In Argentum Exploration Ltd v Republic of South Africa [2024] UKSC 16, the UK Supreme Court ruled that South Africa was entitled to state immunity in an in rem claim by salvors of a World War II shipwreck. The Court found that the silver onboard was not “used or intended for commercial purposes” at the time it was transported.
Background:
The case involved the salvage of 2,364 bars of silver by Argentum Exploration (“Argentum”) from the wreck of the SS Tilawa, a merchant ship torpedoed by a Japanese submarine on November 23, 1942, in the Indian Ocean. The silver, purchased in 1942 by the Government of the Union of South Africa from the Government of India for use in the South African Mint, was being transported from Bombay to Durban aboard the British-owned vessel. After lying at a depth of 2.5 kilometres for over 70 years, the silver was recovered in 2017 by salvors, who brought it to Southampton, delivered it to the Receiver of Wreck, and claimed salvage rights.
At the outset, South Africa contested the jurisdiction of the English Court, claiming immunity under section 1 of the State Immunity Act 1978 (“SIA”) and Article 25 of the Salvage Convention 1989. Argentum countered, asserting that section 10(4)(a) of the SIA applied, which states that a State is not immune in respect of “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”. By the time the case reached the Supreme Court, it was agreed that the relevant time for assessing use of the vessel was 1942, when it sank. While the vessel was used for commercial purposes, the silver was intended for a sovereign purpose – minting South African coins. The main issue before the courts, therefore, was whether the silver, in 1942, was being used for a commercial purpose.
The parties agreed that the vessel was used for commercial purposes, but Argentum argued that the silver was in commercial use at the time of transport as it was being carried under a commercial contract of carriage after being purchased through a commercial contract of sale. It contended that these commercial aspects should negate South Africa’s claim to sovereign immunity. South Africa maintained that the silver was not “in use” for any purpose while being transported. They argued that the intended use of the silver – primarily for minting coins for the Union of South Africa – was a sovereign, non-commercial purpose. South Africa asserted that this intended use should be the determining factor in applying sovereign immunity.
Court’s Decision:
The Court of Appeal decided that the silver was in use for the commercial purpose of fulfilling the underlying contracts of sale and carriage, dismissing South Africa’s sovereign immunity claim. South Africa appealed to the Supreme Court, and while the judgment was pending, the claim was settled. A judgment was nonetheless handed down, dismissing the decision of the Court of Appeal.
The Supreme Court disagreed, criticised the Court of Appeal’s “unduly technical” approach that focused on how the silver became cargo rather than its actual use. Citing Alcom Ltd v Republic of Columbia [1984] AC 580 and SerVaas Incorporated v Rafidain Bank [2012] UKSC 40, the Court emphasized that the intended purpose of the property is key. It concluded that the silver’s purpose—coinage—was non-commercial, which determined its use under section 10(4)(a) of the SIA. Lord Lloyd-Jones and Lord Hamblen, delivering the judgment, concluded that the silver, while being transported in the ship’s hold, was not “in use” by the South African government for any purpose, commercial or otherwise. The court emphasised that mere transportation does not constitute “use” within the meaning of the SIA. Regarding the “intended use” of the silver, the Supreme Court found that it was predominantly for a sovereign purpose – minting coins for the Union of South Africa. As such, South Africa was entitled to immunity for the in rem action. The Court further noted that in rem proceedings are more intrusive to state property rights than in personam proceedings, requiring stricter criteria to deny immunity.
Additionally, the Court referenced the Brussels Convention of 1926 on the Immunity of State-Owned Vessels, highlighting that the SIA was enacted partly to align UK law with the Convention. Under Article 3(3) of the Convention, state-owned cargo on commercial vessels is immune from in rem proceedings. The Supreme Court found that section 10(4)(a) of the SIA aligned with the Convention and upheld South Africa’s immunity.