Argentum Exploration Ltd v Republic of South Africa

State-owned cargo carried aboard a commercial vessel is not thereby “in use” for commercial purposes under section 10(4)(a) of the State Immunity Act 1978. The court must examine the use or intended use to which the state has put the cargo, rather than the commercial origin of, or contractual arrangements concerning, the property.

Where a salvage cause of action arises long after carriage, the cargo’s status during carriage is determinative if no relevant change of use or intention has occurred. Cargo intended for sovereign use remains immune from an action in rem, although an action in personam may remain available. That distinction reflects the especially intrusive effects of proceedings in rem and conforms to international law.

Silver owned by the Republic of South Africa was shipped from Bombay to Durban in 1942 for the predominant purpose of minting South African coinage. The vessel was sunk by enemy action. Argentum recovered the silver in 2017 and brought an action in rem seeking salvage.

Sir Nigel Teare and a majority of the Court of Appeal, [2022] EWCA Civ 1318, held that the silver was in commercial use because it was carried pursuant to commercial contracts. Elisabeth Laing LJ dissented, considering that the silver was merely being carried and was intended for sovereign use.

The central question was whether the commercial arrangements for carriage made the silver “in use or intended for use for commercial purposes” within section 10(4)(a) of the State Immunity Act 1978, so as to remove state immunity from the action in rem.

1. Appeal allowed. Lord Lloyd-Jones and Lord Hamblen gave the unanimous judgment, with which Lord Briggs, Lord Leggatt and Lord Richards agreed. The Republic was immune from the action in rem under section 1(1) of the State Immunity Act 1978. The exception in section 10(4)(a) did not apply.

2. The phrase “at the time when the cause of action arose” referred to 2017, when salvage occurred. Nevertheless, the court should examine the vessel’s and cargo’s use and intended use during the 1942 carriage. Where the cause of action arises later, any intervening change must also be considered. As there had been no relevant change, the status during carriage was determinative.

3. The silver was not “in use” by the Republic merely because it was carried under commercial contracts of sale and carriage. That interpretation departed from the ordinary meaning of the statutory language. The relevant inquiry concerned the use or intended use to which the state put the property, rather than the transactions from which it originated. The same distinction between a property’s source and its use had been applied to section 13(4) in Alcom and SerVaas.

4. Section 10(4)(a) deliberately imposes a higher threshold for an action in rem against cargo than section 10(4)(b) imposes for an action in personam. Treating every cargo carried commercially as itself commercially used would erase that distinction. Proceedings in rem encumber the property, perfect a maritime lien, establish jurisdiction through the presence of the res and permit arrest. They therefore intrude more substantially upon a state’s property rights.

5. Article 3(3) of the Brussels Convention preserves immunity from proceedings in rem for state-owned cargo carried on a merchant ship for governmental and non-commercial purposes. Its second paragraph permits the specified claims only in personam. Section 10(4) accurately implements that distinction.

6. The silver’s intended use for minting currency was relevant and sovereign. Section 10(4)(a) therefore left the general immunity intact. This result did not require a Convention-compliant reinterpretation under section 3 of the Human Rights Act 1998. Any restriction on access to a court was justified and proportionate because international law required the immunity and an action in personam remained available. Article 25 of the Salvage Convention confirmed the same result.

• United Kingdom Supreme Court: The appeal was allowed unanimously. The Republic was held immune from Argentum’s action in rem: [2024] UKSC 16.
• Court of Appeal: By a majority, Popplewell LJ and Andrews LJ held that the silver was in use for commercial purposes and that state immunity was unavailable. Elisabeth Laing LJ dissented: [2022] EWCA Civ 1318.
• High Court: Sir Nigel Teare held that the silver was in commercial use because it was carried under commercial sale and carriage arrangements. The citation is not stated in the judgment.