In the Name of Allāh,

the Entirely Merciful, the Especially Merciful

Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.

Resolution No. 147 (5/16)

International Commodities and their Trading Standards

The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 16th session in Dubai, United Arab Emirates, on 30 Ṣafar – 5 Rabīʿ al-Awwal 1426h (9–14 April 2005),

Having examined the research papers submitted to the Academy concerning

International Commodities and their Trading Standards, Having listened to the discussions on the subject,

Resolves

First: Confirmation of resolution no. 63 (1/7) on Financial Markets, which states that: Dealing in international commodities in organized markets can be through either of the following four methods:

First Method

The contract involves the right of receiving the sold commodity and the spot price, while the commodity or the documents representing it are owned and possessed by the seller. This contract is Shariah-acceptable, subject to the well- known conditions of sale contracts.

Second Method

The contract involves the right of receiving the sold commodity and the price on the spot as guaranteed by the market management. This contract is Shariah- acceptable, subject to the well-known conditions on sale contracts.

Third Method

When the contract involves a well-defined and described commodity to be deliv- ered in the future and the price is payable on delivery, and the contract includes a condition requiring actual/physical delivery and receipt. This contract is not permissible because it involves the postponement of both the commodity sold and the price. It could, however, be amended to satisfy the known conditions for Salam and hence becomes permissible.

It is also not permissible to sell a commodity that has been purchased through

Salam before taking delivery of it.

Fourth Method

When the contract involves the in-the-future delivery of a well-defined and de- scribed commodity, and payment of the delivery price, while there is no condi- tion in the contract that enforces physical/actual delivery and receipt, and hence the contract can be terminated by a new reversed contract.

This type of contract, which is the most common in commodity markets, is prohibited in Shariah.

Second: In the light of the research and studies submitted, the Council of the Academy discussed several forms of financial transactions practised by Islamic financial institutions and came to realize that such applications take so many forms and have several aspects and details that need to be tackled in detail be- fore reaching a Shariah ruling on international commodities and the criteria of dealing in them. The Academy, therefore, recommends that its Secretariat General should organize a special seminar for the following:

1. Presentation of the actual transactions practiced by the Islamic financial institutions in the international commodity markets.
2. A comprehensive discussion of all the criteria that Islamic financial insti- tutions should observe in transactions in the financial
3. Conducting additional research studies on the different aspects of these transactions, to cover all the issues relating to international

Third: The Academy commends the intention of the Government of Dubai to set up an international commodity market in Dubai and hopes that this pro- ject will enable Islamic financial institutions to avoid the Shariah-prohibited practices in the international markets that have been indicated in the research studies presented to the Academy.

The Academy also requests those who are in charge of the project to give much care to the Shariah aspects in preparing the laws and procedures of the proposed market and to be very keen to develop mechanisms that ensure con- formity of market practices to the rules and principles of the Shariah.

Indeed, Allāh is All-Knowing.