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Hong Kong government to submit construction sector bill to regulate contracts, speed up adjudication in financial disputes

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The Hong Kong government will put forward a bill to better regulate contract terms in the construction industry and establish a new binding mechanism to speed up adjudication of financial disputes to ensure contractors will be paid on time.

The Development Bureau said on Thursday it planned to submit the Construction Industry Security of Payment Bill to the legislature on May 29, with the aim to get the green light within this year and begin implementing the changes in new contracts from mid-2025.

A bureau spokesman stressed the significance of the bill given the liquidation in March of prominent contractor Fung Cheung Kee, which was reported to have delayed payment to a subcontractor for years.

“If the sector can improve its payment practices, we can avoid affecting the employees of all parties involved because of unhealthy finance,” he said.

A construction industry labour union has said the decades-old contractor owes HK$150 million (US$19 million) to subcontractors, suppliers and employees.

Under the bill, companies will not able to deny or defer payment to a claimant on the grounds they are waiting for funds from other parties.

Claimants will also be entitled to the right to suspend or slow down its work when a party fails to pay in full on time.

Parties subject to payment claims will have to respond within 30 days and settle before a maximum of 60 days.

The bill covers public and private agreements where the main contract value is at least HK$5 million for construction work and HK$500,000 for supply and services related to construction. Photo: Eugene Lee

Failure to comply will open up the possibility for claimants to initiate proceedings under a new adjudication mechanism within 28 days after the dispute arises.

Adjudicators have to make a decision over the dispute and specify the payment period within 55 working days. If the paying party fails to settle the bill, the claimant can apply to have the matter taken to court and obtain leave for the case within seven days.

The spokesman added that the court could also liquidate companies in serious cases.

The Development Bureau said the new mechanism could shorten the time needed and cut down on costs in resolving financial disputes, noting that companies at present could only take disputes to court after waiting in some instances for several years for a contract to end.

“With this mechanism, we can avoid preliminary financial disputes from snowballing,” the spokesman said, noting that it would ease burdens on small and medium-sized companies.

Asked whether the government considered penalising companies who delayed payment, the spokesman said it was not necessary to dish out punishment in every case as each one involved particular circumstances.

The bill covers public and private agreements where the main contract value is at least HK$5 million for construction work and HK$500,000 for supply and services related to construction.

Under the first stage of implementation, all terms will be applied to public contracts. The private sector will also need to comply with the provisions but the adjudicators will not handle their payment disputes where project time is extended.

The government explained that such cases were complicated and needed more time to smoothen the adjudication process. These disputes would only be covered in the second implementation stage, which the bureau had yet to set a time.

Lawmaker Edward Lau Kwok-fan, a member of the legislature’s development panel, hoped the government could offer a clear time frame to improve payment and construction delay.

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