The July 2000 issue of ICLR1 contained a Correspondent’s Report from Pakistan regarding the decision of the Supreme Court holding that all laws which deal with the payment of interest were repugnant to the Injunctions of Islam and that any amount over the principal in a contract of loan or in a debt was Riba prohibited by the Holy Quran. The Government of Pakistan was directed to amend all such laws and to introduce interest-free Islamic banking by 30 June 2001. The Report examined the judgment and its likely effect on all transactions both domestic and foreign, including foreign arbitration awards and judgments. A view was expressed that unless the judgment is reviewed or further time granted by the court to implement it, it was not possible to indicate what was likely to happen at the end of June 2001. An additional point noted was that legislation would be necessary to provide alternative means of compensation in lieu of interest.

As the deadline of 30 June 2001 approached, there was considerable public interest in international financial and domestic circles as to how this judgment would be implemented, what alternative financial instruments would be introduced for normal trade and business to continue and how delay in payment will be compensated if interest is not allowed.