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- Appointment of the Director of the Asian International Arbitration Centre (AIAC)
- Adjudication
The Government of Malaysia has finally appointed the new AIAC (Asian International Arbitration Centre) Director with effect from 1st December 2020, ending a gruelling 8-month pause in adjudication proceedings for construction contracts under CIPAA, among other responsibilities of the Director. Developers, contractors, sub-contractors and construction material suppliers alike can soon resume the filing for adjudication cases under CIPAA.
What is Adjudication?
Adjudication is a form of dispute resolution, a channel to settle contentions between two parties. In this case, Adjudication is used to resolve disputes arising from payment issues between parties bound to a construction contract (i.e. developer & contractor, contractor & sub-contractor, etc). An Adjudicator would be appointed to assess each case and determine the settlement outcome. It is such that under CIPAA, only the AIAC Director has the authority to assign Adjudicators to assess the cases that come in.
What is CIPAA?
CIPAA is the Construction Industry Payment and Adjudication Act 2012, enacted to alleviate and resolve construction payment disputes through adjudication. This provides a speedy settlement to reduce the rampant cash flow issues (i.e non-payment, under-payment, delay in payment) plaguing the Construction Industry. The highest claim amount in 2018 was RM31,194,085.73. The hindrance due to the absence of the AIAC Director for 8 months is bound to restrict the cash flow of most construction firms in dispute.
Pros of CIPAA
As opposed to other means of dispute resolution such as Arbitration and Court Proceedings, CIPAA is characterised as such:
- Faster (within 106 working days, when others would typically take 1.5 to 2 years)
- Relatively Cheaper
- Statutory (meaning there is no need for an adjudication clause in the construction contract for any party to commence an adjudication proceeding)
- Adjudicator’s Decision is Final and Binding
- Nullifies conditional payment clauses (i.e. pay when paid, back-to-back payments, pay if paid), thus reducing limitations on payment conditions
Limitations of CIPAA
CIPAA’s International Counterparts (with localised differences)
Despite its limitations, it remains hopeful that the resumption of CIPAA case proceedings gives the Construction Industry a quick mechanism for resolving payment disputes, especially amidst the Covid-19 pandemic where cash flow is tighter than ever. The wider usage of CIPAA would also prompt for a more contractually mindful and professional workforce in the construction sector moving forward.
- Mainly focuses on payment issues, less on the technical work aspect
- Hasty decisions could be made due to its speedy nature, especially for more complex cases
- Can be overruled by Arbitration (if commenced)
- Does not apply to the construction of disaster relief efforts/facilities, military/police training camps etc.
- Does not apply to construction/renovation of individual homes, more for commercial construction contracts
CIPAA’s International Counterparts (with localised differences)
- UK 1996 Act
- New South Wales 1999 Act (Australia)
- New Zealand Construction Contracts Act 2002
- Singapore Building and Construction Industry Payment Act 2004
Despite its limitations, it remains hopeful that the resumption of CIPAA case proceedings gives the Construction Industry a quick mechanism for resolving payment disputes, especially amidst the Covid-19 pandemic where cash flow is tighter than ever. The wider usage of CIPAA would also prompt for a more contractually mindful and professional workforce in the construction sector moving forward.
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