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The Higher Shariah Authority does, and it does so as a matter of federal law.
The Higher Shariah Authority does, and it does so as a matter of federal law. Under the new Central Bank law, an authority attached to the Central Bank sets the Shariah rules, controls and standards for the whole sector, and its resolutions and fatwas bind every Islamic Financial Institution, each institution’s own internal committee, and any other entity that asks for its opinion (Federal Decree-Law No. 6 of 2025, Article 24(5) and Article 24(8)). Inside each firm sits a second tier, the Internal Shariah Supervision Committee, whose own rulings bind the firm but only so far as they do not conflict with the Authority above, with every disagreement resolved upward to the Authority as final (Article 75(2) and Article 75(6)). A product that is offside is not merely uncertified. It is a supervisory breach, and the Central Bank imposes actions and sanctions on it after consulting the Authority (Article 77).
Two features of the 2025 law make this more than a restatement of prior practice. First, the same decree-law that carries this hierarchy is the instrument that brought insurance under the Central Bank, keeping the regulations made under the repealed 2023 insurance law in force only until they are replaced, so takaful now sits inside the identical Shariah-governance architecture (Article 183; Article 104). One apex, one supervisor, one binding chain, now covering banks, other financial institutions and takaful alike. Second, the law states its own test of compliance: an Islamic Financial Institution is deemed to comply with Shariah if it complies with the resolutions, regulations and standards issued by the Authority (Article 74(4)). The question of what a product is measured against therefore has a statutory answer, and that answer points to the Authority’s output, examined in Section VII.
The law is in force. It took effect on 16 September 2025 and runs a one-year reconciliation period during which the regulations made under the prior laws remain in force until replaced (Article 184; Article 183). The architecture is settled; the detailed standards beneath it are where currency has to be checked, and Section VIII sets out where.
The Higher Shariah Authority is an organ of the Central Bank, not an independent body of scholars sitting beside it. The law establishes it as an authority attached to the Central Bank, of between five and seven members qualified in the jurisprudence of Islamic financial transactions (Article 24(1)). The Central Bank’s Board of Directors approves its charter, powers, functions and funding mechanism; the Central Bank appoints its members for renewable three-year terms; and the Islamic Financial Institutions themselves bear its costs (Article 24(2) to 24(4)).
That placement is the point. An authority attached to the supervisor is an authority whose rulings arrive with supervisory force behind them. Its opinions are not advisory soundings that a firm may weigh and set aside. They are the instructions of a body whose parent institution licenses the firm, examines it, and sanctions it. The sections that follow all turn on this single structural fact.
The Authority’s rule-making power is broad and general. It shall establish the Shariah rules, controls, standards and general principles relevant to Shariah-compliant activities, together with the Shariah governance requirements that apply to them, and it supervises the internal committees inside the institutions (Article 24(5)). Beyond rule-making, it gives opinions on the regulatory rules that govern Islamic institutions, approves the Shariah-compliant instruments the Central Bank itself issues to manage Islamic liquidity, and opines on sovereign sukuk when the Government asks (Article 24(6)).
The binding effect is stated in terms. The Authority’s resolutions and fatwas are binding on the internal Shariah supervisory committees, on the Islamic Financial Institutions, and on other entities seeking the Authority’s opinion (Article 24(8)). Three classes of person are caught: the committees inside firms, the firms themselves, and any outside entity that comes to the Authority for a ruling. A firm that seeks the Authority’s opinion is bound by the answer it receives.
The operative limit sits in the final item. With one exception, the Article does not apply to the Government or to the governments of the member emirates (Article 24(10)); the exception preserved is the Authority’s opinion on sovereign sukuk (Article 24(6)(c)). The carve-out draws the line of the Authority’s binding reach at the edge of the State itself: sovereign issuance is served but not commanded, while every licensed institution and every private entity that asks is bound.
Beneath the Authority, the law requires a committee inside each firm. Every Islamic Financial Institution must establish an independent Internal Shariah Supervision Committee of specialists able to issue fatwas in Islamic finance, including in Islamic banking or takaful as the case may be (Article 75(1)). The committee supervises and approves all of the firm’s business, products, contracts and codes, and sets the Shariah controls, within the framework of the rules and standards set by the Authority (Article 75(2)).
The committee’s rulings bind the firm, but conditionally. Its fatwas are binding provided they are consistent with and do not conflict with the resolutions and fatwas of the Higher Shariah Authority (Article 75(2)). Where a Shariah disagreement arises, whether among the committee’s own members or between the committee and the board, the matter is referred to the Authority, whose opinion is binding and final (Article 75(6)). The hierarchy is complete: the firm’s committee governs the firm, the Authority governs the committee, and the Authority has the last word.
Independence is built in rather than assumed. The committee is appointed and dismissed by the general assembly, but only after the members’ names have gone to the Authority for approval, and the same route governs dismissal and dissolution (Article 75(4)). Members may not hold any executive position in the firm, provide it services outside the committee, or hold shares or interests in it, extending to relatives to the second degree (Article 75(5)). And the firm must build two further independent functions, an internal Shariah control division and an internal Shariah audit division, each headed by a person whose appointment the committee and the Authority approve (Article 75(7)). Shariah compliance inside the firm is therefore a structure of appointments the Authority controls, not a matter left to the firm’s discretion.
One exemption exists, and it carries its own limit. The Central Bank, after consulting the Authority, may exempt an institution from establishing a committee where its size and nature do not require one and equivalent procedures exist, but the exemption is expressly unavailable to a bank, a finance company or a takaful company (Article 75(3)). The institutions most readers would call Islamic financial institutions cannot use the exemption at all; it reaches only the smaller, narrower cases.
The committee also reports. The law provides for a report of the Internal Shariah Supervision Committee, the instrument through which the committee records the firm’s Shariah position (Article 76). The precise addressee, timing and contents of that report are set by the Authority’s own standards rather than by the decree-law, and are noted here for verification against those standards rather than stated from the statute.
Shariah non-compliance is a supervisory event with supervisory consequences. Where it is established that an Islamic Financial Institution has conducted business contravening Shariah, measured as per the Higher Shariah Authority rulings, resolutions and standards, the institution is subject to actions and sanctions determined by the Central Bank after consultation with the Authority (Article 77).
Two things follow for anyone structuring a product. First, the benchmark of the breach is the Authority’s output, not a general or contested notion of Shariah, which ties the enforcement question directly to the standards examined in Section VII. Second, the consequence is the Central Bank’s ordinary supervisory response, reached through consultation with the Authority rather than through a separate Shariah tribunal. The exposure of a non-compliant product is therefore of the same order as any prudential breach, and it lands on the institution.
The practical consequence is where the caution belongs. The reversible steps in an Islamic product, the internal analysis and the committee’s review, are inexpensive to revisit. The step that is hard to reverse is the one the law fixes in the constitutional documents and at launch: for takaful, the business model must be written into the memorandum and articles of association (Article 104, examined next), and once a product is issued to customers on a given Shariah basis, the position is set. The place to resolve the Shariah question is before the model is committed to the constitution and before the product reaches the market.
Takaful now sits inside the same architecture, because the 2025 law folded insurance into the Central Bank regime. The law defines takaful insurance as a scheme of solidarity and cooperation in which participants contribute to a Takaful Insurance Fund on the basis of tabarru, the fund bearing the responsibility of paying those entitled when the insured risks materialise (Article 1, definition of Takaful Insurance). A Takaful Insurance Company is an insurance company that carries on its business in accordance with Shariah and the decree-law (Article 1). And a takaful company is itself an Islamic Financial Institution for the purposes of the law (Article 1, definition of Islamic Financial Institutions), which is what draws it inside the Authority and committee regime described above.
The governance rule for takaful is explicit and constitutional. Takaful and re-takaful companies, and insurers carrying on takaful business, must conduct that business without violating Shariah and as per the business models determined by the Higher Shariah Authority, which shall be reflected in their memorandum and articles of association (Article 104). Two points sit in that single sentence. The permitted takaful business models are set by the Authority, not chosen by the company; and the chosen model is a constitutional matter, written into the company’s founding documents. A takaful structure that departs from the Authority’s models is not merely irregular; it is inconsistent with the company’s own constitution.
The takaful fund is treated as a distinct object in the law, established and governed as a separate matter (Article 105). The detailed mechanics of the fund, including the treatment of any surplus, are set by that provision and by the Authority’s standards, and are flagged here for a dedicated reading rather than stated from the definitions alone.
The statute answers who tests compliance and makes the test binding. It does not, in its own text, name the external Shariah standard a product must meet. Two layers must be kept apart, because they bind differently.
The first layer is the regulatory instrument, and it binds directly. The decree-law gives the Authority power to set the Shariah rules, controls, standards and general principles (Article 24(5)), deems an institution compliant if it complies with the resolutions, regulations and standards issued by the Authority (Article 74(4)), and measures contravention against the Authority’s rulings, resolutions and standards (Article 77). Read together, these three provisions make the Authority’s own output the operative test of Shariah compliance under UAE law. That much is settled on the face of the statute.
The second layer is the external Shariah standard, and whether it binds depends on adoption. The internationally recognised standard-setter for Islamic financial institutions is the Accounting and Auditing Organisation for Islamic Financial Institutions. Whether, and how far, its standards bind a UAE institution is a question of whether the Authority has adopted them into its own resolutions and standards, and to what extent. Practitioner commentary reports that the UAE adopted those standards as minimum requirements, but the adopting instrument has not been read for this article, and the scope of adoption is not stated here as settled. It is the subject of a dedicated piece, in which the adoption instrument itself is read and its scope stated at the level the instrument supports. The distinction is the whole point: the decree-law is binding law, while an external standard binds only to the extent the Authority has taken it up, and treating an unadopted standard as a governing rule would misstate the position.
Most of this layer is settled, and settled on the face of the statute. The apex authority and its binding power are settled (Article 24). The two-tier hierarchy, with the firm’s committee subordinate to the Authority and disagreements resolved upward as final, is settled (Article 75). The statutory test of compliance, compliance with the Authority’s output, is settled (Article 74(4); Article 77). The consolidation of insurance and takaful into the same regime is settled (Article 183; Article 104). And the law is in force, effective 16 September 2025 (Article 184).
What is open is the detailed standard beneath the architecture. The decree-law delegates the Shariah rules, controls and standards to the Authority (Article 24(5)) and delegates the licence, activities and operating standards of Islamic institutions to Board regulations (Article 74(2)). The content of those standards, and the scope of any adoption of external standards such as AAOIFI, is not settled on the decree-law alone and must be read against the Authority’s own instruments and the Central Bank’s Shariah-governance rulebook. Those instruments are the next pieces in this series.
What is moving is the layer beneath the statute, and the law itself tells a firm how to read it. During the one-year reconciliation period running from 16 September 2025, the regulations, standards and circulars made under the prior Central Bank law and the prior insurance law remain in force until the Central Bank issues replacements (Article 183; Article 184). For a takaful company in particular, the operative regulatory detail may still sit in instruments made under the repealed 2023 insurance law, valid only until replaced. The practical rule follows directly: confirm that the instrument governing a given Shariah-governance or takaful question is the current Central Bank-era version and not a legacy insurance-era one that a replacement has since overtaken. The statute is stable; the standards beneath it are in transition, and that is where currency has to be checked at the point of reliance.
This analysis rests on Federal Decree-Law No. 6 of 2025, as it stands on the Central Bank’s live rulebook, in force since 16 September 2025. Where the position turns on the Authority’s own resolutions and standards, on the Central Bank’s Shariah-governance rulebook, or on the treatment of external standards, those instruments govern and are read in the pieces that follow.
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