Legal Challenges in International Trade Finance: A Comparative Study of Conventional and Islamic Finance

Abstract

This dissertation examines the legal challenges in international trade finance through a comparative analysis of conventional and Islamic financial systems. It explores the structural differences between risk-sharing mechanisms in Islamic finance and risk-transfer approaches in conventional finance, highlighting their implications for legal certainty and enforceability in cross-border transactions. The study critically evaluates regulatory frameworks, including international standards such as the Basel Accords and Islamic financial guidelines issued by AAOIFI and IFSB, assessing their effectiveness in managing financial risks. Particular attention is given to issues of legal harmonisation, jurisdictional conflicts, and the role of Sharia compliance in shaping financial practices. Furthermore, the research analyses key case law and international legal instruments to identify gaps in enforcement and dispute resolution mechanisms. The findings suggest that while conventional finance benefits from greater standardisation and global acceptance, Islamic finance faces challenges due to fragmented regulatory structures. The dissertation concludes by proposing legal and regulatory reforms aimed at enhancing compatibility, reducing uncertainty, and improving the efficiency of international trade finance across both systems.