J. A. Clyde-Smith, Esq., Commissioner, and Jurats Morgan and Liston
Consolidated Resources Armenia
Global Gold Consolidated Resources Limited
Mr Van Krikorian
Global Gold Corpopration
Advocate A. Kistler for the Plaintiff.
Advocate C. J. Swart for the Second and Third Defendants.
1. The second and third defendants apply for these proceedings to be stayed pursuant to Article 5 of the Arbitration (Jersey) Law 1998 ("the Arbitration Law"), which is in the following terms:-
"5 Mandatory stay of court proceedings where party proves arbitration agreement
If any party to an arbitration agreement, or any person claiming through or under the party, commences any legal proceedings in any court against any other party to the agreement, or any person claiming through or under him or her, in respect of any matter agreed to be referred, any party to those legal proceedings may at any time before the expiration of a period of 3 weeks from the date on which the action was placed on the pending list or en prevue apply to the court to stay the proceedings; and the court, unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings."
2. The plaintiff ("Consolidated Resources") and the third defendant ("Global Gold" or "third defendant") entered into a joint venture agreement on 27th April, 2011, (the "Joint Venture Agreement") to conduct and develop mining and exploration rights in two properties in Armenia. In very broad terms, the joint venture was to be conducted through a new company with Consolidated Resources investing an initial US$5M and Global Gold introducing the mining and exploration rights.
3. Pursuant to the Joint Venture Agreement, the parties incorporated the first defendant in Jersey (which we will refer to as "the Joint Venture Company") with the mining and exploration activities in due course being carried on by two Armenian entities owned through wholly owned holding companies of the Joint Venture Company incorporated in Delaware. On the 18th February, 2012, the parties executed a shareholders agreement (the "Shareholders Agreement") to regulate their interests in the Joint Venture Company.
4. It was agreed that Global Gold would own 51% and Consolidated Resources 49% of the equity in the Joint Venture Company, but the powers of the majority shareholder were heavily prescribed. Each party can nominate one director for every 20% of the shares held (in practice, only one director has been nominated by each party so that there are two directors). Both directors have to be present for a meeting of the board to be quorate. Even then, there is a comprehensive list of matters that require the unanimous approval of the directors.
5. In addition, the Shareholders Agreement provides for a schedule of "Fundamental Matters" that require the approval of each nominated director. Accordingly under the terms of the Shareholders' Agreement, there is very little that the Joint Venture Company can do without the approval of the two directors nominated by the parties.
6. The second defendant, Mr Van Krikorian ("Mr Krikorian" or "second defendant") is the chairman and chief executive officer of Global Gold (which has some 1,300 shareholders and whose shares can be traded over the counter) and he was appointed executive chairman of the Joint Venture Company (in addition to being the director nominated by Global Gold). As such he is the chief executive of the Joint Venture Company in managing its operations. The other director, nominated by Consolidated Resources, is Mr Caralapati Premraj.
7. Mr Krikorian asserts that it was Mr Premraj (with another) who was held out to be the beneficial owner of Consolidated Resources, but Mr Joseph Borkowski has made the affirmations in favour of Consolidated Resources and states that he is the sole director. It would appear to be the relationship between Mr Krikorian and Mr Borkowski that has broken down.
8. The history of the joint venture is convoluted, but for the purposes of this judgment, we would refer to the following:-
(i) On 17th January, 2012, the Joint Venture Company executed an instrument (the "Note Instrument") by which convertible loan notes were issued to Consolidated Resources (part of the subject matter of the Order of Justice) and, according to the accounts, to Global Gold.
(ii) In February 2013, it was proposed that the shares of the Joint Venture Company be listed on AIM and each side blames the other for that proposal not coming to fruition.
(iii) In September 2013, heads of terms were agreed with an Australian public company Signature Gold Limited ("Signature"), the intention of which was for Signature to acquire the share capital of the Joint Venture Company in return for issuing new shares in Signature to the Joint Venture Company shareholders. An agreement was entered into on 22nd November, 2013, but that proposal has not come to fruition, for which the parties again blame each other. The problem appears to have been the inability of Consolidated Resources and Global Gold to agree on the level of debt due to them respectively by the Joint Venture Company and for which it was proposed Signature would take responsibility.
9. On 10th March, 2014, Consolidated Resources obtained ex parte interim injunctions again all three defendants restraining the Joint Venture Company from in any way disposing of or encumbering or dealing with or diminishing the value of any of its assets whether they are in or outside of Jersey. Those injunctions were amended by the Court on 2nd April, 2014, to allow transactions or arrangements in the ordinary and proper course of business. The catalyst for Consolidated Resources seeking those interim injunctions was the issuing by Mr Krikorian of a notice of a shareholders' and directors' meeting to take place on 27th February, 2014. Mr Premraj did not attend that meeting and therefore the directors' meeting could not proceed. The shareholders' meeting was adjourned by Mr Krikorian to Friday 7th March, 2014. Consolidated Resources was concerned that if that adjourned meeting proceeded the assets of the Joint Venture Company would be put in jeopardy.
10. The defendants applied unsuccessfully for those interim injunctions to be lifted on the grounds of material non-disclosure but the Court declined to lift the injunctions for the reasons set out in its judgment of 5th June, 2014, (Consolidated Resources-v-Global Gold  JRC 124).
11. Consolidated Resources then applied for judgment in relation to its monetary claims in default of the filing by the Joint Venture Company of an answer. The Court rejected that application for the reasons set out in its judgment of the 18th June, 2014, (Consolidated Resources Armenia-v-Global Gold and Others  JRC 132). The Court held that status quo in relation to the subject matter of the dispute should be maintained pending the Court determining the relief sought by Consolidated Resources, assuming a stay was not granted in the meantime pursuant to this application.
12. The claims brought by Consolidated Resources under the Order of Justice can be summarised as follows:-
(i) A demand against the Joint Venture Company for payment of US$1,670,033.44c being the amount due under the convertible loan notes either issued or which should have been issued (and if issued, to the extent would by now have matured) pursuant to the Note Instrument.
(ii) A demand against Global Gold for the same sum, under the terms of the guarantee entered into by it on 19th February, 2013, in respect of the obligations of the Joint Venture Company under the convertible loan notes.
(iii) Orders under Article 143 of the Companies (Jersey) Law 1991 (the "Companies Law") on the ground that the affairs of the Joint Venture Company are being or have been conducted in a manner which is unfairly prejudicial to Consolidated Resources or in the alternative that the Joint Venture Company be wound up under Article 155. In particular, orders are sought under Article 143:-
(a) That the defendants purchase the shares of Consolidated Resources in the Joint Venture Company at a price to be assessed, or
(b) Consolidated Resources purchase the shares of Global Gold in the Joint Venture Company at a price to be assessed, or
(c) The defendants to pay damages in a sum to be assessed.
13. The second and third defendants by their summons seek a stay of all of the claims under the Order of Justice on the grounds that they are the subject of an arbitration agreement. To the extent that the claims under the Note Instrument are found not to be the subject of an arbitration agreement, they still seek a stay of those claims in order to avoid a multiplicity of proceedings. To the extent that none of the claims in the Order of Justice are found to be the subject of an arbitration agreement, then they maintain their application for a stay on the grounds that Jersey is not the convenient forum for these proceedings. We were not addressed by either party on any of these alternative arguments.
14. Consolidated Resources is an exempt non-resident Cayman Island company and Global Gold is a Delaware corporation. They were the principal parties to the Joint Venture Agreement; the remaining parties being affiliated to or wholly owned by them respectively. The Joint Venture Agreement is governed by the laws of New York. As its name implies, it establishes the joint venture between Consolidated Resources and Global Gold and provides for the formation of the Joint Venture Company, the transfer of assets to it, its funding and a potential public listing. It expressly contemplates the parties entering into a shareholders' agreement and sets out some of the terms that will be contained within it.
15. At paragraph 9.12 of the Joint Venture Agreement, it provides the following:-
"9.12 Dispute Resolution
9.12.1 Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity hereof, or any non-contractual obligations arising out of or in connection with this Agreement shall be settled through consultation, mediation or by arbitration pursuant to this section 9.12.
9.12.2 Before any party institutes an arbitration proceeding, it will use its best efforts to resolve the dispute through consultation with the other party, although no party shall be obligated to pursue such consultation for more than ninety (90) days after it has notified the other party of the dispute
9.12.3 In the event the parties are unable to amicably resolve any such dispute, the matter in dispute will be referred first to mediation and, if the parties are not able to resolve such dispute through mediation within thirty (30) days (or such other applicable time frame herein specifically stipulated to any particular matter or dispute), to arbitration in accordance with this Section 9.12. Any dispute not resolved by such negotiation and mediation shall be finally resolved by arbitration as set out in this Section 9.12.
9.12.4 Any party may refer any dispute arising under this Agreement for resolution through arbitrations under the supervision of an according to the procedural rules then in effect of the American Arbitration Association in New York City in accordance with its Commercial Arbitration rules including the Optional Rules for Emergency Measures of Protection, and judgment on the award rendered by a single arbitrator may be entered in any court having jurisdiction thereof, including, without limitation, the competent courts of the Republic of Armenia."
16. The Shareholders' Agreement was entered into by Consolidated Resources, Global Gold and the Joint Venture Company on 18th February, 2012. It is also governed by the laws of New York. There is no dispute resolution provision but it provides at Section 14.11:-
"Section 14.11 Entire Agreement
This Agreement constitutes the entire agreement between the Parties with respect to the matters provided for herein and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties with respect to the matters herein, provided, however, that in no event shall any of the following be superseded by this Agreement (i) the Joint Venture Agreement dated as of April 27, 2011 by and between GGC and certain of its affiliates, on the one hand, and CRA and certain of its affiliates, on the other hand, (ii) the Binding Term Sheet for the Convertible Notes executed on December 29, 20121 by and between GGC and certain of its affiliates, on the one hand and CRA and certain of its affiliates, on the other hand, and the Company and (iii) the Note Instrument creating such Convertible Notes. Should the terms and provisions of this Shareholder Agreement conflict with any of the terms and provisions of the Convertible Notes, the Binding Term Sheet, the Note Instrument or the Letter, then the terms and provisions of the Joint Venture Agreement, the Convertible Notes, the Binding Term Sheet, the Note Instrument and the Letter (as applicable) shall prevail. The Joint Venture Agreement, the Convertible Notes, the Binding Term Sheet, the Note Instrument and the Letter are hereby incorporated by reference in their entirety into this Shareholder Agreement including the Remaining Consideration Payable to GGC (the "Remaining Consideration"). There are no representations, warranties, conditions or other agreements, express or implied, collateral, statutory or otherwise, between the Parties in connection with the subject matter of this Agreement except as specifically set forth herein and none of the Parties has relied or is relying on any other information, discussion or understanding in entering into and completing the transactions contemplated in this Agreement."
17. On the next day, namely 19th February, 2012, the parties entered into a Supplemental Letter agreement. We observe that it is expressed as being supplemental to the Joint Venture Agreement (not the Shareholders' Agreement). It notes the execution of the Shareholders' Agreement and deals with such issues as the appointment of directors, funding, mining operations and mining licences. It provides as follows at paragraph 8:-
"8. .... This Letter shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to the choice of law principles thereof, and any disputes with regard to the subject matter hereof shall be settled in accordance with Section 9 12 of the JV Agreement."
18. Of the other agreements referred to in Section 14.11 of the Shareholders' Agreement, the Binding Term Sheet, we were told, contained no governing law or dispute resolution provisions. "The Letter" is defined as being a side letter to the Binding Term Sheet and again we understand that there are no governing laws or dispute resolution provisions contained within that letter. The Note Instrument is, however, governed by Jersey law and contains the following provision:-
"12.2 The Jersey courts have exclusive jurisdiction to settle any dispute arising out of or in connection with this Instrument and/or the Notes (including a dispute relating to any non-contractual obligations arising out of or in connection with this Instrument and/or the Notes) and the Company and the Noteholders submit to the exclusive jurisdiction of the Jersey courts."
The Convertible Notes are expressed as being governed by Jersey law.
19. The case for the second and third defendants is that the Joint Venture Agreement is an over-arching agreement between Consolidated Resources and Global Gold governing their combined investment in the Joint Venture Company which concerns ultimately the realisation for value of interests in two gold mining ventures in Armenia. The Joint Venture Agreement has not concluded and remains binding on and enforceable against the parties to it.
20. The subject matter of the unfair prejudice claims brought by Consolidated Resources are, submitted Advocate Swart, all disputes, controversies or claims which arise from or relate to the parties' performance and non-performance of the terms of the Joint Venture Agreement. Consolidated Resources had to set the scene in the Order of Justice for the basis of its claims by introducing at paragraph 6 the Joint Venture Agreement which brought the parties together in the first place and which encapsulates the objectives of the parties. The matters Consolidated Resources complains of are all inextricably tied up in the performance of the Joint Venture Agreement. The evidence filed by Consolidated Resources continually refers to the Joint Venture Agreement and its performance.
21. The second and third defendants' case is simple. They say that there is an arbitration agreement in place namely paragraph 9.12 of the Joint Venture Agreement, whereby the parties agree to arbitrate their differences in the agreed exclusive forum in New York and the Court should stay the proceedings so that the arbitration can take place. This dispute resolution provision is widely drawn and it has been expressly incorporated in its entirety into the Shareholders' Agreement. Furthermore, the issues raised in the Order of Justice relate in the main to the Joint Venture Agreement. There is nothing to show that, as per Article 5 of the Arbitration Law, the arbitration agreement contained within the Joint Venture Agreement was "null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties with regard to the matter to be referred".
22. The starting point for Consolidated Resources is that the Shareholders' Agreement, unlike the Joint Venture Agreement and the Supplementary Letter, does not contain a dispute resolution clause and that must have been intentional; it would have been plain to the parties, Advocate Kistler submitted, that the Joint Venture Company was incorporated under Jersey law, which laws could be enforced in the courts in Jersey. As a matter of construction, he said, the incorporation of the Joint Venture Agreement into the Shareholders' Agreement does not result in a transfer of Clause 9.12 of the Joint Venture Agreement into the Shareholders' Agreement. The Joint Venture Agreement was one of a number of agreements incorporated into the Shareholders' Agreement, which in some cases have conflicting provisions in relation to their governing law and dispute resolution. The Note Instrument, for example, is subject to Jersey law with the Jersey courts having exclusive jurisdiction over any disputes. Why then should the dispute provisions of the Joint Venture Agreement take precedence in this respect?
23. An initial point arose as to the law which the Court should apply to the question of whether there was an arbitration agreement between the parties; both the Joint Venture Agreement and the Shareholders' Agreement being subject to the laws of New York. The parties had agreed upon directions for the hearing of this application without referring the matter to the Court. Those directions did not include provision for the filing of expert evidence as to New York law. Evidence in general had to be filed by the second and third defendants by 20th June, 2014. On 9th July, 2014, the second and third defendants purported to serve upon Consolidated Resources an opinion of New York law by Steven Kayman of Proskauer Rose LLP dated 8th July, 2014. That was subsequently attached as an exhibit to an affidavit by Mr Krikorian dated 21st July, 2014. Leaving aside the objections that Consolidated Resources had to the alleged lack of independence of Mr Kayman, the Court was not prepared to admit the same without giving the plaintiff time to respond, which would have meant an adjournment. After discussion, it was agreed by counsel that the Court should proceed by not admitting the affidavit and applying Jersey law on the basis that it did not differ materially from the law of New York in relation to these matters.
24. The issue was whether paragraph 9.12 of the Joint venture Agreement applied to the subject matter of the claims in the Order of Justice. There was no dispute between the parties as to the principles applicable to the construction of the agreements, which were summarised recently by the Court of Appeal in Trilogy Management Limited v YT Charitable Foundation (International) Limited and others  JCA 152 at paragraphs 37 - 39:-
"37. In La Petite Croatie Limited v Ledo  JCA 221 the Court considered the approach in this jurisdiction to the construction of documents generally. It endorsed the principles set out in the judgment of Commissioner Page in In Re Internine Trust  JLR 236 at paragraph 62. At paragraph 11, Martin JA, with whom the other members of the Court agreed, summarised those principles as follows:-
'The aim is to establish the presumed intention of the parties from the words used; but the words used must be construed against the background of the surrounding circumstances, which means the circumstances that must be taken to have been known to the [parties] at the time. These circumstances include anything that would have affected the way in which the language would have been understood by a reasonable man, except that evidence of subjective intention is ordinarily inadmissible. The words must also be read in the context of the document as a whole, and should so far as possible be given their ordinary meaning; but a different meaning may have to be given to them if a reading of the document as a whole and common sense so require.'
38. This summary is consistent with views recently expressed in the United Kingdom Supreme Court in Rainy Sky SA v Kookmin Bank  1 WLR 2900: see paragraph 14 in the judgment of Lord Clarke of Stone-cum-Ebony JSC, with whom the other members of the Court agreed.
39. To the summary by Martin JA the following supplementary points can be added:-
(i) First, where parties have used unambiguous language the Court must apply it: (per Lord Clarke in Rainy Sky SA at paragraph 23). The Court cannot rewrite the language which the parties have used in order to make it conform to business common sense 9per Hoffmann LJ in Co-operative Wholesale Society Ltd v National Westminster plc  1 EGLR 97, cited in Rainy Sky SA at paragraph 23). Loyalty to the text of a commercial contract, instrument or document read in its contextual setting is the paramount principle of interpretation (per Lord Steyn in Society of Lloyd's v Robinson  1 WLR 756, cited in Rainy Sky SA at paragraph 25).
(ii) Second, however, the Court should be astute to remember that, language being a flexible instrument, if the words used are capable of more than one construction that which appears most likely to give effect to the commercial purpose of the agreement should be chosen (per Hoffmann LJ in Co-operative Wholesale Society Ltd v National Westminster plc; the Court ought generally to favour a commercially sensible construction over technical interpretations and undue emphasis on niceties of language (per Lord Steyn in Society of Lloyd's v Robinson). If therefore there are two possible constructions, the Court is entitled to prefer the construction which is consistent with business common sense and to reject the other: see Rainy Sky SA at paragraphs 21, 23 and 25.
(iii) The exercise of construction is therefore essentially one unitary exercise (per Lord Clarke in Rainy Sky SA at paragraph 212), 'neither uncompromisingly literal nor unswervingly purposive' (per Sir Thomas Bingham MR in Arbuthnott v Fagan  CLC 1396."
25. When dealing with the application by the defendants to set aside the interim injunctions on the grounds of non-disclosure, Consolidated Resources got the better of the argument in the sense that the Court (as then constituted) found the dispute resolution provision in the Joint Venture Agreement was not something which should have been disclosed by the plaintiff to the Deputy Bailiff when the application was made for the interim injunctions ex parte. The Court said this at paragraph 18 of the judgment of 5th June 2014:-
"We do not wish to pre-judge the issue as it may fall to be determined by the Court in due course but we agree with Advocate Kistler that this would not have been an argument that the plaintiff could reasonably have expected to have been raised by the defendants and which should therefore have been drawn to the attention of the Deputy Bailiff. The Joint Venture Company is incorporated in Jersey and what is being invoked, in part, is a specific remedy given under the Companies (Jersey) Law 1991 to companies incorporated in Jersey and which would not be available other than in this jurisdiction (see In the matter of Nasbulk Limited  BVIHCM (Com) 65 of 2012)."
26. The Court was influenced in its approach by the decision in Nasbulk, a case involving forum, where it was held that the BVI courts should entertain actions which involved specific remedies given by the legislature to companies incorporated in the BVI (equivalent to those available here under Articles 143 and 155 of the Companies Law) and which would not be available elsewhere (and in particular would not be available in the natural forum of the People's Republic of China). The underlying concept was that of an inalienable right to apply for statutory relief of this kind. That decision has since been overturned, although no judgment was available at the time of this application.
27. It is now for this Court to judge the issue of whether or not there is an arbitration agreement. The aim in construing the agreements is to establish the presumed intentions of the parties set against the background of surrounding circumstances and that, in our view, is best evidenced by the Joint Venture Agreement, which is the document by which the entire joint venture was established. In that sense, it has an over-arching role as the second and third defendants argue. Under paragraph 9.12 of the Joint Venture Agreement, the parties agreed that any dispute, controversy or claim arising out of "the Agreement" would be settled by consultation, mediation or by arbitration. "The Agreement" is the agreement that establishes the joint venture, provides for the formation of the Joint Venture Company and contemplates the parties entering into a Shareholders' Agreement.
28. In the Order of Justice, Consolidated Resources complains of unfairly prejudicial conduct that is not narrowly confined to the Shareholders' Agreement, but is concerned in substantial part with the conduct of Global Gold as a party to the Joint Venture Agreement, as the second and third defendants point out. We will not set out all of the particulars in paragraph 22 the Order of Justice, but by way of example;-
"(i) On or about 14 April 2011 the Third Defendant filed a form 10-K pursuant to the Securities and Exchange Act 1934 which materially overstated the total gold reserve in the Toukhmanuk property. The Defendants have continued to so overstate those reserves and thereby overstate the value of the First Defendant's contingent assets.
(ii) By paragraph 2.3 the third Defendant and the First Defendant were to complete what is described as the closing of the joint venture, by reference to which the assets of Mego-Gold LLC ("Mego-Gold") and Getik Mining Company LLC ("Getik"), both being Armenian LLCs and wholly owned subsidiaries of GGC, were to be transferred to the First defendant.
(iii) On various and diverse dates and occasions the Plaintiff proposed dates for early closing of the joint venture but these were not acceded to by the Defendants for undisclosed reasons. Notwithstanding the agreed deadline of 26 April 2012 provided for in the JVA, the Defendants or each of them, without lawful excuse refused to complete the closing in accordance with the Assignment and Assumption Agreements for each of Mego-Gold LLC and Getik Mining Company LLC, which action continues unabated as of this date.
(iv) By paragraph 2.4 of the JVA, the Plaintiff and the Third Defendant agreed to cause the First Defendant to be listed as a public company following the Closing. The Defendants or each of them, without lawful excuse have refused to cause the First Defendant to be listed as a public company.
(v) Consequential upon the delays referred to above, the Second Defendant and/or the Third Defendant have sought to renegotiate the terms of the JVA to secure terms more favourable to the Third Defendant in respect of preserving the Third Defendant's equity interests in the First defendant at the expense of the Plaintiff upon listing."
29. Section 14.11 of the Shareholders' Agreement is in two parts. Under the first part, it provides that the Shareholders' Agreement constitutes the entire agreement between the parties save that it does not in any way supersede the Joint Venture Agreement, the Binding Terms Sheet for the Convertible Notes, and the Note Instrument. However, it goes on to provide that in the event of conflict between the Shareholders' Agreement and any of these other agreements, the latter shall prevail. The Shareholders' Agreement was therefore to be subsidiary to these other agreements including the Joint Venture Agreement.
30. It could have been left at that, but the section then goes on to provide that these other agreements are "incorporated" into the Shareholders' Agreement. It is difficult to know precisely what the parties intended by this additional provision. The agreements so incorporated clearly cannot be merged into one complete agreement as that would require extensive re-drafting. In addition, provisions contained in one agreement cannot be transferred to another. They must all remain distinct agreements but incorporated in their entirety within the Shareholders' Agreement, which itself plays a subsidiary role in the case of conflict.
31. Taking a narrow view, it is true that the Shareholders' Agreement contains no dispute resolution provision but paragraph 9.12 of the Joint Venture Agreement is widely drawn. There is no question that it constitutes an arbitration agreement binding on the parties and in our view it is wide enough to encompass the unfairly prejudicial conduct on the part of Global Gold of which Consolidated Resources now complains. We find that it was the intention of the parties to the Joint Venture Agreement that all disputes between them arising out of the joint venture, which would include their conduct as shareholders in the Joint Venture Company, would be referred to arbitration unless expressly agreed otherwise.
32. They did agree otherwise in relation to the Note Instrument issued by the Joint Venture Company (which was not itself a party to the Joint Venture Agreement). This is a narrowly confined document by which the Joint Venture Company was to be funded and the debtor being a Jersey incorporated company, it makes sense for any claims to be brought in Jersey where any judgment could be directly enforced. In the Note Instrument it expressly provides that all disputes arising out of or in connection with it will be subject to the exclusive jurisdiction of the Courts of Jersey to whose exclusive jurisdiction the note holders (in this case Consolidated Resources) submitted. The claims of Consolidated Resources in relation to the convertible loan notes is not therefore the subject of arbitration agreement.
33. There is no need for us to consider whether the claims in relation to the convertible loan notes should still be stayed to avoid a multiplicity of proceedings for the reasons which will become clear. We should make mention at this stage of the claim brought by Consolidated Resources in the Order of Justice in relation to the guarantee executed in its favour by Global Gold. Unlike the Note Instrument to which it relates, it contains no dispute resolution provision. It is merely stated to be subject to the laws of New York. The issue arises as to whether the guarantee is the subject of the arbitration agreement. We would require further assistance from counsel before determining this point but for the reasons which again will become clear it is not necessary for us to do so.
34. Advocate Kistler went on to argue that in any event, the dispute between the parties was not liable to arbitration because the relief sought under Article 143 of the Companies Law was not within the power of a private arbitrator to award. The issues before a New York arbitrator would be limited, he said, to determining whether the complaints made by Consolidated Resources amount to breaches of the terms of the contractual documents and any non-contractual duties which might arise as between the parties. The ability to compel Global Gold to buy out Consolidated Resources or to compel Global Gold to sell to Consolidated Resources would not be available. Most importantly, the principal remedy sought by Consolidated Resources may not be available - that is a winding up of the company and appointing a liquidator with statutory powers and authority. The Court had itself in earlier hearings identified that a winding-up of the Joint Venture Company was a real possibility because of the deadlock between the shareholders.
35. He referred us to the case of Obelisk Trust v Grand Circle Safaris 2002/208 (31st October, 2002). In that case, the parties had accepted that the joint venture had ended and that the Joint Venture Company could no longer fulfil its original purpose. On an application by one party to wind up the company under Article 155 of the Companies Law, it was contended by the other party that the matter should be referred to arbitration under a provision in the agreement which provided that "any dispute ... in regard to ... this agreement ... shall be decided by arbitration." The Court found that any dispute in connection with the agreement was separate from the question of the legal existence of the company. Quoting from the judgment of Birt, Deputy Bailiff at paragraph 8:-
"8. In our judgment the relief sought by the representation is not a matter covered by the arbitration clause in the Agreement. The arbitration clause concerns disputes relating to ("in regard to") the Agreement. The representation, whilst referring to the Agreement, does not seek any remedy by reference to the Agreement; it merely seeks an order that the Court place an end to the legal existence of the Company by ordering its winding-up. It is only the Court - or the parties by agreement - who can alter the legal status of the Company. Termination of the Agreement or an award of damages for breach of the Agreement would not affect the legal status of the Company nor the position of the parties as 50% shareholders."
36. Whilst it is true that the Court has referred previously to the apparent deadlock between Consolidated Resources and Global Gold as shareholders in the Joint Venture Company, Consolidated Resources has substantially changed its position since the commencement of the proceedings. The body of the Order of Justice and the particulars assert only unfairly prejudicial conduct pursuant to Article 141 of the Companies Law and the remedy sought under Article 143 is for the purchase or sale of shares in the Joint Venture Company and damages. It is only in the prayer to the Order of Justice that Consolidated Resources seeks, in the alternative, an order that the company be wound up. The Order of Justice does not purport to set out the grounds upon which an order for a winding-up would be justified. It is in effect relief that has been tacked on to the prayers in the order of Justice. The current English Practice Direction 49B draws attention to the undesirability of asking, as a matter of course, for a winding-up order as an alternative to an order under Section 994 of the Companies Act 2006 (the equivalent of Article 141 of the Companies Law).
37. Advocate Swart referred us to the more recent decision of the English Court of Appeal in Fulham Football Club v Richards and another  1 All ER 414, a decision made in the context of a similar legislative framework with the English law equivalent of Article 5 of the Arbitration Law mandating a stay unless the Court is satisfied that "the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred". In that case, the company was responsible for managing the Football Association Premier League. Each of the twenty football clubs who were its members held one share and the Football Association ("the FA") held one non-voting share. The company's rules provided that membership of the League constituted an agreement between it and the twenty clubs and between each of the clubs to submit all disputes between them to final and binding arbitration in accordance with the provisions of the Arbitration Act 1996. The FA's rules also contained an arbitration agreement. One of the twenty member clubs brought a petition under Section 994 seeking relief from alleged unfair prejudicial conduct by the chairman of the company, who had allegedly intervened in negotiations for the transfer of a football player. The relief sought by the club included the removal of the chairman. The respondents applied for a stay of the petition pending arbitration under the company's rules and the FA rules. The High Court granted a stay and the club appealed.
38. This was not a case where the club was seeking an order regulating the affairs of the company which bound other shareholders or for the winding-up of the company. The inability of an arbitrator to make such orders was however relied upon to support the argument that claims for that or comparable relief lay beyond what the law will permit the parties to submit to arbitration. Having considered the judgment of Weeks J in Exeter City Association Football Club Limited v Football Conference Limited  EWHC 2304 where it was held that the statutory rights conferred on shareholders to apply for relief of this kind was inalienable and could not be diminished or removed by contract or otherwise (following Warren J in A Best Floor Sanding Party Limited v Skyer Australia Pty Ltd  VFC 170), Patten LJ said this at paragraph 76:-
" Warren J was, I think, right to regard the arbitration clause she had to consider as unenforceable in so far as it included within the scope of the reference the question whether the company should be wound-up. Such an order lies within the exclusive jurisdiction of the court and the discretion as to whether or not to make that order is for the court, not the arbitrator to exercise. But I part company with her if and in so far as she suggests in para  of her judgment that there can be no resort to arbitration in respect of the dispute between shareholders or the company which forms the grounds upon which such relief may be sought.
 The determination of whether there has been unfair prejudice consisting of the breach of an agreement or some other unconscionable behaviour is plainly capable of being decided by an arbitrator and it is common ground that an arbitral tribunal constituted under the FAPL or the FA rules would have the power to grant the specific relief sought by Fulham in its s 994 petition. We are not therefore concerned with a case in which the arbitrator is being asked to grant relief of a kind which lies outside his powers or forms part of the exclusive jurisdiction of the court. Nor does the determination of issues of this kind call for some kind of state intervention in the affairs of the company which only a court can sanction. A dispute between members of a company or between shareholders and the board about alleged breaches of the articles of association or a Shareholders' Agreement is an essentially contractual dispute which does not necessarily engage the rights of creditors or impinge on any statutory safeguards imposed for the benefit of third parties. The present case is a particularly good example of this where the only issue between the parties is whether Sir David has acted in breach of the FA and FAPL rules in relation to the transfer of a Premier League player.
78 Judge Weeks was therefore wrong in my view to extend the reasoning of Warren J in the A Best Floor Sanding case to a petition under what was then s 459. The statutory provisions about unfair prejudice contained in s 994 give to a shareholder an optional right to invoke the assistance of the court in cases of unfair prejudice. The court is not concerned with the possible winding-up of the company and there is nothing in the scheme of these provisions which, in my view, makes the resolution of the underlying dispute inherently unsuitable for determination by arbitration on grounds of public policy. The only restriction placed upon the arbitrator is in respect of the kind of relief which can be granted."
He went on to say this at paragraph 83 obiter:-
"I have already set out my own reasons for preferring the view that disputes of this kind which do not involve the making of any winding-up order are capable of being arbitrated. Although not necessary for the resolution of this appeal, I also take the view, as Austin J did in the ACD Tridon case, that the same probably goes for a similar dispute which is used to ground a petition under s 122(1)(g) to wind up the company on just and equitable grounds. In those cases the arbitration agreement would operate as an agreement not to present a winding-up petition unless and until the underlying dispute had been determined in the arbitration. The agreement could not arrogate to the arbitrator the question of whether a winding-up order should be made. That would remain a matter for the court in any subsequent proceedings. But the arbitrator could, I think legitimately, decide whether the complaint of unfair prejudice was made out and whether it would be appropriate for winding-up proceedings to take place or whether the complainant should be limited to some lesser remedy. It would only be in circumstances where the arbitrator concluded that winding-up proceedings would be justified that a shareholder would then be entitled to present a petition under s 122(1)(g). In these circumstances the court could be invited to lift any stay imposed on proceedings imposed under s 9(4). In much the same way, it would, I think, be open to an arbitrator who considered that the proper solution to a dispute between a shareholder and the company was to give directions for the conduct of the company's affairs to authorise the shareholder to seek such relief from the court under s 994. But such cases are likely to be rare in practice. If the relief sought is of a kind which may affect other members who are not parties to the existing reference, I can see no reason in principle why their views could not be canvassed by the arbitrators before deciding whether to make an award in those terms. Opposition to the grant of such relief by those persons may be decisive. Similarly if the order sought is one which cannot take effect without the consent of third parties then the arbitrators' hands will be tied."
39. The English Court of Appeal accordingly held as per the headnote as follows:-
"The statutory provisions about unfair prejudice contained in s 994 gave to a shareholder an optional right to invoke the assistance of the court in cases of unfair prejudice. The court was not concerned with the possible winding-up of the company and there was nothing in the scheme of those provisions which made the resolution of the underlying dispute inherently unsuitable for determination by arbitration on grounds of public policy. The only restriction placed upon the arbitrator was in respect of the kind of relief which could be granted. There was no authority which suggested that an agreement to resolve a dispute between shareholders which might justify a winding-up order on just and equitable grounds would either infringe the statute or be void on grounds of public policy. The 1996 Act set out the principle that parties should be free to agree how their disputes were resolved, subject only to such safeguards as were necessary in the public interest; it was not necessary in the public interest that agreements to refer disputes about the internal management of a company should in general be prohibited or necessary to prohibit arbitration agreements to the extent that they applied to disputes as to whether a company's affairs were being conducted in an unfairly prejudicial manner to the interests of its members. Accordingly, the appeal would be dismissed."
40. Adopting the rationale in the Fulham case, we conclude that there is nothing in the Arbitration Law or public policy which would prevent the allegations of unfairly prejudicial conduct contained in the Order of Justice being referred to arbitration. Under Article 5 of the Arbitration law the Court is bound therefore to grant a stay in relation those matters.
41. Obelisk can, we think, be distinguished on the facts in that the parties in that case agreed that the joint venture had come to an end and the Joint Venture Company could no longer fulfil its original purpose. The application was not concerned with a dispute "in regard to" the agreement between the parties; no remedy was sought under the agreement. The application was concerned solely with the legal status of the company, which only the Court, absent agreement between the parties, could alter.
42. Having successfully surmounted these two hurdles, namely the existence of an arbitration agreement in relation to the claims of unfairly prejudicial conduct and the arbitrability of those claims, the second and third defendants then face a further and we find decisive hurdle.
43. Article 27(2) and )(3) of the Arbitration Law provides as follows:-
"(2) Where an agreement between any parties provides that disputes which may arise in the future between them shall be referred to arbitration, and a dispute which so arises involves the question whether any such party has been guilty of fraud, the Court shall, so far as may be necessary to enable that question to be determined by the court, have power to order that the agreement shall cease to have effect and power to give leave to revoke the authority of any arbitrator or umpire appointed by or by virtue of the agreement.
(3) In any case where, by virtue of this Article, the court has power to order that an arbitration agreement shall cease to have effect or to give leave to revoke the authority of an arbitrator or umpire, the Court may refuse to stay any action brought in breach of the agreement."
44. As the Court found in Makarenko v CIS Emerging Growth Limited  JLR 348, the only possible interpretation of these provisions is that, notwithstanding the mandatory terms of Article 5 of the Arbitration Law, they allow the Court to refuse to enforce an arbitration agreement (and therefore not to grant a stay) where a question of fraud arises. Having considered the almost identical English statutory provisions and case law on the interpretation of those provisions, Birt, Deputy Bailiff, derived the following principles:-
"31 The principles which we derive from the cases can be summarized as follows:
(a) Before a court will refuse a stay where fraud is alleged, there must be a concrete and specific issue of fraud raised by the case. There must be prima facie evidence to support the allegation, not a mere bandying about of allegations.
(b) Once the threshold is crossed, a discretion then arises as to whether to refuse a stay on the ground that the dispute involves fraud. However, where the party against whom fraud is alleged opposes the stay so that he may clear his name in public before the court, the court will, almost as a matter of course, refuse a stay so that he has that opportunity.
(c) Where the party alleging fraud opposes a stay, this will not normally be sufficient of itself, even if the evidence of fraud is strong, for the court to refuse a stay. As Bingham, L.J. put it in Cunningham-Reid  1 WLR at 689:-
'The parties in this case incorporated an agreement to arbitrate in their contract at a time when they did not know who would be claiming what against whom and at a time when they no doubt reasonably anticipated there would be no claim to arbitrate at all; it was an agreement which they made for better or worse, for richer or poorer, and the ordinary duty of the Court is to give effect to the parties' own agreement. The desire of a party alleging fraud against another to have a trial in open Court would not ordinarily amount to a sufficient reason why the matter should not be referred in accordance with the agreement so as to bring the case within s4.'
The underlying thinking behind this approach was well summed up by Jessel, M.R. in Russell when he said (14 Ch D at 477):-
'Does the party charging the fraud desire [to exclude arbitration] or the party charged with the fraud desire it? Where the party charged with the fraud desires it, I can perfectly understand the Court saying 'I will not refer your character against your will to a private arbitrator'. It seems to me that case is almost a matter of course to refuse the reference, but I by no means think the same consideration follows when the publicity is desired by the person charging the fraud. His character is not at stake, and the other side may say, 'The very object that I have in desiring the arbitration is that the matter shall not become public. It is very easy for you to trump up a charge of fraud against me, and damage my character, by an investigation in public.' There is a very old and familiar proverb about throwing plenty of mud, which applies very much to these charges made by members of the same family, or members of the same partnership, against one another in public. It must be an injury, as a rule, to the person charged with fraud to have it published, and I must say that I am by no means satisfied that the mere desire of the person charging the fraud is sufficient reason for the Court refusing to send the case to arbitration.'"
45. He went on to find that these principles apply equally in Jersey save that in this respect:-
"32 It may be argued that this court should simply adopt these principles as part of Jersey law on the grounds that our statutory provisions are much the same. However, there are two matters which would suggest that the approach of this court should not be identical:
(a) The English courts were dealing with a discretionary power to stay (s.4 of the Arbitration Act 1950) whereas art. 6 of the 1998 Law provides for a mandatory stay where there is an arbitration agreement. The presumption in favour of granting a stay would therefore appear to be somewhat stronger than in the cases before the English courts.
(b) Jersey law places great weight upon the maxim "la convention fait la loi des parties." Accordingly, very good reason needs to be shown why the court should relieve the parties of the consequences of an arbitration agreement into which they have entered of their own free will.,
Our view is that the general principles set out above are equally applicable in Jersey save that the burden upon the party opposing a stay (whether that be the person alleging fraud or against whom fraud is alleged) is somewhat higher in Jersey than it is in England."
46. In this case, the second and third defendants have made repeated allegations of fraud against Mr Borkowski and directly and indirectly against Consolidated Resources, of which he is the sole director. In resisting the application by Consolidated Resources for judgment in default against the Joint Venture Company in relation to its monetary claims, Advocate Swart informed Commissioner Clyde-Smith that the defences available to the Joint Venture Company centred around the allegedly fraudulent activities of Mr Borkowski (see paragraph 27 of the judgment of 18th June, 2014). Advocate Swart informed us that any answer filed by the second and third defendants in these proceedings would raise such allegations. They are summarised in Mr Krikorian's first affidavit under the heading "The fraudulent activities of .... JB [Mr Borkowski]" and are repeated in his second, third and fourth affidavits. At paragraph 70, Mr Krikorian says that these are very serious issues which go to the heart of the Joint Venture Agreement. Global Gold has apparently been advised by its US lawyers that it will be entitled to set aside all of the arrangements that have been entered into with Consolidated Resources - the Joint Venture Agreement and all subsequent agreements will be void ab initio. Allegations of fraudulent actions on the part of Consolidated Resources and Mr Borkowski and others are also contained in the first affidavits of Drury Gallagher and Ian Hague, directors of Global Gold. Furthermore they are referred to in the US Securities and Exchange Commission filings of Global Gold, a public document.
47. As the party against whom fraud is alleged, Consolidated Resources takes issue with the reference of these matters to a private arbitration in reliance on Article 27 of the Arbitration Law and Advocate Kistler referred the Court specifically to the comments of Jessel M.R. in Russell set out above.
48. We conclude that there is a concrete and specific issue of fraud raised by the case and that the threshold has been crossed, so that a discretion arises as to whether the Court should refuse a stay.
49. Accepting that the burden upon Consolidated Resources under Jersey law is somewhat higher than it may be in England, it is the party against whom fraud is alleged and it requires to clear its name and that of its sole director in public before the Court. The Court should not refer their character against their will to a private arbitration and will therefore exercise our discretion in favour of Consolidated Resources. Accordingly, we order that the Arbitration Agreement shall cease to have effect in relation to the disputes which have arisen between the parties and we refuse to stay the proceedings brought by Consolidated Resources in breach of the arbitration agreement.
50. Advocate Swart did not pursue his alternative argument in relation to Jersey not in any event being the convenient forum. Accordingly and in conclusion the application by the second and third defendants for a stay is rejected. The case should now proceed to an expedited hearing for which directions will need to be given when this judgment is handed down.
Arbitration (Jersey) Law 1998.
Companies (Jersey) Law 1991.
Obelisk Trust v Grand Circle Safaris 2002/208.
Companies Act 2006.
Arbitration Act 1996.
Exeter City Association Football Club Limited v Football Conference Limited  EWHC 2304.
A Best Floor Sanding Party Limited v Skyer Australia Pty Ltd  VFC 170.