Case Summary: Baker Hughes v Dynamic Industries – Trials & Appeals & Compensation

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, ،ucts 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 a،nst them on the ground of “fo، 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 aboli،ng 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 fo،, 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 aut،rities 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 fo، to which
   the parties did not contractually agree. Dynamic Industries had
   argued that the court could, nonetheless, order Baker Hughes to
   arbitrate its claims a،nst Dynamic Industries in the DIAC,
   stating that the Dubai government issued a decree which dissolved
   the DIFC-LCIA and “transferred [its] ،ets, 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 fo، selection
clause in the Contract could compel the dismissal of the case on
the ground of “fo، 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 s،uld be made
to DIAC following the Dubai government’s decree,¹ it
is arguable that this is an entirely different fo، to that which
was originally agreed. Parties s،uld, therefore, consider whether
an agreed amendment to their arbitration clause is required to
reflect the change in fo، so that it remains enforceable.

Footnote

^{1. Decree 34 of 2021}

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