Muslims can use sharia law in Britain to enforce disputes between them, Justice Secretary Jack Straw has acknowledged.
He said religious councils could act as arbitrators between Muslims, as long as both sides agreed.
Under the Arbitration Act, which was passed in 1996, Muslims can agree to have their dispute settled by the sharia court, he said.
But the Blackburn MP said the agreements were still covered by English law and were "subservient" to its provisions.
He told the Islamic Trade and Finance Conference yesterday: "There is nothing whatever in English law that prevents people abiding by sharia principles if they wish to, provided they do not come into conflict with English law. There is no question about that. But English law will always remain supreme, and religious councils subservient to it."
He said arbitrations of this kind were "very limited", but reports have claimed more than 100 cases had been decided every year by courts in Bradford, Manchester, Birmingham and London.
The Muslim Arbitration Tribunal has dealt with cases ranging from inheritance disputes to Muslim divorce.
Mr Straw said there were "overwhelming" arguments against allowing sharia to operate separately from English law. He added: "We have not changed the position on sharia law established by the previous government in 1996 and nor will we do so.
"The position remains as before: there is no room for parallel legal systems. Regardless of religious belief, we are all equal before the law."
Archbishop of Canterbury Rowan Williams has backed the adoption of some aspects of sharia law.