CONSTRUCTION INDUSTRY SECURITY OF PAYMENT ("SOP") ORDINANCE HONG KONG

The Hong Kong Construction Industry SOP Ordinance is to help main contractors, sub-contractors, consultants and suppliers receive payments on time for work done and services provided. It also provides a means to rapidly resolve disputes. There have been many voices in the Hong Kong construction industry advocating the introduction of SOPL to improve payment practices and dispute resolution.

The Hong Kong SAR Government and the Construction Industry Council conducted a comprehensive and industry wide survey on payment practice in the local construction industry in 2011. The survey revealed that significant payment problems were being experienced by main contractors, sub-contractors, consultants and suppliers. Particular problems included the use of ‘pay when paid’ clauses and payments being delayed by disputes. Payment problems were more severe in the private sector. Administrative and contractual arrangements on public works contracts alone cannot help resolve the problems of the wider industry. The Hong Kong SAR Government therefore considers it necessary to adopt a legislative approach to address payment problems.

The Hong Kong SOP Ordinance is modelled with reference to other jurisdictions which have similar industry practices to Hong Kong where security of payment legislations have been put in place, in recognition of the vulnerability of the construction industry (and especially the smaller sub-contractors, consultants and suppliers) to disputes and payment delays. The countries which have already enacted SOP legislation are the United Kingdom, Australia (in 6 different states and 2 territories), New Zealand, Singapore, Malaysia and Ireland.

The long-anticipated SOP Ordinance was gazetted on 17 May 2024 and was introduced into LegCo for its first reading on 29 May 2024. The full draft can be downloaded here: