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International security of payment legislation for the construction industry (‘SoPL’) seeks to improve cash flow and reduce costly disputes. It does so primarily through regulating payment practices and providing rights to fast-track interim adjudication. This article examines the development of SoPL in eight jurisdictions where it has been in force for at least fifteen years and been subject to substantive review and amendment. The different models of SoPL are examined from the policy perspectives of improving economic efficiency and protecting small businesses. The focus is on the practical implications of SoPL and consideration is given to fairness and balance between those who undertake and those who pay for construction. It is argued that SoPL has been successful in many of its aims and, intentionally or not, effected a significant de facto privatisation of justice. In many ways it has addressed problems of the justice system rather than the construction industry. However, the international development of SoPL has also shown that ex post regulation by enforcement of rights through adjudication alone cannot achieve all policy objectives, especially for the smallest businesses. Provisions for actual security of funds and criminal sanctions for compliance failures are gaining traction in some jurisdictions. Whilst SoPL has sometimes been criticized as intruding into freedom of contract or giving special treatment to the construction industry, it might be more relevant to ask whether SoPL should have resonance and application in other sectors.
Peter A. Clayton (Wed,) studied this question.