In a recent United States Court of Appeals for the Fifth Circuit ("Fifth Circuit") opinion, Baker Hughes Saudi Arabia Company Limited v. Dynamic Industries, Incorporated1 ("Baker Hughes v Dynamic"), the Fifth Circuit interpreted the application and enforcement of a clause requiring the parties to submit to arbitration with the DIFC-LCIA.
On 14 September 2021, after the contract had been signed, the Ruler of Dubai issued Decree No.34 of the Government of Dubai (the "Decree") and abolished DIFC-LCIA. It was replaced with the Dubai International Arbitration Centre ("DIAC").2 Article 6 of the Decree states that all agreements to arbitrate at DIFC-LCIA which were concluded by the date of the Decree, are deemed valid and will be supervised by DIAC.
There have been a number of challenges to the Decree. In Narcisco v Nash, the DIFC First Instance Court held "Decree 34 does not render an arbitration agreement subject to DIFC law unenforceable on the grounds of violation of the principle of party autonomy".3 The Singapore High Court, however, came to the opposite view when considering the validity of a provisional award. They held that defaulting an arbitration under DIFC-LCIA Rules to a DIAC forum constitutes a violation of party autonomy and as such renders the arbitration agreement invalid (save for the parties' choice of an alternative institutional forum)4.
Baker Hughes v Dynamic considers Decree 34 in an United States context. In this case, a dispute arose between the parties following the dissolution of the DIFC-LCIA, and Baker Hughes, instead of commencing arbitration proceedings, issued court proceedings against Dynamic in Louisiana federal court. At first instance, the Louisiana Eastern District Court ("District Court") held that Decree 34 had abolished the DIFC-LCIA, rendering the chosen forum no longer available5. The District Court characterized the clause as a forum selection clause, and declined to dismiss the case on the basis that it was improper to order arbitration because the DIAC, "whatever similarity" it may have with the DIFC-LCIA, is not the same forum. That decision was appealed to the Fifth Circuit.
In its decision, the Fifth Circuit overruled the District Court's finding that a motion to dismiss for forum non conveniens (inconvenient forum) was a proper procedure for dismissing the case. The Fifth Circuit held that the proper procedure is to file a motion to compel arbitration6, which is the core of the Court's decision.
Ultimately, the Fifth Circuit in Baker Hughes v. Dynamic upheld the arbitration clause and remanded the case back to the District Court to determine whether the DIFC-LCIA rules can be applied in any other available forum and compel arbitration in that forum, or if not, compel arbitration in Saudia Arabia. This decision is in line with the preference of federal courts in the United States to enforce arbitration provisions in light of the enactment of the Federal Arbitration Act and adoption of the New York Convention7. Generally, federal courts have little discretion in compelling arbitration. In the Fifth Circuit, if four factors are met, the New York Convention requires the court to order arbitration unless the agreement is "null and void, inoperative or incapable of being performed."8
The clause at issue in Baker Hughes v. Dynamic provides:
"[I]f the dispute is not settled by mediation . . . the dispute 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, which Rules are deemed to be incorporated by reference herein (save for Article 5.6 which is hereby expressly excluded)."9
The Fifth Circuit held that this clause only designates a set of rules, and not a particular forum. Much of the Court's decision was in dicta discussing, in depth, "even if" scenarios.
The Fifth Circuit discussed, but did not decide, whether the forum (DIFC-LCIA) was "unavailable". The specific issue - whether a designated forum remains available where a functionally identical successor forum exists - is novel in the Fifth Circuit10. The Fifth Circuit only located two cases with similar circumstances, which both held that while the designated forum was technically unavailable, arbitration to the affiliate forum was nonetheless compelled.11
The Fifth Circuit also analyzed whether the parties intended to arbitrate generally or set an exclusive forum12. The court can select an alternative forum if the selected forum is unavailable, unless the forum selection clause sets an exclusive forum and that exclusive forum is integral to the contract13.
Even if the clause in Baker Hughes v. Dynamic was a forum-selection clause, the Fifth Circuit found that the DIFC-LCIA was not the exclusive forum because the subcontract designated multiple possible fora for the arbitration14. Additionally, because the dominant purpose of the subcontract was to arbitrate generally, a selection of DIFC-LCIA as a forum was not integral to the contract.
The District Court has not decided in which forum to compel arbitration. While much of the Fifth Circuit's holding is dicta, it provides insight on how other courts in the United States will decide similar motions to compel arbitration involving the DIFC-LCIA. It also supports the United States' reputation as a pro-arbitration seat. However, if the DIFC-LCIA had been the exclusive forum selected in the contract, and that forum was considered integral to the contract, then all bets are off on the outcome of a motion to compel, which would be highly fact-specific.
Practical suggestions
Whilst the debate about the validity of DIFC-LCIA clauses continues, to avoid costly court hearings, we advise you check your contracts and amend any that refer to DIFC-LCIA institution. We are happy to advise on alternative clauses and institutions.
If you have a DIFC-LCIA arbitration which is referred to DIAC, note the parties' agreement to arbitration in the DIAC forum under the DIAC rules in your Procedural Order Number One to avoid arguments later during the enforcement phase.
[1] 126 F.4th 1073 (5th Cir. 2025).
[2] Decree No. 34 of 2021 concerning the Dubai Arbitration Centre.
[3] Claim No. ARB 009/2024 Narcisco v. Nash, 20 June 2024.
[4] DFL v DFM [2024] SGHC 71.
[5] Baker Hughes Saudi Arabia Co. Ltd. v. Dynamic Indus., Inc., No. 2:23-cv-1396, at *5-8 (E.D. La. Nov. 6, 2023).
[6] Baker Hughes, supra, 126 F.4th at 1080.
[7] 9 U.S.C. § 201 provides in pertinent part, "The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10 1958, shall be enforced in United States courts in accordance with this chapter…"
[8] Baker Hughes, 126 F.4th at 1080, citing Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil Co. (Pemex), 767 F.2d 1140, 1146 n.17 (5th Cir. 1985).
[9] Baker Hughes, 126 F.4th at 1081.
[10] Id. at 1086.
[11] Id., citing Lewis v. UBS Fin. Servs., 818 F. Supp. 2d 1161, 1166 (N.D. Cal. 2011); Constitution Reinsurance Corp. v. Republic W. Ins. Co., No. 98 Civ. 7208, 1999 U.S. Dist. LEXIS 2651, 1999 WL 126462, at *2 (S.D.N.Y. Mar. 10, 1999).
[12] Baker Hughes, 126 F.4th at 1087.
[13] Baker Hughes, citing 9 U.S.C. §§4-5; BP Expl. Libya Ltd. v. ExxonMobil Libya Ltd., 689 F.3d 481, 491 n.7 (5th Cir. 2012).
[14] Baker Hughes, 126 F.4th at 1087-88.
