KLRCA launches standard form of building contracts

PETALING JAYA (Aug 15): The Kuala Lumpur Regional Centre for Arbitration (KLRCA) has launched a suite of Standard Form of Contracts (SFC) which is suitable for all building construction projects in Malaysia.

The SFC is aimed at filling the gaps in the existing form of building contracts governing relationships, rights and duties of parties in a building construction project, according to the KLRCA in press release following the launch of the SFC today.

The Malaysia-centric contract will be tweaked in the coming months to meet international standards for projects outside Malaysia, it added.

It is Malaysia’s first CIPAA (Construction Industry Payment and Adjudication Act)-compliant suite of building contracts and contains more mechanisms for parties to resolve disputes and deadlocks including mediation, encouraging parties to continue work despite disputes, while preserving parties’ rights till completion — thus making continuity of works and working relationships its highest priorities.

KLRCA is the first arbitral institution worldwide to launch a suite of this kind.

At the launch today, KLRCA director Datuk Professor Sundra Rajoo touched on KLRCA’s existing relationship with the construction industry.

“The industry players have already benefited from the efficient dispute resolution processes and have acknowledged our continuous efforts to further tailor the legal framework to their needs. There is no better illustration than our recent statistics; as of today, we have more than 1,100 registered cases (as compared to 22 cases in 2010),” he said.

He however admitted that although the number of cases sound impressive, the issues surrounding the construction industry in Malaysia run deeper.

“We have come to realise that the problem goes beyond simple payment issues and stems from the contracts used by the parties,” said Sundra.

Offering KLRCA’s SFC as a solution to these issues, he said,  “the SFC was engineered in a way to become a hybrid that bridges and fills the gaps of local and foreign standard form contracts with due consideration given to current laws and judicial precedents impacting the Malaysian construction industry”.

 Minister in the Prime Minister’s Department Azalina Othman Said who officiated the launch event said the role of an ADR (Alternative Dispute Resolution) Centre has gone beyond merely resolving disputes. It now also extends to dispute avoidance, she said.

“In just three months, Datuk Professor Sundra Rajoo and his KLRCA team together with a line-up of dedicated industry experts making up the advisory committee embarked on a tedious and arduous journey to produce a more complete, refined and easy to use suite of Standard Form of Building Contracts,” she said.

“While several Standard Form of Building Contracts already exist in the market today, there remain noticeable gaps that require addressing and bridging. KLRCA saw the need to address this,” she added.