Adjudication in Singapore

Introduction

Singapore introduced its construction payment regime in the form of the Building and Construction Industry Security of Payment Act (the SOP Act) in April 2005. The SOP Act creates a regime aimed at improving cash flow by speeding up payment in the construction industry and providing a procedure for resolving disputes quickly and in a cost-efficient manner before an independent adjudicator appointed by Singapore Mediation Centre.

 

Which statutes govern the payment regime in Singapore?

The SOP Act came into operation in Singapore on 1 April 2005. The SOP Act was amended by the Building and Construction Industry Security of Payment (Amendment) Act 2018 and the Building and Construction Industry Security of Payment (Amendment) Regulations 2019, which took effect on 15 December 2019. The 2019 amendments introduced several enhancements to the SOP Act, including expanding and clarifying the scope of the Act and improving the adjudication process.

 

Briefly, what is the effect of this legislation?

The SOP Act aims to improve cash flow in the construction industry by facilitating payments for construction work completed or for related goods and services supplied in a construction project. The Act seeks to achieve this goal by: (i) providing a statutory right to payment; and (ii) establishing a speedy and low-cost payment dispute resolution mechanism which provides efficient adjudication by an independent adjudicator.

 

To what type of contract does the payment regime apply?

The SOP Act applies to written contracts for: (i) construction work; and (ii) supply of services or goods for construction projects carried out in Singapore.

The SOP Act does not apply to:

• any contract for the carrying out of construction work at or on, or the supply of goods or services in relation to, any residential property; or
• any contract for the prefabrication, in Singapore, of components intended for construction work to be carried out on a construction site outside Singapore where any of the parties to the contract is not an entity incorporated or registered in Singapore.

 

What types of disputes can be referred to adjudication?

All types of payment claim disputes. The SOP Act covers both final payment claims and progress payment claims issued by a contractor or sub-contractor under a written construction contract, meaning claims may be made even while a project is still ongoing. The Act can also be used where the contract has no provision for progress payments.

 

What is the format of an adjudication?

The SOP Act allows a party to apply for adjudication through an “Authorised Nominating Body,” currently the Singapore Mediation Centre. In an adjudication proceeding, the Singapore Mediation Centre appoints an independent adjudicator to determine the amount payable in a disputed payment claim. The adjudication process generally lasts approximately 21 days.

Importantly, the time limits applicable under the SOP Act are strictly enforced. Therefore, it is essential for parties to timely file claims for adjudication. Singapore courts have ruled that claims were inadmissible because they were submitted late.

The adjudicator’s determination is binding, although the underlying dispute can be the subject of a separate and final litigated or arbitrated process. Respondents must pay adjudicated amounts within 7 days of being served with the determination and the claimant’s invoice. Although a respondent may still appeal and/or seek to set aside the determination in the courts, the grounds for challenge are limited.

 

How are adjudicator's decisions enforced?

While most losing parties pay without the need for enforcement, the SOP Act regime in Singapore provides for a speedy enforcement process in the Singapore courts. Parties seeking to challenge the adjudicator’s determination may also apply to set aside the determination on limited grounds, including if they were not properly heard by the adjudicator.

 

What reforms do you expect to the regime?

No reforms to the regime are expected imminently. The most recent amendments to the SOP Act took effect on 15 December 2019, which, relevantly: (i) expanded the scope of the Act to overseas production of pre-fabricated components supplied for construction work to be carried out in Singapore as well as prefabricated components in Singapore intended for overseas projects where the parties to the contract are Singapore incorporated or registered entities; and (ii) made certain changes to improve and streamline the adjudication process. These amendments were aimed at bringing greater certainty to the SOP Act and further facilitating the resolution of payment disputes under the regime.