The Lord Chief Justice, Lord Phillips of Worth Matravers, emphatically ruled out the possibility of sharia courts sitting in this country or deciding penalties.

But in a speech at the East London Muslim Centre in Whitechapel he said there was no reason why sharia principles could not be used in "mediation or other forms of alternative dispute resolution".

Sharia – a set of principles governing the way that many Muslims believe one should live one's life – suffered from "widespread misunderstanding" by the rest of the world, he added.

Lord Phillips said: "There is no reason why sharia principles, or any other religious code, should not be the basis for mediation or other forms of alternative dispute resolution.

"It must be recognised, however, that any sanctions for a failure to comply with the agreed terms of mediation would be drawn from the laws of England and Wales."

The Lord Chief Justice told his audience that severe physical punishments such as flogging, stoning and the cutting off of hands would not be acceptable.

He added: "There can be no question of such courts sitting in
this country, or such sanctions being applied here.

"So far as the law is concerned, those who live in this country are governed by English and Welsh law and subject to the jurisdiction of the English and Welsh courts."

The judge said the Archbishop of Canterbury, Dr Rowan Williams, had been misunderstood when it was reported in February that he said British Muslims could be governed by sharia law.

Dr Williams suggested that sharia could play a role in "aspects of marital law, the regulation of financial transactions and authorised structures of mediation and conflict resolution".

The Lord Chief Justice said yesterday: "It was not very radical to advocate embracing sharia law in the context of family disputes, for example...

"It is possible in this country for those who are entering into a contractual agreement to agree that the agreement shall be governed by a law other than English law."