Lawyer Monthly - August 2022

counsel to prioritise the intended outcome – bearing in mind that, in the commercial world, winning at all costs is not always a real victory, as one could have “won the battle but lost the war”. Sometimes, a sound business judgement may be made through compromising on a dispute. Parties should always keep in mind that the ultimate goal is to resolve the dispute in a quick, efficient, and cost-effective way, to preserve future business relationships, and to be able to focus resources on the core business. Please tell us about the proposed introduction of statutory adjudication in the Hong Kong construction sector. What progress has been made on legislation in this area? Having been introduced in the UK by the Housing Grants, Construction and Regeneration Act 1996, statutory adjudication has since been legislated by many countries, such as Ireland, Australia, New Zealand, Malaysia, Singapore and Canada. In Hong Kong, there have been voices in the construction sector advocating for the introduction of a similar legislation to improve payment practices and provide rapid resolution of payment disputes. In 2011, an industry-wide survey was conducted, followed by a consultancy study commissioned by the government with establishment of a working group formulating a framework for the construction industry on the proposed legislation, namely security of payment legislation (SOPL). Having received feedback from public consultations conducted in 2015 and the task force for preparing the legislative proposal, the SOPL framework and its scope of application were formulated in a draft SOPL Bill. Since 2020, a dedicated working group was also formed to revise the conditions of public works contracts to align with the SOPL framework. In October 2021, the government first rolled out a pilot programme through incorporating the SOPL regime in all new public works contracts going to tender after 31 December 2021, with a view to facilitating swifter introduction of SOPL through the experience collated from public works contracts. The pilot programme is intended to provide both the government and the industry with an opportunity to test the regime and to identify improvements concurrent with the finalisation of the SOPL. This has now paved a way towards the longawaited legal reform of the Hong Kong construction sector. Watch this space! Why is a statutory adjudication regime urgently needed? The construction industry is very vulnerable to payment problems, with reported total outstanding payments exceeding HK$20 billion. In addressing the known serious issues (such as withheld payments, adversarial working relationships and lengthy and costly dispute resolutions) plaguing the Hong Kong construction sector, statutory adjudication is now the key to SOPL in regulating payment practices by imposing payment rights and providing a system to protect cash flow in the construction industry. It provides an effective means to arrive at an interim binding decision from an independent third party, i.e. an adjudicator, on a construction dispute during the course of the project. Following that is the contractor’s entitlement to be able to suspend or reduce the project’s rate of progress if the adjudicated amount is not paid when due. Any unfair payment provisions (such as “pay when paid”) are also rendered ineffective and unenforceable. SOPL aims to improve payment practices in the construction industry with a better operating environment and cash flow in the supply chain. It ultimately helps to build up the capacity of the Hong Kong construction industry and enhance competition. 47 AUG 2022 | WWW.LAWYER-MONTHLY.COM EXPERT INSIGHT About John Lau John Lau is a Chartered Civil Engineer, a Chartered Structural Engineer, and a Chartered Surveyor with over two decades of experience in the construction sector. He is an independent mediator, adjudicator and arbitrator who is on the panels of various leading alternative dispute resolution bodies. He is a Fellow of the Chartered Institution of Arbitrators, the Institution of Engineers Australia and the Royal Institution of Chartered Surveyors. He holds two masters’ degrees in law, both with distinctions and is active in dispute resolution matters – being conversant with arbitration, adjudication, mediation and other ADR methods – coupled with his solid knowledge in construction law and in-depth engineering practitioner experience. John Lau Independent Arbitrator, Adjudicator and Mediator 1601, 16/F, Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Kowloon, Hong Kong SAR E:

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