What is the difference between trust and waqf in legal terms?

Question

I am interested in understanding the key distinctions between a trust, which is commonly used in common law systems, and a waqf, which is a religious endowment under Islamic law. Specifically, I would like to know how their purposes, structures, and legal implications differ. Additionally, are there any notable similarities between them in terms of asset management or beneficiary support? I tried to use Google for hours to no avail.

Answer 1

Background

A waqf, or mortmain property, is an inalienable charitable endowment under Islamic law. It typically involves donating a building, plot of land or other assets for Muslim religious or charitable purposes with no intention of reclaiming the assets. A charitable trust may hold the donated assets. The person making such dedication is known as a waqif ('donor') who uses a mutawalli ('trustee') to manage the property in exchange for a share of the revenues it generates. A waqf allows the state to provide social services in accordance with Islamic law while contributing to the preservation of cultural and historical sites. Although the waqf system depended on several hadiths and presented elements similar to practices from pre-Islamic cultures, it seems that the specific full-fledged Islamic legal form of endowment called waqf dates from the 9th century AD.

(Wikipedia Source)

Question

I am interested in understanding the key distinctions between a trust, which is commonly used in common law systems, and a waqf, which is a religious endowment under Islamic law. Specifically, I would like to know how their purposes, structures, and legal implications differ. Additionally, are there any notable similarities between them in terms of asset management or beneficiary support? I tried to use Google for hours to no avail.

Answer

A waqf is very similar to a common law trust. In its charitable or religious trust versions, it is also quite similar in organizational form and legal effect to the organization of Hindu and Shinto shrines, and has many similarities to charitable endowments in civil law countries.

• The waqf must be established by someone who is legally capable of disposing of their property, which means they must be an adult of sound mind and a responsible person. It cannot be done by a minor, an insane person, or someone lacking legal capacity.

• The person establishing the waqf (the waqif) must designate a specific beneficiary or recipient for the waqf, such as a mosque, a specific individual, or an institution. It cannot be left in his or her discretion.

• The waqf should not be subject to any conditions, hanging or temporary clauses, or be contingent on certain events, like the option to revoke it.

• The waqif (the one establishing the waqf) should not include any conditions that are contrary to the essential conditions, like a condition that allows them to sell or gift the endowed property whenever they wish, or a condition that grants them personal choice or discretion over it.

• The waqf should be of a virtuous and moral nature, reflecting what is ethical and righteous, and it should not support or be associated with corrupt or unethical activities. It should be established with the intention of promoting goodness and benefiting society.

• The property being endowed in the waqf should either be owned by the waqif (the person establishing the waqf) or acquired with the waqif's own funds. It should not involve borrowed money or property that the waqif does not own outright.

The requirement that the waqf benefit a specific individual, if it is not charitable, is essentially a more strict version of the rule against perpetuities, and more generally, the degree of complexity allowed in a common law trust, which often has elaborate contingencies and multiple phases, is not permitted with a waqf. Likewise, while a common law trust may be revocable or have the settlor as one of its beneficiaries, a waqf may not.

The most obvious difference in terms of asset management is that a waqf must operate according to the principles of Islamic finance law. Most notably, this includes a prohibition on charging interest. Islamic law, in practice, has substitutes for simple interest, largely conceived of as "renting" an asset", but does effectively prohibit compound interest transactions.

Also, most often, the bulk of the assets subject to a waqf are tangible property, such as a specific mosque building, or a particular residence which is being held in trust for someone. It may end up holding cash to care for and manage the core trust property, but it does not really embrace the common law trust notion that property is property and that a trustee may exchange the original property of the trust for substitute property freely and without restriction.

Other big practical differences between a waqf and a charitable trust in the common law context, arise from the different institutional structures in which they are embedded.

A common law trust was historically subject to regulation by the courts of equity jurisdiction in strong states, and historically, some royal or government official was charged with monitoring and regulating charitable trusts in those courts.

Islamic law has legal institutions that reflect a weaker state in its formative period (there are religious and secular courts in most places that utilize them now, but the weak state at the time Islamic law came into being influenced its substantive provisions and structure). Often, its process involves seeking a formal legal opinion from a recognized Islamic law scholar, rather than litigating a case in an adversarial proceeding in something more like a tribunal. And, historically, Islamic law has relied more heavily on self-help remedies, while the common law countries generally enforce the rulings of their tribunals with writs directed at government officials or other people in positions of authority over the litigants or property at issue in a case. The qadi of the trust, sometimes translated as "judge" is perhaps better translated to the common law trust law concept of a "trust protector".

Another historic implication of the weak state context in which the waqf developed is that it has somewhat weaker expectations about the extent to which the trustee/mutawillis should be prohibited from personally benefitting from the management of the trust, and weak expectations regarding accounting for its management in a formal, written manner.

Wikipedia, at the link above, makes the following comparison between this institution and trust law:

The waqf in Islamic law, which developed in the medieval Islamic world from the 7th to 9th centuries, bears a notable resemblance to the English trust law. Every waqf was required to have a waqif (founder), mutawillis (trustee), qadi (judge) and beneficiaries. Under both a waqf and a trust, "property is reserved, and its usufruct appropriated, for the benefit of specific individuals, or for a general charitable purpose; the corpus becomes inalienable; estates for life in favor of successive beneficiaries can be created" and "without regard to the law of inheritance or the rights of the heirs; and continuity is secured by the successive appointment of trustees or mutawillis."

The only significant distinction between the Islamic waqf and English trust was "the express or implied reversion of the waqf to charitable purposes when its specific object has ceased to exist", though this difference only applied to the waqf ahli (Islamic family trust) rather than the waqf khairi (devoted to a charitable purpose from its inception). Another difference was the English vesting of "legal estate" over the trust property in the trustee, though the "trustee was still bound to administer that property for the benefit of the beneficiaries." In this sense, the "role of the English trustee therefore does not differ significantly from that of the mutawalli."

Personal trust law developed in England at the time of the Crusades, during the 12th and 13th centuries. The Court of Chancery, under the principles of equity, enforced the rights of absentee Crusaders who had made temporary assignments of their lands to caretakers. It has been speculated that this development may have been influenced by the waqf institutions in the Middle East.

Thus, the English common law trust may be a generalization of the legal concept of the waqf.

Also the waqf in its charitable trust form is probably a larger share of the non-profit sector than the latter developed non-profit organization, which is governed in a more democratic manner by a collective board or group of members in many cases, rather than merely by a trustee. The shift from charitable trusts to non-profit organizations in the West, more or less, coincides with the general rise of democratic institutions, not merely at the governmental level, but at the same time in religious and charitable institution, particular after the Christian Reformation in the 16th century.

Unlike many Western non-profit organizations which will often have many contributor/members who are on somewhat equal footing, a waqf will generally have either a single founder or very small number of founders, whose founding contribution to the waqf is different in kind from the donations of pilgrims and others who utilize the beneftis of the waqf.

But, unlike a "private foundation" in the U.S., which has many similarities, the purpose of a waqf is some very specific form of charitable activity rather than mere to benefit charity with funds derived from the main private donors generally.