after reviewing the research papers submitted to the Academy on the subject of the “auction contract,” and after listening to the discussions that took place concerning it; and whereas the auction contract is one of the contracts widely used at present and its implementation has, in some cases, been marred by abuses that call for regulating the manner of dealing with it so as to safeguard the rights of the contracting parties in accordance with the rulings of Islamic law—regulations that have likewise been adopted by institutions and governments and embodied in administrative procedures—and in order to clarify the Sharīʿah rulings pertaining to this contract, the Academy has resolved the following:
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An auction contract is a commutative contract based on inviting interested parties, verbally or in writing, to participate in the auction, and it is concluded only with the seller’s consent.
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According to its subject matter, the auction contract may pertain to a sale, a lease, or other transactions; and according to its nature it may be voluntary, as in ordinary auctions between individuals, or compulsory, as in auctions mandated by the courts and required by public or private institutions, government bodies, or individuals.
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The procedures applied in auction contracts—such as written documentation, organisation, regulatory measures, and administrative or legal stipulations—must not conflict with the rulings of the Sharia.
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It is permissible under Islamic law to require a security deposit from anyone wishing to enter the auction. The deposit must be returned to every participant whose bid is not accepted, and for the successful bidder it shall be counted toward the purchase price.
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There is no legal objection to charging an entry fee—namely, the cost of the specifications booklet, provided that it does not exceed its actual production cost—since the booklet is being sold to the participants.
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It is permissible for an Islamic bank, or for any other entity, to present investment projects in order to realise