WHAT IS ADJUDICATION?

Adjudication is a dispute resolution process preliminary resolved by an independent impartial third party, the adjudicator, who decides the dispute within a relatively short period of time. It is usually an expert in technical matters, who can comes to an interim binding decision. The winning party can enforce the adjudication decision against the losing party in its interim stage during the course of the contract if the losing party does not commence litigation or arbitration after the completion of the project - HKICAdj

ADJUDICATION IN MALAYSIA

The unswerving growth of the construction industry in Malaysia that has been dominantly driven by the patronage of the Economic of Malaysia that has given rise to several construction-related disputes. To address these problems, the Construction Industry Payment & Adjudication Act 2012 (Act 746) (“CIPAA”) has come into operation effective 15 April 2014, driven by AIAC. - Asian International Arbitration Centre AIAC.

CIPAA 2012

Before CIPAA 2012, disputes in the matter of construction may had to go through the process of mediation, arbitration and/or litigation, which are lengthy and costly processes. The result is of great disappointment to many contractors that are unable to sustain their cash-flow and maintaining their business operations whilst waiting for the dispute to be resolved. With CIPAA 2012, the law allows statutory adjudication as an interim dispute resolution process which is quick, efficient and effective procedure, designed to resolve payment disputes pending other dispute resolutions by way of arbitration or litigation that has finality. 

ADJUDICATION IN HONGKONG

With introduction of Adjudication in the proposed Security of Payment Legislation in Hong Kong, Adjudication is set to become the first-tier dispute resolution method in construction contracts.
Adjudication is one of the Alternative Dispute Resolution method. Adjudication is a dispute resolution process preliminary resolved by an independent impartial third party, the adjudicator, who decides the dispute within a relatively short period of time. It is usually an expert in technical matters, who can comes to an interim binding decision. The winning party can enforce the adjudication decision against the losing party in its interim stage during the course of the contract if the losing party does not commence litigation or arbitration after the completion of the project. - HKICAdj

SECURITY OF PAYMENT LEGISLATURE (SOPL) HK

a) ‘Pay when paid’ clauses will not be effective .

b) Parties can agree payment periods between applications and payments but not exceeding 60 calendar days (interim payments) or 120 calendar days (final payments).

c) A right to dispute resolution by Adjudication

d) The right to adjudication arises in the event of non-payment and when there are disputes about the value of work, services, materials or plant and/or disputes about extension of time and financial claims under the contract.

e) The maximum period allowed for adjudications from appointment of an adjudicator to issue of the adjudicator’s decision will be 55 working days

f) If either party is unhappy with an adjudicator’s decision, they still have the right to refer the dispute to court or arbitration (if specified in the contract).
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​g) Unpaid parties have the right to suspend or reduce the rate of progress of work after either non-payment of an adjudicator’s decision or non-payment of amounts admitted as due.

ADJUDICATION IN UK

​Adjudication is a way of resolving disputes in construction contracts. The Act provides parties to construction contracts with a right to refer disputes arising under the contract to adjudication. It sets out certain minimum procedural requirements which enable either party to a dispute to refer the matter to an independent party (the adjudicator) who is then required to make a decision within 28 days of the matter being referred.

HOUSING GRANTS,
CONSTRUCTION AND REGENERATION ACT 1996 HGCRA

The legislation provides that adjudication can be used at any time. For example, provided the parties have a contractual relationship it can be used to decide contractual disputes with designers before construction begins; it can be used to resolve contractual disputes with and between designers, contractors and subcontractors during construction; and with or between them after completion.  Once a dispute has arisen between the parties either party may seek adjudication. The adjudicator is selected within a week and must decide the dispute within a further four weeks (subject to any agreed extension). Once the adjudicator has made their decision, the other party must comply with it: if they do not, a court hearing to compel compliance can usually be obtained in a few weeks.

CIPAA 2012 is the 'Fast and Furious' options to help all contractors who have had difficulty in collecting their claims...

Step - 01. 

Because CIPAA 2012 is a 'Fast and Furious' quick fix to the payment problem, it offers a cost-effective legal avenue to compel the non-paying party to pay up. It also renders all back-to-back payment arrangements to be void, so that the provisions of CIPAA 2012  cannot be circumvented.

Step - 02.

Once a decision is made pursuant to CIPAA 2012, that decision is legally binding. The winning party can enforce the CIPAA 2012 decision by applying to register it in the High Court. CIPAA 2012 allows slowing-down or suspension of works without penalty, or even seek payment from the principal for any amount owed. Losing party may seek the court to set aside, usually for reasons of jurisdictional challenge and on grounds of natural justice.

Advantages

  1. Speedy resolution and recovery of payment in the construction industry.
  2. Provides binding and enforceable decisions on payment disputes. The adjudicator’s decision can be enforced as a judgment.
  3. High level of enforcement. It allows the suspension of works or reduction in the rate​ of progress. 
  4. Enables direct payment from the principal.
  5. Parties can choose their own adjudicator.
  6. An Adjudicator has relevant expertise in a specific field.
  7. Private and confidential.
  8. Informal procedures.

Disadvantages 

  1. CIPAA 2012 only confined to payment disputes in relation to construction contracts.
  2. The decision made by the Adjudicator is interim in nature as it is subjected to arbitration and litigation.
  3. The Adjudicator will decide the course interaction of the proceedings. Parties have little room to negotiate.

Updates and Articles on CIPAA 2012, read HERE

Following the birth of a statutory adjudication scheme in the UK under the Housing Grants, Construction and Regeneration Act 1996[i] (the “1996 UK Act”), on 1 June 2015, many countries within the commonwealth had taken the similar bold steps to enact the similar Security of Payment Legislation SOPL within their own legislation. Fundamentally SOPL, as its name suggested, is a piece of legislation to ensure that payment to the contractors are secured as payment is a fundamental ‘life-line’ to any business of construction, without it the entire machinery of construction will collapse and such will create detrimental ripple effects to both the downstream and upstream of the economy. In a nutshell, the theory behind SOPL is to ‘pay first, argue later’ based on ‘rough justice’ with legally binding decision that has no ‘finality’ thus providing only temporal relief.

Prior to the eventful year of 2012, the Pertubuhan Arkitek Malaysia (PAM) has taken the initial steps to initiate a version of the SOPL for the Malaysian construction industry owing to the fact that via its collaborations with various stakeholders, especially with the Construction Industry Development Board (CIDB), various issues pertaining to non-payments to the contractors had been raised. A joint working committee has been deployed to draft the framework for this SOPL. As the matter at hand, was largely attributed to the issues faced by contractors, it was naturally befitting CIDB to take the lead[ii]. This effort has since, taken a setback when the Kuala Lumpur Regional Centre for Arbitration (KLRCA) as it was known then before it was rebranded as the Asian International Arbitration Centre (AIAC), has taken the ‘idea’ and forged ahead to be passed and enacted in the Parliament as the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012), enforced in 2014, adopting the New Zealand’s Security of Payment Legislation model (NZ Act)[iii] with modification to suit ‘document only’, ‘fast track’ and ‘chess time’ procedural. Unlike other commonwealth jurisdictions, the CIPAA 2012 has the term ‘Adjudication’ included as the only statutory means to dispense ‘rough justice’ in recouping any unpaid claims in the construction industry, virtually monopolize by the AIAC as the sole appointing body[iv].    

In the beginning, any claims put forth by the claimant, in CIPAA, will stand an 80% chances of winning due to its ‘rough justice stance’ with no ‘finality’. ‘I will CIPAA you’, became the common phrase in town. The ‘fast and furious’ approach in dispensing rough justice via CIPAA has received various challenges in the Courts of law, notably with regards to the following issues