ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has floated a concept paper to introduce an alternative dispute resolution (ADR) mechanism for Islamic finance contracts to promote out-of-court settlement, including mediation, arbitration, and neutral evaluation.

The concept paper has been finalised under the Strategic Action Plan 2024-26 to develop Islamic finance in the non-bank financial sector.

The primary objective is to propose a specialised ADR mechanism that aligns with Shariah principles and rules, providing a Shariah-compliant, efficient, and effective means of resolving disputes, thereby enhancing stakeholder confidence in the Islamic finance sector.

The SECP has said that Islamic finance is a significant part of Pakistan’s financial system and a driving force behind economic growth and ethical investments.

However, this growth necessitates the development of effective dispute resolution mechanisms.

Contracts like Musharakah, Modaraba, Murabaha, Ijarah, Wakala, and Istisna are unique in their alignment with Islamic jurisprudence.

Traditional litigation may not always align with Islamic principles, necessitating the need for ADR mechanisms tailored specifically for such contracts.

Published in Dawn, March 15th, 2025