(Series of Answers by the Eminent Scholar Ata Bin Khalil Abu al-Rashtah, Ameer of Hizb ut-Tahrir, to the Questions of the Visitors of his Facebook Page "Fiqhi")
Answer to a Question Guarantee, Insurance, and Monopoly To Mohamed Ali Bouazizi
Question:
Assalamu Alaikum, I have two questions:
First: In the book The Economic System, in the discussion of Insurance, there is an example that I find difficult to understand. It mentions giving clothes to a washerman; if the clothes are damaged, there is a guarantor, a guaranteed party (madhmun lahu), and a party guaranteed on behalf of (madhmun 'anhu), which is the unknown washerman. How does this situation differ from an insurance company? There, the guarantor is the company, the guaranteed party is the car owner, and the party guaranteed on behalf of is the car on the road whose driver is unknown and whom we might collide with one day.
Second Question: How does the Islamic State treat monopoly? Does it force the monopolist to sell his goods at a certain price? In this case, we would be entering into price-fixing (tas’eer), which is haram, or is it something else?
May Allah reward you for your efforts and benefit all Muslims through them.
Answer:
Wa Alaikum Assalam Wa Rahmatullahi Wa Barakatuh,
- Regarding your question about the "party guaranteed on behalf of" (madhmun 'anhu) in Guarantee (Dhaman) and Insurance (Ta’meen), and the confusion you have...
My brother, I have reviewed your question. Naturally, the prohibition of insurance is not only due to the issue of the "party guaranteed on behalf of," but also because of many Shari’ah violations. These include the absence of a right established in the liability (haqq fi al-dhimmah) either immediately or eventually, which makes the insurance contract void. Additionally, insurance involves compensation (mu’awadhah) for the guarantee, which also renders it void, as explained in its respective chapter.
However, it seems the confusion arose from your assumption that in the case of the washerman mentioned in The Economic System, we stated that the "party guaranteed on behalf of" is unknown (majhul) yet the guarantee is valid, while in the case of insurance, we also stated that the "party guaranteed on behalf of" is unknown (as you assumed) and thus it is void. You then wondered how it could be valid for the washerman but void for insurance.
My brother, we did not say in both cases that the "party guaranteed on behalf of" is unknown. Rather, we said that in the case of the washerman, he is unknown, but in the case of insurance, he is non-existent. I will quote the text for you from The Economic System for both cases:
A- In the case of the washerman, the book states:
"(However, it is not a condition that the party guaranteed on behalf of (madhmun 'anhu) be known, nor is it a condition that the guaranteed party (madhmun lahu) be known. The guarantee is valid if they are unknown. If a person says to another: 'Give your clothes to a washerman,' and the other replies: 'I fear he might ruin them,' and the first says: 'Give your clothes to a washerman and I guarantee them for you if they are ruined,' without specifying a washerman, it is valid. If he then gives them to a washerman and they are ruined, the guarantor is liable, even though the party guaranteed on behalf of was unknown. Similarly, if he says: 'So-and-so is a skilled washerman, and whoever places clothes with him, I guarantee the washerman against any damage,' it is valid, even if the guaranteed party (madhmun lahu) was unknown.)"
Then the book mentions the evidence:
"(The evidence for Guarantee (Dhaman) is clear that it is the joining of one liability to another, and that it is a guarantee for a right established in the liability (haqq thabit fi al-dhimmah). It is clear that it involves a guarantor, a party guaranteed on behalf of, and a guaranteed party, and that it is without compensation. In this example, the party guaranteed on behalf of and the guaranteed party are unknown. The evidence for this is what Abu Dawood narrated from Jabir who said:
كَانَ رَسُولُ اللَّهِ صلى الله عليه وسـلم لا يُصَلِّي عَلَى رَجُلٍ مَاتَ وَعَلَيْهِ دَيْنٌ، فَأُتِيَ بِمَيِّتٍ فَقَالَ: أَعَلَيْهِ دَيْنٌ؟ قَالُوا: نَعَمْ دِينَارَانِ. قَالَ: صَلُّوا عَلَى صَاحِبِكُمْ. فَقَالَ أَبُو قَتَادَةَ الأَنْصَارِيُّ: هُمَا عَلَيَّ يَا رَسُولَ اللَّهِ، قَالَ: فَصَلَّى عَلَيْهِ رَسُولُ اللَّهِ صلى الله عليه وسـلم، فَلَمَّا فَتَحَ اللَّهُ عَلَى رَسُولِ اللَّهِ صلى الله عليه وسـلم قَالَ: أَنَا أَوْلَى بِكُلِّ مُؤْمِنٍ مِنْ نَفْسِهِ. فَمَنْ تَرَكَ دَيْنًا فَعَلَيَّ قَضَاؤُهُ، ومن تَرَكَ مَالاً فَلِوَرَثَتِهِ
'The Messenger of Allah ﷺ would not pray over a man who died while in debt. A deceased person was brought and he asked: "Does he have any debt?" They said: "Yes, two dinars." He said: "Pray for your companion." Abu Qatadah al-Ansari said: "They are upon me (i.e., I guarantee them), O Messenger of Allah." So the Messenger of Allah ﷺ prayed over him. When Allah granted victory to the Messenger of Allah ﷺ, he said: "I am closer to every believer than his own self. Whoever leaves a debt, its payment is upon me, and whoever leaves wealth, it is for his heirs."'
This Hadith clearly shows that Abu Qatadah joined his liability to the liability of the deceased regarding the commitment to a financial right that had become due to the creditor. It is clear that Guarantee involves a guarantor, a party guaranteed on behalf of, and a guaranteed party. It also shows that the guarantee undertaken by each of them is a commitment to a right in the liability without compensation. It is also clear that the party guaranteed on behalf of (the deceased) and the guaranteed party (the creditor) were unknown at the time of the guarantee. Thus, the Hadith contains the conditions for the validity and conclusion of the Guarantee.)"
It is clear from this that "being unknown" (jahalah) regarding the party guaranteed on behalf of or the guaranteed party does not mean they do not exist, but rather that their names or specific details are unknown. The deceased (the party guaranteed on behalf of) exists, even if the guarantor does not know his name or lineage. Thus, the "unknown" status is in the description of the party, not in their existence. Therefore, the guarantee is valid because the party exists but is unknown by definition. Likewise, the washerman exists in the neighborhood, but the "unknown" part is the specific name of the washerman with whom the person will place his clothes. This does not affect the Guarantee according to the evidence from the Hadith of Abu Dawood from Jabir mentioned above.
B- As for the case of insurance, the book states:
"(Thus, the insurance company has guaranteed what is not mandatory at the present time nor in the future, so the guarantee is invalid, and consequently, the insurance is void. Furthermore, in insurance, there is no party guaranteed on behalf of (madhmun 'anhu), because the insurance company has not guaranteed on behalf of anyone who has a right established against them for it to be called a guarantee. Thus, the insurance contract lacks an essential element of the Shari’ah-required elements of Guarantee, which is the existence of a party guaranteed on behalf of. This is because Guarantee must involve a guarantor, a party guaranteed on behalf of, and a guaranteed party. Since the insurance contract does not contain a party guaranteed on behalf of, it is Shari’ah-void.)"
As you can see, we stated: "there is no party guaranteed on behalf of... and since the insurance contract does not contain a party guaranteed on behalf of, it is Shari’ah-void." The party guaranteed on behalf of is said to be "non-existent" at the time of the contract; there is no car accident yet that would result in the driver being liable to pay for damages for the insurance company to then guarantee him. Meaning, the party guaranteed on behalf of here is completely non-existent, not just an existing person whose name or lineage is unknown. Therefore, the contract is void because the party guaranteed on behalf of is non-existent, not just unknown. It seems you thought "non-existent" meant "unknown," and thus you confused the two cases.
The matter, as we have explained, is that the party guaranteed on behalf of in the case of the washerman exists but is unknown in name and lineage, while the party guaranteed on behalf of in insurance is non-existent, not just unknown.
I hope this is sufficient.
- Regarding the issue of monopoly (Ihtikar), as we explained in The Economic System, monopoly is haram:
"(Monopoly is prohibited absolutely and is Shari’ah-forbidden, due to the clear and decisive prohibition mentioned in the Hadith. It was narrated in Sahih Muslim from Sa’id bin al-Musayyib from Ma’mar bin Abdullah al-Adawi that the Prophet ﷺ said:
لا يَحْتَكِرُ إِلاَّ خَاطِئٌ
'No one monopolizes except a sinner.' (Sahih Muslim)
And al-Qasim narrated from Abu Umamah who said:
نَهَى رَسُولُ اللَّهِ صلى الله عليه وسـلم أَنْ يُحْتَكَرَ الطَّعَامُ
'The Messenger of Allah ﷺ forbade that food be monopolized.' (Narrated by al-Hakim and Ibn Abi Shaybah).
Muslim narrated with his chain from Sa’id bin al-Musayyib that Ma’mar said: the Messenger of Allah ﷺ said:
مَنْ احْتَكَرَ فَهُوَ خَاطِئٌ
'Whoever monopolizes is a sinner.' (Sahih Muslim)
The prohibition in the Hadith implies the demand to abstain, and the disparagement of the monopolist by describing him as a 'sinner'—and a sinner is one who is disobedient and criminal—is an indication (qarinah) that the demand to abstain is decisive. Thus, the Hadiths indicate the prohibition of monopoly. A monopolist is one who hoards goods waiting for their price to rise, in order to sell them at expensive prices, thereby making it difficult for the people of the land to purchase them...)"
As for how to treat the issue of monopoly, it is by punishing the monopolist with a discretionary punishment (ta’zir) and forcing him to display his goods to consumers and sell them at the market price, not by the State fixing the price, because price-fixing (tas’eer) is haram, as stated in the book:
"(Islam has prohibited price-fixing absolutely, based on what Imam Ahmad narrated from Anas who said: 'The price became high during the time of the Messenger of Allah ﷺ, so they said:
يَا رَسُولَ اللَّهِ لَوْ سَعَّرْتَ. فَقَالَ: إِنَّ اللَّهَ هُوَ الْخَالِقُ، الْقَابِضُ، الْبَاسِطُ، الرَّازِقُ، الْمُسَعِّرُ، وَإِنِّي لأَرْجُو أَنْ أَلْقَى اللَّهَ، وَلا يَطْلُبُنِي أَحَدٌ بِمَظْلِمَةٍ ظَلَمْتُهَا إِيَّاهُ، فِي دَمٍ، وَلا مَالٍ
"O Messenger of Allah, if only you would fix the prices." He said: "Indeed, Allah is the Creator, the One who withholds, the One who gives lavishly, the Provider, the Price-setter. I hope to meet Allah such that no one claims against me a grievance (mazlamah) I committed against him, regarding blood or property."'
And based on what Abu Dawood narrated from Abu Hurairah:
إِنَّ رَجُلاً جَاءَ فَقَالَ: يَا رَسُولَ اللَّهِ، سَعِّرْ. فَقَالَ: بَلِ ادْعُوا. ثُمَّ جَاءَهُ رَجُلٌ فَقَالَ: يَا رَسُولَ اللَّهِ، سَعِّرْ. فَقَالَ: بَلِ اللَّهُ يَخْفِضُ وَيَرْفَعُ
'A man came and said: "O Messenger of Allah, fix the prices." He said: "Rather, supplicate." Then another man came and said: "O Messenger of Allah, fix the prices." He said: "Rather, it is Allah who lowers and raises (the prices)."'
These Hadiths indicate the prohibition of price-fixing, and that it is an act of injustice (mazlamah) for which a complaint is raised to the ruler to remove it. If the ruler does it, he sins before Allah because he has committed a forbidden act. Every individual among his subjects has the right to raise a complaint to the Court of Unjust Acts (Mahkamat al-Mazalim) against this ruler who fixed prices, whether he is a Governor or a Khalifah, complaining of this injustice so that the court may rule against him and remove this grievance.)"
As for selling at the market price, this is because it is the Shari’ah rule in buying and selling. If the commodity is only found with this monopolist such that he sells it at whatever price he wants, controlling the price because it is only with him, then in this case, the State must provide the commodity in the market so that no merchant can control the price of his goods, because they are available in the market and sold at the market price. He will then be forced to sell the commodity at the market price as well. Therefore, the remedy for the monopolist is to punish him with ta’zir and force him to display his goods in the market. Then, if it is only with him, the State must provide the goods in the market so he cannot control the price. The book clarified this in the chapter of "Price-fixing":
"(As for what happens regarding high prices during times of war or political crises, it results either from the goods not being available in the market due to monopoly, or due to scarcity. If the lack of availability results from monopoly, Allah has forbidden it. If it results from scarcity, the Khalifah is commanded to manage the affairs of the people, so he must strive to provide them in the market by bringing them from other places. By this, he would have prevented high prices. Umar bin al-Khattab, during the Year of Famine, which was called the Year of Ashes (Am al-Ramadah), when the famine occurred in the Hijaz only due to the scarcity of food in that year, and prices rose because of its scarcity, he did not set specific prices for food. Rather, he sent for and brought food from Egypt and Ash-Sham to the Hijaz, so prices dropped without the need for price-fixing.)"
Furthermore, not selling at the market price creates fraud (ghabn). Excessive fraud (ghabn fahish) is haram, which is when the price exceeds the market price beyond what is customary among merchants in terms of a small increase or decrease. If it is a large increase to which the term "excessive fraud" applies, it is a forbidden matter. All of this makes the market price mandatory for the seller, and the State must establish the market price so that no merchant controls any commodity. Indeed, if the commodity is not available with anyone else to establish a market price, the State must bring the goods and sell them in the market, thereby ensuring no merchant controls the price.
It states in the book The Islamic Personality (Ash-Shakhsiyyah al-Islamiyyah), Volume 2, in the chapter of "Salam Sale":
"(However, it is a condition that there is no excessive fraud in the price; rather, the price must be according to the market price at the time of the sale contract for such a deferred term, not at the time of receiving the goods. This is because Salam is a sale, and excessive fraud is haram in all sales, so Salam sale is included. Just as it is forbidden to sell a commodity with immediate delivery for a deferred price with excessive fraud, it is likewise not permissible to sell a commodity with deferred delivery for an immediate price with excessive fraud.)"
And it states in The Islamic Personality, Volume 3, in the chapter of "The Effective Cause (Al-Illah)":
"(Similar to what was narrated from Abu Hurairah:
نَهَى رَسُولُ اللَّهِ صلى الله عليه وسـلم أَنْ يَبِيعَ حَاضِرٌ لِبَادٍ
'The Messenger of Allah ﷺ forbade a city-dweller from selling on behalf of a desert-dweller.' (Narrated by al-Bukhari). He mentioned the prohibition of a city-dweller selling for a desert-dweller, mentioning with the prohibition the seller's status as a city-dweller (from the urban population) and the buyer's status as a desert-dweller (coming from the desert). Each of these is a description that provides the reasoning (ta’lil) for the prohibition of the sale, and it provides the reasoning for the prohibition because of the desert-dweller’s ignorance of the market price. This indicates that being a desert-dweller is the cause (illah) because he is ignorant of the market price, which is the aspect of the reasoning. Similarly, the prohibition of meeting the caravans (talaqqi al-jalab), where the reason was explicitly mentioned. Abu Hurairah said:
نَهَى صلى الله عليه وسـلم أَنْ يُتَلَقَّى الْجَلَبُ، فَإِنْ تَلَقَّاهُ إِنْسَانٌ فَابْتَاعَهُ، فَصَاحِبُ السِّلْعَةِ فِيهَا بِالْخِيَارِ إِذَا وَرَدَ السُّوقَ
'The Prophet ﷺ forbade meeting the trade caravans (outside the city to buy from them). If a person meets them and buys from them, the owner of the goods has the choice (to cancel the deal) once he reaches the market.' (Narrated by at-Tirmidhi).)"
The summary is that the solution to the issue of monopoly is through:
- Punishing the monopolist with a discretionary punishment (ta’zir).
- Obliging him to display his goods in his store to sell them to people at the market price.
- If the goods are only with him and people are in need of them, the State must provide the goods, thereby establishing a market price without any merchant controlling the price of the goods.
- Thus, the problem is solved without price-fixing, because price-fixing is not permissible.
Your brother, Ata Bin Khalil Abu al-Rashtah
26 Ramadan 1439 AH Corresponding to 11/06/2018 CE