In part
1 I discussed heter iska, and whether it is a genuine solution to the
problem of taking interest. Here I will try to clarify whether the provision of
loans with interest may be permissible under certain circumstances, without the
need for heter iska.
Limited
Companies
Different
alternatives to heter iska exist, although they are mostly applicable only in
localised cases.[1] I am
aware of only one that could cover a large percentage of the problems- the use
of companies limited by shares. As almost all banks fall into this category,
there is the potential here to find far-reaching leniencies.
In a limited
company, the liability of members or subscribers of the company is limited
to what they have invested in it. In other words, the company is an abstract
legal entity of its own which can have assets, and owe or be owed money. The
members are not independently obligated by the debts of the company (nor do
they have an independent claim to the debts owed to the company). The big
question is whether halacha recognises such an entity, or if not, how does
halacha relate to a situation where such an entity has been created by secular
law.
R' Moshe
Feinstein understands that halacha also recognises the concept of a limited
company. Therefore he writes that there is no problem to receive interest from
a limited company, as no individual has any personal obligation to pay this
debt. However, the prohibition of interest does apply when the borrower is an
individual, even if the lender is a limited company.[2]
R' Shlomo Zalman
Auerbach disagrees. His assumption is that even when the borrower is a limited
company, the obligation to pay is equivalent to the owners (shareholders)
having an obligation to pay from specific assets. He proves from various cases
in the gemara that even when the obligation of the borrower to pay is limited
to specific property, taking interest is forbidden.[3]
I believe that
the basis of this dispute is the question of how far we take the principle that
'any condition to a monetary agreement is valid.'[4]
R' Shlomo Zalman understands that although two parties can stipulate any
condition, no-one can create a new type of independent halachic entity (in this
case an inanimate, abstract body that has independent financial obligations). R'
Moshe Feinstein assumes that this possibility does exist, and in the case of a
limited company there is no human who has any obligation to pay the debt from
any property whatsoever.[5]
Futures
Trading
To decide how to
rule in this dispute, it helps to find precedents based on similar principles.
One such example is the issue of the purchase of something that does not yet
exist (e.g. produce that has not yet grown). In the gemara there are two
opinions about whether such a purchase is valid, but the halacha clearly follows
the view that it is not valid.[6]
The question is
whether this rule is set in stone and unchangeable. We know that although the
gemara has rules for how transactions can be carried out, when the custom is to
use alternative acts of acquisition, this is recognised by halacha.[7]
What happens when the custom is to acquire things that do not yet exist?
This question
was already raised by early authorities. The Mordechai quotes Rabbeinu Yechiel
(13th century, Paris/Eretz Yisrael) who says that there is no way that
something that does not yet exist can be acquired.[8]
However, the Rosh (1250-1327, Germany/Spain) writes straightforwardly that when
the clear custom is to buy things that do not yet exist, it works.[9]
The Chasam Sofer (1762-1839, Germany/Hungary)
writes that really all agree that the custom is binding here. The transaction
that Rabbeinu Yechiel ruled was invalid was not done in accordance with the
custom at the time. He explains that the only reason that the gemara said that
one cannot acquire something that does not exist is because of a lack of full
understanding on behalf of the parties involved. When the custom is to carry
out such transactions, the required understanding does exist and thus the
acquisition is valid.[10]
Although not all
agree with the Chasam Sofer,[11]
the existence of advance purchase of things that do not yet exist has long
since been recognised as valid by all batei din. In a world where such
transactions happen every minute of the day, it simply would not make sense to
fight this reality. The entire concept of ownership and transactions preceded
the Torah and was based on custom, and it would not be logical to think that
the Torah wanted to stop this.
I believe that
the same is true when it comes to limited companies. When the whole concept of
a limited company was new and had little effect on everyday life, it may have
been relevant to debate whether halacha recognises such an entity. Nowadays,
when every individual has dealings with such companies, it is not relevant. The
clear understanding when opening accounts with banks, the electricity company
etc. is that they will be dealt with in the way that civil law defines them,
and there is no reason for halacha to treat them differently.
Can a limited
company be Jewish?
R' Moshe
Feinstein's leniency only helps us with a small part of the problem. While
savers can relax if they know it is ok to take interest from banks, borrowing
from banks is a problem on a much larger scale. However, if we are consistent with
our acceptance of the legal definition of a limited company, we can question
why it should be a problem to pay interest to a limited company.
The prohibition
of borrowing with interest only applies if the lender is Jewish.[12]
According to what we have seen so far, a limited company is not even human. How
then can paying interest to it be prohibited?[13]
To answer this,
it helps to consider the relative ease in starting a limited company. Two Jewish
partners could make their company limited, becoming the only shareholders and
appointing a director. If this company lends money, it would be hard to argue
that the interest is merely being paid to an independent, inhuman entity. The
two partners have full control, and the director runs the company is merely
their agent. If he acts against their wishes, he could be fired at any time.[14]
Clearly then, taking interest under such circumstances is forbidden.
The same should
be true with a thousand or a million equal shareholders, as being in a
partnership does not exempt us from the prohibitions of the Torah.
Theoretically, it could be forbidden for a Jew to own shares in a company that
lends to Jews with interest (or a company that owns chametz on Pesach, as well
as other examples).
Elsewhere, R'
Moshe Feinstein explains why in reality this is not the case. As the main
owners of the company usually keep enough shares for themselves to ensure that
they maintain control, the vote that a regular shareholder gets is merely a
fictitious pretence. Thus the regular shareholders do not really own part of
the company, and all they have bought is the right to a share in the profits.
Buying enough shares to get a significant say is indeed forbidden.[15]
It is clear to
me that this is also the reason that R' Moshe does not allow borrowing from a
'Jewish' limited company with interest. If the majority shareholder or some of
the significant shareholders are Jewish, he or they own part of the loan. Only
the portion of the company 'owned' by the insignificant shareholders can be
described as a loan from an inhuman entity.
Thus a person
looking for a mortgage who does not want to rely on heter iska needs to find a
bank whose significant shareholders are not Jewish. This is no easy task in
Israel,[16] so we need to be a bit more creative. A bank with no major
shareholders would not help, as then even the shares of the regular
shareholders would be meaningful.[17]
Communal
bodies
The only real
solution I can think of is the use of a limited company whose major shareholders
themselves are abstract, inhuman entities. The classic example is the
government, whose funds should not be extractable by any individuals under any
circumstances. One who borrows from the government is genuinely not borrowing
from a Jew, irrespective of how religious the ministers may or may not be.
To the best of
my knowledge, nowadays none of the Israeli banks are government owned. This is
unlikely to change in the near future (nor would I want it to), but we don't
need the government to help us here. All we need is to create a similar model,
a body that has no real owners who can dissolve the company and take the funds
for themselves. Any institution like a shul or community centre, or a network
of such institutions, could be used.
It may sound
unrealistic, but I believe that if there was enough will for it from serious
religious Jews, it could be done. If such a plan was implemented and banks
relying on heter iska lost some of their income, it may also encourage a more
serious application of the 'iska' rules (see part
1).
[1] For example, if the main intention is for a payment to be made on
time with no interest, penalties for late payment may be justifiable
halachically.
[2] Igros Moshe, Yoreh Deah 2, siman 62
[3] Minchas Shlomo, part 1, siman 28. The proofs seem watertight, but are
only relevant according to his understanding of how to view limited companies.
[5] Although the person employed by the company responsible for this
area must carry out his responsibility, this is not a personal debt. If he
resigns from his job before the payment date, this responsibility will pass to
someone else. There is not even any person who is ultimately responsible, as
the shareholders can also sell their shares to others.
[6] See for example Yevamos 93a, and Shulchan Aruch Choshen Mishpat
209:4.
[7] This principle is known as situmta, based on the custom
mentioned in the gemara in Bava Metsia 74a.
[9] Responsa of the Rosh 13:20.
[10] Responsa of the Chasam Sofer 5:65.
[11] See Pischei Teshuva, Choshen Mishpat 201:2.
[12] Mishna Bava Metsia 70b. Lending to a non-Jew with interest is
forbidden rabbinically, although here many leniencies exist which are beyond
the scope of this post.
[13] In fact some write that it is permitted. See R' Osher Weiss's
article in T'chumin, volume 33.
[14] They also can dissolve the company at any time, taking the interest
for themselves. In contrast, if the company borrows money, the lender cannot
demand payment from the partners. The responsibility to pay (from the funds of
the company) is the director's, and even if the director resigns all the
shareholders have to do is to appoint a new director.
[15] Igros Moshe, Even Haezer 1:7
[17] If such a bank existed even outside Israel it would be problematic
to borrow from it, as even one Jewish shareholder would be considered a genuine
part-owner.
No comments:
Post a Comment