Do parties implicitly select an arbitral forum when they agree to apply that forum’s rules?
The short answer is the classic lawyer’s response: it depends—on the appellate circuit, as demonstrated in the Fifth Circuit’s recent decision in Baker Hughes.
Baker Hughes involved a 2017 service subcontract agreement between two oil and gas technology and oilfield service companies. Relevant to this discussion, the agreement provided that should a dispute arise under the contract, the dispute would proceed to arbitration using DIFC-LCIA Arbitration Rules. However, in 2021, the DIFC Arbitration Institute, which administered the selected rules, was, via a Decree issued by the Dubai government, abolished and replaced with the Dubai International Arbitration Centre (“DIAC”).
When the parties’ relationship soured, Baker Hughes filed a Motion to Compel Arbitration at the district court level, seeking to arbitrate under with the DIFC-LCIA. The district court denied the Motion, holding the DIFC-LCIA and its rules no longer existed and thus the arbitration clause could not be enforced. The Fifth Circuit disagreed.
The Fifth Circuit held the arbitration clause in question referred to a set of arbitration rules—not necessarily a forum, seat, or institution. The Fifth Circuit reasoned that the clause’s language merely references arbitration “under the Arbitration Rules of the DIFC-LCIA” and did not inherently indicate a requirement that the DIFC-LCIA serve as the forum.
This distinction mattered. Although the court concluded that the “parties’ dominant purpose was to arbitrate generally” rather than to arbitrate before the now-defunct DIFC-LCIA, the Fifth Circuit refused to adopt “a blanket rule that any designation of arbitral rules necessarily means selection of a forum.” In other words, the Fifth Circuit refused to find that the parties implicitly selected a arbitral forum when they selected which rules would apply at arbitration. This led the Fifth Circuit to instruct the district court on remand to determine whether another available forum (i.e., the LCIA, DIAC, or other forum) could apply the DIFC-LCIA Rules consistent with the parties’ objective intent. If so, the district court was directed to compel arbitration in that forum.
Circuit Split on Defunct Arbitration Forums
As discussed in the Fifth Circuit’s opinion, federal appellate courts disagree as to whether parties implicitly agree to an arbitral forum by agreeing to arbitrate using a forum’s rules. On one side, the Second, Fourth, and Eleventh Circuits determined that parties impliedly select an arbitral forum when agreeing to a forum’s rules. The Ninth and now Fifth Circuits disagree with this conclusion.
For example, the Eleventh Circuit held parties impliedly selected to arbitrate before the National Arbitration Forum (“NAF”) by agreeing to pursue arbitration using the NAF’s Code of Procedure. The Court reasoned that because the contract did not specify a forum but specified which forum’s rules would apply, the parties should proceed to arbitrate before that forum.
The Fourth Circuit reached a similar holding. In Critical Health, the Fourth Circuit stated that because the arbitration agreement named a particular forum, the parties intended to exclude other arbitral forums. Likewise, the Second Circuit held parties that agree to an arbitral forum’s rules also agree to arbitrate before the same forum.
Comparatively, the Ninth Circuit determined the parties had not selected the forum by merely choosing the rules to apply at arbitration. In Reddam, the arbitration agreement selected the rules of the forum, but not the forum itself. The Court reasoned parties could have “easily” picked their forum had they intended to.
Practical Implications for Maritime Arbitration Agreements
Maritime contracts commonly include arbitration clauses and commercial maritime disputes are increasingly being heard in front of arbitral forums, but Baker Hughes shows that small drafting choices can now have major consequences. For example, numerous maritime contracts contain arbitration clauses that often reference a set of rules—such as those of the Society of Maritime Arbitrators (SMA), the London Maritime Arbitrators Association (LMAA), or the Houston Maritime Arbitration Association (HMAA) by way of example only—but in some instances may not expressly designate a specific arbitral forum or administrator. This omission, which historically may not have been seen as critical, can create major procedural vulnerabilities if the named institution ceases to exist, merges with another, or undergoes significant rule changes.
This procedural vulnerability, as the Baker Hughes dispute shows, could include potentially losing the ability to arbitrate the dispute as the parties originally intended when selecting or negotiating the agreement at issue. Baker Hughes highlights the reality that, depending on which courts are tasked with determining a motion to compel arbitration, arbitration may be compelled in the agreed forum or not. At the moment, this circuit split generates potential uncertainty, but hopefully it will not be used by arguing parties to forum shop. The uncertainty may also leave many companies that rely on the maritime industry (even insofar as it relates to the transnational movement of goods) exposed to unnecessary litigation over threshold issues like where, how, and even whether arbitration will occur.
The Fifth Circuit’s approach—declining to automatically treat a selection of rules as a selection of forum—offers maritime parties some flexibility if an arbitral institution disappears or restructures. But that flexibility is not guaranteed elsewhere. As the Second, Fourth, and Eleventh Circuits have demonstrated, some courts read a reference to an institution’s rules as a de facto agreement to arbitrate only before that institution. Given the international nature of maritime commerce, parties are increasingly vulnerable to finding themselves litigating forum questions across multiple jurisdictions, potentially under inconsistent standards.
For maritime attorneys, the key takeaway is clear: arbitration clauses should be drafted with precision. Practitioners should ensure that agreements not only identify the applicable procedural rules but also expressly state the intended arbitral forum, and crucially, address what happens if that forum becomes unavailable. Existing contracts should be reviewed in light of Baker Hughes and the widening circuit split, and revised where necessary to incorporate fallback language or severability provisions. Without this careful attention, clients could find themselves stranded in procedural limbo—forced to litigate and expend significant sums litigating the validity of an arbitration clause before they can even reach the merits of their claims.
Conclusion
Ultimately, Baker Hughes offers helpful guidance for preserving arbitration agreements when an institution ceases to exist, but the decision also highlights the growing uncertainty practitioners face. With federal circuits now split on whether referencing an institution’s rules implies a choice of forum, maritime attorneys cannot assume that courts will uniformly enforce arbitration clauses without challenge. As arbitral institutions continue to evolve, maritime practitioners should work with their clients now to shore up arbitration clauses—ensuring that the choice of forum, fallback options, and governing rules are unmistakably clear. Doing so will not only potentially limit litigation risks but also safeguard the swift and certain dispute resolution that maritime commerce demands.
