SOP in Hong Kong – Pilot Programme For Public Works Contracts

This article has been authored by Bryan Cave Leighton Paisner LLP.

As the old saying holds, cash-flow is the life blood of the construction industry. To ensure that cash-flow is protected, many jurisdictions have introduced SOP regimes to regulate payment practices and provide for rapid adjudication of payment disputes. In our experience, SOP regimes are usually implemented via legislation.

The first jurisdiction to enact a SOP legislation was the UK in 1998¹. The UK was followed by other jurisdictions including various Australian states², New Zealand³, Singapore⁴ and Malaysia ^5,. In Hong Kong, public discussion of SOP - related issues goes back to 2001, when the Construction Industry Review Committee publicly proposed that SOP legislation be enacted⁶. A nonexhaustive history of further developments relating to SOP in Hong Kong is provided in Figure 1 below.⁷

The Pilot Programme

In 2021, Hong Kong appears ready to implement a SOP regime for public works projects. This will take the form of a pilot programme applying to public works contracts and sub-contracts. To this end, the Hong Kong Development Bureau has released a draft Technical Circular titled “Implementation of the Spirit of SOP in Public Works Contracts”. This circular, if brought into effect, will incorporate SOP provisions into public works contracts and related sub-contracts.

The draft Circular indicates that the contractual regime will apply to public works contracts which go to tender during or after the second half of 2021. The regime will apply to contracts issued by the Hong Kong Government only and will not cover contracts issued by statutory bodies or corporations.

Footnotes:

1: Housing Grants, Construction and Regeneration Act 1996, as enacted on 11 September 1996 and revised and in force from 31 January 2017, available at https://www. legislation.gov.uk/ukpga/1996/53/part/I (Retrieved 15 June 2021).

2: New South Wales: Building and Construction Industry Security of Payment Act 1999, as assented on 6 October 1999 and revised and in force from 1 March 2021, available at https://legislation.nsw.gov.au/view/whole/html/inforce/current/act-1999-046 (Retrieved 15 June 2021).

Victoria: Building and Construction Industry Security of Payment Act 2002, as assented on 31 January 2003 and revised and in force from 1 July 2013, available at https://www.legislation.vic.gov.au/in-force/acts/building-and-construction-industry-security-payment-act-2002/012 (Retrieved 15 June 2021).

Western Australia: Construction Contracts Act 2004, as assented on 8 July 2004 and revised and in force from 3 April 2017, available at https://www.legislation.wa.gov.au/ legislation/statutes.nsf/main_mrtitle_188_homepage.html (Retrieved 15 June 2021).

Queensland: Building and Construction Industry Payments Act 2004, as assented on 20 May 2004, available at https://www.legislation.qld.gov.au/view/html/repealed/ current/act-2004-006 (Retrieved 15 June 2021), before it was repealed and replaced by Building Industry Fairness (Security of Payment) Act 2017, as assented on 1 March 2021, available at https://www.legislation.qld.gov.au/view/html/inforce/current/act-2017-043 (Retrieved 15 June 2021).

Northern Territory: Construction Contracts (Security of Payments) Act 2004, as assented on 1 July 2005 and revised and in force from 3 February 2020, available at https:// legislation.nt.gov.au/en/Legislation/CONSTRUCTION-CONTRACTS-SECURITY-OF-PAYMENTS-ACT-2004 (Retrieved 15 June 2021).

South Australia: Building and Construction Industry Security of Payment Act 2009, as assented on 10 December 2009 and revised and in force from 10 December 2011, available at https://www.legislation.sa.gov.au/lz/c/a/building%20and%20construction%20industry%20security%20of%20payment%20act%202009.aspx (Retrieved 15 June 2021).

Tasmania: Australia Building and Construction Industry Security of Payment Act 2009, as assented on 17 December 2009 and revised and in force from 1 January 2017, available at https://www.legislation.tas.gov.au/view/whole/html/inforce/current/act-2009-086 (Retrieved 15 June 2021).

Australian Capital Territory: Australia Building and Construction Industry (Security of Payment) Act 2009, as assented on 1 July 2010 and revised and in force from 10 December 2019, available at https://www.legislation.act.gov.au/a/2009-50 (Retrieved 15 June 2021).

3: Construction Contracts Act 2002, as assented on 26 November 2002 and revised and in force from 30 January 2021, available at https://www.legislation.govt.nz/act/ public/2002/0046/latest/DLM163059.html (Retrieved 15 June 2021). and in force from 15 December 2019, available at https://sso.agc.gov.sg/Act/BCISPA2004 (Retrieved 15 June 2021).

4: Building and Construction Industry Security of Payment Act 2004, as enacted on 3 January 2005 and revised and in force from 15 December 2019, available at https://sso. agc.gov.sg/Act/BCISPA2004 (Retrieved 15 June 2021).

5: Construction Industry Payment and Adjudication Act 2012, 14 April 2014. Courtesy copy by the Asian International Arbitration Centre (Malaysia) is available at https://www. aiac.world/wp-content/adjudication/CIPAAct-7.pdf (Retrieved 15 June 2021).

6: Report titled “Construction for Excellence” by the Construction Industry Review Committee to the Honourable Tung Chee Hwa, then-Chief Executive of Hong Kong SAR, dated 18 January 2001, available at https://www.devb.gov.hk/filemanager/en/content_735/reporte.pdf (Retrieved 15 June 2021).

7: Graphic created and provided by the authors.

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July 06, 2021

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