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This article offers a comparative analysis of the Islamic Waqf and the English Trust, exploring their historical origins, legal structures, and contemporary issues and challenges. Both devices serve to preserve property and allocate its benefits. While the English Trust has flourished in legal and economic arenas, Waqf in Islamic countries has been restricted to charitable and social functions under government control. This paper highlights the initial parenthood relationship between the two devices, as well as similarities and parallels between the two devices, particularly in terms of personhood, beneficiaries, and administration. It also delves into the legal and tax issues that have hindered the development of Waqf in Islamic-civil law jurisdictions, arguing for the expansion of Waqf beyond its current charitable limitations into broader economic uses. The study, thus, concludes that Islamic countries ought to benefit from reassessing Waqf through their legal traditions. Such an endeavor would facilitate proper interaction and mutual understanding between Waqf and Trust, particularly for international legal and tax planning purposes, inter alia.
Introduction
Waqf and Trust have only been briefly explored by legal studies, particularly in Islamic law jurisdictions. This short paper attempts to delve into these concepts from a comparative perspective, acknowledging that a thorough analysis of this significant topic remains a contemporary and pressing issue.
The origins of the English Trust also referred to as the use, have been debated extensively among legal scholars. Various theories have been proposed regarding its roots. Some scholars trace it to the Roman Fideicommissum, while others suggest a Germanic origin through the Salmannus or a hybrid Romano-Germanic evolution. Yet, an influential argument links the English Trust to the Islamic Waqf .
One scholar asserts that “if an outside paradigm for the English use is to be located, the
Islamic Waqf ’s parallel structure and historical proximity indicate that it was the Waqf which most prominently influenced the development of the use.”[1] This assertion highlights the parallels between the two systems in purpose, theory, and structure, making it unlikely that the Waqf did not inspire the Trust.
The institution of Waqf originated in the early Islamic period, around the 7th century, and was influenced by practices attributed to the Prophet Muhammad. By the 13th century, after the
Crusades, it is believed that the Franciscan Friars returning to Europe may have brought back knowledge of this system.[2] Moreover, given that European scholars frequently studied in Andalusia (modern-day Spain) — a hub of Islamic culture and law — it is plausible that they encountered Waqf practices there. Islamic institutions, including Waqf , were well-known in cities such as Córdoba and Granada, suggesting that European jurists may have adopted and assimilated elements of this legal structure.[3]
The term Waqf literally means “detention.” According to the Hanafi school, Waqf refers to the detention of a specific asset by its owner (Waqif) while dedicating its usufruct (income or profit) to charitable purposes.4 Although there is no explicit mention of Waqf in the Qur’an, it is widely established in Islamic law through the traditions of the Prophet Mohamed. A hadith records that when Umar ibn al-Khattab acquired land in Khyber, he consulted the Prophet Muhammad about it, who advised: “If you like, make the property inalienable, and give the profit from it to charity.”5
The key features of the Waqf include its permanent dedication to religious, pious, or charitable purposes. Nevertheless, perpetuity is not required by the Maliki school, which means that the Waqf can be established temporarily.[4] The essential pillars of Waqf are outlined below:
The founder must possess legal capacity, which includes being an adult, of sound mind, financially competent, and free from restrictions such as bankruptcy. Importantly, while Waqf is an Islamic institution, it is not limited to Muslims. Non-Muslims, such as dhimmis (protected non-Muslim citizens in an Islamic state), may also establish a Waqf .[5]
The property used for Waqf must be capable of being owned and legally transacted. Under Islamic law, the object of Waqf must be lawful and under the founder’s ownership and control. Most Islamic scholars allow movable and immovable property to be dedicated to Waqf , though
Hanafi jurists impose some restrictions on movable goods.[6]
The beneficiaries of the Waqf can be persons and public utilities. This is the case to which some scholars attribute a legal entity to Waqf because the utility being the beneficiary becomes a legal person acting, contracting, and accepting mortgages as separate legal persons. It is worth
mentioning here that this may have triggered the establishment of companies and corporations as legal persons in Europe later on.[7]
The Islamic law divides the Waqf into “charitable causes”, in which the beneficiaries are the public benefits, the poor, and “family” Waqf in which the founder makes the beneficiaries his relatives. There can also be multiple beneficiaries. For instance, the founder may specify that some of the proceeds would go to his family, while other part goes to the poor.
Conditions for valid beneficiaries:
There is a dispute over whether the founder can reserve exclusive rights to use Waqf . Most scholars agree that once the Waqf is founded, it can’t be taken back, but it’s a possibility because according to the practice (Sunnah) attributed to Prophet Mohammad he founded a Waqf on a land while he enjoyed its usufruct till he passed away then it was dedicated to charity for the poor by his will.
Most scholars don’t require any written declaration to found a Waqf though it is usually done through a written document accompanied by a verbal declaration. Sometimes, a Waqf can be founded even by committing actions that imply the intention to establish a Waqf . For example, if a person builds a mosque and allows others to pray in it regularly, or if someone builds a graveyard and allows others to bury their dead people therein, then these actions are regarded as equivalent to founding a Waqf .
Consequently, founding a Waqf can also be implicit and comparable to the concept of constructive Trust in English law[8] because of the close similarities between the two legal creatures. Thus, a clear parenthood that relates the Waqf to “Trust” can also be inferred as well. 5. Administration
Typically, a Waqf has a range of beneficiaries. The founder and administrator (called nāẓir or mutawallī or ḳayyim) would arrange for assigning successive administrators. In his lifetime, the founder can himself administer the Waqf . Where the number of beneficiaries are limited the beneficiaries themselves can administer the Waqf (they are considered the virtual owners).
The administrators’ requirements are the capacity to act and contract, Trustworthiness, and administration skills. Here the Waqf as in the Trust emphasizes the basis of Trust between the
Trustee(Wakif) and the beneficiary (Mawkufalih) whereas in civil law this is understood as a relationship arising between the two parties with all legal and taxation implications.
Some scholars require that the administrator of this Islamic institution be a Muslim, nevertheless, the Hanafi school drops this condition accepting a non-Muslim to assume such a position.
From what we have seen above the Waqf in Islamic law bears a significant resemblance to the English Trust law. Waqf must have, a Waqif (founder), Mutawillis (Trustee), Qadi (judge) like the equity court in common law system, and beneficiaries. The property in both Waqf and Trust is reserved and its usufruct is appropriated for the benefit of individuals, or charitable purposes. The corpus becomes inalienable irrespective of the law of inheritance or the rights of the heirs. The successive appointment of Trustees or Mutawillis secures the continuity of both devices.
The only difference between the Islamic Waqf and English Trust is the express or implicit return of the Waqf to charitable purposes when its specific object has ceased to exist, but this difference only exists in the Waqf Ahli (Islamic family Trust) which doesn’t include the Waqf Khairi (charitable purpose).
As mentioned above, the similarities between Waqf and the English Trust are notable. Both institutions require a founder, Trustee, judge, and beneficiaries. The Trust vests “legal estate” over the Trust property in the Trustee while he is still compelled to administer that property for the benefit of the beneficiaries. In this regard. The role of the English Trustee is notably similar to that of the Mutawalli in Waqf . However, unlike Trusts, Waqf has historically faced great challenges in Islamic civil law jurisdictions.
Some of the objectives of this comparative discussion are to discuss some legal, economic, and tax issue facts about both Waqf and Trust in these Islamic-Civil law jurisdictions. We know that every Waqf needs to have a Waqif (founder), Mutawillis (Trustee), Qadi (judge) and beneficiaries. We also acknowledge the fact that under both Waqf and a Trust, “property is reserved while its usufruct is appropriated for either the benefit of specific individuals or a general charitable purpose. The corpus becomes inalienable estates for life in favor of beneficiaries without regard to the law of inheritance and continuity is secured by the successive appointment of Trustees or Mutawillis.
While the Trust device keeps flourishing in today’s legal and economic arenas the situation of Waqf is conversely grim. Waqf is limited in both goals and practices in these Islamic countries, and it is more restricted to the social field for charitable purposes. The Waqf in Islamic societies did not continue to be a private institution as was, initially and purposely, created. Due to many uncooperative historical facts these “Islamic” states, successfully, have managed to nationalize Waqf institutions and put them under their governmental control and successfully have designated Waqf for their public bureaucratic purposes instead. The legal impasse continues to deter the proper development of Waqf by, inter alia, limiting its expansion into the economic field, leaving it stagnant in the charitable sector and restricted to limited family purposes.”
Some other factors for sharing the blame for such an awkward situation lay in the codification of law conducted between 1839 and 1876, resulting in a series of reforms known as “Tanzimat” in the Ottoman Empire codification of law. That process resulted in borrowing mainly from the civil law system as in France and/or other European countries. That process has led to a fuse between Islamic Law and Civil Law philosophies. Islamic law in some aspects looks more like the common law for both systems was not a codified body of legal doctrines, but rather a clutch of principals, values, opinions of the scholars, and case law precedence.
The implementation of the French Napoleon code system took place after the invasion of Egypt in 1798 by Napoleon Bonaparte, where the adoption of the French Napoleon code system took place steadfastly afterwards in the whole region. A wide adoption of the Civil Law system ensued and spread throughout different jurisprudences, that were under Ottoman control in the region. The process will be furthered even more with the fall of North Africa and some other Middle Eastern countries under the influence of the France colonization later on.
Subsequently, the destiny of Waqf and Islamic law, in general, was sealed, diminished and restricted by the codification policy of the Civil Law philosophy. That was the destiny of the Waqf to be depressed by the influence of Civil Law paradigms. One may well find this duality in court doctrines and systems very awkward and deterring rather than efficient and effective. This legal impasse continues to deter, on the other hand proper development of Waqf through expanding its use to encompass the economic field rather than being stagnant in the charitable field and to limited family purposes.
Despite the similarities between Waqf and the Trust as discussed above, the Trust is a completely, unknown legal creature to Islamic-civil law jurisprudence. In theory and practice the civil courts are still not legally capable of adopting an ample idea about the Trust Instrument even though it carries the same legal aspects of the Waqf . The fuse of Civil Law with Islamic Law has decapitated and hindered, in this sense, the adoption of Trust within those hodgepodge legal systems.
From that perspective, it is very plausible when these Islamic-civil law jurisprudence courts are faced with the issues of “Trust” they would resort to the Civil Law philosophy rather than the Islamic law principles pertaining to Waqf . Straying away from the solution existing right there in the Waqf Court (Qadi) system accentuates the problematic structure of such Legal welter in those systems, thus ironically contradicting constitutional provisions of these countries, where Islamic Law is stated to be a source of legislation. It is advisable and optimal that the court of Qadi (Judge) specialized in the Waqf matters should be dealt with separately from the Civil Court whose doctrine breastfeeds from civil law philosophy, which can not deal with the Waqf as it is continuously struggling with the Trust concept ab initio.
The Trust device remains a problem to civil law scholars for the idea being inherited in that legal school, which, within its own philosophy, allocates one property for one proprietor; it will certainly remain a rigid obstacle toward accepting the Trust therein. The solutions offered so far to assimilate such an instrument in a civil law system have been either to capitulate to the common law like in the case of Louisiana state,[9] or adopt some legal creatures with close features to the Trust like in the case of France with no substantial success.
The Trust in Islamic-civil law jurisdiction must be logically comprehended and analyzed according to no other legal device but to Waqf ‘s analogy within Islamic law principles in opposition to Civil law dogma. Such is the solution to the issue of Waqf and Trust together. The benefits of such an endeavor are numerous, as it will allow Common Law jurisdictions to know the Waqf , which will create proper interactions between the two devices for further legal and tax understandings.
Islamic civil law jurisdictions occupy a large geographical space stretching from North Africa to the Middle East and passing through a large portion of Asia. Despite its potential, these jurisdictions, due the fact delineated above have not fully utilized Waqf in the economic and estate planning sectors, confining its application to limited charitable endeavors.
These countries have entered into many Double Taxation Conventions (DTCs) with many common law jurisdictions like the USA, UK, and other countries, and they are based on the OECD, US, or UN model conventions. Article 2 of these DTC model conventions includes the Trust as a “person” for definition purposes among other entities that are eligible for benefits of such provisions. Despite that fact, none of these jurisdictions has yet assimilated the Trust into their legal system nor did they allow the Waqf to widen its use other than its charitable purposes. Thus, negatively, depriving themselves of the plethora of economic benefits that are crucial to the development for which their societies are craving.
From a tax perspective, it is certain that the Trust device will fall into the cracks of the Civil Law paradigm, which is based on the form-over-substance doctrine. Such classification will lead to some uncomfortable tax treatment of the Trust, contrary to its reality and the intentions of its founders.
It is noteworthy, from tax planning purposes, to mention herein that “Waqf has not been characterized by the Internal Revenue Service (IRS) for United States tax purposes; but an appropriate presentation of facts it would likely be determined to be charitable Trusts”.[10] Based on the substance-over-form doctrine, this characterization focuses on the actual function and purpose of Waqf,rather than its legal form. Comparatively adequate, the Waqf is also considered in Islamic-civil law jurisdiction as charitable for tax law purposes.
It will be a long time before a real attempt can be made to apply and extend the same tax law procedures for the Trust device in common law jurisdictions to that of the Waqf . Jurisdictions like Qatar and others have emerged as international financial centers with others that will follow in the very foreseeable future. Such developments are making these jurisdictions, from an estate planning perspective, places of great opportunities and benefits to an international person to consider using and utilizing the Waqf device for such purposes.
Islamic civil law jurisdictions possess a rich legal heritage concerning the Waqf , so with proper legal reform, it could be expanded to encompass broader economic purposes. Using and utilizing its principle innovatively can help extend the Waqf device to assimilate the Trust that became an internationally efficient legal and economic device for their own legal and economic
endeavors for development and prosperity without resorting to the civil law dichotomy. On the other hand, recognizing the similarities between Waqf and Trust could also encourage Common Law jurisdictions to engage with Waqf as a viable legal and economic tool.
