Islamic banking is a new, rapidly growing business, which is competing with its counterpart in Sri Lanka. As in any other area of business, emergence of disputes arising among stakeholders of Islamic banking is quite natural. However, the ability to resolve such disputes without destroying the business relationship is quite important. Many disadvantages inherent in the process of litigation may prompt those involved to seek an alternative way of dispute resolution (adr), offering less formality, lower costs and protection of privacy. Hence, in this respect, adr could be proposed as an ideal mechanism. This article strives to examine the possibility to apply arbitration for Islamic banking dispute resolution in Sri Lanka. Sri Lanka’s Arbitration Act No. 11 of 1995 may play a significant role in this sense.
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