You’re painfully aware of the deepwater oil rig explosion in the Gulf of Mexico that has produced the worst spill in U.S. history.
This week the company responsible, BP, apologized for the damage and agreed to set aside $20 billion in compensation funds to be put in escrow.
In a twist of language irony, escrow derives from an Old French word (spoken in the years 900 to 1400) meaning scrap, shred, and — most obviously — scroll. According to the Oxford English Dictionary, this connects in Modern French to the verb écrouer, to lock up in jail, and to a noun that means “entry of a name in a jail register.”
Outrage over the tragedy suggests that people might prefer a little less escrow from BP and a lot more écrouer.
So does this $20 billion escrow have anything in common with the process average people go through when they buy a house?
Escrow is a special agreement and fund managed by a third, independent party. This party finalizes the agreement only once all the terms and conditions of the deal are met. So, in the case of the oil spill, the fund will be overseen by Kenneth Feinberg, who managed the September 11th Victim Compensation Fund. He also has mediated cases as varied as an agent orange class-action lawsuit and a dispute over the value of the JFK assassination film.
Those of you who buy and sell items on eBay might use escrow. In this case, a third party holds onto a buyer’s money until the buyer approves a purchase. Escrow is also used sometimes when software programmers are selling source codes to clients.
But not all kinds of escrow are high stakes. Vending machines use a form of escrow. A customer’s money is kept in a separate area before a purchase is made. If the customer doesn’t follow through on the purchase, the money is returned. If a purchase is made, the customer’s money is deposited into the vending machine’s bank.