The Republic of South Africa (RSA) owned silver which was being carried on the SS Tilawa from Bombay (Mumbai), India, to Durban, South Africa, in 1942 for minting into coinage by RSA. The vessel was hit by Japanese torpedoes and sank with its cargo. In 2017 the silver was salvaged off the coast of South Africa and brought to Southampton, where it was delivered to the Receiver of Wreck. Argentum Exploration Ltd (Argentum) brought an in rem salvage claim against the silver in the Admiralty Court. RSA entered an acknowledgment of service, and applied to strike out or set aside the claim, or to have it permanently stayed, on the basis of state immunity. Teare J dismissed this application, holding that the proceedings fell within the exception to state immunity in s 10(4)(a) of the State Immunity Act 1978 (UK) (the SIA): see Argentum Exploration Ltd v The Silver [2020] EWHC 3434 (Admlty) (CMI1134).

SA appealed. The majority of the Court of Appeal (Popplewell, Andrews LJJ; Elisabeth Laing LJ dissenting) dismissed the appeal: see Argentum Exploration Ltd v The Silver [2022] EWCA Civ 1318 (CMI2010). RSA appealed to the Supreme Court.

Held: Appeal allowed.

The approach of the High Court Judge and the majority of the Court of Appeal means that s 10(4)(a) of the SIA, which provides that a State is not immune respecting 'an action in rem against a cargo belonging to that State if both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes' could never apply to a State-owned cargo carried on a commercial or merchant vessel, because such a cargo will always be carried pursuant to commercial arrangements of the kind which they describe in their judgments, and will therefore never have immunity. That is a counter-intuitive result for State-owned cargoes such as armaments. Section 10(4)(a) of the SIA should be construed, so far as possible, so as to be consistent with art 3.3 of the Immunity of State-Owned Ships Convention 1926, which provides that 'State-owned cargoes carried on board merchant vessels for Governmental and noncommercial purposes shall not be subject to seizure, attachment, or detention, by any legal process, nor to judicial proceedings in rem.'

The silver was being ‘carried’ for the relevant purposes under art 3.3, as it was being carried to South Africa in order to be minted into coinage, and substantially for a Governmental and non-commercial purpose. 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 s 10(4)(a). This led Popplewell LJ to take an unduly technical approach to the meaning of 'cargo' in s 10(4)(a), focusing on the contractual means by which the silver became cargo and then asking whether those transactions were commercial. It also led Popplewell LJ to misidentify the context under s 10(4). As RSA points out, the context is not whether property qualifies as cargo but whether something which is obviously cargo, because it is being carried on a ship, should be immune from an action in rem.

The correct reading of s 10(4)(a) becomes even clearer when one considers arts 1-3 of the Convention. The SIA was enacted, among other purposes, in order to enable the UK to become a party to the Convention. The SIA broadly implements the provisions of the Convention into domestic law within the UK. The complexity of the drafting of the Convention resulted in Parliament enacting s 10 of the SIA, instead of merely giving effect to the Convention in domestic law. In respect of cargo at least, the relevant provisions of the SIA are to be construed, so far as is possible, so as to conform to the Convention.

The Court's conclusion as to the meaning of art 3.3 of the Convention is supported by two commentators, Van Slooten and Gidel, both of whom were closely involved in its drafting. They show that the original draft of article 3.3 was much narrower in scope and granted immunity only to State-owned cargoes that were carried on State-owned vessels. Van Slooten describes the development as follows:

One cannot conceive, in fact, … how a State would accept that one could seize a cargo which it intended for a governmental purpose that was transported on a merchant ship. Such a situation is not purely hypothetical, the dangers it poses are not fanciful. Many states use this procedure for the transport of arms, supplies and munitions intended for the use of their armed forces, in their colonies and overseas possessions. The Conference ended up by adopting this point of view …

(G van Slooten, 'The Brussels Convention on the Juridical Status of State ships' Revue de Droit International 7 (1926) 476–477) (unofficial translation).

Similarly Gidel writes:

If government-owned cargo is transported on board a merchant ship, it only benefits from immunity from seizure or other legal proceedings in rem if it has a governmental and non-commercial purpose (article 3(3)). The Goetenburg and Genoa drafts were much too severe with respect to state-owned cargoes: they did not exempt such cargoes from seizure under any circumstances when transported on board private ships. Immunity was only accorded to them if they were transported for a governmental and non-commercial aim on board ships owned or operated by States. The Brussels Convention has very opportunely reduced the rigour of these provisions.

(G Gidel, Le Droit International Public de la Mer, Le Temps De Paix, vol 2, Les Eaux Intérieures, Ch 5, p 367) (unofficial translation).

The intention behind art 3.3 was clearly that a State should be immune from interference with its cargo which was transported on a merchant ship and intended for use for a governmental purpose. The second para of art 3.3 leaves in place the immunity from in rem proceedings established by the first para, but provides that there should be no immunity for in personam claims. This accords with the understanding of the drafter of s 10(4) of the SIA, which draws a clear distinction between actions in rem in s 10(4)(a) and actions in personam in s 10(4)(b). Section 10(4) accurately gives effect to art 3.3 of the Convention. For these reasons, RSA is immune from an action in rem in respect of the silver carried on board the vessel, because the cargo was, at the time when the cause of action arose, intended for use for non-commercial purposes.

This result accords with art 25 of the Salvage Convention which is implemented into domestic law. Article 25 provides:

Unless the State owner consents, no provision of this Convention shall be used as a basis for the seizure, arrest or detention by any legal process of, nor for any proceedings in rem against, non-commercial cargoes owned by a State and entitled, at the time of the salvage operations, to sovereign immunity under generally recognized principles of international law.

The silver was a non-commercial cargo owned by a State and entitled, at the time of salvage operations, to sovereign immunity under generally recognised principles of international law.