Argentum Exploration Ltd v Republic of South Africa [2024] UKSC 16 (8 May 2024)

A salvage company sought to claim salvage rights over silver cargo recovered from a ship sunk in 1942. The silver belonged to South Africa and was intended for minting coins. The Supreme Court held South Africa was entitled to state immunity from the in rem claim because the cargo was intended for sovereign, non-commercial purposes.

Facts

On 23 November 1942, SS TILAWA was sunk by enemy action in the Indian Ocean whilst carrying 2364 bars of silver belonging to the Union of South Africa (now the Republic of South Africa). The silver had been purchased for the predominant purpose of being minted into coinage by the South African mint. Between January and June 2017, the silver was recovered from the seabed by a specialist salvage vessel. Argentum Exploration Ltd, claiming to be the salvor, commenced an in rem claim against the silver seeking salvage. The Republic of South Africa challenged the court’s jurisdiction on grounds of state immunity under the State Immunity Act 1978 (SIA) and Article 25 of the International Convention on Salvage 1989.

Issues

Primary Issue

Whether the silver was ‘in use or intended for use for commercial purposes’ within the meaning of section 10(4)(a) of the SIA, such that South Africa would not be entitled to state immunity from the in rem salvage claim.

Secondary Issues

Whether the interpretation of ‘when the cause of action arose’ should refer to 1942 or 2017; whether intended use of cargo is relevant under section 10(4)(a); and whether section 10(4)(a) should be read down under the Human Rights Act 1998.

Judgment

The Supreme Court unanimously allowed South Africa’s appeal, holding that the Government was entitled to state immunity from the in rem claim. Lord Lloyd-Jones and Lord Hamblen delivered the joint leading judgment.

On the Meaning of ‘In Use’

The Court held that the majority of the Court of Appeal erred in finding the silver was ‘in use’ for commercial purposes simply because it was being carried pursuant to commercial contracts. Lord Lloyd-Jones and Lord Hamblen stated:

“As a matter of ordinary language a cargo which was sitting in the hold of a ship was not being used for any purpose, commercial or otherwise. While it was undoubtedly the subject of commercial arrangements for its carriage, it would be a distortion of language to say that it was being used for the purposes of those arrangements.”

On Intended Use

The Court confirmed that the intended use of cargo is highly material. The silver was intended for the sovereign purpose of minting coinage for South Africa, which was non-commercial. The Court referenced the ILC commentary noting that:

“the word ‘intended for use’ has been retained because the cargo is not normally used while it is on board the ship and it is therefore its planned use which will determine whether the State concerned is or is not entitled to invoke immunity.”

On the Distinction Between In Rem and In Personam Claims

The Court emphasised the compelling reasons why more stringent criteria apply to in rem claims, including that such proceedings are far more intrusive into state property rights, creating maritime liens, establishing jurisdiction merely by presence of property, and enabling arrest without meeting usual jurisdictional requirements.

On the Brussels Convention

The Court held that section 10(4)(a) must be construed consistently with Article 3(3) of the Brussels Convention, which provides immunity from in rem proceedings for state-owned cargoes carried for governmental and non-commercial purposes on merchant ships.

Implications

This judgment clarifies the interpretation of state immunity provisions relating to cargo claims under UK law. It establishes that:

• Cargo being carried on a ship is not ‘in use’ merely by virtue of the commercial arrangements for its carriage
• The intended use of cargo by the state owner is the determinative factor for immunity purposes
• Section 10(4)(a) maintains an important distinction between in rem and in personam claims against state-owned cargo
• The restrictive theory of state immunity still protects state property intended for sovereign purposes from the intrusive nature of in rem proceedings

The decision reinforces that while states engaging in commercial activities may lose immunity, the nature of the state’s intended use of its property remains paramount when considering immunity from enforcement measures against that property.

Verdict: Appeal allowed. The Republic of South Africa is entitled to state immunity from the in rem claim under section 1 of the State Immunity Act 1978. The exception under section 10(4)(a) does not apply because the silver cargo was not in use or intended for use for commercial purposes at the relevant time.

Source: Argentum Exploration Ltd v Republic of South Africa [2024] UKSC 16 (8 May 2024)