The “Pay Now, Argue Later” Doctrine: Securing the Lifeblood of Construction

Introduction: The Lifeblood of the Industry

The “Pay Now, Argue Later” doctrine has become a cornerstone of modern construction law, prioritising the continuity of projects over the final resolution of disputes. In the construction sector, regular interim payments are frequently described as the “lifeblood” of the industry. Construction firms typically operate with high cash turnover and comparatively low asset backing; their survival depends not merely on eventual entitlement, but on timing. Even meritorious claims can be rendered meaningless if delayed payments trigger cash-flow collapse or insolvency.

The doctrine responds to this commercial reality by ensuring that contractors are not starved of funds while disputes are worked through agreed dispute resolution mechanisms. In doing so, it preserves employment, supply chains, and project momentum — while deferring, rather than denying, the parties’ right to final determination.

Case Study: National Irrigation Authority v Sogea Satom SA

This principle was recently reaffirmed in the landmark Kenyan decision of National Irrigation Authority v Sogea Satom SA. The dispute arose under a FIDIC “Pink Book” contract incorporating a Dispute Board (DB). The DB awarded the contractor approximately KES 892 million. The employer resisted payment, contending that the DB’s decision should not be enforceable until arbitration or litigation had conclusively resolved the dispute.

Both the High Court and the Court of Appeal rejected this argument. The courts held that compliance with DB decisions is not optional; it is a mandatory contractual obligation. The employer’s dissatisfaction with the decision did not excuse non-payment. The obligation was to pay first, and contest later through the prescribed dispute resolution process.

Legal Distinction: “Binding” vs “Finally Binding”

A proper understanding of the doctrine requires appreciation of the distinction between decisions that are binding and those that are finally binding.

• Binding (temporarily binding): Under FIDIC and similar contractual frameworks, a DB or adjudicator’s decision is immediately binding. The parties must “promptly give effect” to it so that works may continue uninterrupted.
• Finally binding: A decision only becomes final if no Notice of Dissatisfaction is issued within the strictly prescribed contractual period, commonly 28 days.

Where a Notice of Dissatisfaction is issued, the dissatisfied party retains the right to challenge the decision in arbitration or litigation — but that challenge does not suspend the obligation to comply in the meantime. The doctrine therefore compels performance now, while preserving substantive justice later.

This dynamic is best understood through analogy. A Dispute Board’s decision functions much like a referee’s whistle during a match. Even if a player believes the referee has made an incorrect call, the game proceeds immediately in accordance with that whistle so that play is not paralysed. The aggrieved team may lodge a formal protest with the league after the match — but it cannot stop the clock, refuse to play, or rewrite the score mid-game. Similarly, construction projects must move forward in obedience to interim decisions, with challenges deferred to the appropriate forum.

Statutory Parallels and the “Pay Less” Notice

In other jurisdictions, the “Pay Now, Argue Later” principle is not merely contractual but statutory. A leading example is the United Kingdom’s Housing Grants, Construction and Regeneration Act 1996. The Act introduced a compulsory adjudication regime designed to provide an intervening provisional stage in construction disputes.

Under the UK framework, a certified or “notified sum” must be paid unless the payer issues a valid pay-less notice within a prescribed timeframe. Failure to do so renders the sum an immediate and enforceable debt, irrespective of disputes concerning workmanship or valuation. The statutory objective mirrors that of FIDIC-style DBs: cash flow first, arguments later.

Kenyan Position:
Kenya does not currently have a direct statutory equivalent to the UK’s Housing Grants, Construction and Regeneration Act 1996. There is no comprehensive construction adjudication or security-of-payment statute mandating interim enforcement of payment claims by law.

Instead, the Kenyan position relies primarily on:

• Contractual mechanisms (notably FIDIC Dispute Boards and adjudication clauses);
• The Arbitration Act, which supports party autonomy and enforcement of agreed dispute resolution processes; and
• Judicial enforcement, where courts have increasingly demonstrated willingness to summarily enforce DB and adjudicator decisions as binding contractual obligations.

The NIA v Sogea Satom SA decision is therefore particularly significant: it performs, through judicial reasoning, much of the practical function that a statutory adjudication regime would otherwise serve.

Managing Organisational Complexity

Construction projects are often described as “temporary multi-organisations” — complex networks of employers, consultants, contractors, subcontractors, suppliers, and financiers bound together by interdependent contractual obligations. In such an ecosystem, a single delayed payment can trigger cascading defaults across the supply chain.

The “Pay Now, Argue Later” doctrine operates as a risk-management tool. By temporarily shifting financial risk to the payer — usually the party best placed to absorb it — the doctrine prevents systemic collapse while preserving the payer’s right to ultimate redress.

The Court as the Coercive Power

While Dispute Boards and adjudication are private mechanisms, their effectiveness ultimately rests on the coercive authority of the court. The court’s role is not to re-litigate the technical merits of the dispute, but to summarily enforce the contractual bargain the parties struck.

Enforcement typically proceeds through summary judgment or similar expedited procedures, reflecting the principle that there is no genuine defence to non-payment where a binding interim decision exists.

Conclusion: Towards a Culture of Trust

The National Irrigation Authority v Sogea Satom SA decision sends a clear signal to the construction industry: pending disputes cannot be weaponised to justify delayed payment. By enforcing interim decisions robustly, Kenyan courts are fostering legal certainty, reinforcing contractual discipline, and promoting confidence in alternative dispute resolution mechanisms.

In doing so, they are helping to keep the industry’s lifeblood flowing — even as the final arguments await their proper forum.