Mustafa Hussain

In spirit and in law – Interweaving Shariah With Common Law Trusts

Private client practitioners are increasingly being asked to address the challenge for families in the Middle East and Asia arising from the influence and potential application of Shariah law. It is imperative that succession plans take these legal and moral principles into consideration. Whilst the common law trust is the preferred arrangement of choice for practitioners to recommend and for families to benefit from, it is important to examine whether Shariah adherence can and should be effectively interwoven with traditional trust planning.

This article examines the genesis of Shariah and common law trusts and examines how those may be reconciled with each other. Whilst on the face of it, these distinct systems of law seem very different to each other, there are actually a large number of similarities between them. Drawing on these commonalities is key to prudent and insightful modern practice. Instead of interweaving Shariah and common law, practitioners have over the last several years focussed on the mitigation of the effect of forced heirship rules. This has reduced altruistic principles to a list of “do’s and don’ts”, equating the same to factual compliance without regard to concomitant obligations and intention. By going back to the beginning, we can understand more masterfully how to tackle current requirements in law and in spirit.

Common Law, Equity And Trusts

An appropriate place to commence in examining the interweaving of an equitable arrangement with a moral legal code is to remind ourselves of how equity originated and what the religion itself (and hence the law and morality that derives from it) comprises. This facilitates an extraction of their common themes – which will make for more accurate application in practice.

Until the Judicature Acts, there were two parallel systems of law in England, each with their own rights and remedies. Common law derived from justice as the prerogative of the crown. Its laws and prescribed remedies were limited and strict, applied despite resulting hardship or injustice on the particular facts. To mitigate the ensuing rigidity, the chancellor developed a distinct court of ‘conscience’ in Chancery so as to avoid generalisation in law and acknowledge the impossibility of ‘universality’ (prescribing for every conceivable human action or scenario). As a result, over the centuries, to act ‘equitably’ has become synonymous with acting ‘fairly’. Equity and its judicial decisions emphasised judgement in a way which was fair and right, so that justice was achieved between these parties in this case. The chancellor decided based on his own sense of justice in the arising circumstances. This ensured fairness but also an inherently arbitrary outcome, said to vary with the length of the chancellor’s foot!

The need for creativity and conscience to mitigate the effect of common law was the very reason for equity’s genesis. It led in particular to the evolution of the trust as a synthesis of legal and equitable rights, remedies and interests. The recognition that one person held legal title to property, but that it was equitable they be compelled to use it for the benefit of another, is the origin of the split between legal and beneficial ownership. This duality enabled trusteeship, which started in the law of property.  In feudal England the crown presided over the pyramid structure that saw serfs beneath layers of tenure from overlords (taxation accompanying the use of property). The winds of change blew in when Englishmen found the need to avoid unconscionable treatment of landowners returning home from fighting the Islamic empire in the crusades. They found that the common law denied their claims, whereas the chancellor’s conscience afforded much needed principled recognition of their rights.

Eventually law reports and precedent led to the fusion of the parallel systems. However, key developments by then had included, amongst others: (i) the school of thought in Chancery being influenced by religious precepts (as well as natural justice) on account of chancellors usually having had theological training (as well as clerical) and being versed in Roman and Canon law, (ii) equity courts exercising jurisdiction over any person within their power notwithstanding that the subject property may have been situated abroad (out of the territory) which introduces a concept of jurisdiction without reference to territory and (iii) the principle of ‘stare decisis‘ obliging the court to follow the reasoning of prior decision, ensuring in common law that similar facts yielded similar results and so giving birth to certainty in the rule of common law.

Law And Morality

In England, canon law was deliberately developed as a separate body for matters concerning the administration of the church. Over centuries, the English distinction between morality, law and religion became greater. Divergent views were illustrated in modern times. One perspective opined that some areas of behaviour should be left to individual morality, rather than legal regulation (The Wolfenden Report). The other announced law and morality as fundamentally interconnected, the common morality as to what is good or evil being the cement of society, without which it would begin to disintegrate and with law having a right and duty to uphold that common morality (Lord Devlin).

The Role Of Religion

The best known Abrahamic religions, in chronological order of founding, are Judaism, Christianity and Islam. Each of these religions is based on monotheism: the belief that there is only one God. Whilst the messages and dogma of these religions set down to humankind through scripture and prophets as messengers have notable distinctions, there is also much overlap between them.

If the Abrahamic religions could be characterised by a single word, it has been said that for Judaism that might be ‘action‘, for Christians it may be ‘faith‘ but for Muslims it would certainly be ‘submission‘. The definition of the word Islam itself means submission and the nature of the religion is as an all-encompassing way of life that defers the individual prerogative to the tenets of the all-encompassing faith. Such subjugation enlightens the understanding that these religious principles permeate every aspect of a Muslim’s life from matters of personal status, to commerce, taxation, family matters, inheritance, worship, society, law and morality. There is no distinction between these spheres, in stark contrast to the illustrated evolution of partially separate law and morality in common law territories. In addition, since the submission is of personal will, the code of religious conduct applies universally without reference to jurisdiction by territory, exactly as illustrated in equity’s origins. It is for this reason that understanding Islamic tenets and the desire of Muslims to follow them, is key for private client practitioners. Divorcing the spirit of such principles from the prescriptions of specific rules is akin to applying common law without the conscience of equity but with the result being an arrangement that a Muslim believes God will judge them by, not merely the judiciary.

Sometimes there is a conceived rationale or desire to avoid forced heirship rules on the part of the client and solution-seeking practitioner. However such rationale may be misplaced if it demonstrates little or no understanding of (i) the origins of such rules and (ii) the tools that can enable compliant planning without evasion, but achieving the desired results in effect. To explore these origins further, it is necessary to travel backwards in time to examine the practices of society in pre-Islamic Arabia, being the location for the birthplace of Islam.

Pagan Arabia

Living conditions were harsh in the unforgiving desert environment of pagan Arabia. When not battling the searing heat, limited resources and barren landscape, hostility was directed between the inhabitants enduring the tough surroundings. The nomadic peoples, comprising patriarchal families, forged tribal relationships for the protectionism of units, drawing strength from alliances and blood ties. Their law, morality and custom was informed by and derived from their pagan beliefs. Those practices were reflective of the harsh way of life and societal setup of the time, reinforcing the patriarchy, which in turn supplied the protection and communal grouping vital to survival.

Naturally, the most valued resources were strength of numbers and preservation of wealth in all its local forms. Men would make contracts of mutual alliance, agreeing to pursue each other’s blood feuds with reciprocity and tying this to inheritance of each other’s wealth as a reward for such vengeance. This had the effect of incentivising  loyalty and the taking up of arms in consideration of capital. It was compounded by the misuse of acts like adoption whereby adopted sons were afforded the same rights of inheritance as biological sons, provided they could bear arms (notwithstanding their paternity being known). The pre-packaging of inheritance in this manner had the net effect of preserving the prevailing patriarchy to the exclusion of females (and their relatives), some males (with the nearest male taking the entire estate) and ascendants or collaterals who would find themselves exposed at the sharp end of such arrangements.

These archaic practices enabled the preservation of the status quo in succession within families. Power and wealth were directly linked in this regard. It also concentrated wealth in the hands of dominant leaders, stripping all other beneficiaries of defined rights or identifiable shares. Utterly repugnant local customs even extended to female infanticide. In some cases females and slaves were on par with chattels in the estate. This was abhorrent not only to our modern sensibilities: it was as equally unacceptable to the pre-eminent social reformer of the time, the Prophet Muhammed (may peace be upon him) 1.

The Advent Of Islam

During the last 22 years of his life, beginning at the age of 40 in 610 CE, the Prophet Muhammed MPBUH reported revelations from God conveyed to him through the archangel Gabriel. The content of these revelations were known as the Quran. They comprised moral, ethical, conduct and societal codes, rights, obligations and responsibilities along with prophecy. Revelation focussed on belief in one God, abandonment of polytheism and the destabilisation of the immoral prevailing social order by prescribing an ethically principled way of living. The Prophet’s MPBUH own conduct during his lifetime supplements the primary inalienable divine source of the Quran. This is accompanied by the consensus of scholars interpreting these primary sources, to form the Shariah (Islamic principles for religious, moral, social, economic, political and legal norms) and to facilitate universality in time and place in so far as that is possible without a codified body. Such is the basis of Shariah; being a complete way of life for Muslims, with submission to Divine Will sans distinction between law, morality, private or public spheres. The religious authority, military force and state bodies were all one and the same establishment, because the law and principles drew no distinction between them.

Societal Reform

Shariah’s objective is the welfare of the community. This encompasses the civilisation and ordering of society by prescribing for ethical conduct by its members and their families. Such altruism generated prescribed regulations and forced rules to create and maintain order, but also to specifically address and seek to correct the prevalent pagan practices. Establishing defined rights and shares in fixed portions in the case of inheritance (with some testamentary discretion) emanated from this necessity. The rigidity was akin to common law’s approach to enshrinement of fixed remedies but the philosophy (informed by the same Abrahamic monotheistic morality as chancellors in equity would be centuries later) was based in common morality. Justice sought to address the specific needs of these parties in this circumstance (again, a comparison can be drawn to equity) and individuals had defined rights, but these were subjugated to those of the community.

The rules sought to distribute wealth amongst all entitled and legitimate beneficiaries. This avoided the prevalent concentration in patriarchal hands, whilst simultaneously maintaining the protectionism that was so key to survival in the harsh environment. The need to achieve this balance of retaining the benefit of protectionism whilst eradicating immoral conduct, explains why the Islamic succession rules are a fusion with (not a complete replacement) of the old customs with new prescriptions. The emphasis shifted to rights and shares. The shares were not equal in quantum because those with rights to greater portions (e.g. sons) were burdened with the obligations of maintenance to those with fewer shares (e.g. daughters). The obligations necessarily accompanied the entitlements and accepting that duality as not being mutually exclusive is key to understanding why private client practitioners cannot implement or avoid the prescriptive shares without specifying the concomitant obligations too (and vice versa).

Reproducing all of the inheritance entitlements and exclusions would entail a tome in itself and is not the purpose of this article. That data is retrievable from primary and other established sources. There are different schools of thought in Islamic law which have interpreted the pervasive principles of Shariah to different derivations and these are principled in a waterfall of distributions and exclusions but not codified. The lack of codification and reliance instead on scholarly opinion entails a disparate body of detail, which because it is inherently bespoke to each situation (these parties, this situation) makes it involved to illustrate generically. Instead, a rarer focus is to examine how solutions can be determined which embrace the genesis and similarities, as well as spirit between common law and Shariah, instead of resorting to a tick-box exercise of avoidance.

Islamic Endowment

At this juncture it is also helpful to note that the instrument of Islamic donation and endowment (referred to in Arabic as a ‘waqf’) is not necessarily a substitute for a common law trust that complies with Shariah principles. A waqf is a permanent dedication of property for charitable, pious or religious purposes. The subject assets become the property of God and are managed by an appointed administrator (which in the modern age, may be a municipal body, taking the private arrangement into the public sphere). Whilst in some cases the founder and their family may benefit from income, the beneficiaries have no capital interest and the ultimate purpose is necessarily philanthropic. The arrangements must be irrevocable, established inter vivos and  in some cases perpetual. They are also inalienable as to capital, which can never be depleted, with the result being the inaccessible tie-up of capital alongside its protection.

Trusts For Muslims

In the modern era, many Muslim families, particularly those from the Gulf Co-operation Council States and parts of Asia have become very wealthy. Their portfolio holdings are cross-border and  complex. Their income generating or core assets are often in jurisdictions that are less politically certain or secure than Western common law territories. Such geo-political factors impinge on the private client practitioner’s advice and reinforce the attraction of stable, certain and transparent jurisdictions such as Jersey. The drivers for professionally advised structures include confidentiality, tax and cost efficiency, limitation of liability, risk management, separation of portfolios by debt and geography, avoidance of cross-collateralisation, political stability, ring-fencing and enabling assets to be bought and sold easily. Maintaining wealth and income is key. The certainty of case law, respect for privacy and testamentary freedom, combined with the availability of a higher calibre of professional services, facilitates succession planning through use of offshore trusts and common law arrangements for these families.

However, as we have seen, the overlay of Shariah is as equally important a factor to be accounted. Whilst it is understandably a challenge for the practitioner to access, comprehend and apply religious principles in the context of estate planning (without succumbing to the pitfalls of opinion shopping), this must not be an abrogation of the responsibility to do so. Indeed, since a number of countries in which Islam is the religion of state seek to apply jurisdiction without reference to territory or location of assets, the failure to account for Shariah in a disclosed offshore structure could lead to claims or litigation onshore. In the ultimate scenario, this could result in the court overruling the non-compliant structure – or ignoring it and intervening – thereby effectively nullifying the advice taken.

Shaping Solutions

The planning tools available are numerous and dynamic when harmonised together effectively.

Consent is a useful alleviation of the presumption that an estate should be broken up on death. Anticipated beneficiaries can come together and set out their intention to keep the portfolio together, thereby recording their consent to do so, whilst maintaining their own identifiable interests.

The settlement during lifetime of sub-funds or equity, the quantum of which is reflective of Shariah prescribed proportions is also a helpful adhesion. It is particularly noteworthy that lifetime gifts need not be constrained by prescribed proportions. This is often overlooked, but do be mindful of clawback rules and conditions.

When accompanied by an effective family charter (or in the case of a family business company, a binding shareholder’s agreement that includes the expression of wishes and disincentives for break-up) this can have the desired effect through use of the law of contract, without avoiding Shariah.

When providing for the allocation of capital in prescribed proportions, it is imperative to joinder the rights to entitlements with the accompanying obligations and responsibilities. This is particularly the case where males and females are allotted unequal shares – the male portions must then be encumbered by the requirements to provide for the subject females, as befits the original intention of the system.

It is not necessary to provide for Shariah in a governing role in legal documentation. In fact, given the certainty that offshore law will be stated as the governing law of the arrangement, to also provide for Shariah would entail a conflict of laws. This will manifest itself, amongst other things, on issues such as accrual of interest (which is prohibited) and on the requirement to ensure finance facilities are Shariah compliant (structured using Islamic contracts of profit sharing, partnership or lease) or the investment of trust assets in a manner that meets Shariah obligations (for example, avoiding arms, gambling and prohibited consumables such as pork and alcohol).

Since Islam does not seek to establish comprehensive prescriptions for every conceivable claim or scenario in succession planning, surely it would be prudent to include a role, alongside the trustee (who, incidentally, should also be mindful of Shariah issues albeit not necessarily attempting to resolve them without expert opinion)  for a specialist Muslim protector or guardian who would be consulted for advice and guidance on arising scenarios. Noting that such protector’s duty would be to inform the trustees of Shariah requirements notwithstanding market pressures (conventional or non-Shariah investments and facilities are often more readily available and lower cost). The provision for such an  ‘Islamic conscience’ within a common law trust structure is entirely in keeping with the chancellor’s original role in Chancery at the advent of the common law trust itself and would serve well the needs of these beneficiaries in this particular arrangement.


The common law trust‘s tremendous flexibility has enabled it to adapt through the centuries and into new social and commercial contexts. It has even been referenced as the ‘greatest and most distinctive achievement performed by Englishmen in the field of jurisprudence‘ (Maitland). The prevalent characteristic of equity has been its capacity to develop new rights and remedies over time, for the benefit of the people. The need for such creativity in English law was the very reason for equity’s genesis and it led to the evolution of the trust in particular. This is exactly why it is particularly ironic that common law trusts are often used to evade forced heirship laws and avoid Shariah rather than embracing it and enabling the settlor’s intentions within the spirit and parameters of the moral law.

Clients wish to have structures they can trust as robust, but they also desire the fulfilment of the convictions of the soul, alongside their familial aspirations. Practitioners face the challenge of anticipating structural attack from creditors, divorces, leaks and litigation. They have to provide for such contests whilst accepting a new world of transparency and striving for good governance. Shariah compliance comes in addition to all this. However, by making use of the tools that Shariah and the common law both offer together and not avoiding or evading requirements, practitioners can find robust solutions that are secure, certain and well-regulated as well as morally and spiritually sound.

1 May peace be upon him or MPBUH is the English translation of a phrase used by Muslims whenever they refer to the name of the Prophet Muhammed MPBUH, as a sign of great respect and honour.

Mustafa Hussain, ‘In spirit and in law’, STEP Trust Quarterly Review (Vol18 Iss2), pp.26-32

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