In this article, the authors examine the legal impact that a recent U.S. federal district court decision may have for parties around the globe that entered into arbitration agreements that established a particular arbitral institution that subsequently ceased to exist as the administrating institution; compare the outcome from that ruling with decisions of other courts around the globe that have addressed similar issues; and offer practical guidance from the in-house and outside counsel perspective on how to minimize the risk that the ruling poses for parties facing the same issue.
What happens when two parties enter into a valid and binding arbitration agreement but the arbitral institution they named in that agreement is later abolished and replaced with another one before a dispute arises?
In Baker/Dynamic Saudi Arabia Ltd v. Dynamic Industries, Inc. et al.,2 a U.S. federal trial court faced with that exact question decided that: (1) the party resisting arbitration could not be compelled to arbitrate because the arbitral institution under whose rules the party had agreed to arbitrate—the DIFCLCIA—no longer existed, and (2) the successor organization—the Dubai International Arbitration Centre—was not one to which the resisting party had agreed.
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