Argentum salvaged silver bars from a shipwreck belonging to South Africa and claimed salvage. The Supreme Court held South Africa was immune from the in rem claim under the State Immunity Act 1978, as the silver was intended for the non-commercial sovereign purpose of minting coinage, not in use for commercial purposes.
Background
In November 1942, the SS Tilawa was sunk by enemy action in the Indian Ocean while carrying 2,364 bars of silver belonging to the Union of South Africa (now the Republic of South Africa). The silver had been purchased from the Government of India on free on board terms and was being transported from Bombay to Durban for the predominant purpose of being minted into coinage by the South African Mint. The vessel was a privately owned commercial passenger/cargo liner.
Between January and June 2017, the respondent Argentum Exploration Ltd recovered the silver from the seabed at approximately 2.5 kilometres depth. The silver was transported to the United Kingdom and declared to the Receiver of Wreck. Argentum commenced an in rem claim against the silver on 1 October 2019, ultimately seeking a salvage reward. South Africa challenged the jurisdiction of the English courts on the basis that it was entitled to state immunity under section 1(1) of the State Immunity Act 1978 (‘the SIA’) and/or Article 25 of the International Convention on Salvage 1989.
The Issue(s)
The central issue was 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 the exception to state immunity would apply. It was common ground that the vessel carrying the silver was in use for commercial purposes and that the silver’s intended use was predominantly the sovereign purpose of minting coinage for the Union of South Africa. The five issues before the Supreme Court were:
Issue 1
Whether the Court of Appeal erred in interpreting ‘at the time when the cause of action arose’ in section 10(4)(a) solely by reference to the maritime circumstances creating the recognised subject matter of salvage.
Issue 2
Whether the majority of the Court of Appeal erred in holding that the silver was ‘in use’ for commercial purposes while being carried aboard the vessel.
Issue 3
Whether the intended use of the silver was relevant to section 10(4)(a).
Issue 4
Whether section 10(4)(a) must be read down under section 3 of the Human Rights Act 1998 because immunity would exceed that required by customary international law.
Issue 5
Whether South Africa was entitled to immunity under section 1 of the SIA and Article 25 of the Salvage Convention.
The Court’s Reasoning
Issue 1: The relevant time
The Supreme Court agreed with the trial judge, Sir Nigel Teare, that while the cause of action in salvage only arose in 2017 when the silver was salved, it was appropriate to have regard to the use and intended use of the vessel and cargo at the time of carriage in 1942, and to ask whether there had been any subsequent change of use. As there was no such change, the status of the vessel and cargo at the time of carriage was determinative.
Issue 2: Whether the silver was ‘in use’ for commercial purposes
The Supreme Court held that the majority of the Court of Appeal had erred. Lord Lloyd-Jones and Lord Hamblen (with whom Lord Briggs, Lord Leggatt and Lord Richards agreed) 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.
Adopting the reasoning of Elisabeth Laing LJ in dissent in the Court of Appeal, the Supreme Court endorsed her succinct observation that the silver ‘was being carried, and that is all.’ The Court noted that the International Law Commission had itself observed in 1991 that ‘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.’
The Court drew support from the distinction between the origin of property and its use, as established in Alcom Ltd v Republic of Colombia [1984] AC 580 and SerVaas Inc v Rafidain Bank [2012] UKSC 40. Lord Clarke in SerVaas had stated:
Parliament did not intend a retrospective analysis of all the circumstances which gave rise to property, but an assessment of the use to which the state had chosen to put the property.
The Court held that the majority in the Court of Appeal had been led into error by allowing the nature of the salvage cause of action to dominate their interpretation of section 10(4)(a). Moreover, Argentum’s reading would distort the statutory scheme by collapsing the distinction between section 10(4)(a) (in rem claims, requiring both ship and cargo to be in use or intended for use for commercial purposes) and section 10(4)(b) (in personam claims, requiring only the ship to be in use or intended for use for commercial purposes). If carriage on a commercial vessel automatically meant the cargo was ‘in use’ for commercial purposes, the additional threshold in paragraph (a) would be satisfied by every such cargo, rendering it redundant.
The Court further held that section 10(4)(a) must be construed consistently with Article 3(3) of the Brussels Convention 1926, which the SIA was enacted to implement. Article 3(3) provides that state-owned cargoes carried on merchant ships for governmental and non-commercial purposes shall not be subject to seizure, arrest, detention, or proceedings in rem, while permitting in personam claims including for salvage. The Court rejected Argentum’s alternative reading, stating:
On the reading previously suggested by Argentum, the grant of immunity in respect of in rem claims by the first paragraph of article 3(3) would be deprived of any content.
Issue 3: Relevance of intended use
The Court rejected the majority of the Court of Appeal’s view that the intended use of the cargo was irrelevant. It explained that while in the context of adjudicative jurisdiction generally, the nature of the activity rather than its purpose is determinative, different considerations apply to proceedings concerning the property of a state. Proceedings in rem are far more intrusive than proceedings in personam: they encumber property, establish jurisdiction based solely on presence of property within the jurisdiction, and compel a state to choose between defending the claim or losing its property. The Court identified five compelling reasons why more stringent criteria should be satisfied before immunity is denied in actions in rem, including the creation of secured creditor status upon issue, the perfection of maritime liens, and the establishment of jurisdiction by mere presence of property.
The Court concluded:
In the present case, the claim is not founded on any commercial activity or alleged breach of duty on the part of the Government. The claim to salvage is not based on any contract of salvage but on the fact that the Government was the owner of the cargo which was salved. In these circumstances, as a matter of customary international law it is both permissible and necessary to have regard to the use and intended use of the cargo.
Issue 4: Human Rights Act 1998
The Court rejected Argentum’s submission that the SIA must be read down under section 3 of the Human Rights Act 1998. The immunity claimed applied only to proceedings in rem and did not preclude proceedings in personam, so the very essence of the right of access to a court was not impaired. Further, the grant of immunity from proceedings in rem where property was intended for sovereign purposes conformed with general principles of international law.
Issue 5: Entitlement to immunity
The Court concluded that South Africa was entitled under section 1 of the SIA to immunity from the in rem claim. The exception under section 10(4)(a) did not apply because the silver was not in use or intended for use for commercial purposes. This was also consistent with Article 25 of the Salvage Convention.
Practical Significance
This decision is of considerable importance for the law of state immunity in the maritime context. It clarifies that cargo merely being transported aboard a vessel is not ‘in use’ for commercial purposes simply because it is the subject of commercial sale and carriage arrangements. The determinative inquiry under section 10(4)(a) of the SIA concerns the use or intended use to which the state puts the property, not the commercial character of the transactions that generated or transported it. The case reinforces the distinction between in rem and in personam proceedings against state property, confirming that more stringent criteria must be met before immunity is denied for in rem claims owing to their far more intrusive nature. It also provides authoritative guidance on the proper interpretation of section 10(4) of the SIA in light of the Brussels Convention 1926. The parties subsequently settled the matter, but the Court considered it appropriate to hand down the judgment nonetheless.
Verdict: The Supreme Court unanimously allowed the appeal. The Republic of South Africa was entitled to state immunity under section 1(1) of the State Immunity Act 1978 from the in rem claim brought by Argentum Exploration Ltd against the silver. The exception to immunity under section 10(4)(a) did not apply because the silver was not, at the relevant time, in use or intended for use for commercial purposes.
Source: Argentum Exploration Ltd v Republic of South Africa [2024] UKSC 16
