Conflicts of Interest between Sharia and International Sale of Goods: Does CISG Interest Fit with Islamic Law?

Obligations to pay interest are widely accepted in commerce. However, in Muslim-majority countries subject to sharia law, they are normally forbidden. The United Nations Convention on Contracts for the International Sale of Goods (‘CISG’) art 78 imposes an interest obligation. Consequently, many have been reluctant to accede to the Convention. The CISG Advisory Council has partially addressed how the CISG interest obligation is affected by prohibitions on interest. What remains unresolved is whether this renders the CISG compatible with sharia law. To date, perceptions of their compatibility have relied on generalised views of both the Islamic prohibitions and CISG interest. This article seeks to truly determine whether sharia and the CISG are reconcilable on the question of interest. It examines the basis for Islamic prohibitions on riba and gharar, but importantly, considers differing approaches across individual Muslim-majority states. Likewise, interpretation of the CISG interest obligation is considered in detail. Given this richer contextual landscape, we analyse whether sharia ‘fits’ with the CISG. We conclude that the CISG and sharia are compatible if slight modifications to Opinion No 14 are adopted. This may encourage greater accession to the CISG by Muslim countries as part of their push to adopt laws that attract more international trade