A month after the Baltic Exchange started its scheme to provide safeguards for sale-and-purchase cash through Singapore’s OCBC Bank, deals are in progress.
The Baltic’s Asia-Pacific head, Chris Jones, describes interest in the escrow service as very high.
“We have received a large amount of enquiries and are in the process of doing some deals,” he told TradeWinds.
“Interest has come from both owners and brokers, and even from non-members.”
To use the service, the buyer needs to be a Baltic Exchange member, although there are plans to expand this to support transactions in which the seller or broker is a member. Both parties involved in the deal pay a set fee of $5,000.
Jones, a former S&P shipbroker, who jokingly describes himself as having been in the business long enough to have sold a livestock carrier to a man named Noah, was the driver in setting up the service, which he described as designed to make life a bit easier for members.
Massive paperwork
“Setting up [a] joint or escrow account is a lot of hassle,” he said. “The paperwork is massive. A lot of lawyers offer this facility, so we thought it would be good to offer the service to our members.”
Providing such services should help attract more members, he added.
Under the terms of any sale agreement that incorporates the escrow service, the Baltic is the deposit holder. OCBC Bank provides the joint deposit account, while the Baltic’s parent, the Singapore Exchange (SGX), provides the oversight.
“Their [SGX] compliance rules are very strict,” Jones said. “The SGX in-house compliance platform does intense background checks, but it can be done very quickly.”
The escrow service will soon be made available to hold security deposits for dispute-resolution cases.
This ties in well with Singapore’s aim of being an international dispute-resolution centre; it will not be restricted only to cases being arbitrated there.
“It is early days, so we have not actively promoted the escrow service for disputes, but we do have the capability of doing it now,” Jones said.
Since it was bought out by the SGX in November 2016, the Baltic’s more Asia-centric approach has led to a substantial growth in its membership base there.
Jones said it has added 65 new Asian members, and is garnering a lot more interest from Japan and India.
Its Singapore office has also seen a substantial rise in its volume of debt collecting.
Although not an official debt collector, the Baltic provides support to its members involved with commercial disputes through its system of “posting”, whereby the exchange lets its entire membership know if a company has withheld payment to a member, such as not paying a commission or honouring an arbitration award.
Big stick
“It is a free service to members and works well for smaller amounts,” Jones said. “The threat of being posted acts as a big stick, and more often than not the amount is quickly paid.”
The service has been proving particularly successful in Singapore and he estimated that outstanding amounts totalling more than $4m were paid this year through the Baltic’s intervention.
