The U.S. District Court for the Eastern District of Louisiana recently refused to compel arbitration on the ground that the arbitral forum had ceased to exist and that a purported replacement forum was not the same forum and that a party could thus not be compelled to arbitrate there under the terms of an arbitration agreement requiring arbitration in the now defunct forum.
Baker Hughes Saudi Arabia Co. Ltd. contracted with Dynamic Industries Inc., Dynamic Industries International LLC, and Dynamic Industries International Holdings Inc. for materials and services related to an oil and gas project in Saudi Arabia. The agreement included an arbitration clause requiring arbitration with the Dubai International Financial Centre-London Court of International Arbitration (DIFC-LCIA).
Baker Hughes claimed that Dynamic breached the contract and filed suit in the U.S. District Court for the Eastern District of Louisiana. Dynamic moved to compel arbitration pursuant to the arbitration clause. Baker Hughes opposed the motion on the grounds that the government of Dubai had issued a decree abolishing the DIFC-LCIA and replacing it with the Dubai International Arbitration Centre (DIAC). Dynamic responded that the government of Dubai had transferred the assets, rights, and obligations of the DIFC-LCIA to the DIAC and had deemed all arbitration agreements subject to the DIFC-LCIA valid.
The district court denied the motion to compel arbitration. It noted that arbitration is based on consent and that binding Fifth Circuit precedent precluded compelling arbitration where “the agreed upon arbitration tribunal is unavailable or no longer exists.” The court rejected Dynamic’s arguments about the government of Dubai’s transfer and provision, noting that the DIAC was “not the same forum in which the parties agreed to arbitrate” and that the government of Dubai did not have the authority to compel Baker Hughes to arbitrate in a different forum.
Baker Hughes Saudi Arabia Co. v. Dynamic Industries, Inc., No. 2:23-cv-01396 (E.D. La. Nov. 6, 2023).
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