Halacha

Halacha (also spelled halakha or halakhah) is the body of Jewish law and legal practice. It is built up from the Torah, the Talmud, later legal codes, the written rulings of rabbinic authorities known as responsa, and the customs and precedents of particular communities. The Hebrew word comes from a root meaning "to go" or "to walk", and is usually translated as "the way".

Halacha covers ritual, family life and ethics, but it also contains a large and detailed civil law dealing with contracts, property, damages, lending, partnerships and charity. Those monetary rules still govern many transactions between observant Jews and shape financial institutions such as the gemach and the heter iska.

Jewish tradition distinguishes the Written Torah, the five books of Moses, from the Oral Torah, the interpretive tradition later put into writing. The main layers are:

• The Mishnah, compiled around 200 CE, which organizes the oral law by subject.
• The Talmud, the extended discussion of the Mishnah. The Babylonian Talmud, completed around the sixth century, became the main authority; its tractates Bava Kamma, Bava Metzia and Bava Batra deal extensively with civil and commercial law.
• The codes, especially the Mishneh Torah of Maimonides in the twelfth century and the Shulchan Aruch of Joseph Karo, published in the sixteenth century with glosses by Moses Isserles reflecting Ashkenazi practice.
• Responsa (she'elot u-teshuvot), written answers by rabbis to specific questions, which apply the law to new situations and continue to be written today.

The Shulchan Aruch is divided into four parts. Monetary law is concentrated in Choshen Mishpat, while the laws of interest and charity appear in Yoreh De'ah.

Halacha is applied by a decentralized system of scholars and courts rather than a single legislature. A posek is a rabbinic authority who issues rulings on practical questions. Disputes are heard by a beit din, a rabbinical court typically composed of three judges, each known as a dayan. In many countries a beit din can act as an arbitration panel, and its awards may then be enforceable under ordinary arbitration law, though this depends on the jurisdiction.

Several areas of halacha have direct consequences for finance:

• Interest: the prohibition on ribbit forbids Jews from charging or paying interest on loans to one another. Business finance is therefore often arranged through an iska, a partnership-style investment, rather than a loan.
• The sabbatical year: under the laws of Shmita, personal debts are released every seventh year. The prozbul, attributed to the sage Hillel, allows creditors to preserve debts by transferring them to a court.
• Charity: tzedakah is treated as an obligation rather than a voluntary act, with traditional guidance to give a tenth of income.
• Fair dealing: rules against overcharging (ona'ah), false weights and deceptive sales set standards for commercial honesty.

The Talmudic principle dina de-malkhuta dina, "the law of the kingdom is the law", requires Jews to obey the legitimate laws of the state in which they live, particularly on taxes and civil administration. In practice, observant individuals and firms comply with national banking, tax and anti-money laundering laws while also structuring transactions so that they are valid under halacha. In Israel, the major commercial banks operate under a general heter iska so that their loans to Jewish customers do not breach the interest prohibition.

Halacha and Sharia share several features: both are religious legal systems developed through scholarly interpretation rather than legislation, both prohibit interest in certain circumstances, and both have produced alternative financing contracts. Islamic commercial jurisprudence, fiqh al-mu'amalat, prohibits riba in all lending, while the halachic prohibition on ribbit applies to loans between Jews, so the two systems differ in scope and in the structures they have developed.