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Decoding Hong Kong’s Unique Construction Payments Adjudication Scheme

9 Sept 2022

In construction disputes, time is of the essence.  Stable and clear legal frameworks are essential for complex construction projects to be undertaken smoothly, and for any disputes that arise to be properly and timeously resolved, in order to minimise their impact on the overall completion of the construction works involved.

One crucial aspect of any construction dispute is when, under what conditions, and how, payments before project completion will be due and made.  Following industry concerns about payment problems experienced by contractors, the Development Bureau of the HKSAR Government explored creating the Security of Payment (“SOP”) scheme to clarify the legal framework involved in resolving these key questions.

The objective of the SOP scheme is to enhance the cash flow of contractors whilst resolving any disputes that arise by providing a simple process for claiming payments, responding to claims, and resolving payment disputes by adjudication when a construction project is ongoing.

This is first of two consecutive articles which will highlight the overall framework and important implications of the SOP scheme in Hong Kong.  In this first introductory article, the authors aim to explain the overall structure of the adjudication process envisaged under the contractual SOP scheme.

In summary:

  • (a) Hong Kong’s SOP scheme is currently contractual in nature and applies to all public works construction projects.
  • (b) It aims to achieve rough and ready justice by quickly adjudicating payment disputes in the interim to maintain cashflow, leaving the final resolution of such disputes to subsequent litigation or arbitration proceedings.
  • (c) In the meantime, the adjudication decision cannot be overturned (with probable exception on narrow grounds).
  • (d) It can be enforced by a direct application for payment, failing which a contractor can choose to slow down work under the construction contract, or apply for summary judgment of the adjudicated sum.

To read the full text, please download Newsletter: Decoding Hong Kong’s Unique Construction Payments Adjudication Scheme.

This Article was co-authored by Calvin CheukKaiser Leung, and Joshua Yeung.