South African government wins Supreme Court appeal in claim arising from silver salvaged from WW2 wreck

About this case:

• Citation:
  [2024] UKSC 16
• Judgment:
  External link
• Judge:
  Lord Lloyd-Jones and Lord Hamblen

Argentum Exploration Ltd argued that the silver was used or intended to be used for commercial purposes, and therefore fell within an exception to the general law of state immunity. Previous judgments in the High Court and Court of Appeal had been made in their favour. A settlement between the parties was made on 26 April 2024, however it was agreed by the parties that the judgment should nonetheless be handed down.

The appeal was heard by Lord Lloyd-Jones, Lord Briggs, Lord Hamblen, Lord Leggatt, and Lord Richards. Christopher Smith KC, Samuel Wordsworth KC and Jessica Wells appeared for the appellant and Stephen Hofmeyr KC, Liisa Lahti and Cameron Miles for the respondent.

Sovereign purpose

In 2017, a large number of silver bars were recovered from the seabed from the wreck of the SS TILAWA, which was sunk in 1942 while transporting the silver from Bombay to Durban. The silver had been purchased by the South African government for the purpose of being minted for coin for both South Africa and Egypt. It arrived in the UK on 2 October 2017 having been salvaged by the respondent and declared to the Receiver of Wreck.

On 1 October 2019, Argentum commenced an in rem claim for a declaration it was the owner of the silver, or alternatively for voluntary salvage. Having accepted that the South African government owned the silver, only the salvage claim was insisted on. However, the appellant sought to challenge the jurisdiction of the English courts on the basis of state immunity.

It was the respondent’s position that state immunity did not apply, as the exception under section 10(4)(a) of the State Immunity Act 1978, covering actions in rem where a State cargo was in use or intended to be used for commercial purposes, applied. The High Court found that the silver was intended for commercial purposes, as did a majority of judges in the Court of Appeal.

The reasoning of three of the Court of Appeal judges was that the silver was being carried pursuant to a commercial contract of carriage, having been purchased by the government under a commercial contract of sale. In a dissenting judgment, Elisabeth Laing LJ held that the silver could not be in use while it was being carried, and minting it into South African coinage, as the majority of the silver would be, was a sovereign purpose.

It was submitted for the appellant that the conclusion that the silver was in use while being carried aboard the vessel was inconsistent with the natural meaning of the words “in use” and ignored the words “intended for use”. On behalf of Argentum it was submitted that section 10(4)(a) expressly contemplates that a cargo in transit can be “in use” for the purposes of a contract for the supply of goods or services, or a transaction or activity into which the state enters or in which it engages otherwise than in the exercise of sovereign authority.

Distortion of language

In a joint opinion with which the other judges agreed, Lord Lloyd-Jones and Lord Hamblens said of Argentum’s arguments: “As Elisabeth Laing LJ explained in her dissenting judgment in the Court of Appeal, 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.”

They continued: “The majority in the Court of Appeal were led into error by their concentration on the cause of action in salvage which they permitted to dominate their interpretation of section 10(4)(a). This led Popplewell LJ to take an unduly technical approach to the meaning of ‘cargo’ in section 10(4)(a), focussing on the contractual means by which the Silver became cargo and then asking whether those transactions were commercial. However, as Elisabeth Laing LJ observed, whether something is a cargo is primarily a question of fact.”

Noting that Argentum’s proposed interpretation would distort the statutory scheme, the judges said: “If it were right to say that when a cargo is carried on a commercial vessel it is in use for commercial purposes, the additional test in paragraph (a) would be satisfied by every such cargo. As a result, the test under (a) would be the same as under (b) which was clearly not the legislative intention.”

They concluded: “In the circumstances of this case the grant of immunity from proceedings in rem on the basis of the intended use of the property for sovereign purposes conforms with and is required by general principles of international law. The hybrid nature of proceedings in rem and the intrusion they would represent into a foreign state’s rights over its property make it both appropriate and necessary that where the property is intended for use for sovereign purposes the state should be entitled to invoke immunity.”

The appeal was therefore allowed.