Unusia Law Faculty Urges Sharia-Based Bankruptcy Resolution in Religious Courts

The ongoing discussion on the revision of the Bankruptcy and Suspension of Debt Payment Obligations (PKPU) Law has revived discourse on strengthening the sharia economic legal system in Indonesia. Academics believe the momentum of this regulatory revision must be utilised to clarify the authority for resolving bankruptcy cases originating from sharia-based contracts and transactions. The Dean of the Faculty of Law at Nahdlatul Ulama University Indonesia (Unusia), Muhamad Afifi, emphasised that companies formed and operated based on sharia principles should also obtain bankruptcy dispute resolution through a sharia legal mechanism. According to Afifi, there has been an inconsistency between the contracts used when a company is established and the dispute resolution mechanism when the company experiences default or bankruptcy. “How can the contract be sharia-based, with all legal relationships built on sharia principles, yet when bankruptcy occurs, it is resolved using a conventional approach? This clearly contradicts the spirit of the contract chosen by the parties from the outset,” Afifi stated. He believes the Supreme Court and the House of Representatives need to start considering stricter regulations regarding the absolute competence of Religious Courts in handling bankruptcy cases arising from sharia-based transactions and business entities. He noted that so far, Religious Courts have been granted the authority to resolve sharia economic disputes but do not yet have explicit authority in bankruptcy and PKPU cases involving sharia entities. “We urge that the revision of the Bankruptcy Law provide clear space for the Religious Courts to handle sharia bankruptcy cases. If the contract is sharia-based, then the resolution must also use sharia principles and instruments,” he said. Afifi stressed that legal certainty is an essential need for business actors who initially chose a sharia scheme as the basis of their legal relationships.