Indonesian Academic Pushes for Islamic Bankruptcies to Be Resolved in Religious Courts

An Indonesian academic is pushing for a shift in how bankruptcies stemming from Islamic financial principles are handled, advocating for their resolution within the framework of religious courts. Muhamad Afifi, Dean of the Faculty of Law at Nahdlatul Ulama Indonesia University (Unusia), believes that companies established and operating under Sharia principles should have their bankruptcy proceedings settled through Islamic legal mechanisms.

Afifi pointed out a current inconsistency where contracts are based on Sharia, but the resolution of disputes during insolvency or bankruptcy follows conventional approaches. "How can the contract be Sharia, all legal relationships built on Sharia principles, but when bankruptcy occurs, it is resolved with a conventional approach? This clearly contradicts the spirit of the contract chosen by the parties from the beginning," Afifi stated.

“

How can the contract be Sharia, all legal relationships built on Sharia principles, but when bankruptcy occurs, it is resolved with a conventional approach? This clearly contradicts the spirit of the contract chosen by the parties from the beginning.

He urged the Supreme Court and the House of Representatives to consider clearer regulations that explicitly grant religious courts absolute jurisdiction over bankruptcy cases arising from Sharia-based transactions and business entities. Afifi noted that while religious courts already handle Sharia economic disputes, they lack explicit authority in bankruptcy and suspension of debt payment obligations (PKPU) involving Islamic entities.

"We are pushing for the revision of the Bankruptcy Law to provide a clear space for Religious Courts to handle Islamic bankruptcy cases. If the contract is Sharia, then the resolution must also use Sharia principles and instruments," he asserted. Afifi emphasized that legal certainty is crucial for business actors who have chosen the Sharia scheme as the basis for their legal relationships from the outset.

“

We are pushing for the revision of the Bankruptcy Law to provide a clear space for Religious Courts to handle Islamic bankruptcy cases. If the contract is Sharia, then the resolution must also use Sharia principles and instruments.