News & Insights

The long awaited Construction Industry Security of Payment Bill gazetted on 17 May 2024 for LegCo’s first reading on 29 May 2024

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Authored by: Joseph Chung and Stanley Lo

On 16 May 2024, the Development Bureau released the Construction Industry Security of Payment Bill (“Bill”) which aims at establishing a system for addressing payment delays within the construction industry in Hong Kong.

As reported in our previous articles, the Bill has implications on various stakeholders in the construction industry, including employers/developers, contractors, subcontractors, sub-subcontractors, suppliers, and consultants. Payment delays have a ripple effect throughout the supply chain, particularly impacting small and medium-sized enterprises with limited tolerance for financial risks. Additionally, these delays may contribute to project disruptions, delays and may result in unpaid wages for construction workers.

The purpose of the Bill is to enhance payment terms in contracts by prohibiting unfair practices such as “pay when paid” and “pay if paid”. It also sets time limits for the paying party to respond to payment claims and make full payment of amounts that they acknowledge as payable.

To resolve payment disputes, the Bill introduces an adjudication mechanism. An independent adjudicator is appointed to make a determination within 55 working days after their appointment. Both parties involved in the dispute have the right to pursue litigation or arbitration if they are dissatisfied with the adjudicator’s determination.

If the adjudicator determines that a party is entitled to an extension of time for completing the construction work or supplying related goods and services under the construction contract, the adjudicator must also determine the corresponding amount payable based on that extension of time.

If the paying party acknowledges an amount as payable but fails to make full payment by the specified deadline, or if the adjudicator reaches a decision but the paying party fails to make full payment by the deadline, the claiming party is entitled to suspend or reduce the pace of work or services, the financial consequences of which will be borne by the paying party.

Looking forward to LegCo’s first reading on the Bill on 29 May 2024 whereupon further reports will be provided on this important legislation for the construction industry in Hong Kong. Stay tuned

Further articles relating to this Construction Industry Security of Payment Legislation written by Deacons can be found here: 15 October 2021, 19 August 2022 and 1 February 2023.

Key Contacts

Kwok Kit (KK) Cheung

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9427

Joseph Chung

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9647

Justin Yuen

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9734

Stanley Lo

Consultant | Litigation and Dispute Resolution

Email or call +852 2826 5395

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