Is there any specific legislation relating to payment in the industry?


Belgium Small Flag Belgium

The Law of 9 July 1971 relating to house construction and the sale of houses to be or being built contains several clauses governing the payments the client is to execute to the contractor, especially the advance payment that cannot exceed 5% of the contract price. 
For public construction projects, detailed provisions on the payment mechanisms can be found in the Royal decree of 14 January 2013 on the general rules of performance of public procurement contracts (deadline for approval of the payment request, subsequent deadline for payment, interest rates).

In a B2B context, specific obligations in respect of payment, interest rates and compensation for debt recovery efforts, can be found in the Act of 2 August 2002 on combating late payment in commercial transactions.

Oman Small Flag Oman

Parties to a construction contract can mutually agree payment terms in default of which the CTL requires payment be made in accordance with market practice.

Advance payments are normal practice and the Oman Standard Documents contemplate an advance payment of 10% of contract value.

As in other jurisdictions, the most common pricing structures are “measure and value” and “fixed price lump sum”. Under a measure and value contract, payments are made periodically by reference to work completed and priced against a schedule of rates. Under a fixed price lump sum contract payments are made upon attainment of specific milestones. The Oman Standard Documents can be amended to accommodate either structure.

Denmark Small Flag Denmark

The parties are, in accordance with the freedom of contract principle, generally free to agree on the terms they wish.

However, under the Danish Interest Act, the agreed payment period between two businesses or a business and a public authority can generally not be more than 30 days. Other payment terms that are deemed unreasonable by a Danish court or an arbitration tribunal can also be set aside.

Spain Small Flag Spain

Yes, the one relating to anti-money laundering, mentioned above and also Law 3/2004, of 29th of December, by means of with the measures against delay in payment are established (Ley por la que se establecen medidas de lucha contra la morosidad en las operaciones comerciales).

Indonesia Small Flag Indonesia

For the privately funded constructed contract, there is no any specific legislation relating to payment in the construction industry. This is based on the principle of freedom of contract.
For construction contracts funded by APBN, there are regulations on the procedures of payment for goods and services.

Mexico Small Flag Mexico

In the case of government contracts, the Public Works Laws establish a process of estimating the works, authorization of the estimates, invoicing and payment. Payment is also regulated by the tax laws that define the ways of invoicing under a specific regime (electronic invoicing).

In the case of private contracts, the terms of payment are free to determine. Payment has to satisfy the tax laws and regulations such as the issuance of electronic invoices (CFDIs).

Colombia Small Flag Colombia

Except for PPP schemes, where legislation introduced an alternative of payment that consists on a condition of payment related to the availability of the infrastructure, where the contractor only acquires the right to the remuneration only until the infrastructure is ready to be operative, there is no legislation that regulates the payments in the industry.

Switzerland Small Flag Switzerland

There are no specific legislation relating to payment in the industry. However, given ever tighter AML rules, payments are customarily run through wire transactions through the banks of the parties involved with corresponding compliance implications.

Australia Small Flag Australia

Each Australian state and territory has enacted legislation to regulate security for payment in the building and construction industry. These laws are not harmonised, with consequent differences between jurisdictions.

Norway Small Flag Norway

No, the payment is regulated in the contract between the parties.

Sweden Small Flag Sweden

The principle of freedom of contract is very strong in Swedish law. There is no specific legislation that will interfere with the parties’ freedom to agree the payment conditions. The Interest Act (which may be set aside by contract) provides for penalty interest for late payment (currently 7.5% p.a.)

Hong Kong Small Flag Hong Kong

There currently is no specific legislation relating to payment in the construction industry. However, in April 2016, the Development Bureau of the Hong Kong Government published its report on the public consultation on the proposed security of payment legislation ("SOPL") for the construction industry. The report generally supports the proposed terms of the SOPL.
The legislative framework of the proposed SOPL envisages that it will cover both the public sector (i.e. the Government and 31 specified statutory bodies/corporations, including the Housing Authority, Airport Authority and MTRC) and the private sector contain. It is intended that the SOPL will contain the following key obligations and rights:
• Parties can agree payment periods between applications and payments but not exceeding 60 calendar days (interim payments) or 120 calendar days (final payments).
• A right to dispute resolution by adjudication – a rapid procedure under which an adjudicator gives an independent decision on the dispute and the amount of any payment due.
• The right to adjudication arises in the event of non-payment and when there are disputes about the value of work, services, materials or plant and/or disputes about extensions of time and financial claims under the contract.
• The maximum period allowed for adjudications from appointment of an adjudicator to issue of the adjudicator’s decision will be 55 working days unless the parties both agree to a longer period. Straightforward cases should be decided more quickly.
• If either party is unhappy with an adjudicator’s decision, they still have the right to refer to dispute to court or arbitration (if specified in the contract). Any amount the adjudicator decided as due must, however be paid in the meantime.
• Unpaid parties have the right to suspend or reduce the rate of progress of work after either non-payment of an adjudicator’s decision or non-payment of amounts admitted as due.
The next step is for the Government to finalise the actual framework and wording of the legislation and to prepare the bill for submission to the legislature.

United Kingdom Small Flag United Kingdom

The HGCRA 1996 prescribes a detailed interim payment mechanism to which nearly all UK construction contracts must conform. The Act envisages that the contractor will submit an interim payment application showing the amount it consider due at the “due date”; the employer (or contract administrator) must submit a payment notice recording “the sum due”; and then the employer must submit a “pay less notice” if it intends to pay less than the amount stated in the payment notice. The sum due must be paid on or before the “final date for payment”, and if not paid, can be recovered by way of adjudication. Minor errors in the contents or timing of a notice may invalidate it and such errors often cannot be remedied until the next interim payment cycle.

United States Small Flag United States

On public projects in the United States, Congress has imposed on agencies an obligation to pay every “proper invoice” within 30 days after its receipt. Under the Prompt Payment Act, an agency that fails to pay within the required time will be liable for interest on the delinquent payment. Furthermore, while the invoice must be "proper" in order to trigger the Prompt Payment Act requirements, an agency may not impose unreasonable requirements on its submission.

Many states have adopted their own version of the Prompt Payment Act that provides contractors or subcontractors who do work or furnish materials under a contract with prompt payment for materials or services provided. This type of statute is considered a corollary to a state’s mechanic’s lien law. The amount must be “undisputed,” i.e., there is no good faith dispute over the amount owed. Monies withheld by the owner or by an upstream contractor that are the subject of a dispute do not fall within the statute.

Serbia Small Flag Serbia

There is no specific legislation relating especially to payments in the construction industry. Nevertheless, there is the general Law on deadlines for settlement of pecuniary obligations in commercial transactions, according to which the longest deadline for the payments amongst legal entities within the Republic of Serbia are 60 days, respectively 45 days when a publicly owned entity is the debtor. However, hardly any one respects that law in practice.

UAE Small Flag UAE

If the Employer and Contractor do not agree on the payment for the construction works, Article 888 of the Civil Code states that the Contractor “…shall be entitled to fair remuneration, together with the value of the materials he has provided as required by the way.”

Similar provisions are provided in respect of work carried out by consultants. Article 889 of the Civil Code states provides that, if a fee has not been agreed with the consultant who has “…designed the building and supervised the construction” then the consultant shall be entitled to fair remuneration which is in accordance with the “custom”. If completion does not occur, then the consultant will be entitled to “fair remuneration for the work undertaken”.

Unless the parties have agreed otherwise, a party who has carried out work is due to be paid on completion of the works (Article 885 of the Civil Code).

Germany Small Flag Germany

Payment obligations depend on the respective contract. According to VOB/B-conditions, installment payments are to be granted in the shortest possible time intervals or at the agreed points in time to the amount of the value of the respectively proven contractual services. The claim for final payment will be due soon after examination and determination, at the latest within 30 days after receipt of the final invoice.

Austria Small Flag Austria

There are no specific legal rules governing payments in the construction sector.

France Small Flag France

Payments of construction contracts are generally performed in several instalments, which will depend on the advancement of the project.

For private contractor agreements, payment terms are regulated by general commercial rules which provide for a payment no later than 60 days from the issuance date of the invoice. By derogation, the parties can agree on a payment no later than 45 days end of the month following the issuance of the invoice. The project owner has also, in most cases, the obligation to provide a guarantee of payment to the contractor for the price of the contractor agreement (article 1799-1 of the French Civil Code).

Greece Small Flag Greece

Unless otherwise stipulated between the parties to a typical construction contract, payment to the contractor of the agreed remuneration is due upon delivery of the project or upon delivery of specific parts of the works in case of partial payment (694 GCC). In this respect, if any payment due under the construction contract in not paid in full or properly credited, then the employer shall pay interest thereon starting on the date of delivery of the project or the respective parts thereof. As regards the public projects, payment of the contractor's remuneration is typically made in installments, according to the respective project schedule (Art. 152 of Public Procurement Law). The contract documents may provide for a down payment of up to 15% of the total contract price, the amortisation of which is made through retention of certain amounts from each partial payment (Art. 150 of Public Procurement Law). Further to the above, Directive 2011/7/EU on combating late payment in commercial transactions was transposed into national law through Section G of Law 4152/2013, which applies on payments both between commercial entities and between commercial entities and the public sector.

Saudi Arabia Small Flag Saudi Arabia

The Government Tenders and Procurement Regulation of 2006 requires government contracts with a value above US$ 1.335 million and more than one year's duration to be approved by the Ministry of Finance, whose officials monitor all payments by government agencies closely.

Malaysia Small Flag Malaysia

The Construction Industry Payment And Adjudication Act 2012 (“CIPAA”) introduced statutory adjudication to ease cash flow and to swiftly resolve payment disputes within the construction industry. This was targeted to address the commonly encountered issue of non-payment for work done within the industry. An aggrieved party (normally the contractor or sub-contractor) may submit a payment claim to the responding party. Within 10 days of the payment claim, the responding party may elect to either admit or dispute the claim in whole or in part. Following that, any dispute that arises may be referred for statutory adjudication under CIPAA.

The rights under CIPAA are additional to any contractual dispute resolution procedures and cannot be contractually varied or excluded.

The appellate courts in Malaysia have taken the view that the general application of CIPAA is retrospective in nature. CIPAA’s applicability is however restricted solely to work done and services rendered. This seems to suggest that CIPAA by its nature is one-sided for the benefit of the payee, and not the paymaster.

Updated: October 16, 2018