Argentum Exploration Ltd v The Silver

For the adjudicative jurisdiction under section 10(4)(a) of the State Immunity Act 1978, state-owned cargo carried under ordinary commercial contracts may be regarded as being used for commercial purposes. The court must interpret that phrase in its statutory context and against the restrictive theory of state immunity. Where cargo was commercially purchased and shipped on a merchant vessel, its commercial status may continue to be relevant when the vessel later becomes a wreck. The cargo’s intended governmental use after discharge does not necessarily alter that status. The court distinguished the enforcement jurisdiction, where the relevant use is assessed when enforcement process is issued. The foreign state was therefore not immune from an action in rem seeking adjudication of a salvage claim.

Argentum Exploration Ltd recovered silver bars from the wreck of the SS TILAWA, which had sunk in 1942 while carrying cargo owned by the Government of the Union of South Africa, the predecessor of the Republic of South Africa. The claimant brought an admiralty action in rem against the silver, seeking ownership or, alternatively, a salvage reward.

The Republic acknowledged service to assert its interest and applied for the action to be struck out, set aside or stayed on grounds of state immunity under the State Immunity Act 1978 and article 25 of the Salvage Convention. The central issue was whether, when the salvage cause of action arose in 2017, both the cargo and the ship carrying it were in use or intended for use for commercial purposes within section 10(4)(a).

1. Application dismissed. The Republic of South Africa was not immune from the court’s adjudicative jurisdiction in the action in rem.
2. Sections 10(4)(a) and 17 of the State Immunity Act 1978 required the court to decide whether both the cargo and the ship carrying it were, when the salvage cause of action arose, in use or intended for use for commercial purposes. The Act had to be construed against the restrictive theory of state immunity.
3. The SS TILAWA was a merchant vessel used for commercial purposes. The silver had been bought under an FOB contract and shipped under a commercial contract of carriage. In the context of state-owned cargo carried by sea, that was sufficient to establish use for commercial purposes. The fact that the silver was intended partly for governmental coin production did not change its commercial status.
4. The relevant status in 1942 remained material in assessing the position in 2017. The sinking and the resulting end of the contract of carriage did not, without a decision by the state to change the cargo’s status, convert the cargo into property used for sovereign purposes. Applying the test mechanically would produce the surprising result that salvage immunity arose merely because a commercial vessel became a wreck.
5. The reasoning in Altair [2008] 2 Lloyd’s Reports 90, although obiter in that case, supported this conclusion. The later authorities concerning section 13, including SerVaas Inc v Rafidain Bank [2012] 3 WLR 545 and LR Avionics Technologies Ltd v Federal Republic of Nigeria [2016] 4 WLR 120, concerned the enforcement jurisdiction and did not require a different result.
6. The court was deciding the adjudicative aspect of the action in rem. Any later application to arrest or sell the cargo would engage section 13, with the test assessed at the time enforcement process was issued. Article 25 of the Salvage Convention added nothing because the cargo was commercial and the Republic was not entitled to sovereign immunity.

First-instance decision. No appellate history was stated in the judgment.