Supreme Court rules on State immunity in claim for wartime silver trove

13/05/24

A unanimous Supreme Court has upheld an appeal relating to a cargo of 2364 bars of silver sunk off the Seychelles on 23 November 1942. The SS Tilawa was sunk by two torpedoes from a Japanese submarine. The silver had been purchased in Bombay by the-then Union of South Africa for the minting of coinage for South Africa and Egypt. The silver was salvaged in 2017 by the respondent, Argentum Exploration Limited, and declared to the Receiver of Wreck in Southampton.

Teare J, and thereafter a majority in the Court of Appeal (Popplewell LJ and Andrews LJ. Elizabeth Laing LJ dissenting), had upheld the salvor’s claim. This was on the basis that the Government of South Africa had no immunity in terms of section 10(4)(a) of the State Immunity Act (SIA), 1978 or Article 25 of the International Convention on Salvage, 1989 in that that the cargo of silver was “intended for use for commercial purposes”.

In a wide-ranging review of English and international law Lord Lloyd Jones and Lord Hamblen (with whom Lord Briggs, Lord Leggatt and Lord Richards agreed) traced the development of a restrictive theory of immunity of state property. They cited the Tate Letter of 1952, taken up by the US Federal Courts in cases such as Alfred Dunhill of London Inc v Republic of Cuba (1976), and the approach adopted by the Bundesverfassungsgericht in Claim against the Empire of Iran (1963) 45 ILR 57). Restrictive immunity was recognised by the majority (Lord Denning MR and Shaw LJ) in Trendtex Trading Cop v Central Bank of Nigeria [1977] QB 229 and by Lord Wilberforce in I Congreso del Partido [1983] AC 244.

The Supreme Court rejected the conclusion by Teare J that the silver was in commercial use because the use to which it was being put was being carried on a merchant ship, pursuant to a contract of sale and a contract of carriage. It considered that “it would be a distortion of language to say that it [the silver] was being used for the purposes of these arrangements”. It also was unpersuaded by each of the approaches adopted by Popplewell LJ and Andrews LJ in their concurring judgments in the Court of Appeal. It preferred that of Elizabeth Laing LJ: that whether something is a cargo, and whether it has an intended use, are primarily factual questions. Popplewell LJ, the Supreme Court held, had been led into “tak[ing] an unduly technical approach to the meaning of ‘cargo’ in section 10(4)(a) ….[and] to misidentify the context under section 10(4)”. Sitting in the hold the silver was not being used by the Government for any purpose, commercial or otherwise. “It was being carried, and that is all”. It was en route from Bombay to Durban to be minted into coinage, and substantially for a governmental and non-commercial purpose.

The Court accordingly concluded that the Government of South Africa was immune as regards an action in rem, because the cargo was, at the time the cause of action arose, intended for non-commercial purposes.

A residual argument that if section 10(4)(a) entitled South Africa to immunity, then it must be read down under section 3 of the Human Rights Act 1998 (because such immunity would exceed that required by customary international law) was also rejected. In enacting section s10(4)(a) of the SIA Parliament had a legitimate aim to give effect to the restrictive theory of immunity in international law in order to become party to the Brussels Convention. The measure was also proportionate, and accorded with general principles of international law.

Judgment was handed down on 8 May 2024. The Supreme Court recorded that it had been advised a few days before that the parties had reached a settlement. The parties had however “agreed that we should nevertheless hand down the judgment and we are satisfied that it is appropriate to do so”.

The judgment is here.