Facts
In 1942, a ship was sunk in the Indian Ocean by enemy torpedoes (“the Ship”).
It had about 2,500 bars of silver. They belonged to what was then the Union of South Africa. The intention was that they would be made into coin by the South African mint (“the Silver”).
In 2017, the Silver was recovered to the UK because Argentum Exploration Ltd (“Argentum”) understood that it was owned by the UK Government.
Argentum claimed to be the salvor. In 2019, it brought an action “in rem” for a declaration that it owned the Silver, or the salvage. In 2020, it brought an action “in personam” against the Government claiming salvage.
On second appeal, although it continued to claim the salvage, Argentum accepted that what is now the Republic of South Africa (“the Government”) owns the Silver.
Issue
The Government challenged the jurisdiction of the court on the basis of immunity.
A state is not immune in respect of ‘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.’
There were two agreed facts. First, “use” meant the use and intended use of the Ship, and the Silver, at the time. Secondly, the Ship was “in use” for commercial purposes, and there was no subsequent change of use, or intended use.
The issue was whether the Silver was “in use or intended for use for commercial purposes”.
First instance & first appeal
Sir Nigel Teare and the majority of the Court of Appeal held that the Silver was “in use” for commercial purposes. This was because it was being carried, pursuant to a commercial contract of carriage, having been purchased by the Government under a commercial contract for sale. Accordingly, the Government did not have state immunity.
The dissenting judgment on first appeal reasoned that, as a matter of ordinary language, the Silver was not “in use” by the Government for any (commercial or other) purpose. It was simply being carried. In fact, it was “intended for use” for a non-commercial purpose, in particular, to be minted into coinage. Accordingly, the Government had state immunity.
State immunity
In international law, state immunity is primarily a matter of customary international law.
Treaty law on state immunity, however, includes: the 1926 International Convention for the Unification of Certain Rules concerning the Immunity of State-owned Ships; the 1972 European Convention on State Immunity; and the 2004 United Nations Convention on Jurisdictional Immunities of States and their Property.
At common law, to determine whether state immunity applies, a court identifies whether it is an act of a private law character, such as a private citizen might have entered into, or a sovereign, public act.
Maritime lien, actions “in rem” and actions “in personam”
Salvage gives rise to a maritime lien.
This arises by operation of law, at the time of the event creating it. From that point, it is enforceable against purchasers of the property, whether or not they have notice of it. Furthermore, it takes priority over all other claims, whether or not they arose before the maritime lien, save for possessory liens.
A maritime lien is carried into effect by an action “in rem” (against a thing). In other words, a claim against the property, irrespective of its ownership. A practical advantage of an in rem claim is that it confers a right of arrest, enabling security for a claim to be obtained, and it establishes jurisdiction through service of the thing within the jurisdiction.
After acknowledgement of service of an action in rem, the action becomes “in personam” (against the person). It does not shed its in rem character, instead, it evolves into a hybrid action.
Discussion
Regard must be had to the use, and intended use, of the Ship, and the Silver, at the time when the former was carrying the latter.
If the cause of action arose later in time, it would also have been necessary to consider whether there was any change in use, or intended use, in the intervening period.
In at least five ways, actions in rem are far more intrusive into the rights of a state over its property than actions in personam. These are in addition to the jurisdiction enforcement powers of arrest, appraisal and sale.
The Government was immune in respect of an action in rem, and the Silver carried on board the Ship. This is because, at the time that the cause of action arose, the Silver was intended to be used for non-commercial purposes.
Both the use, and the intended use, of the property, by the state, is “highly material” when considering state immunity. “The exercise of jurisdiction by the courts of one state over the property of a foreign state which is in use or intended for use by that foreign state for sovereign purposes may well constitute an impermissible interference with sovereign functions of the foreign state.”
Finally, whether Article 6 of the European Convention of Human Rights (right to a fair and public hearing) is not engaged – because state immunity is required by international law; or it is a justifiable interference – the effect is the same.
State immunity should not be denied to the Government.
Disposal
The appeal would have been allowed, however, the parties settled.
Nevertheless: the parties agreed that judgment should still be handed down; and the court was satisfied that it was appropriate to do so.
Written by Dominic Bright.