The case concerned the ability of the state to avoid liability for claims related to the recovery of sunken property.

In November 1942, the private vessel SS Tilawa sank in the Indian Ocean as a result of a hit from Japanese torpedoes, along with all its cargo, including 2,364 silver bars worth about 32 million pounds. In 2017 Argentum Exploration Ltd. (the Claimant) was able to recover cargo from the vessel’s wreck. The cargo was delivered to Southampton and declared to the Special Receiver of Wreck.

The Claimant advised that it was entitled to the entire cargo as “unclaimed wreck” or to a reward if the owner announced. South Africa (RSA) has declared that it is the owner of the cargo, but has also refused to accept liability for claims for compensation for lifting assets based on state immunity, referring to the State Immunity Act 1978 and Art. 25 of the International Convention on Salvage, 1989. The Claimant commenced an action in rem against a cargo.

The State Immunity Act 1978 (SIA) regulates the issue of sovereign immunity of other states in English courts. This law, in section 10(4), contains a special exception for action in rem against state-owned property 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. In accordance with section 3(3)(a) of the law, a commercial transaction includes any contract for the supply of goods or services.

The date the cause of action arose was 2017 (the date of the lifting of the property), and the court reviewed the status of the cargo and the vessel in 1942 to establish whether the cargo was intended to be used for commercial purposes in 2017. The court found that the vessel was chartered by South Africa and used for commercial purposes. The cargo was purchased by the South African government on FOB terms and was transported on the basis of a carriage agreement, i.e. both the contract for the supply of goods and the contract for the provision of services were applied to the cargo. The court also pointed out that nothing has changed with regard to the cargo since 1942, i.e. in 2017, it was also expected to be used for commercial purposes.

On this basis, the court decided that South Africa could not invoke sovereign immunity under this claim¹.

Commentary: this case is important for English case law, since the section 10(4) SIA was examined for the first time. Earlier this section 10 was considered in court only once (Altair [2008] 2 Lloyd’s Reports 90). It may be difficult for rescuers of such sunken property to assess in advance the nature of the use of the vessel and cargo at the time of sinking.

An acceptable option in such a situation may be the conclusion of a special agreement with the state, which may presumably own the cargo, according to which the rescuer will search or lift property for rewards. Otherwise, there is always a risk that the state will become the owner of the cargo and even the vessel, since the vessel and (or) cargo were not used for commercial purposes.

So, in 2007 Odyssey Marine Exploration, Inc. filed a lawsuit in the United States for seizure in order to secure its ownership of 14.5 tons of silver and gold coins worth about $ 500 million, raised from the remains of the Spanish frigate Nuestra Señora de las Mercedes, which sank in 1804.

The Spanish government also filed a lawsuit in relation to the cargo and claimed to be its owner, since the frigate belonged directly to Spain. However, Spain refused to pay any remuneration, referring to state immunity. As a result of the proceedings, the courts ruled to return all raised property to Spain, taking into account the provisions of the Foreign Sovereign Immunities Act (FSIA) and indicating that since Spain’s state immunity extends to a Spanish ship, it also applies to all of its cargo.

It seems that in the Russian Federation a claim similar to that considered by the English court could also be considered by the court. Firstly, it is likely that the court would agree to recognize its jurisdiction, for example, on the basis of § 1 of Art. 36 CPC RF (Commercial (Arbitrazh) Proceedings Code), if the defendant (the owner of the sunken property) would not have been known to the plaintiff at the time of filing the claim.

Secondly, in accordance with Art. 13 of the Federal Law “On Jurisdictional Immunities of a Foreign State and Property of a Foreign State in the Russian Federation” the court could establish that a foreign state does not have judicial immunity in the Russian Federation in respect of disputes, related to the carriage of goods by a foreign state operated vessel, if (1) at the time of the cause of action arose, the ship was used by this foreign state for purposes other than non-commercial purposes, and / or (2) the cargo was not cargo belonging to a foreign state and used or intended to be used by it solely for the exercise of sovereign powers.

In this case, the Russian court would need to further analyze the purpose of silver, taking into account the definition of sovereign powers in Art. 2 of the law. ■

Notes