Is Claiming Pre-Judgment Interest as a Lawyer Permissible?

Answered by Shaykh Muhammad Carr

Question 

I’ve been practicing law for over a decade, and I’ve been considering focusing more on litigation and moving away from corporate/real estate work
because of concerns about being involved with Riba-based loans and mortgages.

I wanted clarification on pre-judgment interest. When a client sues someone for damages or money owed (for example, a personal injury, contract, or other civil claim), the law may allow the plaintiff to receive prejudgment interest on the amount awarded, calculated for the period between when the cause of action arose and when judgment is entered.

It isn’t an interest-bearing loan between the parties, but an amount added to the judgment under legislation because of the passage of time.

As a litigation lawyer, I may have to claim this interest in the pleadings, calculate it, negotiate settlements that account for it, or request it as part of a judgment.

Would this type of statutory pre-judgment interest be considered riba? If it is, would my involvement be in claiming or calculating it? Is civil litigation impermissible, or could I avoid the interest-related aspects while still practicing litigation?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

May Allah reward you for your increase in Allah-consciousness. “Allah never wastes the wage of those who excel in good”. [Quran, 12:90]

Each case would have to be considered on its own merits. Prejudgment interest in a personal injury case is treated differently from money that is simply owed.

In the former, there is a basis for construing the prejudgment interest as part of the claim itself, thereby making it valid. The same, however, cannot be said of money that is owed.

Injury Case

This type of statutory prejudgment interest is not riba. Interest arises in the context of a loan contract. In the absence of a loan contract, interest does not exist. There is no loan contract between the plaintiff and the defendant that gives rise to interest.

The Sharia simply construes the above amount as part of the award. It is therefore permissible for you to negotiate settlements that take this amount into account.

The legal fiction of a loan, which gives rise to the terminology of interest, serves as the basis for determining the value of the plaintiff’s loss.

Interest is used here as a means of determining value rather than as a stipulated positive return on a loan. The resulting amount is then incorporated into the overall award.

This is analogous to the position of scholars who hold that a usurper must compensate the owner based on the highest value of the usurped goods between the time of the usurpation and the time of their destruction. [See Muqri, Rawd al-Matalib]

Money Owed

In the case of money owed, it would not be permissible to negotiate settlements along these lines, as it can no longer be construed as an increase in the award.

This applies to all cases in which a liability is established at one point in time and an additional charge is levied for time. This is the classic case of interest that the Quran prohibits. [See Misri, Riba]

Rather, it is clearly an increase in the amount due directly linked to the passage of time. In this case, only valid, directly related charges to recouping the money may be added. [See AAOIFI] And Allah knows best.

In the case of money owed, it would not be permissible to negotiate settlements along these lines, as the additional amount can only be construed as a stipulated positive return on a deferred ‘monetary’ liability.

This applies to all cases in which a liability is established at a particular point in time and an additional charge is imposed in consideration of the passage of time. This is the classic form of interest prohibited by the Quran. [See Misri, Riba]

In such cases, only valid charges that are directly related to recovering the outstanding amount may be added. This must not be disposed to the benefit of the ‘lender’ [See AAOIFI]

Practicing Caution

It is important that you consult a scholar regularly, on a case-by-case basis, to ensure that your activities remain Sharia-compliant. This will give you peace of mind and further encouragement to continue the good work your vocation enables you to do. It will also help alleviate religious anxiety.

When in doubt, consult a qualified scholar where appropriate; otherwise, avoid the matter altogether. The Prophet (May Allah bless him and give him peace) said, “Leave what causes you doubt for that which does not.” [Tirmidhi]

And with Allah alone is our success.

[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door for students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.