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Ribit Revisited - A Commercial Conundrum: Does Prudence Permit the Jewish "Permissible Venture?"
Prof. Steven H. Resnicoff


Many religious systems purport to regulate the commercial, as well as the ritual, conduct of their adherents. To the extent that religious law is autonomous, parties can predict its consequences and fashion their business negotiations and investments accordingly. Where, as in the United States, such religious rules co-exist with a separate, secular legal system, which may have fundamentally dissimilar conceptualizations of legal entities and norms, there are inherent dangers of misunderstanding and miscalculation leading to unanticipated and undesirable commercial consequences.

This article addresses one example of this phenomenon. A Jewish "permissible venture"3 is a unique contractual arrangement devised under Jewish law4 to circumvent the religious prohibition on the collection or payment of interest.5 It accomplishes this by substituting an investment scheme in lieu of a loan without meaningfully altering the parties' respective rights. Within the realm of Jewish law this device for centuries has effectively facilitated consumer as well as commercial financing.

The implications of a permissible venture, under Jewish law, are quite different from those of a partnership under American law. Nevertheless there is a risk that the permissible venture, especially as it is commonly composed, would be perceived through the prism of secular law as a partnership, yielding unintended, adverse ramifications for one or both of the parties.

This possibility is a serious one, because the permissible venture continues to be employed, recently with perhaps even greater frequency,6 by institutional and individual lenders, as well as by businessmen, in major United States financial centers such as New York, Los Angeles and Chicago and throughout the world.7

In Part I, I describe how the permissible venture works. In Part II, I explain why American law may treat the permissible venture as a partnership, and I identify attendant negative repercussions. In Part III, I explore whether the Jewish and secular legal systems are sufficiently flexible to eliminate, or at least substantially reduce, the risk of such an unfortunate outcome and to allow the religious objective to be obtained at no commercial cost. I evaluate a variety of analytical approaches, some of which would warrant, both from technical legal and policy perspectives, characterization of the permissive venture as a loan. In Part IV I survey alternatives to the permissible venture which have been suggested to avoid the Jewish ban on interest.

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