What many see as the inherent strength of Islamic finance amid the global crisis is spurring supporting nations to create a legal framework that would provide certainty and predictability to transactions.

In a recent speech by Bank Negara Malaysia governnor Dr Zeti Akhtar Aziz, Dr Aziz stressed the building of so-called Shariah Parameters, which he said not only represents an important bridge between the governing Shariah principles and Islamic finance itself as a practice, but also serve as a solid risk mitigator.

"From a domestic perspective, more jurisdictions are considering a central Shariah Council as the ultimate decision making body on Shariah matters," he said, commenting on the differences in Shariah interpretations between countries which add to the complexity of cross-border transactions.

"Islamic financial transactions have their own unique risk characteristics that need to be managed. The introduction of new, more innovative and complex products and financial transactions enables the disaggregation and repackaging of risks in ways that have not been explored. Shariah advisors would require collective expertise, including legal practitioners, to identify and understand the permissibility of a given structure," Dr Aziz added.

To promote the consistent application of Islamic financial contracts in Malaysia, Bank Negara issued Shariah Parameters aimed at setting a standard of reference on Shariah for Islamic finance practitioners. The Shariah Parameters will outline the main requirements in contracts and provide examples, methods and models for their practical application.

"In Malaysia, Islamic finance disputes are adjudicated in civil courts and not the Shariah courts where the jurisdiction is limited to matters relating to Muslim individuals.  If the dispute concerns a point on the ascertainment of Shariah, the courts and arbitrators are required to refer to the Shariah Council at Bank Negara Malaysia to facilitate the ruling," Dr Aziz said.

At present, Islamic banking assets in Malaysia comprise nearly 19 per cent of total banking assets, with total financing now amounting to RM118 billion ($33.8 billion) and accounting for 20.1 per cent of the total financing portfolio of the banking sector. On the global front, Islamic financial assets are expected to grow to $1.6 trillion by 2012.