by Lionel M. Schooler, FCIArb
Jackson Walker LLP¹

Introduction. In Baker Hughes Saudi Arabia Company Limited v. Dynamic Industries, Incorporated, Saudi Arabia Limited, 126 F.4th 1073 (5th Cir. 2025), the United States Court of Appeals for the Fifth Circuit addressed a question of first impression about the obligation on a court to assess arbitrability when the original forum designated by the parties is characterized as no longer in existence.

Background: Contractual Arbitration Clause. Baker Hughes and Dynamic Industries signed a subcontract in connection with an oil and gas project in Saudi Arabia. This document contained an arbitration clause regarding the process for addressing any disputes arising under this agreement. Under Schedule A of the agreement, Dynamic Industries could demand arbitration in Saudi Arabia; or, failing that, either party could initiate arbitration under the Dubai International Financial Centre’s joint partnership with the London Court of International, identified as the “DIFC-LCIA,” and referred to by the court as the DIFC-LCIA Arbitration Centre.

Background: Change in Rules and Arbitral Institution. Four years later, according to the court, the United Arab Emirates (UAE) abolished the DIFC-LCIA and created a new arbitral institution, the Dubai International Arbitration Centre (DIAC) that was found to be functionally identical to its predecessor in many key respects. The court based this analysis in part upon the language in the document abolishing the DIFC-LCIA, which provided that any arbitration agreement executed before the dissolution of that institution would remain valid after creation of the DIAC, such that the DIAC would be appointed to administer any such arbitral proceeding. The court went on to indicate that the DIAC Rules adopted in 2021 were in several meaningful respects identical to the Rules previously established by the DIFC-LCIA.

Background: Motion to Compel Arbitration. In March 2023, Baker Hughes sued several of Dynamic Industries’ entities, but not Dynamic Industries itself, for failure to pay money owed to Baker Hughes for products, materials and services provided by Baker Hughes for the project in question. The suit was filed in a Louisiana state court. The Defendants removed the lawsuit to federal court in the Eastern District of Louisiana and, thereafter, moved to compel arbitration of the claims. By this point, Dynamic Industries had joined the lawsuit. Alternatively, the Defendants moved to dismiss the case on the basis of forum non conveniens. Even so, according to the Fifth Circuit, Dynamic Industries never demanded arbitration in Saudi Arabia or requested the district court to compel arbitration in Saudi Arabia.

Background: District Court Ruling on Arbitrability. The district court subsequently took up the motion to compel arbitration. The district court held that whereas the parties had originally agreed to arbitrate any disputes in the DIFC-LCIA, and whereas that arbitral forum was subsequently abolished, the result was that abolition rendered the DIFC-LCIA unavailable as a dispute resolution forum. On this basis, the district court concluded that the original contractual forum-selection clause was invalid and unenforceable and, accordingly, that the district court was powerless to compel arbitration. Dynamic Industries appealed this decision to the Fifth Circuit.

Issue Presented. Whether a federal court can compel arbitration, and the location of a tribunal to conduct such an arbitration, even where it otherwise could not address a claim of forum non conveniens.

Appellate Review: Forum Non Conveniens. The Court of Appeals commenced its review of the lower court’s decision by noting that neither the New York Convention nor the Federal Arbitration Act empowered it to dismiss a claim on the basis of forum non conveniens. It therefore rejected dismissal as a permissible result in this case. To the court, the only permissible decision had to do with whether the parties could be compelled to arbitrate their dispute under the unique circumstances presented in this case.

Appellate Review: Forum vs. Applicable Rules. Turning then to the issue of arbitrability, the court’s initial inquiry had to do with whether the contract in question invoked a particular arbitral forum, or only a particular set of rules. The court rejected the district court’s interpretation of the original arbitration clause as a forum-selection clause. The court then reviewed microscopically the applicable contract language and determined that the language referring to the DIFC-LCIA designated a set of applicable rules, not a particular forum location for the arbitration.

Appellate Review: Availability of Designated Forum. From there, it moved on to the issue of whether the designated forum was available. While acknowledging that the DIFCLCIA institution no longer existed, the court determined that the DIAC institution qualified as its “successor,” particularly given (for example) the same roster of arbitrators available.

Appellate Review: Authority to Compel Arbitration in this Case. Finally, the Fifth Circuit focused its attention upon whether the district court had erred in refusing to compel arbitration under the circumstances presented in this case. It declared that the district court erred by not considering whether the parties intended to arbitrate, in general, or instead intended to arbitrate exclusively in one forum. As a result, it held that the district court likewise erred in not compelling the parties to seek resolution of their dispute before the arbitral tribunal, because it considered the contract in question not to compel arbitration exclusively before only one specific forum. It further concluded that the district court was empowered under the applicable agreement to appoint a substitute arbitrator consistent with the parties’ intent.

Conclusion. The Baker Hughes decision illustrates the extent to which a flexibly worded arbitration agreement can successfully be applied when the original contractual backdrop has changed.

¹ Mr. Schooler is a former member of the Board of the CIArb North America Branch, and the immediate Past Chair of the Texas Chapter.