Escrow
Escrow is an arrangement whereby an independent third party holds funds or assets until the agreed conditions have been met.
Escrow, also referred to in Dutch as a derdengeldenregeling, is a contractual arrangement whereby the parties appoint a neutral escrow agent to hold funds, documents or goods in custody. The agent releases the assets only once the conditions set out in the escrow agreement have been satisfied.
The arrangement is particularly relevant in transactions where the parties lack sufficient mutual trust, such as mergers and acquisitions, real estate transfers and international trade agreements. The escrow provides an additional safeguard against non-performance and limits the associated risks.
In practice, the escrow agent is typically a notary or a specialised bank that acts strictly in accordance with the instructions contained in the escrow agreement. The release conditions are drafted with precision to prevent subsequent disputes.
“The buyer and the seller agreed to have the purchase price held in an escrow account until the final warranties had been fulfilled.”
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