Construction sector sees a higher number of dispute cases

AIAC recorded 932 cases last year, with over 700 disputes related to the construction sector


Dispute cases related to the construction sector are on the rise with over 700 contention filed with the Asian International Arbitration Centre (AIAC) last year, and year-to-date value of almost RM1.4 billion.

Malaysia’s rising spending of construction and infrastructure works has been a windfall for contractors, but rising disputes due to contracts clarity and payment avoidances have marred the sector’s growth and hurt many parties.

According to AIAC data, there has been a steady rise in the number of adjudication cases filed year-on-year, with over 700 cases recorded in 2017.

The disputed claims for adjudication as at the end of 2017 totalled about RM1.38 billion.

AIAC, which was formerly known as the Kuala Lumpur Regional Centre for Arbitration, recorded 932 cases last year with over 700 disputes related to the construction sector.

In 2010, AIAC only received 22 cases as more parties sought the centre to help secure resolutions to their disputes.

AIAC director Prof Datuk Sundra Rajoo said payments, poorly constructed contracts and works quality are the main contention brought to the AIAC

AIAC director Prof Datuk Sundra Rajoo said payments, poorly constructed contracts and works quality are the main contention brought to the AIAC.

He said based on AIAC findings, a majority of the disputes occurred due to poorly drafted contracts at the initial negotiation state before any construction works begin.

Sundra said other disputes include financing mechanism, works quality that stall payments, irresponsible behaviours to escape payments and deliberate disregard of all agreed initial terms and agreements.

“To tackle the issue of a poorly drafted contract, we went one step further, whereby we issued a standard form contract last year to improve the process, as we want to encourage people to avoid disputes,” Sundra (picture) told The Malaysian Reserve when met recently.

Malaysia is spending billions on the infrastructure and construction sector, including the RM32 billion Mass Rapid Transit Line 2, the RM50 billion high-speed rail linking Kuala Lumpur and Singapore, the RM60 billion East Coast Rail Link and other public projects.

Sundra said payments issues including delays, contention and avoidance have a negative impact on the industry as they severe relationships and eventually delay projects.

He said AIAC — as an alternative medium for disputes resolution outside of the courts — wants all related parties to tackle the alarming growth of disputes in the construction sector to avoid further deterioration.

Besides non-and delayed payments, other issues faced by the construction sector include accountability between employers and architects, bribery and corruption, technical problems and valuation disagreements.

Sundra admitted that there are no fast resolutions to these disputes, but the issues can be resolved if all related parties administer their contracts carefully.

“Contracting parties must ensure that the construction contracts template used reflects the needs of the present environment,” he said.