Tabung Haji-TRX Deal: Understanding Governance and Compliance to Shariah

If you were to engage in a transaction (say, for example, for the purchase of a car) with a questionable party (say, a drug dealer) where the terms of transaction is clear, price is agreed and there is a willingness to transact. Does it still make this transaction Shariah compliant?

I say No.

I read with great interest the recent purchase of TRX land by Tabung Haji. How the Chairman Azeez “miscommunicated” and how the Chairman of the Tabung Haji Shariah committee says the process checks out and the deal is Shariah compliant. I am not trying to discount the opinion of the Tabung Haji Shariah committee chairman, however, Shariah compliance takes into consideration more than just due process. Shariah compliance and governance requirements takes into consideration two additional factors: the integrity of the parties as well as the objectives.

Advisors and practitioners of Shariah law will be able to provide many case studies on how this is true. Examples include case studies how financing Coca-Cola expansion is non-Shariah compliant due to its questionable financial support to Israel and even a case on fundraising a company where a small subsidiary of the company is in the business of printing pornographic material deems the whole company non-Shariah as a whole.

Integrity of the parties is important in Shariah. Tabung Haji is an honourable name and 1MDB is a tainted name. 1MDB has questionable elements as part of its operations, e.g. what was the money at Cayman Islands used for and what is the truth of the PetroSaudi deal?

1MDB has failed the test on integrity of parties and objective of transaction thus, it is my opinion that this transaction is not Shariah compliant. Tabung Haji management is quick to say that they shall immediately sell the land in question, even at a profit. Clearly, Tabung Haji management has lost the plot – if the first transaction is not Shariah compliant, the second sale does not make it right by Shariah definition. While it makes great commercial sense that Tabung Haji has made gains in such a short time, it does not make its original transaction Shariah compliant and as Shariah compliance is a requirement for Tabung Haji deals, a wrong has clearly been committed.

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