April 15, 2014
The Construction Industry Payment And Adjudication Act 2012 Comes Into Operation
Kuala Lumpur – The Construction Industry Payment and Adjudication Act (CIPAA) 2012 has come into operation effective 15 April 2014. The Act was passed on 18 June 2012 and gazetted on 22 June 2012. The Ministry of Works had proposed the Construction Industry Payment and Adjudication (Exemption) Order 2014 and the amended Construction Industry Payment and Adjudication Regulations 2014. Both had been approved by the Minister of Works Datuk Haji Fadilah bin Yusof and is operative 15 April 2014.
The Kuala Lumpur Regional Centre for Arbitration (KLRCA) welcomes the implementation of CIPAA 2012. It is indeed good news for the construction industry that have been plagued with payment dispute problems for far too long. KLRCA has been named the adjudication authority by virtue of Part V of CIPAA 2012, giving the centre a key role in being the default appointing, administrative and training authority for statutory adjudication. The KLRCA has put in place the internal infrastructure to handle the administrative process of statutory adjudication at the centre.
The KLRCA had recommended that CIPAA 2012 be prospective in nature so as to apply to all construction contracts made after the operative date. Nonetheless, the Minister of Works has approved CIPAA 2012 to apply retrospectively. In effect CIPAA 2012 applies to all construction contracts with immediate effect save those that have been exempted.
The Construction Industry Payment and Adjudication (Exemption) Order 2014 seeks to exempt two categories of Government construction contracts. The first category of Government construction contracts are contained in the First Schedule of the Exemption order namely a contract for any construction works that involve emergency, unforeseen circumstances and that relate to national security or security related facilities.
The second category of Government construction contracts are contained in the Second Schedule of the Exemption order namely construction contracts with the Government of the contract sum of twenty million ringgit (RM20,000,000) and below. With regards to this second category, the exemption order merely exempts these contracts from the application of subsections 6(3), 7(2), 10(1), 10 (2), 11(1) and 11(2) of CIPAA 2012, and relates to the timeline for submissions and replaced with a set of longer timelines for such submissions. It is also a temporary exemption from 15 April 2014 to 31 December 2015 for this second category. However, the exemption order does not extend to construction contracts to which the Government is not a party.
The CIPAA 2012 and the accompanying Regulations and Exemption Order can be viewed on the website of the Federal Government Gazette at www.federalgazette.agc.gov.my.
Professor Datuk Sundra Rajoo
April 15, 2014