Are you thinking of whether to pursue adjudication through CIPAA Malaysia instead of arbitration or litigation? Let’s go over what the differences are and whether they are suitable for your needs.
Understanding CIPAA 2012 Malaysia
CIPAA, or the Construction Industry Payment and Adjudication Act 2012, aims to resolve payment disputes in Malaysia’s construction industry. It introduces a streamlined adjudication process where an independent adjudicator provides a binding decision on payment disputes within 106 working days.
For more information, read: Adjudication Under CIPAA Act 2012 Malaysia, CIPAA Act 2012: A Complete Guide To The Malaysian Construction Industry and CIPAA Procedure For Construction Disputes
Here are some differences between CIPAA and standard litigation or arbitration to help you make an informed decision:
Statutory Adjudication (CIPAA) | Litigation or Arbitration |
Statutory adjudication under CIPAA is confined to payment disputes under the express terms of the construction contract. The contract must be:
Residential buildings of less than 4 storeys intended for own occupation by natural persons (i.e. not companies) are exempted. The Works Minister may also categorically exempt certain contracts from the operation of CIPAA Malaysia. | You can refer a dispute to arbitration if there is an arbitration clause or agreement in place, and the scope of the dispute falls within the arbitration clause. Arbitration is not limited to payment disputes only. All other disputes (i.e. non-payment disputes, and disputes not covered by an arbitration clause) must be referred to litigation vide the Courts. The Court has unlimited monetary jurisdiction, and can further grant other reliefs like injunctions, specific performance of contracts, declaratory orders, etc. |
| The adjudication process is swift. The CIPAA timelines would complete in a little over 5 months, or approximately 105 working days from the issuance of the payment claim to the delivery of the adjudication decision. This timeline may (but is rarely) extended by parties. However, even after an adjudication decision is given, parties must still consider how to enforce this decision, which would take more time. | Litigation takes between 9 months to 1 year to conclude in the first instance (i.e. until the conclusion of the trial). However, this is subject to further appeals. In reality, arbitration usually takes a longer time than litigation. You would anticipate a time frame of between 18 months to 2 years for arbitration to be completed. |
| The CIPAA Act 2012 adjudication decision is binding but not final. The matter can be re-arbitrated or re-litigated. However, there is temporary finality in the decision, namely, an employer who is required to pay pursuant to an adjudication decision must still make that payment whilst the matter is being arbitrated/litigated. | The decision of a judge is final, subject to appeals. Usually, appeals focus on points of law and findings of fact are rarely appealed successfully. As for arbitration, the decision of the arbitrator would also be final and the grounds for setting aside an arbitration award would be extremely limited (even less than the grounds of appeal against a judge). |
| The adjudication process is usually based on documents only. Although CIPAA 2012 allows for oral hearings, it is unlikely that an adjudicator would allow oral hearings because of the tight deadlines. Therefore, you should have good documentary support for your claim if you intend to mount a CIPAA claim. | Both litigation and arbitration allow for oral testimony by witnesses. If your claim depends on such oral testimony, the CIPAA Act Malaysia may not be the best available avenue for you. |
| Representation in the statutory adjudication under CIPAA proceeding is at the parties’ option. In other words, you can represent yourself, but be wary that the other side may appoint a lawyer who may then be mounting legal arguments against you. | A natural person can represent herself in Court but a company is required to be represented by a lawyer. However, there is nothing to stop parties from representing themselves in arbitration, although the rules of arbitration may be overly technical for a layman to navigate. |
*The comparison shown here is by no means exhaustive.
Benefits of using CIPAA Malaysia
- Quick and cost-effective resolution of disputes (within 106 working days).
- Binding and enforceable decisions.
- Improved cash flow and reduced financial uncertainty.
- Enhances overall industry efficiency.
When to use CIPAA Act Malaysia?
- Use CIPAA if facing delayed payments in construction contracts.
- It is beneficial when other dispute-resolution methods are too slow or costly.
Considerations before choosing the CIPAA Act
- Assess the nature of the dispute: Is it purely about payment?
- Consider the cost and time involved in adjudication versus other methods.
- Evaluate the relationship with the other party: Is it worth potentially straining?
Concluding remarks
In other words, should you adjudicate through the CIPAA Act 2012 or refer your dispute to arbitration/litigation?
Although many claims consultants encourage CIPAA adjudication, this may be because they are not entitled to represent you in litigation. Therefore, there may be an element of self-interest involved.
Whether CIPAA Malaysia is the right process for every payment dispute depends on your specific facts. Do not rush in unless you are certain. Ensure fair compensation in payment disputes with the CIPAA Act, and contact us for legal assistance for your specific needs.
If you have any queries, send us an email at [email protected]. This article was contributed by Daryl Khor, a practising lawyer with Messrs Kheng Hoe. He may be contacted at [email protected].