Shipyard Escrow

Shipyard Escrow is an arrangement used in the construction of large vessels to hold client funds securely during the build process.

Instead of the buyer paying stage payments directly to the shipyard, agreed sums are paid into an independent escrow account. The funds are held there and released only when agreed conditions are met.

Shipyard Escrow is commonly used for the construction of cruise ships, superyachts, large commercial vessels, bespoke tenders and specialist marine assets.

Shipyard Escrow is suitable for vessel owners, shipyards, project managers and advisors involved in long-term vessel construction projects.

It is particularly relevant where the build involves high-value stage payments, forward purchase of raw materials, or commissioning of bespoke interiors, systems or equipment.

Escrow is also used where the buyer wants assurance that funds will be applied to the build as agreed, and where the shipyard wants confidence that funds are committed before incurring significant upfront costs.

Shipyard Escrow is suitable for vessel owners, shipyards, project managers and advisors involved in long-term vessel construction projects.

It is particularly relevant where the build involves high-value stage payments, forward purchase of raw materials, or commissioning of bespoke interiors, systems or equipment.

Escrow is also used where the buyer wants assurance that funds will be applied to the build as agreed, and where the shipyard wants confidence that funds are committed before incurring significant upfront costs.

Vessel construction projects typically run over long periods and involve significant upfront costs. Shipyards may need to commit to raw materials, engines, propulsion systems or bespoke interior finishes well before they are paid for under standard stage payment schedules.

Buyers may be concerned about paying large sums directly to a shipyard before work is completed or materials are secured. Shipyards, on the other hand, may be unwilling to place orders or reserve production capacity without confidence that funds are committed.

Shipyard Escrow addresses these challenges by holding funds independently and releasing them only when agreed conditions are met. This reduces risk on both sides and supports orderly progress of the build.

The primary benefit of Shipyard Escrow is payment security with flexibility. Funds are genuinely set aside, but not paid away prematurely.

Escrow allows buyers to demonstrate that funds are available for the build, while retaining comfort that money will be released only in line with agreed milestones or procurement steps.

For shipyards, escrow provides assurance that client funds are committed and can be accessed once the agreed conditions are satisfied, supporting confident forward planning and procurement.

Benefits for vessel owners and buyers

For vessel owners and buyers, Shipyard Escrow reduces the risk of paying too much, too early.

Funds are protected while the build progresses and can be tied to clear milestones, certification or evidence of procurement. This can be particularly important where bespoke elements or long-lead items are involved.

Escrow also provides reassurance in the event of delay, change of specification or dispute, as funds remain held until the agreed process is followed.

Benefits for shipyards and builders

For shipyards and builders, Shipyard Escrow provides confidence that funds are available to support the build.

This allows shipyards to place advance orders, secure production slots and commission bespoke components without relying solely on contractual promises.

Escrow can also reduce financing pressure on the shipyard by aligning cash availability with procurement and build needs.

Benefits for project managers and advisors

For project managers, surveyors and advisors, Shipyard Escrow provides a clear and neutral framework for managing payment risk.

It reduces the need for ad hoc arrangements or informal assurances and supports disciplined release of funds against agreed milestones.

Escrow can also simplify discussions with funders, insurers and other stakeholders by demonstrating that payment arrangements are properly structured and secured.

Shipyard Escrow can be structured in different ways, depending on how the vessel build is funded and managed. There is no single standard model.

Most commonly, escrow is used to support stage payments linked to agreed build milestones. Funds are paid into escrow in advance and released as milestones are achieved.

Escrow is also used to secure forward procurement, such as steel, engines, propulsion systems or bespoke interior finishes. In these cases, funds may be released when purchase orders are placed or when materials are delivered to the yard.

Additional escrows may be used for change orders or upgrades agreed during the build.

Yes. Shipyard Escrow arrangements are often tailored to reflect the complexity and duration of the build.

Different escrow accounts may be used for different purposes, such as base build stages, long-lead items and bespoke elements. Alternatively, a single account may be used with clearly defined release conditions for each category.

Escrow can also be combined with other security arrangements, such as refund guarantees or insurance, where appropriate. Advisors often recommend tailored structures for high-value or bespoke projects.

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.

Shipyard Escrow works by holding build funds independently while construction and procurement activities take place.

Instead of the buyer paying stage payments directly to the shipyard, agreed sums are paid into an escrow account. The funds remain there until the agreed release conditions are met.

This allows work to progress without either party carrying unnecessary payment risk.

The shipbuilding contract and technical specifications continue to govern the build. They define milestones, quality standards, delivery dates and change procedures.

The escrow agreement sits alongside the build contract. It deals only with how funds are held and when they may be released. Release conditions usually mirror certification events under the build contract, such as milestone completion, surveyor sign-off or confirmation that materials have been procured.

The escrow agent does not assess build quality or interpret specifications. It releases funds only when the agreed evidence is provided.

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 objective events, such as certification by a project manager or surveyor, confirmation of delivery of long-lead items, or agreement of a change order.

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 Shipyard Escrow:

1. ‍Pay funds into escrow
   The buyer pays agreed stage or procurement sums into the escrow account in advance.‍
2. Funds held while work and procurement progress
   Funds remain held while construction milestones are reached or materials and components are ordered or delivered.‍
3. Provide certification or confirmation
   When a milestone is achieved or procurement step completed, the agreed certification or evidence is provided.‍
4. Release funds in line with the escrow agreement
   Funds are released from escrow to the shipyard in accordance with the agreed conditions.‍
5. Hold funds if conditions are not met
   If milestones are not achieved or evidence is incomplete, funds remain held until the agreed process is followed.

Setting up a Shipyard Escrow account starts with agreeing how the build will be funded and what the escrow will secure. This includes stage payments, forward procurement or bespoke change orders.

An escrow agreement is then prepared. This document sits alongside the shipbuilding contract and specifications and sets out how funds are held and when they may be released.

At the same time, we begin the account opening and onboarding process so the account is ready to receive funds before construction or procurement begins.

The time needed to open a Shipyard Escrow account depends on the parties involved and the complexity of the build.

For straightforward projects, account opening can usually be completed within a short period once the required information has been provided and the escrow agreement is agreed. Large or highly bespoke projects, or those involving multiple entities or jurisdictions, may take longer.

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

To open a Shipyard 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 the buyer and the shipyard, and the source of the funds to be paid into escrow.

We may also need high-level information about the vessel, the build programme and the relevant milestones so the escrow account can be set up correctly.

The following information is typically required to open a Shipyard Escrow account:

• Details of the vessel owner or buyer
• Details of the shipyard or builder
• Identification information for authorised individuals
• Corporate documents showing ownership and control
• Source of funds information for escrowed amounts
• Summary of the build contract and payment structure
• Agreed milestones, procurement items or release triggers
• Expected build timetable

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

A Shipyard Escrow account is funded by the vessel owner or buyer.

Funds are usually paid into escrow in advance of key build stages or procurement steps. This may include stage payments under the build contract, sums required for forward purchase of materials, or amounts linked to bespoke components or upgrades.

The funding structure and timing are agreed in advance and set out clearly in the escrow agreement.

Payments from a Shipyard Escrow account are made only when the agreed release conditions are met.

These conditions are usually linked to objective milestones, such as completion of a build stage, certification by a surveyor or project manager, or confirmation that materials or equipment have been ordered or delivered.

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.