Third-party deposit

With a third-party deposit, money or documents are handed to a neutral party. It holds them and passes them to the recipient once the conditions agreed by the parties are met. Until then, neither the seller nor the buyer can dispose of them.

Where it is used

Russian law has several forms. A debtor can deposit money with a notary if the creditor avoids accepting it. The Civil Code separately governs the conditional deposit agreement, or escrow: the depositary holds the property and transfers it to the recipient when the agreed grounds arise. For money, an escrow account at a bank is used.

In foreign trade, a third-party deposit is needed when the parties know little about each other: the buyer is ready to pay, the seller is ready to ship, but neither wants to go first.

How it differs from a letter of credit and a guarantee

With a letter of credit, the bank itself undertakes to pay against documents. A bank guarantee comes into play only if something goes wrong. With a third-party deposit, the money is already separated from the parties and sits with a third party until the conditions are met.

What to watch for

The agreement must clearly describe the release conditions: which documents or events, who confirms them, and what happens if the conditions are not met by the deadline. The depositary is responsible for safekeeping and usually charges a fee for the service. For an international deal, it is important that both parties’ banks can work with the depositary’s bank.

At VEDmost, a similar task is handled by escrow on request: the roubles wait for execution in a special escrow account at a Russian bank, for an additional fee. More details: Payment protection.