State Has no Immunity with Respect to Salvage Claims

South Africa’s claims of state immunity in respect of a cargo of silver bars (current value: £32 million) was resisted in Argentum Exploration Limited v The Silver [2020] EWHC 2323 (Admlty) where the United Kingdom’s High Court decided in the context of section 10 (4) (a) of the United Kingdom’s State Immunity Act, 1978 (hereinafter referred to as the “SIA”).

The silver was carried on the SS Tilawa, a privately-owed merchant ship, during World War II, when the said vessel was sunk in international waters by Japanese torpedoes as she made the crossing from Mumbai to Durban, carrying (among other cargo) the silver for use by the South African Mint. The silver sank to depths which until recently had precluded salvage.
Argentum salved the silver in 2017 and brought it to Southampton, where it was declared to the Receiver of Wreck. Argentum also commenced proceedings in rem claiming salvage from the owner of the silver. South Africa claimed ownership of the silver, but argued that it was immune from the proceedings in rem due to sovereign immunity. Resolution of the matter hinged on whether, for the purposes of s 10(4)(a) of the United Kingdom’s State Immunity Act 1978 (“SIA”), the silver and the Tilawa could be said to be “in use, or intended for use for commercial purposes” in 2017, being the time at which Argentum’s cause of action against South Africa arose.

Judgment was delivered on 16 December 2020. Sir Nigel Teare (sitting as a judge of the United Kingdom High Court) held that (for the purposes of s 10(4) (a) SIA) the Tilawa and the silver were in commercial use when the wreck was salved, noting that, on sinking, the ship was a merchant vessel and its cargo was being shipped under a commercial contract of carriage and that nothing had happened between 1942 and 2017 to alter the status of either. Therefore s 10(4)(a) of the SIA applied and South Africa was not immune from proceedings in rem claiming salvage in respect of the silver.

Argentum v the Silver appears to be the first case to consider section 10(4) (a) of the SIA. Kenya does not appear to have an Act similar to the SIA and so, by dint of section 4 of the Judicature Act, Cap 8 which provides that “the admiralty jurisdiction of the High Court of Kenya shall be exercisable (a) over and in respect of the same persons, things and matters; (b) and in the same manner and to the same extent; and (c) in accordance with the same procedure as in the High Court in England, and shall be exercised in conformity with international laws and the comity of nations” and so the SIA, which provides at section 10 (1) (a) that section 10 of the SIA is applicable “to (a) Admiralty proceedings and (b) proceedings on any claim which could be made the subject of Admiralty proceedings,” is relevant to the development of Kenyan law.

That said, certain aspects of the judgment are interesting. The primary question raised by South Africa was with regard to whether South Africa was immune having regard to section 10 (4) (a) of the SIA. Section 10 (4) (a) of the SIA provides that “a State is not immune as respects an action in rem against a cargo belonging to that State if both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes.” Thus, in South Africa’s view, the cause of action arose when the salvage operations for the silver were completed on or about the 2nd of August, 2017. In South Africa’s view at the time the cause of action arose, the silver was not obviously in use and there was no evidence that it was intended for use for commercial purposes. However, the UK High Court, in agreement with the claimant’s arguments was of the view that because the South African interpretation would produce a result not in consonance with the international obligations of the UK both under customary international law (see the restrictive theory of state immunity as opposed to the absolute theory of state immunity) and the Brussels Convention of 1926, for which the SIA was enacted to enable the UK ratify the same. The Brussels Convention provides in principle that state owned ships and cargoes etc. are subject to the same rules of liability and the same obligations as those applicable in the case of privately-owned ships, cargoes and equipment. The court thus, departed from the natural meaning of section 10 (4) (a) of the SIA because it felt that the interpretation adopted by South Africa would give States immunity even in commercial transactions freely entered into by themselves. This decision affirms the inclination of the English courts to limit a foreign state’s reliance on immunity in circumstances where it has acted as a commercial entity and engaged in commercial activities.

This decision will be of particular interest to offshore and sub-sea contractors engaged in the recovery of high value cargo such as the many cargoes of precious metals known to have been lost particularly in times of war. The Court’s approach may well encourage such salvage operations in the future where there is a possibility that the owner of the cargo might turn out to be a state or state-controlled entity.

The decision can be found here

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