis is the whims and desires of man. In society however people will simply follow the law of the land when conducting their day to day business regardless of the basis on which the law was derived. For example, when buying goods in America a Muslim and non-Muslim will use dollars, and in the Caliphate they will use dinars and dirhams. If they steal the goods in America they will be punished, and if they steal in the Caliphate they will be punished. The punishments and judicial process differ between the states but in essence it’s about law and order which must exist for a society to function.
Therefore, the law of the Caliphate which happens to be based on shari’a will be applied upon all citizens whether Muslim or non-Muslim with the caveats mentioned below.
Areas of society where laws are not adopted
The Caliphate is not a totalitarian state which micromanages every aspect of society. The Caliphate only adopts laws from the shari’a necessary to manage life’s affairs. It does not adopt divine rules pertaining to worship (ibadat) except Zakat and Jihad due to their societal impact. It also does not adopt in any of the thoughts connected to the Islamic ‘aqeeda. This means the state will not force one school of thought (mazhab) upon the Muslims forcing them to pray in a particular way or adopt a particular school of thought in the branches of belief.
In certain periods of Islamic history, the executive did attempt to impose a particular school of thought both in belief and action upon the ulema (scholars) who were upholding the legislative and judicial branches of the state. The Abbasid Caliph Al-Ma’mun (813-833) was the first to introduce a mihna (inquisition) which forced the ulema to adopt the Mu’tazilah school of thought pertaining to the philosophical question of whether the Qur’an was created or not. This mihna was finally abolished in 847 by the Caliph Al-Mutawakkil but not before causing much harm to the ummah. Therefore, a future Caliphate will restrict its adoption to the societal transactions (mu’amilaat) and penal code (hudud) and those areas of ibadat with societal impact such as the start of Ramadan, what items zakat is payable upon and when is Eid.
Any Muslim regardless of their school of thought will be left alone to practise without interference from the state, providing the school of thought is not outside the boundaries of Islam.
Similarly, non-Muslims will be left to practise their religions without interference from the state. They will not be forced to become Muslim and they can continue worshipping in their churches or synagogues. They can eat according to what their religions permit such as pork. They can drink alcohol in the private sphere but not publicly in society. This is similar to America with its open container laws that prohibit an open container of alcohol being carried publicly. Marriage and divorce will also be according to their religions. Outside this they will follow the law of the land in business, buying houses, accounting the state and so forth, the same as Muslims.
Constitution. Written or unwritten?
A constitution is defined as, ‘a body of fundamental principles or established precedents according to which a state or other organization is acknowledged to be governed.’22
Some states have written codified constitutions such as France and America and others have unwritten constitutions such as Britain.
When the first Islamic State was established in Medina the Prophet Muhammad ﷺ wrote a document which was effectively the constitution of the state. After this time though the Caliphate never had a written constitution as such until 1876 when Abdul-Hamid II introduced one for the Ottoman State. This was only in effect for two years before being abolished.
Since the future Caliphate will be a new state and an alternative governing system in the world then it should have a written constitution which outlines the principles upon which the state and its systems are based. This should be written in a general manner addressing those areas necessary to maintain unity of the state such as the constitutional process for electing a Caliph.
An explanation of the first Islamic State’s constitution now follows to illustrate this point.
Taqiuddin an-Nabhani in Dowlah Islamiyyah writes:
When Islam’s authority was established in Madinah, differences deepened and the need to establish relations between the Muslims and the Jews on a specific basis became a necessity. So the Messenger of Allah ﷺ determined the Muslims’ position towards the other members of the society. In the light of this the Messenger of Allah ﷺ wrote a document concerning the Muhajireen and Ansar in which he made an agreement with the Jews establishing them in their religion and their property, and in which he stated their reciprocal obligations. He ﷺ began the document as follows,
“This is a document from Muhammad the Prophet, governing the relations between the believing Muslims of Quraysh and Yathrib (Madinah), and those who followed them and joined them and fought alongside them. They are one Ummah to the exclusion of all people.”
He ﷺ then mentioned how the relationship between the believers was to be constituted. He also mentioned the Jews during his talk concerning the relations between the believers, saying,
“A believer shall not slay a believer for the sake of a disbeliever, nor shall he aid a disbeliever against a believer. Allah’s covenant amongst them is one, the least of them is responsible. Believers are protectors (Wula’a) of one to the other to the exclusion of outsiders. To the Jews who follow us belong help and equality. They shall not be wronged nor shall their enemies be aided. The peace of the believers is indivisible. No separate peace shall be made when believers are fighting in the way of Allah. Conditions must be fair to all.”
The Jews mentioned in this document were the ones who wanted to become citizens of the Islamic State. It was not addressed to the Jewish tribes living on the outskirts of Madinah. Thus, any Jew wanting to become a citizen of the State would enjoy the same rights and receive the same treatment, for he would then be considered a Dhimmi (people of the covenant). As for the Jewish tribes mentioned in the document, they were referred to in the latter part of the document and included the Jews of Banu ‘Auf and the Jews of Banu al-Najjar and so on. Their position vis-a-vis the Islamic State was defined by the document. It was clearly determined that their relationship with the Muslims would be based on the Islamic rule, that it would be subject to the authority of Islam and to safeguarding the interests of the State. Some of the points mentioned in the document were:
  • The close friends of the Jews are as themselves. None of them shall go out except with the permission of Muhammad ﷺ.
  • Yathrib shall be a sanctuary for the people of this document.
  • If any dispute or controversy likely to cause trouble should arise, it must be referred to Allah and to the Messenger of Allah.
  • The Quraysh and their helpers shall not be given protection.
The document of Allah’s Messenger ﷺ determined the position of the Jewish tribes neighbouring Madinah. It imposed on them the condition that they were not to go out of Madinah without his ﷺ permission, i.e. the State’s permission. They were forbidden from violating the sanctuary of Madinah by war or by helping in a war. They were also forbidden from helping the Quraysh or those who helped the Quraysh and were bound by the conditions of the covenant to refer any dispute arising about the content of the document to the Messenger of Allah ﷺ. The Jews agreed to the conditions laid out in the document and all those tribes mentioned in it signed to that effect. They were Banu ‘Auf, Banu al-Najjar, Banu al-Harith, Banu Sa’ida, Banu Jushm, Banu al- Aus and Banu Tha’labah. Banu Quraydah, Banu al-Nadir and Banu Qaynuqa’ did not sign at the time, but did so at a later date, and they all willingly submitted to the conditions laid down in the document. By signing this document the Messenger of Allah ﷺ firmly fixed the relationships within the newly born Islamic State. The relationship between the State and the neighbouring Jewish tribes was also firmly established on a clear and specific basis. In both instances though, it was Islam that would be the judge and arbiter. It was at this stage that Allah’s Messenger ﷺ became reassured knowing that the Islamic society was now properly founded and that he was to a certain degree safe from any immediate acts of betrayal and fighting by the Jews, so he ﷺ began the task of removing the material obstacles that stood in the way of the Message of Islam by preparing for war.23


Notes
1 C.A. Nallino, Appunti sulla natura del ‘Califfato’ in genere e sul presunto ‘Califfato Otttomano’, p. 200
2 Thomas W. Arnold, ‘The Caliphate,’ Oxford University Press, 1924, p. 53
3 Bible, Matthew 22:21
4 Holy Qur’an, Chapter 6, Surah al-An’am, Verse 38
5 Holy Qur’an, Chapter 6, Surah al-An’am, Verse 57
6 Taqiuddin an-Nabhani, ‘The System of Islam,’ translation of Nidham ul-Islam, Khilafah Publications, p.95
7 Holy Qur’an, Chapter 33, Surah Al-Ahzaab, Verse 36
8 King James I, ‘Speech Before Parliament,’ 21 March 1609, http://www.luminarium.org/sevenlit/james/1609speech.htm
9 Taqiuddin an-Nabhani, ‘The draft constitution of the Khilafah State. The Introduction and the incumbent reasons,’ translation of Muqadimatud-Dustur Aw al-Asbabul Mujibatulah, Article 12
10 C.H. Becker, ‘Islampolitik,’ Die Welt des Islams, iii, p. 103, Berlin, 1915
11 Taqiuddin an-Nabhani, ‘The draft constitution of the Khilafah State,’ Op.cit., Article 36
12 Brian Baird, ‘We Need to Read the Bills,’ Washington Post, 27 November 2004, http://www.washingtonpost.com/wp-dyn/articles/A15620-2004Nov26.html
13 Holy Qur’an, Chapter 73, Surah Al-Muzzammil, Verse 20
14 Noah Feldman, ‘The Fall and Rise of the Islamic State,’ Princeton University Press, 2008, p. 61
15 Abu’l-Hasan al-Mawardi, ‘The Laws of Islamic Governance,’ translation of Al-Ahkam as-Sultaniyah, Ta Ha Publishers, p. 11
16 Abdullahi A. An-Na’im, ‘Shari’a and Positive Legislation: is an Islamic State Possible or Viable?,’ p. 1
17 Sahih Muslim 2361
18 Noah Feldman, Op.cit., p. 43
19 Noah Feldman, Op.cit., p. 147
20 Abdelwahab El-Affendi, ‘Who needs an Islamic State?,’ Second Edition, Malaysia Think Tank London, 2008, p. 140
21 Holy Qur’an, Chapter 33, Surah Al-Ahzaab, Verse 36
22 Oxford English Dictionary
23 Taqiuddin an-Nabhani, ‘The Islamic State’, translation of Dowlah Islamiyya, Khilafah Publications, p. 46

Saturday, October 07, 2017

The Fiqh of Transitioning to the Gold & Silver Standard

The following are answers to several questions related to the future Khilafah state and the transition of the current currency to the Gold and Silver Standard. 

1. Question: Is it permissible in Islam for the Khilafah to partially back its currency during a transitional period on the justification (if it is so) that it does not have the capacity (in reserves) to maintain 100% convertibility. In terms of the US, this would mean that it could partially back (at around 20%) all of its currency at the current rate, without having to change that parity or endure the negative effects associated with this. This would grant it the stability it would need to expand its reserves (through various means) so that it can gradually move towards a 100% backed rate.

Answer: 
For the state to issue a gold and silver based currency it will have to depend on the availability of these metals in its treasuries. In addition to this the state will also have to attain the available gold and silver from the merchants, goldsmiths and the general population apart from attempting to extract the metal from the earth. 

And in the situation if it does not has the necessary amount of gold and silver so as to be able to replace the existing currency completely then the state will look at mechanisms to attain the gold and silver from outside the state. 

However, considering the reality that we live in today and because of the very limited gold and silver reserves maintained by treasuries and the proliferation of fiat currency, it is very likely that the state will not be able to find the necessary amounts of gold and silver to issue enough currency which can replace the existing currency in any state. 

The unavailability of the necessary amount of gold and silver to issue currency is similar to the well researched and discussed subject among the scholars which is called ‘انقطاع النقد’ among the scholars which is the reality when a currency runs out in a marketplace. 

This is a reality that often occurred in the Muslim market places where people would deal with metallic currencies such as the dirhams and dinars and fils and so on and many a times a person would make a trade deal only to find that the currency has run out at the time of payment. The scholars discussed about this in detail and specially the ahnaaf who mentioned that in such a situation the ‘قيمة’ is still applicable i.e the value is still payable as was agreed upon and it remains a debt. 

Note that the term ‘value’ here is different to the price. So the price may have been agreed as 10 dirhams for a certain product, and the dirhams were no more available in the market at the time of payment, then the buyer pays the value of the 10 dirhams in another currency and this will be calculated based on the rate of exchange between this currency and the dirham on the last day before the dirham ran out in the market. 

Ibn Abidin writes in his Hashiya – 

إذا انقطعت ـ أي النقود ـ بأن لا توجد في الأسواق، ولو وجدت في يد الصيارفة، أو في البيوت، تجب القيمة هنا في آخر يوم الانقطاع وهو المختار”
“if the money/currency ran out in the market, even if it was available with the currency exchangers or in the houses of the people, the value is obliged based on what the value was on the day when the currency ran out”

In Tanbeeh arruqood ala masail al uqood, Ibn Abideen says

وإن انقطع بحيث لا يقدر عليه، فعليه قيمتها ـ أي في الدين والعقود ـ في آخر يوم انقطع، من الذهب والفضة، وهو المختار”.
“if the currency is not available then the value applies on him in gold or silver i.e in debts and contracts as was the rate of exchange on the last day when the currency ran out”

The reality of the currency running out in a market or its demonetization and the removal of the state that minted a currency that people currently use and the loss of the value of this currency are similar. The removal of the state that minted the currency is equivalent to the ‘انقطاع النقد’ i.e after the removal of the state the currency has no value.

The illah (legal reason) that relates the two realities is the loss of the currency’s value due to a cause and the people’s dependency on conducting transactions on it.

Therefore, in the reality that the Khilafah Rashida was not to be able to exchange peoples existing currency with a gold backed currency, it can still issue the currency to them which will be considered a debt on the state. This currency that the state will issue will be similar to a cheque or a bond that the state has to return, and this has been discussed in the books of fiqh as ‘qutoot’ which is a currency issued by the state in the form of a debt. 

The evidence to issue Sukook or Qutoot is found in the hadith of Bukhari, 

حَدَّثَنَا سَعِيدُ بْنُ أَبِي مَرْيَمَ، حَدَّثَنَا اللَّيْثُ، قَالَ حَدَّثَنِي عُقَيْلٌ، عَنِ ابْنِ شِهَابٍ، قَالَ ذَكَرَ عُرْوَةُ أَنَّ الْمِسْوَرَ بْنَ مَخْرَمَةَ، رضى الله عنهما وَمَرْوَانَ أَخْبَرَاهُ أَنَّ النَّبِيَّ صلى الله عليه وسلم حِينَ جَاءَهُ وَفْدُ هَوَازِنَ قَامَ فِي النَّاسِ، فَأَثْنَى عَلَى اللَّهِ بِمَا هُوَ أَهْلُهُ، ثُمَّ قَالَ ‏ "‏ أَمَّا بَعْدُ، فَإِنَّ إِخْوَانَكُمْ جَاءُونَا تَائِبِينَ، وَإِنِّي رَأَيْتُ أَنْ أَرُدَّ إِلَيْهِمْ سَبْيَهُمْ، فَمَنْ أَحَبَّ مِنْكُمْ أَنْ يُطَيِّبَ ذَلِكَ فَلْيَفْعَلْ، وَمَنْ أَحَبَّ أَنْ يَكُونَ عَلَى حَظِّهِ حَتَّى نُعْطِيَهُ إِيَّاهُ مِنْ أَوَّلِ مَا يُفِيءُ اللَّهُ عَلَيْنَا ‏"‏‏.‏ فَقَالَ النَّاسُ طَيَّبْنَا لَكَ‏.‏

Narrated Al-Miswar bin Makhrama and Marwan:When the delegates of the tribe of Hawazin came to the Prophet (ﷺ) he stood up amongst the people, Glorified and Praised Allah as He deserved, and said, "Then after: Your brethren have come to you with repentance and I see it logical to return to them their captives; so whoever amongst you likes to do that as a favor, then he can do it, and whoever of you like to stick to his share till we give him his right from the very first Fai (war booty) (1) which Allah will bestow on us, then (he can do so)." The people replied, "We do that (to return the captives) willingly as a favor for your sake." [Bukhari]

In another hadith narrated by Abu Dawud

 رُدُّوا عَلَيْهِمْ نِسَاءَهُمْ وَأَبْنَاءَهُمْ فَمَنْ مَسَكَ بِشَىْءٍ مِنْ هَذَا الْفَىْءِ فَإِنَّ لَهُ بِهِ عَلَيْنَا سِتَّ فَرَائِضَ مِنْ أَوَّلِ شَىْءٍ يُفِيئُهُ اللَّهُ عَلَيْنَا ‏"‏ ‏
Return to them (Hawazin) their women and their sons. If any of you withholds anything from this booty, we have six camels for him from the first booty which Allah gives us. [AbuDawud]

There are other evidences to prove that the prophet would borrow from the people in his capacity as the head of the state, and he had appointed bilal ibn Rabbah (ra) to undertake this responsibility of raising debt for spending on the people. 

These Sukook/Qutoot is acceptable to be sold and purchased. Ibn Shaibah narrated in his Musannaf under the chapter of ‘sale of Sukook arrizq’ that Umar bin Al khattab and Zaid accepted the sale of Qutoot and they and applied the rules of money on them. 

In short, the state will make all attempts to avail the necessary amounts of gold and silver to be able to issue the currency and wherever the state falls short it will issue the currency in the form of ‘sanadaat – cheques/bonds’, and in this case the amount of gold/silver equivalent to the currency will be a debt on the state.

2. Question: Is it possible in Islam to fix a parity, announce it, and work towards that conversion rate or would that come under the subject of price fixing (taster) in Islam? It may be conducive to have a parity to work with, in order to accrue enough reserves to meet that rate and ensure that the state can convert all of its currency to gold if it needs to. Also if it announces a rate, people can adjust and plan on that. 

If not, can experts estimate what parity the market would likely reach in the future based on the scarcity of gold within the country and the current demand for money, sort its reserves based on this figure, without informing the public - and when transition comes (the conversion rate should be similar to what the experts estimated) the state would simply adopt this figure as the true value so as to enable a smooth transition? In doing this it would not fix the parity but estimate what it would settle at in the future so that it can expand its reserves in the meantime.

Answer: 
The state when it is established will bring about a new economic regime after ending the existing capitalist regime. The state will have to define the exchange value of the dinar compared to the goods and services. And the shari way to do that would be to not give the dinar any additional value other than what the market has given it, i.e its price in gold and silver. For eg, the price of 4.25 grams of pure gold was equivalent to ‘x’ kg of a vital good. In this way the state would have not only set the exchange rates for the new currency and the goods and services but also the exchange rates of the new currency with the demonetized currency. 

In short, the value of the demonetized currency will be defined based on its value in the market by comparison to the goods and services that could be purchased with this currency. 

Based on this assessment of value at the time of demonetization, the new currency’s exchange rate will be defined. 

As for the hadith that the price fixing is prohibited in islam and that the prophet did not fix the prices of gold and silver, it is true and the principle is that the state does not fix prices. However there is a difference between the two realities, i.e the reality of the prophet and the reality of the upcoming state. When he (saw) came to Makkah, the dirham and dinar were already being circulated so he did not undertake any changes rather accepted what was already the situation. However, the state upon its establishment will encounter a new reality which is the responsibility to replace the existing currency with a gold/silver backed currency, so it will have to fix a rate of exchange and thereafter leave the matter to the market. 

This is something the state will have to undertake so as to avoid chaos and confusion among the people , so it is not considered as ‘price fixing’ rather it is considered from the aspects of ‘riayah – care’ of the people.

3. Question: Is it permissible for the Khilafah to purchase gold from its people (or ask them to sell) at a just and fair rate in times of desperation. This would add significant gold to our reserves and maintain convertibility - if we could not find the gold in any other way

Answer: Upon the establishment of the first Islamic state, the prophet (saw) encouraged the people of Madina to contribute to the building the bayt al Maal and there are many ahadith that discuss about the sahaba’s sacrifices. 

In a similar way the future Khilafah Rashida will encourage people to contribute their gold and silver items to the state and the state will also buy these metals from the people in return of lands that the state owns or in returns of bonds to return the metal upon availability in the future. 

However, the state cannot compel or force the general population rather it can only encourage them except for those who the state finds are hoarding gold and silver, in which case the hukm of hoarding would apply on them.

4. Question: Is it fard for the state to implement the gold standard immediately on the first day of its existence, or can it announce its intention to implement it in say, 6 months down the line, just to give some time for the economy to organise itself around this arrangement.

Answer:
Firstly, it should be clear that with the establishment of the state the constitution of the state will come into effect and all previous laws will be considered abolished. 

It is mentioned in Article 167 of the Draft Dastoor (Constitution)

The currency of the State is to be restricted to gold and silver, whether minted or not. No other form of currency for the State is permitted.

However, the setup of the currency minting machines and what is related to it will take time. Much similar to the time taken to setup the Judiciary and the Ministries, which will be a matter of a few weeks to months. 

The state upon its establishment will have to declare its currency and the exchange rates of the currency with the vital goods and services and with the demonetized currency and it should start issuing the new currency. Since the new currency will take time to be issued and then be widely circulated, the demonetized currency can be used and its value will be fixed at the exchange rate with the new currency as declared when the state was established. So effectively the demonetized currency would be in lieu of the new Islamic currency and it will only be in use until the new currency is in wide circulation. 

So the new currency would be announced along with the establishment of the state and so will its exchange rate with the existing currency however the actual circulation of the new currency will take some time and during this time the demonetized currency which will be fixed to the new currency can be used.

5.  Question: There are many ways to move to a gold standard. One has been discussed here (to redefine the existing currency in terms of gold). Another suggested is to implement a parallel system where the Khilafah would legitimise gold as money without demonetising what is already in circulation, so as to avoid any volatility due to an imbalance in the parity between the two. This would allow a transition to happen until gold becomes the predominant currency, at which point we could move to it entirely. Is this permissible?

Answer:
It is mentioned in Article 167 of the Draft Dastoor

The currency of the State is to be restricted to gold and silver, whether minted or not. No other form of currency for the State is permitted.

So it is not permitted for the state to accept any other currency other than the Islamic currency. 

Upon the announcement of the state the state will announce the exchange rates of its gold and silver based currency with the vital goods and services and with the existing currencies. The demonetized currency of the state where the khilafah rashidah is established would become valueless after this announcement however because it is exchangeable with the Islamic states currency, it can be used until it is exchanged with the Islamic currency. 

Therefore, there is no need to run a parallel system with the gold based currency along with the demonetized currency.

6. Question: What happens if the market chooses a parity value multiple times the current price of gold in order to maintain convertibility based on the shortage of gold. So for instance, if the parity of gold was $1300 today and it rose to $13,400 tomorrow. Would it create inflation or deflation or neither, and for what reasons?

Answer:
At the time of establishment of the state it will have to study and announce the rate at which it will exchange the demonetized currency and that will be defined based on the value of the demonetized currency at the time of demonetization and the value of the gold and silver at the time of announcement of the states establishment. And this exchange rate will remain fixed for the demonetized currency. 

We have discussed about this in detail and its permissibility in the previous answers.

Ustadh Abu Khaled al-Hejazi