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This article provides a practical and legally grounded overview of escrow arrangements in Dubai, clarifying their regulatory framework, typical use cases, and best practices for international counterparties.
Dubai and the broader United Arab Emirates (UAE) continue to attract sophisticated international investors, particularly in complex commercial transactions involving energy, commodities and cross-border trade.
Among the contractual mechanisms used to manage financial and performance risk, escrow accounts stand out as a versatile — yet frequently misunderstood — tool.1
An escrow account is a contractual and banking arrangement whereby funds are deposited with a neutral third party — typically a licensed financial institution — to be held and released only upon the fulfilment of clearly defined contractual conditions.
Escrow mechanisms are widely used in cross-border transactions to mitigate risks related to non-performance, delayed delivery, regulatory approvals or milestone-based obligations.
The legal treatment of escrow accounts in Dubai depends entirely on the nature of the underlying transaction. It is critical to distinguish between three different regulatory environments:
Under Dubai Law No. 8 of 2007, escrow accounts are mandatory for off-plan real estate developments. This regime is regulated by the Real Estate Regulatory Agency (RERA) and the Dubai Land Department (DLD) and applies exclusively to property development projects.
This framework does not extend to commercial, energy or industrial transactions.2
ln oil & gas and broader energy projects, escrow accounts are not legally mandatory.3 Their use is entirely contractual and governed by general principles of UAE commercial and civil law, notably:
These laws recognize conditional payment mechanisms, third-party fund retention and freedom of contract, allowing parties to structure escrow arrangements as part of their commercial risk allocation.
Beyond oil & gas, escrow accounts are commonly used in a wide range of other transactions, including:
In all such cases, escrow remains a voluntary but highly effective contractual instrument, tailored to the specific risk profile of the transaction rather than imposed by regulation.
Rather than being limited to a single transaction type, escrow accounts form part of a broader set of best practices in complex commercial deals, particularly where trust, timing and performance are critical.
Escrow arrangements are frequently adopted where there is:
A robust escrow structure usually involves:
While escrow mechanisms are often associated with investor protection, they are equally relevant for any paying party seeking certainty that funds will only be released when contractual obligations are met.
A common source of dispute arises when escrow conditions are poorly aligned with the main agreement. Release triggers must be precise, objective and operationally feasible.
Careful consideration should be given to:
In international transactions, arbitration or common-law-based forums (such as ADGM Courts) are frequently preferred.
The escrow agent’s role is neutral but operationally critical. Banks licensed by the UAE Central Bank or reputable international institutions are commonly appointed, subject to compliance acceptance.
When properly designed, escrow mechanisms add predictability and trust to complex transactions. However, execution failures are common and often costly.
These issues frequently result in frozen funds, delayed projects, loss of commercial leverage or costly disputes — precisely the risks escrow is meant to prevent.
A well-structured escrow arrangement must therefore be treated not as a formality, but as a core component of the transaction architecture.
Escrow accounts are not a statutory requirement in Dubai for oil & gas or commercial transactions. They are, however, a powerful contractual tool for managing risk, aligning incentives and protecting paying parties in complex, high-value deals.
When structured with legal precision and commercial awareness, escrow arrangements significantly enhance transaction security and execution certainty.4
How can Struecker Hungaro help?
Struecker Hungaro Advogados acts as a legal advisor in Brazil for international companies and investors, providing comprehensive legal support for cross-border transactions and market entry strategies.
Our team advises clients from the incorporation of local entities in Brazil to the structuring and negotiation of commercial agreements, including distribution agreements, agency and commercial representation contracts, as well as public contracts and government procurement procedures (public tenders).
Whether you are assessing escrow mechanisms, establishing operations in Brazil or structuring complex international transactions, we deliver enforceable, efficient and investor-ready legal solutions aligned with international standards and local regulatory requirements..
If you are researching tax planning, international corporate structures or cross-border transactions, our blog offers additional articles that may help you better understand the legal and strategic landscape:
Especialista em M&A, holdings e contratos empresariais, fluente em alemão, inglês e espanhol.
