Baker Hughes Saudi Arabia Co. v. Dynamic Industries, Inc., Civ. A. No. 2:23-cv-1396 (E.D. La. Nov. 6, 2023)
Plaintiff Baker Hughes Saudi Arabia Co. Ltd. (“Baker Hughes”) contracted with Dynamic Industries Saudi Arabia, Ltd. (and other related Dynamic Industries entities named in the case as Defendants (collectively, “Dynamic”)) to supply materials, products, and services for an energy project Dynamic was working on in Saudi Arabia. The parties’ contract required that disputes, if not otherwise resolved, “shall be referred by either Party to and finally resolved by arbitration under the Arbitration Rules of the DIFC LCIA (the ‘Rules’) from time to time in force ….”
The DIFC LCIA—the Dubai International Financial Center London Court of International Arbitration—was an arbitration center located in Dubai that applied international rules for arbitration based on those used in the London Court of International Arbitration. However, on September 20, 2021, Dubai enacted “Decree 34 of 2021 Concerning the Dubai International Arbitration Centre,” in which it abolished the DIFC LCIA and replaced it with the Dubai International Arbitration Centre (“DIAC”).
The Court Proceedings
Thereafter, Baker Hughes filed suit against Dynamic in the United States District Court for the Eastern District of Louisiana, in New Orleans, alleging damages of $1.355 million for unpaid services. Dynamic moved to dismiss the claims on the ground of forum non conveniens, and in the alternative, moved to compel arbitration. In opposition, Baker Hughes argued that the arbitration provision was unenforceable, because the selected forum, the DIFC LCIA, no longer existed.
The court explained that relevant precedent dictated that arbitration could not be compelled when the agreed arbitral tribunal is unavailable or no longer in existence. As consent is the cornerstone of arbitration, courts consider the parties’ contractual choice of forum an integral part of the agreement to arbitrate and cannot rewrite the parties’ agreement to order that arbitration be held in a forum to which the parties did not contractually agree.
Dynamic argued that, nevertheless, Baker Hughes should be compelled to arbitrate its claims in the DIAC, since the abolition decree not only transferred the assets, rights, and obligations of the DIFC LCIA to the DIAC, but also expressly stated that DIFC-LCIA arbitration agreements remained valid. The court found, however, that neither it nor the Dubai government had the authority to unilaterally change the arbitration forum agreed to by the parties.
Therefore, as the DIFC LCIA forum was no longer available and the DIAC was not the same forum in which the parties agreed to arbitrate, the court ruled that it could not compel Baker Hughes to arbitrate, and that no enforceable forum selection clause required dismissal on forum non conveniens grounds.
This Article was originally published in the North America Newsletter.