Lawyer Monthly - October 2022

When we last spoke, you raised the urgent need for a statutory adjudication system in the Hong Kong construction industry. Has there been any progress on this? In our last interview, we discussed some important challenges facing the construction industry in Hong Kong, and its ongoing pilot programme of the proposed security of payment (SOP) legislation, with the new payment and statutory adjudication regime having been imposed to all public work contracts since 31 December 2021 – though this had yet to be rolled out to private contracts at the time. With the pilot regime having commenced for only a short period of time, the final timetable of its enactment remains uncertain at this stage. However, it is worth reviewing some interim practical issues and challenges arising out of the new pilot regime. The first challenge is limited judicial oversight over the regime, given that it is imposed on contractual rather than statutory basis. Hence, there is no direct access to courts to enforce or challenge an adjudication decision, such as in jurisdictional challenges in cases of an adjudicator’s ultra vires act or a lack of due process during adjudication. As such, any disputes arising out of an adjudicator’s decision will still have to be resorted to existing dispute resolution provisions (commonly arbitration) in the contract. Another challenge is related to the reformed payment mechanism. Under the new regime, a sub-contractor of any lower tier is now entitled to recover directly from the employer for any unpaid adjudicated amount, followed by its corresponding adjustment from payments due to main contractors. This has undoubtedly placed significant financial risks and burdens on main contractors in the event of payment failures down their sub-contracting chains. In addition, there is also limited availability of experienced local adjudicators, as adjudication is relatively new in Hong Kong. To date, the Registers of Adjudicator Nominating Bodies (ANB) are formed by four professional institutions with training and support ongoing for expanding the list. There are unquestionably some Trends and Developments in Hong Kong Construction Earlier this year, we heard from John Lau, an independent arbitrator, adjudicator and mediator, on the evolving environment for dispute resolution in the Hong Kong construction industry. Three months later, a significant legislative shift has been seen. In this feature, we catch up with John and learn more about the current trajectory of construction sector disputes in Hong Kong. Expert Insight 66 LAWYERMONTHLYOCTOBER 2022

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