Construction Industry Payment And Adjudication Act 2012 Comes Into Operation In Malaysia

Author:Goodman Derrick LLP
Profession:Goodman Derrick LLP
 
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Adjudication is now a well established method of resolving disputes in the construction field in the UK, Australia, New Zealand and Singapore. In 2012, Malaysia followed this lead by passing an Act intended to introduce adjudication into Malaysia. This was the Construction Industry Payment and Adjudication Act 2012 ("CIPAA").

There has been some delay in CIPAA coming into operation but the Minister of Works has now approved suitable Regulations and an Exemption Order to accompany CIPAA and the Act came into operation on 15 April 2014.

CIPAA (the full text of which is available at www.klrca.org.my/rules/adjudication) introduces a system which is in many ways more straightforward than that used in the UK. There is no provision for payment notices, pay less notices and the like; instead, a party who considers itself to be unpaid on a construction contract may serve a Payment Claim. Unless that claim is admitted within 10 working days, the unpaid party has the right to refer the dispute to adjudication. After service of submissions, the adjudicator has 45 working days from the date of the last submission in which to reach his decision. This means that, overall, the process is likely to take about 90 days - rather longer than the UK procedure but arguably simpler.

The ambit of the Act is wide and quite similar (but by no means identical) to that of the UK legislation. It had been thought that there might be significant exemptions on the part of the Malaysian Government, but the only significant exemption relates to Government works involving emergency or unforeseen circumstances, or to national security or security related facilities. The timescale for the adjudication process is extended for Government contracts with a value of less than RM20m (about £3.6m) but even then the exemption only lasts until the end of 2015.

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