The Fifth Circuit Court of Appeals recently reversed a district court’s denial of a motion to compel arbitration, concluding that the contract between the parties evinced an intent to arbitrate even if the purported arbitral forum chosen by the parties no longer existed.
Baker Hughes Saudi Arabia Co. and Dynamic Industries Saudi Arabia Ltd. entered into a subcontract related to an oil and gas project in Saudi Arabia. The subcontract contained two arbitration clauses: Dynamic Industries could demand arbitration in Saudi Arabia and either party could initiate arbitration under the rules of the Dubai International Financial Centre’s joint partnership with the London Court of International Arbitration (DIFC-LCIA). The DIFC-LCIA was subsequently abolished, and a new institution was created in its place.
Baker Hughes then sued Dynamic Industries in court in the United States. Dynamic Industries moved to compel arbitration in the DIFC-LCIA. The court denied that motion because the parties’ designated forum, the DIFC-LCIA, no longer existed and the “forum-selection clause” was unenforceable.
The Fifth Circuit reversed. It noted that the arbitration clause related to the DIFC-LCIA provided that a “dispute shall be referred by either Party to and finally resolved by arbitration under the Arbitration Rules of the DIFC LCIA.” It concluded that that language was not a forum-selection clause because it “sets only the rules of arbitration and not the forum.” The Fifth Circuit also held that even if the clause was a forum-selection clause, the clause was not integral to the subcontract and the subcontract evinced a general intent to arbitrate regardless of the specific arbitral forum. Indeed, a separate arbitration provision allowed for arbitration in Saudi Arabia.
Baker Hughes Saudi Arabia Co. v. Dynamic Industries, Inc., 126 F.4th 1073 (5th Cir. Jan. 27, 2025).
