Arbitration Security Escrow

Arbitration Security Escrow is an arrangement used to hold funds provided as security during arbitration proceedings.

Instead of paying money into court or transferring funds to the other party, an agreed sum is paid into an independent escrow account. The funds are held there and released only when the agreed conditions are met.

This provides security to the receiving party while keeping the funds neutral and protected throughout the arbitration.

Arbitration Security Escrow is suitable for claimants and respondents involved in arbitration where security is required or ordered.

It is commonly used in institutional arbitration and ad hoc arbitration, including international proceedings. Escrow may be used where security is ordered by the arbitral tribunal or agreed between the parties.

It is particularly relevant where one party is based overseas, where enforcement risk is a concern, or where payment into court is not available or appropriate.

Arbitration Security Escrow is typically put in place after an arbitral tribunal orders security, or where the parties agree to provide security without a formal order.

It may also be used at an early stage to avoid procedural disputes, or later in the arbitration if circumstances change, such as concerns about solvency or recoverability of costs.

Escrow can be used throughout the life of the arbitration and remains in place until the agreed conditions for release are met.

In arbitration, security for costs is often required where there is concern about recoverability at the end of proceedings. This can arise because a party is based overseas, has limited assets, or may become insolvent.

Unlike court proceedings, there is usually no mechanism to pay money into court. Parties are therefore left to agree alternative arrangements or rely on direct payment to the other side, which can raise concerns about control and neutrality.

Arbitration Security Escrow addresses these issues by providing a neutral place to hold security funds, without requiring payment into court or transfer of control to the opposing party.

The primary benefit of Arbitration Security Escrow is neutrality. Funds are held independently and are not under the control of either party.

This gives the receiving party confidence that security is genuinely in place, while protecting the paying party from an irreversible transfer of funds.

Escrow also provides clarity. Everyone knows where the money is held, what it is for, and the conditions under which it can be released.

Benefits for the party receiving security

For the party receiving security, escrow provides assurance that funds are ring-fenced and available if a costs award is made in their favour.

Funds held in escrow are not dependent on the future cooperation or solvency of the paying party. This can be particularly important in international arbitration, where enforcement may be complex or slow.

Escrow can also reduce the need for further procedural applications, as the mechanism for holding and releasing security is already agreed.

Benefits for the party providing security

For the party providing security, escrow avoids paying funds directly to an opponent or into an unfamiliar legal system.

Funds remain protected and can be returned if the arbitration concludes in their favour, is discontinued, or settles on agreed terms. This can be important where proceedings are lengthy or where significant sums are involved.

Using escrow can also reduce friction and allow the arbitration to proceed without repeated disputes about security arrangements.

Benefits in international arbitration

In international arbitration, parties often come from different jurisdictions with different legal systems.

Arbitration Security Escrow provides a practical and jurisdiction-neutral solution. Funds can be held independently and released in line with the arbitral award or settlement, without relying on local court processes.

This supports enforceability and reduces uncertainty for both parties.

Benefits for arbitrators and advisors

For arbitrators, escrow provides a clear and predictable way to implement security orders. It avoids the need for ongoing supervision of how funds are held.

For legal advisors, escrow reduces administrative burden and provides a neutral mechanism that can be integrated into procedural timetables and orders.

This can support procedural efficiency and reduce the scope for satellite disputes.

Arbitration Security Escrow can be structured in different ways, depending on how security is required. There is no single standard model.

Most commonly, escrow is used to hold a fixed sum ordered by an arbitral tribunal as security for costs. The funds are paid into escrow and held until the arbitration concludes or the order is varied.

Escrow may also be used where the parties agree to provide security without a formal order, for example to avoid procedural disputes or to satisfy concerns raised during the arbitration.

Yes. Arbitration Security Escrow arrangements are often tailored to reflect the scope, duration and risk profile of the arbitration.

Security may be provided in tranches, increased or reduced at agreed stages, or linked to procedural milestones. Escrow can also be combined with other forms of security, such as guarantees or insurance, where a layered approach is appropriate.

Advisors often recommend tailored escrow structures in complex or long-running arbitrations, particularly where circumstances may change over time.

All escrow arrangements are administered through the dospay digital escrow portal.

The portal provides a single place where authorised parties can view account balances, payment history and escrow status. It also supports the submission and tracking of information required for payments or releases, in line with the escrow agreement.

Using a digital portal reduces reliance on email chains and manual reconciliation. It improves transparency and creates a clear audit trail for payments and releases. Advisors often find this helpful when reviewing payment history or responding to queries during the life of the project.

In practice, Arbitration Security Escrow works by holding the security funds independently while the arbitration proceeds.

The party providing security pays the agreed amount into escrow. The funds remain held and cannot be accessed by either party without agreement or an appropriate tribunal direction.

At the end of the arbitration, or when the relevant stage is reached, funds are released from escrow in line with the arbitral award, settlement terms or agreed procedure.

Arbitration Security Escrow does not replace the authority of the arbitral tribunal or the applicable arbitration rules. Any order for security continues to apply.

The escrow agreement implements the tribunal’s order or the parties’ agreement by setting out how the funds are held and when they may be released. Release conditions usually reflect the outcome of the arbitration, such as a final award, settlement or withdrawal of claims.

The escrow agent does not assess entitlement or interpret arbitral decisions. It holds and releases funds strictly in line with the escrow agreement and the tribunal’s directions.

Only parties authorised under the escrow agreement can give instructions to the escrow agent. This is agreed at the outset and documented clearly.

Instructions are usually tied to specific events, such as the issue of a certificate, confirmation of a milestone or the occurrence of a payment default. The escrow agent checks that the instruction matches the agreed conditions before acting.

This approach ensures that payments are controlled, predictable and not dependent on informal requests or unilateral decisions by one party.

Only parties authorised under the escrow agreement can give instructions to the escrow agent. This is agreed and documented at the outset.

Instructions are typically linked to clear procedural events, such as the issue of a final award, confirmation of settlement or agreement that the arbitration has concluded.

The escrow agent checks that the instruction matches the agreed conditions before acting. Informal or unilateral requests are not accepted.

Below is a practical view of the steps that parties typically follow when using Arbitration Security Escrow.

1. ‍Provide security into escrow
   The party ordered or agreeing to provide security pays the required amount into the escrow account.‍
2. Funds held while arbitration proceeds
   The funds remain held independently while the arbitration continues and procedural steps are taken.‍
3. Arbitration concludes or relevant determination is made
   The tribunal issues a final award, the parties settle, or the proceedings are discontinued.‍
4. Release funds in line with the outcome
   Funds are released from escrow in accordance with the arbitral award, settlement terms or agreed procedure.‍
5. Return any remaining balance where appropriate
   Any balance not required to satisfy a costs order is returned to the paying party in line with the escrow agreement.

Setting up an Arbitration Security Escrow account starts with confirming that security is required and the amount to be provided. This may be pursuant to an order of the arbitral tribunal or by agreement between the parties.

An escrow agreement is then prepared. This document sets out how the security funds will be held, who can give instructions and the circumstances in which funds may be released. It aligns with the tribunal’s order or the parties’ agreement.

At the same time, we begin the account opening and onboarding process so the account is ready to receive funds promptly.

The time needed to open an Arbitration Security Escrow account depends on the parties involved and the complexity of the arbitration.

For straightforward matters, account opening can usually be completed within a short period once the required information has been provided and the escrow agreement is agreed. Arbitrations involving overseas parties or complex ownership structures may take longer.

Most delays arise from incomplete onboarding information rather than from the escrow process itself.

To open an Arbitration Security Escrow account, standard onboarding checks are required. These are similar to the checks required when opening a bank account or instructing a law firm.

This usually includes confirming the identity of authorised individuals, the ownership and control of any corporate parties, and the source of the security funds.

We may also need basic information about the arbitration, such as the tribunal, seat and the relevant order or agreement requiring security.

The following information is typically required to open an Arbitration Security Escrow account:

• Details of the parties to the arbitration
• Identification information for authorised individuals
• Corporate documents showing ownership and control, where applicable
• Source of funds information for the security amount
• Copy or summary of the tribunal’s security order or agreement
• Amount of security to be held and any staged arrangements
• Expected duration of the arbitration

Providing this information clearly and early helps ensure the account can be opened without unnecessary delay.

An Arbitration Security Escrow account is funded by the party required to provide security.

The amount is usually set by an arbitral tribunal or agreed between the parties. The paying party transfers the security sum into the escrow account by the deadline specified in the order or agreement.

Once paid in, the funds are ring-fenced and held only for the purpose of providing security for costs.

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Payments from an Arbitration Security Escrow account are made only when the agreed release conditions are met.

These conditions are set out in the escrow agreement and usually reflect the outcome of the arbitration. This may include a final award on costs, a settlement agreement or confirmation that the proceedings have concluded without a costs liability.

When a release request is made, we check that the agreed conditions have been satisfied before releasing funds in line with the escrow agreement.

If instructions are disputed or unclear, we will not release the funds.

Instead, the funds remain held safely in the escrow account while the parties follow the process set out in the escrow agreement. This may involve clarification, confirmation from an agreed third party, or the use of the dispute resolution process under the underlying contract.

This approach protects both parties. It ensures that money is not released prematurely and that funds remain available once the position is resolved.

If a party to the underyling contract becomes insolvent, we continue to operate under the escrow agreement.

Because the funds are held in escrow and not in the control of either party, they are protected from being used for other purposes. We will follow the agreed instructions and any applicable insolvency process, as set out in the escrow agreement.

In practice, this can provide greater certainty than relying on funds held directly by one of the parties, particularly where payment timing or entitlement is being considered as part of an insolvency situation.

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What happens if DOS & Co. becomes insolvent?

All escrow funds are segregated (kept separate from our own funds), safeguarded (protected by law from our own creditors) and kept liquid and unencumbered at the Bank of England. In the event of our insolvency, we have set aside regulatory capital that will be used by our administrators to 'unwind' our affairs - this will usually involve working with the parties to agree the identity of a new escrow agent who will 'step in' to carry out our obligations under the escrow agreement.

Funds paid into an escrow account are held separately from the money of the parties and separately from our own funds. They are not mixed with operational accounts.

All of our escrow funds are held liquid and unencumbered at the Bank of England. This means that there is no counterparty risk (the bank does not lend out funds, so a 'run on the bank' is not possible).

The escrow account is set up specifically for the purposes agreed in the escrow agreement. Funds can only be used in line with that agreement and cannot be applied for any other purpose.

This separation helps protect the funds if something goes wrong elsewhere. For example, the funds are not available to the creditors of the Employer, the Contractor, us, or the underlying bank. They remain ring-fenced for the project until they are released in accordance with the agreed conditions.

We are regulated by the Financial Conduct Authority for the provision of payment services. This means we are required to meet regulatory standards around governance, systems, controls and the handling of client funds.

Where escrow arrangements involve regulated payment activity, those activities are carried out within that regulatory framework. Other aspects of escrow are contractual in nature and governed by the escrow agreement between us and the parties.

In practical terms, this combination of regulation and contract provides structure and oversight, while still allowing escrow arrangements to be tailored to the needs of a specific matter or project.

Escrow is designed to hold, protect and release funds in line with agreed conditions. It does not decide who is right or wrong in a dispute.

We do not interpret the underlying contract, assess the quality of anything done or delivered under that underlying contract, or replace the role of a contract administrator, adjudicator or court. If there is a dispute, the funds remain held while the parties follow the agreed dispute resolution process.

The escrow arrangement also does not remove the need for a properly drafted underlying contract. It supports that contract by providing a clear and neutral payment mechanism, but it does not change the parties’ underlying rights or obligations.

Escrow pricing depends on the structure, value and duration of the escrow arrangement. There is no single fixed fee, as projects and payment flows vary.

Pricing usually reflects three main elements. First, the work involved in setting up the escrow arrangement, including compliance, onboarding and preparation of the escrow agreement. Second, the ongoing administration of the escrow account while funds are held. Third, the handling of payments or releases during the life of the project.

What pricing covers is the independent holding of funds, administration of agreed payment mechanics, record-keeping, reporting, all bank fees and support throughout the project. It does not cover legal advice, contract administration or dispute resolution, which remain the responsibility of the parties and their advisors.

If something goes wrong, the escrow arrangement provides a clear framework for dealing with it.

If there is a mistake, delay or disagreement about instructions, funds remain safely held in escrow while the issue is addressed. We follow the process set out in the escrow agreement and do not release funds unless and until the agreed conditions are met.

If a party has a concern about how the escrow account is being operated, we have a formal complaints process. This allows issues to be raised, reviewed and resolved in a structured way, with escalation routes available if needed.

We are a specialist provider focused on escrow and managed payment arrangements. Escrow is not an add-on to another service. It is a core part of what we do.

Escrow funds are held securely and separately, with infrastructure designed specifically for escrow rather than adapted from other uses. Account opening is handled efficiently, and escrow arrangements are administered through a dedicated digital escrow portal, giving authorised parties visibility and a clear audit trail.

Advisors often recommend dospay because we sit independently of the transaction, operate within a regulated framework, have a proven track record and focus on doing one thing well: Holding and administering escrow funds in a clear, neutral and predictable way.