Concession Contracts: Appendix B - The Shariah Basis for the Standard

Transcription

1. Shari ’ah Standard No. (22): Concession Contracts Appendix (B) The Shari’ah Basis for the Standard Concession for Utilization of Minerals ■ The right of the State to regulate survey or exploration of minerals, water and the like by offering exclusive rights of utilization, stems from the fact that such an act by the State leads to realization of public interest and prevention of disputes. This reasoning is adopted by the fuqhaa who argue that development of wasteland requires State permission. The basic assumption here, knowingly, is that when the State disposes of public property, its act is supposed to be that of serving the cause of public interest, which should always surpass private interest. ■ The distinction between survey on the one hand, and exploration and concession on the other, and the fact that only the latter two can enable the licensee to have the exclusive status as a contractor, stems from the fact that survey is based on mere expectation, while exploration is like Tahjir (retention) in wasteland development, which usually precedes utilization. Thus, offering the exclusive right to the explorer can be based on the saying of the Prophet (peace be upon him): “Whom who develops a piece of wasteland shall become its owner.”(2) ■ The ruling that gives the one who discovers the minerals the priority in utilizing them is extracted from the fact that exploration resembles wasteland development, which entitles to ownership of the developed land. ■ The alternate viewpoint of the Maliki School, which considers minerals as the property of Bayt al-Mal (treasury) even when discovered in a private land, leans towards the fact that no body, the landlord included, can claim the honor of bringing these minerals into being. Putting the mi(2) This Hadith has been Related by Al-Bukhari in his “Sahih” [3: 139], Al-Shaab Publications, 1378 A.H. 601
2. Shari ’ah Standard No. (22): Concession Contracts nerals at the disposal of the State, therefore, does not leave any room for dispute between the property owner and the one who discovers the minerals. ■ The viewpoint of the majority of the Fuqaha, including the Maliki School, that the minerals are the property of the landowner, focuses on their perspective that deems land ownership as underground resources. Moreover, the fact that the Kharaj imposed on land is one fifth indicates that the remaining four fifths are the property of the landowner. ■ Eligibility of the holder of the concession for utilization of minerals to other rights pertaining to production and transportation devices is due to the fact that such rights constitute the complementary requirements. This reasoning also holds true for eligibility of the licensee to the easement rights pertinent to one’s license. ■ The condition that the licensee should sustain the activity in question originates from the Shari’ah ruling on the case of a person who retains a piece of wasteland for a period of time without developing it. In this connection it has been narrated that Caliphate Umar Ibn Al-Khattab said: “When somebody develops a piece of wasteland that had been left for three years undeveloped by its original owner, the land becomes the property of the developer”(3) ■ Eligibility of the State to purchase the quantity it requires from the output of the project is justifiable by the need to realize public interest without harming the licensee, since purchasing takes place according to the procedures and conditions available to other clients. With regard to the right of the State to fix the price of the product, the justification is hinged on the need to prevent social injury that could result from charging unduly high prices by licensee. ■ The State is given the right of amending concession contracts for minerals when necessary, because the acts of the State are normally considered to be in pursuance of public interest, which should always surpass private interest. (3) Related by Abu Yusuf in “Al-Kharaj” (P. 61), Dar Al-Ma’arif edition. Al-Hafiz said in “Al-Dirayah” that this Hadith has been narrated by reliable people. 602
3. Shari ’ah Standard No. (22): Concession Contracts Concession for Construction of Projects ■ Project construction contracts are permissible because they come under commitments that should be honored by virtue of the divine ordain of Allah, Exalted be He, Who says: {“fulfill (all) obligations”}(4) and also the Hadith of the Prophet (peace be upon him): “Muslims honor all their obligations except those which permit prohibited deeds or prohibit permitted deeds”(5) ■ Permissibility of remunerating the licensee by allowing him to benefit from the project before handing it over to the licensor, relates to the fact that in Istisna’a, temporary benefiting from the product may constitute the price of its production. That is to say, the price can be either money or usufruct including that of the product in question. This viewpoint has been confirmed by a similar resolution of the Al Baraka Seminar.(6) The other viewpoint referred to in this Standard is that the price should be fixed first, and then the licensee is given the chance to utilize the project until he gets the remuneration agreed upon, regardless of any specific period of time. The basis for this viewpoint is that a predetermined period may not be sufficient for getting the full price. This viewpoint, therefore, seems to visualize the relationship between the State and the Institution as a management relationship, as well as a clearance arrangement with regard to the price to be paid and the period of utilization. ■ Permissibility for Institutions to enter into concession contracts with the State directly or as intermediaries is clear because they do this in a permissible contractual form such as Ju’alah, Mudarabah, Musharakah, Istisna’a and Ijarah. All these contractual forms are permissible whether performed directly or though entering as an intermediary between the State and the other original party to the contract. (4) [Al-Ma`idah (The Table): 1] (5) Narrated by several companions of the Prophet (peace be upon him) and quoted by: Ahmad [1: 312], Ibn Majah [2: 784], Mustafa Al-Babi Al-Halabi, Cairo, 1372 A.H./1952 A.D.); Al-Hakim (Hyderabad Publications, India, 1355 A.H.); Al-Bayhaqi [6: 70 and 156], [10: 133], Hayderabad Publications, India, 1355 A.H.); Al-Daraqatni [4: 228], [3: 77], Dar Al-Mahasin, Cairo, 1372 A.H./ 1952 A.D.). (6) Resolutions and Recommendations of the 17th Seminar of Al Baraka, Resolution No. 13/2, (P. 220). 603
4. Shari ’ah Standard No. (22): Concession Contracts Management Contracts ■ Permissibility for the State to offer concession licenses for management of public utilities is justified by the fact that the State has the right of regulating such facilities and collecting fees, and therefore it can transfer this right to a second party. The management contract in this case is Ijarah and the government has the right of identifying the lessee on the ground of common interest. ■ Permissibility of fixing the contract’s value in terms of money is that the deal is considered as Ijarah, and determination of the contract’s value as a specific share of the project’s income could embody uncertainty ((Jahalah Jahalah)) pertaining to the possibility of realizing the agreed upon amount during the contract’s period. The relationship between the State and the licensee, in this sense, is considered as an Ijarah deal. If such relationship is considered as Mudarabah, the basis for determination of the contract’s value will become a given share of the project’s profit, which can be determined only after preservation of the project’s capital, which is the managed asset in this case. The Hanbalis permit Mudarabah on income-generating assets like animals. The reason behind the justification for sharing the net profit after allocations is the preservation of the project’s capital. ■ Permissibility for licensor to rescind the contract when the other party breaches a condition or fails to fulfill an obligation is derived from the commitment of Muslims to honor contractual obligations according to the Hadith of the Prophet (peace be upon him) stating: “Muslims shall honor their obligations”(7) (7) Narrated by several companions of the Prophet (peace be upon him) and quoted by: Ahmad [1: 312], Ibn Majah [2: 784], Mustafa Al-Babi Al-Halabi, Cairo, 1372 A.H./1952 A.D.); Al-Hakim (Hyderabad Publications, India, 1355 A.H.); Al-Daraqatni [4: 228] and [3: 77], Dar Al-Mahasin, Cairo, 1372 A.H./ 1952 A.D.). 604