Federal Court Issues Landmark Ruling on Section 57 of the Central Bank of Malaysia Act
11 April 2019
The Federal Court yesterday issued a landmark decision in JRI Resources Sdn Bhd v Kuwait Finance House.
The issue before the Federal Court was whether a ruling made by the Syariah Advisory Council (‘SAC’) established under the Central Bank of Malaysia Act 2009 (‘CBA’) is ultra vires Article 121 of the Federal Constitution which, inter alia, vests judicial power over civil matters in the High Court.
Section 56 of the CBA provides that where any question arises in any proceedings relating to Islamic financial business before a court or arbitrator concerning a Shariah matter, the court or arbitrator shall take into consideration any published rulings of the SAC or refer such question to the SAC for its ruling.
Under Section 57 of the CBA, any ruling made by the SAC pursuant to a reference made to it under section 56 shall be binding on the court or the arbitrator making the reference.
The Federal Court by a 5:4 decision held that the rulings of the SAC does not amount to a judicial decision and constitute an expert opinion in matters pertaining to Islamic finance. The majority judges added that a matter could be referred to the SAC to ascertain which opinion or jurist was most applicable, and it is for the court to apply the ascertained Islamic law to the case. The judges also added that the final decision on the matter remains with the court.
The minority judges opined that section 57 of the CBA vests judicial power in the SAC to the exclusion of the High Court in Shariah matters and must be struck down as unconstitutional and void as judicial power cannot be removed from the judiciary.
Apart from the significance of the decision, the case is noteworthy as it is reported to be the first time in the history of the Malaysian Courts that a case was heard by a nine-member bench.
Note: As the judgments of the Federal Court have yet to be available, the above summary is based on reports of the decision in the local media.