What is CIPAA Act? CIPAA stands for the Construction Industry Payment and Adjudication Act 2012, which came into effect on 15.4.2014.
Before CIPAA, disputes in the construction industry had to go through the process of arbitration or litigation. This is a lengthy process that is also costly. The result is that many contractors are unable to sustain their cashflow and business operations whilst waiting for the dispute to be resolved.
By CIPAA, Parliament introduced statutory adjudication as an interim dispute resolution process. It is a quick, efficient, effective (but rather summary) procedure designed to resolve payment disputes pending a final dispute resolution by way of arbitration or litigation.
CIPAA helps alleviate cash flow issues faced by many contractors
Because CIPAA is quick and cost-effective, it helps to alleviate the cashflow issues faced by many contractors who are unpaid. CIPAA also renders all back-to-back payment arrangements to be void, so that the provisions of CIPAA cannot be circumvented.
Once a decision is made pursuant to CIPAA, that decision is immediately binding. The winning party can enforce the CIPAA decision by applying to register it in the High Court, slowing-down or suspending their works without penalty, or even seek payment from the principal if there is any amount owing (applicable to sub-contractors seeking direct payments from employers).