<![CDATA[The rapid advancement of Islamic economics in Indonesia necessitates a robust legal framework that guarantees legal certainty while remaining adaptable to the ongoing evolution of Islamic financial products. The Compilation of Islamic Economic Law (KHES), promulgated through Supreme Court Regulation (PERMA) No. 2 of 2008, currently functions as the primary substantive legal reference for resolving disputes in Islamic economics. However, its status as a judicial regulation and its product-specific substantive design raise concerns regarding its normative legitimacy and regulatory flexibility. This study investigates the adequacy of PERMA as a legal instrument for KHES and explores how its substantive provisions might be restructured through a principle-based regulatory approach. Utilizing normative legal research with statutory, conceptual, and comparative methodologies, the study applies Kelsen’s Legal Hierarchy Theory—operationalized through three criteria: formal status, functional role, and legitimacy contestation—to evaluate KHES’s juridical adequacy. Additionally, it employs principle-based regulation to assess its substantive framework. The findings suggest that reinforcing KHES necessitates the establishment of a dedicated statutory instrument rather than continued reliance solely on PERMA. Furthermore, its substantive reconstruction should be founded on universal ‘aqd principles instead of product-specific regulations. The originality of this study resides in its integration of legal hierarchy theory and principle-based regulation within a unified analytical framework, an approach not previously undertaken in KHES scholarship. This integration offers a model that enhances legal certainty, accommodates financial innovation, and supports the long-term sustainability of Indonesia’s Islamic economic legal system.]]>
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