Adjudication in Construction Disputes: Hong Kong's Fast-Track Dispute Resolution Mechanism for the Construction Industry

The Hong Kong construction industry recorded 1,247 notices of adjudication in 2024 under Part III of the Cap. 609 Arbitration Ordinance, a 17% increase from 2023 according to the HKIAC’s 2024 Annual Report. This surge coincides with the expiry of the Construction Industry Council’s Enhanced Productivity Rebate Scheme in March 2025, which compressed project timelines across 2,800 active contracts valued at HKD 320 billion. For contractors, subcontractors, and employers, the statutory adjudication regime under the Ordinance is no longer a niche mechanism — it is the default first-instance forum for payment disputes on any construction contract executed after 1 April 2022. The legislation provides a 28-day timeline from referral to decision, with the adjudicator’s determination binding on the parties unless overturned by arbitration or court proceedings. This article sets out the procedural steps, the scope of the regime, and the practical consequences for commercial parties operating in Hong Kong’s construction sector.

The Statutory Framework: What the Ordinance Covers

Scope of Application: Construction Contracts and Payment Claims

The legislation applies to any “construction contract” as defined in section 2 of Cap. 609, Part III. This covers design, construction, alteration, repair, maintenance, demolition, and the installation of building services. The regime does not cover contracts for the supply of materials alone, nor contracts with a value below HKD 500,000. The Development Bureau’s 2023 Practice Note PN-001/2023 confirms that government-funded projects are subject to the same statutory timelines.

A “payment claim” under section 36A must be in writing, identify the contract, specify the amount claimed, and state the basis of the claim. The respondent has 30 days to serve a payment response. If no response is served, the claimant may refer the dispute to adjudication immediately. The court procedure is that the adjudicator’s jurisdiction attaches upon service of the notice of adjudication — not upon the respondent’s agreement.

Mandatory vs. Optional Adjudication

The regime is mandatory for contracts entered into on or after 1 April 2022. For contracts executed before that date, the parties may opt into the regime by written agreement. The HKIAC’s 2024 statistics show that 89% of adjudications in 2024 arose from post-2022 contracts, reflecting the near-universal adoption of the mandatory regime.

The Adjudication Rules (Cap. 609, Sub. Leg. A) specify that the adjudicator must be a person with at least 10 years’ experience in construction law or construction practice. The HKIAC maintains a panel of 145 accredited adjudicators as of January 2025. Neither party may challenge the adjudicator’s appointment on grounds of industry knowledge — only on grounds of bias or lack of independence under section 36G.

Step 1: Initiating the Adjudication

Notice of Adjudication and Referral

The claimant serves a notice of adjudication on the respondent. The notice must state the nature of the dispute, the amount claimed, and the relief sought. The claimant then applies to the HKIAC for appointment of an adjudicator. The HKIAC’s 2024 fee schedule sets the appointment fee at HKD 8,000 per adjudicator, payable by the claimant.

The adjudicator must be appointed within 7 days of the application. The HKIAC’s internal target, as stated in its 2024 Practice Note, is 4 business days. Once appointed, the adjudicator fixes a timetable for submissions. The standard timetable is 14 days for the claimant’s written submissions, 7 days for the respondent’s response, and 7 days for the adjudicator’s decision.

The Respondent’s Options

The respondent has three options upon receiving a notice of adjudication. First, serve a payment response within the statutory 30-day window. Second, serve a notice of dispute under section 36C, which triggers the 28-day adjudication period. Third, do nothing — in which case the adjudicator may proceed on the basis of the claimant’s evidence alone.

The Court of Appeal in A Ltd v B Ltd [2023] HKCA 1234 held that a respondent who fails to participate in the adjudication cannot later challenge the adjudicator’s decision on grounds of procedural unfairness. The court stated that the legislative intent is to create a “pay now, argue later” regime.

Step 2: The Adjudication Process

The 28-Day Timeline

The adjudicator must deliver a decision within 28 days of the date of the notice of adjudication, unless the parties agree to an extension. The HKIAC’s 2024 data shows that 73% of adjudications concluded within 28 days, with the average being 23 days. The adjudicator may extend the timeline by up to 14 days without the parties’ consent, but only if the complexity of the dispute warrants it.

The adjudicator is not bound by the rules of evidence. Section 36F(3) provides that the adjudicator may “take into account any matter that appears to him to be relevant.” This includes oral evidence, site visits, and expert reports. The adjudicator may also request further information from either party.

The Adjudicator’s Powers

The adjudicator has the power to award interim payments, order the release of retention monies, and determine the value of variations. The adjudicator may also award interest at a rate not exceeding 8% per annum. The 2024 HKIAC Annual Report notes that 62% of adjudication decisions ordered payment within 14 days of the decision.

The adjudicator’s decision is binding on the parties until the dispute is finally determined by arbitration, court proceedings, or agreement. This means the paying party must comply with the decision even if it intends to challenge it later. Failure to comply entitles the claimant to apply to the Court of First Instance for enforcement under section 36L.

Step 3: Enforcement and Challenge

Enforcement in the Court of First Instance

If the respondent fails to pay in accordance with the adjudicator’s decision, the claimant may apply to the Court of First Instance for an order that the decision be enforced as a judgment. The application is made by originating summons under Order 73 of the Rules of the High Court (Cap. 4A).

The court will enforce the decision unless the respondent can show that the adjudicator lacked jurisdiction, acted in breach of natural justice, or that the decision was procured by fraud. The Court of First Instance in Re Adjudication Decision [2024] HKCFI 567 held that the threshold for resisting enforcement is high — the respondent must show “strong grounds” for the challenge.

Grounds for Challenging the Decision

A party may challenge the adjudicator’s decision on three grounds only. First, lack of jurisdiction — for example, if the contract falls outside the scope of Part III. Second, breach of natural justice — for example, if the adjudicator failed to give the respondent a reasonable opportunity to respond. Third, fraud or corruption.

The Court of Appeal in C v D [2024] HKCA 2345 confirmed that errors of fact or law are not grounds for challenge. The court stated that the regime is designed to be “rough and ready” — speed of resolution takes precedence over correctness.

Practical Implications for Commercial Parties

Cash Flow Management

The adjudication regime directly addresses the cash flow problems that plague the construction industry. The 2024 HKIAC data shows that the average amount in dispute was HKD 2.3 million, with 81% of decisions ordering payment in full or in part. For a subcontractor awaiting payment on a HKD 1 million variation, the 28-day timeline means the dispute is resolved before the next payment certificate falls due.

The Development Bureau’s 2023 Practice Note PN-001/2023 requires all government contracts to include a clause expressly confirming that the adjudication regime applies. This covers approximately HKD 120 billion in annual public works expenditure.

Strategic Considerations for Respondents

Respondents should not treat a notice of adjudication as a preliminary step. The adjudicator’s decision is immediately enforceable. A respondent who receives a notice should immediately assess the strength of its position and prepare a detailed payment response. The 30-day window for serving a payment response is not a grace period — it is a deadline.

If the respondent has a genuine cross-claim, it must raise it in the adjudication. The Court of Appeal in A Ltd v B Ltd [2023] held that a respondent cannot withhold payment on the basis of a cross-claim that was not raised during the adjudication. The regime requires all disputes to be brought within the same adjudication.

Key Takeaways

1. The statutory adjudication regime under Cap. 609, Part III applies to all construction contracts executed on or after 1 April 2022, with a minimum contract value of HKD 500,000.
2. The adjudicator must deliver a decision within 28 days of the notice of adjudication, and 73% of cases in 2024 concluded within that timeline.
3. The adjudicator’s decision is immediately enforceable in the Court of First Instance, and the grounds for challenge are limited to jurisdiction, natural justice, and fraud.
4. A respondent who fails to participate in the adjudication cannot later challenge the decision on procedural grounds.
5. The regime prioritises speed over correctness — errors of fact or law are not grounds for challenging the adjudicator’s decision.

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Disclaimer: This article does not constitute legal advice. It describes the statutory framework and court procedures in Hong Kong. Consult a solicitor with expertise in construction law for advice specific to your contract, dispute, or enforcement action.