As of March 14th, the Coronavirus COVID-19 disease had spread to more than 120 countries and territories, with more than 130,000 confirmed cases and millions of people under quarantine. The World Health Organization officially labelled the outbreak a pandemic.
With a global crisis like this, it is unfortunate but understandable that most meeting planners are being asked by their organizations to either cancel or postpone their events.
In a crisis situation, a major benefit of advance deposits being held in escrow trust is that neither party can “hold the money hostage” and must negotiate fairly and in good faith. Once the parties come to an agreement and provide updated instructions to Meeting Escrow, as trustee of the funds, we must execute the instructions.
If the parties agree to postpone rather than cancel the program, they can instruct Meeting Escrow to continue to hold the funds in escrow until the new program dates are set.
Added benefits of the escrow process are that the client’s meeting budget remains committed, the budget is shielded from foreign exchange fluctuations (if being held in a different currency) and the funds continue to earn interest (USD and CAD dollar escrow accounts) until the postponed program takes place and funds are released.
HOW THE SOLUTION WORKS
1) Quick Escrow Overview:
Advance deposit funds are securely held in escrow for the protection of the client and the supplier and only released once the program is completed (except for sub-vendor deposits required by DMCs and other intermediaries). Several “trigger conditions” can interrupt the release of the funds:
a) there is a change in ownership or brand of the supplier (for example a hotel that changes “flags” and is no longer appropriate for an incentive group)
b) bankruptcy / cessation of operations by the supplier or client
c) force majeure invoked by the client or supplier.
2) Is Coronavirus COVID-19 crisis a reason for invoking force majeure?
This is a matter for meetings industry legal experts such as Lisa Sommer Devlin and Jonathan Howe to advise on (and there have been many articles published recently). Should either party invoke force majeure, based on their interpretation of their contract or agreement, they would notify Meeting Escrow and we would pause the release of funds for 7 days, giving time for verification by both parties.
3) If not force majeure, both parties can also agree to a pause
If force majeure is not invoked, but the parties require additional time to negotiate next steps, then to pause the release of funds, the client would send an email to Meeting Escrow with c.c. to the supplier and the supplier would have to reply that they agree.
4) Supplier contract terms always apply
The most important thing to remember is that no matter whether funds are due to be deposited in escrow or already held in escrow or already released (for sub-vendor advance deposits), the actual obligations of the client and supplier are still governed by the agreement that they have signed together.
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