Hi Ho ‘Silver’. Salvage and Sovereign Immunity.

 

As 2020 draws to a close, we have the first case on the application of the 1978 Sovereign Immunity Act to a claim for salvage, in Argentum Exploration Ltd v The Silver [2020] EWHC 3434 (Admlty) (16 December 2020), heard by Sir Nigel Teare acting as a judge of the High Court.

A UK company formed in 2012 for the purpose of locating and salving valuable shipwrecks lying at depths which up until then had precluded salvage claimed to have salved in 2017 silver bars worth US$43m from the wreck of the SS Tilawa which Japanese torpedoes sunk in the Indian Ocean on 23 November 1942. The bars are the property of the South African government which was intending to use them in 1942 for minting South African coinage and some Egyptian coinage.

South Africa asserted sovereign immunity and claimed the Receiver of Wreck should deliver the cargo to it without any salvage being paid. Section 1 of the State Immunity Act 1978 (“the SIA”) provides that “a State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act.” This is subject to various exceptions, in particular that in s.10(4) .

A State is not immune as respects—

(a) 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; “

The key question was whether the bars of silver and the vessel carrying them were, at the time the cause of action arose, in use or intended for use for commercial purposes.

South Africa argued that cargo was not in use during the voyage, but this did not determine the question of state immunity because it remained to consider whether the cargo was intended for use for commercial purposes. Sir Nigel Teare had difficulty in accepting that there is a principled reason for state immunity from the court’s adjudicative jurisdiction in an action in rem claiming salvage where the state has chosen to have its cargo carried by sea pursuant to a contract of carriage just like any private owner of cargo and has therefore exposed itself to claims for salvage like any private owner of cargo. The cargo of silver was intended to be used for commercial purposes, because it had been bought from the Bombay Mint and shipped commercially, and its intended us as part of a sovereign activity of producing South African cargo did not affect its status as commercial cargo.

The character or status of the cargo in 1942 was relevant to the character or status of the cargo in 2017, and there was no reason to conclude that the character or status of the cargo in 1942 as a cargo used for the commercial purposes of a contract of carriage had changed by then. For the character or status of the cargo in 1942 to have changed by 2017 there must have been some decision by the South Africa to change it. There was none on the facts of this case.

Accordingly, Sir Nigel Teare found that the matter fell within the ‘commercial purposes’ exception in the SIA. This conclusion was consistent with the obiter approach of Gross J., in the Altair that the cargo in that case was a commercial cargo (in use for commercial purposes) because it had been bought and shipped commercially, notwithstanding that it was to be used as part of the Public Distribution System.

It was therefore unnecessary to consider whether, if, contrary to this conclusion, the cargo was not in use for commercial purposes it was intended to be used for commercial purposes. On the facts it was intended to be used substantially for the government or sovereign purpose of producing South African Union coinage which was a sovereign or governmental activity.

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