Daniel Lund III | Phelps Dunbar
What happens when your designated arbitration forum is no longer available?
Plaintiff entered a subcontract in 2017 for an oil-and-gas project, which included an arbitration clause referring disputes to arbitration under the rules of Dubai International Financial Centre’s joint partnership with the London Court of International Arbitration, a/k/a the DIFC-LCIA Arbitration Centre. However, in 2021, the DIFC-LCIA was abolished and replaced by the Dubai International Arbitration Centre (DIAC). When a dispute under the subcontract arose, plaintiff sought to compel arbitration, but the federal district court in New Orleans denied the motion, citing the non-existence of the designated forum. An appeal followed.
The United States Fifth Circuit Court of Appeals reversed, leaning on the fact that the arbitration clause did not clearly designate the DIFC-LCIA as the exclusive arbitration forum. Instead, the appellate court found that the primary intent of the parties was to arbitrate disputes, not to designate an exclusive forum:
“An arbitrator designation is integral to the agreement only if the parties ‘unambiguously expressed their intent not to arbitrate their disputes in the event that the designated arbitral forum is unavailable.’… In other words, a court will decline to appoint a substitute arbitrator only if the parties’ choice of forum is ‘so central to the arbitration agreement that the unavailability of that arbitrator [brings] the agreement to an end.’… Where the parties’ dominant purpose was to arbitrate generally, the designation of a particular forum is not integral to the contract, and the forum-selection clause is severable from the rest of the contract.”
As part of its decision, the appellate court considered that the DIAC, as the successor to the DIFC-LCIA, is functionally similar and capable of administering arbitrations under the same rules. Eventually on that topic, however, the court wrote: “Again, however, we need not decide whether the DIFC-LCIA is unavailable as a forum because we conclude [earlier in our written decision] that any forum-selection clause designating the DIFCLCIA is not integral to the parties’ subcontract.”
Baker Hughes Saudi Arabia Co. v. Dynamic Indus., 2025 U.S. App. LEXIS 1752 (5th Cir. Jan. 27, 2025)
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