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A U.S. federal district court refused to compel arbitration in a contractual dispute concerning the supply of materials, products, and services for an oil and gas project being performed by defendants in Saudi Arabia. The parties’ agreement provided for arbitration under the now-defunct Dubai International Financial Center London Court of International Arbitration Rules (DIFC- LCIA).

The DIFC-LCIA was an arbitration center located in Dubai that applied international rules for arbitration based on those used in the London Court of Arbitration. However, in 2021, the government of Dubai issued a decree abolishing the DIFC-LCIA and replacing it with the Dubai International Arbitration Center (DIAC).

The plaintiff argued that the contract’s arbitration provision was unenforceable because the selected forum, the DIFC-LCIA, no longer existed. The crux of the defendants’ argument was that the Dubai government’s decree dissolving the DIFC-LCIA also “transferred the assets, rights and obligations” of the DIFC-LCIA to the DIAC and “expressly state[ed] that DIFC-LCIA arbitration agreements entered into before the effective date of [the decree] [we]re deemed valid[.]”

The district court, siding with the plaintiff, held that it “[could not] rewrite the agreement of the parties and order the [arbitration] proceeding to be held” in a forum to which the parties did not contractually agree. The court further held that whatever similarity the DIAC may have with the DIFC-LCIA, it is not the same forum in which the parties agreed to arbitrate and, therefore, the court could not compel the plaintiff to arbitrate.

The key takeaway is that despite the liberal federal policy favoring arbitration, arbitration is ultimately a matter of contract. Therefore, if the tribunal that was selected by the parties in the agreement is no longer in existence, courts may refuse to compel arbitration.

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Photo of Petar Angelov Petar Angelov

Petar Angelov is an attorney in Bradley’s Construction Practice Group in the firm’s Nashville office. His practice focuses on both litigation and transactional matters within the construction industry. He primarily represents general contractors, subcontractors, material suppliers, residential and commercial owners, developers, architects, and…

Petar Angelov is an attorney in Bradley’s Construction Practice Group in the firm’s Nashville office. His practice focuses on both litigation and transactional matters within the construction industry. He primarily represents general contractors, subcontractors, material suppliers, residential and commercial owners, developers, architects, and engineers in litigation, arbitration, contract negotiation, and contract drafting. Petar assists clients both before and after problems arise by drafting agreements to best position clients to avoid disputes, as well as litigating and arbitrating matters to final resolution.

Photo of Jennifer Ersin Jennifer Ersin

Jennifer Morrison Ersin focuses her practice in international disputes. She advises clients in international investment and commercial arbitrations across a range of sectors. She has acted in proceedings governed by the rules of arbitration of the International Chamber of Commerce (ICC), United Nations…

Jennifer Morrison Ersin focuses her practice in international disputes. She advises clients in international investment and commercial arbitrations across a range of sectors. She has acted in proceedings governed by the rules of arbitration of the International Chamber of Commerce (ICC), United Nations Commission on International Trade Law (UNCITRAL), American Arbitration Association (AAA), and International Centre for Settlement of Investment Disputes (ICSID). Jennifer has acted in arbitrations seated in jurisdictions around the world, and is a fellow of the Chartered Institute of Arbitrators (FCIArb).

Her experience includes advising clients on federal government construction contracts disputes, and arbitrating construction, energy, and agribusiness matters. She also has extensive experience handling matters that arise from municipal infrastructure projects.

Jennifer has particular experience in acting in disputes involving sovereign states. She has most recently represented contractors against sovereign employers including Libya and Ethiopia. This experience extends to counseling contractors on how to best exit high-conflict states, including Libya and Afghanistan.

Jennifer is also adept at handling matters before U.S. courts, particularly where those matters include an international element or a foreign party. She is able to assist foreign clients in Section 1782 discovery actions and enforcement actions.