The general concept of the Trust existed in ancient Roman and Germanic law and was thereafter further developed in Medieval England into what we now call the modern Trust.
The term fiducia was used by the Ancient Romans, referring to the contract between parties whereby one transfers property to another for a myriad of reasons, and the said transfer will be on condition that it would be restored or administered under instruction.
Such contracts would then be utilised in a variety of ways; Fideicommissum is known as the transfer of property from one to others. This system shares many similarities with the modern trust.
The Romans also introduced the fiduciant, bearing close similarities to a modern settlor, and the fiduciaries, being the trustee, in the ancient trust system under an arrangement called the Fiducia cum amico. The arrangement describes that the assets passed on to the fiducarius by the fiduciant is not owned by the fiducarius, rather administered by the fiduciant on very specific terms.
In 12th Century England, when an individual left England to fight in wars, the individual would often transfer ownership of his assets to another. This other individual entrusted with the ownership would then in turn manage the estate to the requirements of the transferor. Upon the transferor’s return, the ownership would then be transferred back.
A Syariah Perspective
Whilst the idea of the concept of Trust is largely associated with ancient Roman and the Germanic Law, there has been schools of thought believing that the concept of Trust under English legal system is prominently influenced by Islamic law. During the first three centuries of Islam, the Muslim jurists developed the legal institution known as the Waqf, which combines the idea of trust, family entail and charitable foundation in compliance with Islamic law and its related principles.
The word Waqf derived from the Arabic word Waqafa which says ‘causing a thing to stop and stand still”. Waqf is also called boniyad or habs in Iran and North Africa. It is used as an instrument to protect a property by preventing it from becoming the property of a third person. In another words, Islamic law recognise Waqf as holding a property and preserving its ownership for the confined benefits for religious or humane purposes and prohibiting any disposition of it outside that specific objective.
The origin of the Waqf can be traced back to its Islamic origin, where the Islamic jurisdictions were derived from the Al-Quran and the Sunnah of the Prophet. Although there is no mention of Waqf as such in Quran, the Muslim jurists believes that the underlying object and legal justification of Waqf deals with the charity act of Muslim to give anything that is good and valuable to others in the anticipation of reward by Allah in the afterlife. Thus, religious factors played crucial role for the formation of Waqf, where Muslims demonstrates a voluntary and irrevocable dedication of his property to the cause of God.
During the first and second centuries of Islam, the main function of establishing a Waqf was to finance the jihad (struggling in the cause of God) and Muslim brotherhood. However, due to the spread of Islam throughout western Arabia, Northern Africa and the East, Muslim societies attained high degree of development. In the later period, Waqf became very common in the Muslims societies and resumed a very important role in the socio-economic order. The good example of Waqf commonly adopted is provided by Ottoman state, where Waqf is very common and comprehensive to the extent that towards the end of the 18th century, there were 20000 Waqf in the Ottoman empire, which made up one third of the total economy.
The concept of Islamic trust requires a person entrusted with such trust to look after the trust property just as he would look after and protect his own property. A Waqf is created when the owner of the asset (the Waqif) declares that the income of the subject asset is reserved for a specific purpose. A Trustee is normally appointed in the form of Wakalah, to hold the asset on behalf of the Beneficiary and distribute the Waqf income under the supervision of the judge.
The Waqf and the English Trust are almost identical in its purpose and structure, where both have a Settlor appointing a Trustee to hold a property for the benefit of the Beneficiary. The only significant distinction between the Waqf and English Trust is the Waqf mandates that the trust corpus be used exclusively for charity purposes, whether immediately in the case of charitable, or as a reversion in the case of family endowment.