INTRODUCTION The Shariah-based bank has become a global phenomenon.

The development of Shariahbased bank, or also called as riba-free bank, is increasing time to time as an alternative banking system. This not only develops in Islamic states, but also spread to other states. In Indonesia, the emergence of the Sharia-based bank was initiated by the enactment of Law no.7/1992 on Banking. Bank Muamalat was considered as the first bank which operates in accordance with Islamic principle. The Banking Act No.7/1992 was amended by Act No. 10/1998, to provide an opportunity to conventional banks to open an Islamic window. Since that time, the growth of Islamic banking in Indonesia has been progressing steady and fast.1 The development of Shariah-based bank, shall in accordance with the development of the legal product which regulate about it. One of the aspects shall be considered is the dispute settlement. The enactment of the latest law about Shariah Banking, the Law no.21/2008 has answered many problems on Shariah Banking, including the dispute settlement. This paper is trying to discuss on: 1. How the Law no. 21/2008 regulate about the dispute settlement for Shariah Banking? 2. What are the challenges of the disputes settlement bodies for Shariah Banking?

Abdul Rasyid, Settlement of Islamic Banking Disputes in Indonesia: Opportunities and Challenges, International Conference on Mediation in the Asia Pacific: Constraints and Challenges 16-18 June, 2008

ANALYSIS 1. The Dispute Settlement for Shariah Banking Matter In the past, there was confusion on the question which forum was competent to settle Islamic banking disputes: civil court or religious court. Both regarded themselves to be competent to settle such disputes. But the problem was that the jurisdiction of the civil courts did not extend to Shariah matters, within which Islamic banking disputes apparently came. On the other hand, the jurisdiction of the religious courts was limited to Personal law matters which did not cover banking disputes, and was confined to a) marriage, b) inheritance, testamentary succession, hiba and waqf.2 The Law no.21/2008 was enacted, which regulate about Shariah Banking. The dispute settlement for Shariah Banking was regulated in the article 55, among other:3 (1) The dispute settlement of Shariah Banking is done by the Islamic Court (2) In case that the parties agreed the other way to settle the dispute, the dispute settlement done according to what have been agreed. (3) The dispute settlement which stated at (2), may not breach the Shariah Principle Then, in the explanation of Law no.21/2008 it explained the means of the dispute settlement done according to what have been agreed are:4 a. musyawarah b. banking mediation c. through the Basyarnas d. civil court Based on that, we can divide the ways to settle Shariah Banking dispute by litigation and non-litigation.

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ibid Law no.21/2008 on Shariah Banking, art. 55 4 Explanatory Clause, Law no. 21/2008

Non-litigation In Indonesia, the dispute settlement by non-litigation ways is regulated in article 6 UU no.30/1999 on arbitration and alternative dispute settlement.5 The UU no.21/2008 is also provide the non-litigation way to settle the Shariah Banking dispute, if it agreed at the first place by the parties in the agreement. Litigation Litigation process is a way to settle a dispute through court process. The Law no.21/2008 provides two litigation processes to settle the Shariah Banking disputes; they are the Islamic Court, and the Civil Court. 2. Challenges Faced By the Dispute Settlement Bodies for Shariah Banking There are some problems faced by the disputes settlement bodies. Since Shariah Banking still consider as a new thing in Indonesia, there is still a lack of understanding regarding the Shariah cases. The Islamic Court judges might be not fully understand on banking system (even though it is a Shariah system), while some of the Civil Court judges are not fully understand on Shariah Principle. This condition becoming problematic, and will lead to the problem of societys trust on Court. The alternative dispute settlements can be a way out for this problem, because in this mechanism, the parties can choose the experts in the Shariah Banking field to be the mediator or arbitrator. The institution which managed about the Shariah National Arbitration is Basyarnas, an independent body under the MUI (Indonesian Ulama Association). But, this body is not well-managed6 and somehow cost a lot.7 Another thing shall be considered is about the jurisdiction. Some people believe that the double jurisdiction by Islamic Court and Civil Court will lead to further problem, but the others believe it would not.8
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Suhartono, S.Ag., SH., MH, Paradigma Sengketa Perbankan Syariah di Indonesia Abdul Rasyid, Loc Cit 7 PMII KOMFAKSYAHUM, Mengurai Benang Kusut Badan Arbitrase Syariah Nasional (BASYARNAS), 31-Juli 2007 8 http/hukumonline.com/ Dualisme Penyelesaian Sengketa Perbankan Syariah

It would need not a short time to solve those problems, but it doesnt mean that would be impossible. Educating the judges of the Islamic and Civil Court on Shariah Banking is a must. Another thing to do is to make the Shariah Arbitration body to be more professional.

CONCLUSION The new Law for Shariah Banking has enacted, and provides a broader regulation on Shariah Banking. One of them is the dispute settlement. There are some ways can be taken to settle a Shariah Banking dispute: litigation process through Islamic Court or Civil Court, and non-litigation process through musyawarah, mediation, and arbitration. There are some challenges faced by the disputes settlement bodies for Shariah Banking. This, regarding the understanding of the judges toward the Shariah Banking matters. Another problem is about the professionalism in Basyarnas. REFERENCES Abdul Rasyid, Settlement of Islamic Banking Disputes in Indonesia: Opportunities and Challenges, International Conference on Mediation in the Asia Pacific: Constraints and Challenges 16-18 June, 2008 PMII KOMFAKSYAHUM, Mengurai Benang Kusut Badan Arbitrase Syariah Nasional (BASYARNAS), 31-Juli 2007 Law no.21/2008 http/hukumonline.com/ Dualisme Penyelesaian Sengketa Perbankan Syariah

Islamic Banking Law

DISPUTE SETTLEMENT ON SHARIAH-BASED BANKING

Meiske Iriyani 08410016

Faculty of Law Islamic University of Indonesia Jogjakarta 2010