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    HK Security of Payment

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    Anonymous pGodzH4xL
    The Development Bureau of Hong Kong introduced an interim contractual security of payment framework for public works contracts to facilitate timely processing of payments and resolve disputes. Key provisions include: 1) "Pay if paid" clauses are unenforceable, requiring payments down the subcontracting chain. 2) Contractors can submit payment claims for late payments that must be responded to within 30 days and paid within 60 days. 3) Disputes can be referred for adjudication within 55 days, with direct payment and deduction by the employer for unpaid adjudicated amounts. 4) Contract administrators monitor compliance and can issue poor performance ratings, affecting future work eligibility. Legal advice is recommended to navigate the new adjudication process and timelines.

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    © All Rights Reserved
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    HK Security of Payment

    Uploaded by

    Anonymous pGodzH4xL
    48 views2 pages
    The Development Bureau of Hong Kong introduced an interim contractual security of payment framework for public works contracts to facilitate timely processing of payments and resolve disputes. Key provisions include: 1) "Pay if paid" clauses are unenforceable, requiring payments down the subcontracting chain. 2) Contractors can submit payment claims for late payments that must be responded to within 30 days and paid within 60 days. 3) Disputes can be referred for adjudication within 55 days, with direct payment and deduction by the employer for unpaid adjudicated amounts. 4) Contract administrators monitor compliance and can issue poor performance ratings, affecting future work eligibility. Legal advice is recommended to navigate the new adjudication process and timelines.

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    The Development Bureau of Hong Kong introduced an interim contractual security of payment framework for public works contracts to facilitate timely processing of payments and resolve disputes. Key provisions include: 1) "Pay if paid" clauses are unenforceable, requiring payments down the subcontracting chain. 2) Contractors can submit payment claims for late payments that must be responded to within 30 days and paid within 60 days. 3) Disputes can be referred for adjudication within 55 days, with direct payment and deduction by the employer for unpaid adjudicated amounts. 4) Contract administrators monitor compliance and can issue poor performance ratings, affecting future work eligibility. Legal advice is recommended to navigate the new adjudication process and timelines.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    48 views2 pages

    HK Security of Payment

    Uploaded by

    Anonymous pGodzH4xL
    The Development Bureau of Hong Kong introduced an interim contractual security of payment framework for public works contracts to facilitate timely processing of payments and resolve disputes. Key provisions include: 1) "Pay if paid" clauses are unenforceable, requiring payments down the subcontracting chain. 2) Contractors can submit payment claims for late payments that must be responded to within 30 days and paid within 60 days. 3) Disputes can be referred for adjudication within 55 days, with direct payment and deduction by the employer for unpaid adjudicated amounts. 4) Contract administrators monitor compliance and can issue poor performance ratings, affecting future work eligibility. Legal advice is recommended to navigate the new adjudication process and timelines.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    https://www.lexology.com/library/detail.aspx?

    g=e948ad6b-fa58-4fcb-a8fe-
    4ae811406024&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-
    +General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfee
    d+2022-04-21&utm_term=

    (SOP) Regime for Public Works Contracts


    Stephenson Harwood LLP

    Introduction
    At the end of 2021, the Development Bureau of Hong Kong introduced an interim
    contractual security of payment (SOP) framework in public works contracts, with a
    view to facilitating timely processing of contractual payments and providing an interim
    mechanism for speedy resolution of payment disputes before the enactment of the
    Security of Payment Legislation (SOPL) in Hong Kong.
    After 1 April 2022, all public works main contracts, including design and build
    contracts and term contracts, as well as Relevant Subcontracts at all tiers are subject to
    the contractual SOP regime.
    We have set out below some of the key provisions to the contractual SOP regime:
    1. Unenforceability of "Pay if paid" and "pay when paid" provisions
    It is no longer permissible for main contractors to refuse or delay payments to
    subcontractors on the grounds that the Employers have not paid the main contractors.
    2. Payment claims
    In case of late payments, contractors at all tiers are now entitled to submit payment
    claims. After receiving the payment claims, the paying party must:
    (a) serve a payment response to the claiming party within 30 days; and
    (b) make payment of the admitted amount within 60 days.

    2. Adjudication of payment disputes


    After going through contractual claim handling procedures, any disgruntled party may
    refer a payment dispute to adjudication within 28 days from the date when the payment
    dispute arose. The adjudication is subject to a tight timeline. Within 55 working days
    from the adjudicator's appointment, the adjudicator shall decide on the payment dispute.
    Given the tight timeline, parties should seek legal assistance as soon as the dispute
    arises.

    HK Security of Payment 1/2


    Given that the security of payment legislation has not yet been enacted, contracting
    parties to public works will not be able to apply to the Court for enforcement or the
    setting aside of an adjudication decision.
    3. Consequences of not getting paid
    If the adjudicated / admitted amount is not paid, the claimant can exercise his/her right
    to suspend or reduce rate of progress.
    4. Direct payment for settlement of unpaid Adjudicated Amount
    In order to prevent vain attempts at adjudication, the contractual SOP regime enabled
    the Employer's direct payment for settlement of unpaid adjudicated amounts.
    Accordingly, a subcontractor is empowered to request direct payment from the
    Employer in case the main contractor has failed to settle the adjudicated amount. The
    Employer is entitled to deduct from payments due to the main contractor the amount
    which has been directly paid to the subcontractor. This is not affected by any
    subsequent arbitration, court or other proceedings or settlement resulting in the amount
    due being different from the Adjudicated Amount under Relevant Subcontract or if the
    adjudication decision is no longer binding on the parties to the adjudication.
    5. Role of contract administrators
    Contract administrators are responsible for monitoring the contractors' compliance with
    the security for payment provisions. They can give "poor" or "very poor" rating in the
    Contractor's Performance Report and record any adverse impact on the progress of
    works which has been caused by the contractor's failures. Contractors with a poor
    record may be asked to refrain from tendering or even be removed, suspended and
    demoted from the List of Approved Contractors for Public Works.
    Takeaways
    The contractual SOP regime is new to Hong Kong and its provisions for adjudication
    and contractual enforcement mechanism are considerably different from traditional
    construction contract administration and dispute resolution. Moreover, the tight timeline
    for the adjudication process and the Employer's power to make direct payment and
    deduction for the unpaid adjudicated amount can pose challenges and cause concerns. It
    is crucial for contractors and subcontractors alike to seek timely legal advice on not
    only the merits and quantum of claims but also the effective management of the
    processes of adjudication, mediation and arbitration.
     

    HK Security of Payment 2/2

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