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.
It might have been expected that, like the UK legislation, CIPAA would not apply retrospectively. In fact, the provisions of CIPAA apply to all construction contracts whenever made, and thus it is likely that disputes will begin to be referred to adjudication with almost immediate effect.
In the same way as in the UK prior to the first decided cases on the relevant statute, how CIPAA is going to operate in Malaysia is uncertain. What is clear is that there will be no scrambling amongst bodies who wish to be accredited to appoint adjudicators in Malaysia since the sole appointing body is the Kuala Lumpur Regional Centre for Arbitration ("KLRCA"). As soon as the Act was passed in 2012, KLRCA ran a series of training sessions for adjudicators both within Malaysia and internationally. Goodman Derrick partner John Wright, who was already an arbitrator on KLRCA's panel, attended one of the early training sessions in Kuala Lumpur and is therefore on the KLRCA panel of adjudicators.
John Wright has since taken a close interest in the development of CIPAA in Malaysia and has presented papers in London on its operation. He also spoke at the Chartered Institute of Arbitrators 2013 International Conference held in George Town, Penang, and will present papers at the KLRCA International Arbitration Conference in Kuching in June and at the Society of Construction Law Malaysia Conference in Kuala Lumpur in September.
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