After a delay of six years since the Hong Kong Development Bureau (DEVB) published its "Report on Public Consultation of Proposed Security of Payment Legislation for the Construction Industry" in April 2016, Hong Kong government has now taken a further step towards security of payment legislation (SOPL), which - in this jurisdiction - will likely ultimately mean regulation of construction payment terms, banning "pay when paid" clauses, and the introduction of 55 day statutory construction adjudication.
The step Hong Kong has now taken is the DEVB's publication of Technical Circular (Works) No. 6/2021 on 5 October 2021 entitled “Security of Payment Provisions in Public Works Contracts” (the Circular). Since 1 April 2022, this Circular has applied to all contractors on the List of Approved Contractors for Public Works.
The Circular is not SOPL legislation in Hong Kong. The Circular is however intended to introduce the principles of SOPL to all new public works contracts in Hong Kong. It does so however by introducing contractual provisions rather than relying on a legislative scheme.
The fact that the Circular can only introduce such policy via a contractual not statutory mechanism means that parties winning a contractual adjudication may not be able to rely on easy and effective court enforcement, and are likely instead to have to rely on their contractual rights to suspend or reduce rate of progress if the adjudicated – or admitted – amount is not paid within 30 days of an adjudicator's Decision. There are also provisions for Employer direct payment of unpaid adjudicated amounts at sub-contract level.
It is hoped that the experience gained from implementing the Circular on public contracts will assist when Hong Kong finally implements SOPL legislation - which will apply to both public and private construction contracts.
The Circular does therefore represent a further material - if somewhat tentative - step in Hong Kong's long journey towards full SOPL. It is to be welcomed in this very important Asian construction and infrastructure marketplace.
That change in payment culture is needed in Hong Kong as much as anywhere else in the world where SOPL has been introduced.
"This Circular promulgates the implementation of the spirit of the SOPL in all new public works contracts with a view to facilitating the smooth introduction of the legislation through the experience gained in public works contracts." Paragraph 6 of the Hong Kong Development Board's Technical Circular (Works) No. 6/2021 (5 October 2021)