Hong Kong’s construction industry and construction time and costs have long been afflicted by delays in payments in an inefficient, over-multilayered subcontracting system. Even when projects are financially sound in more blooming cycles, payment is often delayed, leaving downstream subcontractors in an awkward situation where “the work is done but corresponding part payment is nowhere in sight.” This causes cash flow pressures and increased operational risks. Payment disputes and unfair contractual terms are common, forming a structural problem that has plagued subcontractors and workers in the industry for years—impacting project timelines, quality, and the sustainable development of the industry as a whole.
After more than two decades of in-depth discussion and repeated consultations, the Construction Industry Security of Payment Ordinance (Cap. 652) was finally passed and came into full effect on 28 August 2025. The enactment of this ordinance marks a significant institutional reform in Hong Kong’s construction industry and is a direct response to long-standing industry calls to improve the payment culture.
At the heart of the ordinance lies the principle of promoting fair contractual performance among all parties and introducing a timely adjudication mechanism to resolve payment disputes during the course of the works. When one party fails to make timely payments, the other party may initiate a streamlined process to apply for adjudication by an independent adjudicator, who will issue a binding and enforceable decision. The ordinance also allows for the suspension or reduction of goods and services under specific conditions to protect affected parties. Supporting this framework, Hong Kong courts are empowered to enforce, or, where appropriate, set aside such decisions, ensuring the practical effectiveness of the system.
While adjudication is not a new concept globally, its application to the construction industry marks a major step forward for Hong Kong. Beyond establishing the legal framework, the greater challenge lies in cultivating a pool of adjudicators who are professionally competent, credible, and experienced—and, equally important, in building industry confidence in the system. Recently, we at AALCO were honored to welcome The Hon. Justice Dato’ Lee Swee Seng, a senior judge and head of construction industries adjudication from Malaysia, to Hong Kong to share his jurisdiction’s experience. Since adopting a similar system, Malaysia has—through the joint efforts of its legal and construction sectors—gradually developed a practical adjudication framework that is efficient, fair, and professional, offering valuable lessons for Hong Kong.
AALCO Hong Kong Regional Arbitration Centre (AALCO-HKRAC) has long been committed to advancing professional dispute resolution mechanisms in the construction sector and is actively supporting the implementation of the ordinance. In line with the statutory provisions, we have established a comprehensive system and talent development framework to fulfill our role as a nominating body for adjudicators. Drawing upon over 60 years of dispute resolution experience across AALCO’s 49 member states, we have developed a robust adjudication system tailored to Hong Kong’s construction industry—international in outlook, yet grounded in local rule-of-law principles—designed to deliver consistent, high-quality services to the sector.
We will continue to work closely with the industry and host regular training programmes for adjudicators. We are also grateful for the support of professional institutions such as the Hong Kong Institute of Architects (HKIA), the Hong Kong Institution of Engineers (HKIE), and the Hong Kong Institute of Surveyors (HKIS). Their collaboration and commitment are instrumental to building a fairer and more transparent payment culture across the entire construction ecosystem.
We firmly believe that the construction industry is not just part of economic production—it is the foundation of urban development and the quality of life for citizens. Hong Kong deserves a construction environment that is transparent, institutionally sound, and fair in payment. AALCO-HKRAC is proud to stand alongside the industry, witnessing the perseverance and dedication of generations of construction professionals.
We also aspire to export Hong Kong’s rule-of-law experience, professional systems, and talent networks to Mainland China and Belt and Road countries, actively participating in infrastructure projects and cross-border collaborations within the Greater Bay Area, and expanding the global influence of Hong Kong’s construction industry. With the implementation of the ordinance and the institutional framework now in place, Hong Kong is poised not only to create a more stable and equitable business environment for the local industry, but also to leverage its professional strengths to seize regional development opportunities and contribute in broader markets.
This institutional reform is more than just a legal advancement—it is a manifestation of Hong Kong’s professional spirit. From improving the payment culture to exporting values of the rule of law, the construction industry in Hong Kong now stands at a new starting point, ready to embrace a future filled with greater promise and potential, and in a prime position to “export” our experience and adjudicators to help make construction projects complete on time and on budget in other Belt and Road Initiative countries.
