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10 Aug 2026

What Is CIPAA and How Can You Claim Unpaid Construction Work Payments?

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Payment problems are common in the construction industry. A contractor may complete the work, a subcontractor may submit a progress claim, or a consultant may provide services, but payment is delayed, reduced or not made at all. When that happens, cash flow can quickly become a serious problem.

This is where the Construction Industry Payment and Adjudication Act 2012, commonly known as CIPAA, can help.

The key idea behind CIPAA is simple: payment disputes should be dealt with quickly so that money continues to flow through a construction project. That is why CIPAA is often described as operating on a “pay now, argue later” basis.

What is CIPAA?

CIPAA is a Malaysian law that came into force on 15 April 2014. It introduced a statutory adjudication process for payment disputes arising from construction contracts. In simple terms, CIPAA gives parties in the construction industry a faster way to resolve payment disputes and recover money without having to wait for a full court case or arbitration to finish.

Adjudication is a fast-track dispute resolution process. Instead of waiting for a full trial, the dispute is referred to an independent adjudicator, who considers the parties’ documents and arguments and makes a decision within a strict statutory timeline.

The adjudicator’s decision is binding on an interim basis. This means the parties must generally comply with it unless the decision is stayed or set aside, or the dispute is later finally decided by a court, arbitration or agreement between the parties.

Why is CIPAA useful if you are not being paid?

For an unpaid party, the main attraction of CIPAA is speed. Construction businesses depend heavily on cash flow. Waiting a long time for payment can affect workers, suppliers, subcontractors and the progress of the project itself.

CIPAA is designed to deal with that problem. It gives an unpaid party a structured route to pursue payment quickly, obtain an adjudication decision and, if necessary, take steps to enforce that decision.

Put simply, if your dispute is about money due under a construction contract, CIPAA may provide a much faster route to recovery than waiting for the entire dispute to be finally resolved through ordinary litigation or arbitration.

Can the main contractor say, “I’ll pay you only when I get paid”?

Generally, no. One of the most important payment protections under CIPAA is that a party cannot make your right to payment conditional upon first receiving payment from another party higher up the contractual chain.

Section 35 of CIPAA makes a conditional payment provision void. In simple terms, “pay when paid”, “pay if paid” and back-to-back payment clauses are not enforceable where they make payment to you conditional on the paying party first receiving payment from a third party. If CIPAA applies, the paying party cannot simply say, “My client has not paid me yet, so I do not have to pay you.”

This is important for subcontractors and other parties further down the payment chain. The risk of an employer or another upstream party not paying cannot simply be passed down through a conditional payment clause. The Court of Appeal has also confirmed that Section 35 is not limited only to CIPAA adjudication proceedings and may apply to invalidate such a clause in court or arbitral proceedings.

However, not every clause described as “back-to-back” is automatically invalid. In Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd [2022] MLJU 2109, the Court of Appeal distinguished a “pay when certified” clause from a prohibited “pay when paid” clause. The key question is whether your payment is truly conditional on the other party first receiving money from a third party. The wording of the contract therefore matters.

What types of payment disputes can be referred under CIPAA?

CIPAA can cover a wide range of payment disputes arising from construction contracts. Common examples include:

unpaid or underpaid progress claims for work done;
variation works or additional works;
final account claims;
retention sums that have not been released;
non-payment or under-payment of certified sums;
under-certification or non-certification of payment claims; and
disputes involving set-offs or deductions.

Good records are important. A party bringing a CIPAA claim should be able to clearly explain why the money is due and support the claim with proper contemporaneous documents. Clear documentation also helps the adjudicator understand and decide the payment dispute.

Who does CIPAA apply to?

Generally, CIPAA applies to written construction contracts for construction work or construction consultancy services carried out wholly or partly in Malaysia, unless the contract falls within an exclusion under the Act.

Depending on the contractual arrangement, parties commonly covered may include:

employers and developers;
main contractors;
subcontractors;
consultants such as engineers, architects and quantity surveyors; and
suppliers and specialist contractors.

Not every construction contract is covered. For example, certain contracts relating to residential buildings of fewer than four storeys that are intended to be occupied by a natural person are excluded. Certain government construction contracts may also be exempt where an exemption has been prescribed.

How does the CIPAA process work?

CIPAA works on strict timelines. That is one of the main reasons it can move much faster than ordinary court proceedings. A simplified overview is set out below.

Step 1: Payment Claim and Payment Response

The unpaid party serves a written Payment Claim setting out the basis of the claim and the amount sought. The receiving party has 10 working days to serve a Payment Response if it disputes the claim.

Step 2: Notice of Adjudication

If the payment dispute remains unresolved, the claimant may commence adjudication by serving a Notice of Adjudication. The notice identifies the dispute and the relief or remedy sought.

Step 3: Appointment of an adjudicator

The parties may agree on an adjudicator within 10 working days from service of the Notice of Adjudication. If they cannot agree, the Director of the Asian International Arbitration Centre, or AIAC, may appoint one.

Step 4: Adjudication Claim, Response and Reply

Once the adjudicator accepts the appointment, the claimant must serve its Adjudication Claim within 10 working days. The respondent then has 10 working days to serve its Adjudication Response. The claimant may serve an Adjudication Reply within 5 working days, if necessary.

Step 5: Adjudication Decision

The adjudicator must generally deliver a written decision within 45 working days after the relevant response or reply is served, or after the time for serving the response has expired.

Because each stage is governed by short deadlines, a CIPAA adjudication is designed to reach a decision within a matter of months rather than leaving the payment dispute unresolved for a prolonged period.

What happens if you win a CIPAA adjudication?

Winning the adjudication is not necessarily the end of the process if the other party still does not pay. CIPAA provides several remedies that may help a successful claimant recover the adjudicated sum.

The successful party may apply to the High Court to enforce the adjudication decision as if it were a judgment or order of the Court.
Once enforced, ordinary court enforcement measures may be available to recover the adjudicated sum.
Where the statutory requirements are met, the successful party may seek direct payment from the respondent’s principal.
If the respondent fails to comply with the adjudication decision, the successful party may suspend or reduce the rate of progress of work after giving the required written notice.
The adjudicator may also make orders relating to interest and the costs of the adjudication.

These remedies are important because CIPAA is not only about obtaining a decision on paper. The Act also gives a successful claimant routes to turn that decision into actual payment.

Is a CIPAA decision final?

No. A CIPAA decision is temporarily binding rather than finally binding. This reflects the “pay now, argue later” approach. The payment issue is dealt with quickly first, while the parties remain free to have their wider dispute finally determined later by a court, arbitration or agreement.

Unless the adjudication decision is stayed or set aside, it remains binding in the meantime.

Why CIPAA matters to the construction industry

Construction projects involve a chain of payments. If one party does not pay, the effect can quickly flow down to contractors, subcontractors, suppliers and workers. CIPAA was introduced to reduce the damage caused by long payment delays and to keep cash moving through the industry.

CIPAA also protects the payment chain by outlawing conditional payment provisions such as “pay when paid”, “pay if paid” and back-to-back payment clauses. This means an upstream party generally cannot pass the risk of its own non-payment down to a contractor or subcontractor by making payment conditional on first receiving money from someone else. Together with the fast adjudication process, this helps keep cash moving through the construction industry.

When should you consider CIPAA?

If you have carried out construction work or provided construction-related services and payment is being withheld, delayed or reduced, it may be worth considering whether CIPAA applies to your contract and claim.

Timing matters because CIPAA has strict procedural deadlines. It is also important to identify the correct claim, the amount sought and the supporting documents before the adjudication begins.

Navigating CIPAA disputes with Cheah Teh Su

CIPAA moves quickly, so parties should assess their position early and prepare their documents carefully. Cheah Teh Su has extensive experience in dispute resolution and construction matters, including construction payment disputes.

The firm’s Dispute Resolution practice has been ranked in the Chambers Asia-Pacific Guide for 18 consecutive years and recognised as a Leading Firm in the Legal 500 Asia-Pacific Guide. At CTS, matters are senior-led from the outset, with the supervising partner involved throughout the matter.

If you require advice on a CIPAA payment claim, adjudication or a wider construction payment dispute, contact us or speak to our Construction and Infrastructure team at Cheah Teh Su to discuss the available options.

FAQs

What does CIPAA stand for?

CIPAA stands for the Construction Industry Payment and Adjudication Act 2012. It is the Malaysian law that provides the statutory adjudication process for payment disputes arising from construction contracts.

Who can initiate a CIPAA claim?

A party claiming payment under a written construction contract may commence the CIPAA process if the claim falls within the scope of the Act. This commonly includes contractors, subcontractors, consultants and suppliers, depending on the contractual relationship.

How long does the CIPAA process take?

CIPAA sets short statutory deadlines at each stage. The actual duration depends on the circumstances of the case, but adjudication is designed as a speedy process and is generally concluded within a few months.

Is a CIPAA decision final?

No. The decision is binding on an interim basis. It remains effective unless it is stayed or set aside, or the dispute is finally determined by a court, arbitration or agreement between the parties.

Can a main contractor refuse to pay me because it has not been paid by the employer?

If CIPAA applies and the contract makes your payment conditional on the main contractor first receiving payment from the employer or another third party, that conditional payment clause is void and cannot be enforced. This is commonly referred to as a “pay when paid”, “pay if paid” or back-to-back payment clause. A clause dealing with certification may be different, so the actual wording of the contract should be checked.

Can a CIPAA decision help me actually recover the money?

Yes. A successful claimant may, depending on the circumstances, enforce the adjudication decision in the High Court and use the remedies provided under CIPAA to pursue payment.