More building arbiters wanted as Hong Kong quickens dispute process

Lawyers, surveyors, engineers, and architects with a track record in handling claims will be in demand.

Hong Kong may need more adjudicators in six months, when a measure that seeks to fast-track the process of resolving payment disputes in the construction industry takes effect, according to legal experts.

The government might have to widen eligibility for the job and take in foreigners in case of a shortage, Donovan Ferguson, a partner at international law firm King & Wood Mallesons, told Hong Kong Business.

“Conflict of interest and availability issues may prevent a lot of adjudicators from taking up this work because of the intensive 55 working days needed to deliver a decision,” he pointed out.

“It will be incumbent on the nominating bodies to secure a sufficient number of qualified adjudicators who are willing and able to take up appointments as they arise,” he added.

The city’s Legislative Council in December passed a bill that would cut down the resolution period for payment-related claims in the building industry to 55 working days. It normally takes years to resolve these disputes.

The change is meant to minimise delays to construction projects, said Stanley Lo, a lawyer at Deacons.

Hong Kong’s construction industry is expected to slow from an estimated growth of 4% last year to 0.7% in 2025 due to headwinds such as high interest rates, geopolitical tensions, a slump in the property sector, and rising budget deficits, according to London-based GlobalData Plc.

At present, contractors and subcontractors can only refer a dispute to arbitration or litigation once a project is completed, which could take three to five years after signing a contract, Ferguson said. “With the new security of payment framework, this changes completely because they now have a monthly right to refer matters to adjudication.”

With an adjudication process in place, Ferguson expects more adjudicators in Hong Kong by the end of 2025 and through 2026.
Data from the Hong Kong International Arbitration Centre’s (HKIAC) website showed that Hong Kong has 76 adjudicators.

‘Ramp-up period’

Ferguson, who adjudicated many cases in Queensland, Australia, said about 100 adjudicators might suffice for the next year or two since the new law only applies to contracts that are entered into after August, but more may be needed in the years to come.

“There will be a ramp-up period over a number of years as the number of contracts that the ordinance applies to gradually increases,” he said. “More and more contractors and subcontractors will pursue adjudication under the ordinance during that ramp-up period as that option becomes available to them.”

At present, there are four registered bodies in Hong Kong that nominate adjudicators — the HKIAC, Hong Kong Institute of Surveyors, Hong Kong Institution of Engineers, and Hong Kong Institute of Architects, Lo said. “These adjudicator-nominating bodies are responsible for ensuring that adjudicators are registered, trained, and ready to handle adjudication cases by the 28th of August.”

Construction adjudicators are typically lawyers, surveyors, and architects with a proven track record in handling construction claims, according to an online article by UK-based law firm Thomson Snell & Passmore.

Lo said Hong Kong should start a training program and an awareness campaign to encourage professionals to become adjudicators. He expects adjudication claims to rise three to six months after the ordinance takes effect.

Under the new law, relevant main contractors, subcontractors, consultants, and suppliers can dispute payment amounts monthly, with an independent adjudicator resolving the issues, Lo said.

Ferguson said main contractors are likely to receive the most payment claims. He cited the need for proper record-keeping, while Lo said parties should review contracts to ensure these comply with the new law.

Most construction contracts contain a “pay when paid” clause, which means a subcontractor will only get paid by the prime contractor once the latter gets paid by the project owner. This is now void, Ferguson said, noting that prime contractors must pay subcontractors regardless of client payments.

Lo noted that since adjudication claims have tight timelines, stakeholders should upgrade their document management systems, whilst project owners and developers set up efficient payment schedules. 

The ordinance aligns Hong Kong with countries like Australia, England, New Zealand, Singapore, and Malaysia, which have similar security of payment laws, he added.