Islamic Law Perspective on the Authority of Arbitration in Business Dispute Resolution in Indonesia

Abstract

Business disputes are an inevitable consequence of commercial activities and require dispute resolution mechanisms that are efficient, fair, and legally certain. Arbitration has become a preferred alternative to litigation in Indonesia because it offers confidentiality, procedural flexibility, and final and binding decisions. This study examines the authority of arbitration in business dispute resolution from the perspective of Islamic law and its compatibility with the Indonesian legal system. Using a normative juridical method with statutory, conceptual, and comparative approaches, this research analyzes relevant legislation, Islamic legal principles, and scholarly literature concerning arbitration (tahkim). The findings demonstrate that the authority of arbitration is consistent with the principles of justice ('adl), consensual agreement (taradhi), fulfillment of contracts (awfu bil-'uqud), and peaceful dispute settlement (islah) recognized in Islamic law. Furthermore, Indonesian arbitration law provides a legal framework that accommodates these principles, thereby strengthening legal certainty and promoting ethical, efficient, and equitable business dispute resolution in both conventional and Sharia-based commercial transactions.