How to Open an Escrow Account in Ukraine

Starting from 23rd of March 2017, Ukrainian government has introduced amendments to the Civil Code of Ukraine and allowed to open and use escrow accounts. Escrow account is a type of bank account, which allows owner of funds to give irrevocable instruction to the bank to send the funds to a specific individual or legal entity (hereinafter – the Beneficiary) subject to occurrence of certain circumstances (hereinafter – the Event).

As defined in Civil Code of Ukraine, escrow account has the following key features:

it can be opened only with a bank;
escrow account agreement (hereinafter – Escrow agreement) is concluded between the bank and owner of the account (payer). Additionally, Beneficiary can be included as a party to Escrow agreement. If the Beneficiary is a party to Escrow agreement, any amendment to such agreement are valid only providing they are signed both by bank, owner of escrow account and the Beneficiary;
Neither owner of the account, not Beneficiary are entitled to use funds on the escrow account;
Escrow agreement should contain information on the Event, which is a condition to transfer funds to the Beneficiary, as well as documents, confirming the Event and party, authorized to confirm occurrence of the Event;
Escrow agreement may include conditions when funds should be transferred back from escrow account to a regular account of the account owner;
Escrow agreement is concluded for a limited period of time. If during this time the Event which is a condition of transferring funds to Beneficiary did not occur, funds should be returned to the owner (regular current account of the owner or in cash as defined in Escrow agreement);
if otherwise not defined by the Escrow agreement, the bank is an institution which is entitled to confirm occurrence of the Event (this right can be imposed on other party as per Escrow agreement, for example, a notary, an attorney etc);
if otherwise not defined by the Escrow agreement, the bank will check documents confirming occurrence of the Event only based on external characteristics;
if based on bank’s examination of the documents the bank decides that Event has occurred, the bank has to transfer funds from escrow account of the account owner to bank account of the Beneficiary or other party, defined by the Beneficiary within 5 working days upon receipt of the demand (unless other term is defined by the Escrow agreement);
if based on bank’s examination of the documents the bank decides that documents do not confirm occurrence of the Event as per provisions of the Escrow agreement, the bank has to refuse the Beneficiary with explanation of reasons of such refusal within 5 working days from receipt of the demand.

Therefore, escrow accounts can be used for any settlements between the parties, including for settlements for real-estate or other investment transactions.

Please note that foreign nationals may use escrow account for settlements only for their investment in Ukraine. Such settlements can be made either in UAH or foreign currency of the 1st group of Classifier of Foreign Currencies (including USD, EUR, GBP, CAD and others). However, when the Beneficiary is a private individual-resident of Ukraine, the foreign investor can make escrow payment only in UAH currency.

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