Secular Law Enforcement of the Heter 'Iska
Kenneth H. Ryesky, Esq.

A Jew is prohibited from charging interest (ribit) to another Jew. ¹ The Heter 'Iska was developed by the Rabbis in order to structure business transactions in such a manner as to avoid running afoul of the prohibitions against ribit.² The Heter 'Iska principle is based upon the borrower and lender agreeing to be partners in a business venture, whereby one partner invests money and the other uses his entrepreneurial skills to manage the venture. The investor-partner can thereby earn "profit" attributable to his portion of the joint business venture, and the sharing of such profit by the manager-partner would not constitute payment of interest upon a loan. The arrangement thus has characteristics of both a loan and a trust.³

Ideally, the business transaction is successful for all concerned parties. Realistically, such is not always the case, and disputes often arise as the parties to the unfortunate deal seek to enforce their rights and protect their property. The reality is that Jewish parties to ill-fated Heter 'Iska arrangements sometimes resort to the secular courts, a course of action fraught with halachic issues.⁴ As detailed in this artiele, actual resolutions of disputes involving Heter 'Iska in the normative secular American court system can and do leave something to be desired from a halachic perspective. In addition to the usual propensities for litigants to disparage one another unnecessarily, parties to Heter 'Iska disputes in secular courts can easily make contentions in the heat of the dispute which, in the given context, can be perceived as minimizing the validity of halacha. Furthermore, there is the risk that interest can be imposed by, the secular courts in a manner contrary to halacha.

The purpose of this article is to explore and analyze the American legal system in its approach to situations involving a Heter 'Iska, with an eye towards formulating a Heter 'Iska that the Anierican courts can be expected to enforce in a manner as nearly consistent as possible with halachic paramters. Heter 'Iska enforcement by courts in Israel, a land of diverse and often discordant legal systems, ⁵ is beyond the ambit of this article.⁶ Prior to directly discussing the Heter 'Iska per se, this article covers two essential background topics, the American law concepts of interest and the American courts' approach to the Beth Din as a form of arbitration.

The examples and citations of American secular law in this article will be drawn largely, though not exclusively, from New York state law, a function more of the fact that the author lives and practices law in New York than of any superiority of the New York law over that of other states. Emphasis upon the law of New York does not necessarily detract from the utility of this article, however. For one thing, New York is disproportionate among the states in its numbers of people, Jews, and Jewish religious institutions.⁷ Furthermore, the New York courts are respected as precedentsetting tribunals by numerous other courts in the United States, which often cite New York court decisions as authority for their own. ⁸ From a practical standpoint, the secular lawin New York is therefore usually relevant to most situations involving Jews in America.