Construction and projects in Hong Kong: overview

A Q&A guide to construction and projects law in Hong Kong.

The Q&A gives a high level overview of the main trends and significant deals; procurement arrangements; transaction structures and corporate vehicles; financing projects; security and contractual protections that funders require; standard forms of contracts; risk allocation; excluding liability, including caps and force majeure; contractual provisions covering material delays and variations; appointing and paying contractors; subcontractors; licences and consents; projects insurance; employment laws; health and safety; environmental issues; corrupt business practices and bribery; bankruptcy/insolvency; public private partnerships (PPPs); dispute resolution; tax and mitigating tax liability; and proposals for reform.

To compare answers across multiple jurisdictions, visit the construction and projects Country Q&A tool.

This Q&A is part of the global guide to construction and projects law. For a full list of jurisdictional Q&As visit www.practicallaw.com/construction-guide.

Contents

Overview of the construction and projects sector

1. What are the main trends in the local construction and projects market? What are the most significant deals?

Main trends

The Hong Kong construction and projects market reflects increased expansion of the city's strategic public and private infrastructure. Developments in the territory's construction and arbitration law indicate that disputes activity in the construction sector is likely to increase.

While the Hong Kong construction industry's ten mega projects (including the Kai Tak Development, the Hong Kong section of the Guangzhou–Shenzhen–Hong Kong Express Rail Link, the Hong Kong–Zhuhai–Macau Bridge, the Tuen Mun–Chek Lap Kok link, the Sha Tin to Central link and various government projects for new town extensions and new development areas) continue into their construction phase, many new public and private projects have also been recently announced. These include various strategic infrastructure investments such as:

SkyCity. In addition to the ongoing reclamation and construction to add a third runway to the Hong Kong Airport, the airport authority has recently announced plans for SkyCity, a major integrated development situated near Hong Kong International Airport with a strategy to expand and transform the airport into a retail city. The development is to sit on a 25 hectare parcel of land adjacent to the airport's Terminal 2 and will have up to 930,000 square meters of commercial development including an exhibition and leisure centre, restaurants, shops and showrooms and office towers.

Various mass transit railway projects. The Hong Kong government's statutory transport corporation, MTR Corporation, has recently completed the city's new South Island connecting Hong Kong city with the southern districts of the island. Further announced and underway projects include the massive high-speed Guangzhou-Shenzhen-Hong Kong Express Rail Link Hong Kong Section and various additions to the existing Hong Kong MTR network in the form of the North Line, Sha Tin to Central Link and South Island Line (West) construction of which will be on a rolling schedule to 2021.

Hong Kong Government 2016-2017 budget capital works expenditure. This includes:

  • The HK$15.1 billion dual two-lane highway connecting Tseung Kwan O at Po Shun Road in the east with proposed Trunk Road T2 in Kai Tak Development in the west.

  • The Central Kowloon Route a 4.7km long dual 3-lane trunk road in Central Kowloon linking Yau Ma Tei Interchange in West Kowloon with the road network on Kai Tak Development and Kowloon Bay in East Kowloon.

  • Approximately HK$200 billion earmarked for hospital and community health centre projects including the expansion of Haven of Hope Hospital, part of the works for redevelopment of Kwong Wah Hospital and Kwai Chung Hospital, and the extension of the operating theatre block for Tuen Mun Hospital.

  • The construction of sports centres and relevant facilities in Kwun Tong, Sham Shui Po and Tai Po, the remaining section of the cycle tracks between Tuen Mun and Sheung Shui, as well as 16 district signature projects championed by district councils.

Reform to Hong Kong's construction law and Arbitration Ordinance also indicates that increased activity in disputes concerning the construction sector is likely. The biggest pending development remains the government's consultation on security of payment legislation. If the legislation is enacted, it is expected that it will result in a significant number of construction disputes being adjudicated.

Despite a recent push to reform the Arbitration Ordinance to allow third party funding of arbitration proceedings, this has remained an unsettled legal area. This is because the English law doctrines of champerty and maintenance, which prohibit funding of legal proceedings, remain in force in Hong Kong.

The government has recently gazetted a Bill in line with the recommendations of the Hong Kong Law Reform Commission to allow third party funding. If the reform goes through, it is expected to have a disproportionate effect on the construction industry which (pending the outcome of the government's proposed security of payment legislation) continues to rely heavily on arbitration as its primary mechanism of dispute resolution.

 

Procurement arrangements

2. Which are the most common procurement arrangements if the main parties are local? Are these arrangements different if some or all of the main parties are international contractors or consultants?

The Hong Kong Government is the main employer in the construction market and, until recently, used its own standard forms of contract (derived from Institution of Civil Engineers standard forms). These were typically traditional construct-only fixed priced lump sum contracts.

The government has now committed to using New Engineering Contracts (NEC3) for all government projects tendered in 2015 and 2016, following successes on an initial tranche of 30 NEC3 pilot projects. The Option C–Target Cost form of NEC3 is frequently used.

There is usually no significant difference in the way contracts are procured when the parties are international contractors and consultants.

 

Transaction structures

3. What transaction structures and corporate vehicles are most commonly used in both local and international projects?

Local projects

Main contactors typically enter into joint ventures for large projects in Hong Kong in order to spread risk and benefit from the wider expertise available by forming a joint venture. These joint ventures are very often unincorporated and the parties enter into an agreement for that particular project only. The agreement allocates the percentage of risk and reward for the project.

International projects

Contractors frequently establish special purpose vehicles and enter into joint ventures for international projects, primarily to limit risk and pool resources.

 

Finance

4. How are projects financed? How do arrangements differ for major international projects?

In the public sector, projects are usually financed by the employer. The two main employers are the Hong Kong Government and the MTR Corporation (MTRC).

The government finances projects from its own financial resources. MTRC has typically financed railway development through property development associated with its rail projects. In the private sector, the main employers are property developers that usually finance projects using debt and equity.

There are no major differences between local and international projects in terms of financing.

 

Security and contractual protections

5. What forms of security and contractual protections do funders typically require to protect their investments?

Security

The forms of security that funders receive for construction projects are typically the same as those they would receive when financing other types of projects. They usually include charges over the borrowers' assets, including (but not limited to) the projects themselves.

Contractual

Step-in rights, warranties and assignment of contractual rights are common in finance documents for construction projects. They provide the funders with the ability to continue the projects if the borrowers default.

 

Standard forms of contracts

6. What standard forms of contracts are used for both local and international projects? Which organisations publish them?

Local projects

Until recently, the most widely used forms of contract for public works were the Hong Kong Government's standard form Building Works and Civil Engineering Works. However, the government is now committed to using the New Engineering Contracts suite of contracts published by the Institution of Civil Engineers for all government projects tendered in 2015 and 2016.

In October 2016, the Development Bureau promulgated the following two practice notes for public works projects in Hong Kong:

  • Practice note for New Engineering Contract (NEC).

  • Practice note for Engineering and Construction Contract (ECC).

These practice notes provide guidance in the preparation and administration of public works projects and consultancy agreements using the NEC form. They affect all tenders invited on or after 1 December 2016 for capital works contracts and that both:

  • Adopt the NEC or ECC forms.

  • Exceed the quotation limit set out in section 220 of the Stores and Procurement Regulations (SPR 220).

The MTR Corporation also has its own standard forms of contract.

In the private sector, it is usual to use the standard form contracts published by the Hong Kong Institute of Architects and the Hong Kong Institute of Surveyors.

International projects

International Federation of Consulting Engineers standard forms are often used for international projects (particularly the Red Book (Conditions of Contract for Works of Civil Engineering Construction)).

 

Contractual issues

Contractors' risks

7. What risks are typically allocated to the contractor? How are these risks offset or managed?

The Hong Kong Government places all risk on the contractor, including ground conditions in civil engineering projects.

In contrast, the MTR Corporation does not place the risk of ground conditions on the contractor where those conditions are beyond those set out in a baseline set of anticipated conditions (geotechnical baseline report).

Employers manage the risk of non-performance of the contractor by requiring parent company guarantees and on-demand performance bonds (usually 10% of the contract sum). Contractors are also usually required to provide:

  • Warranties as to fitness for purpose.

  • Indemnities against specified third-party claims made against the employer, for example, intellectual property rights claims.

Contract price fluctuations are paid for by the employer up to a limit based on a percentage of the final (adjusted) contract sum.

In both the public and private sectors, risks are mostly borne by the contractor. In the private sector, where the market is dominated by large developers, the contractor bears most of the contractual risk.

In both the public and private sectors, risks are mostly borne by the contractor. In the private sector, where the market is dominated by large developers, the contractor bears most of the contractual risk.

 

Excluding liability

8. How can liability be excluded or restricted under local law?

Generally, the contractor cannot limit its liability for indirect or consequential loss. In the public sector, the contractor is generally not liable for loss of business or profit although it will be liable to pay liquidated damages caused by its delay.

In the private sector, the ability to exclude liability depends to a very large extent on the bargaining power of the parties. Contractors are unlikely to be able to negotiate exclusion of liability where the employer is a major developer.

 

Caps on liability

9. Do the parties usually agree to a cap on liability? If yes, how is this usually fixed? What liabilities, if any, are typically not capped?

For public sector major projects, there is usually no express cap on liability for breach of contract. However, most construction contracts include a liquidated damages provision usually expressed as an amount payable per day for each day that substantial completion of the project is delayed as a result of the contractor's default.

In the private sector, there is more scope to negotiate a cap on liability, but this very much depends on the respective bargaining power of the parties and prevailing market conditions.

 

Force majeure

10. Are force majeure exclusions available and enforceable?

Most construction contracts include a force majeure exclusion. These clauses are readily enforceable in Hong Kong.

Force majeure provisions include "neutral events" under which the contractor is compensated for any delay by being granted an extension of time. The contractor will not be entitled to additional payment under the contract. Contracts can also include express frustration provisions instead of force majeure clauses.

Force majeure provisions do not generally assist the contractor with delay that is beyond its control or in the event of a shortage of labour and materials.

 

Material delays

11. What contractual provisions are typically negotiated to cover material delays to the project?

Most construction contacts include detailed provisions on delays to project works that result from circumstances beyond the control of the contractor. If the contractor delays the project as a result of its own default, it must pay liquidated damages calculated for each day of delay.

The contractor's entitlement to an extension of time is conditional on complying with strict notice provisions. The contractor must provide regular updates (following initial notification) of the effect of the delay and to substantiate its entitlement to the extension of time claimed. Frequently, the contractor has an express contractual obligation to mitigate any delay.

 

Material variations

12. What contractual provisions are typically negotiated to cover variations to the works?

Nearly all construction contracts have a variation clause setting out in detail the circumstances under which the contractor is entitled to a variation order (which entitles it to additional payment and/or an extension of time under the contract).

Detailed provisions set out how the value of variations must be calculated, usually by the architect or engineer (the employer's agent administering the contract and certifying payment). Valuation is based on rates under the contract (included in a bill of quantities or schedule of rates) that are similar to the varied work. If there is no similar rate, valuation is based on rates calculated by the architect or engineer from first principles, or as agreed between the architect or engineer and the contractor.

 

Other negotiated provisions

13. What other contractual provisions are usually heavily negotiated by the parties?

There is little (if any) scope for a contractor to negotiate terms under a construction contract in Hong Kong. This is because there is a relatively small market with a large number of contractors. The combination results in a very competitive (employer's) market. All major construction contracts are secured using a competitive tender approach in which contracts are simply priced by contractors rather than being negotiated.

There may be more scope with international projects to negotiate contractual provisions, although with larger projects contactors usually need to competitively tender for work and so do not have much scope to negotiate.

 

Architects, engineers and construction professionals

14. How are construction professionals usually selected? Following selection, how are they then formally appointed?

Construction professionals are appointed under standard form consultancy agreements that are, in most cases, competitively tendered by employers.

For government contracts, construction professionals such as architects must be on approved lists for certain categories of work. The categories are banded according to the value of the work to be performed.

 
15. What provisions of construction professionals' appointments are most heavily negotiated? Are liabilities commonly limited or capped in construction professionals' appointments?

Negotiated provisions

Generally, consultants are not prepared to provide fitness for purpose warranties, but will provide (less onerous) warranties for reasonable skill and care.

Liability

Consultants' agreements have a limitation of liability provision which caps liability up to a maximum of the consultant's fees under the agreement.

 

Payment for construction work

16. What are the usual methods of payment for construction work? Are there ways for the contractor and consultants to secure payment or mitigate risks of non-payment under local law?

Methods of payment

Payment for construction work in Hong Kong is purely contractual. There is currently no statutory framework to ensure that contractors and consultants are paid in accordance with their contracts.

Security for payment legislation is currently being considered by the Hong Kong Government, having gone through a public consultation process in 2015. Similar to other common law jurisdictions, the current proposal provides for a statutory adjudication framework. It is proposed that under this legislation "pay when paid" clauses and "pay when certified" clauses will no longer be enforceable.

In addition, under the proposed new legislation, subcontractors of any tier will also be protected. Subcontractors have traditionally been the most affected by non-payment, particularly those further down the subcontract contractual chain.

Securing payment

Contractors cannot obtain any security for payment under any statutory framework. A contractor can exercise a common law lien over materials brought onto site (and before they are incorporated into the contract for works), but this is unusual.

 

Subcontractors

17. How do the parties typically manage their relationships with subcontractors?

Contractors usually contract "back to back" with their subcontractors, which means that subcontractors are only paid when the main contractor is paid by the employer. Until recently, there has been no obligation (because there is no contractual relationship) for an employer to pay a contractor's domestic subcontractor.

That position has now changed because the Contracts (Rights of Third Parties) Ordinance has come into force. Unless the main contract expressly excludes third party rights under the Ordinance, subcontractors can now claim against an employer under the main contract. However, based on English experience, it is likely that most parties will expressly exclude third party rights under the Ordinance.

Nominated subcontractors can be paid by the employer if the contractor fails (without any reasonable excuse) to pay them. Nominated subcontractors will, in any event, now have rights under the Contracts (Rights of Third Parties) Ordinance.

 

Licensing

18. What licences and other consents must contractors and construction professionals have to carry out local construction work? Are there any specific licensing requirements for international contractors and construction professionals?

To carry out public works, construction professionals and contractors must be on the government's approved lists of contractors and consultants.

There are two approved lists of public works contractors:

  • The list of approved contractors for public works.

  • The list of approved suppliers of materials and specialist contractors for public works.

Contractors must meet the financial, technical and management criteria for admission and be retained on the approved lists to be awarded public works contracts.

The list of consultants is maintained by the Architectural and Associated Consultants Selection Board and comprises six categories, including architectural, building services, building surveying, landscape architectural, quantity surveying and structural engineering.

Each of these categories of consultants (except for the building surveying and landscape architectural categories) is further divided into two bands according to the number of professional staff and number of years the firm has been established. Band one consultants are eligible to bid for projects with a value of over HK$300 million and band two can bid for projects under that value. There is also a band three for consultants engaged in minor public projects.

Almost all construction work in Hong Kong (whether in the public or private sector) can only be carried out with the approval of the Hong Kong Buildings Authority (BA).

Contractors must be registered with the BA and obtain various consents during the lifecycle of a project. Construction professionals must also be registered as authorised persons (APs). Both registered contractors and APs have statutory obligations under the Buildings Ordinance.

 
19. What licences and other consents must a project obtain?

Before

Apart from planning permission requirements under the Town Planning Ordinance, all construction projects must be approved by the Buildings Authority (BA) before they start. It is not possible to obtain retrospective approval for a project once it has started. The BA is primarily concerned with the structural safety of buildings and will conduct a review of drawings and calculations for new buildings and other structures before approving the documents.

During

During construction of (private sector) project works, various approvals and inspections may be required by the Buildings Authority, for example, in respect of geotechnical and structural works. Inspections and approvals may also need to be obtained from other government departments, such as the Electrical and Mechanical Services Department where plant and equipment are included in the works.

Public sector projects are generally not strictly subject to the requirements of the Buildings Ordinance and its subsidiary legislation.

On completion

When a project is completed, an occupation permit is needed before it can be used. Before issuing an occupation permit, inspections and approvals must be carried out by government departments (depending on the nature of the project), such as the Fire Services Department.

 

Projects insurance

20. What types of insurance must be maintained by law? Are other non-compulsory types of insurance maintained under contract?

Compulsory insurance

The Employees' Compensation Ordinance lays down the rights and obligations of employers and employees in respect of injuries or death caused by accidents arising out of and in the course of employment or by prescribed occupational diseases under the Ordinance. All consultants and contractors' employees must have an insurance cover for these.

Non-compulsory insurance

In typical construction contacts, the employer will take out contractor's "all risks" insurance to provide cover to all contractors and subcontractors working on the project. Contractors must also have third party liability insurance. Contractors may also be required to secure other types of insurance, such as insurance for equipment brought onto site.

Under their appointment contracts, construction professionals must usually have professional indemnity insurance cover up to a specified amount to insure against negligent design.

 

Employment laws

21. What are the main requirements for hiring local and foreign workers?

Local workers

Local workers do not need any specific permits, but all workers must have a Hong Kong identity card to be able to work in Hong Kong.

Foreign workers

The use of foreign workers is very heavily restricted. Generally, foreign workers are not allowed to work in Hong Kong, resulting in a shortage of skilled labour in the construction industry. Foreign workers can only work in Hong Kong with the appropriate visa from the Hong Kong Immigration Department.

 
22. Which employment laws are relevant to projects?

The statutory minimum wage was increased in May 2015 to HK$32.50 per hour.

Employers must contribute to the employee's Mandatory Provident Fund. Employees must also contribute if they meet the minimum wage threshold.

If an employee engaged in building and construction works is owed wages by his direct employer (subcontractor), he can request the principal contractor, the superior subcontractor or the superior nominated subcontractor to pay the first two months' unpaid wages on behalf of his employer (Employment Ordinance).

 
23. Must an employer pay statutory redundancy or other payments at the end of a project? Are all employees eligible?

There is no requirement for an employer to pay an employee any redundancy at the end of a project. Employees may be entitled to a severance payment if they have been employed under a continuous contract of employment for at least 24 months.

 

Health and safety

24. Which health and safety laws apply to projects?

There are many health and safety laws that apply to construction projects. The Occupational Safety and Health Ordinance covers most work places to protect the safety and health of employees at work. Other legislation applicable to construction sites includes the Factories and Industrial Undertakings Ordinance and its subsidiary legislation, in particular, the Construction Sites (Safety) Regulations.

Breaching these regulations can result in fines and/or imprisonment. For example, failure to comply with improvement notices and suspension notices against activities carried on in a workplace that may create an imminent hazard to the employees constitutes an offence punishable with a fine of HK$200,000 and HK$500,000 respectively and imprisonment for up to 12 months.

 

Environmental issues

25. Which local laws regulate projects' effects on the environment?

Air

The Air Pollution Control Ordinance limits emissions of many types of pollutants into the atmosphere, including dust and smoke.

The Noise Control Ordinance, among other things, restricts the normal daily working hours that construction activities can be carried out. Directors of companies that continually breach this Ordinance can be held personally liable.

Water

The Water Pollution Control Ordinance regulates the discharge of effluent into foul sewers, storm water drains, inland waters or coastal waters.

Waste

The import and export of waste (including construction waste) is subject to control under the Waste Disposal Ordinance (WDO). Under Part IVA of the WDO, import or export of any waste requires a permit issued by the Environmental Protection Department unless the waste is:

  • Listed in the sixth schedule to the WDO.

  • Uncontaminated, as defined under the WDO.

  • Intended for genuine recycling or reuse.

Environmental impact assessments (EIAs)

Most construction projects require an EIA. The types of projects requiring an EIA are listed in Schedules 1 and 2 to the Environmental Impact Assessment Ordinance.

Sustainable development

Under the Buildings Energy Efficiency Ordinance, certain prescribed types of buildings must comply with the Building Energy Code and/or Energy Audit Code.

If developers obtain a Green Building Certification Label from the Green Building Council as a result of including environmentally friendly features in their proposed developments, they can be granted additional gross floor area for that development by the Buildings Authority.

 
26. Do new buildings need to meet carbon emissions or climate change targets?

There is no specific statutory framework on carbon emissions and climate change targets.

 

Prohibiting corrupt practices

27. Are there any rules prohibiting corrupt business practices and bribery (particularly any rules targeting the projects sector)? What are the applicable civil or criminal penalties?

Rules

Hong Kong has very strict rules on corrupt practices and most construction contracts include provisions to prevent bribery and corruption.

The Prevention of Bribery Ordinance (PBO) is the main piece of legislation concerning bribery and corruption. The Independent Commission Against Corruption (ICAC) is a powerful body that conducts investigations and seeks to prosecute those who commit offences under the PBO.

Penalties

The penalties for offences under the PBO are severe and include fines up to HK$500,000 and imprisonment for up to ten years.

 

Bankruptcy/insolvency

28. What rights do the client and funder have on the contractor's bankruptcy or insolvency?

Most construction contracts contain provisions enabling termination of the contract in the event that the contractor becomes insolvent (or enters into a scheme of arrangement). There is no statutory protection afforded to the contractor if it becomes insolvent.

 

PPPs

29. Are public private partnerships (PPPs) common in local construction projects? If so, which sectors commonly use PPPs?

PPPs are not common in Hong Kong. There have been a few projects that have used PPPs, for example, procurement of the cross harbour tunnels and more recently an exhibition centre.

 
30. What local laws apply to PPPs?

There is no specific legal or statutory framework for PPPs in Hong Kong.

 
31. What is the typical procurement/tender process in a PPP transaction? Does the government or another body publish standard forms of PPP project agreement and related contracts?

There is no specific tendering process in PPP transactions.

 

Dispute resolution

32. Which are the most common formal dispute resolution methods used? Which courts and arbitration organisations deal with construction disputes?

Formal dispute resolution methods

Nearly all construction contracts in Hong Kong are subject to mandatory arbitration, which is final and binding. There is very limited scope in the Hong Kong courts to appeal or set aside arbitration awards. The courts in Hong Kong are generally very pro-arbitration and are reluctant to intervene in the arbitration process or set aside an award once published.

Typical dispute resolution clauses in construction contracts are multi-tiered and require negotiation, then mediation and then (if previous steps fail to resolve the dispute) arbitration. Under government contracts, arbitration cannot be commenced until the project is complete, so it can be several years before a contractor can seek to resolve a dispute.

Hong Kong is currently in the process of formulating legislation on security of payment, which includes an adjudication mechanism enabling parties to resolve disputes in a comparatively short period. The current proposal provides that adjudications would be completed in 60 working days from commencement. The Hong Kong Government released a report on its public consultation in April 2016. The next steps are for the Development Bureau to finalise the framework of the legislation and to prepare a Bill for submission to the Legislative Council.

Courts and arbitration organisations

Construction litigation is dealt with in a specialist High Court construction and arbitration list.

Most domestic construction contracts adopt the Hong Kong International Arbitration Centre's Domestic Arbitration Rules, which were revised in 2014. It is unusual for parties to adopt other institutional rules, unless one or both parties are international, in which case the parties typically choose to adopt the rules of the International Chamber of Commerce or London Court of International Arbitration.

 
33. What are the most commonly used alternative dispute resolution (ADR) methods?

Currently, the most commonly used methods of dispute resolution are mediation and arbitration.

The Hong Kong Government is in the process of deciding on security of payment legislation which will include an adjudication mechanism. It is expected that the legislation, if adopted, will result in the adjudication of a significant number of construction disputes.

 

Tax

34. What are the main tax issues arising on projects?

There are few tax issues concerning projects in Hong Kong. Hong Kong does not have any VAT or sales tax.

A developer may be required to pay a premium to the Hong Kong Government for redeveloping a site. The amount of the premium depends on the increase in land value following completion of the project.

 
35. Are any methods commonly used to mitigate tax liability on projects? Are there any tax incentives to carry out regeneration projects?

Mitigating tax

There are generally no methods used to mitigate tax liability on projects.

Tax incentives

There are no tax incentives to carry out regeneration projects.

 

Other requirements for international contractors

36. Are there any specific requirements that international contractors or construction professionals must comply with?

There is no restriction on international contractors entering the Hong Kong construction market. Like their domestic counterparts, they must be licensed by the Building Authority. To become licensed, international contractors sometimes acquire a local contractor who is already licensed.

 

Reform

37. Are there any proposals to reform construction and projects law? Are there any new legal or regulatory trends affecting projects?

Security of payment

The biggest development is the Hong Kong Government's current consultation on security of payment legislation. If the legislation is enacted, it is expected that it will result in a significant number of construction disputes being adjudicated.

Another area of reform is the Hong Kong Law Reform Commission's (LRC) ongoing consultation on third party funding of arbitration proceedings. This remains an unsettled legal area because of the English doctrines of champerty and maintenance which remain in force in Hong Kong.

The LRC has recommended that amendments be made to the law to allow third party funding of arbitration. If adopted, this will open the door to funders.

Other developments include the recent entry into force of the Contracts (Rights of Third Parties) Ordinance and the Competition Ordinance.

Third party funding

Another area of reform is the Hong Kong Law Reform Commission's (LRC) recommendation that the law be reformed to allow third party funding of arbitration proceedings. This has remained an unsettled legal area because the English law doctrines of champerty and maintenance, which prohibit funding of legal proceedings, remain in force in Hong Kong.

The LRC has, in its most recent report of October 2016, recommended that amendments be made to the law to allow third party funding of arbitration. The LRC has recommended that a code containing clear ethical and financial standards for third party funders providing funding to parties should be developed. The LRC has recommended that the Hong Kong Advisory Committee on the Promotion of Arbitration should oversee the adoption of the code and assess its effectiveness after an initial three year period.

The LRC has further recommended that where a funding agreement is entered into in an arbitration, the funded party must give written notice to the other party and to any administering arbitral institution of the fact that a funding arrangement has been entered into and the identity of the third party funder.

The government has recently gazetted a Bill in line with the recommendations of the LRC. If the Bill is enacted, the reforms will firmly open the door to funding of arbitration in Hong Kong.

Rights of third parties

Other developments include the recent entry into force of the Contracts (Rights of Third Parties) Ordinance and the Competition Ordinance.

The following trends can also be observed:

  • Alteration of the balance of risk, shifting away from contractors, consultants and suppliers towards employers.

  • Earlier resolution through adjudication for disputes related to payment.

  • Increased funding options.

  • Regulation of anti-competitive behaviour.

 

Main construction organisations

Construction Industry Council (CIC)

Main activities. The CIC aims to strengthen the sustainability of the construction industry in Hong Kong and promote continuous improvement by improving construction skills and increasing awareness of health and safety in the industry.

W www.cic.hk

Hong Kong Construction Association

Main activities. This is an association of contractors with a common goal of, among other things, taking a proactive approach to safety management and constantly aiming to improve the safety of workers. It also promotes a culture of innovation, research and development to enhance productivity in the industry and encourages a stable employment environment for all workers.

W www.hkca.com.hk

Hong Kong Institute of Construction Managers

Main activities. This is a non-profit making organisation that functions as an educational and professional institution for practitioners in construction management. It maintains a register of construction professionals.

W www.hkicm.org.hk



Online resources

Department of Justice Bilingual Laws Information System (BLIS)

W www.legislation.gov.hk/eng/home.htm

Description. BLIS is an electronic database of all Hong Kong legislation. It is established and updated by the Department of Justice and provides bilingual texts of Ordinances and subsidiary legislation in force on or after 30 June 1997 (including the current version and past versions dating back to 30 June 1997).



Contributor profiles

Paul Starr, Partner

King & Wood Mallesons

T +852 3443 1118
F +852 3443 1299
E Paul.Starr@hk.kwm.com
W www.kwm.com

Professional qualifications. Hong Kong, Lawyer; England and Wales, Lawyer; New South Wales; Lawyer

Areas of practice. Dispute resolution and infrastructure; international arbitration; construction disputes.

Non-professional qualifications. Honours graduate in law, Peterhouse, Cambridge University, England (won a scholarship and the University's prestigious Squire Law Prize)

Richard Lyons, Counsel

King & Wood Mallesons

T +852 3443 1138
F +852 3443 1299
E Richard.Lyons@hk.kwm.com
W www.kwm.com

Professional qualifications. Hong Kong, Lawyer; Chartered civil engineer

Areas of practice. Construction; dispute resolution.

James McKenzie, Senior Associate

King & Wood Mallesons

T +852 3443 1246
F +852 3443 1299
E James.McKenzie@hk.kwm.com
W www.kwm.com

Professional qualifications. Hong Kong, Lawyer; New South Wales, Australia, Lawyer

Areas of practice. Dispute resolution and infrastructure; international arbitration; construction disputes.


{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1247352964609", "objName" : "Construction and projects in Hong Kong overview", "userID" : "2", "objUrl" : "http://us.practicallaw.com/cs/Satellite/us/resource/6-502-0698?null", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "22e97be00:15b0f932482:-2d53", "analyticsSessionCookie" : "22e97be00:15b0f932482:-2d52", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }