Law and regulations with retroactive effect

Q321 :Does Islam permit the enactment of laws which have retroactive effect? In this connection, is it permissible for one of the parties to a contract to go back on it after the contract has been completed and acted upon? May I mention the case of a law which has been enacted specifically to encourage citizens to repatriate funds which they hold abroad. The government gives certain guarantees which are calculated to make such citizens feel that their money will be safe once it is repatriated. However, the government goes back on its promises and brings in a new regulation which renders all promised guarantees ineffective. Please comment in detail.

A321 : Let us first of all be clear about the area in which an Islamic government may enact laws and regulations. We know that Islam sets into operation certain laws which are applicable to all Muslim communities and in all generations. What these Islamic laws forbid cannot be made permissible by any authority, whether social or governmental. For example, Islam forbids the drinking and the sale of intoxicants as well as adultery and fornication. It is not permissible for any Muslim government in the light of the above prohibition to issue licenses to any person, Muslim or non-Muslim, to sell intoxicants in a shop, a hotel, or a restaurant. You find in some Muslim countries that the sale of intoxicants is permissible. Moreover, the government imposes certain taxes on the import and sale of such stuff. This is certainly a forbidden action and the government which allows such a thing contravenes Islamic teachings. Similarly, in some Muslim countries, we find laws that suggest that sexual intercourse between consenting man and woman does not constitute an offense. It is not open to a Muslim government to enact such a regulation. Things may go further than that and we find that brothels are legal in some Muslim countries. Indeed, the governments of one or two Muslim countries impose taxes on the income of prostitutes working in such brothels and the profits made by their owners. On the other hand, many Muslim countries allow their banks to operate a system based on interest. It is not permissible for any government to enact such laws or implement them. Moreover, Muslim citizens who refuse to observe such laws cannot be prosecuted for their violation. Similarly an employee who refuses to carry them out cannot be accused of failing to do his duty. A Muslim government may issue laws and decrees to regulate those areas which are left to our discretion. There is indeed a large area which Islam has left open to different communities to regulate according to their circumstances. A government may determine the course it wishes its society to map out in these matters. In such areas, a government may enact a retroactive law if it determines that such a retroactive effect will serve the best interest in society. However, a retroactive law is bound to have some adverse effects on individuals. Those individuals must be compensated for any harm which they may suffer as a result of this retroactive law. They must be rendered harmless, if justice is to be maintained. It is needless to say that an Islamic government must always maintain justice. On the subject of money and finance, it must be clear that Islam considers the money of every individual as his own private property which he may use as he wishes, provided that he does not use it in any way which causes any person, including himself, any harm. It is not permissible for any individual to use his money to buy intoxicants, because intoxicants are harmful to the person who drinks them and to his family and to society as a whole. Similarly, it is not permissible for anyone to use his money in gambling because gambling is bound to have bad effects on the gambler and his family. Similarly, an individual may not use his money in a way which causes harm to the community as a whole. Before we go any further, we must explain that we are using the term "private property" here in a rather liberal sense. The fact is that our money does not belong to us as such; it belongs to Allah and He has placed us in charge of it. However, while this trust is in operation, we may use the money in our trust as our own, for our own benefits, provided that we fulfill our Islamic duties, pay zakah, and give a portion of what we have for charity and we do not use our money in a harmful way. Furthermore, Islam guarantees private ownership. If you come to possess something in a halal or permissible way, then it is your private property and no one may take it away from you. Hence, it is open to any government, particularly an Islamic government to enact a law which restricts the movement of capital, if it determines that such a restriction will serve the best interests of the society as a whole. In this case, the Islamic government is not taking away the property of individuals, but it is regulating or restricting certain actions which they may feel inclined to take, simply because it wants to protect the interest of the community as a whole. Sometimes, speculators can cause a terrible harm to the economy of a country while making fat profits through their speculation. If the government bans such speculations, it acts within its jurisdiction. Its law must be obeyed, because it contravenes no Islamic principle. On the other hand, if the government issues a law which deprives people from their possessions for no valid reason, then those who are affected by such a law commit no offense if they try to protect their property. Let me give here the example of a decree which was issued some years back in some Muslim countries which confiscated or, to use the terminology of that decree, "put under sequestration" the properties of many rich individuals for no reason other than the political differences which existed between the government and those individuals. The real effect of that law was to give such confiscated property to army officers and party members who enjoyed them as if they were their own. From the Islamic point of view, such a law is unjust and its provisions have no legitimacy. It is true that the government can implement it because it has the power to do so. However, once an Islamic government comes into existence in that country, it should compensate the individuals who have been affected by this law for the harm it caused them. The question of money held outside the country is a tricky one. It is permissible in the first instance to take one's money abroad, if one determines that it is in his interest to do so. However, if any individuals hold large sums of money abroad, that may affect the economy of the country, if the government of a Muslim country wants to guard against such a harmful effect, it acts within its jurisdiction, if it promulgates a law preventing its citizens from transferring their money abroad without a specific permission. It may also be wise to encourage citizens to repatriate their funds because that is bound to strengthen the economy. In individual cases, the government may require a particular citizen to repatriate whatever money he holds abroad if that person is in debt at home and he does not have enough funds to pay his debts. If he had smuggled his money abroad, the government may inflict any suitable punishment on him until he causes those funds to be transferred back home. It is only right that he should pay back his debts, even though he may lose the benefit of having the money kept abroad. How can he justify his prolonged indebtedness when the money is being invested somewhere else. The Prophet has spoken in a highly disapproving manner about rich people who unnecessarily postpone the repayment of their debts. Over the years, there have been certain cases where governments have tried to get funds held by its citizens abroad to be repatriated in order to strengthen its economy. This is a legitimate purpose for which governments may offer certain incentives. There was a case in a particular Muslim country where the government went as far as overlooking the provisions of a number of its laws in order to encourage such repatriation of funds. It promised its people that once they get their money repatriated, they would not be asked any questions about the sources from which those funds have been acquired or how they came to be abroad. It guaranteed for all such people bringing money from abroad that their funds will not be subjected to any legal claims or legal action. Since people generally prefer to have their money close at hand and to have it within their home countries where they could use it to good purpose, people have responded by transferring into the country the money they have held abroad. However, soon afterward, the government went back on its earlier promise and subjected all such repatriated funds to legal claims of all sorts. Moreover, they made the new law retroactive. In other words, the government did not merely stop the guarantees it had promised, but it rendered them ineffective from the day they were set in operation. This is certainly a case of injustice on the part of the government and such a law is not acceptable from the Islamic point of view. The government of that Muslim country would have been better advised if it allowed only ordinary claims, such as those of creditors to be made against the money transferred into the country, or rather, against the debtors themselves. It should not have allowed itself to yield to the temptation of forming a special tribunal to look into all sorts of justified or unjustified claims against the money transferred from abroad. Once it has promised to allow such repatriated funds to be immune from such action, it should honor its word. However, the word of the government cannot abrogate a rightful claim of any person against another. If someone who transferred his money back home owed part of it to another person, that person may bring legal action to get his money back, even though the government does not want him to do so. This is a rightful claim which cannot be canceled by a government decree.

Our Dialogue ( Source : Arab News - Jeddah )