Case Summary: Baker Hughes v Dynamic Industries

By Nicholas Gould, Partner, and Sana Mahmud, Senior Associate

Baker Hughes Saudi Arabia Co. Ltd v Dynamic Industries, Inc., Dynamic Industries International LLC and Dynamic Industries International Holdings, Inc.
United States District Court (Eastern District of Louisiana) 
Judgment dated 6 November 2023

The facts 

The Plaintiff, Baker Hughes Saudi Arabia Co. Ltd (“Baker Hughes”), entered into a contract with the Defendants (“Dynamic Industries”) to supply materials, products and services for an oil and gas project being performed by Dynamic Industries in Saudi Arabia (the “Contract”). The Contract was governed by Saudi law. Upon fulfilling its obligations under the Contract, Baker Hughes filed a suit in court, claiming that Dynamic Industries had failed to pay US$1.355 million for the works performed. 

Dynamic Industries filed a motion at the court to dismiss Baker Hughes’ claim against them on the ground of “forum non conveniens”, or in the alternative, to compel Baker Hughes to arbitrate its claim. 

The decision

The Contract contained a provision that required any dispute between the parties to be referred to and finally resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre (“DIFC-LCIA”), on which Dynamic Industries sought to rely. However, in 2021, the government of Dubai issued a decree abolishing the DIFC-LCIA and replacing it with the Dubai International Arbitration Centre (“DIAC”). 

Baker Hughes argued that the Contract’s arbitration provision was unenforceable because the selected forum, the DIFC-LCIA, no longer existed. 

The court agreed with Baker Hughes and denied Dynamic Industries’ motion. In coming to its decision, the court considered relevant authorities and precedent, noting that:

1. Arbitration is a matter of a contract requiring consent and private arbitration agreements are enforced according to their terms.
2. The court could not, therefore, compel arbitration where the agreed upon arbitration tribunal is unavailable or no longer exists. 
3. The Dubai government could not rewrite the agreement of the parties and order that the arbitration be held in a forum to which the parties did not contractually agree. Dynamic Industries had argued that the court could, nonetheless, order Baker Hughes to arbitrate its claims against Dynamic Industries in the DIAC, stating that the Dubai government issued a decree which dissolved the DIFC-LCIA and “transferred [its] assets, rights and obligations” to the DIAC, and “expressly stated that DIFC-LCIA arbitration agreements entered into before the effective date of [the decree] are deemed valid”. 

Accordingly, the court found that no enforceable forum selection clause in the Contract could compel the dismissal of the case on the ground of “forum non conveniens”, and Dynamic Industries’ motion was denied. 

Analysis 

This decision is a useful guide for any party to a contract that contains an arbitration clause pursuant to which disputes are referred and resolved by arbitration under the DIFC rules. Whilst in such cases a party may claim that the reference should be made to DIAC following the Dubai government’s decree,1 it is arguable that this is an entirely different forum to that which was originally agreed. Parties should, therefore, consider whether an agreed amendment to their arbitration clause is required to reflect the change in forum so that it remains enforceable. 

Fenwick Elliott LLP and its partner firm, Hammad & Al-Mehdar, provided Saudi law advice to the Defendant, Baker Hughes, in relation to the Contract subject to this dispute. 

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• 1. Decree 34 of 2021